QuickLinks -- Click here to rapidly navigate through this document

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549



FORM 10-Q

(Mark One)

ý   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

OR

o

 

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)

600 Hale Street, Prides Crossing, Massachusetts 01965
(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 ý    No o

        Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o    No o (Registrant is not subject to the requirements of Rule 405 of Regulation S-T at this time).

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o
(Do not check if a smaller reporting company)
  Smaller reporting company o

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

        There were 41,678,829 shares of the registrant's common stock outstanding on August 3, 2009.



PART I—FINANCIAL INFORMATION

Item 1.    Financial Statements


AFFILIATED MANAGERS GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share data)

(unaudited)

 
  For the Three Months
Ended June 30,
  For the Six Months
Ended 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 Affiliate

                         
   

investments in partnerships

    (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)

   
(45,650

)
 
(30,671

)
 
(98,824

)
 
(51,549

)

Net (income) loss (non-controlling interests in partnerships)

    (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  

Supplemental disclosure of total comprehensive income:

                         

Net income

  $ 85,437   $ 56,249   $ 156,445   $ 79,489  

Other comprehensive income (loss)

    9,460     24,676     (2,448 )   14,804  
                   

Comprehensive income

    94,897     80,925     153,997     94,293  

Comprehensive income (non-controlling interests)

    (50,802 )   (45,270 )   (90,587 )   (62,385 )
                   

Comprehensive income (controlling interest)

  $ 44,095   $ 35,655   $ 63,410   $ 31,908  
                   

The accompanying notes are an integral part of the Consolidated Financial Statements.

2



AFFILIATED MANAGERS GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

 
  December 31,
2008
  June 30,
2009
 

Assets

             

Current Assets:

             
 

Cash and cash equivalents

  $ 396,431   $ 274,369  
 

Investment advisory fees receivable

    131,099     113,899  
 

Affiliate investments in partnerships

    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 bank debt

   
233,514
   
 

Senior convertible securities

    445,535     451,255  

Junior convertible trust preferred securities

    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

    180,732     149,252  

Non-controlling interests in partnerships

    65,465     75,305  
           
   

Total equity

    1,170,998     1,329,810  
           
   

Total liabilities and equity

  $ 3,212,700   $ 3,080,296  
           

The accompanying notes are an integral part of the Consolidated Financial Statements.

3



AFFILIATED MANAGERS GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(dollars in thousands)

(unaudited)

 
  Total Stockholders' Equity    
   
   
 
 
  Common
Stock
  Additional
Paid-In
Capital
  Accumulated
Other
Comprehensive
Income (Loss)
  Retained
Earnings
  Treasury
Shares at
Cost
  Non-
controlling
interests
  Non-
controlling
interests in
partnerships
  Total
Equity
 

December 31, 2008

  $ 458   $ 817,713   $ (4,081 ) $ 813,664   $ (702,953 ) $ 180,732   $ 65,465   $ 1,170,998  

Stock issued under option and other incentive plans

        (23,772 )           34,329             10,557  

Tax benefit of option exercises

        2,545                         2,545  

Issuance costs

        (396 )                       (396 )

Settlement of forward equity sale agreement

        (25,378 )           169,636             144,258  

Share-based payment arrangements

        7,267                         7,267  

Changes in Affiliate equity

        (15,687 )               778         (14,909 )

Distributions to non-controlling interests

                        (83,807 )       (83,807 )

Redemptions of non-controlling interests in partnerships

                            (996 )   (996 )

Net Income

                17,104         51,549     10,836     79,489  

Other comprehensive income

            14,804                     14,804  
                                   

June 30, 2009

  $ 458   $ 762,292   $ 10,723   $ 830,768   $ (498,988 ) $ 149,252   $ 75,305   $ 1,329,810  
                                   

The accompanying notes are an integral part of the Consolidated Financial Statements.

4



AFFILIATED MANAGERS GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 
  For the Three Months
Ended June 30,
  For the Six Months
Ended 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 )
 

Issuance of common stock

    19,026     11,622     232,803     11,622  
 

Settlement of convertible securities

            (208,730 )    
 

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  
                   

Supplemental disclosure of non-cash financing activities:

                         
 

Stock issued for conversion of floating rate senior convertible securities

  $   $   $ 299,970   $  
 

Stock issued in settlement of mandatory convertible securities

            93,750      
 

Notes received for Affiliate equity sales

    4,686     593     15,141     4,060  
 

Payables recorded for Affiliate equity purchases

    2,568     671     4,936     671  

The accompanying notes are an integral part of the Consolidated Financial Statements.

5



AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

        The consolidated financial statements of Affiliated Managers Group, Inc. ("Company" or "AMG") have been prepared in accordance with accounting principles generally accepted in the United States of America 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 accounting principles generally accepted in the United States of America 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 accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments considered necessary for a fair statement of the results have been included. All intercompany balances and transactions have been eliminated. All dollar amounts in these notes (except information that is presented on a per share, per security, per note or per contract basis) are stated in thousands, unless otherwise indicated. Certain reclassifications have been made to the prior period's financial statements to conform to the current period's presentation. In this Quarterly Report on Form 10-Q, the Company has included the current quarter operating results of one of its equity method Affiliates (formerly recorded one quarter in arrears, as permitted for equity method investments). This reporting change did not have a material effect on the Company's consolidated financial results. Operating results for interim periods are not necessarily indicative of the results that may be expected for any other period or for the full year. The Company's Annual Report on Form 10-K (as amended, the "Annual Report on Form 10-K") for the fiscal year ended December 31, 2008 includes additional information about AMG, its operations, its financial position and its accounting policies, and should be read in conjunction with this Quarterly Report on Form 10-Q.

2. Recently Adopted Accounting Standards

        In 2009, the Company adopted several accounting standards that have been retrospectively applied to prior periods, including

    FASB Staff Position ("FSP") APB 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement)" ("APB 14-1");

    Statement of Financial Accounting Standards ("FAS") No. 141 (revised 2007) "Business Combinations" ("FAS 141R");

    FAS No. 160 "Non-Controlling Interests in Consolidated Financial Statements, an amendment of ARB No. 51" ("FAS 160"); and

    Emerging Issues Task Force ("EITF") Topic No. D-98 "Classification and Measurement of Redeemable Securities" ("Topic D-98").

        APB 14-1 requires the Company to bifurcate certain of its convertible debt securities into their theoretical debt and equity components. The Company accretes (as interest expense) the debt components to their principal amounts over the expected life of the debt. As a result of APB 14-1, the Company has reported incremental non-cash interest of approximately $529 and $3,365 for the three months ended June 30, 2008 and 2009, respectively.

        FAS 141R requires the Company to expense acquisition-related professional fees. The Company retrospectively applied FAS 141R to acquisition-related professional fees that were deferred as of December 31, 2008, and, accordingly, the Company's 2008 net income was reduced by $5,902 ($328 and

6



AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


$859 attributable to the three and six months ended June 30, 2008, respectively). The other provisions of FAS 141R will be applied to future acquisitions.

        FAS 160 requires the Company to change the income statement, balance sheet and cash flow presentation of non-controlling interests (previously known as minority interests). Net income (non-controlling interest), which was previously reported as Minority interest (and reduced net income) on the Company's Consolidated Statements of Income, is now included in Net income. The accumulated capital of non-controlling interests, which was previously reported as Minority interest on the Company's Consolidated Balance Sheets, is now reported in Equity. Payments to non-controlling interests, profit distributions and repurchases of Affiliate equity, are now classified as financing activities on the Statements of Cash Flows (previously reported as operating and investing activities, respectively).

        Topic D-98 provides guidance on the reporting of equity securities that are subject to mandatory redemption requirements or whose redemption is outside the control of the issuer. Topic D-98 requires the Company to present the redemption value of its Affiliate equity on its Consolidated Balance Sheets (referred to as "Redeemable non-controlling interests"). Adjustments to Redeemable non-controlling interests are recorded to stockholders' equity.

        The Company adopted several other accounting standards that became effective in the second quarter of 2009, none of which had a material impact on its results of operations or financial position.

3. Senior Bank Debt

        On November 27, 2007, the Company entered into an amended and restated senior credit facility (the "Facility"). During the third quarter of 2008, the Company increased its borrowing capacity to $1,010,000, comprised of a $770,000 revolving credit facility (the "Revolver") and a $240,000 term loan (the "Term Loan"). In the first quarter of 2009, the Company repaid the outstanding balance of the Term Loan ($233,514); the capacity under the Revolver remains at $770,000. The Company pays interest on any outstanding obligations at specified rates (based either on the Eurodollar rate or the prime rate as in effect from time to time) that vary depending on the Company's credit rating. Subject to the agreement of lenders to provide additional commitments, the Company has the option to increase the Facility by up to an additional $175,000.

        The Facility will mature in February 2012, and contains financial covenants with respect to leverage and interest coverage. The Facility also contains customary affirmative and negative covenants, including limitations on indebtedness, liens, cash dividends and fundamental corporate changes. Borrowings under the Facility are collateralized by pledges of the substantial majority of capital stock or other equity interests owned by the Company. The Company had outstanding borrowings under the Facility of $233,514 at December 31, 2008 and no outstanding borrowings at June 30, 2009.

7



AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Senior Convertible Securities

        Following the Company's adoption of APB 14-1, the carrying values of the senior convertible securities are as follows:

 
  December 31, 2008   June 30, 2009  
 
  Carrying
Value
  Principal amount
at maturity
  Carrying
Value
  Principal amount
at maturity
 

2008 senior convertible notes

  $ 398,389   $ 460,000   $ 403,992   $ 460,000  

Zero coupon senior convertible notes

    47,146     50,135     47,263     50,135  
                   

Total senior convertible securities

  $ 445,535   $ 510,135   $ 451,255   $ 510,135  
                   

2008 Senior Convertible Notes

        In August 2008, the Company issued $460,000 of senior convertible notes due 2038 ("2008 senior convertible notes"). The 2008 senior convertible notes bear interest at 3.95%, payable semi-annually in cash. In accordance with APB 14-1, the Company is accreting the carrying value to the principal amount at maturity using an interest rate of 7.4% (over its expected life of five years), resulting in incremental interest expense for 2009 of approximately $11,205. Each security is convertible into 7.959 shares of the Company's common stock (at an initial conversion price of $125.65) upon the occurrence of certain events. Upon conversion, the Company may elect to pay or deliver cash, shares of its common stock or some combination thereof. The holders of the 2008 senior convertible notes may require the Company to repurchase the notes in August of 2013, 2018, 2023, 2028 and 2033. The Company may redeem the notes for cash (subject to the holders right to convert) at any time on or after August 15, 2013.

        The 2008 senior convertible notes are considered contingent payment debt instruments under federal income tax regulations. These regulations require the Company to deduct interest in an amount greater than its reported interest expense, which will result in annual deferred tax liabilities of approximately $10,200. These deferred tax liabilities will be reclassified directly to stockholders' equity if the Company's common stock is trading above certain thresholds at the time of the conversion of the notes.

Zero Coupon Senior Convertible Notes

        In 2001, the Company issued $251,000 principal amount at maturity of zero coupon senior convertible notes due 2021 ("zero coupon convertible notes"), with each note issued at 90.50% of such principal amount and accreting at a rate of 0.50% per year (the adoption of APB 14-1 did not affect these securities). As of June 30, 2009, $50,135 principal amount at maturity remains outstanding. Each security is convertible into 17.429 shares of the Company's common stock (at a current base conversion price of $54.09) upon the occurrence of certain events, including the following: (i) if the closing price of a share of the Company's common stock is more than a specified price over certain periods (initially $62.36 and increasing incrementally at the end of each calendar quarter to $63.08 in April 2021); (ii) if the credit rating assigned by Standard & Poor's to the securities is below BB-; or (iii) if the Company calls the securities for redemption. The holders may require the Company to repurchase the securities at their accreted value in May 2011 and 2016. If the holders exercise this option in the future, the Company may elect to repurchase the securities with cash, shares of its common stock or some combination thereof. The Company has the option to redeem the securities for cash at their accreted value. Under the terms of the indenture governing the zero coupon convertible notes, a holder may

8



AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


convert such security into common stock by following the conversion procedures in the indenture. Subject to changes in the price of the Company's common stock, the zero coupon convertible notes may be convertible in certain future periods.

5. Junior Convertible Trust Preferred Securities

        Following the Company's adoption of APB 14-1, the carrying values of the junior convertible trust preferred securities are as follows:

 
  December 31, 2008   June 30, 2009  
 
  Carrying
Value
  Principal amount
at maturity
  Carrying
Value
  Principal amount
at maturity
 

2006 junior convertible trust preferred securities

  $ 211,429   $ 300,000   $ 211,935   $ 300,000  

2007 junior convertible trust preferred securities

    293,605     430,820     294,234     430,820  
                   

Total junior convertible securities

  $ 505,034   $ 730,820   $ 506,169   $ 730,820  
                   

        In 2006, the Company issued $300,000 of junior subordinated convertible debentures due 2036 to a wholly-owned trust simultaneous with the issuance, by the trust, of $291,000 of convertible trust preferred securities to investors. The junior subordinated convertible debentures and convertible trust preferred securities (together, the "2006 junior convertible trust preferred securities") have substantially the same terms.

        The 2006 junior convertible trust preferred securities bear interest at a rate of 5.1% per annum, payable quarterly in cash. In accordance with APB 14-1, the Company is accreting the carrying value to the principal amount at maturity using an interest rate of 7.5% (over its expected life of 30 years). The incremental interest expense for 2009 is expected to be $1,036. Each $50 security is convertible, at any time, into 0.333 shares of the Company's common stock, which represents a conversion price of $150 per share (or a 48% premium to the then prevailing share price of $101.45). Upon conversion, investors will receive cash or shares of the Company's common stock (or a combination of cash and common stock) at the election of the Company. The 2006 junior convertible trust preferred securities may not be redeemed by the Company prior to April 15, 2011. On or after April 15, 2011, they may be redeemed if the closing price of the Company's common stock exceeds $195 per share for a specified period of time. The trust's only assets are the junior convertible subordinated debentures. To the extent that the trust has available funds, the Company is obligated to ensure that holders of the 2006 junior convertible trust preferred securities receive all payments due from the trust.

        In October 2007, the Company issued an additional $500,000 of junior subordinated convertible debentures which are due 2037 to a wholly-owned trust simultaneous with the issuance, by the trust, of $500,000 of convertible trust preferred securities to investors. The junior subordinated convertible debentures and convertible trust preferred securities (together, the "2007 junior convertible trust preferred securities") have substantially the same terms. In the fourth quarter of 2008, the Company repurchased $69,180 aggregate principal amount of the 2007 junior convertible trust preferred securities. Following this repurchase, these securities were cancelled and retired.

        The 2007 junior convertible trust preferred securities bear interest at 5.15% per annum, payable quarterly in cash. In accordance with APB 14-1, the Company is accreting the discounted amount to the principal amount at maturity using an interest rate of 8.0% (over its expected life of 30 years). The

9



AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


incremental interest expense for 2009 is expected to be $1,288. Each $50 security is convertible, at any time, into 0.25 shares of the Company's common stock, which represents a conversion price of $200 per share (or a 53% premium to the then prevailing share price of $130.77). Upon conversion, investors will receive cash or shares of the Company's common stock (or a combination of cash and common stock) at the election of the Company. The 2007 junior convertible trust preferred securities may not be redeemed by the Company prior to October 15, 2012. On or after October 15, 2012, they may be redeemed if the closing price of the Company's common stock exceeds $260 per share for a specified period of time. The trust's only assets are the 2007 junior convertible subordinated debentures. To the extent that the trust has available funds, the Company is obligated to ensure that holders of the 2007 junior convertible trust preferred securities receive all payments due from the trust.

        The 2006 and 2007 junior convertible trust preferred securities are considered contingent payment debt instruments under federal income tax regulations. These regulations require the Company to deduct interest in an amount greater than its reported interest expense, which will result in annual deferred tax liabilities of approximately $8,800. These deferred tax liabilities will be reclassified directly to stockholders' equity if the Company's common stock is trading above certain thresholds at the time of the conversion of the notes.

6. Forward Equity Sale Agreements

        In May 2008, the Company entered into a forward equity sale agreement with a major securities firm to sell up to $200,000 of its common stock (the "May 2008 Agreement"), with the timing of sales in the Company's discretion. Under the terms of the May 2008 Agreement, the Company can settle forward sales at any time prior to March 31, 2010 by issuing shares in exchange for cash. Alternatively, the Company may choose to settle forward sales on a net basis. The Company has sold all $200,000 under the May 2008 Agreement at a weighted average exercise price of $65.41 and has settled approximately $144,000 of these forward sales through the issuance of approximately 1.8 million shares.

        In May 2009, the Company entered into a second forward equity sale agreement to sell up to $200,000 of its common stock (the "May 2009 Agreement"). The Company has sold all $200,000 under the May 2009 Agreement at a weighted average exercise price of $57.27, but has not yet elected to settle the forward sales. As is the case in the May 2008 Agreement, the Company may choose to settle forward sales by issuing shares in exchange for cash or on a net basis (at any time prior to August 1, 2010). In July 2009, the Company entered into a third forward equity sale agreement to sell up to $200,000 of its common stock.

10



AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Income Taxes

        The Company's consolidated income taxes represent taxes on Net Income (controlling interest) as net income attributable to non-controlling interests is not taxed at the corporate level. A summary of the provision for income taxes is as follows:

 
  For the Three Months
Ended June 30,
  For the Six Months
Ended June 30,
 
 
  2008   2009   2008   2009  

Current:

                         
 

Federal

  $ 7,682   $ (4,640 ) $ 15,152   $ (14,625 )
 

State

    1,235     1,312     2,424     1,675  
 

Foreign

    3,439     2,202     7,925     3,779  
                   

Total Current

    12,356     (1,126 )   25,501     (9,171 )
                   

Deferred:

                         
 

Federal

    8,413     7,448     14,185     18,456  
 

State

    480     (2,149 )   810     (891 )
 

Foreign

    (908 )   (433 )   (1,818 )   (737 )
                   

Total Deferred

    7,985     4,866     13,177     16,828  
                   

Provision for Income Taxes

  $ 20,341   $ 3,740   $ 38,678   $ 7,657  
                   

Effective tax rate(1)

    37.0 %   25.4 %   37.0 %   30.9 %
                   

(1)
Calculated by dividing the Provision for Income Taxes by Income before income taxes, excluding income attributable to non-controlling interests.

        During the quarter ended June 30, 2009, the Company reversed $3,000 of its valuation allowance on state net operating losses upon the adoption by the Commonwealth of Massachusetts of favorable tax regulations. This adjustment reduced the Company's effective tax rate for the three and six months ended June 30, 2009, respectively.

        The components of deferred tax assets and liabilities are as follows:

 
  December 31, 2008   June 30, 2009  

Deferred assets (liabilities):

             
 

Intangible asset amortization

  $ (185,376 ) $ (202,165 )
 

Convertible securities interest

    (124,805 )   (131,986 )
 

Non-deductible intangible amortization

    (18,277 )   (18,816 )
 

State net operating loss carryforwards

    31,259     31,426  
 

Deferred compensation

    4,643     4,762  
 

Fixed asset depreciation

    (3,626 )   (3,565 )
 

Accrued expenses

    4,739     4,638  
 

Capital loss carryforwards

    922     922  
 

Foreign tax credit carryforwards

        2,214  
 

Deferred income

    3,211     3,123  
           

    (287,310 )   (309,447 )

Valuation allowance

    (32,181 )   (28,600 )
           

Net deferred income taxes

  $ (319,491 ) $ (338,047 )
           

11



AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

        Deferred tax liabilities are primarily the result of tax deductions for the Company's intangible assets and convertible securities. The Company amortizes most of its intangible assets for tax purposes only, reducing its tax basis below its carrying value for financial statement purposes and generating deferred taxes each reporting period. In connection with the adoption of APB 14-1, the Company recorded approximately $110,000 of deferred tax liabilities related to convertible securities interest to account for the future deferred tax impact of non-cash interest accretion. The Company's junior convertible trust preferred securities and 2008 senior convertible notes also generate deferred taxes because the Company's tax deductions are higher than the interest expense recorded for financial statement purposes.

        At June 30, 2009, the Company has state net operating loss carryforwards that expire over a 15-year period beginning in 2009. The valuation allowances at December 31, 2008 and June 30, 2009 were principally related to the uncertainty of the realization of the loss carryforwards, which realization depends upon the Company's generation of sufficient taxable income prior to their expiration.

        At June 30, 2009, the Company's liability for uncertain tax positions was $21,440, including interest and related charges of $4,282. The Company does not anticipate that this liability will change significantly over the next twelve months.

8. Earnings Per Share

        The calculation of basic earnings per share is based on the weighted average number of shares of the Company's common stock outstanding during the period. Diluted earnings per share is similar to basic earnings per share, but adjusts for the dilutive effect of the potential issuance of incremental shares of the Company's common stock. The following is a reconciliation of the numerator and denominator used in the calculation of basic and diluted earnings per share available to common stockholders. Unlike all other dollar amounts in these Notes, the amounts in the numerator reconciliation are not presented in thousands.

 
  For the Three Months
Ended June 30,
  For the Six Months
Ended June 30,
 
 
  2008   2009   2008   2009  

Numerator:

                         

Net Income (controlling interest)

  $ 34,635,000   $ 10,979,000   $ 65,858,000   $ 17,104,000  

Convertible securities interest expense, net

    81,000     36,000     2,075,000     72,000  
                   

Net Income (controlling interest), as adjusted

  $ 34,716,000   $ 11,015,000   $ 67,933,000   $ 17,176,000  
                   

Denominator:

                         

Average shares outstanding—basic

    39,300,624     41,450,659     36,885,373     40,740,486  

Effect of dilutive instruments:

                         
 

Stock options

    1,615,970     557,275     1,667,350     324,501  
 

Forward sale

    528     277,403     264     144,201  
 

Senior convertible securities

    1,454,332     873,803     2,852,499     873,803  
 

Mandatory convertible securities

            191,796      
 

Junior convertible trust preferred securities

                 
                   

Average shares outstanding—diluted

    42,371,454     43,159,140     41,597,282     42,082,991  
                   

        As more fully discussed in Notes 4 and 5, the Company had certain convertible securities outstanding during the periods presented and is required to apply the if-converted method to these

12



AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


securities in its calculation of diluted earnings per share. Under the if-converted method, shares that are issuable upon conversion are deemed outstanding, regardless of whether the securities are contractually convertible into the Company's common stock at that time. For this calculation, the interest expense (net of tax) attributable to these dilutive securities is added back to Net Income (controlling interest) (reflecting the assumption that the securities have been converted). Issuable shares for these securities and related interest expense are excluded from the calculation if an assumed conversion would be anti-dilutive to diluted earnings per share.

        The calculation of diluted earnings per share for the three and six months ended June 30, 2009 excludes the potential exercise of options to purchase approximately 2.1 million common shares and the assumed conversion of the junior convertible trust preferred securities and the 2008 senior convertible notes because the effect would be anti-dilutive.

9. Commitments and Contingencies

        The Company and its Affiliates are subject to claims, legal proceedings and other contingencies in the ordinary course of their business activities. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved in a manner unfavorable to the Company or its Affiliates. The Company and its Affiliates establish accruals for matters for which the outcome is probable and can be reasonably estimated. Management believes that any liability in excess of these accruals upon the ultimate resolution of these matters will not have a material adverse effect on the consolidated financial condition or results of operations of the Company.

        Certain Affiliates operate under regulatory authorities which require that they maintain minimum financial or capital requirements. Management is not aware of any violations of such financial requirements occurring during the period.

10. Affiliate Investments in Partnerships

        Purchases and sales of investments (principally equity securities) and gross client subscriptions and redemptions relating to Affiliate investments in partnerships were as follows:

 
  For the Three Months
Ended June 30,
  For the Six Months
Ended June 30,
 
 
  2008   2009   2008   2009  

Purchase of investments

  $ 110,609   $ 166,850   $ 220,896   $ 283,833  

Sale of investments

    110,537     166,202     214,240     284,164  

Gross subscriptions

    229     650     4,253     650  

Gross redemptions

    225     142     597     1,121  

        Management fees earned by the Company on partnership assets were $698 and $362 for the six months ended June 30, 2008 and 2009, respectively.

        As of December 31, 2008 and June 30, 2009, the Company's investments in partnerships that are not controlled by its Affiliates were $10,221 and $25,784, respectively. These assets are reported within "Other assets" in the Consolidated Balance Sheets. The income or loss related to these investments is classified within "Investment and other (income) loss" in the consolidated statement of income.

13



AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. Affiliate Investments in Marketable Securities

        The cost of Affiliate investments in marketable securities, gross unrealized gains and losses were as follows:

 
  December 31,
2008
  June 30,
2009
 

Cost of Affiliate investments in marketable securities

  $ 14,984   $ 15,090  

Gross unrealized gains

    36     449  

Gross unrealized losses

    (4,621 )   (1,750 )

12. Fair Value Measurements

        Effective January 1, 2008, the Company adopted FAS 157, "Fair Value Measurements" for all financial instruments and nonfinancial instruments that are measured at fair value on a quarterly basis. The Company adopted the provisions of FAS 157 for nonfinancial assets and nonfinancial liabilities, which were previously deferred, on January 1, 2009. FAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and requires expanded disclosure about fair value measurements. Fair value is determined based on the price that would be received for an asset or paid to transfer a liability in the most advantageous market, utilizing a hierarchy of three different valuation techniques:

    Level 1—Quoted market prices for identical instruments in active markets;

    Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs, or significant value drivers, are observable; and

    Level 3—Prices reflecting the Company's own assumptions concerning unobservable inputs to the valuation model.

