SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 001-13459
AFFILIATED MANAGERS GROUP, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 04-3218510
-------- ----------
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number)
TWO INTERNATIONAL PLACE, BOSTON, MASSACHUSETTS 02110
----------------------------------------------------
(Address of principal executive offices)
(617) 747-3300
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares of the Registrant's Common Stock outstanding as of
August 10, 2001 was 22,161,076.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
December 31, 2000 June 30, 2001
---------------------- --------------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents.................................... $ 31,612 $ 175,835
Investment advisory fees receivable.......................... 66,126 54,286
Other current assets ........................................ 15,448 10,248
---------------------- --------------------
Total current assets................................... 113,186 240,369
Fixed assets, net............................................... 15,346 14,815
Equity investment in Affiliate.................................. 1,816 1,905
Acquired client relationships, net of accumulated amortization
of $33,775 in 2000 and $39,701 in 2001....................... 199,354 197,052
Goodwill, net of accumulated amortization of $51,939 in 2000
and $59,854 in 2001.......................................... 444,116 444,407
Other assets.................................................... 19,912 21,590
---------------------- --------------------
Total assets............................................ $ 793,730 $ 920,138
====================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities..................... $ 86,800 $ 60,950
---------------------- --------------------
Total current liabilities............................... 86,800 60,950
Long-term debt.................................................. 151,000 277,313
Deferred taxes.................................................. 31,907 34,164
Other long-term liabilities..................................... 2,636 2,765
Subordinated debt............................................... 800 800
---------------------- --------------------
Total liabilities....................................... 273,143 375,992
Minority interest............................................... 26,677 20,484
Commitments and contingencies................................... -- --
Stockholders' equity:
Common stock.................................................. 235 235
Additional paid-in capital.................................... 407,057 408,356
Accumulated other comprehensive income (loss)................. (342) (1,070)
Retained earnings............................................. 140,513 165,549
---------------------- --------------------
547,463 573,070
Less treasury stock, at cost.................................. (53,553) (49,408)
Total stockholders' equity.............................. 493,910 523,662
---------------------- --------------------
Total liabilities and stockholders' equity.............. $ 793,730 $ 920,138
====================== ====================
</Table>
The accompanying notes are an integral part of the consolidated
financial statements.
2
AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------------------- -------------------------------
2000 2001 2000 2001
------------- --------------- ------------- -------------
Revenues................................. $ 110,895 $ 100,663 $ 225,693 $ 201,138
Operating expenses:
Compensation and related expenses..... 40,154 32,698 84,569 66,906
Amortization of intangible assets..... 6,609 6,940 13,053 13,842
Depreciation and other amortization... 984 1,428 1,937 2,786
Selling, general and administrative... 18,759 19,034 35,387 37,115
Other operating expenses.............. 2,409 2,673 4,832 5,288
------------- --------------- ------------- ---------------
68,915 62,773 139,778 125,937
------------- --------------- ------------- ---------------
Operating income.................. 41,980 37,890 85,915 75,201
Non-operating (income) and expenses:
Investment and other income........... (582) (1,470) (2,220) (1,994)
Interest expense...................... 4,142 3,351 7,989 6,512
------------- --------------- ------------- ---------------
3,560 1,881 5,769 4,518
------------- --------------- ------------- ---------------
Income before minority interest and
taxes................................. 38,420 36,009 80,146 70,683
Minority interest........................ (15,240) (14,164) (33,551) (28,956)
------------- --------------- ------------- ---------------
Income before income taxes............... 23,180 21,845 46,595 41,727
Income taxes............................. 9,503 8,738 19,103 16,690
------------- --------------- ------------- ---------------
Net income............................... $ 13,677 $ 13,107 $ 27,492 $ 25,037
============= =============== ============= ===============
Earnings per share - basic............... $ 0.62 $ 0.59 $ 1.22 $ 1.13
Earnings per share - diluted............. $ 0.61 $ 0.58 $ 1.21 $ 1.11
Average shares outstanding - basic....... 22,187,587 22,109,068 22,455,041 22,086,244
Average shares outstanding - diluted..... 22,507,064 22,654,951 22,803,699 22,612,010
The accompanying notes are an integral part of the consolidated
financial statements.
3
AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
For the Six Months
Ended June 30,
--------------------------------
2000 2001
------------- ---------------
Cash flow from operating activities:
Net income................................................................. $27,492 $25,037
Adjustments to reconcile net income to net cash flow from operating activities:
Amortization of intangible assets.......................................... 13,053 13,842
Depreciation and other amortization........................................ 1,937 2,786
Deferred income tax provision.............................................. 4,853 2,743
Reclassification of FAS 133 adjustment to net income....................... -- 1,467
FAS 133 transition adjustment.............................................. -- (2,201)
Changes in assets and liabilities:
Decrease in investment advisory fees receivable............................ 184,243 11,840
(Increase) decrease in other current assets................................ (4,084) 5,200
Decrease in non-current other receivables.................................. 2,621 5,465
Decrease in accounts payable, accrued expenses and other liabilities....... (105,652) (26,204)
Minority interest.......................................................... (33,433) (6,193)
------------- -------------
Cash flow from operating activities................................. 91,030 33,782
------------- -------------
Cash flow used in investing activities:
Purchase of fixed assets................................................... (8,493) (1,953)
Costs of investments, net of cash acquired................................. (99,853) (13,331)
Increase in other assets................................................... (426) (101)
Loans to employees......................................................... (130) --
------------- -------------
Cash flow used in investing activities............................... (108,902) (15,385)
------------- -------------
Cash flow from financing activities:
Borrowings of senior bank debt............................................. 165,500 49,300
Repayments of senior bank debt............................................. (117,000) (150,300)
Issuances of debt securities............................................... -- 227,313
Issuances of equity securities............................................. 4,156 6,142
Repurchase of stock........................................................ (39,635) (698)
Debt issuance costs........................................................ (15) (5,932)
------------- -------------
Cash flow from financing activities.................................. 13,006 125,825
Effect of foreign exchange rate changes on cash flow.......................... (148) 1
Net increase (decrease) in cash and cash equivalents.......................... (5,014) 144,223
Cash and cash equivalents at beginning of period............................ 53,879 31,612
------------- -------------
Cash and cash equivalents at end of period.................................... $48,865 $175,835
============= =============
The accompanying notes are an integral part of the consolidated
financial statements.
