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
	6/30/08*		6/30/09
Revenue	$	308,964	$	201,246
Net Income (controlling interest)	$	34,635	$	10,979
Cash Net Income (A)	$	62,088	$	42,419
EBITDA (B)	$	88,305	$	53,155
Average shares outstanding - diluted	42,371,454		43,159,140
Earnings per share - diluted	$	0.82	$	0.26

	December 31, 2008*		June 30, 2009
Cash and cash equivalents	$	396,431	$	274,369
Senior debt	$	233,514	$	—
Senior convertible securities (C)	$	445,535	$	451,255
Junior convertible trust preferred securities (C)	$	505,034	$	506,169
Stockholders’ equity	$	924,801	$	1,105,253

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Affiliated Managers Group, Inc.

Financial Highlights

(dollars in thousands, except per share data)

	Six Months		Six Months
	Ended		Ended
	6/30/08*		6/30/09
Revenue	$	643,998	$	379,721
Net Income (controlling interest)	$	65,858	$	17,104
Cash Net Income (A)	$	120,275	$	80,125
EBITDA (B)	$	176,876	$	102,383
Average shares outstanding - diluted	41,597,282		42,082,991
Earnings per share - diluted	$	1.63	$	0.41

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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
	6/30/08*		6/30/09
Net Income (controlling interest)	$	34,635	$	10,979
Convertible securities interest expense, net (D)	81		36
Net Income (controlling interest), as adjusted	$	34,716	$	11,015
Average shares outstanding - diluted	42,371,454		43,159,140
Earnings per share - diluted	$	0.82	$	0.26

	Six Months		Six Months
	Ended		Ended
	6/30/08*		6/30/09
Net Income (controlling interest)	$	65,858	$	17,104
Convertible securities interest expense, net (D)	2,075		72
Net Income (controlling interest), as adjusted	$	67,933	$	17,176
Average shares outstanding - diluted	41,597,282		42,082,991
Earnings per share - diluted	$	1.63	$	0.41

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Affiliated Managers Group, Inc.

Operating Results

(in millions)

Assets Under Management

Statement of Changes - Quarter to Date

	Mutual Fund			Institutional			High Net Worth			Total
Assets under management, March 31, 2009	$	30,623		$	98,379		$	23,914		$	152,916
Client cash inflows	1,927			7,965			1,296			11,188
Client cash outflows	(2,994		)	(8,342		)	(1,404		)	(12,740		)
Net client cash flows	(1,067		)	(377		)	(108		)	(1,552		)
Investment performance	5,636			16,054			2,891			24,581
Other (E)	—			(2,130		)	(11		)	(2,141		)
Assets under management, June 30, 2009	$	35,192		$	111,926		$	26,686		$	173,804

Statement of Changes - Year to Date

	Mutual Fund			Institutional			High Net Worth			Total
Assets under management, December 31, 2008	$	34,704		$	109,450		$	25,991		$	170,145
Client cash inflows	3,402			15,190			2,616			21,208
Client cash outflows	(5,663		)	(18,141		)	(3,362		)	(27,166		)
Net client cash flows	(2,261		)	(2,951		)	(746		)	(5,958		)
Investment performance	2,749			10,146			1,511			14,406
Other (E)	—			(4,719		)	(70		)	(4,789		)
Assets under management, June 30, 2009	$	35,192		$	111,926		$	26,686		$	173,804

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Affiliated Managers Group, Inc.

Operating Results

(in thousands)

Financial Results

	Three			Three
	Months			Months
	Ended		Percent	Ended		Percent
	6/30/08*		of Total	6/30/09		of Total
Revenue
Mutual Fund	$	125,980	41%	$	72,360	36%
Institutional	147,409		48%	101,491		50%
High Net Worth	35,575		11%	27,395		14%
	$	308,964	100%	$	201,246	100%
EBITDA (B)
Mutual Fund	$	30,079	34%	$	14,391	27%
Institutional	47,317		54%	31,690		60%
High Net Worth	10,909		12%	7,074		13%
	$	88,305	100%	$	53,155	100%

	Six			Six
	Months			Months
	Ended		Percent	Ended		Percent
	6/30/08*		of Total	6/30/09		of Total
Revenue
Mutual Fund	$	260,843	40%	$	140,698	37%
Institutional	307,488		48%	183,729		48%
High Net Worth	75,667		12%	55,294		15%
	$	643,998	100%	$	379,721	100%
EBITDA (B)
Mutual Fund	$	61,221	35%	$	29,266	28%
Institutional	94,751		53%	59,127		58%
High Net Worth	20,904		12%	13,990		14%
	$	176,876	100%	$	102,383	100%

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Affiliated Managers Group, Inc.