        The following table summarizes the Company's financial assets that are measured at fair value on a quarterly basis. The Company did not have any nonfinancial assets or nonfinancial liabilities which required remeasurement during the three months ended June 30, 2009.

 
   
  Fair Value Measurements  
 
  June 30,
2009
 
Financial Assets
  Level 1   Level 2   Level 3  

Affiliate investments in partnerships

  $ 78,560   $ 74,351   $ 24   $ 4,185  

Affiliate investments in marketable securities

    13,789     11,499     2,290      

        Substantially all of the Company's Level 3 instruments consist of Affiliate investments in partnerships. Any change in the fair value of these investments is presented as "Net (income) loss (non-controlling interests in partnerships)" in the Consolidated Statements of Income. However, the portion of this income or loss that is attributable to investors that are unrelated to the Company is

14



AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


reported as "Net (income) loss (non-controlling interests in partnerships)." The following table presents the changes in Level 3 assets or liabilities for the three and six months ended June 30, 2009:

 
  Three Months Ended
June 30, 2009
  Six Months Ended
June 30, 2009
 

Balance, beginning of period

  $ 4,185   $ 4,185  

Realized and unrealized gains (losses) included in net income

         

Realized and unrealized gains (losses) included in other comprehensive income

         

Purchases, issuances and settlements

         

Transfers in and/or out of Level 3

         
           

Balance, June 30, 2009

  $ 4,185   $ 4,185  
           

Amount of total gains (losses) included in net income attributable to unrealized gains (losses) from assets still held at June 30, 2009

  $   $  

        FSP FAS 107-1 and APB 28-1, "Disclosures about Fair Value of Financial Instruments" requires disclosures about the fair value of financial instruments whenever summarized financial information is reported in interim periods.

        As of June 30, 2009, the carrying amount of the Company's cash, cash equivalents and short-term investments approximates fair value because of the short-term nature of these instruments. The carrying value of notes receivable approximates fair value because interest rates and other terms are at market rates. The carrying value of notes payable approximates fair value principally because of the short-term nature of the notes. The carrying value of senior bank debt approximates fair value because the debt is a credit facility with variable interest based on selected short-term rates. The fair market value of the zero coupon senior convertible notes, the 2008 senior convertible notes, and the 2006 and 2007 junior convertible trust preferred securities was $50,847, $397,302 and $383,131, respectively. The carrying value of the zero coupon senior convertible notes, the 2008 senior convertible notes, and the 2006 and 2007 junior convertible trust preferred securities was $47,263, $403,992 and $506,169, respectively.

13. Related Party Transactions

        The Company periodically records amounts receivable and payable to Affiliate partners in connection with the transfer of Affiliate equity interests. As of December 31, 2008 and June 30, 2009, the total receivable (reported in "Other assets") was $42,808 and $35,538, respectively. The total payable as of December 31, 2008 was $28,241, of which $26,187 is included in current liabilities. The total payable as of June 30, 2009 was $3,202, of which $2,907 is included in current liabilities.

        In certain cases, Affiliate management owners and Company officers may serve as trustees or directors of certain mutual funds from which the Affiliate earns advisory fee revenue.

15



AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Stock Option and Incentive Plans

        The following summarizes the transactions of the Company's stock option and incentive plans for the six months ended June 30, 2009:

 
  Stock
Options
  Weighted
Average
Exercise Price
  Weighted Average
Remaining
Contractual
Life (years)
 

Unexercised options outstanding—January 1, 2009

    5,250,137   $ 48.38     4.5  
 

Options granted

    18,587     37.37        
 

Options exercised

    (329,366 )   36.02        
 

Options expired

    (22,500 )   45.67        
 

Options forfeited

    (27,775 )   67.97        
                   

Unexercised options outstanding—June 30, 2009

    4,889,083     49.07     4.2  
                   

Exercisable at June 30, 2009

    3,726,798     47.31     4.0  

        Under the Company's Long-Term Executive Incentive Plan, the Company granted incentive awards during the second quarter of 2009. The awards are denominated in the Company's common stock, with a fair value of $20,000. Consistent with the Company's retention and incentive objectives, the awards are subject to performance, vesting and forfeiture provisions. The Company will recognize expense for these awards ratably over the 4.5 year service period.

        The Company's Net Income (controlling interest) for the three and six months ended June 30, 2009 includes compensation expense of $1,194 and $1,912, respectively (net of income tax benefits of $764 and $1,223, respectively, related to the Company's share-based compensation arrangements). As of June 30, 2009, the deferred compensation expense related to share-based compensation arrangements was $33,982, which is expected to be recognized over a weighted average period of approximately four years (assuming no forfeitures). As of June 30, 2009, 1.6 million options have expiration dates prior to the end of 2010.

15. Derivatives

        During the first quarter of 2008, the Company entered into a series of treasury rate lock contracts with a notional value of $250,000. Each contract was designated and qualified as a cash flow hedge under FAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." These contracts were settled in the second quarter of 2008, and the Company received $8,154. During the fourth quarter of 2008, the Company concluded that it was probable that the hedged transaction would not occur and the gain was reclassified from accumulated other comprehensive income to Net Income (controlling interest).

16



AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16. Segment Information

        Financial Accounting Standard No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("FAS 131"), establishes disclosure requirements relating to operating segments in annual and interim financial statements. Management has assessed the requirements of FAS 131 and determined that the Company operates in three business segments representing the Company's three principal distribution channels: Mutual Fund, Institutional and High Net Worth, each of which has different client relationships.

        Revenue in the Mutual Fund distribution channel is earned from advisory and sub-advisory relationships with all domestically-registered investment products as well as non-institutional investment products that are registered abroad. Revenue in the Institutional distribution channel is earned from relationships with foundations and endowments, defined benefit and defined contribution plans and Taft-Hartley plans. Revenue in the High Net Worth distribution channel is earned from relationships with wealthy individuals, family trusts and managed account programs.

        Revenue earned from client relationships managed by Affiliates accounted for under the equity method is not consolidated with the Company's reported revenue but instead is included (net of operating expenses, including amortization) in "Income from equity method investments," and reported in the distribution channel in which the Affiliate operates. Income tax attributable to the profits of the Company's equity-method Affiliates is reported within the Company's consolidated income tax provision.

        In firms with revenue sharing arrangements, a certain percentage of revenue is allocated for use by management of an Affiliate in paying operating expenses of that Affiliate, including salaries and bonuses, and is called an "Operating Allocation." In reporting segment operating expenses, 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. Generally, as revenue increases, additional compensation is typically paid to Affiliate management partners from the Operating Allocation. As a result, the contractual expense allocation pursuant to a revenue sharing arrangement may result in the characterization of any growth in profit margin beyond the Company's Owners' Allocation as an operating expense. All other operating expenses (excluding intangible amortization) and interest expense have been allocated to segments based on the proportion of cash flow distributions reported by Affiliates in each segment.

17



AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Statements of Income

 
  For the Three Months Ended June 30, 2008  
 
  Mutual Fund   Institutional   High Net Worth   Total  

Revenue

  $ 125,980   $ 147,409   $ 35,575   $ 308,964  

Operating expenses:

                         
 

Depreciation and other amortization

    2,740     6,801     1,912     11,453  
 

Other operating expenses

    78,273     93,608     22,169     194,050  
                   

    81,013     100,409     24,081     205,503  
                   

Operating income

    44,967     47,000     11,494     103,461  
                   

Non-operating (income) and expenses:

                         
 

Investment and other (income) loss

    514     (421 )   (519 )   (426 )
 

Income from equity method investments

    (418 )   (11,716 )   (1,280 )   (13,414 )
 

Investment (income) loss from Affiliate investments in partnerships

        80     (5,484 )   (5,404 )
 

Interest expense

    5,796     9,045     2,086     16,927  
                   

    5,892     (3,012 )   (5,197 )   (2,317 )
                   

Income before income taxes

    39,075     50,012     16,691     105,778  

Income taxes

    7,952     10,072     2,317     20,341  
                   

Net income

    31,123     39,940     14,374     85,437  
 

Net income (non-controlling interests)

    (17,602 )   (22,835 )   (5,213 )   (45,650 )
 

Net loss (non-controlling interests in partnerships)

    19     44     (5,215 )   (5,152 )
                   

Net Income (controlling interest)

  $ 13,540   $ 17,149   $ 3,946   $ 34,635  
                   

18



AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 
  For the Three Months Ended June 30, 2009  
 
  Mutual Fund   Institutional   High Net Worth   Total  

Revenue

  $ 72,360   $ 101,491   $ 27,395   $ 201,246  

Operating expenses:

                         
 

Depreciation and other amortization

    1,011     7,476     2,800     11,287  
 

Other operating expenses

    50,314     71,139     18,813     140,266  
                   

    51,325     78,615     21,613     151,553  
                   

Operating income

    21,035     22,876     5,782     49,693  
                   

Non-operating (income) and expenses:

                         
 

Investment and other (income) loss

    (5,025 )   (1,560 )   (606 )   (7,191 )
 

Income from equity method investments

    (139 )   (6,835 )   (377 )   (7,351 )
 

Investment (income) loss from Affiliate investments in partnerships

        (385 )   (14,562 )   (14,947 )
 

Interest expense

    5,198     11,441     2,554     19,193  
                   

    34     2,661     (12,991 )   (10,296 )
                   

Income before income taxes

    21,001     20,215     18,773     59,989  

Income taxes

    2,034     1,449     257     3,740  
                   

Net income

    18,967     18,766     18,516     56,249  
 

Net income (non-controlling interests)

    (12,994 )   (14,130 )   (3,547 )   (30,671 )
 

Net loss (non-controlling interests in partnerships)

        (385 )   (14,214 )   (14,599 )
                   

Net Income (controlling interest)

  $ 5,973   $ 4,251   $ 755   $ 10,979  
                   

 

 
  For the Six Months Ended June 30, 2008  
 
  Mutual Fund   Institutional   High Net Worth   Total  

Revenue

  $ 260,843   $ 307,488   $ 75,667   $ 643,998  

Operating expenses:

                         
 

Depreciation and other amortization

    5,623     13,078     3,876     22,577  
 

Other operating expenses

    162,786     194,101     46,506     403,393  
                   

    168,409     207,179     50,382     425,970  
                   

Operating income

    92,434     100,309     25,285     218,028  
                   

Non-operating (income) and expenses:

                         
 

Investment and other (income) loss

    2,370     33     (890 )   1,513  
 

Income from equity method investments

    (852 )   (23,894 )   (2,656 )   (27,402 )
 

Investment (income) loss from Affiliate investments in partnerships

    (5 )   370     8,565     8,930  
 

Interest expense

    13,879     21,320     4,665     39,864  
                   

    15,392     (2,171 )   9,684     22,905  
                   

Income before income taxes

    77,042     102,480     15,601     195,123  

Income taxes

    15,398     19,128     4,152     38,678  
                   

Net income

    61,644     83,352     11,449     156,445  
 

Net income (non-controlling interests)

    (35,504 )   (51,127 )   (12,193 )   (98,824 )
 

Net loss (non-controlling interests in partnerships)

    78     346     7,813     8,237  
                   

Net Income (controlling interest)

  $ 26,218   $ 32,571   $ 7,069   $ 65,858  
                   

19



AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

 
  For the Six Months Ended June 30, 2009  
 
  Mutual Fund   Institutional   High Net Worth   Total  

Revenue

  $ 140,698   $ 183,729   $ 55,294   $ 379,721  

Operating expenses:

                         
 

Depreciation and other amortization

    2,089     14,900     5,631     22,620  
 

Other operating expenses

    95,454     128,801     38,428     262,683  
                   

    97,543     143,701     44,059     285,303  
                   

Operating income

    43,155     40,028     11,235     94,418  
                   

Non-operating (income) and expenses:

                         
 

Investment and other (income) loss

    (4,399 )   (1,727 )   (824 )   (6,950 )
 

Income from equity method investments

    (209 )   (12,946 )   (612 )   (13,767 )
 

Investment (income) loss from Affiliate investments in partnerships

    (3 )   (316 )   (10,833 )   (11,152 )
 

Interest expense

    11,247     22,538     5,356     39,141  
                   

    6,636     7,549     (6,913 )   7,272  
                   

Income before income taxes

    36,519     32,479     18,148     87,146  

Income taxes

    4,990     2,242     425     7,657  
                   

Net income

    31,529     30,237     17,723     79,489  
 

Net income (non-controlling interests)

    (20,930 )   (24,430 )   (6,189 )   (51,549 )
 

Net loss (non-controlling interests in partnerships)

    (3 )   (316 )   (10,517 )   (10,836 )
                   

Net Income (controlling interest)

  $ 10,596   $ 5,491   $ 1,017   $ 17,104  
                   

Total assets as of December 31, 2008

  $ 983,008   $ 1,733,928   $ 495,764   $ 3,212,700  

Total assets as of June 30, 2009

    945,507     1,663,834     470,955     3,080,296  

17. Goodwill and Acquired Client Relationships

        The following table presents the change in goodwill during the six months ended June 30, 2009:

 
  Mutual Fund   Institutional   High Net Worth   Total  

Balance, as of December 31, 2008

  $ 463,421   $ 559,511   $ 220,651   $ 1,243,583  

Goodwill acquired, net

    99     1,299     14     1,412  

Foreign currency translation

    4,359     4,623     1,816     10,798  
                   

Balance, as of June 30, 2009

  $ 467,879   $ 565,433   $ 222,481   $ 1,255,793  
                   

        The following table reflects the components of intangible assets of the Company's Affiliates that are consolidated as of December 31, 2008 and June 30, 2009:

 
  December 31, 2008   June 30, 2009  
 
  Carrying
Amount
  Accumulated
Amortization
  Carrying
Amount
  Accumulated
Amortization
 

Amortized intangible assets:

                         
 

Acquired client relationships

  $ 399,886   $ 176,261   $ 401,187   $ 192,399  

Non-amortized intangible assets:

                         
 

Acquired client relationships-mutual fund management contracts

  $ 267,783       $ 267,783      
 

Goodwill

    1,243,583         1,255,793      

20



AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

        For the Company's Affiliates that are consolidated, definite-lived acquired client relationships are amortized over their expected useful lives. As of June 30, 2009, these relationships were being amortized over a weighted average life of approximately 10 years. The Company estimates that its consolidated annual amortization expense will be approximately $32,500 for the next five years, assuming no additional investments in new or existing Affiliates.

        The definite-lived acquired client relationships attributable to the Company's equity method investments are amortized over their expected useful lives. As of June 30, 2009, these relationships were being amortized over approximately seven years. Amortization expense for these relationships was $15,862 for the six months ended June 30, 2009. The Company estimates that the annual amortization expense attributable to its current equity-method Affiliates will be approximately $31,500 for the next five years.

18. Recent Accounting Developments

        In June 2009, the FASB issued FAS No. 166, "Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140" ("FAS 166"). FAS 166 establishes new criteria that must be met before transfers of financial assets are eligible for sale accounting and changes the amount that can be recognized as a gain or loss on a transfer accounted for as a sale when beneficial interests are received by the transferor. Disclosures are also required to provide information about transfers of financial assets and a transferor's continuing involvement with transferred financial assets. The Company will adopt FAS 166 in the first quarter of 2010 and does not expect this standard to have a material effect on the consolidated financial statements.

        In June 2009, the FASB issued FAS No. 167, "Amendments to FASB Interpretation No. 46(R)" ("FAS 167"). FAS 167 amends FASB Interpretation No. 46 (revised December 2003), "Consolidation of Variable Interest Entities" ("FIN 46(R)") to require an enterprise to qualitatively assess the determination of the primary beneficiary of a variable interest entity ("VIE") based on whether the entity has the power to direct the activities of a VIE that most significantly impact the entity's economic performance and has the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. FAS 167 also requires an ongoing reconsideration of the primary beneficiary, and amends the events that trigger a reassessment of whether an entity is a VIE. Disclosures are also required to provide information about an enterprise's involvement in a VIE. The Company will adopt FAS 167 in the first quarter of 2010 and is currently evaluating the potential impact of this new standard.

        In June 2009, the FASB issued FAS No. 168, "The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162" ("FAS 168"). FAS 168 replaces all previously issued accounting standards and establishes the "FASB Accounting Standards Codification™" ("Codification") as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles in the United States. The Company will adopt FAS 168 in the third quarter of 2009.

19. Affiliate Equity

        Many of the Company's operating agreements provide Affiliate managers a conditional right to require the Company to purchase their retained equity interests at certain intervals. Certain agreements also provide the Company a conditional right to require Affiliate managers to sell their retained equity interests to the Company upon their death, permanent incapacity or termination of employment and

21



AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


provide Affiliate managers a conditional right to require the Company to purchase such retained equity interests upon the occurrence of specified events. The purchase price of these conditional purchases are generally calculated based upon a multiple of the Affiliate's cash flow distributions, which is intended to represent fair value. Affiliate management partners are also permitted to sell their equity interests to other individuals or entities in certain cases, subject to the Company's approval or other restrictions.

        The Company may pay for Affiliate equity purchases in cash, shares of its common stock or other forms of consideration and can consent to the transfer of these interests to other individuals or entities. The Company's cumulative redemption obligation for these interests has been presented as "Redeemable non-controlling interests" on the Company's Consolidated Balance Sheets. Changes in redeemable non-controlling interests for the six months ended June 30, 2009 are principally the result of changes to the value of these interests. Although the timing and amounts of these purchases are difficult to predict, the Company expects to repurchase approximately $50,000 of Affiliate equity during the next twelve months, and, in such event, will own the cash flow associated with any equity repurchased.

        During the six months ended June 30, 2008 and 2009, the Company acquired interests from and transferred interests to Affiliate management partners. The following schedule discloses the effect of changes in the Company's ownership interest in its Affiliates on the controlling interest's equity:

 
  For the Six Months
Ended June 30,
 
 
  2008   2009  

Net Income (controlling interest)

  $ 65,858   $ 17,104  
 

Increase in controlling interest paid-in capital from the sale of Affiliate equity

    7,877     4,373  
           
 

Change from Net Income (controlling interest) and net transfers with non-controlling interests

  $ 73,735   $ 21,477  
           

20. Comprehensive Income

        A summary of comprehensive income, net of applicable taxes, is as follows:

 
  For the Three Months Ended June 30,   For the Six Months Ended June 30,  
 
  2008   2009   2008   2009  

Net income

  $ 85,437   $ 56,249   $ 156,445   $ 79,489  

Foreign currency translation adjustment(1)

    1,183     24,672     (7,528 )   14,955  

Change in net unrealized gain (loss) on investment securities

    94     4     121     (151 )

Change in net unrealized loss on derivative securities

    8,183         4,959      
                   

Comprehensive income

    94,897     80,925     153,997     94,293  

Comprehensive income (non-controlling interests)

    (50,802 )   (45,270 )   (90,587 )   (62,385 )
                   

Comprehensive income (controlling interest)

  $ 44,095   $ 35,655   $ 63,410   $ 31,908  
                   

(1)
Foreign currency translation results from the impact of changes in foreign currency exchange rates at Affiliates whose functional currency is not the United States dollar.

22



AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

        The components of accumulated other comprehensive income, net of applicable taxes, are as follows:

 
  December 31, 2008   June 30, 2009  

Foreign currency translation adjustments

  $ (3,721 ) $ 11,234  

Unrealized gain (loss) on investment securities

    (360 )   (511 )
           

Accumulated other comprehensive income

  $ (4,081 ) $ 10,723  
           

21. Subsequent Event

        On July 29, 2009 the Company announced an agreement to acquire a majority interest in Harding Loevner LLC ("Harding Loevner"). Harding Loevner manages approximately $5 billion in assets under management in a range of investment strategies including emerging markets, global and international products. The transaction is expected to close during the third quarter of 2009.

        Subsequent events and transactions have been evaluated for potential recognition or disclosure through August 6, 2009, the day the financial statements were issued.

23


Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

        When used in this Quarterly Report on Form 10-Q, in our other filings with the United States Securities and Exchange Commission, in our press releases and in oral statements made with the approval of an executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "may," "intends," "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:

    our performance is directly affected by changing conditions in global financial markets generally and in the equity markets particularly, and a decline or a lack of sustained growth in these markets may result in decreased advisory fees or performance fees and a corresponding decline (or lack of growth) in our operating results and in the cash flow distributable to us from our Affiliates;

    we cannot be certain that we will be successful in finding or investing in additional investment management firms on favorable terms, that we will be able to consummate announced investments in new investment management firms, or that existing and new Affiliates will have favorable operating results;

    we may need to raise capital by making long-term or short-term borrowings or by selling shares of our common stock or other securities in order to finance investments in additional investment management firms or additional investments in our existing Affiliates, and we cannot be sure that such capital will be available to us on acceptable terms, if at all; and

    those certain other factors discussed under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2008, and in any other filings we make with the Securities and Exchange Commission from time to time.

        These factors (among others) could affect our financial performance and cause 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.

Overview

        We are an asset management company with equity investments in a diverse group of boutique investment management firms (our "Affiliates"). We pursue a growth strategy designed to generate shareholder value through the internal growth of our existing business, additional investments in investment management firms and strategic transactions and relationships designed to enhance our Affiliates' businesses and growth prospects.

        Through our Affiliates, we manage approximately $173.8 billion in assets (as of June 30, 2009) in more than 300 investment products across a broad range of asset classes and investment styles in three principal distribution channels: Mutual Fund, Institutional and High Net Worth. We believe that our diversification across asset classes, investment styles and distribution channels helps to mitigate our exposure to the risks created by changing market environments. The following summarizes our operations in our three principal distribution channels.

    Our Affiliates provide advisory or sub-advisory services to more than 100 mutual funds. These funds are distributed to retail and institutional clients directly and through intermediaries,

24


      including independent investment advisors, retirement plan sponsors, broker/dealers, major fund marketplaces and bank trust departments.

    In the Institutional distribution channel, our Affiliates offer approximately 200 investment products across approximately 50 different investment styles, including small, small/mid, mid and large capitalization value, growth equity and emerging markets. In addition, our Affiliates offer quantitative, alternative, credit arbitrage and fixed income products. Through this distribution channel, our Affiliates manage assets for foundations and endowments, defined benefit and defined contribution plans for corporations and municipalities, and Taft-Hartley plans, with disciplined and focused investment styles that address the specialized needs of institutional clients.

    The High Net Worth distribution channel is comprised broadly of two principal client groups. The first group consists principally of direct relationships with high net worth individuals and families and charitable foundations. For these clients, our Affiliates provide investment management or customized investment counseling and fiduciary services. The second group consists of individual managed account client relationships established through intermediaries, generally brokerage firms or other sponsors. Our Affiliates provide investment management services through approximately 100 managed account and wrap programs.

        We operate our business through our Affiliates in our three principal distribution channels, maintaining each Affiliate's distinct entrepreneurial culture and independence through our investment structure. In making investments in boutique asset management firms, we seek to partner with the highest quality firms in the industry, with outstanding management teams, strong long-term performance records and a demonstrated commitment to continued growth and success. Fundamental to our investment approach is the belief that Affiliate management equity ownership (along with AMG's ownership) aligns our interests and provides Affiliate managers with a powerful incentive to continue to grow their business. Our investment structure provides a degree of liquidity and diversification to principal owners of boutique investment management firms, while at the same time expanding equity ownership opportunities among the firm's management and allowing management to continue to participate in the firm's future growth. Our partnership approach also ensures that Affiliates maintain operational autonomy in managing their business, thereby preserving their firm's entrepreneurial culture and independence.

        Although the specific structure of each investment is highly tailored to meet the needs of a particular Affiliate, in all cases, AMG establishes a meaningful equity interest in the firm, with the remaining equity interests retained by the management of the Affiliate. Each Affiliate is organized as a separate firm, and its operating or shareholder agreement is structured to provide appropriate incentives for Affiliate management owners and to address the Affiliate's particular characteristics while also enabling us to protect our interests, including through arrangements such as long-term employment agreements with key members of the firm's management team.

        In most cases, we own a majority of the equity interests of a firm and structure a revenue sharing arrangement, in which a percentage of revenue is allocated for use by management of that Affiliate in paying operating expenses of the Affiliate, including salaries and bonuses. We call this the "Operating Allocation." The portion of the Affiliate's revenue that is allocated to the owners of that Affiliate (including us) is called the "Owners' Allocation." Each Affiliate allocates its Owners' Allocation to its managers and to us generally in proportion to their and our respective ownership interests in that Affiliate.

        One of the purposes of our revenue sharing arrangements is to provide ongoing incentives for Affiliate managers by allowing them to participate in the growth of their firm's revenue, which may increase their compensation from both the Operating Allocation and the Owners' Allocation. These

25



arrangements also provide incentives to control operating expenses, thereby increasing the portion of the Operating Allocation that is available for growth initiatives and compensation.

        An Affiliate's Operating Allocation is structured to cover its operating expenses. However, should actual operating expenses exceed the Operating Allocation, our contractual share of cash under the Owners' Allocation generally has priority over the allocations and distributions to the Affiliate's managers. As a result, the excess expenses first reduce the portion of the Owners' Allocation allocated to the Affiliate's managers until that portion is eliminated, before reducing 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 the portion of future Owners' Allocation allocated to the Affiliate's managers.