4
1. BASIS OF PRESENTATION
The consolidated financial statements of Affiliated Managers Group,
Inc. (the "Company" or "AMG") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The year-end condensed
balance sheet data was derived from audited financial statements, but does not
include all of the disclosures required by generally accepted accounting
principles. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. All material intercompany balances and transactions have been
eliminated. All dollar amounts except per share data in the text and tables
herein are stated in thousands unless otherwise indicated. Operating results for
interim periods are not necessarily indicative of the results that may be
expected for the full year. The Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000 includes additional information about AMG,
its operations, and its financial position, and should be read in conjunction
with this quarterly report on Form 10-Q.
2. RECENT ACCOUNTING DEVELOPMENTS
In July 2001, the Financial Accounting Standards Board issued
Financial Accounting Standard No. 141 (FAS 141), "Business Combinations," and
Financial Accounting Standard No. 142 (FAS 142), "Goodwill and Other
Intangible Assets." FAS 141 limits the method of accounting for business
combinations to the purchase method and establishes new criteria for the
recognition of other intangible assets. FAS 142 requires that goodwill and
other intangible assets with indefinite lives no longer be amortized, but
instead be tested for impairment at least annually.
FAS 141 became effective as of July 1, 2001, except with regard to
business combinations initiated prior to that date. While FAS 142 will
generally become effective January 1, 2002, goodwill and any other intangible
assets determined to have indefinite lives that are acquired in a purchase
business combination completed after June 30, 2001 will not be amortized from
the date of their acquisition.
Upon the effectiveness of FAS 142, FAS 141 requires that goodwill
acquired in prior purchase business combinations be evaluated and any
necessary reclassifications be made to separate other intangible assets
(which meet the new FAS 141 criteria) from goodwill. FAS 141 also requires
that intangibles acquired in prior business combinations be reviewed for
impairment under the new rules upon the effectiveness of FAS 142. Any
impairment loss will be measured as of the date of the adoption and
recognized as a cumulative effect of a change in accounting principle in the
first interim period. At this time, the Company does not expect that the
adoption of these statements will result in any reclassification of goodwill
or impairment of intangible assets.
3. DERIVATIVE FINANCIAL INSTRUMENTS
On January 1, 2001, the Company adopted Financial Accounting
Standard No. 133 (FAS 133), "Accounting for Derivative Instruments and
Hedging Activities," as amended by Financial Accounting Standard No. 138,
"Accounting For Certain Derivative Instruments and Certain Hedging
Activities." FAS 133 requires that all derivatives be recorded on the balance
sheet at fair value and establishes criteria for designation and
effectiveness of hedging relationships. The cumulative effect of adopting FAS
133 was not material to the Company's consolidated financial statements.
The Company is exposed to interest rate risk inherent in its
variable rate debt liabilities. The Company's risk management strategy uses
financial instruments, specifically interest rate swap contracts, to hedge
certain interest rate exposures. In entering into these contracts, AMG
intends to offset cash flow gains and losses that occur on its existing debt
liabilities with cash flow losses and gains on the contracts hedging these
liabilities. The Company agrees with a counterparty (typically a major
commercial bank) to exchange the difference between fixed-rate and
floating-rate interest amounts calculated by reference to an agreed notional
principal amount. The Company intends to hold its current interest rate swap
contracts until their maturity. During the period ended June 30, 2001, the
Company did not discontinue hedging activities or terminate variable debt
instruments.
The Company records all derivatives on the balance sheet at fair value.
As the Company's hedges are designated and qualify as cash flow hedges, the
effective portion of the unrealized gain or loss on the derivative instrument is
recorded in accumulated other comprehensive income as a separate component of
stockholders' equity and reclassified into earnings when periodic settlement of
variable rate liabilities are recorded in earnings. For interest
5
rate swaps, hedge effectiveness is measured by comparing the present value of
the cumulative change in the expected future variable cash flows of the
hedged contract with the present value of the cumulative change in the
expected future variable cash flows of the hedged item, both of which are
based on LIBOR rates. To the extent that the critical terms of the hedged
item and the derivative are not identical, hedge ineffectiveness is reported
in earnings as interest expense. Hedge ineffectiveness was not material in
the second quarter of fiscal 2001.
At June 30, 2001, the net fair value of the Company's interest rate
swap liability was $481, and was recorded on the consolidated balance sheet in
accounts payable and accrued liabilities. AMG estimates the fair values of
derivatives based on quoted market prices.
At June 30, 2001, the Company had recorded approximately $729 of net
unrealized losses on derivative instruments, net of taxes, in accumulated other
comprehensive income. AMG expects that approximately 40% of these losses will be
reclassified to earnings within one year, and that the remainder will be
reclassified to earnings after one year.
4. COMPREHENSIVE INCOME
The Company's comprehensive income includes net income, changes in
unrealized foreign currency gains and losses and changes in unrealized gains and
losses on derivative instruments, which also include the cumulative effect of
adopting FAS 133. Comprehensive income, net of taxes, was as follows:
For the Three Months For the Six Months
Ended June 30, Ended June 30,
----------------------------- -------------------------------
2000 2001 2000 2001
------------- ----------- ------------- --------------
Net income...................................... $ 13,677 $ 13,107 $ 27,492 $ 25,037
Change in unrealized foreign currency gains
(losses)...................................... (124) 17 (148) 25
Change in net unrealized loss on derivative
instruments................................... -- (149) -- (289)
Cumulative effect of change in accounting
principle - FAS 133 transition adjustment..... -- -- -- (1,321)
Reclassification of FAS 133 transition
adjustment to net income...................... -- 716 -- 881
------------- ----------- ------------- --------------
Comprehensive income............................ $ 13,553 $ 13,691 $ 27,344 $ 24,333
============= =========== ============= ==============
The components of accumulated other comprehensive income, net of taxes, were as
follows:
December 31, 2000 June 30, 2001
------------------------ --------------------
Foreign currency translation adjustment................. $ (342) $ (341)
Unrealized loss on derivative instruments............... --- (729)
------------------------ --------------------
Accumulated other comprehensive income (loss)........... $ (342) $(1,070)
======================== ====================
5. ACQUISITIONS
On June 29, 2001, the Company's Affiliate, Renaissance Investment
Management, completed its merger with Bowling Portfolio Management. AMG owns a
majority of the combined firm. This merger transaction was funded through the
Company's working capital.
