Affiliated Managers 8K Results of Operations and Financial Condition | MGR 1 Feb 11

Exhibit 99.3

Affiliated Managers Group, Inc.

Financial Highlights

(dollars in thousands, except per share data)

	Three Months		Three Months
	Ended		Ended
	12/31/09		12/31/10

Revenue	$	244,658	$	420,768

Net Income (controlling interest)	$	24,600	$	62,011

Economic Net Income (A)	$	59,957	$	106,561

EBITDA (B)	$	79,871	$	152,145


Average shares outstanding - diluted	44,852,911		52,747,453

Earnings per share - diluted	$	0.55	$	1.18

Average shares outstanding - adjusted diluted (C)	44,145,519		52,747,453

Economic earnings per share (C)	$	1.36	$	2.02

	December 31, 2009		December 31, 2010

Cash and cash equivalents	$	259,487	$	313,328

Senior bank debt	$	—	$	460,000

Senior convertible securities (D)	$	456,976	$	422,118

Junior convertible trust preferred securities (D)	$	507,358	$	509,872

Stockholders’ equity	$	1,109,690	$	1,799,963

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Affiliated Managers Group, Inc.

Financial Highlights

(dollars in thousands, except per share data)

	Year		Year
	Ended		Ended
	12/31/09		12/31/10

Revenue	$	841,840	$	1,358,242

Net Income (controlling interest)	$	59,473	$	138,633

Economic Net Income (A)	$	185,711	$	299,083

EBITDA (B)	$	242,787	$	404,391



Average shares outstanding - diluted	43,333,355		49,398,535

Earnings per share - diluted	$	1.38	$	2.81

Average shares outstanding - adjusted diluted (C)	42,533,898		49,113,690

Economic earnings per share (C)	$	4.37	$	6.09

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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
	12/31/09		12/31/10

Net Income (controlling interest)	$	24,600	$	62,011
Convertible securities interest expense, net (E)	36		—
Net Income (controlling interest), as adjusted	$	24,636	$	62,011

Average shares outstanding - diluted	44,852,911		52,747,453

Earnings per share - diluted	$	0.55	$	1.18

	Year		Year
	Ended		Ended
	12/31/09		12/31/10

Net Income (controlling interest)	$	59,473	$	138,633
Convertible securities interest expense, net (E)	144		53
Net Income (controlling interest), as adjusted	$	59,617	$	138,686

Average shares outstanding - diluted	43,333,355		49,398,535

Earnings per share - diluted	$	1.38	$	2.81

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Affiliated Managers Group, Inc.

Reconciliations of Average Shares Outstanding

	Three Months		Three Months
	Ended		Ended
	12/31/09		12/31/10

Average shares outstanding - diluted	44,852,911		52,747,453
Assumed issuance of LYONS shares	(873,803	)	—
Assumed issuance of 2008 Senior Convertible Notes shares	—		—
Assumed issuance of Trust Preferred shares	—		—
Dilutive impact of LYONS shares	166,411		—
Dilutive impact of 2008 Senior Convertible Notes shares	—		—
Dilutive impact of Trust Preferred shares	—		—
Average shares outstanding - adjusted diluted (C)	44,145,519		52,747,453

	Year		Year
	Ended		Ended
	12/31/09		12/31/10

Average shares outstanding - diluted	43,333,355		49,398,535
Assumed issuance of LYONS shares	(873,803	)	(383,671	)
Assumed issuance of 2008 Senior Convertible Notes shares	—		—
Assumed issuance of Trust Preferred shares	—		—
Dilutive impact of LYONS shares	74,346		98,826
Dilutive impact of 2008 Senior Convertible Notes shares	—		—
Dilutive impact of Trust Preferred shares	—		—
Average shares outstanding - adjusted diluted (C)	42,533,898		49,113,690