        Our minority investments are also structured to align our interests with those of the Affiliate's management through shared equity ownership, as well as to preserve the Affiliate's entrepreneurial culture and independence by maintaining the Affiliate's operational autonomy. In cases where we hold a minority interest, the revenue sharing arrangement generally allocates a percentage of the Affiliate's revenue to us. The remaining revenue is used to pay operating expenses and profit distributions to the other owners.

        Certain of our Affiliates operate under profit-based arrangements through which we own a majority of the equity in the firm and receive a share of profits as cash flow, rather than a percentage of revenue through a typical revenue sharing agreement. As a result, we participate fully in any increase or decrease in the revenue or expenses of such firms. In these cases, we participate in a budgeting process and generally provide incentives to management through compensation arrangements based on the performance of the Affiliate.

        We are focused on establishing and maintaining long-term partnerships with our Affiliates. Our shared equity ownership gives both AMG and our Affiliate partners meaningful incentives to manage their businesses for strong future growth. From time to time, we may consider changes to the structure of our relationship with an Affiliate in order to better support the firm's growth strategy.

        Through our affiliated investment management firms, we derive most of our revenue from the provision of investment management services. Investment management fees ("asset-based fees") are usually determined as a percentage fee charged on periodic values of a client's assets under management; most asset-based advisory fees are billed by our Affiliates quarterly. Certain clients are billed for all or a portion of their accounts based upon assets under management valued at the beginning of a billing period ("in advance"). Other clients are billed for all or a portion of their accounts based upon assets under management valued at the end of the billing period ("in arrears"). Most client accounts in the High Net Worth distribution channel are billed in advance, and most client accounts in the Institutional distribution channel are billed in arrears. Clients in the Mutual Fund distribution channel are billed based upon average daily assets under management. Advisory fees billed in advance will not reflect subsequent changes in the market value of assets under management for that period but may reflect changes due to client withdrawals. Conversely, advisory fees billed in arrears will reflect changes in the market value of assets under management for that period.

        In addition, over 50 Affiliate alternative investment and equity products, representing approximately $29.0 billion of assets under management (as of June 30, 2009), also bill on the basis of absolute or relative investment performance ("performance fees"). These products, which are primarily in the Institutional distribution channel, are often structured to have returns that are not directly correlated to changes in broader equity indices and, if earned, the performance fee component is typically billed less frequently than an asset-based fee. Although performance fees inherently depend on investment results and will vary from period to period, we anticipate performance fees to be a recurring component of our revenue. We also anticipate that, within any calendar year, the majority of any performance fees will typically be realized in the fourth quarter.

26


        For certain of our Affiliates, generally where we own a non-controlling interest, we are required to use the equity method of accounting. Consistent with this method, we have not consolidated the operating results of these firms (including their revenue) in our Consolidated Statements of Income. Our share of these firms' profits (net of intangible amortization) is reported in "Income from equity method investments," and is therefore reflected in our Net Income (controlling interest) and EBITDA. As a consequence, increases or decreases in these firms' assets under management (which totaled $45.8 billion as of June 30, 2009) will not affect reported revenue in the same manner as changes in assets under management at our other Affiliates.

        Our Net Income attributable to controlling interest reflects the revenue of our consolidated Affiliates and our share of income from Affiliates which we account for under the equity method, reduced by:

    our expenses, including the operating expenses of our consolidated Affiliates; and

    the profits allocated to managers of our consolidated Affiliates (i.e., income attributable to non-controlling interests).

        As discussed above, for consolidated Affiliates with revenue sharing arrangements, the operating expenses of the Affiliate as well as its managers' non-controlling interest generally increase (or decrease) as the Affiliate's revenue increases (or decreases) because of the direct relationship established in many of our agreements between the Affiliate's revenue and its Operating Allocation and Owners' Allocation. At our consolidated profit-based Affiliates, expenses may or may not correspond to increases or decreases in the Affiliates' revenues.

        Our level of profitability will depend on a variety of factors, including:

    those affecting the global financial markets generally and the equity markets particularly, which could potentially result in considerable increases or decreases in the assets under management at our Affiliates;

    the level of Affiliate revenue, 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;

    our receipt of Owners' Allocation from Affiliates with revenue sharing arrangements, which depends on the ability of our existing and future Affiliates to maintain certain levels of operating profit margins;

    the increases or decreases in the revenue and expenses of Affiliates that operate on a profit-based model;

    the availability and cost of the capital with which we finance our existing and new investments;

    our success in making new investments and the terms upon which such transactions are completed;

    the level of intangible assets and the associated amortization expense resulting from our investments;

    the level of our expenses, including compensation for our employees; and

    the level of taxation to which we are subject.

27


Results of Operations

        The following table presents our Affiliates' reported assets under management by operating segment (which are also referred to as distribution channels in this Quarterly Report on Form 10-Q).

Assets under Management

Statement of Changes—Quarter to Date

(in billions)
  Mutual
Fund
  Institutional   High
Net Worth
  Total  

March 31, 2009

  $ 30.6   $ 98.4   $ 23.9   $ 152.9  
 

Client cash inflows

    1.9     8.0     1.3     11.2  
 

Client cash outflows

    (3.0 )   (8.4 )   (1.4 )   (12.8 )
                   
   

Net client cash flows

    (1.1 )   (0.4 )   (0.1 )   (1.6 )
                   
 

Investment performance

    5.7     16.0     2.9     24.6  
 

Other(1)

        (2.1 )   (0.0 )   (2.1 )
                   

June 30, 2009

  $ 35.2   $ 111.9   $ 26.7   $ 173.8  
                   

Statement of Changes—Year to Date

(in billions)
  Mutual
Fund
  Institutional   High
Net Worth
  Total  

December 31, 2008

  $ 34.7   $ 109.4   $ 26.0   $ 170.1  
 

Client cash inflows

    3.4     15.2     2.6     21.2  
 

Client cash outflows

    (5.7 )   (18.2 )   (3.3 )   (27.2 )
                   
   

Net client cash flows

    (2.3 )   (3.0 )   (0.7 )   (6.0 )
                   
 

Investment performance

    2.8     10.1     1.5     14.4  
 

Other(1)

        (4.6 )   (0.1 )   (4.7 )
                   

June 30, 2009

  $ 35.2   $ 111.9   $ 26.7   $ 173.8  
                   

(1)
Other includes assets under management attributable to Affiliate product closings, the financial effect of which is not material to our ongoing results.

        As shown in the assets under management table above, client cash inflows totaled $21.2 billion while client cash outflows totaled $27.2 billion for the six months ended June 30, 2009. The net flows for the six months ended June 30, 2009 occurred across a broad range of product offerings in each of our distribution channels, with no individual cash inflow or outflow having a material impact on our revenue or expenses.

        The operating segment analysis presented in the following table is based on average assets under management. For the Mutual Fund distribution channel, average assets under management represent an average of the daily net assets under management. For the Institutional and High Net Worth distribution channels, average assets under management represent an average of the assets at the beginning and end of each calendar quarter during the applicable period. We believe that this analysis

28



more closely correlates to the billing cycle of each distribution channel and, as such, provides a more meaningful relationship to revenue.

 
  For the Three Months
Ended June 30,
   
  For the Six Months
Ended June 30,
   
 
(dollars in millions, except as noted)
  2008   2009   % Change   2008   2009   % Change  

Average assets under management (in billions)(1)

                                     

Mutual Fund

  $ 57.8   $ 33.8     (42 )% $ 57.7   $ 33.1     (43 )%

Institutional

    159.1     105.1     (34 )%   166.2     106.6     (36 )%

High Net Worth

    28.4     25.3     (11 )%   29.7     25.5     (14 )%
                               
 

Total

  $ 245.3   $ 164.2     (33 )% $ 253.6   $ 165.2     (35 )%
                               

Revenue

                                     

Mutual Fund

  $ 126.0   $ 72.3     (43 )% $ 260.8   $ 140.7     (46 )%

Institutional

    147.4     101.5     (31 )%   307.5     183.7     (40 )%

High Net Worth

    35.6     27.4     (23 )%   75.7     55.3     (27 )%
                               
 

Total

  $ 309.0   $ 201.2     (35 )% $ 644.0   $ 379.7     (41 )%
                               

Net Income

                                     

Mutual Fund

  $ 13.5   $ 6.0     (56 )% $ 26.2   $ 10.6     (60 )%

Institutional

    17.2     4.2     (76 )%   32.6     5.5     (83 )%

High Net Worth

    3.9     0.8     (79 )%   7.1     1.0     (86 )%
                               
 

Total

  $ 34.6   $ 11.0     (68 )% $ 65.9   $ 17.1     (74 )%
                               

EBITDA(2)

                                     

Mutual Fund

  $ 30.1   $ 14.4     (52 )% $ 61.2   $ 29.3     (52 )%

Institutional

    47.3     31.7     (33 )%   94.8     59.1     (38 )%

High Net Worth

    10.9     7.1     (35 )%   20.9     14.0     (33 )%
                               
 

Total

  $ 88.3   $ 53.2     (40 )% $ 176.9   $ 102.4     (42 )%
                               

(1)
These amounts include assets managed by affiliated investment management firms whose financial results are not consolidated for financial reporting purposes of $58.4 billion and $42.9 billion for the three months ended June 30, 2008 and 2009, respectively, and $60.3 billion and $43.3 billion for the six months ended June 30, 2008 and 2009, respectively. Assets under management attributable to any investments that closed during the relevant periods are included on a weighted average basis for the period from the closing date of the respective investment.

(2)
EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. Our use of EBITDA, including reconciliation to cash flow from operations, is described in greater detail in "Liquidity and Capital Resources—Supplemental Liquidity Measure." For purposes of our distribution channel operating results, expenses not incurred directly by Affiliates have been allocated based on the proportion of aggregate cash flow distributions reported by each Affiliate in the particular distribution channel.

        As a result of the strong investment performance across global equity markets during the second quarter, ending assets under management were 5% higher than average assets under management for the six months ended June 30, 2009. This variance between ending assets under management and average assets under management is unlikely to meaningfully affect future operating results.

29


Revenue

        Our revenue is generally determined by the level of our assets under management, the portion of our assets across our products and three operating segments, which realize different fee rates, and the recognition of any performance fees. As described in the "Overview" section above, performance fees are generally measured on absolute or relative investment performance against a benchmark. As a result, the level of performance fees earned can vary significantly from period to period and these fees may not necessarily be correlated to changes in assets under management.

        Our total revenue decreased $107.8 million (or 35%) in the three months ended June 30, 2009, as compared to the three months ended June 30, 2008, primarily from a 33% decrease in average assets under management. This decrease in average assets under management resulted principally from the decline in global equity markets and negative net client cash flows. Unrelated to the change in assets under management, performance fees in the three months ended June 30, 2009 increased as compared to the three months ended June 30, 2008 (5% of revenue for the three months ended June 30, 2009 and 3% of revenue for the three months ended June 30, 2008).

        Our total revenue decreased $264.3 million (or 41%) in the six months ended June 30, 2009, as compared to the six months ended June 30, 2008, primarily from a 35% decrease in average assets under management. This decrease in average assets under management resulted principally from the decline in global equity markets and negative net client cash flows. Unrelated to the change in assets under management, performance fees in the six months ended June 30, 2009 decreased as compared to the six months ended June 30, 2008 (3% of revenue for the six months ended June 30, 2009 and 6% of revenue for the six months ended June 30, 2008).

        The following discusses the changes in our revenue by operating segments.

Mutual Fund Distribution Channel

        Our revenue in the Mutual Fund distribution channel decreased $53.7 million (or 43%) in the three months ended June 30, 2009 as compared to the three months ended June 30, 2008, while average assets under management decreased 42%, and decreased $120.1 million (or 46%) in the six months ended June 30, 2009 as compared to the six months ended June 30, 2008, while average assets under management decreased 43%. These decreases in average assets under management resulted principally from the decline in global equity markets and negative net client cash flows. Unrelated to the change in assets under management, our performance fees in the six months ended June 30, 2009 declined as compared to the six months ended June 30, 2008.

Institutional Distribution Channel

        Our revenue in the Institutional distribution channel decreased $45.9 million (or 31%) in the three months ended June 30, 2009 as compared to the three months ended June 30, 2008, while average assets under management decreased 34%, and decreased $123.8 million (or 40%) in the six months ended June 30, 2009 as compared to the six months ended June 30, 2008, while average assets under management decreased 36%. These decreases in average assets under management resulted principally from the decline in global equity markets and negative net client cash flows. Unrelated to the change in assets under management, our performance fees in the six months ended June 30, 2009 declined as compared to the six months ended June 30, 2008.

High Net Worth Distribution Channel

        Our revenue in the High Net Worth distribution channel decreased $8.2 million (or 23%) in the three months ended June 30, 2009 as compared to the three months ended June 30, 2008, while average assets under management decreased 11%, and decreased $20.4 million (or 27%) in the six months ended June 30, 2009 as compared to the six months ended June 30, 2008, while average assets under management decreased 14%. These decreases in average assets under management resulted principally from the decline in global equity markets, partially offset by our 2008 investment in a new Affiliate.

30


Operating Expenses

        The following table summarizes our consolidated operating expenses:

 
  For the Three Months
Ended June 30,
   
  For the Six Months
Ended June 30,
   
 
(dollars in millions)
  2008   2009   % Change   2008   2009   % Change  

Compensation and related expenses

  $ 140.8   $ 103.4     (27 )% $ 291.9   $ 187.5     (36 )%

Selling, general and administrative

    48.2     32.2     (33 )%   101.0     64.7     (36 )%

Amortization of intangible assets

    8.6     8.1     (6 )%   16.9     16.1     (5 )%

Depreciation and other amortization

    2.9     3.2     10 %   5.7     6.5     14 %

Other operating expenses

    5.0     4.7     (6 )%   10.5     10.5     0 %
                               

Total operating expenses

  $ 205.5   $ 151.6     (26 )% $ 426.0   $ 285.3     (33 )%
                               

        The substantial portion of our operating expenses is incurred by our Affiliates, the majority of which is incurred by Affiliates with revenue sharing arrangements. For Affiliates with revenue sharing arrangements, an Affiliate's Operating Allocation percentage generally determines its operating expenses. Accordingly, our compensation expense is impacted by increases or decreases in each Affiliate's revenue and the corresponding increases or decreases in each Affiliate's respective Operating Allocation. During the three and six months ended June 30, 2009, approximately $46.4 million and $73.1 million (or 45% and 39%), respectively, of our consolidated compensation expense was attributable to our Affiliate management partners. The percentage of revenue allocated to operating expenses varies from one Affiliate to another and may also vary within an Affiliate depending on the source or amount of revenue. As a result, changes in our aggregate revenue may not impact our consolidated operating expenses to the same degree.

        Compensation and related expenses decreased 27% and 36% in the three and six months ended June 30, 2009, as compared to the three and six months ended June 30, 2008, respectively, primarily as a result of the relationship between revenue and operating expenses at Affiliates, which experienced decreases in revenue, and accordingly, reported lower compensation expenses. These decreases were also attributable to decreases in holding company share-based compensation of $1.7 million and $4.3 million in the three and six months ended June 30, 2009, as compared to the three and six months ended June 30, 2008, respectively. These decreases were partially offset by increases in aggregate Affiliate expenses resulting from our new Affiliate investment in 2008 of $4.3 million and $8.6 million in the three and six months ended June 30, 2009, as compared to the three and six months ended June 30, 2008, respectively.

        Selling, general and administrative expenses decreased 33% and 36% in the three and six months ended June 30, 2009, as compared to the three and six months ended June 30, 2008, respectively. These decreases resulted from decreases in sub-advisory and distribution expenses attributable to a decline in assets under management at our Affiliates in the Mutual Fund distribution channel, as well as Affiliate and holding company cost-cutting initiatives. The decrease in the six months ended June 30, 2009 as compared to the six months ended June 30, 2008 was also attributable to a decrease of $5.1 million in sub-advisory and administrative costs related to performance fees. In each period, these decreases were partially offset by increases in aggregate Affiliate expenses from our new Affiliate investment in 2008 of $1.0 million and $2.0 million, respectively.

        Amortization of intangible assets decreased 6% and 5% in the three and six months ended June 30, 2009 as compared to the three and six months ended June 30, 2008, respectively. These increases were principally attributable to a decrease in definite-lived intangible assets.

31


        Depreciation and other amortization increased 10% and 14% in the three and six months ended June 30, 2009 as compared to the three and six months ended June 30, 2008, principally attributable to an increase in aggregate Affiliate expenses from our new Affiliate investment in 2008.

        Other operating expenses decreased 6% in the three months ended June 30, 2009 as compared to the three months ended June 30, 2008, as a result of Affiliate cost-cutting initiatives. This decrease was partially offset by a $0.3 million increase in aggregate Affiliate expenses from our new Affiliate investment in 2008. Other operating expenses were essentially flat in the six months ended June 30, 2009 as compared to the six months ended June 30, 2008, as the Affiliate and holding company cost-cutting initiatives were offset by a $0.6 million increase in aggregate Affiliate expenses from our new Affiliate investment in 2008.

Other Income Statement Data

        The following table summarizes other income statement data:

 
  For the Three Months
Ended June 30,
   
  For the Six Months
Ended June 30,
   
 
(dollars in millions)
  2008   2009   % Change   2008   2009   % Change  

Income from equity method investments

  $ 13.4   $ 7.4     (45 )% $ 27.4   $ 13.8     (50 )%

Investment and other income (loss)

    0.4     7.2     N.M. (1)   (1.5 )   6.9     N.M. (1)

Investment income (loss) from Affiliate investments in partnerships

    5.4     14.9     176 %   (8.9 )   11.2     N.M. (1)

Interest expense

    16.9     19.2     14 %   39.9     39.1     (2 )%

Income tax expense

    20.3     3.7     (82 )%   38.7     7.7     (80 )%

(1)
Percentage change is not meaningful.

        Income from equity method investments consists of our share of income from Affiliates that are accounted for under the equity method of accounting, net of any related intangible amortization. Income from equity method investments decreased 45% and 50% in the three and six months ended June 30, 2009, as compared to the three and six months ended June 30, 2008, respectively. These decreases were principally the result of decreases in revenue resulting from declines in assets under management at Affiliates that we account for under the equity method of accounting. These decreases also resulted from increases in intangible amortization expense of $3.0 million and $6.0 million in the three and six months ended June 30, 2009, as compared to the three and six months ended June 30, 2008, respectively.

        Investment and other income increased in the three and six months ended June 30, 2009, as compared to the three and six months ended June 30, 2008, principally as a result of an increase in Affiliate investment earnings. Investment and other income also improved in the six months ended June 30, 2009 as compared to the six months ended June 30, 2008 because of $2.0 million of expenses incurred on the settlement of our 2004 mandatory convertible securities and the conversion of our floating rate senior convertible securities in the first quarter of 2008, which did not recur in the first quarter of 2009.

        Investment income (loss) from Affiliate investments in partnerships relates to the consolidation of certain investment partnerships in which our Affiliates are the general partner. For the three months ended June 30, 2008 and 2009, the income from Affiliate investments in partnerships was $5.4 million and $14.9 million, respectively. For the six months ended June 30, 2008 and 2009, the income from Affiliate investments in partnerships was $(8.9) million and $11.2 million, respectively. This income (loss) was principally attributable to investors who are unrelated to us.

32


        Interest expense increased 14% in the three months ended June 30, 2009, as compared to the three months ended June 30, 2008. This increase was principally attributable to an increase of $8.4 million attributable to the issuance of our 2008 senior convertible notes, partially offset by a $5.2 million decrease in the cost of our senior bank debt resulting from a decline in borrowings. Interest expense decreased 2% in the six months ended June 30, 2009, as compared to the six months ended June 30, 2008. The decrease was principally attributable to an $11.2 million decrease in the cost of our senior bank debt resulting from a decline in borrowings and a $4.9 million decrease from the conversion of our floating rate senior convertible securities and the settlement of our mandatory convertible securities in 2008. These decreases were partially offset by an increase of $16.8 million attributable to the issuance of our 2008 senior convertible notes.

        Income taxes decreased 82% in the three months ended June 30, 2009, as compared to the three months ended June 30, 2008, principally as a result of the decrease in Net Income (controlling interest), as well as a decrease in the effective tax rate from 37.0% to 25.4%. Income taxes decreased 80% in the six months ended June 30, 2009, as compared to the six months ended June 30, 2008, principally as a result of the decrease in Net Income (controlling interest), as well as a decrease in the effective tax rate from 37.0% to 30.9%. The effective tax rate for the three and six month periods ending June 30, 2009 decreased as a result of new Commonwealth of Massachusetts tax regulations, which enabled us to reverse $3.0 million of valuation allowance related to state net operating losses.

Net Income

        The following table summarizes Net Income:

 
  For the Three Months
Ended June 30,
   
  For the Six Months
Ended June 30,
   
 
(dollars in millions)
  2008   2009   % Change   2008   2009   % Change  

Net income (non-controlling interests)

  $ 45.7   $ 30.7     (33 )% $ 98.8   $ 51.5     (48 )%

Net income (loss) (non-controlling interests in partnerships)

    5.2     14.6     181 %   (8.2 )   10.8     N.M. (1)

Net Income (controlling interest)

    34.6     11.0     (68 )%   65.9     17.1     (74 )%

(1)
Percentage change is not meaningful.

        Net income attributable to non-controlling interests decreased 33% and 48% in the three and six months ended June 30, 2009, as compared to the three and six months ended June 30, 2008, respectively, principally as a result of the previously discussed changes in revenue.

        Net income (loss) (non-controlling interest in partnerships) relates to the consolidation of certain investment partnerships in which our Affiliates are the general partner. For the three months ended June 30, 2008 and 2009, the net income from Affiliate investment partnerships attributable to the non-controlling interests was $5.2 million and $14.6 million, respectively. For the six months ended June 30, 2008 and 2009, the net income (loss) from Affiliate investment partnerships attributable to the non-controlling interests was $(8.2) million and $10.8 million, respectively.

        The decrease in Net Income (controlling interest) in the three and six months ended June 30, 2009, as compared to the three and six months ended June 30, 2008, resulted principally from decreases in revenue and income from equity method investments, partially offset by decreases in reported operating, minority interest and income tax expenses, as described above.

33


Supplemental Performance Measure

        As supplemental information, we provide a non-GAAP performance measure that we refer to as Cash Net Income. This measure is provided in addition to, but not as a substitute for, Net Income (controlling interest). 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. We consider Cash Net Income an important measure of our financial performance, as we believe it best represents operating performance before non-cash expenses relating to our acquisition of interests in our Affiliates. Cash Net Income is used by our management and Board of Directors as a principal performance benchmark, including as a measure for aligning executive compensation with stockholder value.

        Since our acquired assets do not generally depreciate or require replacement by us, and since they generate deferred tax expenses that are unlikely to reverse, we add back these non-cash expenses to Net Income (controlling interest) to measure operating performance. 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 we no longer amortize but which continues 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 our shareholders. We add back the portion of consolidated depreciation expense incurred by our Affiliates because under our Affiliates' operating agreements we are generally not required to replenish these depreciating assets.

        In connection with recent accounting changes (see Note 2 to the consolidated financial statements), we modified our Cash Net Income definition to add back non-cash charges related to certain Affiliate equity transfers (referred to as Affiliate equity expense) and APB 14-1 (both net of tax). In prior periods, Cash Net Income was defined as "Net Income plus amortization and deferred taxes relating to intangible assets plus Affiliate depreciation." Under this prior definition, Cash Net Income reported for the three and six months ended June 30, 2008 was $59.5 million and $116.2 million, respectively.

        The following table provides a reconciliation of Net Income (controlling interest) to Cash Net Income:

 
  For the Three Months
Ended June 30,
  For the Six Months
Ended June 30,
 
(in millions)
  2008   2009   2008   2009  

Net Income (controlling interest)

  $ 34.6   $ 11.0   $ 65.9   $ 17.1  
 

Intangible amortization

    13.5     16.0     26.8     32.0  
 

Intangible-related deferred taxes

    9.0     9.5     18.1     19.1  
 

APB 14-1 expense

    0.4     2.0     1.4     4.1  
 

Affiliate equity expense

    2.9     1.9     4.9     3.9  
 

Affiliate depreciation

    1.7     2.0     3.2     3.9  
                   

Cash Net Income

  $ 62.1   $ 42.4   $ 120.3   $ 80.1  
                   

        Cash Net Income decreased 32% and 33% in the three and six months ended June 30, 2009, as compared to the three and six months ended June 30, 2008, respectively, primarily as a result of the previously-described factors that caused a decrease in Net Income, partially offset by increases in amortization and intangible-related deferred tax expenses.

34


Liquidity and Capital Resources

        The following table summarizes certain key financial data relating to our liquidity and capital resources:

(in millions)
  December 31, 2008   June 30, 2009  

Balance Sheet Data

             

Cash and cash equivalents

  $ 396.4   $ 274.4  

Senior debt

    233.5      

Senior convertible securities

    445.5     451.3  

Junior convertible trust preferred securities

    505.0     506.2  

 

 
  For the Three Months
Ended June 30,
  For the Six Months
Ended June 30,
 
 
  2008   2009   2008   2009  

Cash Flow Data

                         

Operating cash flow

  $ 179.6   $ 72.2   $ 242.8   $ 87.9  

Investing cash flow

    (52.1 )   (5.0 )   (74.5 )   (8.7 )

Financing cash flow

    (96.1 )   (31.6 )   (197.4 )   (202.4 )

EBITDA(1)

    88.3     53.2     176.9     102.4  

(1)
The definition of EBITDA is presented in Note 2 on page 29 and below under Supplemental Liquidity Measure.