6
6. INCOME TAXES
A summary of the provision for income taxes is as follows:
For the Three Months For the Six Months
Ended June 30, Ended June 30,
----------------------------- -------------------------------
2000 2001 2000 2001
------------- ----------- ------------- --------------
Federal:
Current.................................... $ 6,213 $ 7,096 $ 12,182 $ 12,203
Deferred................................... 1,908 550 4,126 2,401
State:
Current.................................... 1,035 1,014 2,068 1,744
Deferred................................... 347 78 727 342
------------- ----------- ------------- --------------
Provisions for income taxes................... $ 9,503 $ 8,738 $ 19,103 $ 16,690
============= =========== ============= ==============
7. EARNINGS PER SHARE
The calculation of basic earnings per share is based on the weighted
average of common shares outstanding during the period. The following is a
reconciliation of the numerators and denominators of the basic and diluted
earnings per share computations. Unlike all other dollar amounts in these
footnotes, net income in this table is not presented in thousands.
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------------------- -------------------------------
2000 2001 2000 2001
------------- ------------- ------------- --------------
Numerator:
Net Income................................. $ 13,677,000 $ 13,107,000 $ 27,492,000 $ 25,037,000
Denominator:
Average shares outstanding - basic......... 22,187,587 22,109,068 22,455,041 22,086,244
Incremental shares of stock options........ 319,477 545,883 348,658 525,766
------------- ------------- ------------- --------------
Average shares outstanding - diluted....... 22,507,064 22,654,951 22,803,699 22,612,010
Earnings per share:
Basic...................................... $ 0.62 $ 0.59 $ 1.22 $ 1.13
Diluted.................................... $ 0.61 $ 0.58 $ 1.21 $ 1.11
In April 2000, the Board of Directors authorized a share repurchase
program pursuant to which AMG can repurchase up to five percent of its issued
and outstanding shares of Common Stock, with the timing of purchases and the
amount of stock purchased determined at the discretion of AMG's management. The
Board of Directors authorized a similar repurchase program in 1999. For the
twelve-month and eighteen-month periods ended June 30, 2001, the Company
repurchased a total of 209,500 and 1,275,800 shares of Common Stock,
respectively, under these two programs.
8. LONG-TERM DEBT
At June 30, 2001, long-term debt was $277,313, consisting of $50,000 of
senior bank debt and $227,313 of zero-coupon senior convertible notes. Long-term
debt consisted of $151,000 of senior bank debt at December 31, 2000.
The zero-coupon senior convertible notes were privately placed by
the Company in an offering completed in May 2001. The Company issued $251,000
principal amount at maturity zero-coupon senior convertible debt securities
due 2021 for aggregate proceeds (net of transaction costs) of approximately
$221,000. Approximately $101,000 of the net proceeds were used to repay debt;
the balance is available for other general business purposes. Each security
was issued at 90.50% of principal amount at maturity, accretes at a rate of
0.50% per annum and is convertible into 11.62 shares of the Company's Common
Stock if certain
7
conditions are met. The Company has the option to redeem the securities for cash
on or after May 7, 2006 and may be required to repurchase the securities at the
accreted value at the option of the holders on May 7 of 2002, 2004, 2006, 2011
and 2016. If the holders exercise this option the Company may elect to
repurchase the securities in cash, shares of its Common Stock or some
combination thereof. In June 2001, a registration statement registering the
securities under the Securities Act of 1933 for resale by the holders became
effective.
9. SUBSEQUENT EVENTS
On July 30, 2001, the Company and Welch & Forbes, Inc. and Welch &
Forbes (a Partnership) (collectively, Welch & Forbes) entered into a
definitive agreement for the Company to acquire a majority equity interest in
Welch & Forbes. Following the transaction, the Company will own a 60%
interest in Welch & Forbes, with Welch & Forbes' management retaining the
remaining 40%. The transaction is expected to close upon receipt of customary
approvals.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
WHEN USED IN THIS FORM 10-Q AND IN OUR FUTURE FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION, IN OUR PRESS RELEASES AND IN ORAL STATEMENTS
MADE WITH THE APPROVAL OF AN AUTHORIZED EXECUTIVE OFFICER, THE WORDS OR PHRASES
"WILL LIKELY RESULT," "ARE EXPECTED TO," "WILL CONTINUE," "IS ANTICIPATED,"
"BELIEVES," "ESTIMATE," "PROJECT," OR SIMILAR EXPRESSIONS ARE INTENDED TO
IDENTIFY "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS ARE SUBJECT TO CERTAIN
RISKS AND UNCERTAINTIES, INCLUDING, AMONG OTHERS, THE FOLLOWING:
o OUR PERFORMANCE IS DIRECTLY AFFECTED BY CHANGING CONDITIONS IN
THE FINANCIAL AND SECURITIES MARKETS, AND A DECLINE OR A LACK
OF SUSTAINED GROWTH IN THE FINANCIAL MARKETS MAY RESULT IN
DECREASED ADVISORY FEES OR PERFORMANCE FEES AND A
CORRESPONDING DECLINE (OR LACK OF GROWTH) IN THE CASH FLOW
DISTRIBUTABLE TO US FROM OUR AFFILIATES;
o WE CANNOT BE CERTAIN THAT WE WILL BE SUCCESSFUL IN FINDING OR
INVESTING IN ADDITIONAL INVESTMENT MANAGEMENT FIRMS ON
FAVORABLE TERMS OR IN COMPLETING ANY PENDING INVESTMENTS, OR
THAT EXISTING AND NEW AFFILIATES WILL HAVE FAVORABLE OPERATING
RESULTS;
o WE WILL NEED TO RAISE CAPITAL BY MAKING LONG-TERM OR
SHORT-TERM BORROWINGS OR BY SELLING SHARES OF OUR STOCK IN
ORDER TO FINANCE INVESTMENTS IN ADDITIONAL INVESTMENT
MANAGEMENT FIRMS, AND WE CANNOT BE SURE THAT SUCH CAPITAL WILL
BE AVAILABLE TO US ON ACCEPTABLE TERMS; AND
o THOSE CERTAIN OTHER FACTORS DISCUSSED UNDER THE CAPTION
"BUSINESS-CAUTIONARY STATEMENTS" IN OUR ANNUAL REPORT ON FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 2000.
