Welcome to the Westwood Holdings Group Second Quarter 2012 Earnings Conference Call. Today's call will begin with the presentation followed by a question-and-answer session. Instructions on that feature will be given later in the program. I would now like to turn the call over to your host for today's call, Sylvia Fry, Vice President and Chief Compliance Officer.

Thank you. Good afternoon. Welcome to our second quarter 2012 earnings conference call. I'd like to start by reading our forward-looking statements disclaimer. The following discussion will include forward-looking statements. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results to be materially different from those contemplated by the forward-looking statements. Additional information concerning the factors that could cause such a difference is included in our press release issued earlier today as well as in our annual report on Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. You are cautioned not to place undue reliance on forward-looking statements. In addition, in accordance with SEC rules concerning non-GAAP financial measures, the reconciliation of our economic earnings, economic earnings per share and economic expenses to the most comparable GAAP measures is included at the end of our press release issued earlier today. On the call today, we will have Brian Casey, our President and Chief Executive Officer; and Bill Hardcastle, our Chief Financial Officer. I'd like to turn the call over to Bill Hardcastle, our CFO.

Thanks, Sylvia. Good afternoon, everyone. As you may have seen, we filed our 10-Q this afternoon. If you have any questions after reading the 10-Q, feel free to give me a call at the phone number is listed on our website. As a background for the discussion of second quarter financials, I would like to point out that second quarter 2012 results include onetime and ongoing expenses related to our newly launched subsidiary, Westwood International Advisors. However, there is no revenue contribution from Westwood International in the second quarter. I would also like to highlight several significant items that impacted second quarter 2012 pretax income. Performance fees in our MLP strategy of approximately $1.2 million compared to $1.0 million for the second quarter of 2011. A gain of approximately $899,000 related to the sale of 100,000 shares of Teton Advisors. Onetime recruiting and legal fees of approximately $1.4 million related to hiring Westwood International team members. Amortization of approximately $1.2 million related to Westwood International bonus awards. And ongoing expenses related to Westwood International operations of approximately $1.3 million. Moving on to revenue for the quarter. For the second quarter 2012, our total revenues were $20.1 million compared to $18.9 million in the second quarter 2011. Comparing second quarter revenue in 2012 versus 2011, asset-based advisory fees declined by 2% as a result of decreased average assets under management due to asset withdrawals by certain clients and market depreciation, partially offset by inflows from new and existing clients. Performance-based advisory fees increased by 19% due to a larger performance fee on our MLP strategy. Trust fees increased by 8% as a result of increased trust assets under management, primarily due to asset inflows from new and existing clients. GAAP net income for the second quarter 2012 was $2.2 million compared…

Thanks, Bill, and thanks to all of you for joining our call today. We're coming off the strongest first quarter stock performance since 1982. It was not surprising that the second quarter spend most of the period in the red with the relief rally at the end of June. And investors again sold equities and fund flows continued to favor fixed income or equity income-oriented strategies. This resulted in favorable flows to our Income Opportunity Mutual Fund, WHGIX, as well as several new institutional client wins in the income opportunity area. On the equity side, most Westwood equity products were down more than the market, as we remained underway, the top performing utilities and consumer staples areas. But we did have some bright spots, including MLP, which had another great quarter and once again earned a nice performance fee for the prior year. Thanks to Todd Williams, Matthew Na, Bill Costello, and Jay Singhania for their terrific work in this area. Another bright spot is SmallCap, which is well ahead of its benchmark and was just a touch outside of the first quartile year-to-date. SmallCap is on the verge of putting together strong back-to-back years, which will help our marketing efforts in the year ahead. Search activity is centered around income opportunity with some interest in MLP. We're excited that it finally see some momentum from both consultants and plan sponsors for both products. Assets and income opportunity currently exceed $1.5 billion and we have the capacity to manage more than 3x that amount. MLP interest is increasing and we have some outstanding searches, but it will take more sponsorship from the consultant community to see widespread adoption of MLPs by the plan sponsor community. While the industry continues to experience outflows from equity funds, we've managed to grow the…

[Operator Instructions] And our first question comes from Mac Sykes of the Gabelli & Company.

If you could just walk me through the P&L impacts and the cash impacts from the addition of the -- that would be very helpful.

The addition of the -- what was the last part?

The addition of the Westwood International Advisors team. If you could just walk through the P&L?

Mac, it's Bill Hardcastle. We tried to kind of lay out the impacts of Westwood International in the press release, if you've seen it. So there were onetime recruiting and legal fees related to hiring of the team of about $1.4 million in the quarter. We also amortized some bonus awards to team members and that was $1.2 million for the quarter. And then ongoing expenses for Westwood International operations and that's salaries, bonus accrual, office rent, et cetera, that was about $1.3 million in the quarter.

Our next question is from Chuck Hendershot.

I had a follow-up on Mac's question. It looks like from the press release about $2.5 million of quarterly drag on your quarterly numbers. Do you have a projection of when you would expect revenues from the organization and when WIA might go breakeven?

I'll let Bill address the drags on the new cost. But certainly in terms of revenue, when we do things like this, we don't budget for immediate revenue. But we do believe that in the space emerging markets and global that there is a shortage of good managers and there is demand from plan sponsors for that asset class. And we have done absolutely no marketing at this point. And in fact, have had inbound calls from plan sponsors, who are interested in talking to us when we are ready to talk to them. So while I certainly can't give you a revenue projection as to when that would happen. We do feel very encouraged by the fact that we have a really strong team with strong historical performance and a shortage of managers in that space. And then, Bill, if you want to answer the second part of his question.

Sure, I guess, kind of just going back through the expenses again. The onetime legal and recruiting fees, obviously, those were just like we said, onetime. So those do not continue. The ongoing expenses of $1.3 million in the second quarter, that number will go up as we have a full quarter of salaries, and office lease and so forth, and as we hired new members to the team. And then the amortization of the bonus awards of $1.2 million, that amortization will continue for 3 more years. But at the end of 2013, close to 80% of that amortization will be expensed through the income statement.

And we do have Mr. Sykes back.

Just a quick question on the share count. I was just looking for difference in the weighted average diluted shares this quarter and the outstanding that's listed in the Q. I was just wondering, if you could just go through some of that accounting?

That's correct. We use the treasury share method of calculating diluted shares, and so you have to calculate the dilutive impact of unvested awards and we have that calculation in the 10-Q.

[Operator Instructions] And we have no additional questions in queue at this time.

Well, I'll wrap it up and just say that we couldn't be more excited about Westwood International Advisors. And the folks who've been down here now for a couple of months, they are everything we'd hope they would be. They are committed, terrific investment professionals. And in many ways, in the last 10 years every product we have, we've built from scratch. And if you think about the risk associated with building a product from scratch where you have to hire the people, spend the money, build the record. And then after 3 years you get to see if the record is any good, and if the team can work well together and if you have something that you can market. This is a team that's been together for a long time. They work incredibly well together. They finish each other sentences and they are excited to be part of Westwood. And I think as we begin to get out and tell that story that we're going to have a lot of terrific reception from the institutional community and the relationships that we've had with many of those consultants that go back 25 or more years. Thanks again for your interest today. If you have any follow-up questions, please call Bill or myself. All of our filings and all of our information is on our website at westwoodgroup.com. Thanks again for your time.

That concludes today's conference. Thank you for your participation. You may now disconnect.