Reconciliations of Performance and Liquidity Measures

(in thousands)

	Three Months			Three Months
	Ended			Ended
	6/30/08*			6/30/09
Net Income (controlling interest)	$	34,635		$	10,979
Intangible amortization	13,500			16,000
Intangible-related deferred taxes	9,040			9,544
APB 14-1 expense	375			2,053
Affiliate equity expense	2,858			1,889
Affiliate depreciation	1,680			1,954
Cash Net Income (A)	$	62,088		$	42,419
Cash flow from operations	$	179,573		$	72,214
Interest expense, net of non-cash items	15,705			13,928
Current tax provision	12,356			(1,126		)
Income from equity method investments, net of distributions	1,821			5,428
Changes in assets and liabilities and other adjustments	(121,150		)	(37,289		)
EBITDA (B)	$	88,305		$	53,155
Holding company expenses	15,700			10,537
EBITDA Contribution	$	104,005		$	63,692

	Six Months			Six Months
	Ended			Ended
	6/30/08*			6/30/09
Net Income (controlling interest)	$	65,858		$	17,104
Intangible amortization	26,800			32,000
Intangible-related deferred taxes	18,061			19,115
APB 14-1 expense	1,457			4,110
Affiliate equity expense	4,873			3,895
Affiliate depreciation	3,226			3,901
Cash Net Income (A)	$	120,275		$	80,125
Cash flow from operations	$	242,780		$	87,905
Interest expense, net of non-cash items	35,796			28,650
Current tax provision	25,501			(9,171		)
Income from equity method investments, net of distributions	(12,146		)	809
Changes in assets and liabilities and other adjustments	(115,055		)	(5,810		)
EBITDA (B)	$	176,876		$	102,383
Holding company expenses	33,241			21,049
EBITDA Contribution	$	210,117		$	123,432

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Affiliated Managers Group, Inc.

Consolidated Statements of Income

(dollars in thousands, except per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008*			2009			2008*			2009
Revenue	$	308,964		$	201,246		$	643,998		$	379,721
Operating expenses:
Compensation and related expenses	140,822			103,373			291,902			187,533
Selling, general and administrative	48,178			32,157			101,028			64,664
Amortization of intangible assets	8,551			8,044			16,901			16,138
Depreciation and other amortization	2,902			3,243			5,676			6,482
Other operating expenses	5,050			4,736			10,463			10,486
	205,503			151,553			425,970			285,303
Operating income	103,461			49,693			218,028			94,418
Non-operating (income) and expenses:
Investment and other (income) loss	(426		)	(7,191		)	1,513			(6,950		)
Income from equity method investments	(13,414		)	(7,351		)	(27,402		)	(13,767		)
Investment (income) loss from Affiliateinvestments in partnerships (F)	(5,404		)	(14,947		)	8,930			(11,152		)
Interest expense	16,927			19,193			39,864			39,141
	(2,317		)	(10,296		)	22,905			7,272
Income before income taxes	105,778			59,989			195,123			87,146
Income taxes - current	12,356			(1,126		)	25,501			(9,171		)
Income taxes - intangible-related deferred	9,040			9,544			18,061			19,115
Income taxes - other deferred	(1,055		)	(4,678		)	(4,884		)	(2,287		)
Net income	85,437			56,249			156,445			79,489
Net income (non-controlling interests) (F)	(45,650		)	(30,671		)	(98,824		)	(51,549		)
Net (income) loss (non-controlling interests in partnerships) (F)	(5,152		)	(14,599		)	8,237			(10,836		)
Net Income (controlling interest)	$	34,635		$	10,979		$	65,858		$	17,104
Average shares outstanding - basic	39,300,624			41,450,659			36,885,373			40,740,486
Average shares outstanding - diluted	42,371,454			43,159,140			41,597,282			42,082,991
Earnings per share - basic	$	0.88		$	0.26		$	1.79		$	0.42
Earnings per share - diluted	$	0.82		$	0.26		$	1.63		$	0.41

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Affiliated Managers Group, Inc.

Consolidated Balance Sheets

(in thousands)

	December 31,			June 30,
	2008*			2009
Assets
Current assets:
Cash and cash equivalents	$	396,431		$	274,369
Investment advisory fees receivable	131,099			113,899
Affiliate investments in partnerships (F)	68,789			78,560
Affiliate investments in marketable securities	10,399			13,789
Prepaid expenses and other current assets	23,968			27,591
Total current assets	630,686			508,208
Fixed assets, net	71,845			66,885
Equity investments in Affiliates	678,887			664,669
Acquired client relationships, net	491,408			476,571
Goodwill	1,243,583			1,255,793
Other assets	96,291			108,170
Total assets	$	3,212,700		$	3,080,296
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	183,794		$	118,909
Payables to related party	26,187			2,907
Total current liabilities	209,981			121,816
Senior debt	233,514			—
Senior convertible securities (C)	445,535			451,255
Junior convertible trust preferred securities (C)	505,034			506,169
Deferred income taxes	319,491			338,047
Other long-term liabilities	30,414			26,133
Total liabilities	1,743,969			1,443,420
Redeemable non-controlling interests	297,733			307,066
Equity:
Common stock	458			458
Additional paid-in capital	817,713			762,292
Accumulated other comprehensive income	(4,081		)	10,723
Retained earnings	813,664			830,768
	1,627,754			1,604,241
Less treasury stock, at cost	(702,953		)	(498,988		)
Total stockholders’ equity	924,801			1,105,253
Non-controlling interests (F)	180,732			149,252
Non-controlling interests in partnerships (F)	65,465			75,305
Total equity	1,170,998			1,329,810
Total liabilities and equity	$	3,212,700		$	3,080,296

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Affiliated Managers Group, Inc.