THESE FACTORS (AMONG OTHERS) COULD AFFECT OUR FINANCIAL PERFORMANCE AND
CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM HISTORICAL EARNINGS AND THOSE
PRESENTLY ANTICIPATED AND PROJECTED. WE WILL NOT UNDERTAKE AND WE SPECIFICALLY
DISCLAIM ANY OBLIGATION TO RELEASE PUBLICLY THE RESULT OF ANY REVISIONS WHICH
MAY BE MADE TO ANY FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES
AFTER THE DATE OF SUCH STATEMENTS OR TO REFLECT THE OCCURRENCE OF EVENTS,
WHETHER OR NOT ANTICIPATED. IN THAT RESPECT, WE WISH TO CAUTION READERS NOT TO
PLACE UNDUE RELIANCE ON ANY SUCH FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS
OF THE DATE MADE.
8
OVERVIEW
We buy and hold equity interests in investment management firms and
currently derive all of our revenues from those firms. Our affiliated
investment management firms in aggregate managed $73.7 billion in assets at
June 30, 2001. On July 30, 2001, we entered into a definitive agreement with
Welch & Forbes, Inc. and Welch & Forbes (a Partnership) (collectively, Welch
& Forbes) pursuant to which we will acquire a majority equity interest in
Welch & Forbes. Following the transaction, we will own a 60% interest in
Welch & Forbes, with Welch & Forbes' management retaining the remaining 40%.
Welch & Forbes had approximately $4.3 billion of assets under management at
June 30, 2001.
We describe the mid-sized investment management firms in which we
invest as our "Affiliates." We have a revenue sharing arrangement with each of
our Affiliates which allocates a specified percentage of revenues (typically
50-70%) for use by management of that Affiliate in paying operating expenses,
including salaries and bonuses, which we refer to as the "Operating Allocation."
The remaining portion of revenues of each such Affiliate (typically 30-50%) is
referred to as the "Owners' Allocation," and is allocated to the owners of that
Affiliate (including AMG) in general proportion to their ownership of the
Affiliate. In certain cases our profit distribution is paid to us in the form of
a guaranteed payment for the use of our capital or a license fee, which in each
case is paid from the Owners' Allocation. One of the purposes of our revenue
sharing arrangements is to provide ongoing incentives for the managers of these
Affiliates by allowing them:
o to participate in the growth of their firm's revenues, which
may increase their compensation from the Operating Allocation,
and profit distributions from the Owners' Allocation; and
o to control operating expenses, thereby increasing the portion
of the Operating Allocation which is available for growth
initiatives and compensation.
Under the revenue sharing arrangements, the managers of our Affiliates
have incentives both to increase revenues of the Affiliate (thereby increasing
the Operating Allocation and their share of the Owners' Allocation) and to
control expenses of the Affiliate (thereby increasing the excess Operating
Allocation).
The revenue sharing arrangements allow us to participate in the revenue
growth of our Affiliates because we receive a portion of the additional revenue
as our share of the Owners' Allocation. However, we participate in that growth
to a lesser extent than the managers of our Affiliates, because we do not share
in the growth of the Operating Allocation.
Under the organizational documents of the Affiliates, the allocations
and distributions of cash to us generally take priority over the allocations and
distributions to the other owners of the Affiliates. This further protects us if
there are any expenses in excess of the Operating Allocation of an Affiliate.
Thus, if an Affiliate's expenses exceed its Operating Allocation, the excess
expenses first reduce the portion of the Owners' Allocation allocated to the
Affiliate's management owners, until that portion is eliminated, and then reduce
the portion allocated to us. Any such reduction in our portion of the Owners'
Allocation is required to be paid back to us out of future Affiliate management
Owners' Allocation. Unlike all other Affiliates, The Managers Funds LLC is not
subject to a revenue sharing arrangement since we own substantially all of the
firm. As a result, we participate fully in any increase or decrease in the
revenues or expenses of Managers.
The portion of our Affiliates' revenues which is included in their
Operating Allocation and retained by them to pay salaries, bonuses and other
operating expenses, as well as the portion of our Affiliates' revenues which is
included in their Owners' Allocation and distributed to us and the other owners
of the Affiliates, are included as "revenues" in our Consolidated Statements of
Operations. The expenses of our Affiliates which are paid out of the Operating
Allocation, as well as our holding company expenses which we pay out of the
amounts of the Owners' Allocation which we receive from the Affiliates, are both
included in "operating expenses" on our Consolidated Statements of Operations.
The portion of our Affiliates' revenues which is allocated to owners of the
Affiliates other than us through their share of Owners' Allocation is included
in "minority interest" on our Consolidated Statements of Operations.
In our investment structure, the management team at each Affiliate
retains an ownership interest in its own firm. We believe that this structure
provides management owners incentives to grow their firms and aligns their
interests with ours. The organizational documents of each Affiliate (other than
Paradigm Asset Management Company, L.L.C.) provide that management owners have
the right to sell their interests to us. This enables the management owners to
realize a portion of the equity value that they have created in their firm. In
addition, the organizational
9
documents of some of our Affiliates provide us with the right to require the
management owners to sell portions of their interests in the Affiliate to us,
and the organizational documents of each Affiliate (other than Paradigm)
include provisions obligating owners to sell their remaining interests at a
point in the future, generally after the owner has left the Affiliate. We
settle our purchases under the above-described arrangements for cash, shares
of our Common Stock or other forms of consideration.
