Affiliated Managers (MGR) 8-K Results of Operations and Financial Condition

Exhibit 99.2

Affiliated Managers Group, Inc.

Financial Highlights

(dollars in thousands, except per share data)

	Three Months		Three Months
	Ended		Ended
	3/31/08*		3/31/09
Revenue	$	335,034	$	178,475
Net Income (controlling interest)	$	31,223	$	6,125
Cash Net Income (A)	$	58,187	$	37,706
EBITDA (B)	$	88,571	$	49,228
Average shares outstanding - diluted	40,821,649		41,082,130
Earnings per share - diluted	$	0.81	$	0.15

	December 31, 2008*		March 31, 2009
Cash and cash equivalents	$	396,431	$	237,291
Senior debt	$	233,514	$	—
Senior convertible securities (C)	$	445,535	$	448,395
Junior convertible trust preferred securities (C)	$	505,034	$	505,605
Stockholders’ equity	$	924,801	$	1,086,542

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Affiliated Managers Group, Inc.

Reconciliations of Earnings Per Share Calculation

(dollars in thousands, except per share data)

	Three Months		Three Months
	Ended		Ended
	3/31/08*		3/31/09
Net Income (controlling interest)	$	31,223	$	6,125
Convertible securities interest expense, net (D)	1,994		36
Net Income (controlling interest), as adjusted	$	33,217	$	6,161
Average shares outstanding - diluted	40,821,649		41,082,130
Earnings per share - diluted	$	0.81	$	0.15

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Affiliated Managers Group, Inc.

Operating Results

Assets Under Management

(in millions)

Statement of Changes

	Mutual Fund			Institutional			High Net Worth			Total
Assets under management, December 31, 2008	$	34,704		$	109,450		$	25,991		$	170,145
Net client cash flows	(1,194		)	(2,574		)	(638		)	(4,406		)
Investment performance	(2,887		)	(5,908		)	(1,380		)	(10,175		)
Other (E)	—			(2,589		)	(59		)	(2,648		)
Assets under management, March 31, 2009	$	30,623		$	98,379		$	23,914		$	152,916

Financial Results

(in thousands)

	Three				Three
	Months				Months
	Ended		Percent		Ended		Percent
	3/31/08*		of Total		3/31/09		of Total
Revenue
Mutual Fund	$	134,863	40	%	$	68,338	38	%
Institutional	160,078		48	%	82,238		46	%
High Net Worth	40,093		12	%	27,899		16	%
	$	335,034	100	%	$	178,475	100	%
EBITDA (B)
Mutual Fund	$	31,142	35	%	$	14,875	30	%
Institutional	47,434		54	%	27,437		56	%
High Net Worth	9,995		11	%	6,916		14	%
	$	88,571	100	%	$	49,228	100	%

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Affiliated Managers Group, Inc.

Reconciliations of Performance and Liquidity Measures

(in thousands)

	Three Months			Three Months
	Ended			Ended
	3/31/08*			3/31/09
Net Income (controlling interest)	$	31,223		$	6,125
Intangible amortization	8,350			8,094
Intangible amortization - equity method investments (F)	4,950			7,906
Intangible-related deferred taxes	9,021			9,571
APB 14-1 expense, net of tax	1,082			2,057
Affiliate equity expense, net of tax	2,015			2,006
Affiliate depreciation	1,546			1,947
Cash Net Income (A)	$	58,187		$	37,706
Cash flow from operations	$	49,818		$	11,929
Interest expense, net of non-cash items	20,091			14,722
Current tax provision	13,145			(8,045		)
Income from equity method investments, net of distributions (F)	(13,967		)	(4,619		)
Changes in assets and liabilities and other adjustments	19,484			35,241
EBITDA (B)	$	88,571		$	49,228
Holding company expenses	17,541			10,512
EBITDA Contribution	$	106,112		$	59,740

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Affiliated Managers Group, Inc.

Consolidated Statements of Income

(dollars in thousands, except per share data)

	Three Months Ended March 31,
	2008*			2009
Revenue	$	335,034		$	178,475
Operating expenses:
Compensation and related expenses	151,080			84,160
Selling, general and administrative	52,850			32,507
Amortization of intangible assets	8,350			8,094
Depreciation and other amortization	2,774			3,239
Other operating expenses	5,413			5,750
	220,467			133,750
Operating income	114,567			44,725
Non-operating (income) and expenses:
Investment and other (income) loss	1,939			241
Income from equity method investments	(13,988		)	(6,416		)
Investment (income) loss from Affiliate investments in partnerships (G)	14,334			3,795
Interest expense	22,937			19,948
	25,222			17,568
Income before income taxes	89,345			27,157
Income taxes - current	13,145			(8,045		)
Income taxes - intangible-related deferred	9,021			9,571
Income taxes - other deferred	(3,829		)	2,391
Net income	71,008			23,240
Net income (non-controlling interests) (G)	(53,174		)	(20,878		)
Net loss (non-controlling interests in partnerships) (G)	13,389			3,763
Net Income (controlling interest)	$	31,223		$	6,125
Average shares outstanding - basic	34,470,123			40,022,423
Average shares outstanding - diluted	40,821,649			41,082,130
Earnings per share - basic	$	0.91		$	0.15
Earnings per share - diluted	$	0.81		$	0.15

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Affiliated Managers Group, Inc.