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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, September 30, 2010	$	74,889		$	172,422		$	32,366		$	279,677
New investments (F)	3,568			11,581			—			15,149
Client cash inflows	6,065			8,983			2,590			17,638
Client cash outflows	(5,216		)	(5,755		)	(1,982		)	(12,953		)
Net client cash flows	849			3,228			608			4,685
Investment performance	5,937			12,919			2,169			21,025
Other (G)	—			—			(490		)	(490		)
Assets under management, December 31, 2010	$	85,243		$	200,150		$	34,653		$	320,046

Statement of Changes - Year to Date

	Mutual Fund			Institutional			High Net Worth			Total

Assets under management, December 31, 2009	$	44,531		$	133,858		$	29,650		$	208,039
New investments (F)	26,471			37,641			427			64,539
Client cash inflows	21,368			29,777			7,596			58,741
Client cash outflows	(18,466		)	(24,224		)	(6,686		)	(49,376		)
Net client cash flows	2,902			5,553			910			9,365
Investment performance	9,765			25,415			4,156			39,336
Other (G)	1,574			(2,317		)	(490		)	(1,233		)
Assets under management, December 31, 2010	$	85,243		$	200,150		$	34,653		$	320,046

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Affiliated Managers Group, Inc.

Operating Results

(in thousands)

Financial Results

	Three			Three
	Months			Months
	Ended		Percent	Ended		Percent
	12/31/09		of Total	12/31/10		of Total
Revenue
Mutual Fund	$	91,798	37%	$	181,055	43%
Institutional	121,957		50%	204,141		49%
High Net Worth	30,903		13%	35,572		8%
	$	244,658	100%	$	420,768	100%

EBITDA (B)
Mutual Fund	$	26,790	34%	$	40,108	26%
Institutional	42,313		53%	97,314		64%
High Net Worth	10,768		13%	14,723		10%
	$	79,871	100%	$	152,145	100%

	Year			Year
	Ended		Percent	Ended		Percent
	12/31/09		of Total	12/31/10		of Total
Revenue
Mutual Fund	$	313,177	37%	$	578,790	43%
Institutional	415,605		49%	649,205		48%
High Net Worth	113,058		14%	130,247		9%
	$	841,840	100%	$	1,358,242	100%

EBITDA (B)
Mutual Fund	$	70,570	29%	$	119,364	29%
Institutional	139,671		58%	242,331		60%
High Net Worth	32,546		13%	42,696		11%
	$	242,787	100%	$	404,391	100%

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Affiliated Managers Group, Inc.

Reconciliations of Performance and Liquidity Measures

(in thousands)

	Three Months			Three Months
	Ended			Ended
	12/31/09			12/31/10

Net Income (controlling interest)	$	24,600		$	62,011
Intangible amortization	16,317			26,200
Intangible-related deferred taxes	13,256			12,595
Imputed interest and contingent payment adjustments	2,076			3,969
Affiliate equity expense	1,774			1,786
Affiliate depreciation	1,934			—
Economic Net Income (A)	$	59,957		$	106,561

Cash flow from operations	$	75,142		$	129,219
Interest expense, net of non-cash items	14,140			15,469
Current tax provision	8,407			26,344
Income from equity method investments, net of distributions	4,793			42,669
Changes in assets and liabilities and other adjustments	(22,611		)	(61,556		)
EBITDA (B)	$	79,871		$	152,145
Holding company expenses	14,878			23,085
EBITDA Contribution	$	94,749		$	175,230

	Year			Year
	Ended			Ended
	12/31/09			12/31/10

Net Income (controlling interest)	$	59,473		$	138,633
Intangible amortization	64,437			85,860
Intangible-related deferred taxes	38,552			47,465
Imputed interest and contingent payment adjustments	8,253			13,223
Affiliate equity expense	7,248			7,102
Affiliate depreciation	7,748			6,800
Economic Net Income (A)	$	185,711		$	299,083

Cash flow from operations	$	243,210		$	480,699
Interest expense, net of non-cash items	57,039			58,481
Current tax provision	(701		)	42,127
Income from equity method investments, net of distributions	8,087			43,911
Changes in assets and liabilities and other adjustments	(64,848		)	(220,827		)
EBITDA (B)	$	242,787		$	404,391
Holding company expenses	47,352			84,816
EBITDA Contribution	$	290,139		$	489,207

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Affiliated Managers Group, Inc.