Our revenues are generally derived from the provision of investment
management services for fees by our Affiliates. Investment management fees (or
"asset-based fees") are usually determined as a percentage fee charged on
periodic values of a client's assets under management. Certain of the Affiliates
bill advisory fees for all or a portion of their clients based upon assets under
management valued at the beginning of a billing period ("in advance"). Other
Affiliates bill advisory fees for all or a portion of their clients based upon
assets under management valued at the end of the billing period ("in arrears"),
while mutual fund clients are billed based upon daily assets. Advisory fees
billed in advance will not reflect subsequent changes in the market value of
assets under management for that period. Conversely, advisory fees billed in
arrears will reflect changes in the market value of assets under management for
that period. In addition, several of the Affiliates charge performance-based
fees to certain of their clients; these performance-based fees result in
payments to the applicable Affiliate based on levels of investment performance
achieved. While the Affiliates bill performance-based fees at various times
throughout the year, the greatest portion of these fees has historically been
billed in the fourth quarter in any given year. All references to "assets under
management" include assets directly managed as well as assets underlying overlay
strategies (which we call "overlay assets"), which employ futures, options or
other derivative securities to achieve a particular investment objective.
Our level of profitability will depend on a variety of factors,
including principally:
o the level of Affiliate revenues, which is dependent on the
ability of our existing and future Affiliates to maintain or
increase assets under management by maintaining their existing
investment advisory relationships and fee structures,
marketing their services successfully to new clients and
obtaining favorable investment results;
o a variety of factors affecting the securities markets
generally, which could potentially result in considerable
increases or decreases in the assets under management at our
Affiliates;
o the receipt of Owners' Allocation, which is dependent on the
ability of our existing and future Affiliates to maintain
certain levels of operating profit margins;
o the availability and cost of the capital with which we finance
our existing and new investments;
o our success in making new investments and the terms upon which
such transactions are completed;
o the level of intangible assets and the associated amortization
expense resulting from our investments;
o the level of expenses incurred for holding company operations,
including compensation for the employees of AMG; and
o the level of taxation to which we are subject.
In addition, our profitability will depend upon fees paid on the
basis of investment performance at certain Affiliates. Fees based on
investment performance are inherently dependent on investment results, and
therefore may vary substantially from year to year. For example,
performance-based fees were of an unusual magnitude in 1999, but were not as
significant in 2000, and may not recur even to the same magnitude as in 2000
in 2001 or future years, if at all. In addition, while the performance-based
fee contracts of our Affiliates apply to investment management services in a
range of investment management styles and securities market sectors, such
contracts may be concentrated in certain styles and sectors. In particular,
our substantial performance-based fees in 1999 were the result of the
concentration of such products in technology sectors which performed well in
that year but have declined significantly since that time. To the extent such
contracts are concentrated within styles or sectors, they are subject to the
continuing impact of fluctuating securities prices in such styles and sectors
as well as the performance of the relevant Affiliates.
10
Our investments have been accounted for using the purchase method of
accounting under which goodwill is recorded for the excess of the purchase price
for the acquisition of interests in Affiliates over the fair value of the net
assets acquired, including acquired client relationships. As a result of our
investments, intangible assets, consisting of acquired client relationships and
goodwill, constitute a substantial percentage of our consolidated assets. As of
June 30, 2001, our total assets were approximately $920.1 million, of which
approximately $197.1 million consisted of acquired client relationships and
$444.4 million consisted of goodwill.
As described below in greater detail, the accounting for intangible
assets is in transition. Prior to the pending accounting changes, the
amortization period for intangible assets for each investment has been assessed
individually, with amortization periods for our investments to date ranging from
seven to 28 years in the case of acquired client relationships and 15 to 35
years in the case of goodwill. In determining the amortization period for
intangible assets acquired, we considered a number of factors including:
o the firm's historical and potential future operating
performance and rate of attrition among clients;
o the stability and longevity of existing client relationships;
o the firm's recent, as well as long-term, investment
performance;
o the characteristics of the firm's products and investment
styles;
o the stability and depth of the firm's management team; and
o the firm's history and perceived franchise or brand value.
We have regularly performed an evaluation of intangible assets on an
investment-by-investment basis to determine whether there has been any
impairment in their carrying value or their useful lives. If impairment has been
indicated, then the carrying amount of intangible assets, including goodwill,
has been reduced to their fair values.
In July 2001, the Financial Accounting Standards Board issued
Financial Accounting Standard No. 141 (FAS 141), "Business Combinations," and
Financial Accounting Standard No. 142 (FAS 142), "Goodwill and Other
Intangible Assets." FAS 141 limits the method of accounting for business
combinations to the purchase method and establishes new criteria for the
recognition of other intangible assets. FAS 142 requires that goodwill and
other intangible assets with indefinite lives no longer be amortized, but
instead be tested for impairment at least annually.
FAS 141 became effective July 1, 2001, except with regard to
business combinations initiated prior to that date. While FAS 142 will
generally become effective January 1, 2002, goodwill and any other intangible
assets acquired in a purchase business combination completed after June 30,
2001 and determined to have indefinite lives will not be amortized from the
date of their acquisition.
Upon the effectiveness of FAS 142, FAS 141 requires that goodwill
acquired in prior purchase business combinations be evaluated and any
necessary reclassifications be made to separate other intangible assets
(which meet the new FAS 141 criteria) from goodwill. FAS 141 also requires
that intangibles acquired in prior business combinations be reviewed for
impairment under the new rules upon the effectiveness of FAS 142. Any
impairment loss will be measured as of the date of the adoption and
recognized as a cumulative effect of a change in accounting principle in the
first interim period.
We are continuing to assess the impact of the new rules on our
accounting. Since goodwill amortization represented 57% of total amortization
expense in the quarter ended June 30, 2001, in similar circumstances in
quarters subsequent to the end of 2001 we anticipate our net income and
earnings per share would be higher. At this time, we do not expect that the
adoption of FAS 141 and FAS 142 will result in any reclassification of
goodwill or impairment of intangible assets.