Consolidated Balance Sheets

(in thousands)

	December 31,			March 31,
	2008*			2009
Assets
Current assets:
Cash and cash equivalents	$	396,431		$	237,291
Investment advisory fees receivable	131,099			101,317
Affiliate investments in partnerships (G)	68,789			63,324
Affiliate investments in marketable securities	10,399			12,810
Prepaid expenses and other current assets	23,968			17,188
Total current assets	630,686			431,930
Fixed assets, net	71,845			69,158
Equity investments in Affiliates	678,887			664,074
Acquired client relationships, net	491,408			481,978
Goodwill	1,243,583			1,237,966
Other assets	96,291			104,168
Total assets	$	3,212,700		$	2,989,274
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	183,794		$	92,795
Payables to related party	26,187			10,153
Total current liabilities	209,981			102,948
Senior debt	233,514			—
Senior convertible securities (C)	445,535			448,395
Junior convertible trust preferred securities (C)	505,034			505,605
Deferred income taxes	319,491			331,929
Other long-term liabilities	30,414			28,355
Total liabilities	1,743,969			1,417,232
Redeemable non-controlling interests	297,733			281,667
Equity:
Common stock	458			458
Additional paid-in capital	817,713			814,019
Accumulated other comprehensive income	(4,081		)	(13,953		)
Retained earnings	813,664			819,789
	1,627,754			1,620,313
Less treasury stock, at cost	(702,953		)	(533,771		)
Total stockholders’ equity	924,801			1,086,542
Non-controlling interests (G)	180,732			143,239
Non-controlling interests in partnerships (G)	65,465			60,594
Total equity	1,170,998			1,290,375
Total liabilities and equity	$	3,212,700		$	2,989,274

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Affiliated Managers Group, Inc.

Consolidated Statements of Cash Flow

(in thousands)

	Three Months Ended March 31,
	2008*			2009
Cash flow from operating activities:
Net income	$	71,008		$	23,240
Adjustments to reconcile Net income to net cash flow used in operating activities:
Amortization of intangible assets	8,350			8,094
Amortization of issuance costs	679			1,795
Depreciation and other amortization	2,774			3,239
Deferred income tax provision	5,192			11,962
Accretion of interest	2,167			3,431
Income from equity method investments, net of amortization	(13,988		)	(6,416		)
Distributions received from equity method investments	32,905			18,941
Tax benefit from exercise of stock options	673			—
Stock option expense	3,783			1,177
Affiliate equity expense	3,135			3,250
Other adjustments	(459		)	(1,212		)
Changes in assets and liabilities:
Decrease in investment advisory fees receivable	28,050			29,342
(Increase) decrease in Affiliate investments in partnerships	(6,584		)	979
Decrease in prepaids and other current assets	19,996			257
Decrease in other assets	1,754			1,830
Decrease in accounts payable, accrued liabilities and other long-term liabilities	(109,617		)	(87,980		)
Cash flow from operating activities	49,818			11,929
Cash flow used in investing activities:
Cost of investments in new Affiliates, net of cash acquired	(10,909		)	—
Purchase of fixed assets	(2,548		)	(552		)
Purchase of investment securities	(14,443		)	(8,836		)
Sale of investment securities	5,550			5,720
Cash flow used in investing activities	(22,350		)	(3,668		)
Cash flow used in financing activities:
Borrowings of senior bank debt	177,000			—
Repayments of senior bank debt	(121,000		)	(233,514		)
Settlement of convertible securities	(208,730		)	—
Issuance of common stock	213,777			—
Repurchase of common stock	(10,502		)	—
Issuance costs	(939		)	(921		)
Excess tax benefit from exercise of stock options	2,886			—
Settlement of forward equity sale agreement	—			144,258
Note payments	878			(1,547		)
Distributions to non-controlling interests	(112,579		)	(57,857		)
Repurchases of Affiliate equity	(32,438		)	(16,385		)
Subscriptions (redemptions) of non-controlling interests in partnerships	3,652			(979		)
Cash flow used in financing activities	(87,995		)	(166,945		)
Effect of foreign exchange rate changes on cash and cash equivalents	(199		)	(456		)
Net decrease in cash and cash equivalents	(60,726		)	(159,140		)
Cash and cash equivalents at beginning of period	222,954			396,431
Cash and cash equivalents at end of period	$	162,228		$	237,291

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Affiliated Managers Group, Inc.