        We view our ratio of debt to EBITDA (our "internal leverage ratio") as an important gauge of our ability to service debt, make new investments and access additional capital. Consistent with industry practice, we do not consider junior trust preferred securities as debt for the purpose of determining our internal leverage ratio. We also view our leverage on a "net debt" basis by deducting from our debt balance holding company cash (including prospective proceeds from the settlement of our forward equity sale agreements). At June 30, 2009, our internal leverage ratio was 0.5:1.

        Under the terms of our credit facility we are required to meet two financial ratio covenants. The first of these covenants is a maximum ratio of debt to EBITDA (the "bank leverage ratio") of 3.50. The calculation of our bank leverage ratio is generally consistent with our internal leverage ratio approach. The second covenant is a minimum EBITDA to cash interest expense ratio of 3.00 (our "bank interest coverage ratio"). For the purposes of calculating these ratios, share-based compensation expense is added back to EBITDA. As of June 30, 2009, our actual bank leverage and bank interest coverage ratios were 1.86 and 5.23, respectively, and we were in full compliance with all terms of our credit facility.

        We are rated BBB- by Standard & Poor's. A downgrade of our credit rating, either as a result of industry or company-specific considerations, would not have a material financial effect on any of our agreements or securities (or otherwise trigger a default).

        In addition to borrowings available under our $770 million revolving credit facility, our current liquidity is augmented by approximately $375 million of holding company cash (including prospective proceeds from the forward equity settlements) and the free cash flow generated by our business. We have no near-term debt maturities.

35


Supplemental Liquidity Measure

        As supplemental information in this Quarterly Report on Form 10-Q, we have provided information regarding our EBITDA, a non-GAAP liquidity measure. This measure is provided in addition to, but not as a substitute for, cash flow from operations. EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. EBITDA, as calculated by us, may not be consistent with computations of EBITDA by other companies. As a measure of liquidity, we believe that EBITDA is useful as an indicator of our ability to service debt, make new investments and meet working capital requirements. We further believe that many investors use this information when analyzing the financial position of companies in the investment management industry.

        The following table provides a reconciliation of cash flow from operations to EBITDA:

 
  For the Three Months
Ended June 30,
  For the Six Months
Ended June 30,
 
(in millions)
  2008   2009   2008   2009  

Cash flow from operations

  $ 179.6   $ 72.2   $ 242.8   $ 87.9  
 

Interest expense, net of non-cash items(1)

    15.7     13.9     35.8     28.7  
 

Current tax provision

    12.4     (1.1 )   25.5     (9.2 )
 

Income from equity method investments, net of distributions(2)

    1.8     5.4     (12.1 )   0.8  
 

Changes in assets and liabilities and other adjustments(3)

    (121.2 )   (37.2 )   (115.1 )   (5.8 )
                   

EBITDA

  $ 88.3   $ 53.2   $ 176.9   $ 102.4  
                   

(1)
Non-cash items represent amortization of issuance costs and interest accretion ($1.2 million and $5.3 million for the three months ended June 30, 2008 and 2009, respectively, and $4.1 million and $10.5 million for the six months ended June 30, 2008 and 2009, respectively).

(2)
Distributions from equity method investments were $16.5 million and $9.9 million for the three months ended June 30, 2008 and 2009, respectively, and $49.4 million and $28.8 million for the six months ended June 30, 2008 and 2009, respectively.

(3)
Other adjustments include stock option expenses, tax benefits from stock options, Net income attributable to non-controlling interests and other adjustments to reconcile Net Income (controlling interest) to net cash flow from operating activities.

        In the six months ended June 30, 2009, we met our cash requirements primarily through cash generated by operating activities. Our principal uses of cash in the six months ended June 30, 2009 were to make distributions to Affiliate managers and repay our Senior debt. We expect that our principal uses of cash for the foreseeable future will be for investments in new and existing Affiliates, distributions to Affiliate managers, payment of interest on outstanding debt, the repurchase of debt securities, and the repurchase of shares of our common stock and for working capital purposes.

        The following table summarizes the principal amount due at maturity of our debt obligations and convertible securities as of June 30, 2009:

(in millions)
  Amount   Maturity
Date
  Form of
Repayment
 

Senior Bank Debt

  $     2012     (1 )

Zero Coupon Senior Convertible Notes

    50.1     2021     (2 )

2008 Senior Convertibles Notes

    460.0     2038     (3 )

Junior Convertible Trust Preferred Securities

    730.8     2036/2037     (4 )

(1)
Settled in cash.

36


(2)
Settled in cash or common stock at our election if holders exercise their May 2011 or 2016 put rights, and in common stock if the holders exercise their conversion rights.

(3)
Settled in cash if holders exercise their August 2013, 2018, 2023, 2028 or 2033 put rights, and in cash or common stock at our election if the holders exercise their conversion rights.

(4)
Settled in cash or common stock at our election if the holders exercise their conversion rights.

Senior Bank Debt

        On November 27, 2007, we entered into an amended and restated senior credit facility (the "Facility"). During the third quarter of 2008, we increased our borrowing capacity to $1.01 billion, comprised of a $770 million revolving credit facility (the "Revolver") and a $240 million term loan (the "Term Loan"). In the first quarter of 2009, we repaid the outstanding balance of the Term Loan ($233.5 million); the capacity under the Revolver remains at $770 million. We pay interest on these obligations at specified rates (based either on the Eurodollar rate or the prime rate as in effect from time to time) that vary depending on our credit rating. Subject to the agreement of lenders to provide additional commitments, we have the option to increase the Facility by up to an additional $175 million.

        The Facility will mature in February 2012, and contains financial covenants with respect to leverage and interest coverage. The Facility also contains customary affirmative and negative covenants, including limitations on indebtedness, liens, cash dividends and fundamental corporate changes. Borrowings under the Facility are collateralized by pledges of the substantial majority of capital stock or other equity interests owned by us. We had outstanding borrowings under the Facility of $233.5 million at December 31, 2008 and no outstanding borrowings at June 30, 2009.

Zero Coupon Senior Convertible Notes

        In 2001, we issued $251 million principal amount at maturity of zero coupon senior convertible notes due 2021 ("zero coupon convertible notes"), with each note issued at 90.50% of such principal amount and accreting at a rate of 0.50% per year (the adoption of APB 14-1 did not affect these securities). As of June 30, 2009, $50.1 million principal amount at maturity remains outstanding. Each security is convertible into 17.429 shares of our common stock (at a current base conversion price of $54.09) upon the occurrence of certain events, including the following: (i) if the closing price of a share of our common stock is more than a specified price over certain periods (initially $62.36 and increasing incrementally at the end of each calendar quarter to $63.08 in April 2021); (ii) if the credit rating assigned by Standard & Poor's to the securities is below BB-; or (iii) if we call the securities for redemption. The holders may require us to repurchase the securities at their accreted value in May 2011 and 2016. If the holders exercise this option in the future, we may elect to repurchase the securities with cash, shares of our common stock or some combination thereof. We have the option to redeem the securities for cash at their accreted value. Under the terms of the indenture governing the zero coupon convertible notes, a holder may convert such security into common stock by following the conversion procedures in the indenture. Subject to changes in the price of our common stock, the zero coupon convertible notes may be convertible in certain future periods.

2008 Senior Convertible Notes

        In August 2008, we issued $460 million of senior convertible notes due 2038 ("2008 senior convertible notes"). The 2008 senior convertible notes bear interest at 3.95%, payable semi-annually in cash. In accordance with APB 14-1, we are accreting the carrying value to the principal amount at maturity using an interest rate of 7.4% (over its expected life of five years), resulting in incremental interest expense for 2009 of approximately $11.2 million. Each security is convertible into 7.959 shares of our common stock (at an initial conversion price of $125.65) upon the occurrence of certain events. Upon conversion, we may elect to pay or deliver cash, shares of common stock, or some combination

37



thereof. The holders of the 2008 senior convertible notes may require us to repurchase the notes in August of 2013, 2018, 2023, 2028 and 2033. We may redeem the notes for cash (subject to the holders right to convert) at any time on or after August 15, 2013.

        The 2008 senior convertible notes are considered contingent payment debt instruments under federal income tax regulations. These regulations require us to deduct interest in an amount greater than our reported interest expense, which will result in annual deferred tax liabilities of approximately $10.2 million. These deferred tax liabilities will be reclassified directly to stockholders' equity if our common stock is trading above certain thresholds at the time of the conversion of the notes.

Junior Convertible Trust Preferred Securities

        In 2006, we issued $300 million of junior subordinated convertible debentures due 2036 to a wholly-owned trust simultaneous with the issuance, by the trust, of $291 million of convertible trust preferred securities to investors. The junior subordinated convertible debentures and convertible trust preferred securities (together, the "2006 junior convertible trust preferred securities") have substantially the same terms.

        The 2006 junior convertible trust preferred securities bear interest at a rate of 5.1% per annum, payable quarterly in cash. In accordance with APB 14-1, we are accreting the carrying value to the principal amount at maturity using an interest rate of 7.5% (over the expected life of 30 years). The incremental interest expense for 2009 is expected to be $1.0 million. Each $50 security is convertible, at any time, into 0.333 shares of our common stock, which represents a conversion price of $150 per share (or a 48% premium to the then prevailing share price of $101.45). Upon conversion, investors will receive cash or shares of our common stock (or a combination of cash and common stock) at our election. The 2006 junior convertible trust preferred securities may not be redeemed by us prior to April 15, 2011. On or after April 15, 2011, they may be redeemed if the closing price of our common stock exceeds $195 per share for a specified period of time. The trust's only assets are the junior convertible subordinated debentures. To the extent that the trust has available funds, we are obligated to ensure that holders of the 2006 junior convertible trust preferred securities receive all payments due from the trust.

        In October 2007, we issued an additional $500 million of junior subordinated convertible debentures which are due 2037 to a wholly-owned trust simultaneous with the issuance, by the trust, of $500 million of convertible trust preferred securities to investors. The junior subordinated convertible debentures and convertible trust preferred securities (together, the "2007 junior convertible trust preferred securities") have substantially the same terms. In the fourth quarter of 2008, we repurchased $69.2 million aggregate principal amount of the 2007 junior convertible trust preferred securities. Following this repurchase, these securities were cancelled and retired.

        The 2007 junior convertible trust preferred securities bear interest at 5.15% per annum, payable quarterly in cash. In accordance with APB 14-1, we are accreting the discounted amount to the principal amount at maturity. The incremental interest expense for 2009 is expected to be $1.3 million. Each $50 security is convertible, at any time, into 0.25 shares of our common stock, which represents a conversion price of $200 per share (or a 53% premium to the then prevailing share price of $130.77). Upon conversion, investors will receive cash or shares of our common stock (or a combination of cash and common stock) at our election. The 2007 junior convertible trust preferred securities may not be redeemed by us prior to October 15, 2012. On or after October 15, 2012, they may be redeemed if the closing price of our common stock exceeds $260 per share for a specified period of time. The trust's only assets are the 2007 junior convertible subordinated debentures. To the extent that the trust has available funds, we are obligated to ensure that holders of the 2007 junior convertible trust preferred securities receive all payments due from the trust.

        The 2006 and 2007 junior convertible trust preferred securities are considered contingent payment debt instruments under the federal income tax regulations. We are required to deduct interest in an

38



amount greater than our reported interest expense. In 2009, these deductions will generate deferred taxes of approximately $8.8 million.

Forward Equity Sale Agreement

        In May 2008, we entered into a forward equity sale agreement with a major securities firm to sell up to $200 million of our common stock (the "May 2008 Agreement"), with the timing of sales in our discretion. Under the terms of the May 2008 Agreement, we can settle forward sales at any time prior to March 31, 2010 by issuing shares in exchange for cash. Alternatively, we may choose to settle forward sales on a net basis. We have sold all $200 million under the May 2008 Agreement at a weighted average exercise price of $65.41 and have settled approximately $144.0 million of these forward sales through the issuance of approximately 1.8 million shares.

        In May 2009, we entered into a second forward equity sale agreement to sell up to $200 million of our common stock (the "May 2009 Agreement"). We have sold all $200 million under the May 2009 Agreement at a weighted average exercise price of $57.27, but have not yet elected to settle the forward sales. As is the case in the May 2008 Agreement, we may choose to settle forward sales by issuing shares in exchange for cash or on a net basis (at any time prior to August 1, 2010). In July 2009, we entered into a third forward equity sale agreement to sell up to $200 million of our common stock.

Derivatives

        During the first quarter of 2008, we entered into a series of treasury rate lock contracts with a notional value of $250 million. These contracts were settled in the second quarter of 2008, and we received $8.2 million. Each contract was designated and qualified as a cash flow hedge under Statement of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). During the fourth quarter of 2008, we concluded that it was probable that the hedged transaction would not occur and the gain was reclassified from accumulated other comprehensive income to Net Income (controlling interest).

Affiliate Equity

        Many of our operating agreements provide Affiliate managers a conditional right to require us to purchase their retained equity interests at certain intervals. Certain agreements also provide us a conditional right to require Affiliate managers to sell their retained equity interests to us upon their death, permanent incapacity or termination of employment and provide Affiliate managers a conditional right to require us to purchase such retained equity interests upon the occurrence of specified events. The purchase price of these conditional purchases are generally calculated based upon a multiple of the Affiliate's cash flow distributions, which is intended to represent fair value. Affiliate management partners are also permitted to sell their equity interests to other individuals or entities in certain cases, subject to our approval or other restrictions.

        We may pay for Affiliate equity purchases in cash, shares of our common stock or other forms of consideration and can consent to the transfer of these interests to other individuals or entities. Our cumulative redemption obligation for these interests has been presented as "Redeemable non-controlling interests" on our Consolidated Balance Sheets. Changes in redeemable non-controlling interests for the three months ended June 30, 2009 are principally the result of changes to the value of these interests. Although the timing and amounts of these purchases are difficult to predict, we expect to repurchase approximately $50.0 million of Affiliate equity during the next twelve months, and, in such event, will own the cash flow associated with any equity repurchased.

39


Operating Cash Flow

        Cash flow from operations generally represents Net Income plus non-cash charges for amortization, deferred taxes, equity-based compensation and depreciation, as well as increases and decreases in our consolidated working capital.

        The decrease in cash flows from operations for the six months ended June 30, 2009 as compared to the six months ended June 30, 2008, resulted principally from decreased Net Income of $77.0 million, and a decrease in the settlement of investment advisory fees receivable of $41.0 million, partially offset by a decrease in settlements of liabilities of $17.7 million.

        In accordance with EITF 04-05, we consolidated $68.8 million and $78.6 million of client assets held in partnerships controlled by our Affiliates as of December 31, 2008 and June 30, 2009 respectively. Purchases of $6.7 million reduced operating cash flow in the first six months ended June 30, 2008. Sales of client assets generated $0.3 million of operating cash flow in the six months ended June 30, 2009.

Investing Cash Flow

        The net cash flow used in investing activities decreased $65.8 million for the six months ended June 30, 2009 as compared to the six months ended June 30, 2008. This was primarily the result of a decrease of $59.5 million in investments in new Affiliates in the current period, a decrease of $11.7 in the purchase of investment securities and a decrease of sale of investment securities of $9.3 million.

        On July 29, 2009, we announced an agreement to acquire a majority interest in Harding Loevner LLC. The transaction is expected to close during the third quarter of 2009.

        Under past acquisition agreements, we are contingently liable, upon achievement of specified financial targets, to make payments of up to $234.0 million through 2012. In 2009, we expect to make total payments of approximately $150.0 million to settle portions of these contingent obligations and our investment in Harding Loevner.

Financing Cash Flow

        Net cash flows used in financing activities increased $4.9 million for the six months ended June 30, 2009, as compared to the six months ended June 30, 2008. This was primarily as a result of an increase in net senior bank debt repayments of $287.0 million, and a decrease in net proceeds from the settlement of convertible securities and issuance of common stock of $12.5 million, partially offset by the $144.3 million received from settlements under our forward equity sale agreement (as discussed above) and a decrease in distributions to non-controlling interests and repurchases of Affiliate equity of $151.8 million.

        During 2008, we retired the outstanding floating rate convertible securities and issued approximately 7.0 million shares of common stock. Additionally, we repurchased the outstanding senior notes component of our 2004 PRIDES. The repurchase proceeds were used by the original holders to fulfill their obligations under the related forward equity purchase contracts. We issued approximately 3.8 million shares of common stock to settle the forward equity purchase contracts.

        Proceeds available under our Facility and forward equity sale agreements are sufficient to support our cash flow needs for the foreseeable future.

40


Contractual Obligations

        The following table summarizes our contractual obligations as of June 30, 2009:

 
   
  Payments Due  
Contractual Obligations
  Total   Remainder
of 2009
  2010-2011   2012-2013   Thereafter  
(in millions)
   
   
   
   
   
 

Senior convertible securities

    1,057.5   $ 9.1   $ 36.3   $ 36.3   $ 975.8  

Junior convertible trust preferred

                               
 

securities(1)

    1,806.1     18.7     75.0     75.0     1,637.4  

Leases

    82.7     8.7     31.8     21.3     20.9  

Other liabilities(2)

    3.3     1.1     2.2          
                       

Total

  $ 2,949.6   $ 37.6   $ 145.3   $ 132.6   $ 2,634.1  
                       

(1)
As more fully discussed on page 35, consistent with industry practice, we do not consider our junior convertible trust preferred securities as debt for the purpose of determining our leverage ratio.

(2)
Other liabilities reflect amounts payable to Affiliate managers related to our purchase of additional Affiliate equity interests (see Note 13 to the Consolidated Financial Statements). This table does not include liabilities for uncertain tax positions ($21.4 million as of June 30, 2009) as we cannot predict when such liabilities will be paid.

Recent Accounting Developments

        In June 2009, the FASB issued FAS No. 166, "Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140" ("FAS 166"). FAS 166 establishes new criteria that must be met before transfers of financial assets are eligible for sale accounting and changes the amount that can be recognized as a gain or loss on a transfer accounted for as a sale when beneficial interests are received by the transferor. Disclosures are also required to provide information about transfers of financial assets and a transferor's continuing involvement with transferred financial assets. We will adopt FAS 166 in the first quarter of 2010 and we do not expect this standard to have a material effect on our consolidated financial statements.

        In June 2009, the FASB issued FAS No. 167, "Amendments to FASB Interpretation No. 46(R)" ("FAS 167"). FAS 167 amends FASB Interpretation No. 46 (revised December 2003), "Consolidation of Variable Interest Entities" ("FIN 46(R)") to require an enterprise to qualitatively assess the determination of the primary beneficiary of a variable interest entity ("VIE") based on whether the entity has the power to direct the activities of a VIE that most significantly impact the entity's economic performance and has the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. FAS 167 also requires an ongoing reconsideration of the primary beneficiary, and amends the events that trigger a reassessment of whether an entity is a VIE. Disclosures are also required to provide information about an enterprise's involvement in a VIE. We will adopt FAS 167 in the first quarter of 2010 and we are currently evaluating the potential impact of this new standard.

        In June 2009, the FASB issued FAS No. 168, "The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162" ("FAS 168"). FAS 168 replaces all previously issued accounting standards and establishes the "FASB Accounting Standards Codification™" ("Codification") as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of

41



financial statements in conformity with generally accepted accounting principles in the United States. We will adopt FAS 168 in the third quarter of 2009.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

        There have been no significant changes to our Quantitative and Qualitative Disclosures About Market Risk in the three months ended June 30, 2009. Please refer to Item 7A in our 2008 Annual Report on Form 10-K.

Item 4.    Controls and Procedures

        We carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures during the quarter covered by this Quarterly Report on Form 10-Q. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2009, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. We continue to review and document our disclosure controls and procedures and may, from time to time, make changes aimed at enhancing their effectiveness and ensuring that our systems evolve with our business.

        There was no change in our internal control over financial reporting that occurred during the quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

42



PART II—OTHER INFORMATION

Item 4.    Submission of Matters to a Vote of Security Holders

        Our Annual Meeting of Stockholders was held in Prides Crossing, Massachusetts on June 9, 2009. At that meeting, the stockholders considered and acted upon the following proposals:

1.
The Election of Directors. By the vote reflected below, the stockholders elected the following individuals to serve as directors until the 2010 Annual Meeting of Stockholders and until their respective successors are duly elected and qualified:
Director
  Shares Voted For   Shares Withheld  

Richard E. Floor

    35,124,336     3,026,385  

Sean M. Healey

    35,386,717     2,764,004  

Harold J. Meyerman

    21,277,619     16,873,102  

William J. Nutt

    35,160,298     2,990,423  

Rita M. Rodriguez

    35,210,206     2,940,515  

Patrick T. Ryan

    21,276,115     16,874,606  

Jide J. Zeitlin

    21,264,608     16,886,113  
2.
The Ratification of the Selection of PricewaterhouseCoopers LLP as the Company's Independent Registered Public Accounting Firm for the Current Fiscal Year. The stockholders voted to ratify the selection of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for the current fiscal year. 37,807,761 shares voted for the proposal, 338,981 voted against the proposal, and 4,379 shares abstained from voting on the proposal.

Item 6.    Exhibits

        The exhibits are listed on the Exhibit Index and are included elsewhere in this Quarterly Report on Form 10-Q.

43



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)
August 6, 2009    

 

 

/s/ DARRELL W. CRATE

Darrell W. Crate
on behalf of the Registrant as Executive Vice
President, Chief Financial Officer and Treasurer
(and also as Principal Financial and Principal
Accounting Officer)

44



EXHIBIT INDEX

Exhibit No.   Description
  10.1   Annual Director Compensation adopted July 21, 2009.

 

10.2

 

Distribution Agency Agreement, dated July 31, 2009, by and between the Company and Deutsche Bank Securities Inc. and Deutsche Bank AG, London Branch.

 

10.3

 

Form of Confirmation Letter Agreement, dated July 31, 2009, by and between the Company and Deutsche Bank AG, London Branch and Deutsche Bank Securities Inc.

 

31.1

 

Certification of Registrant's Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

31.2

 

Certification of Registrant's Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

32.1

 

Certification of Registrant's Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

32.2

 

Certification of Registrant's Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



QuickLinks

PART I—FINANCIAL INFORMATION
AFFILIATED MANAGERS GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except per share data) (unaudited)
AFFILIATED MANAGERS GROUP, INC. CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited)
AFFILIATED MANAGERS GROUP, INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (dollars in thousands) (unaudited)
AFFILIATED MANAGERS GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
AFFILIATED MANAGERS GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
EXHIBIT INDEX

Exhibit 10.1

 

Annual Director Compensation

 

Board of Directors:

 

 

 

 

 

 

 

Board of Directors Annual Fee

 

$

80,000

 

Lead Director Annual Fee

 

$

100,000

 

Board of Directors Annual Equity Award Stock Options — Black Scholes Value

 

$

120,000

 

Deferred Compensation Plan Stock Units — Grant Date Fair Market Value Based on Closing Price

 

$

80,000

 

 

 

 

 

Committees:

 

 

 

 

 

 

 

Audit Committee Membership Annual Fee

 

$

20,000

 

Audit Committee Chair Annual Fee

 

$

35,000

 

Compensation Committee Membership Annual Fee

 

$

17,000

 

Compensation Committee Chair Annual Fee

 

$

20,000

 

Nominating and Governance Committee Membership Annual Fee

 

$

13,000

 

Nominating and Governance Committee Chair Annual Fee

 

$

15,000

 

 

 

Adopted July 21, 2009

 




Exhibit 10. 2

 

AFFILIATED MANAGERS GROUP, INC.

 

Shares of Common Stock
(par value $0.01 per share)

 

DISTRIBUTION AGENCY AGREEMENT

 

July 31, 2009

 

DEUTSCHE BANK SECURITIES INC.

60 Wall Street

New York, New York 10005

 

Ladies and Gentlemen:

 

Affiliated Managers Group, Inc., a Delaware corporation (the “Company”), confirms its agreement with Deutsche Bank Securities Inc. (the “Manager”), as follows:

 

IntroductoryThe Company has entered into a forward stock purchase transaction with Deutsche Bank AG, London Branch (the “Forward Purchaser”) as set forth in a separate letter agreement dated the date hereof, a copy of which is attached hereto as Exhibit A (the “Initial Confirmation”).  The Company may also enter into additional forward stock purchase transactions with the Forward Purchaser on substantially similar terms (each, a “Subsequent Confirmation” and, together with the Initial Confirmation, the “Confirmations”).  Subject to the terms and conditions herein and therein, under the Confirmation and, if applicable, the Subsequent Confirmations, the Company will deliver to the Forward Purchaser, or an affiliate thereof (including the Manager), up to the number of shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), as may be sold in accordance with the terms of this Agreement.  In connection therewith, the Company and the Forward Purchaser understand that the Forward Purchaser, through the Manager, as sales agent, will effect sales of shares of Common Stock having an aggregate offering price not in excess of $200,000,000 (the “Shares”) on the terms set forth in Section 2 of this Distribution Agency Agreement (the “Agreement”).

 

Section 1.  Representations and Warranties of the Company.  The Company represents and warrants to the Manager that:

 

(a) Compliance with Registration RequirementsThe Company has filed, in accordance with the provisions of the Securities Act of 1933, as amended (the “1933 Act”), and the rules and regulations thereunder (the “1933 Act Regulations”), with the Securities and Exchange Commission (the “Commission”) an “automatic shelf registration statement,” as defined in Rule 405 of the 1933 Act Regulations (“Rule 405”), on Form S—3 (File No. 333-148029), including a prospectus, to be used in connection with the public offering and sale of the Shares, which incorporates by reference documents that the Company has filed or will file in accordance with the provisions of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and the rules and regulations thereunder (the “1934 Act Regulations”), which registration

 

1



 

statement became effective not earlier than three years prior to the date of this Agreement upon filing under Rule 462(e) of the 1933 Act Regulations.