11
Following the effectiveness of FAS 141 and FAS 142, intangible
amortization (related to acquired client relationships) will continue to be a
material component of our operating expenses. Accordingly, we believe it is
significant to distinguish amortization expense and other non-cash expenses
(principally depreciation) from other operating expenses since these expenses do
not require the use of cash. We have provided additional supplemental
information in this report for "cash" related earnings as an addition to, but
not as a substitute for, measures of financial performance under generally
accepted accounting principles, and our calculations may not be consistent with
those of other companies. Our additional measures of "cash" related earnings
are:
o Cash Net Income (net income plus depreciation and
amortization), which we believe is useful to investors as an
indicator of funds available to the Company, which may be used
to make new investments, repay debt obligations, repurchase
shares of Common Stock or pay dividends on our Common Stock
(although the Company has no current plans to pay dividends);
o EBITDA (earnings before interest expense, income taxes,
depreciation and amortization), which we believe is useful to
investors as an indicator of our ability to service debt, make
new investments and meet working capital requirements; and
o EBITDA Contribution (EBITDA plus our holding company operating
expenses), which we believe is useful to investors as an
indicator of funds available from our Affiliates' operations
to service debt, make new investments and meet working capital
requirements.
Assets under management were $73.7 billion at June 30, 2001 versus
$69.7 billion at March 31, 2001 and $77.5 billion at December 31, 2000. The
increase in assets under management during the quarter resulted primarily
from positive investment performance of $2.5 billion, positive net client
cash flows of directly managed assets of $1.1 billion, and the merger of
Bowling Asset Management ($387 million in assets under management at the time
of the merger) into Renaissance Investment Management. The year to date
decrease in assets under management resulted from the net loss of overlay
assets of $1.4 billion and a decline in the value of assets under management
of $5.0 billion, resulting principally from a broad decline in the equity
markets. These decreases were offset partially by positive net client cash
flows of directly managed assets of $2.0 billion and from our minority
investment in Dublin Fund Distributors, N.V. in March 2001 (approximately
$200 million in assets under management at the time of our investment) and
the merger of Bowling into Renaissance.
THE THREE MONTHS ENDED JUNE 30, 2001 AS COMPARED TO THE THREE MONTHS ENDED
JUNE 30, 2000
We had net income of $13.1 million for the quarter ended June 30, 2001
compared to net income of $13.7 million for the quarter ended June 30, 2000. The
decrease in net income resulted primarily from the decline in the EBITDA
Contribution of our Affiliates, from $40.3 million for the quarter ended June
30, 2000 to $38.1 million for the quarter ended June 30, 2001. This decline
resulted principally from the decrease in asset-based fees reflecting the impact
of a broad equity market decline in 2000 and the six months ended June 30, 2001,
partially offset by increases in such fees resulting from positive net client
cash flows of directly managed assets.
Total revenues for the quarter ended June 30, 2001 were $100.7 million,
a decrease of $10.2 million from the quarter ended June 30, 2000. As stated
above with respect to EBITDA Contribution, this decline resulted principally
from the decrease in asset-based fees reflecting the impact of a broad equity
market decline in 2000 and the six months ended June 30, 2001, partially offset
by increases in such fees resulting from positive net client cash flows of
directly managed assets.
Total operating expenses decreased by $6.1 million to $62.8 million
for the quarter ended June 30, 2001 from $68.9 million for the quarter ended
June 30, 2000. Compensation and related expenses decreased by $7.4 million to
$32.7 million. Amortization of intangible assets increased by $0.3 million to
$6.9 million, selling, general and administrative expenses increased by $0.3
million to $19.0 million, depreciation and other amortization increased by
$0.4 million to $1.4 million and other operating expenses increased by $0.3
million to $2.7 million. The decrease in total operating expenses was the
result of a decrease in Affiliates' Operating Allocation resulting from the
decline in our revenues.
Minority interest decreased by $1.0 million to $14.2 million for the
quarter ended June 30, 2001 from $15.2 million for the quarter ended June 30,
2000, primarily as a result of the decrease in our Affiliates' Owners'
Allocation resulting from the decline in our revenues.
Interest expense decreased by $0.7 million to $3.4 million for the
quarter ended June 30, 2001 from $4.1 million for the quarter ended June 30,
2000. The decrease in interest expense resulted from the restructuring of our
12
long-term debt to effect lower costs of borrowing and a decrease in the
effective interest rate of our senior revolving credit facility, partially
offset by a one-time adjustment related to our transition to the new
derivative accounting rules. In May 2001, we completed the private placement
of $251 million principal amount at maturity of zero-coupon senior
convertible notes accreting at a rate of 0.50% per annum, and used $101
million of the proceeds to repay debt under our credit facility. The decrease
in the effective interest rate of our senior revolving credit facility was
the result of a decrease in LIBOR rates. The derivative transition adjustment
was attributable to the repayment of the credit facility with the proceeds of
the senior convertible notes offering.
Income tax expense was $8.7 million for the quarter ended June 30,
2001 compared to $9.5 million for the quarter ended June 30, 2000. The change
in tax expense was principally related to the decrease in income before taxes
and a decrease in the effective tax rate.
EBITDA decreased by $1.3 million to $33.6 million for the quarter
ended June 30, 2001 from $34.9 million for the quarter ended June 30, 2000,
primarily as a result of the decline in revenues. Cash Net Income increased
by $0.2 million to $21.5 million for the quarter ended June 30, 2001 from
$21.3 million for the quarter ended June 30, 2000, as a result of the factors
affecting net income as described above, excluding the changes in
depreciation and amortization during the period.
THE SIX MONTHS ENDED JUNE 30, 2001 AS COMPARED TO THE SIX MONTHS ENDED
JUNE 30, 2000
We had net income of $25.0 million for the six months ended June 30,
2001 compared to net income of $27.5 million for the six months ended June 30,
2000. The decrease in net income resulted primarily from the decline in the
EBITDA Contribution of our Affiliates, from $79.1 million for the six months
ended June 30, 2000 to $73.9 million for the six months ended June 30, 2001.