Consolidated Statements of Cash Flow

(in thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008*			2009			2008*			2009
Cash flow from operating activities:
Net income	$	85,437		$	56,249		$	156,445		$	79,489
Adjustments to reconcile Net income to net cash flow from operating activities:
Amortization of intangible assets	8,551			8,044			16,901			16,138
Amortization of issuance costs	530			1,841			1,209			3,636
Depreciation and other amortization	2,902			3,243			5,676			6,482
Deferred income tax provision	7,985			4,866			13,177			16,828
Accretion of interest	692			3,424			2,859			6,855
Income from equity method investments, net of amortization	(13,414		)	(7,351		)	(27,402		)	(13,767		)
Distributions received from equity method investments	16,542			9,879			49,447			28,820
Tax benefit from exercise of stock options	1,606			1,459			2,279			1,459
Stock option expense	3,617			1,958			7,400			3,135
Affiliate equity expense	4,475			3,469			7,610			6,719
Other adjustments	(6,650		)	(21,248		)	6,280			(18,698		)
Changes in assets and liabilities:
(Increase) decrease in investment advisory fees receivable	30,874			(11,447		)	58,924			17,895
(Increase) decrease in Affiliate investments in partnerships	(72		)	(648		)	(6,656		)	331
(Increase) decrease in prepaids and other current assets	(1,616		)	(9,470		)	18,380			(9,213		)
Decrease in other assets	7,357			1,085			9,111			2,915
Increase (decrease) in accounts payable, accrued liabilities and other long-term liabilities	30,757			26,861			(78,860		)	(61,119		)
Cash flow from operating activities	179,573			72,214			242,780			87,905
Cash flow used in investing activities:
Cost of new investments, net of cash acquired	(50,000		)	(1,411		)	(60,909		)	(1,412		)
Purchase of fixed assets	(2,592		)	(663		)	(5,140		)	(1,215		)
Purchase of investment securities	(9,001		)	(2,911		)	(23,444		)	(11,746		)
Sale of investment securities	9,451			—			15,001			5,720
Cash flow used in investing activities	(52,142		)	(4,985		)	(74,492		)	(8,653		)
Cash flow used in financing activities:
Borrowings of senior bank debt	124,000			—			301,000			—
Repayments of senior bank debt	(126,500		)	—			(247,500		)	(233,514		)
Settlement of convertible securities	—			—			(208,730		)	—
Issuance of common stock	19,026			11,622			232,803			11,622
Repurchase of common stock	(14,252		)	—			(24,754		)	—
Issuance costs	(1,002		)	—			(1,941		)	(921		)
Excess tax benefit from exercise of stock options	6,921			1,086			9,807			1,086
Settlement of derivative contracts	8,154			—			8,154			—
Settlement of forward equity sale agreement	—			—			—			144,258
Note payments	946			(2,932		)	1,824			(4,479		)
Distributions to non-controlling interests	(59,118		)	(25,506		)	(185,086		)	(87,125		)
Repurchases of Affiliate equity	(54,243		)	(16,421		)	(86,681		)	(32,806		)
Subscriptions (redemptions) of Non-controlling interests in partnerships	4			508			3,656			(471		)
Cash flow used in financing activities	(96,064		)	(31,643		)	(197,448		)	(202,350		)
Effect of foreign exchange rate changes on cash and cash equivalents	(358		)	1,492			(557		)	1,036
Net increase (decrease) in cash and cash equivalents	31,009			37,078			(29,717		)	(122,062		)
Cash and cash equivalents at beginning of period	162,228			237,291			222,954			396,431
Cash and cash equivalents at end of period	$	193,237		$	274,369		$	193,237		$	274,369

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 Quarterly Report on Form 10-Q for the first quarter of 2009. 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 (including equity method amortization) and deferred taxes related to intangible assets and Affiliate depreciation and equity expenses, 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 portion of deferred taxes generally attributable to intangible assets (including goodwill) that it no longer amortizes but which continues to generate tax deductions is added back because the Company believes it is unlikely these accruals will be used to settle material tax obligations. The Company adds back non-cash expenses relating to certain transfers of equity between Affiliate management partners when these transfers have no dilutive effect to shareholders. 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 expenses (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 three and six months ended June 30, 2008 was $59,515 and $116,160, respectively.
(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.
(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 June 30, 2009. The principal amount at maturity of the junior convertible trust preferred securities was $730,820 at December 31, 2008 and June 30, 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)	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.