Assets Under Management, Net Inflows and Market Share

ETF assets under management ("AUM") were $18.3 billion at December 31, 2012, up from $12.2 billion at December 31, 2011 and $16.8 billion at September 30, 2012. Net inflows for the fourth quarter of 2012 were $1.1 billion compared to $0.8 billion in the fourth quarter of 2011 and $1.0 billion in the third quarter of 2012. WisdomTree's market share of industry net inflows was 1.9% in the fourth quarter of 2012 as compared to 1.7% in the fourth quarter of 2011 and 2.0% in the third quarter of 2012.

For the full year of 2012, net inflows were $4.7 billion as compared to $3.9 billion in 2011. WisdomTree's market share of industry net inflows was 2.6% as compared to 3.3% in 2011.
                                             
1 Proforma operating income and other proforma amounts described below are non-GAAP financial measurements. Please see the section entitled "Non-GAAP Financial Measurements" for a reconciliation of these measurements to GAAP.
 
Summary Operating and Financial Highlights
     
  Three Months Ended Change From
  Dec. 31, Sept. 30, Dec. 31, Sept. 30, Dec. 31,
Operating Highlights (in billions): 2012 2012 2011 2012 2011
ETF AUM $18.3 $16.8 $12.2 9.0% 50.1%
ETF net inflows $1.1 $1.0 $0.8 2.2% 40.1%
Average ETF AUM $17.1 $15.8 $11.8 8.2% 44.2%
Average ETF advisory fee 0.54% 0.54% 0.54% -- --
Market share of industry inflows 1.9% 2.0% 1.7% (0.1) 0.2
  Financial Highlights (in millions):          
Total revenues $23.6 $21.7 $16.2 8.8% 45.7%
Net income $5.3 $4.5 $0.9 15.9% nm
Proforma operating income (non-GAAP) $5.1 $4.8 $1.0 6.9% nm
Gross margin 2 68% 68% 62% -- +6
Pre-tax margin 22% 21% 6% +1 +16
Proforma pre-tax margin 22% 22% 6% -- +16
           
  Year Ended Dec. 31,    
Operating Highlights (in billions): 2012 2011 Change    
ETF AUM $18.3 $12.2 50.1%    
ETF net inflows $4.7 $3.9 21.4%    
Average ETF AUM $15.6 $11.7 32.5%    
Average ETF advisory fee 0.54% 0.55% (0.01)    
Market share of industry inflows 2.6% 3.3% (0.7)    
  Financial Highlights (in millions):          
Total revenues $84.8 $65.2 30.1%    
Net income $11.0 $3.1 nm    
Proforma operating income (non-GAAP) $14.8 $4.0 nm    
Gross margin 66% 61% +5    
Pre-tax margin 13% 5% +8    
Proforma pre-tax margin 18% 6% +12    
           
 
                    
2 Gross margin is defined as total revenues less fund management and administration expenses and third-party sharing arrangements.

R ecent Business Developments
  • On November 6, 2012, WisdomTree announced a change from quarterly to monthly dividend distributions for the Company's Domestic Dividend ETF family.
  • On November 8, 2012, WisdomTree announced Research Affiliates withdrew its patent infringement lawsuit against WisdomTree. 
  • On November 12, 2012, WisdomTree announced the Company commenced a secondary offering for existing stockholders.   On November 14, WisdomTree announced the pricing of the secondary offering. On December 19, WisdomTree announced underwriters exercised their option to purchase additional securities in connection with the previously announced offering.
  • On November 26, 2012, WisdomTree announced zero capital gains distributions for 2012 on all 35 Equity ETFs
  • On December 26, 2012, WisdomTree announced the WisdomTree Japan Hedged Equity Fund (DXJ) surpassed $1 Billion in AUM. On January 22, WisdomTree announced the WisdomTree Japan Hedged Equity Fund (DXJ) surpassed $2 billion in AUM.
  • On January 14, 2013, WisdomTree announced the WisdomTree Emerging Markets Equity Income Fund (DEM) surpassed $5 billion in AUM.
  • On January 23, 2013, WisdomTree announced the Company surpassed $20 billion in AUM.
  • On January 31, 2013, WisdomTree announced the launch of the WisdomTree Global Corporate Bond Fund (GLCB)

Performance

72% of the $15.4 billion invested in our 34 equity ETFs on December 31, 2012 were in funds that, since their respective inceptions, outperformed their capitalization-weighted or competitive benchmarks through that date. 68%, or 23 of our 34 equity ETFs, outperformed their capitalization-weighted or competitive benchmarks since their respective inception through December 31, 2012. For more information about WisdomTree ETFs including standardized performance, please click here or visit www.wisdomtree.com.

Fourth Quarter Financial Discussion

Revenues

Total revenues increased 45.7% to a record $23.6 million as compared to the fourth quarter of 2011 and 8.8% compared to the third quarter of 2012 primarily due to higher average AUM. Our average fee earned was 0.54% in the fourth quarter of 2012, unchanged compared to the fourth quarter of 2011 and third quarter of 2012.

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