This decline resulted principally from the decrease in asset-based fees
reflecting the impact of a broad equity market decline in 2000 and the six
months ended June 30, 2001, partially offset by increases in such fees resulting
from positive net client cash flows of directly managed assets.
Total revenues for the six months ended June 30, 2001 were $201.1
million, a decrease of $24.6 million from the six months ended June 30, 2000. As
stated above with respect to EBITDA Contribution, this decline resulted
principally from the decrease in asset-based fees reflecting the impact of a
broad equity market decline in 2000 and the six months ended June 30, 2001,
partially offset by increases in such fees resulting from positive net client
cash flows of directly managed assets.
Total operating expenses decreased by $13.9 million to $125.9 million
for the six months ended June 30, 2001 from $139.8 million for the six months
ended June 30, 2000. Compensation and related expenses decreased by $17.7
million to $66.9 million. Amortization of intangible assets increased by $0.8
million to $13.8 million, selling, general and administrative expenses
increased by $1.7 million to $37.1 million, depreciation and other
amortization increased by $0.8 million to $2.8 million, and other operating
expenses increased by $0.5 million to $5.3 million. The decrease in total
operating expenses was the result of a decrease in Affiliates' Operating
Allocation resulting from the decline in our revenues.
Minority interest decreased by $4.6 million to $29.0 million for the
six months ended June 30, 2001 from $33.6 million for the six months ended June
30, 2000, primarily as a result of the decrease in our Affiliates' Owners'
Allocation, resulting from the decline in our revenues.
Interest expense decreased by $1.5 million to $6.5 million for the
six months ended June 30, 2001 from $8.0 million for the six months ended
June 30, 2000. The decrease in interest expense resulted from the
restructuring of our long-term debt to effect lower costs of borrowing and a
decrease in the effective interest rate on our senior revolving credit
facility, partially offset by a one-time adjustment related to our transition
to the new derivative accounting rules. In May 2001, we completed the private
placement of $251 million principal amount at maturity of zero-coupon senior
convertible notes accreting at a rate of 0.50% per annum, and used $101
million of the proceeds to repay debt under our credit facility. The decrease
in the effective interest rate of our senior revolving credit facility was
the result of a decrease in LIBOR rates. The derivative transition adjustment
was attributable to the repayment of the credit facility with the proceeds of
the senior convertible notes offering.
Income tax expense was $16.7 million for the six months ended June
30, 2001 compared to $19.1 million for the six months ended June 30, 2000.
The change in tax expense was principally related to the decrease in income
before taxes as well as a decrease in the effective tax rate.
13
EBITDA decreased by $4.7 million to $64.9 million for the six months
ended June 30, 2001 from $69.6 million for the six months ended June 30, 2000,
primarily as a result of the decline in revenues.
Cash Net Income decreased by $0.8 million to $41.7 million for the six
months ended June 30, 2001 from $42.5 million for the six months ended June 30,
2000, as a result of the factors affecting net income as described above,
excluding the changes in depreciation and amortization during the period.
LIQUIDITY AND CAPITAL RESOURCES
We have met our cash requirements primarily through borrowings from
our banks, cash generated by operating activities and the issuance of equity
and convertible debt securities in public and private transactions. Our
principal uses of cash have been to make investments, repay indebtedness, pay
income taxes, repurchase shares, make additional investments in existing
Affiliates (including our purchase of management owners' retained equity),
support our and our Affiliates' operating activities and for working capital
purposes. We expect that our principal use of funds for the foreseeable
future will be for additional investments, distributions to management owners
of Affiliates, repayments of debt including interest on outstanding debt,
payment of income taxes, repurchases of shares, capital expenditures,
additional investments in existing Affiliates and for other working capital
purposes.
At June 30, 2001, excluding cash and cash equivalents held by
Affiliates, we had cash and cash equivalents of approximately $145 million.
Under our senior revolving credit facility, as of June 30, 2001 we had
outstanding borrowings of $50 million and $280 million of additional
capacity. We have the option, with the consent of our lenders, to increase
the facility by another $70 million to a total of $400 million.
In May 2001, we completed the private placement of zero-coupon
senior convertible notes in which we realized net proceeds of approximately
$221 million. Approximately $101 million of the net proceeds were used to
repay debt under our senior revolving credit facility; the balance is
available for other general business purposes. In the placement, we sold a
total of $251 million principal amount at maturity of zero-coupon senior
convertible notes due 2021, with each $1,000 note issued at 90.50% of such
principal amount and accreting at a rate of 0.50% per annum. Each security is
convertible into 11.62 shares of our Common Stock upon the occurrence of any
of the following events: (i) if for certain periods in any calendar six
months, the closing sale price of our Common Stock is more than a specified
price (initially $93.53 and increasing incrementally each calendar six months
for the next twenty years to $94.62 on April 1, 2021); (ii) if the credit
rating assigned to the security is below a specified level; (iii) if we call
the convertible securities for redemption; or (iv) in the event that we take
certain corporate actions. We have the option to redeem the convertible notes
for cash on or after May 7, 2006, and may be required to repurchase the
securities at their accreted value at the option of the holders on May 7 of
2002, 2004, 2006, 2011 and 2016. The purchase price for such repurchases may
be made in cash or shares of our Common Stock.
Our borrowings under our senior revolving credit facility are
collateralized by pledges of all of our interests in our affiliated investment
management firms (including all interests which are directly held by us, as well
as all interests which are indirectly held by us through wholly-owned
subsidiaries), which interests represent substantially all of our assets. Our
credit facility contains a number of negative covenants, including those which
generally prevent us and our Affiliates from: (i) incurring additional
indebtedness (other than subordinated indebtedness), (ii) creating any liens or
encumbrances on material assets (with certain enumerated exceptions), (iii)
selling assets outside the ordinary course of business or making certain
fundamental changes with respect to our businesses, including a restriction on
our ability to transfer interests in any majority owned Affiliate if, as a
result of such transfer, we would own less than 51% of such firm, and (iv)
declaring or paying dividends on our Common Stock. Our credit facility bears
interest at either LIBOR plus a margin or the Prime Rate plus a margin. We pay a
commitment fee on the daily unused portion of the facility. In order to
partially offset our exposure to changing interest rates we have entered into
interest rate hedging contracts, as discussed below in "Market Risk." The credit
facility matures in December 2002.