 

Except where the context otherwise requires, the registration statement, as it may have heretofore been amended, including all documents filed as part thereof or incorporated by reference therein, and including any information contained in a Prospectus (as defined below) filed with the Commission pursuant to Rule 430B of the 1933 Act Regulations (“Rule 430B”) and also including any other registration statement filed with the Commission pursuant to Rule 462(b) or Rule 429 of the 1933 Act Regulations, is herein called the “Registration Statement;” the base prospectus filed as part of such Registration Statement, in the form in which it has most recently been filed with the Commission on or prior to the date of this Agreement, is herein called the “Base Prospectus;” the prospectus supplement specifically relating to the Shares prepared and filed with the Commission pursuant to Rule 424(b) of the 1933 Act Regulations is herein called the “Prospectus Supplement;” and the Base Prospectus, as amended and supplemented from time to time by the Prospectus Supplement, is herein called the “Prospectus.”  The Registration Statement at the time it originally became effective is herein called the “Original Registration Statement.”  Any reference herein to the Registration Statement, the Base Prospectus, Prospectus Supplement or Prospectus or any amendment or supplement thereto shall be deemed to refer to and include the documents incorporated by reference therein, and any reference herein to the terms “amend,” “amendment” or “supplement” with respect to the Registration Statement or the Prospectus shall be deemed to refer to and include the filing after the execution hereof with the Commission of any post-effective amendment to the Registration Statement, any Prospectus Supplement and any document deemed to be incorporated by reference therein.

 

To the extent that the Registration Statement is not available for the sales of the Shares as contemplated by this Agreement or the Company is not a “well known seasoned issuer” as defined in Rule 405 or otherwise is unable to make the representations set forth in Section 1(b) at any time when such representations are required, the Company shall file a new registration statement with respect to any additional shares of Common Stock necessary to complete such sales of the Shares and shall cause such registration statement to become effective as promptly as practicable.  After the effectiveness of any such registration statement, all references to “Registration Statement” included in this Agreement shall be deemed to include such new registration statement, including all documents filed as part thereof or incorporated therein by reference, and all references to “Prospectus” included in this Agreement shall be deemed to include the final form of prospectus, including all documents incorporated therein by reference, included in any such registration statement, as amended or supplemented from time to time (including by any prospectus supplement thereto).  For purposes of this Agreement, all references to the Registration Statement or the Prospectus or to any amendment or supplement thereto shall be deemed to include any copy filed with the Commission pursuant to its Electronic Data Gathering Analysis and Retrieval System (“EDGAR”), and such copy shall be identical in content to any Prospectus delivered to the Manager for use in connection with the offering of the Shares.

 

(b) Well-Known Seasoned Issuer.  (1) At the time of filing of the Original Registration Statement, (2) at the time of the most recent amendment thereto for the purposes of complying with Section 10(a)(3) of the 1933 Act or otherwise (whether such amendment was by

 

2



 

post-effective amendment, incorporated report filed pursuant to Section 13 or 15(d) of the 1934 Act or form of prospectus), (3) at the time the Company or any person acting on its behalf (within the meaning, for this clause only, of Rule 163(c) of the 1933 Act Regulations) made any offer relating to the Shares in reliance on the exemption of Rule 163 of the 1933 Act Regulations, (4) at the earliest time after the filing of the Original Registration Statement that a bona fide offer (within the meaning of Rule 164(h)(2) of the 1933 Act Regulations) of the Shares was made, and (5) at the date hereof, the Company was and is a “well-known seasoned issuer” as defined in Rule 405.  The Registration Statement is an “automatic shelf registration statement,” as defined in Rule 405, and the Shares, since their registration on the Registration Statement, have been and remain eligible for registration by the Company on a Rule 405 “automatic shelf registration statement.”  The Company has not received from the Commission any notice pursuant to Rule 401(g)(2) of the 1933 Act Regulations objecting to the use of the automatic shelf registration statement form.

 

(c) S-3 Eligibility.  The Company meets, and at the time of filing of the Original Registration Statement met, the requirements for use of Form S-3 under the 1933 Act.  The Registration Statement has been filed with the Commission and is effective under the 1933 Act.  The Company has not received, and has no notice of, any order of the Commission preventing or suspending the use or effectiveness of the Registration Statement, or threatening or instituting proceedings for that purpose.  Any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement have been so described or filed.  Copies of the Registration Statement and the Prospectus, any such amendments or supplements and all documents incorporated by reference therein that were filed with the Commission on or prior to the date of this Agreement (including one fully executed copy of each of the Registration Statement and of each amendment thereto for the Manager) have been delivered to the Manager and its counsel.  The Company has not distributed any offering material in connection with the offering or sale of the Shares other than the Registration Statement, the Prospectus or any other materials, if any, permitted by the 1933 Act and the 1933 Act Regulations and reviewed and consented to by the Manager.

 

(d) Form Compliance; No Material Misstatement or Omission of a Material Fact.  Each of the Registration Statement, any post-effective amendment thereto, the Prospectus and any amendment or supplement thereto conforms, and when it became effective or was filed with the Commission conformed, in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations.  The Registration Statement and any post-effective amendment thereto, when it became effective or was filed with the Commission, did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.  The Prospectus and any amendment or supplement thereto does not, and on the date of filing thereof with the Commission did not, include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the foregoing shall not apply to statements in, or omissions from, any such document in reliance upon, and in conformity with, written information concerning the Manager that was furnished in writing to the Company by the Manager specifically for use in the preparation thereof.

 

3



 

(e) Issuer Free Writing Prospectuses.  Any Issuer Free Writing Prospectus(es) (as defined below) and the Prospectus, as amended or supplemented, all considered together (collectively, the “General Disclosure Package”), do not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

As used in this subsection and elsewhere in this Agreement:

 

Applicable Time” means the time of each sale of any Shares pursuant to this Agreement.

 

Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the 1933 Act Regulations (“Rule 433”), relating to the Shares, in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).

 

Each Issuer Free Writing Prospectus does not, and as of its issue date and all subsequent times did not, include any information that conflicts or conflicted with the information contained in the Registration Statement or the Prospectus, including any document incorporated by reference therein, and any preliminary or other prospectus deemed to be a part thereof that has not been superseded or modified.

 

The representations and warranties in this Section 1(e) shall not apply to statements in or omissions from the Registration Statement, the Prospectus or any amendments or supplements thereto or any Issuer Free Writing Prospectus made in reliance upon and in conformity with written information furnished to the Company by the Manager expressly for use therein.

 

(f) Incorporation of Documents by ReferenceThe documents incorporated by reference in the Registration Statement and the Prospectus comply, and at the time they were filed with the Commission complied, in all material respects with the requirements of the 1934 Act and the 1934 Act Regulations, and, when read together with the other information in the Prospectus, do not, and at the time the Original Registration Statement became effective and at the date of the Prospectus did not, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

(g) Independent AccountantsThe accountants who certified the financial statements and supporting schedules incorporated by reference into the Registration Statement and the Prospectus are independent public accountants as required by the 1933 Act and the 1933 Act Regulations.

 

(h) Financial StatementsThe financial statements included in or incorporated by reference into the Registration Statement and the Prospectus, together with the related schedules and notes, present fairly in all material respects the financial position of the Company and its consolidated subsidiaries at the dates indicated and the consolidated statements of income, changes in stockholders’ equity and cash flows of the Company and its consolidated subsidiaries

 

4



 

for the periods specified; said financial statements have been prepared in conformity with generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods involved, except as stated therein.  The supporting schedules incorporated by reference into the Registration Statement and the Prospectus present fairly in accordance with GAAP the information required to be stated therein.  Any pro forma financial statements of the Company, and the related notes thereto, included in or incorporated by reference into the Registration Statement and the Prospectus present fairly the information shown therein, have been prepared in accordance with the Commission’s rules and guidelines with respect to pro forma financial statements and have been properly compiled on the basis described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein.  No other financial statements are required to be set forth in or incorporated by reference into the Registration Statement or the Prospectus under the 1933 Act or the 1933 Act Regulations.

 

(i) No Material Adverse Change in Business.  Since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package and the Prospectus, except as otherwise stated therein, (A) there has been no material adverse change or prospective material adverse change in the business, management, financial position, stockholders equity or results of operations of the Company and its subsidiaries considered as one enterprise from that set forth in the Registration Statement, the General Disclosure Package and the Prospectus, whether or not arising in the ordinary course of business (a “Material Adverse Effect”), (B) there have been no transactions entered into by the Company or any of its subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one enterprise, and (C) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock.

 

(j) Good Standing of the Company.  The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the General Disclosure Package and the Prospectus and to enter into and perform its obligations under, or as contemplated by, this Agreement and the Confirmations.  The Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect.

 

(k) Good Standing of Subsidiaries.  Each subsidiary of the Company has been duly organized or formed and is validly existing as a corporation, limited partnership, limited liability company, Massachusetts business trust or general partnership, as the case may be, under the laws of its jurisdiction of organization and is in good standing under the laws of its jurisdiction of organization, has power (corporate or otherwise) and authority to own, lease and operate its properties and to conduct its business as described in the General Disclosure Package and the Prospectus and is duly qualified as a foreign corporation, limited partnership, limited liability company, Massachusetts business trust or general partnership, as the case may be, to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business,

 

5



 

except where the failure to so qualify or to be in good standing would not result in a Material Adverse Effect.  Except as otherwise disclosed in the General Disclosure Package and the Prospectus, all of the issued shares of capital stock of each subsidiary of the Company which is a corporation, have been duly authorized and validly issued, and are fully paid and non-assessable, and to the extent owned by the Company or any of its subsidiaries (except for directors’ qualifying shares and as described or reflected generally in the General Disclosure Package and the Prospectus) are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims, in each case with such exceptions, individually or in the aggregate, as would not have a Material Adverse Effect.  The partnership interests, membership interests and shares of beneficial interest of each subsidiary of the Company which is a partnership, limited liability company or Massachusetts business trust have been validly issued in accordance with applicable law and the partnership agreement, limited liability agreement or declaration of trust, as applicable, of such subsidiary, and to the extent owned by the Company or any of its subsidiaries (except as described or reflected generally in the General Disclosure Package and the Prospectus) are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims, except, in the case of each subsidiary of the Company, for liens, encumbrances, equities or claims which individually or in the aggregate would not be material to the Company’s ownership of such subsidiary or to the Company’s exercise of its rights with respect to such subsidiary; and none of the outstanding shares of capital stock, partnership interests, membership interests or shares of beneficial interests, as the case may be, of any subsidiary of the Company was issued in violation of the preemptive or similar rights of any securityholder of such subsidiary.

 

(l) CapitalizationThe Company has the authorized, issued and outstanding capitalization described in the General Disclosure Package and the Prospectus (except for subsequent issuances, if any, pursuant to reservations, agreements or employee benefit plans or pursuant to the exercise of convertible securities or options, in each case accurately described or reflected in the General Disclosure Package and the Prospectus, as amended or supplemented).  The shares of issued and outstanding capital stock of the Company, including the Shares, have been duly authorized and validly issued and are fully paid and non-assessable; and none of the outstanding shares of capital stock of the Company was issued in violation of the preemptive or other similar rights of any securityholder of the Company.  There are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any capital stock of the Company or any of its subsidiaries other than those accurately described or reflected in the General Disclosure Package and the Prospectus, as amended or supplemented, or pursuant to reservations, agreements or employee benefit plans or the exercise of convertible securities or options, in each case accurately described or reflected in the General Disclosure Package and the Prospectus, as amended or supplemented.

 

(m) Authorization of Agreement.  This Agreement has been duly authorized, executed and delivered by the Company.

 

(n) Authorization of ConfirmationsThe Initial Confirmation has been duly authorized, executed and delivered by the Company and constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without

 

6



 

limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors’ rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law).  The Company has duly authorized each Subsequent Confirmation and, when executed and delivered by the Company, each Subsequent Confirmation will constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors’ rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law).  The description of the Confirmation and the Subsequent Confirmations set forth in the General Disclosure Package and the Prospectus is correct in all material respects.

 

(o) Authorization and Description of Shares.  The description of the Common Stock set forth in the General Disclosure Package and the Prospectus is correct in all material respects.  The Settlement Shares (as defined in the Confirmation(s)) have been duly authorized by the Company for issuance and sale to the Forward Purchaser pursuant to the Confirmation(s) and, if and when issued and delivered by the Company pursuant to the Confirmation(s) against payment of the consideration specified therein, will be validly issued, fully paid and non-assessable and will not be issued in violation of any preemptive or other similar rights of any securityholder of the Company.  No holder or beneficial owner of the Shares or the Settlement Shares will be subject to personal liability solely by reason of being such a holder or beneficial owner.  The issuance and sale by the Company of the Settlement Shares to the Forward Purchaser or its affiliate in settlement of the Confirmation(s) in accordance with the terms thereof and the delivery by the Forward Purchaser or its affiliate of the Settlement Shares, during the term of and at settlement of the Confirmation(s), to close out open borrowings of Common Stock created in the course of the hedging activities created by the Forward Purchaser or its affiliate relating to its exposure under the Confirmation(s) will not require registration under the 1933 Act.  The Company will not have an obligation to file a prospectus supplement pursuant to Rule 424(b) of the 1933 Act Regulations in connection with any Settlement Shares delivered to the Forward Purchaser or its affiliate by the Company upon such settlement, and no prospectus supplement will be required to be filed under Rule 424(b) of the 1933 Act Regulations in connection with any Settlement Shares delivered by the Forward Purchaser or its affiliate to close out open borrowings created in the course of the hedging activities created by the Forward Purchaser or its affiliate relating to its exposure under the Confirmation(s), assuming in each case that the Manager complied with Rule 173 of the 1933 Act Regulations in connection with the sales of Shares in an amount not less than the Number of Shares (as defined in the Confirmation(s)).

 

(p) Listing on New York Stock Exchange.  The Shares are listed on the New York Stock Exchange (the “NYSE”) and the Company has taken no action designed to, or likely to have the effect of, terminating the listing of the Shares from the NYSE, nor has the Company received any notification that the Commission or the NYSE is contemplating terminating such listing.

 

7



 

(q) Absence of Defaults and Conflicts.  Neither the Company nor any of its subsidiaries is in violation of its charter or by-laws or other constituting or organizational document or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company or any subsidiary of the Company is subject (collectively, “Agreements and Instruments”) except for such defaults that would not result in a Material Adverse Effect; and the execution, delivery and performance of this Agreement and the Confirmation(s) and the consummation of the transactions contemplated herein and therein and in the General Disclosure Package and the Prospectus and compliance by the Company with its obligations hereunder and thereunder, have been duly authorized by all necessary corporate action and do not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any subsidiary of the Company pursuant to, the Agreements and Instruments (except for such conflicts, breaches or defaults or liens, charges or encumbrances that would not result in a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter or by-laws or other constituting or organizational instrument as in effect on the date hereof of the Company or any subsidiary of the Company or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any subsidiary of the Company or any of their assets, properties or operations, except for any such violation of any applicable law, statute, rule, regulation, judgment, order, writ or decree of law which would not result in a Material Adverse Effect.  As used herein, a “Repayment Event” means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any subsidiary of the Company.

 

(r) Absence of Proceedings.  Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, there is no action, suit, proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened, against or affecting the Company or any subsidiary of the Company, which, singly or in the aggregate, would reasonably be expected to result in a Material Adverse Effect, or which would reasonably be expected to materially and adversely affect the consummation of the transactions contemplated in this Agreement or the performance by the Company of its obligations hereunder.

 

(s) Accuracy of Exhibits.  All of the descriptions of contracts or other documents contained or incorporated by reference in the Registration Statement, the General Disclosure Package and the Prospectus are accurate and complete descriptions in all material respects of such contracts or other documents.

 

(t) Absence of Further Requirements.  No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required for the performance by the Company of its

 

8



 

obligations hereunder or under the Confirmation(s) or the consummation of the transactions contemplated by this Agreement, or for the due execution, delivery or performance of this Agreement and the Confirmation(s), except such as have been already obtained or as may be required under the 1933 Act or the 1933 Act Regulations or state securities laws.

 

(u) Possession of Licenses and Permits.  The Company and its subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, “Governmental Licenses”) issued by the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to conduct the business now operated by them; the Company and its subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except in any such case where the failure to so possess or to comply would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect; and neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect.

 

(v) Title to Property.  The Company and its subsidiaries have good and marketable title to all real property owned by the Company and its subsidiaries and good title to all other properties owned by them, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind except such as (a) are described in the General Disclosure Package and the Prospectus or (b) would not, singly or in the aggregate, result in a Material Adverse Effect; and all of the leases and subleases material to the business of the Company and its subsidiaries, considered as one enterprise, and under which the Company or any of its subsidiaries holds properties described in the General Disclosure Package and the Prospectus, are in full force and effect, and neither the Company nor any subsidiary of the Company has any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any subsidiary of the Company under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or such subsidiary to the continued possession of the leased or subleased premises under any such lease or sublease.

 

(w) No Investment Company.  Neither the Company nor any of its subsidiaries is, and upon the offering of the Shares as herein contemplated will be, an “investment company” or an entity “controlled” by an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended (the “1940 Act”).

 

(x) Company Not an Investment Adviser.  The Company is not required to register as an “investment adviser” or as a “broker-dealer” within the Investment Advisers Act of 1940, as amended (the “Advisers Act”) or the 1934 Act, respectively, and the rules and regulations of the Commission promulgated thereunder.  The Company is not required to be registered, licensed or qualified as an investment adviser or broker-dealer under the laws requiring any such registration, licensing or qualification in any jurisdiction in which it or its subsidiaries conduct business.  Each of the subsidiaries has been duly registered as an investment adviser under the Advisers Act, and has been duly registered as a broker-dealer under the 1934

 

9



 

Act, and each such registration is in full force and effect, in each case to the extent such registration is required and with such exceptions as would not reasonably be expected to have a Material Adverse Effect.  Each of the subsidiaries is duly registered, licensed or qualified as an investment adviser and broker-dealer under state and local laws where such registration, licensing or qualification is required by such laws and is in compliance with all such laws requiring any such registration, licensing or qualification, in each case with such exceptions, individually or in the aggregate, as would not reasonably be expected to have a Material Adverse Effect.

 

(y) Investment Adviser Subsidiaries.  Each subsidiary of the Company which is required to be registered as an investment adviser or broker-dealer is and has been in compliance with all applicable laws and governmental rules and regulations, as may be applicable to its investment advisory or broker-dealer business, except to the extent that such non-compliance would not reasonably be expected to result in a Material Adverse Effect and none of such subsidiaries is prohibited by any provision of the Advisers Act or the 1940 Act from acting as an investment adviser.  Each subsidiary of the Company which is required to be registered as a broker-dealer is a member in good standing of the Financial Industry Regulatory Authority (“FINRA”).  No subsidiary of the Company which is required to be registered as an investment adviser or broker-dealer is in default with respect to any judgment, order, writ, injunction, decree, demand or assessment issued by any court or any foreign, federal, state, municipal or other governmental agency, board, commission, bureau, instrumentality or department, domestic or foreign, or by any self-regulatory authority relating to any aspect of its investment advisory or broker-dealer business, which would need to be disclosed pursuant to Rule 206(4)-4(b) under the Advisers Act, or which is reasonably likely to give rise to an affirmative answer to any of the questions in Item 11, Part 1 of the Form ADV of such registered investment adviser or which is reasonably likely to give rise to an affirmative answer to any of the questions in Item 7 of the Form BD of such broker-dealer.

 

(z) Investment Company Mutual FundsEach mutual fund of which a subsidiary of the Company serves as the investment advisor (a “Mutual Fund”) has been since inception, is currently and will be immediately after consummation of the transactions contemplated herein, a duly registered investment company in compliance with the  1940 Act, and the rules and regulations promulgated thereunder and duly registered or licensed, except where any failure to be duly registered, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.  Since their initial offering, shares of each of the Mutual Funds have been duly qualified for sale under the securities laws of each jurisdiction in which they have been sold or offered for sale at such time or times during which such qualification was required, and, if not so qualified, the failure to so qualify would not reasonably be expected to have a Material Adverse Effect.  The offering and sale of shares of each of the Mutual Funds have been registered under the 1933 Act during such period or periods for which such registration is required; the related registration statement has become effective under the 1933 Act; no stop order suspending the effectiveness of any such registration statement has been issued and no proceedings for that purpose have been instituted or, to the best knowledge of the Company, are contemplated.  Except to the extent that such failure to comply, misstatement or omission, as the case may be, would not reasonably be likely to result in a Material Adverse Effect, the registration statement of each Mutual Fund, together with the amendments and supplements thereto, under the 1940 Act and the 1933 Act has, at all times when such registration statement

 

10


 

was effective, complied in all material respects with the requirements of the 1940 Act and the 1933 Act then in effect and neither such registration statement nor any amendments or supplements thereto contained, at the time and in light of the circumstances in which they were made, an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, at the time and in the light of the circumstances under which they were made, not misleading.  All shares of each of the Mutual Funds were sold pursuant to an effective registration statement, or pursuant to a valid exemption from registration, and have been duly authorized and are validly issued, fully paid and non-assessable.  Each of the Mutual Funds’ investments has been made in accordance with its investment policies and restrictions set forth in its registration statement in effect at the time the investments were made and have been held in accordance with its respective investment policies and restrictions, to the extent applicable and in effect at the time such investments were held, except to the extent any failure to comply with such policies and restrictions, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.

 

(aa)  Investment Advisory Agreements.  The Company is not party to any investment advisory agreement or distribution agreement and is not serving or acting as an investment adviser to any person.  Each of the investment advisory agreements to which any of its subsidiaries is a party is a legal and valid obligation of such subsidiary and complies with the applicable requirements of the Advisers Act and the rules and regulations of the Commission thereunder, except where the failure to so comply would not individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  Each of the investment advisory agreements and distribution agreements between a subsidiary of the Company and a Mutual Fund is a legal and valid obligation of such subsidiary and complies with the applicable requirements of the 1940 Act, and in the case of such distribution agreements, with the applicable requirements of the 1934 Act, except where the failure to so comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  No investment advisory agreement or distribution agreement to which any of the subsidiaries is a party that was either in effect on January 1, 2006 or entered into by a subsidiary of the Company since January 1, 2006 has been terminated or expired, except where any such termination or expiration would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  None of such subsidiaries is in breach or violation of or in default under any such investment advisory agreement or distribution agreement, with such exceptions individually or in the aggregate as would not reasonably be expected to have a Material Adverse Effect.  No subsidiary of the Company is serving or acting as an investment adviser to any person except pursuant to an agreement to which such subsidiary is a party and which is in full force and effect, other than any agreement the non-existence of which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  The consummation of the transaction contemplated herein will not constitute an “assignment” as such term is defined in the Advisers Act and the 1934 Act.

 

(bb)  No Fiduciary DutiesThe Company acknowledges and agrees that (i) the sale of the Shares pursuant to this Agreement is an arm’s-length commercial transaction among the Company, on the one hand, and the Forward Purchaser and the Manager, on the other hand, (ii) in connection with the offering contemplated hereby and the process leading to such transaction, the Manager is acting as agent for the Forward Purchaser in connection with sales of the Shares sold on behalf of the Forward Purchaser and neither the Manager nor the Forward

 

11



 

Purchaser nor any of their affiliates is an agent or fiduciary of the Company, or its stockholders, creditors, employees or any other party, (iii) the Manager has not assumed and will not assume an advisory or fiduciary responsibility in favor of the Company with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether the Manager has advised or is currently advising the Company on other matters) and the Manager has no obligation to the Company with respect to the offering contemplated hereby except the obligations expressly set forth in this Agreement, (iv) the Manager and its affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company, and (v) the Manager has not provided any legal, accounting, regulatory or tax advice with respect to the offering contemplated hereby and the Company has consulted its own legal, accounting, regulatory and tax advisors to the extent it deemed appropriate.

 

(cc)  Internal Control over Financial Reporting.  The Company maintains a system of internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the 1934 Act Regulations) that complies with the requirements of the 1934 Act and the 1934 Act Regulations and that has been designed by the Company’s principal executive officer and principal financial officer, or under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  The Company’s internal control over financial reporting is effective and the Company is not aware of any material weaknesses in its internal control over financial reporting.  Since the date of the latest audited financial statements included or incorporated by reference in the General Disclosure Package and the Prospectus, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

(dd)  Disclosure Controls and Procedures.  The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) of the 1934 Act Regulations) that comply with the requirements of the 1934 Act and the 1934 Act Regulations; such disclosure controls and procedures have been designed to ensure that material information relating to the Company and its subsidiaries is made known to the Company’s principal executive officer and principal financial officer by others within those entities; and such disclosure controls and procedures are effective.

 

(ee)  No Stop Order or Cease-and-Desist Proceeding.  The Registration Statement is not the subject of a pending proceeding or examination under Section 8(d) or 8(e) of the 1933 Act, and the Company is not the subject of a pending proceeding under Section 8A of the 1933 Act in connection with the offering of the Securities.

 

(ff)  Actively-Traded Security.  The Common Stock is an “actively traded security” exempted from the requirements of Rule 101 of Regulation M under the 1934 Act by subsection (c)(1) of such rule.