Notes

*	In the first quarter of 2009, the Company adopted Statement of Financial Accounting Standards (“FAS”) No. 141 (revised 2007), “Business Combinations” (“FAS 141R”), FAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (“FAS 160”), Emerging Issues Task Force Topic No. D-98 “Classification and Measurement of Redeemable Securities” (“Topic D-98”) and FASB Staff Position APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (including Partial Cash Settlement)” (“APB 14-1”), each of which is discussed in further detail in its 2008 Annual Report on Form 10-K. These accounting changes have been retrospectively applied to prior periods, and are reflected in the financial results presented herein.
(A)	Under our Cash Net Income definition, we add to Net Income (controlling interest) amortization and deferred taxes related to intangible assets and Affiliate depreciation and equity expense, and exclude the effect of APB 14-1. This supplemental non-GAAP performance measure is provided in addition to, but not as a substitute for, Net Income. The Company considers Cash Net Income an important measure of its financial performance, as management believes it best represents operating performance before non-cash expenses relating to the acquisition of interests in its affiliated investment management firms. Cash Net Income is used by the Company’s management and Board of Directors as a principal performance benchmark.
	The Company adds back amortization attributable to acquired client relationships because this expense does not correspond to the changes in value of these assets, which do not diminish predictably over time. The Company adds back the portion of deferred taxes generally attributable to intangible assets (including goodwill) that it no longer amortizes but which continues to generate tax deductions. These deferred tax expense accruals would be used in the event of a future sale of an Affiliate or an impairment charge, which the Company considers unlikely. The Company adds back the portion of consolidated depreciation expense incurred by Affiliates because under its Affiliate operating agreements, the Company is generally not required to replenish these depreciating assets.
	In connection with the recent accounting changes described above, in the first quarter of 2009 the Company modified its Cash Net Income definition to add back Affiliate equity and APB 14-1 expense (both net of tax). In prior periods, Cash Net Income was defined as “Net Income plus amortization and deferred taxes related to intangible assets plus Affiliate depreciation.” Under this definition, Cash Net Income reported for the first quarter of 2008 was $56,645.
(B)	EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization. This supplemental non-GAAP liquidity measure is provided in addition to, but not as a substitute for, cash flow from operations. As a measure of liquidity, the Company believes EBITDA is useful as an indicator of its ability to service debt, make new investments and meet working capital requirements. EBITDA, as calculated by the Company, may not be consistent with computations of EBITDA by other companies. In reporting EBITDA by segment, Affiliate expenses are allocated to a particular segment on a pro rata basis with respect to the revenue generated by that Affiliate in such segment.

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(C)	In accordance with APB 14-1, the Company has bifurcated certain of its convertible debt securities into their debt and equity components on its balance sheet. The senior convertible securities balance consists of zero coupon senior convertible notes, which were not required to be bifurcated, and senior convertible notes due 2038. The principal amount at maturity of the senior convertible notes due 2038 was $460,000 at December 31, 2008 and March 31, 2009. The principal amount at maturity of the junior convertible trust preferred securities was $730,820 at December 31, 2008 and March 31, 2009.
(D)	Convertible securities interest expense, net, includes the interest expense, net of tax, associated with the Company’s dilutive convertible securities (including the incremental interest expense attributable to APB 14-1 but excluding the interest expense associated with the Company’s mandatory convertible securities).
(E)	Other includes assets under management attributable to Affiliate product closings, the financial effect of which is not material to the Company’s ongoing results.
(F)	The Company is required to use the equity method of accounting for certain of its investments (“equity method investments”). Consistent with this method, the Company has not consolidated the operating results (including the revenue) of its equity method investments in its income statement. The Company’s share of its equity method investments’ profits, net of intangible amortization, is reported in “Income from equity method investments.” Income tax attributable to these profits is reported within the Company’s consolidated income tax provision. The assets under management of equity method investments are included in the Company’s reported assets under management.
(G)	Income attributable to non-controlling interests on the Company’s income statement represents the profits allocated to Affiliate management owners and investors in certain Affiliate investments in partnerships that the Company is required to consolidate. Non-controlling interests on the Company’s balance sheet represents the undistributed profits and capital owned by Affiliate management, who retain a conditional right to sell their interests to the Company. Non-controlling interests in partnerships on the Company’s balance sheet represent the net assets owned by investors in certain Affiliate investment partnerships, who retain the conditional right to redeem their interests to the investment partnership.

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