Selected Quarterly Financial Data (Unaudited)(in thousands except per share data)Quarter ended December 31 March 31 June 30 September 30Fiscal year 2009Operating revenues ......................... $ 969,330 $ 912,272 $1,073,558 $1,238,927Operating income .......................... 268,364 223,322 326,186 384,722Net income ............................... 120,900 1 110,806 2 297,716 367,356Earnings per shareBasic ................................ $ 0.52 $ 0.48 $ 1.30 $ 1.61Diluted .............................. $ 0.52 $ 0.48 $ 1.29 $ 1.60Dividend per share ......................... $ 0.21 $ 0.21 $ 0.21 $ 0.21Common stock price per shareHigh ................................ $ 95.49 $ 70.82 $ 77.62 $ 104.00Low ................................ $ 45.52 $ 37.19 $ 52.93 $ 65.48Fiscal year 2008Operating revenues ......................... $1,685,591 $1,503,692 $1,521,649 $1,321,454Operating income .......................... 635,729 519,087 532,215 411,971Net income ............................... 518,316 366,096 403,312 300,489 3Earnings per shareBasic ................................ $ 2.15 $ 1.55 $ 1.72 $ 1.29Diluted .............................. $ 2.12 $ 1.54 $ 1.71 $ 1.28Dividend per share ......................... $ 0.20 $ 0.20 $ 0.20 $ 0.20Common stock price per shareHigh ................................ $ 143.08 $ 114.49 $ 108.00 $ 113.70Low ................................ $ 108.46 $ 86.06 $ 91.21 $ 81.39Fiscal year 2007Operating revenues ......................... $1,427,815 $1,509,006 $1,639,811 $1,629,137Operating income .......................... 508,070 499,083 519,006 541,388Net income ............................... 426,800 440,866 468,364 436,908Earnings per shareBasic ................................ $ 1.69 $ 1.75 $ 1.89 $ 1.78Diluted .............................. $ 1.67 $ 1.73 $ 1.86 $ 1.76Dividend per share ......................... $ 0.15 $ 0.15 $ 0.15 $ 0.15Common stock price per shareHigh ................................ $ 114.98 $ 126.71 $ 139.32 $ 145.59Low ................................ $ 103.50 $ 111.31 $ 118.80 $ 113.081 Includes $33.8 million of other-than-temporary impairments of investment securities, available-for-sale and a $30.1million decline in fair value of retained interests in securitized assets.2 Includes a $47.1 million decline in fair value of retained interests in securitized assets and $23.9 million of other-thantemporaryimpairments of investment securities, available-for-sale.3 Includes a $19.7 million income tax charge related to repatriated earnings from foreign subsidiaries.Risk FactorsFor a description of certain risk factors and other important factors that may affect us, our subsidiariesand our business, please see the description of the risk factors set forth under Item 1A of Part I of this Form10-K, which is incorporated herein by reference.60
Item 7A.Quantitative and Qualitative Disclosures About Market Risk.In the normal course of business, our financial position is subject to market risk, including, but notlimited to, potential loss due to changes in the value of financial instruments including those resulting fromadverse changes in interest rates, foreign currency exchange rates and market valuation. Financialinstruments include, but are not limited to, investment securities, loans, deposits and debt obligations.Management is responsible for managing market risk. Our Enterprise Risk Management Committee isresponsible for providing a framework to assist management to identify, assess and manage market andother risks.Global markets have continued to experience unprecedented volatility, and challenging and volatilemarket conditions might continue to be present in the foreseeable future. Market conditions have resulted ina significant reduction in our assets under management, which directly impacts our revenues and netincome. A continued economic downturn and volatility in the global financial markets could alsosignificantly affect the estimates, judgments, and assumptions used in the valuation of our financialinstruments.We are exposed to changes in interest rates, primarily through our loans, investment in debt securities,deposit liabilities and other outstanding debt. We minimize the impact of changes in interest rates related toour investments in debt securities by managing the maturities of these securities, and throughdiversification. We minimize the impact of changes in interest rates related to our outstanding debt byentering into financing transactions that ensure an appropriate mix of debt at fixed and variable interestrates. In addition, our banking/finance segment monitors the net interest rate margin and the averagematurity of interest earning assets, as well as funding sources and, from time to time, we may enter intointerest-rate swap agreements to mitigate interest rate exposure arising from the loans receivable portfolio.At September 30, 2009, we have considered the potential impact of a 2% movement in market interestrates on interest earning assets, net of interest-bearing liabilities of our banking/finance segment, total debtoutstanding and our portfolio of debt securities. Based on our analysis, we do not expect that this changewould have a material impact on our operating revenues or results of operations in the next twelve months,for each of these categories or in the aggregate.We are subject to foreign currency exchange risk through our international operations. While weoperate primarily in the United States, we also provide services and earn revenues in The Bahamas, Asia-Pacific, Canada, Europe, Latin America and Africa. Our exposure to foreign currency exchange risk isminimized in relation to our results of operations since a significant portion of these revenues aredenominated in U.S. dollars. This situation may change in the future as our business continues to growoutside the United States and expenses incurred denominated in foreign currencies increase. Our exposureto foreign currency exchange risk in relation to our consolidated balance sheet mostly relates to cash andcash equivalents and investments that are denominated in foreign currencies, primarily in Euro,Pound Sterling, Indian Rupee, Canadian Dollar, Korean Won, and Brazilian Real. These assets accountedfor approximately 13% of the total cash and cash equivalents and investments at September 30, 2009. Wedo not use derivative financial instruments to manage foreign currency exchange risk exposure. As a result,both positive and negative currency fluctuations against the U.S. dollar may affect our results of operationsand accumulated other comprehensive income.We are exposed to market valuation risks related to securities we hold that are carried at fair value andsecurities held by sponsored investment products that we consolidate, which are also carried at fair value.61
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G A I N F R O M O U R P E R S P E C
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Letter to StockholdersGregory E. Jo
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LETTER TO STOCKHOLDERSHaving announ
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Directors and OfficersDirectorsChar
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Performance GraphThe following perf
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(MARK ONE)UNITED STATESSECURITIES A
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operational and other services requ
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A. Assets Under Management (“AUM
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60 days. If agreements representing
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minimum Tier 1 and Total risk-based
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PART IIIItem 10. Directors, Executi
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Item 15.(a)(1)(a)(2)(a)(3)PART IVEx
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Exhibit No.Description10.17 Represe
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Exhibit No.Description12 Computatio
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Exhibit No.DescriptionEXHIBIT INDEX
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Exhibit No.Description10.22 Amendme
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(dollars in thousands)COMPUTATION O
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NameState or Nation ofIncorporation
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CONSENT OF INDEPENDENT REGISTERED P
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EXHIBIT 31.2CERTIFICATIONI, Kenneth
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CERTIFICATION PURSUANT TO 18 U.S.C.
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One Franklin ParkwaySan Mateo, CA 9