 

(gg)  No Other At-The-Market Offerings.  Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, the Company has not entered into any other sales agency agreements or other similar arrangements with any agent or any other

 

12



 

representative in respect of at the market offerings of the Shares in accordance with Rule 415(a)(4) of the 1933 Act Regulations.

 

(hh)  No Stabilization or Manipulation.  The Company has not taken, directly or indirectly, any action designed to or that might be reasonably expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares.

 

(ii)  No Commissions.  There is no broker, finder or other party that is entitled to receive from the Company any brokerage or finder’s fee or other fee or commission as a result of any transactions contemplated by this Agreement.

 

(jj)  Deemed Representation.  Any certificate signed by any officer of the Company delivered to the Manager or to counsel for the Manager pursuant to or in connection with this Agreement shall be deemed a representation and warranty by the Company to the Manager as to the matters covered thereby.

 

Section 2.  Sale and Delivery of Shares.

 

(a)  Subject to the terms and conditions set forth herein, the Manager agrees to use its reasonable efforts to sell the Shares as sales agent for the Forward Purchaser in the manner contemplated by the General Disclosure Package.

 

(b)  The Shares are to be sold on a daily basis or otherwise as shall be agreed to by the Company, the Forward Purchaser and the Manager on any day that is a trading day for the NYSE (other than a day on which the NYSE is scheduled to close prior to its regular weekday closing time, each, a “Trading Day”) that the Company has satisfied its obligations under Section 4 of this Agreement and that the Company has instructed the Manager to make such sales.  On any Trading Day, the Company, in consultation with the Forward Purchaser and the Manager, may instruct the Manager by telephone (confirmed promptly by telecopy or email, which confirmation will be promptly acknowledged by the Manager) as to the maximum amount of Shares to be sold by the Manager on such day (in any event not in excess of the amount then available for sale under the Prospectus and the currently effective Registration Statement) and the minimum price per Share at which such Shares may be sold.  Subject to the terms and conditions hereof, the Manager shall use its commercially reasonable efforts to sell as sales agent for the Forward Purchaser all of the Shares so designated by the Company.  The Company and the Manager each acknowledge and agree that (A) there can be no assurance that the Manager will be successful in selling the Shares, (B) the Manager will incur no liability or obligation to the Company or any other person or entity if it does not sell Shares for any reason other than a failure by the Manager to use its commercially reasonable efforts consistent with its normal trading and sales practices and applicable law and regulations to sell such Shares as required by this Agreement, and (C) the Manager shall be under no obligation to purchase Shares on a principal basis.

 

(c)  Notwithstanding the foregoing, the Company shall not authorize the sale of, and the Manager shall not be obligated to use its commercially reasonable efforts to sell, any Shares (i) at a price lower than the minimum price therefor authorized from time to time, or (ii) 

 

13



 

having an aggregate offering price in excess of the aggregate offering price of Shares authorized from time to time to be issued and sold under this Agreement, in each case, by the Company’s board of directors, or a duly authorized committee thereof, and notified to the Manager in writing.  In addition, the Company or the Manager may, upon notice to the other party hereto by telephone (confirmed promptly by telecopy or email, which confirmation will be promptly acknowledged), suspend the offering of the Shares for any reason and at any time; provided, however, that such suspension shall not affect or impair the parties’ respective obligations with respect to the Shares sold hereunder prior to the giving of such notice.  Under no circumstances shall the aggregate offering price of Shares sold pursuant to this Agreement exceed the aggregate offering price of Shares set forth in the “Introductory” paragraph of this Agreement or the aggregate offering price of Common Stock available for sale under the currently effective Registration Statement.  Notwithstanding any of the provisions of this Agreement, in the event that either (i) the Forward Purchaser is unable to borrow and deliver any Shares for sale under this Agreement or (ii) in the sole judgment of the Forward Purchaser, it is either impracticable to do so or the Forward Purchaser would incur a stock loan cost that is equal to or greater than 75 basis points per annum to do so, then the Manager shall only be required to sell on behalf of the Forward Purchaser the aggregate number of Shares that the Forward Purchaser is able to, and that it is practicable to, so borrow below such cost.

 

(d)  If either party reasonably believes that the exemptive provisions set forth in Rule 101(c)(1) of Regulation M under the 1934 Act are not satisfied with respect to the Company or the Shares, it shall promptly notify the other party and sales of Shares under this Agreement shall be suspended until that or other exemptive provisions have been satisfied in the judgment of each party.

 

(e)  The Manager shall not make any sales of Shares on behalf of the Forward Purchaser other than by means of ordinary brokers’ transactions in accordance with Rule 153 of the 1933 Act Regulations.

 

(f)  The gross sales price of any Shares sold pursuant to this Agreement shall be the market or other price agreed to by the Company and the Manager for Shares sold by the Manager under this Agreement at the time of such sale.  The compensation payable to the Manager for sales of Shares shall be deemed to equal the difference between such gross proceeds and the amount payable by the Forward Purchaser to the Company under the Confirmation(s), assuming full physical settlement of the Confirmation(s) based on the Initial Forward Price (as such term is defined in the Confirmation(s)).  The amount payable by the Forward Purchaser to the Company under the Confirmation(s), assuming full physical settlement of the Confirmation(s) based on the Initial Forward Price, subject to the price adjustment and other provisions of the Confirmation(s) shall constitute the net proceeds to the Company for such Shares (the “Net Proceeds”).

 

(g)  The Manager shall provide written confirmation (which may be by telecopy or email) to the Company following the close of trading on the NYSE each day on which Shares are sold under this Agreement setting forth the number of Shares sold on such day, the price or prices at which such Shares were sold on such day, the aggregate gross sales proceeds of the Shares, the Net Proceeds to the Company and the compensation payable by the Company to the Manager with respect to such sales.

 

14



 

(h)  Settlement for sales of Shares pursuant to this Section 2 will occur on the third business day that is also a Trading Day following the trade date on which such sales are made, unless another date shall be agreed to by the Company and the Manager (each such day, a “Settlement Date”).  On each Settlement Date, the Shares sold through the Manager for settlement on such date shall be delivered by the Forward Purchaser to the Manager.

 

(i)  Notwithstanding any other provision of this Agreement, the Company and the Manager agree that no sales of Shares shall take place, and the Company shall not request the sale of any Shares that would be sold, and the Manager shall not be obligated to sell, (A) during any period starting on the first day of each fiscal quarter of the Company and ending on the day on which the Company’s insider trading policy, as it exists on the date of the Agreement, does not prohibit the purchases or sales of the Company’s Common Stock by its officers or directors, or (B) during any other period in which the Prospectus or any amendment or supplement thereto includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

(j)  At each Applicable Time and on each Settlement Date, each date the Registration Statement or the Prospectus shall be amended or supplemented (other than a prospectus supplement to the Prospectus included as part of the Registration Statement filed pursuant to Rule 424(b) of the 1933 Act Regulations relating solely to the offering of securities other than the Shares) (a “Registration Statement Amendment Date”) and each date the Company files an Annual Report on Form 10-K or a Quarterly Report on Form 10-Q or an amendment to any such document (a “Company Periodic Report Date”), the Company shall be deemed to have affirmed each representation and warranty (except for the representation and warranty in Section 1(l) hereof, which the Company shall be deemed to have affirmed only at each Company Periodic Report Date) and its compliance with each covenant and other agreement contained in this Agreement (unless the Company shall have notified the Manager to the contrary in writing).  The Company shall cause a senior corporate officer of the Company from time to time designated by the Company (which senior corporate officer shall initially be one of the senior corporate officers specified in Exhibit C hereto) to respond via electronic mail to a communication from the Manager in the form set forth in Exhibit C hereto when, during the term of this Agreement, the Company shall have received such a communication.  Any obligation of the Manager to use its commercially reasonable efforts to sell the Shares on behalf of the Forward Purchaser shall be subject to, as determined in the reasonable discretion of the Manager, the continuing accuracy of the representations and warranties of the Company, the compliance by the Company with each covenant contained herein, the performance by the Company of its obligations hereunder and the continuing satisfaction of the additional conditions specified in Section 4 of this Agreement.

 

Section 3.  Covenants of the Company.   The Company hereby covenants and agrees with the Manager that:

 

(a)  During the period beginning on the date hereof and ending on the date, as determined in the reasonable discretion of the Manager, that a prospectus is no longer required by law to be delivered in connection with the offering or sales of the Shares by the Manager or any dealer (whether physically or through compliance with Rule 153 or 172 of the 1933 Act

 

15



 

Regulations, or in lieu thereof, a notice referred to in Rule 173(a) of the 1933 Act Regulations) (the “Prospectus Delivery Period”):

 

(i)  the Company will notify the Manager promptly in writing of the time when any subsequent amendment to the Registration Statement has become effective or any amendment to the Registration Statement or any subsequent supplement to the Prospectus has been filed;

 

(ii)  the Company will prepare and file with the Commission any material required to be filed with the Commission pursuant to Rule 433(d) of the 1933 Act Regulations and any amendments or supplements to the Registration Statement or the Prospectus that, in the reasonable judgment of the Company, may be necessary or advisable in connection with the offering of the Shares by the Manager;

 

(iii)  the Company will comply with Rule 430B; provided, however, that the Company will not file any amendment to the Registration Statement or supplement to the Prospectus unless a copy thereof has been submitted to the Manager a reasonable period of time before filing with the Commission or if the Manager reasonably objects to such filing in writing, in each case excluding an amendment by incorporated report filed pursuant to Section 13 or 15(d) of the 1934 Act.

 

(iv)  the Company will file promptly all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Section 13, 14 or 15 of the 1934 Act and will advise the Manager of any such filing;

 

(v)  the Company will furnish to the Manager at the time of filing thereof, a copy of any document that upon filing is deemed to be incorporated by reference in the Registration Statement or the Prospectus; and

 

(vi)  the Company will cause each amendment or supplement to the Prospectus to be filed with the Commission as required pursuant to the applicable paragraph of Rule 424(b) of the 1933 Act Regulations or, in the case of any document to be incorporated therein by reference, to be filed with the Commission as required pursuant to the 1934 Act, within the prescribed time period.

 

(b)  The Company shall pay the required Commission filing fees relating to the Shares within the time required by Rule 456(b)(1)(i) of the 1933 Act Regulations without regard to the proviso therein and otherwise in accordance with Rules 456(b) and 457(r) of the 1933 Act Regulations.

 

(c)  The Company will promptly advise the Manager of the receipt of any comments of or request by the Commission for any amendment or supplement to the Registration Statement or the Prospectus, including the documents incorporated by reference therein, or for additional or supplemental information with respect thereto or of notice of institution of proceedings for the entry of a stop order suspending the effectiveness of the Registration Statement by the Commission or of any examination pursuant to Section 8(e) of the

 

16



 

1933 Act concerning the Registration Statement or of any order or notice preventing or suspending the use of the Registration Statement, any preliminary prospectus or the Prospectus, or of any proceedings to remove, suspend or terminate from listing or quotation the Common Stock from any securities exchange upon which it is listed for trading or included or designated for quotation, or of the threatening or initiation of any proceedings for any of such purposes.  The Company shall use its best efforts to prevent the issuance of any such stop order or notice of prevention or suspension of such use.  If the Commission shall enter any such stop order or issue any such notice at any time, the Company will use its best efforts to obtain the lifting or reversal of such order or notice at the earliest possible moment, or will file an amendment to the Registration Statement or a new registration statement in a form satisfactory to the Manager and use its best efforts to have such amendment or new registration statement become effective as soon as practicable.

 

(d)  The Company will make available to the Manager and from time to time furnish to the Manager, at the Company’s expense, copies of the Prospectus (or the Prospectus as amended or supplemented if the Company shall have made any amendments or supplements thereto after the effective date of the Registration Statement) in such quantities and at such locations as the Manager may reasonably request for the purposes contemplated by the 1933 Act.

 

(e)  The Company will promptly notify the Manager to suspend the offering of Shares upon the happening of any event known to the Company during the Prospectus Delivery Period or otherwise prior to the final Settlement Date which, in the reasonable judgment of the Company, would require the making of any change in the Registration Statement or in the Prospectus then being used, or in the information incorporated by reference therein, so that the Registration Statement and the Prospectus would not include an untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.  During such time period, the Company will prepare and furnish, at the Company’s expense, to the Manager promptly such amendments or supplements to such Registration Statement and Prospectus as may be necessary to reflect any such change and will furnish the Manager with a copy of such proposed amendment or supplement before filing any such amendment or supplement with the Commission.  If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement (or any other registration statement relating to the Shares) or the Prospectus or any preliminary prospectus or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, the Company will promptly notify the Manager and will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.

 

(f)  The Company will furnish such information as may be required and otherwise will cooperate in qualifying the Shares for offering and sale under the securities or blue sky laws of such jurisdictions as the Manager may designate and to maintain such qualifications in effect so long as required for the distribution of the Shares; provided that the Company shall not be required to qualify as a foreign corporation or to consent to the service of process under the laws

 

17



 

of any such jurisdiction (except service of process with respect to the offering and sale of the Shares).  The Company will promptly advise the Manager of the receipt by the Company of any notification with respect to the suspension of the qualification of the Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose.

 

(g)  Prior to the final Settlement Date, the Company will furnish to the Manager (i) copies of any reports or other communications which the Company shall send directly to its stockholders or shall from time to time publish or publicly disseminate, (ii) copies of all annual, quarterly and current reports filed with the Commission on Forms 10-K, 10-Q and 8-K, or such other similar form as may be designated by the Commission, (iii) copies of any financial statements or reports filed with any national securities exchange on which any class of securities of the Company is listed, and (iv) such other information as the Manager may reasonably request regarding the Company, in each case as soon as such reports, communications, documents or information becomes available.  Where in any part of this document there is an obligation on the part of the Company to deliver a document to the Manager, such obligation shall be deemed satisfied if such document shall have been filed on the Commission’s EDGAR system.

 

(h)  The Company will make generally available to its stockholders as soon as practicable, and in the manner contemplated by Rule 158 of the 1933 Act Regulations but in any event not later than 15 months after the end of the Company’s current fiscal quarter, an earnings statement (which need not be audited) covering a 12 month period beginning after the date upon which a prospectus supplement is filed pursuant to Rule 424(b) of the 1933 Act Regulations that shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 of the 1933 Act Regulations.

 

(i)  Whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, the Company will pay all of its costs, expenses, fees and taxes incident to the performance of its obligations hereunder, including, but not limited to, such costs, expenses, fees and taxes in connection with (i) the preparation and filing of the Registration Statement, the Prospectus, each prospectus supplement filed by the Company in connection with the offering and sale of Shares by the Manager under this Agreement and any amendments or supplements thereto and the printing and furnishing of copies of each thereof to the Manager (including costs of mailing and shipment), (ii) the producing, word processing and/or printing of this Agreement, the Confirmation(s), any power of attorney and any closing documents (including compilations thereof) and the reproduction and/or printing and furnishing of copies of each thereof to the Manager (including costs of mailing and shipment), (iii) the qualification of the Shares for offering and sale under state laws and the determination of their eligibility for investment under state law as aforesaid (including the reasonable legal fees and filing fees and other disbursements of counsel for the Manager) and the preparation, printing and furnishing of copies of any blue sky surveys to the Manager, (iv) the listing of the Settlement Shares on the NYSE, (v) any filing for review of the public offering of the Shares by FINRA, (vi) the fees and disbursements of the Company’s counsel and accountants, (vii) the performance of the Company’s other obligations hereunder, (viii) the costs and expenses (including without limitation any damages or other amounts payable in connection with legal or contractual liability) associated with the reforming of any contracts for sale of the Shares made by the Manager caused by a breach of the representation contained in the first paragraph of Section 1(e), and (ix) the registration, issue, sale and delivery of the Settlement Shares.  The

 

18



 

Manager will pay its own out-of-pocket costs and expenses incurred in connection with entering into this Agreement and the transactions contemplated by this Agreement, including, without limitation, travel, reproduction, printing and similar expenses as well as the fees and disbursements of its legal counsel.

 

(j)  The Company will use the Net Proceeds from the sale of the Shares in the manner set forth in the Prospectus.

 

(k)  The Company will not sell, offer or agree to sell, contract to sell, pledge, register, grant any option to purchase or otherwise dispose of, directly or indirectly, any shares of capital stock or securities convertible into or exchangeable, exercisable or redeemable for capital stock or warrants or other rights to purchase capital stock, except (i) for the registration of the Shares and the sales of Shares through the Manager pursuant to this Agreement, (ii) for shares of Common Stock issued pursuant to existing options, employee benefit agreements or incentive stock or director stock unit plans, (iii) any shares of Common Stock or other securities issued as consideration for investments in or acquisitions of entities involved in investment advisory or investment management activities or other financial services related business, or (iv) any filing under the 1933 Act relating to any shares of Common Stock on Form S-8 or any issuances of Common Stock thereunder, without (a) giving the Manager at least three business days’ prior written notice specifying the nature of the proposed sale and the date of such proposed sale and (b) the Manager suspending activity under this program for such period of time as requested by the Company or as deemed appropriate by the Manager in light of the proposed sale.

 

(l)  At any time during the term of this Agreement, the Company will advise the Manager immediately after it shall have received notice or obtain knowledge thereof, of (x) any information or fact that, in the opinion of counsel to the Company, would alter or affect, in any material respect, any opinion, certificate, letter or other document provided to the Manager pursuant to Section 4 of this Agreement or any of the representations or warranties made pursuant to Section 1 of this Agreement or (y) any non-compliance or imminent non-compliance by the Company with any of its covenants or obligations hereunder in any material respect.

 

(m)  Upon commencement of the offering of the Shares under this Agreement, on every Monday during the term of this Agreement following a week during which no certificate was furnished pursuant to this Section 3(m) (except for any Monday during any period starting on the first day of each fiscal quarter of the Company and ending on the third business day following the next Company Earnings Report Date) and promptly after each Registration Statement Amendment Date, each Company Periodic Report Date, and each date on which a current report on Form 8-K shall be furnished by the Company under Item 2.02 of such form in respect of a public disclosure or material non-public information regarding the Company’s results of operations or financial condition for a completed quarterly or annual fiscal period (a “Company Earnings Report Date”), on the 15th calendar day of the third month of each fiscal quarter of the Company, and on such other dates as the Manager shall reasonably request, the Company will furnish or cause to be furnished forthwith to the Manager a certificate dated the date of effectiveness of such amendment, the date of filing with the Commission of such supplement or other document or the date of such request, as the case may be, in a form satisfactory to the Manager to the effect that the statements contained in the certificate referred to in Section 4(e) of this Agreement which were last furnished to the Manager are true and correct

 

19



 

at the time of such amendment, supplement or filing, as the case may be, as though made at and as of such time (except that such statements shall be deemed to relate to the Registration Statement and the Prospectus as amended and supplemented to such time) or, in lieu of such certificate, a certificate of the same tenor as the certificate referred to in said Section 4(e), but modified as necessary to relate to the Registration Statement and the Prospectus as amended and supplemented, or to the document incorporated by reference into the Prospectus, to the time of delivery of such certificate.  As used in this paragraph, to the extent there shall be an Applicable Time on or following the dates referred to above, promptly shall be deemed to be such Applicable Time.  The delivery requirements in this Section shall be suspended after the Manager has sold the maximum number of Shares authorized to be issued and sold under this Agreement.

 

(n)  Upon commencement of the offering of the Shares under this Agreement and promptly after each Registration Statement Amendment Date, each Company Periodic Report Date and each Company Earnings Report Date, on such other dates as the Manager shall reasonably request, and on the 15th calendar day of the third month of each fiscal quarter of the Company, the Company will furnish or cause to be furnished forthwith to the Manager and to counsel to the Manager written opinions and negative assurance letters of Ropes & Gray LLP, dated the date of effectiveness of such amendment, the date of filing with the Commission of such supplement or other document or the date of such request, as the case may be, in a form and substance satisfactory to the Manager and its counsel, of the same tenor as the opinions and negative assurance letters referred to in Section 4(c) of this Agreement, but modified as necessary to relate to the Registration Statement and the Prospectus as amended and supplemented, or to the document incorporated by reference into the Prospectus, to the time of delivery of such opinion, provided that the Company shall not be required to furnish or cause to be furnished the opinion referred to in Section 4(c) other than upon the commencement of the offering of the Shares and each date the Company files an Annual Report on Form 10-K.  As used in this paragraph, to the extent there shall be an Applicable Time on or following the dates referred to above, promptly shall be deemed to be such Applicable Time.  The delivery requirements in this Section shall be suspended after the Manager has sold the maximum number of Shares authorized to be issued and sold under this Agreement.

 

(o)   Upon commencement of the offering of the Shares under this Agreement and promptly after each Registration Statement Amendment Date, each Company Periodic Report Date and each Company Earnings Report Date, on such other dates as the Manager shall reasonably request, and on the 15th calendar day of the third month of each fiscal quarter of the Company, the Company will cause PricewaterhouseCoopers LLP to furnish to the Manager a letter, dated the date of effectiveness of such amendment, the date of filing of such supplement or other document with the Commission or the date of such request, as the case may be, in form satisfactory to the Manager and its counsel, of the same tenor as the letter referred to in Section 4(d) hereof, but modified as necessary to relate to the Registration Statement and the Prospectus, as amended and supplemented, or to the document incorporated by reference into the Prospectus, to the date of such letter.  As used in this paragraph, to the extent there shall be an Applicable Time on or following the dates referred to above, promptly shall be deemed to be such Applicable Time.  The delivery requirements in this Section shall be suspended after the Manager has sold the maximum number of Shares authorized to be issued and sold under this Agreement.

 

20


 

(p)  The Company acknowledges that the Manager will be trading the Company’s Common Stock for the Manager’s own account and for the account of its clients at the same time as sales of Shares occur pursuant to this Agreement.

 

(q)  If any condition set forth in Section 4(a) or 4(g) hereof shall not have been satisfied on the applicable Settlement Date, the Manager, at the direction of the Company, will offer to any person who has agreed to purchase Shares pursuant to the offering contemplated by this Agreement as the result of an offer to purchase solicited by the Manager the right to refuse to purchase and pay for such Shares.

 

(r)  The Company will disclose in its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, as applicable, the number of Shares sold through the Manager under this Agreement, the Net Proceeds from such sales and the compensation deemed paid by the Company with respect to sales of Shares pursuant to this Agreement during the relevant period.

 

(s)  The Company will use its best efforts to cause the Settlement Shares to be listed on the NYSE and to maintain such listing and to file with the NYSE all documents and notices required by the NYSE of companies that have securities that are listed on the NYSE.

 

(t)  The Company will not (i) take, directly or indirectly, any action designed to stabilize or manipulate the price of any security of the Company, or which may cause or result in, or which might in the future reasonably be expected to cause or result in, the stabilization or manipulation of the price of any security of the Company, to facilitate the sale or resale of any of the Shares, (ii) bid for or purchase, or pay any person (other than as contemplated by the provisions of this Agreement) any compensation for, soliciting purchases of the Shares, or (iii) pay or agree to pay to any person any compensation for soliciting any order to purchase any security that is a “reference security” with respect to the Common Stock of the Company (within the meaning of Regulation M under the 1934 Act) other than as contemplated by the provisions of this Agreement, in each case, during any “restricted period” within the meaning of Regulation M under the 1934 Act.

 

(u)  The Company will comply with all of the provisions of any undertakings in the Registration Statement.

 

(v)  The Company will cooperate timely with any reasonable due diligence review conducted by the Manager or its counsel from time to time in connection with the transactions contemplated hereby, including, without limitation, providing information and making available documents and senior corporate officers, during regular business hours and at the Company’s principal offices, at such times as the Manager may reasonably request.  If the Manager shall so request of one of the senior corporate officers of the Company specified in Exhibit C by 3:00 p.m. Eastern Time on any business day, the Company shall either (i) make available one or more senior corporate officers of the Company for interview due diligence at 9:00 a.m. Eastern Time on the next following business day or (ii) direct the Manager to cease offers and sales of the Shares until such time as such senior corporate officer or officers of the Company shall be made available for such purposes.

 

21



 

(w)  The Company represents and agrees that, unless it obtains the prior consent of the Manager, it has not made and will not make any offer relating to the Shares that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus,” as defined in Rule 405, whether or not required to be filed with the Commission.  Any such free writing prospectus consented to by the Company and the Manager is hereinafter referred to as a “Permitted Free Writing Prospectus.”  The Company represents that it has treated or agrees that it will treat each Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus and has complied and will comply with the requirements of Rule 433 applicable to any Permitted Free Writing Prospectus, including timely filing with the Commission where required, legending and record keeping.

 

(x)  The Company agrees that it will not claim that the Manager has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to the Company, in connection with such transaction or the process leading thereto.