During the six months ended June 30, 2001, we paid approximately
$13.3 million for investments in Bowling Portfolio Management, Dublin Fund
Distributors, N.V. and additional investments in existing Affiliates. These
investments were funded through borrowings under the credit facility and
working capital. The pending investment in Welch & Forbes is expected to be
funded through the Company's working capital.
14
During the six months ended June 30, 2001, we repurchased 14,000
shares of Common Stock with borrowings under our credit facility. Pursuant to
a share repurchase program authorized by our Board of Directors in April
2000, we are authorized to repurchase up to five percent of our issued and
outstanding shares of Common Stock in open market transactions, with the
timing of purchases and the amount of stock purchased determined at the
discretion of our executive officers. We have the authorization to repurchase
an additional 656,781 shares of Common Stock under this program.
In order to provide the funds necessary for us to continue to acquire
interests in investment management firms, including in our existing Affiliates
upon the sale by our Affiliates' owners of their retained equity to us, it will
be necessary for us to incur, from time to time, additional long-term bank debt
and/or issue equity or debt securities, depending on market and other
conditions. There can be no assurance that such additional financing will be
available on terms acceptable to us, if at all.
MARKET RISK
We use interest rate derivative contracts to manage market exposures
associated with our variable rate debt by creating offsetting market exposures.
During February 2001, we became a party, with two major commercial banks as
counterparties, to $50 million notional amount of interest rate swap contracts
that are linked to the three-month LIBOR rate. Under these contracts, we have
agreed to exchange the difference between fixed-rate and floating-rate interest
amounts calculated by reference to the notional amount.
These interest rate swap contracts are not held for trading purposes.
In using these derivative instruments, we face certain risks that are not
directly related to market movements and are therefore not easy to quantify, and
as such are not represented in the analysis which follows. These risks include
country risk, legal risk and credit risk. Credit risk, or the risk of loss
arising from a counterparty's failure or inability to meet payment or
performance terms of a contract, is a particularly significant element of an
interest rate swap contract. We attempt to control this risk through analysis of
our counterparties and ongoing examinations of outstanding payments and
delinquencies.
We have performed a sensitivity analysis assuming a hypothetical 10%
adverse movement in LIBOR rates, sustained for three months. This analysis
reflects the impact of such movement on the combination of our senior debt under
our revolving credit facility and our interest rate derivative contracts, by
multiplying the notional amount of the interest rate derivative contract by the
effect of a 10% decrease in LIBOR rates, and then factoring in the offsetting
interest rate savings on the underlying senior debt. As of August 10, 2001, this
analysis indicated that this hypothetical movement in LIBOR rates would have
resulted in a quarterly loss, net of taxes, of approximately $104,400.
There can be no assurance that we will continue to maintain such
derivative contracts at their existing levels of coverage or that the amount of
coverage maintained will cover all of our indebtedness outstanding at any such
time. Therefore, there can be no assurance that the derivative contracts will
meet their overall objective of reducing our interest expense. In addition,
there can be no assurance that we will be successful in obtaining derivative
contracts in the future on our existing or any new indebtedness.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For quantitative and qualitative disclosures about market risk
affecting us, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Market Risk" in Item 2, which is incorporated herein
by reference.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we and our Affiliates may be parties to various
claims, suits and complaints. Currently, there are no such claims, suits or
complaints that, in the opinion of management, would have a material adverse
effect on our financial position, liquidity or results of operations.
ITEM 2. CHANGES IN SECURITIES
None
15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of Affiliated Managers Group, Inc. was held
in Boston, Massachusetts on May 30, 2001. At that meeting, the stockholders
considered and acted upon the following proposals:
A. THE ELECTION OF DIRECTORS. By the vote reflected below, the
stockholders elected the following individuals to serve as
directors until the 2002 Annual Meeting of Stockholders and
until their respective successors are duly elected and
qualified:
DIRECTOR SHARES VOTED FOR SHARES WITHHELD
-------- ---------------- ---------------
William J. Nutt 18,760,506 229,558
Sean M. Healey 18,890,076 99,988
Richard E. Floor 17,258,279 1,731,785
Stephen J. Lockwood 18,890,721 99,343
Harold J. Meyerman 18,891,174 98,890
Rita M. Rodriguez 18,890,691 99,373
William F. Weld 18,890,535 99,529
B. THE APPROVAL OF AN AMENDMENT AND RESTATEMENT OF THE COMPANY'S
1997 STOCK OPTION AND INCENTIVE PLAN. The stockholders voted
to approve an amendment and restatement of the Company's 1997
Stock Option and Incentive Plan (the "Plan") as follows: to
increase the number of shares of Common Stock reserved for
issuance under the Plan from 3,250,000 to 4,550,000; to
establish that the maximum number of shares for which awards
other than options may be granted under the Plan on or after
April 13, 2001 shall not exceed 250,000 shares of Common Stock
in the aggregate; to set the term of each option to not exceed
seven years from the date of grant; and to establish that
options may not have an exercise price per share of Common
Stock less than 100% of the fair market value of a share of
Common Stock on the date of grant, except when the option is
granted in lieu of cash compensation. 11,879,739 shares voted
for the proposal, 4,964,898 shares voted against the proposal,
and 107,993 shares abstained from voting on the proposal.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(b) Reports on Form 8-K:
The following Current Reports on Form 8-K were filed by AMG during the
quarter ended June 30, 2001.
1. Current Report on Form 8-K dated May 4, 2001 (filed May 4,
2001), containing the press release disclosing the Company's
operating results for the quarter ended March 31, 2001.
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AFFILIATED MANAGERS GROUP, INC.
(Registrant)
/s/ DARRELL W. CRATE on behalf of the Registrant as Executive Vice President, August 13, 2001
- -------------------- Chief Financial Officer and Treasurer
(Darrell W. Crate) (and also as Principal Financial and
Principal Accounting Officer)
17