Consolidated Statements of Income

(dollars in thousands, except per share data)

	Three Months Ended						Year Ended
	December 31,						December 31,
	2009			2010			2009			2010

Revenue	$	244,658		$	420,768		$	841,840		$	1,358,242

Operating expenses:
Compensation and related expenses	109,814			180,984			402,584			594,486
Selling, general and administrative	37,505			93,853			126,781			284,595
Amortization of intangible assets	8,508			21,020			32,939			60,066
Depreciation and other amortization	3,096			3,959			12,745			14,076
Other operating expenses	5,594			6,879			26,945			30,987
	164,517			306,695			601,994			984,210
Operating income	80,141			114,073			239,846			374,032

Non-operating (income) and expenses:
Investment and other income	(11,338		)	(7,977		)	(24,902		)	(22,905		)
Income from equity method investments	(9,662		)	(49,001		)	(31,632		)	(77,544		)
Investment (income) loss from Affiliate investments in partnerships (H)	(1,359		)	—			(27,425		)	4,493
Interest expense	16,045			17,428			64,600			66,178
Imputed interest expense	3,403			7,656			13,529			24,959
	(2,911		)	(31,894		)	(5,830		)	(4,819		)

Income before income taxes	83,052			145,967			245,676			378,851

Income taxes (I)	17,485			38,646			32,760			91,523
Net income	65,567			107,321			212,916			287,328

Net income (non-controlling interests)	(39,756		)	(45,310		)	(126,764		)	(153,080		)
Net (income) loss (non-controlling interests in partnerships) (H)	(1,211		)	—			(26,679		)	4,385

Net Income (controlling interest)	$	24,600		$	62,011		$	59,473		$	138,633

Average shares outstanding - basic	42,185,181			51,508,418			41,385,359			47,428,846
Average shares outstanding - diluted	44,852,911			52,747,453			43,333,355			49,398,535

Earnings per share - basic	$	0.58		$	1.20		$	1.44		$	2.92
Earnings per share - diluted	$	0.55		$	1.18		$	1.38		$	2.81

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Affiliated Managers Group, Inc.

Consolidated Balance Sheets

(in thousands)

	December 31,			December 31,
	2009			2010
Assets
Current assets:
Cash and cash equivalents	$	259,487		$	313,328
Investment advisory fees receivable	140,118			236,411
Investments in partnerships (H)	93,809			—
Investments in marketable securities	56,690			115,965
Unsettled fund share receivables	—			41,971
Prepaid expenses and other current assets	35,478			61,755
Total current assets	585,582			769,430

Fixed assets, net	62,402			67,725
Equity investments in Affiliates	658,332			678,931
Acquired client relationships, net	571,573			1,424,165
Goodwill	1,413,217			2,131,143
Other assets	99,800			219,821
Total assets	$	3,390,906		$	5,291,215

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	117,227		$	252,820
Unsettled fund share payables	—			39,845
Payables to related party	109,888			114,792
Total current liabilities	227,115			407,457

Senior bank debt	—			460,000
Senior convertible securities (D)	456,976			422,118
Junior convertible trust preferred securities (D)	507,358			509,872
Deferred income taxes	322,671			495,349
Other long-term liabilities	26,066			207,825
Total liabilities	1,540,186			2,502,621

Redeemable non-controlling interests	368,999			406,292

Equity:
Common stock	458			539
Additional paid-in capital	612,091			980,469
Accumulated other comprehensive income	45,958			100,464
Retained earnings	873,137			1,011,770
	1,531,644			2,093,242
Less treasury stock, at cost	(421,954		)	(293,279		)
Total stockholders’ equity	1,109,690			1,799,963

Non-controlling interests	281,946			582,339
Non-controlling interests in partnerships (H)	90,085			—
Total equity	1,481,721			2,382,302
Total liabilities and equity	$	3,390,906		$	5,291,215

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Affiliated Managers Group, Inc.