 

Section 4.  Conditions of Manager’s ObligationsThe obligations of the Manager hereunder are subject to (i) the accuracy of the representations and warranties on the part of the Company on the date hereof and as of each Registration Statement Amendment Date, Company Earnings Report Date, Company Periodic Report Date, Applicable Time and Settlement Date, (ii) the performance by the Company of its obligations hereunder and (iii) the following additional conditions precedent:

 

(a)  (i) No stop order with respect to the effectiveness of the Registration Statement shall have been issued under the 1933 Act or the 1933 Act Regulations or proceedings initiated under Section 8(d) or 8(e) of the 1933 Act and no order directed at any document incorporated by reference therein and no order preventing or suspending the use of the Prospectus has been issued by the Commission, and no suspension of the qualification of the Shares for offering or sale in any jurisdiction, or to the knowledge of the Company or the Manager of the initiation or threatening of any proceedings for any of such purposes, has occurred; (ii) the Registration Statement and all amendments thereto, or modifications thereof, if any, shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (iii) the Prospectus and all amendments or supplements thereto, or modifications thereof, if any, and the General Disclosure Package shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they are made, not misleading, (iv) the Company shall have filed the Prospectus, and any amendments and supplements thereto, with the Commission (including the information required by Rule 430B) in the manner and within the time period required by the 1933 Act and the 1933 Act Regulations, and any post-effective amendment thereto containing the information required by Rule 430B shall have become effective, and (v) all material required to be filed by the Company pursuant to Rule 433(d) shall have been filed with the Commission within the applicable time periods prescribed for such filings under Rule 433.

 

(b)  In the judgment of the Manager, there shall not have occurred any Material Adverse Effect.

 

22



 

(c)  The Company shall cause to be furnished to the Manager, on every date specified in Section 3(n) hereof, the opinion and negative assurance letter of Ropes & Gray LLP addressed to the Manager, dated as of such date, in form satisfactory to the Manager and its counsel, substantially in the form of Exhibit B-1 and Exhibit B-2 attached hereto.

 

(d)  The Company shall cause to be furnished to the Manager, on every date specified in Section 3(o) hereof, from PricewaterhouseCoopers LLP letters dated the date of delivery thereof and addressed to the Manager in form and substance satisfactory to the Manager and its counsel, containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements of the Company and its subsidiaries included or incorporated by reference in the Registration Statement.

 

(e)  The Company shall furnish to the Manager, on each date specified in Section 3(m) hereof, a certificate of two of its executive officers to the effect that (i) the representations and warranties of the Company as set forth in this Agreement are true and correct as of the date of such certificate (the “Certificate Date”), (ii) the Company shall have performed such of its obligations under this Agreement as are to be performed at or before each such Certificate Date, and (iii) the conditions set forth in paragraphs (a) and (b) of this Section 4 have been met.

 

(f)  On the date hereof, the Manager shall have received the opinion of Cleary Gottlieb Steen & Hamilton LLP dated the date hereof and addressed to the Manager in form and substance satisfactory to the Manager.  On every date specified in Section 3(n) hereof, the Manager shall have received a negative assurance letter of Cleary Gottlieb Steen & Hamilton LLP, dated as of such date, in form and substance satisfactory to the Manager.

 

(g)  All filings with the Commission required by Rule 424 of the 1933 Act Regulations to have been filed by each Applicable Time or related Settlement Date, as the case may be, shall have been made within the applicable time period prescribed for such filing by Rule 424 (without reliance on Rule 424(b)(8)).

 

(h)  The Settlement Shares shall have been approved for listing on the NYSE, subject to official notice of issuance.

 

(i)  The Company shall have furnished to the Manager such other documents and certificates as to the accuracy and completeness of any statement in the Registration Statement, the Prospectus and the General Disclosure Package as of each Settlement Date as the Manager may reasonably request.

 

(j)  The Company shall have paid the required Commission filing fees relating to the Shares within the time period required by Rule 456(b)(1)(i) of the 1933 Act Regulations without regard to the proviso therein and otherwise in accordance with Rules 456(b) and 457(r) of the 1933 Act Regulations.

 

(k)  FINRA shall not have raised any objection with respect to the fairness and reasonableness of the terms and arrangements under this Agreement.

 

23



 

(l)  No amendment or supplement to the Registration Statement or Prospectus, including documents deemed to be incorporated by reference therein, shall be filed to which the Manager objects in writing.

 

(m)  Since the later of the time of execution of this Agreement and the most recent Applicable Time, there shall not have occurred any downgrading, nor shall any notice or announcement have been given or made of (i) any intended or potential downgrading or (ii) any review or possible change that does not indicate an improvement, in the rating accorded any securities of or guaranteed by the Company by any “nationally recognized statistical rating organization,” as that term is defined in Rule 436(g)(2) of the 1933 Act Regulations.

 

Section 5.  Indemnification.

 

(a)  Indemnification of Manager and Forward PurchaserThe Company agrees to indemnify and hold harmless the Manager and the Forward Purchaser, each of their directors, officers, employees and agents, and each person, if any, who controls the Manager or the Forward Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act:

 

(i)  against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto) or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Issuer Free Writing Prospectus, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

 

(ii)  against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 5(d) below) any such settlement is effected with the written consent of the Company; and

 

(iii)  against any and all expense whatsoever, as incurred (including the reasonable fees and disbursements of counsel chosen by the Manager), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above;

 

24



 

provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by the Manager expressly for use in the Registration Statement (or any amendment thereto) or any Issuer Free Writing Prospectus, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto).

 

(b)  Indemnification of Company, Directors and Officers.  The Manager and the Forward Purchaser severally and not jointly agree to indemnify and hold harmless the Company, its directors, each of its officers who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto) or any Issuer Free Writing Prospectus, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by the Manager expressly for use therein.

 

(c)  Actions against Parties; Notification.  Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement.  In the case of parties indemnified pursuant to Section 5(a) above, counsel to the indemnified parties shall be selected by the Manager, and, in the case of parties indemnified pursuant to Section 5(b) above, counsel to the indemnified parties shall be selected by the Company.  An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party.  In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances.  No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 5 or Section 6 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

 

(d)  Settlement without Consent if Failure to Reimburse.  If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party

 

25



 

for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 5(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.  Notwithstanding the immediately preceding sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, an indemnifying party shall not be liable for any settlement of the nature contemplated by Section 5(a)(ii) effected without its consent if such indemnifying party (i) reimburses such indemnified party in accordance with such request to the extent it considers such request to be reasonable and (ii) provides written notice to the indemnified party substantiating the unpaid balance as unreasonable, in each case prior to the date of such settlement.

 

(e)  Additional Liability.  The obligations of the Company under this Section 5 shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to the directors and officers of the Manager and to each person, if any, who controls the Manager within the meaning of the 1933 Act and each broker-dealer affiliate of the Manager; and the obligations of the Manager under this Section 5 shall be in addition to any liability which the Manager may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company and to each person, if any, who controls the Company within the meaning of the 1933 Act.

 

Section 6.  Contribution.  If the indemnification provided for in Section 5 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Manager and the Forward Purchaser on the other hand from the offering of the Shares pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and of the Manager and the Forward Purchaser on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.

 

The relative benefits received by the Company on the one hand and the Forward Purchaser and the Manager on the other hand in connection with the offering of the Shares pursuant to this Agreement shall be deemed to be in the same respective proportions as (i) the Net Proceeds from the offering of the Shares pursuant to this Agreement (before deducting expenses) received by the Company (which shall be deemed to include the proceeds that would be received by the Company upon physical settlement of the Confirmation(s) assuming that the aggregate amount payable by the Forward Purchaser under the Confirmation(s) is equal to the aggregate amount of the Net Proceeds realized upon the sale of the Shares) and (ii) the aggregate

 

26



 

proceeds received by the Forward Purchaser and the Manager from the sale of the Shares less the aggregate Net Proceeds.

 

The relative fault of the Company on the one hand and the Forward Purchaser and the Manager on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the Forward Purchaser and the Manager and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

The Company and the Manager agree that it would not be just and equitable if contribution pursuant to this Section 6 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 6.  The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 6 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission.

 

Notwithstanding the provisions of this Section 6, the Manager shall not be required to contribute any amount in excess of the total compensation received by the Manager in connection with the sale of Shares on behalf of the Forward Purchaser.

 

No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

 

For purposes of this Section 6, the person, if any, who controls the Manager within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act and the Manager’s Affiliates shall have the same rights to contribution as such Manager, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company.

 

Section 7.  Representations, Warranties and Agreements to Survive Delivery.  The respective indemnities, agreements, representations, warranties and other statements of the Company and the Manager, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of the Manager or any controlling person of the Manager, or the Company, or any officer or director or controlling person of the Company, and shall survive delivery of and payment for the Shares.

 

Section 8.  Termination.

 

(a)  The Company shall have the right, by giving written notice as hereinafter specified, to terminate this Agreement in its sole discretion at any time.  Any such termination

 

27



 

shall be without liability of any party to any other party except that (i) if Shares have been sold through the Manager, then Section 3(q) shall remain in full force and effect notwithstanding such termination, (ii) with respect to any pending sale through the Manager, the obligations of the Company, including in respect of compensation of the Manager, shall remain in full force and effect notwithstanding such termination and (iii) the provisions of Section 1, Section 3(i), Section 5 and Section 6 of this Agreement shall remain in full force and effect notwithstanding such termination.

 

(b)  The Manager shall have the right, by giving written notice as hereinafter specified, to terminate this Agreement in its sole discretion at any time.  Any such termination shall be without liability of any party to any other party except that the provisions of Section 1, 3(i), Section 5 and Section 6 of this Agreement shall remain in full force and effect notwithstanding such termination.

 

(c)  This Agreement shall remain in full force and effect unless terminated pursuant to Section 8(a) or (b) above or otherwise by mutual agreement of the parties or upon settlement of the sale of all the Shares in the aggregate in one or more offerings; provided that any such termination by mutual agreement or pursuant to this clause (c) shall in all cases be deemed to provide that Section 1, Section 3(i), Section 5 and Section 6 of this Agreement shall remain in full force and effect.

 

(d)  Any termination of this Agreement shall be effective on the date specified in such notice of termination; provided that such termination shall not be effective until the close of business on the date of receipt of such notice by the Manager or the Company, as the case may be.  If such termination shall occur prior to the Settlement Date for any sale of Shares, such sale shall settle in accordance with the provisions of Section 2(h) hereof.

 

Section 9.  Notices.  Except as otherwise herein provided, all statements, requests, notices and agreements shall be in writing and delivered by hand, overnight courier, mail or facsimile and, if to the Manager, shall be sufficient in all respects if delivered or sent to Deutsche Bank Securities Inc., 60 Wall Street, New York, NY 10005, 60 Wall Street, 4th Floor, New York, NY 10005, Attention: ECM Syndicate Desk (facsimile: 212-797-9344), with a copy to the General Counsel (facsimile: 212-797-4564); if to the Company, it shall be sufficient in all respects if delivered or sent to the Company at the offices of the Company at 600 Hale Street, Prides Crossing, MA 01965, Attention:  Chief Financial Officer.  Each party to this Agreement may change such address for notices by sending to the parties to this Agreement written notice of a new address for such purpose.

 

Section 10.  Parties.  The Agreement herein set forth has been and is made solely for the benefit of the Manager, the Forward Purchaser and the Company and to the extent provided in Section 5 hereof the controlling persons, directors and officers referred to in such section, and their respective successors, assigns, heirs, personal representatives and executors and administrators.  No other person, partnership, association or corporation (including a purchaser, as such purchaser, from any of the Manager) shall acquire or have any right under or by virtue of this Agreement.

 

28



 

Section 11.  Adjustments For Stock Splits.  The parties acknowledge and agree that all share related numbers contained in this Agreement shall be adjusted to take into account any stock split effected with respect to the Shares.

 

Section 12.  Counterparts.  This Agreement may be executed by any one or more of the parties hereto and thereto in any number of counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument.  This Agreement may be delivered by any party by facsimile or other electronic transmission.

 

Section 13.  Time of the Essence.  Time shall be of the essence of this Agreement.  As used herein, the term “business day” shall mean any day when the Commission’s office in Washington, D.C. is open for business.

 

Section 14.  Waiver of Jury Trial.  The Company and the Manager hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to jury trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

 

Section 15.  Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS PRINCIPLES OF CONFLICTS OF LAW.

 

Section 16.  Headings.  The Section headings in this Agreement have been inserted as a matter of convenience of reference and are not a part of this Agreement.

 

Section 17.  Successors and Assigns.  This Agreement shall be binding upon the Manager and the Company and their successors and assigns and any successor or assign of any substantial portion of the Company’s and any of the Manager’s respective businesses and/or assets.

 

Section 18.  Severability.  The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof.  If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.

 

Section 19.  Entire Agreement.  This Agreement constitutes the entire agreement and supersedes all other prior and contemporaneous agreements and undertakings, both written and oral, among the parties hereto with regard to the subject matter hereof.

 

[Remainder of this page intentionally left blank]

 

29



 

If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement between the Manager and the Company in accordance with its terms.

 

 

Very truly yours,

 

 

 

 

 

Affiliated Managers Group, Inc.

 

 

 

 

 

 

By:

/s/ John Kingston, III

 

Name: John Kingston, III

 

Title:   Executive Vice President, General

 

            Counsel and Secretary

 

 

 

 

Accepted as of the date hereof:

 

 

 

 

 

Deutsche Bank Securities Inc.

 

 

 

 

 

 

By:

/s/ Lars Kestner

 

 

Name: Lars Kestner

 

 

Title: Managing Director

 

 

 

 

 

 

 

By:

/s/ Peter Lambrakis

 

 

Name: Peter Lambrakis

 

 

Title: Managing Director

 

 

 

 

 

Deutsche Bank AG, London Branch

 

 

 

 

 

 

By:

/s/ Lars Kestner

 

 

Name: Lars Kestner

 

 

Title: Managing Director

 

 

 

 

 

 

 

By:

/s/ Peter Lambrakis

 

 

Name: Peter Lambrakis

 

 

Title: Managing Director

 

 



 

Exhibit A

 

CONFIRMATION

 

Separately filed as Exhibit 10.3

 


 

Exhibit B-1

 

FORM OF OPINION OF
ROPES & GRAY LLP

 

July 31, 2009

 

Deutsche Bank Securities Inc.

60 Wall Street

New York, NY 10005

 

Re: Affiliated Managers Group, Inc.

 

Ladies and Gentlemen:

 

We are furnishing this opinion to you pursuant to Section 4(c) of the Distribution Agency Agreement, dated as of July 31, 2009 (the “Distribution Agency Agreement”), among Affiliated Managers Group, Inc., a Delaware corporation (the “Company”) and Deutsche Bank Securities Inc. (the “Manager”).  Capitalized terms not otherwise defined herein shall have the same respective definitions attributed to them in the Distribution Agency Agreement.

 

We have acted as counsel for the Company, in connection with the preparation and filing with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “1933 Act”), of (i) a Registration Statement on Form S-3 (File No. 333-148029) filed by the Company with the Commission and automatically effective on December 12, 2007 (the “Registration Statement”) and (ii) a prospectus supplement, filed with the Commission on July 31, 2009 (the “Prospectus Supplement”), relating to the offering of the Common Stock pursuant to the Distribution Agency Agreement.  The prospectus included in the Registration Statement, as supplemented by the Prospectus Supplement and filed with the Prospectus Supplement, is herein called the “Prospectus.”

 

 

In connection with this opinion, we have examined or considered copies of the Registration Statement, the Prospectus, the Distribution Agency Agreement and the Confirmation dated as of July 31, 2009 between the Company and Deutsche Bank AG, London Branch (the “Confirmation”), and such other documents as we have deemed necessary as a basis for the opinions expressed herein.  The Distribution Agency Agreement and the Confirmation are collectively referred to herein as the “Company Agreements.”

 

We express no opinion as to the laws of any jurisdiction other than those of the Commonwealth of Massachusetts, the State of New York, the Delaware General Corporation Law, and the federal laws of the United States of America.

 



 

In addition, we have examined originals or copies, certified or otherwise indentified to our satisfaction, of such other documents and records and have made such investigation of fact and such examination of law as we have deemed appropriate in order to enable us to render the opinions set forth herein.  In conducting such investigation, we have relied, without independent verification, upon certificates of officers of the Company, public officials and other appropriate persons, and on the representations and warranties in the Distribution Agency Agreement as to matters of fact.

 

For purposes of our opinions expressed in paragraphs 1, 3 and 5, we have relied exclusively on certificates of public officials in the applicable jurisdictions or confirmation letters as to good standing status from CT Corporation.  For purposes of our opinion expressed as to the registration of each Adviser Subsidiary under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), we have relied exclusively on a review of the Commission’s Investment Adviser Public Disclosure website.

 

Based upon the foregoing, and subject to the additional qualifications set forth below, we are of the opinion that:

 

l.              The Company is validly existing as a corporation in good standing under the laws of the State of Delaware.

 

2.             The Company has corporate power to own, lease and operate its properties and to conduct its business as described in the Prospectus and to enter into the Company Agreements.

 

3.             The Company has been duly qualified as a foreign corporation to do business and is in good standing with the Secretary of State in Massachusetts.

 

4.             The Company has authorized common stock as set forth in the Registration Statement.

 

5.             Each domestic (U.S.) subsidiary that the Company has informed us is a “significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X promulgated by the Commission is an existing corporation, limited liability company, limited partnership, general partnership or association with transferable shares (commonly known as a “Massachusetts business trust”), as the case may be; and each such subsidiary which is a corporation, limited liability company, limited partnership or Massachusetts business trust is in good standing under the laws of its jurisdiction of organization.

 

6.             Each of the Company Agreements has been duly authorized, executed and delivered by the Company.

 

7.             Subject to the penultimate paragraph hereof, the Confirmation constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms.

 



 

8.             The Settlement Shares (as defined in the Confirmation) have been duly authorized and, when issued in accordance with the provisions of the Confirmation, will be validly issued, fully paid and non-assessable.

 

9.             The issuance of the Settlement Shares is not subject to any preemptive right in the Certificate of Incorporation or the By-laws of the Company or the Delaware General Corporation Law.

 

10.           No consent, approval or authorization of any Massachusetts, New York or federal court or governmental authority or agency is necessary in connection with the due authorization, execution and delivery of the Company Agreements, or for the issuance of the Settlement Shares in accordance with the Confirmation, other than as may be required under the securities or blue sky laws of the various States (as to which we express no opinion).

 

11.           The Registration Statement has been declared effective under the 1933 Act; any required filing of the Prospectus pursuant to Rule 424(b) under the 1933 Act has been made in the manner and within the time period required by Rule 424(b); and, to our knowledge (i) no stop order suspending the effectiveness of the Registration Statement has been issued under the 1933 Act and (ii) no proceedings for that purpose have been instituted or are pending or threatened by the Commission under the 1933 Act.

 

12.           The execution, delivery and performance by the Company of the Company Agreements and the issuance and sale of the Settlement Shares will not (i) violate any provision of the laws of the Commonwealth of Massachusetts, the laws of the State of New York, the Delaware General Corporation Law, the federal laws of the United States, except that we express no opinion as to state securities or blue sky laws or as to compliance with the antifraud provisions of federal and state securities laws, or the Certificate of Incorporation or By-Laws of the Company, (ii) breach or result in a default under any of the agreements on Exhibit A hereto, or (iii) violate any judgment, injunction, order or decree listed on Exhibit A hereto.

 

13.           Each subsidiary of the Company identified on Exhibit B hereto (“Adviser Subsidiary”) is registered as an investment adviser under the Advisers Act, and no Adviser Subsidiary is required to be registered, licensed or qualified as an investment adviser under the laws of the Commonwealth of Massachusetts or the State of New York. The Company is not required to register as an investment adviser within the meaning of the Advisers Act and the rules and regulations of the Commission promulgated thereunder.

 

14.           The Company is not an “investment company” or an entity “controlled” by an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”).

 

15.           The consummation of the transactions contemplated by the Company Agreements will not result in an “assignment,” within the meaning of the Advisers Act or the Investment Company Act, of any investment advisory agreement to which the Company or any Adviser Subsidiary is a party.

 



 

Our opinion that the Confirmation constitutes the legal, valid, and binding obligation of the Company, enforceable against the Company in accordance with its terms, is subject to (a) bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting the rights and remedies of creditors, (b) general principles of equity, regardless of whether applied in proceedings in equity or at law, and (c) the qualification that, for the provisions contained in the Confirmation pertaining to the calculation of payment obligations upon early termination of the transactions subject to the Confirmation to be valid and enforceable, the actual damages incurred by the party to whom payment would be owed (determined in accordance with the Confirmation) must be difficult to ascertain and the payment to such party (as so determined) must represent a reasonable estimate of such actual damages or, on the other hand, if such actual damages are easily ascertainable and such payment (as so determined) is unreasonably and grossly disproportionate to such actual damages, or is unconscionably excessive, a court will award such party no more than such actual damages.  In addition, we express no opinion (a) as to the extent to which broadly worded waivers or provisions providing for conclusive presumptions or determinations, submission to exclusive jurisdiction, waiver of or consent to service of process and venue, or waiver of offset or defenses will be enforced and (b) as to the application to the Confirmation or any transaction under the Confirmation or the effect on the legality, validity, binding nature, or enforceability of the Confirmation or any transaction under the Confirmation of any federal, Massachusetts or New York law regulating gambling, betting, gaming, or the existence or operation of so-called “bucket shops”.

 

This opinion letter is furnished by us as counsel for the Company to you and is solely for the benefit of you in your role as Manager under the Distribution Agency Agreement, and may not be relied on by you for any other purpose, or furnished to, quoted to, or relied on by, in whole or in part, any other person, firm or corporation for any purpose, without our prior written consent.

 

Very truly yours,

 

 

Ropes & Gray LLP

 



 

Exhibit B-2

 

FORM OF NEGATIVE ASSURANCE LETTER OF
ROPES & GRAY LLP

 

July 31, 2009

 

Deutsche Bank Securities Inc.

60 Wall Street

New York, NY 10005

 

Re: Affiliated Managers Group, Inc.

 

Ladies and Gentlemen:

 

We refer to the Distribution Agency Agreement dated July 31, 2009, by and among Affiliated Managers Group, Inc., a Delaware corporation (the “Company”) and you.  We have acted as counsel to the Company in connection with the transactions described therein.  Terms defined in the Distribution Agency Agreement and not otherwise defined herein are used herein with the meanings so defined.

 

As counsel to the Company, we have reviewed the Registration Statement and the Prospectus and the documents incorporated by reference therein and participated in discussions with officers and representatives of the Company, representatives of the independent registered public accounting firm for the Company and your representatives and counsel at which discussions the contents of these documents were discussed.

 

The purpose of our engagement was not to establish or confirm factual matters set forth in the Registration Statement or the General Disclosure Package or the documents incorporated by reference therein, and we have not undertaken any obligation to verify independently any of the factual matters set forth in those documents.  Moreover, many of the determinations required to be made in the preparation of such documents involve judgments that are primarily of a non-legal nature.

 

Subject to the foregoing and on the basis of information that we have gained in the course of our representation of the Company and our participation in the discussions referred to above, we confirm to you that the Registration Statement, as of the most recent effective date established under Rule 430B, and the Prospectus, as of its date, complied as to form in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and that the documents incorporated by reference into the Prospectus, when they were filed with the Commission, complied as to form in all material respects with the requirements of the 1934 Act and the 1934 Act Regulations.  In addition, based on the information and participation described above, no

 



 

facts that have come to our attention have caused us to believe that (i) the Registration Statement, as of the most recent effective date established under Rule 430B, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading or (ii) the General Disclosure Package, as of the time at which this letter is delivered to you, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. We do not, however, assume any responsibility for the accuracy, completeness or fairness of the statements made or the information contained in the Registration Statement or the General Disclosure Package or the documents incorporated by reference therein, except for those statements in the Prospectus under the caption “Description of Common Stock” insofar as they represent descriptions or conclusions of law, descriptions of securities or a summary of documents referred to therein, which fairly summarize in all material respects such descriptions, conclusions or documents.

 

This letter does not express any view with respect to the financial statements, schedules and other financial or accounting data included or incorporated by reference in the Registration Statement or the General Disclosure Package.

 

This letter is furnished by us to you solely for your benefit in your capacity as Manager to assist you in establishing defenses under applicable securities laws and may not be relied on for any other purpose or by any person other than you.

 

Very truly yours,

 

 

Ropes & Gray LLP

 



 

EXHIBIT C

 

Form of Electronic Communication Specified in Section 2(a)(viii):

 

Please confirm that the prospectus (including the documents incorporated by reference therein), as of the date of this email, does not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

Officers Initially Designated by the Company for purposes of Section 2(k) and Section 3(v):

 

Darrell Crate (darrell.crate@amg.com)

 

Peter MacEwen (pmacewen@amg.com)

 

John Kingston (john.kingston@amg.com).

 




Exhibit 10.3

 

 

Deutsche Bank

 

 

 

Deutsche Bank AG, London Branch

 

Winchester house

 

1 Great Winchester St,

 

London EC2N 2DB

 

Telephone: 44 20 7545 8000

 

 

 

c/o Deutsche Bank Securities Inc.

 

60 Wall Street

 

New York, NY 10005

 

Telephone: (212) 250-2500

 

DATE:

July 31, 2009

 

 

TO:

Affiliated Managers Group, Inc.

 

600 Hale Street

 

Prides Crossing, MA 01965

ATTENTION:

Darrell Crate

FACSIMILE:

(617) 747-3380

 

 

FROM:

Deutsche Bank AG, London Branch

TELEPHONE:

44 20 7545 0556

FACSIMILE:

44 11 3336 2009

 

 

SUBJECT:

Registered Forward Transaction

 

 

REFERENCE NUMBER(S):

342363

 

The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and conditions of the transaction entered into between Deutsche Bank AG, London Branch (“Deutsche”) and Affiliated Managers Group, Inc. (“Counterparty”) on the Trade Date specified below (the “Transaction”).  This Confirmation constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified below.  This Confirmation constitutes the entire agreement and understanding of the parties with respect to the subject matter and terms of the Transaction and supersedes all prior or contemporaneous written and oral communications with respect thereto.