Consolidated Statements of Cash Flow

(in thousands)

	Three Months Ended						Year Ended
	December 31,						December 31,
	2009			2010			2009			2010
Cash flow from operating activities:
Net income	$	65,567		$	107,321		$	212,916		$	287,328
Adjustments to reconcile Net income to net cash flow from operating activities:
Amortization of intangible assets	8,508			21,020			32,939			60,066
Amortization of issuance costs	1,846			1,959			7,325			7,612
Depreciation and other amortization	3,096			3,959			12,745			14,076
Deferred income tax provision	8,003			11,122			28,704			35,420
Imputed interest expense	3,403			7,656			13,529			24,959
Income from equity method investments, net of amortization	(9,662		)	(49,001		)	(31,632		)	(77,544		)
Distributions received from equity method investments	12,908			14,336			55,453			65,756
Tax benefit from exercise of stock options	1,086			986			4,260			4,464
Share-based compensation	2,909			9,119			8,604			19,530
Affiliate equity expense	3,349			4,208			13,218			14,519
Other adjustments	(9,481		)	(527		)	(42,606		)	8,494
Changes in assets and liabilities:
Increase in investment advisory fees receivable	(7,396		)	(37,143		)	(6,552		)	(49,195		)
(Increase) decrease in Affiliate investments in partnerships	(46		)	—			285			(503		)
(Increase) decrease in prepaids and other current assets	1,635			(2,400		)	(8,389		)	(2,912		)
(Increase) decrease in other assets	446			8,478			3,315			(1,301		)
Decrease in unsettled fund shares receivable	—			14,698			—			14,125
Decrease in unsettled fund shares payable	—			(14,097		)	—			(10,578		)
Increase (decrease) in accounts payable, accrued liabilities and other long-term liabilities	(11,029		)	27,525			(60,904		)	66,383
Cash flow from operating activities	75,142			129,219			243,210			480,699
Cash flow used in investing activities:
Investments in Affiliates	—			(112,127		)	(139,271		)	(916,143		)
Purchase of fixed assets	(913		)	(3,447		)	(2,566		)	(8,762		)
Purchase of investment securities	(35,987		)	(20,763		)	(47,733		)	(63,967		)
Sale of investment securities	766			3,289			8,069			15,073
Cash flow used in investing activities	(36,134		)	(133,048		)	(181,501		)	(973,799		)
Cash flow from (used in) financing activities:
Borrowings of senior bank debt	142,000			169,000			142,000			1,191,500
Repayments of senior bank debt	(142,000		)	(80,000		)	(375,514		)	(731,500		)
Issuance of common stock	7,365			10,321			37,125			46,376
Issuance costs	(135		)	(605		)	(1,344		)	(935		)
Excess tax benefit from exercise of stock options	3,703			3,439			7,539			10,103
Settlement of forward equity sale agreement	—			—			144,258			294,657
Note payments	466			2,948			3,184			(28,836		)
Distributions to non-controlling interests	(17,468		)	(23,603		)	(119,555		)	(101,049		)
Affiliate equity issuances and repurchases	775			(19,652		)	(39,534		)	(135,775		)
Subscriptions (redemptions) of Non-controlling interests in partnerships	46			—			(425		)	503
Cash flow from (used in) financing activities	(5,248		)	61,848			(202,266		)	545,044

Effect of foreign exchange rate changes on cash and cash equivalents	477			(143		)	3,613			1,897
Net increase (decrease) in cash and cash equivalents	34,237			57,876			(136,944		)	53,841
Cash and cash equivalents at beginning of period	225,250			255,452			396,431			259,487
Cash and cash equivalents at end of period	$	259,487		$	313,328		$	259,487		$	313,328

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Affiliated Managers Group, Inc.

Notes

(in thousands)

(A) Under our Economic Net Income definition, we add to Net Income (controlling interest) amortization (including equity method amortization), deferred taxes related to intangible assets and Affiliate equity expense, and exclude the non-cash effect of imputed interest expense (principally APB 14-1 interest on convertible securities and non-cash expenses related to contingent payment arrangements). We consider Economic Net Income an important measure of our financial performance, as we believe it best represents operating performance before non-cash expenses relating to the acquisition of interests in our affiliated investment management firms, and it is therefore employed as our principal performance benchmark. This non-GAAP performance measure is provided in addition to, but not as a substitute for, Net Income; Economic Net Income is not a liquidity measure, and should not be used in place of liquidity measures calculated under GAAP.

We add 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 are no longer amortized but continue to generate tax deductions is added back because we believe it is unlikely these accruals will be used to settle material tax obligations. We add back non-cash expenses relating to certain transfers of equity between Affiliate management partners when these transfers have no dilutive effect to shareholders.

In the first quarter of 2010, we modified our Economic Net Income definition to exclude the effect of non-cash imputed interest and revaluation adjustments related to contingent payment arrangements from Net Income (controlling interest), and in the fourth quarter of 2010 we further modified the definition to no longer add back Affiliate depreciation to Net Income (controlling interest). If we had applied these definition changes to our results in the fourth quarter of 2009, Economic earnings per share for the three months and year ended December 31, 2009 would have been $1.14 and $4.14, 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, we believe EBITDA is useful as an indicator of our ability to service debt, make new investments and meet working capital requirements. EBITDA, as calculated by us, 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) Economic earnings per share represents Economic Net Income divided by the adjusted diluted average shares outstanding. In this calculation, the potential share issuance in connection with our convertible securities is measured using a “treasury stock” method. Under this method, only the net number of shares of common stock equal to the value of the contingently convertible securities and the junior convertible trust preferred securities in excess of par, if any, are deemed to be outstanding. We believe the inclusion of net shares under a treasury stock method best reflects the benefit of the increase in available capital resources (which could be used to repurchase sh ares of common stock) that occurs when these securities are converted and we are relieved of our debt obligation. This method does not take into account any increase or decrease in our cost of capital in an assumed conversion. Economic earnings per share is not a liquidity measure, and should not be used in place of liquidity measures calculated under GAAP.

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(D) We have bifurcated our convertible debt securities into their debt and equity components on our balance sheet. The principal amount at maturity of the senior convertible notes due 2038 was $460,000 at December 31, 2009 and December 31, 2010. The principal amount at maturity of the junior convertible trust preferred securities was $730,820 at December 31, 2009 and December 31, 2010.

(E) Convertible securities interest expense, net, includes the interest expense, net of tax, associated with our dilutive convertible securities.

(F) We completed our investment in Artemis Investment Management during the first quarter of 2010; we completed our investments in Pantheon and Aston Asset Management during the second quarter of 2010; and we completed our investment in Trilogy Global Advisors in the fourth quarter of 2010.

(G) Other includes assets under management attributable to Affiliate product transitions and transfers of our interests in certain Affiliated investment management firms, the financial effects of which are not material to our ongoing results.

(H) At December 31, 2009, assets of consolidated investment partnerships are reported as Investments in partnerships. A majority of these assets are held by investors that are unrelated to us, and reported as Non-controlling interests in partnerships. Income from these partnerships is presented as Investment (income) loss from Affiliate investments in partnerships in the Consolidated Statements of Income. In the third quarter of 2010 we deconsolidated these partnerships.

(I) Our consolidated income tax provision includes taxes attributable to controlling interests, and to a lesser extent, taxes attributable to non-controlling interests, as follows:

	Three Months Ended						Year Ended
	December 31,						December 31,
	2009			2010			2009			2010
Current income taxes	$	8,407		$	26,344		$	(701	)	$	42,127
Intangible-related deferred taxes	13,256			12,595			38,552			47,465
Other deferred taxes	(5,253		)	(898		)	(9,848		)	(9,255		)
Taxes attributable to controlling interests	16,410			38,041			28,003			80,337
Taxes attributable to non-controlling interests	1,075			605			4,757			11,186
Total income taxes	$	17,485		$	38,646		$	32,760		$	91,523

Effective tax rate*	40.0		%	38.0		%	32.0		%	36.8		%

* Taxes attributable to controlling interests divided by our share of the consolidated income before taxes.

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