 

DEUTSCHE BANK AG, LONDON BRANCH IS NOT REGISTERED AS A BROKER OR DEALER UNDER THE U.S. SECURITIES EXCHANGE ACT OF 1934.  DEUTSCHE BANK SECURITIES INC. (“DBSI”) HAS ACTED SOLELY AS AGENT IN CONNECTION WITH THE TRANSACTION AND HAS NO OBLIGATION, BY WAY OF ISSUANCE, ENDORSEMENT, GUARANTEE OR OTHERWISE WITH RESPECT TO THE PERFORMANCE OF EITHER PARTY UNDER THE TRANSACTION.  AS SUCH, ALL DELIVERY OF FUNDS, ASSETS, NOTICES, DEMANDS AND COMMUNICATIONS OF ANY KIND RELATING TO THIS TRANSACTION BETWEEN DEUTSCHE BANK AG, LONDON BRANCH, AND COUNTERPARTY SHALL BE TRANSMITTED EXCLUSIVELY THROUGH DEUTSCHE BANK SECURITIES INC.  DEUTSCHE BANK AG, LONDON BRANCH IS NOT A MEMBER OF THE SECURITIES INVESTOR PROTECTION CORPORATION (SIPC).

 

Chairman of the Supervisory Board: Clemens Börsig

Board of Managing Directors: Hermann-Josef Lamberti, Josef Ackermann, Dr. Hugo Banziger, Anthony Dilorio

Deutsche Bank AG is regulated by the FSA for the conduct of designated investment business in the UK, is a member of the London Stock Exchange and is a limited liability company incorporated in the Federal Republic of Germany HRB No. 30 000 District Court of Frankfurt am Main; Branch Registration No. in England and Wales BR000005, Registered address: Winchester House, 1 Great Winchester Street, London EC2N 2DB.

 



 

The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”), as published by the International Swaps and Derivatives Association, Inc., are incorporated into this Confirmation.  In the event of any inconsistency between the Equity Definitions and this Confirmation, this Confirmation shall govern.

 

Each party is hereby advised, and each such party acknowledges, that the other party has engaged in, or refrained from engaging in, substantial financial transactions and has taken other material actions in reliance upon the parties’ entry into the Transaction to which this Confirmation relates on the terms and conditions set forth below.

 

This Confirmation and the pricing supplement delivered hereunder evidence a complete and binding agreement between Deutsche and Counterparty as to the terms of the Transaction to which this Confirmation relates.  This Confirmation, together with all other Confirmations of Equity Contracts (as defined in “Netting and Set-off” below), shall supplement, form a part of, and be subject to an agreement in the form of the ISDA 2002 Master Agreement (the “Agreement”) as if Deutsche and Counterparty had executed an agreement in such form (without any Schedule except for the election of United States dollars (“USD”) as the Termination Currency and such other elections set forth in this Confirmation).  In the event of any inconsistency between the provisions of the Agreement and this Confirmation, this Confirmation will prevail for the purpose of the Transaction to which this Confirmation relates.  The parties hereby agree that, other than the Transaction to which this Confirmation relates and any other Equity Contract, no other Transaction shall be governed by the Agreement.

 

The terms of the particular Transaction to which this Confirmation relates are as follows:

 

General Terms:

 

 

 

Trade Date:

July 31, 2009

 

 

Effective Date:

The first day occurring on or after the Trade Date on which Shares are sold pursuant to the Distribution Agency Agreement dated as of July 31, 2009 between Counterparty and DBSI (the “Distribution Agreement”)

 

 

Seller:

Counterparty

 

 

Buyer:

Deutsche

 

 

Shares:

The common stock of Counterparty, par value USD 0.01 per share (Ticker Symbol:  “AMG”)

 

 

Number of Shares:

The aggregate number of Shares sold pursuant to the Distribution Agreement during the period from and including the Trade Date through and including the Hedge Completion Date; provided, however, that on each Settlement Date, the Number of Shares shall be reduced by the number of Settlement Shares to be settled on such date.

 

 

Hedge Completion Date:

The earliest of (i) the date specified in writing as the Hedge Completion Date by the Counterparty, (ii) any Settlement Date and (iii) September 30, 2009.  Promptly after the Hedge Completion Date, Deutsche will furnish Counterparty with a pricing supplement (the “Pricing Supplement”) substantially in the form of Annex A hereto specifying the Number of Shares as of the Hedge Completion Date (the “Initial Number of Shares”), the Initial Forward Price and the Final Date, all determined in accordance with the terms hereof.

 

 

Initial Forward Price:

98.25% of the volume weighted average price at which the Shares are sold pursuant to the Distribution Agreement during the period from and including the Trade Date through and including the Hedge Completion Date.

 

2



 

Forward Price:

(a)                     On the Hedge Completion Date, the Initial Forward Price; and

 

 

 

(b)                    on each calendar day thereafter, (i) the Forward Price as of the immediately preceding calendar day multiplied by (ii) the sum of 1 and the Daily Rate for such day.

 

 

Daily Rate:

For any day, (i) (a) USD-Federal Funds Rate for such day minus (b) the Spread divided by (ii) 365.

 

 

USD-Federal Funds Rate:

For any day, the rate set forth for such day opposite the caption “Federal funds”, as such rate is displayed on the page “FedsOpen <Index><GO>“ on the BLOOMBERG Professional Service, or any successor page; provided that if no rate appears for a particular day on such page, the rate for the immediately preceding day for which a rate does so appear shall be used for such day.

 

 

Spread:

1.20%, subject to adjustment from time to time by Deutsche in its commercially reasonable discretion; provided that no such adjustment may reduce the Spread below 1.20% or increase the Spread above 1.50%.

 

 

Prepayment:

Not Applicable

 

 

Variable Obligation:

Not Applicable

 

 

Exchange:

The New York Stock Exchange

 

 

Related Exchange(s):

All Exchanges

 

 

Clearance System:

The Depository Trust Company

 

 

Market Disruption Event:

Section 6.3(a) of the Equity Definitions is hereby amended by deleting the words “during the one hour period that ends at the relevant Valuation Time, Latest Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case may be,” in clause (ii) thereof.

 

 

Early Closure:

Section 6.3(d) of the Equity Definitions is hereby amended by deleting the remainder of the provision following the term “Scheduled Closing Time” in the fourth line thereof.

 

 

Settlement:

 

 

 

Settlement Currency:

USD (all amounts shall be converted to the Settlement Currency in good faith and in a commercially reasonable manner by the Calculation Agent)

 

 

Settlement Date:

Any Scheduled Trading Day following the first day occurring on or after the Trade Date on which Shares are sold pursuant to the Distribution Agreement and up to and including the Final Date that is either:

 

(a)                  designated by Counterparty as a “Settlement Date” by a written notice (a “Settlement Notice”) delivered to Deutsche no less than (i) one Scheduled Trading Day prior to such Settlement Date and five Scheduled Trading Days prior to the Final Date, if Physical Settlement applies, and (ii) five Scheduled Trading Days prior to such Settlement Date, which may be the Final Date, if Cash Settlement or Net Stock Settlement applies; provided that if Cash Settlement or Net Stock

 

3



 

 

Settlement applies, any Settlement Date, including a Settlement Date on the scheduled Final Date, shall be deferred until the date on which Deutsche is able to completely unwind its hedge with respect to the portion of the Number of Shares to be settled if Deutsche is unable to completely unwind its hedge with respect to the portion of the Number of Shares to be settled during the Unwind Period due to the restrictions of Rule 10b-18 (“Rule 10b-18”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) agreed to hereunder, the existence of any Suspension Day or Disrupted Day or the lack of sufficient liquidity in the Shares during the Unwind Period (as determined by the Calculation Agent); provided further that if Deutsche shall fully unwind its hedge with respect to the portion of the Number of Shares to be settled during an Unwind Period by a date that is more than three Scheduled Trading Days prior to a Settlement Date specified above, Deutsche may, by written notice to Counterparty, specify any Scheduled Trading Day prior to such original Settlement Date as the Settlement Date; or

 

(b)                 designated by Deutsche as a Settlement Date pursuant to the “Acceleration Events” provisions below;

 

provided that the Final Date will be a Settlement Date if on such date the Number of Shares for which a Settlement Date has not already been designated is greater than zero; provided further that if any Settlement Date specified above is not an Exchange Business Day, the Settlement Date shall instead be the next Exchange Business Day; and provided further that, following the occurrence of at least three consecutive Suspension Days during an Unwind Period and while such Suspension Days are continuing, Deutsche may designate any subsequent Exchange Business Day as the Settlement Date with respect to the portion of the Settlement Shares, if any, for which Deutsche has determined an Unwind Purchase Price during such Unwind Period, it being understood that the Unwind Period with respect to the remainder of such Settlement Shares shall recommence on the next succeeding Exchange Business Day that is not a Suspension Day.

 

 

Final Date:

The first anniversary of the Hedge Completion Date (or if such day is not a Scheduled Trading Day, the next following Scheduled Trading Day)

 

 

Early Settlement Fee:

If a Settlement Date occurs on or prior to the Early Settlement Fee Date (an “Early Unwind Date”), Counterparty shall pay to Deutsche the Early Settlement Fee for such Early Unwind Date; provided that no Early Settlement Fee shall be payable if (i) the USD-Federal Funds Rate is less than the Spread on such Early Unwind Date or (ii) such Early Unwind Date occurs as a result of the designation by Deutsche of a Settlement Date resulting from an event or events outside Counterparty’s control.  “Early Settlement Fee” means, for any Early Unwind Date, an amount of cash equal to (a) the number of Settlement Shares for such Settlement Date multiplied by (b) the Initial Forward Price multiplied by (c) 0.50% multiplied by (d) the number of calendar days in the period from but excluding such Early Unwind Date to and including the Early Settlement Fee Date divided by (e) 365; “Early Settlement Fee Date” means the date that is two months after the Hedge Completion Date.

 

 

Settlement Shares:

(a)                     With respect to any Settlement Date other than the Final Date, the number of Shares designated as such by Counterparty in the relevant Settlement Notice or designated pursuant to the “Acceleration Events”

 

4



 

 

provisions below, as applicable; provided that the Settlement Shares so designated shall (i) not exceed the Number of Shares at that time and (ii) be at least equal to the lesser of 100,000 and the Number of Shares at that time; and

 

 

 

(b)                    with respect to the Settlement Date on the Final Date, a number of Shares equal to the Number of Shares at that time;

 

 

 

in each case with the Number of Shares determined taking into account pending Settlement Shares.

 

 

 

 

Settlement Method Election:

Physical Settlement, Cash Settlement, or Net Stock Settlement, at the election of Counterparty, in its sole discretion, as set forth in a Settlement Notice; provided that if Counterparty elects Cash Settlement or Net Stock Settlement, it shall be deemed to have repeated the representations contained under “Securities Laws Representations and Agreements” below; provided further that if no election is made by Counterparty, Physical Settlement shall apply.  The parties hereto acknowledge that Counterparty cannot be obligated to settle this Transaction by cash payment unless Counterparty elects Cash Settlement; provided, however, that the foregoing shall not apply to the payment of an Early Settlement Fee if the Early Unwind Date occurs as the result of the designation by Counterparty of a Settlement Date.

 

 

Physical Settlement:

If Physical Settlement is applicable, then Counterparty shall deliver to Deutsche through the Clearance System a number of Shares equal to the Settlement Shares for such Settlement Date, and Deutsche shall pay to Counterparty, by wire transfer of immediately available funds to an account designated by Counterparty, an amount equal to the Physical Settlement Amount for such Settlement Date.

 

 

Physical Settlement Amount:

For any Settlement Date for which Physical Settlement is applicable, an amount equal to the product of (a) the Forward Price in effect on the relevant Settlement Date multiplied by (b) the Settlement Shares for such Settlement Date.

 

 

Cash Settlement:

On any Settlement Date in respect of which Cash Settlement applies, if the Cash Settlement Amount is a positive number, Deutsche will pay the Cash Settlement Amount to Counterparty.  If the Cash Settlement Amount is a negative number, Counterparty will pay the absolute value of the Cash Settlement Amount to Deutsche.  Such amounts shall be paid on such Settlement Date.

 

 

Cash Settlement Amount:

An amount determined by the Calculation Agent equal to: (i)(A) the Forward Price as of the first day of the applicable Unwind Period minus (B) the weighted average price (the “Unwind Purchase Price”) at which Deutsche purchases Shares during the Unwind Period to unwind its hedge with respect to the portion of the Number of Shares to be settled during the Unwind Period (including, for the avoidance of doubt, purchases on any Suspension Day or Disrupted Day in part), taking into account Shares anticipated to be delivered or received if Net Stock Settlement applies, and the restrictions of Rule 10b-18 under the Exchange Act agreed to hereunder, plus USD 0.02, multiplied by (ii) the Settlement Shares.

 

 

Net Stock Settlement:

On any Settlement Date in respect of which Net Stock Settlement applies, if the Cash Settlement Amount is a (i) positive number, Deutsche shall deliver a number of Shares to Counterparty equal to the Net Stock Settlement Shares,

 

5



 

 

or (ii) negative number, Counterparty shall deliver a number of Shares to Deutsche equal to the Net Stock Settlement Shares; provided that if Deutsche determines in its good faith judgment that it would be required to deliver Net Stock Settlement Shares to Counterparty, Deutsche may elect to deliver a portion of such Net Stock Settlement Shares on one or more dates prior to the applicable Settlement Date.

 

 

Net Stock Settlement Shares:

With respect to a Settlement Date, the absolute value of the Cash Settlement Amount divided by the Unwind Purchase Price, with the number of Shares rounded up in the event such calculation results in a fractional number.

 

 

Unwind Period:

The period from and including the first Exchange Business Day following the date Counterparty elects Cash Settlement or Net Stock Settlement in respect of a Settlement Date through the third Scheduled Trading Day preceding such Settlement Date (as such date may be changed by Deutsche as described in the first proviso in clause (a) of the definition of Settlement Date above and provided that Deutsche may truncate any Unwind Period pending (and reduce the Settlement Shares for such Unwind Period to the portion thereof, if any, for which Deutsche has determined an Unwind Purchase Price) at the time Deutsche designates a Settlement Date pursuant to the “Acceleration Events” provisions below, effective upon such designation).

 

 

Failure to Deliver:

Applicable

 

 

Suspension Day:

Any day on which Deutsche determines based on the advice of outside counsel of national standing that Cash Settlement or Net Stock Settlement may violate applicable securities laws or cause Deutsche to not be in compliance with applicable legal, regulatory or self-regulatory requirements, or with related policies and procedures applicable to Deutsche.  Deutsche shall promptly notify Counterparty if it receives such advice from its counsel.

 

 

Share Cap:

Except as provided under “Private Placement and Registration Procedures” below, in no event will Counterparty be required to deliver to Deutsche on any Settlement Date, whether pursuant to Physical Settlement, Net Stock Settlement, any Private Placement Settlement or any Registration Settlement, a number of Shares in excess of (i) the Initial Number of Shares minus (ii) the aggregate number of Shares delivered by Counterparty to Deutsche hereunder prior to such Settlement Date.

 

 

Adjustments:

 

 

 

Method of Adjustment:

Calculation Agent Adjustment

 

 

Extraordinary Events:

 

 

 

New Shares:

In the definition of New Shares in Section 12.1(i) of the Equity Definitions, the text in (i) shall be deleted in its entirety and replaced with “publicly quoted, traded or listed on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors)”.

Consequences of Merger Events:

 

 

 

(a)  Share-for-Share:

Cancellation and Payment

 

6



 

(b)  Share-for-Other:

Cancellation and Payment

 

 

(c)  Share-for-Combined:

Cancellation and Payment

 

 

Tender Offer:

Applicable

 

 

Consequences of Tender Offers:

 

 

 

(a)  Share-for-Share:

Cancellation and Payment

 

 

(b)  Share-for-Other:

Cancellation and Payment

 

 

(c)  Share-for-Combined:

Cancellation and Payment

 

 

Composition of Combined Consideration:

Not Applicable

 

 

Nationalization, Insolvency or Delisting:

Cancellation and Payment

 

 

 

In addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it will also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall be deemed to be the Exchange.

 

 

Determining Party:

For all applicable Extraordinary Events, Deutsche; provided, however, that all calculations, adjustments, specifications, choices and determinations by the Determining Party shall be made in good faith and in a commercially reasonable manner.  The parties agree that they will work reasonably to resolve any disputes.

 

 

Additional Disruption Events:

 

 

 

Change in Law:

Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (i) replacing the phrase “the interpretation” in the third line thereof with the phrase “or public announcement of the formal or informal interpretation” and (ii) immediately following the word “Transaction” in clause (X) thereof, adding the phrase “in the manner contemplated by the Hedging Party on the Trade Date”.

 

 

Insolvency Filing:

Notwithstanding anything to the contrary herein, in the Agreement or in the Equity Definitions, upon any Insolvency Filing or other proceeding under the U.S. Bankruptcy Code in respect of the Issuer, the Transaction shall automatically terminate on the date thereof without further liability of either party to this Confirmation to the other party (except for any liability in respect of any breach of representation or covenant by a party under this Confirmation prior to the date of such Insolvency Filing or other proceeding), it being understood that this Transaction is a contract for the issuance of Shares by the Issuer.

 

 

Determining Party:

For all applicable Additional Disruption Events, Deutsche; provided, however, that all calculations, adjustments, specifications, choices and determinations by the Determining Party shall be made in good faith and in a

 

7



 

 

commercially reasonable manner.  The parties agree that they will work reasonably to resolve any disputes.

 

 

Acknowledgments:

 

 

 

Non-Reliance:

Applicable

 

 

Agreements and Acknowledgments Regarding Hedging Activities:

Applicable

 

 

Additional Acknowledgments:

Applicable

 

 

Transfer:

Notwithstanding anything to the contrary herein or in the Agreement, Deutsche may assign, transfer and set over all rights, title and interest, powers, privileges and remedies of Deutsche under this Transaction, in whole or in part, to an affiliate of Deutsche, or any entity sponsored or organized by, or on behalf of or for the benefit of, Deutsche without the consent of Counterparty.  No such assignment, transfer or set over shall affect Deutsche’s obligations hereunder.  In the event of any transfer or assignment of any rights, title and interest, powers, privileges and remedies of Deutsche under this Transaction, the transferee or assignee shall assume and enter into all of the transferor’s covenants and representations under Sections 3(e), 3(f), 4(a)(i) and 4(a)(iii) of the Agreement or enter into new covenants and representations that are agreed by the other party under the Agreement, and the identity of the transferee or assignee shall be entered on the books and records maintained by each party or its respective agents.

 

 

Calculation Agent:

Deutsche.  All calculations and determinations by the Calculation Agent shall be made in good faith and in a commercially reasonable manner.  The parties agree that they will work reasonably to resolve any disputes.

 

 

Account Details:

 

 

 

(a)   Account for delivery of Shares to Deutsche:

To be furnished

 

 

(b)   Account for payments to Counterparty:

To be furnished

 

 

(c)   Account for payments to Deutsche:

Bank of New York

ABA 021-000-018

Deutsche Bank Securities, Inc.

A/C 8900327634

FFC:  To be provided by Deutsche

 

Offices:

 

The Office of Counterparty for the Transaction is:

Inapplicable, Counterparty is not a Multibranch Party.

 

 

The Office of Deutsche for the Transaction is:

Deutsche Bank AG, London Branch

 

1 Great Winchester Street

 

Winchester House

 

London EC2N 2DB

 

Notices:  For purposes of this Confirmation:

 

8



 

(a)

Address for notices or communications to Counterparty:

 

Affiliated Managers Group, Inc.

600 Hale Street

Prides Crossing, MA 01965

Telephone:

(617) 747-3300

Facsimile:

(617) 747-3380

Attention:

Darrell Crate

 

(b)

Address for notices or communications to Deutsche:

 

Deutsche Bank AG, London Branch

c/o Deutsche Bank Securities Inc.

60 Wall Street

New York, NY  10005

Attention:

Paul Stowell

 

Peter Barna

 

 

Telephone:

(212) 250-6270

 

(212) 250-1689

 

 

Email:

paul.stowell@db.com

 

peter.barna@db.com

 

 

with a copy to:

 

 

Deutsche Bank AG, London Branch

c/o Deutsche Bank Securities Inc.

60 Wall Street

New York, NY 10005

Attention:

Lars Kestner

 

 

Telephone:

(212) 250-6043

Email:

lars.kestner@db.com

 

Effectiveness; Distribution Agreement; Interpretive Letter.

 

Conditions to Effectiveness.  This Transaction shall be effective if and only if Shares are sold on or after the Trade Date pursuant to the Distribution Agreement.  If the Distribution Agreement is terminated prior to any such sale of Shares thereunder, the parties shall have no further obligations in connection with this Transaction, other than in respect of breaches of representations or covenants on or prior to such date.

 

Distribution Agreement Representations, Warranties and Covenants.  On the Trade Date and on each date on which Deutsche or its affiliates delivers a prospectus in connection with a sale to hedge this Transaction, Counterparty repeats and reaffirms as of such date all of the representations and warranties contained in the Distribution Agreement.  Counterparty hereby agrees to comply with its covenants contained in the Distribution Agreement as if such covenants were made in favor of Deutsche.

 

Interpretive Letter.  Counterparty agrees and acknowledges that this Transaction is being entered into in accordance with the October 9, 2003 interpretive letter from the staff of the Securities and Exchange Commission to Goldman, Sachs & Co. (the “Interpretive Letter”) and agrees to take all actions, and to omit to take any actions, reasonably requested by Deutsche for this Transaction to comply with the Interpretive Letter.  Without limiting the foregoing, Counterparty agrees that neither it nor any “affiliated purchaser” (as defined in Regulation M (“Regulation M”) promulgated under the Exchange Act) will, directly or indirectly, bid for, purchase or attempt to induce any person to bid for or purchase, the Shares or securities that are convertible into, or exchangeable or exercisable for, Shares during any

 

9



 

“restricted period” as such term is defined in Regulation M.  In addition, Counterparty represents that it is eligible to conduct a primary offering of Shares on Form S-3, the offering contemplated by the Distribution Agreement complies with Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), and the Shares are “actively traded” as defined in Rule 101(c)(1) of Regulation M.

 

Agreements and Acknowledgments Regarding Shares:

 

(i)                                     Counterparty agrees and acknowledges that, in respect of any Shares delivered to Deutsche hereunder, such Shares shall be newly issued (unless mutually agreed otherwise by the parties) and upon such delivery, duly and validly authorized, issued and outstanding, fully paid and nonassessable, free of any lien, charge, claim or other encumbrance and not subject to any preemptive or similar rights and shall, upon such issuance, be accepted for listing or quotation on the Exchange.

 

(ii)                                  Counterparty agrees and acknowledges that Deutsche will hedge its exposure to this Transaction by selling Shares borrowed from third party securities lenders or other Shares pursuant to a registration statement, and that, pursuant to the terms of the Interpretive Letter, the Shares (up to the Initial Number of Shares) delivered, pledged or loaned by Counterparty to Deutsche in connection with this Transaction may be used by Deutsche to return to securities lenders without further registration under the Securities Act.  Accordingly, Counterparty agrees that the Shares that it delivers, pledges or loans to Deutsche on or prior to the final Settlement Date will not bear a restrictive legend and that such Shares will be deposited in, and the delivery thereof shall be effected through the facilities of, the Clearance System.

 

(iii)                               Counterparty has reserved and will keep available at all times, free from preemptive or similar rights and free from any lien, charge, claim or other encumbrance, authorized but unissued Shares at least equal to the Number of Shares, solely for the purpose of settlement under this Transaction.

 

(iv)                              Unless the provisions set forth below under “Private Placement and Registration Procedures” are applicable, Deutsche agrees to use any Shares delivered by Counterparty hereunder on any Settlement Date to return to securities lenders to close out open securities loans with respect to the Shares.

 

(v)                                 In connection with bids and purchases of Shares in connection with any Cash Settlement or Net Stock Settlement of this Transaction, Deutsche shall use its good faith efforts to comply, or cause compliance, with the provisions of Rule 10b-18 under the Exchange Act, taking into account any purchases under other Equity Contracts, as if such provisions were applicable to such purchases.

 

Securities Laws Representations and Agreements:

 

(i)                                     Counterparty represents to Deutsche on the Trade Date and on any date that Counterparty notifies Deutsche that Cash Settlement, Net Stock Settlement or Alternative Settlement under “EITF 00-19; Alternative Settlement” below applies to this Transaction, that (a) each of its filings under the Securities Act, the Exchange Act or other applicable securities laws that are required to be filed have been filed and that, as of the respective dates thereof and as of the date of this representation, there is no misstatement of material fact contained therein or omission of a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading; and (b) it has not and will not directly or indirectly violate any applicable law (including, without limitation, the Securities Act and the Exchange Act) in connection with this Transaction.  In addition to any other requirement set forth herein, Counterparty agrees not to designate any Settlement Date or elect Alternative Settlement under “EITF 00-19; Alternative Settlement” below if settlement in respect of such date would result in a violation of any applicable federal or state law or regulation, including the U.S. federal securities laws.

 

(ii)                                  It is the intent of Deutsche and Counterparty that following any election of Cash Settlement or Net Stock Settlement by Counterparty, the purchase of Shares by Deutsche during any Unwind Period comply with the requirements of Rule 10b5-l(c)(l)(i)(B) of the Exchange Act and that this Confirmation shall be interpreted to comply with the requirements of Rule 10b5-l(c).

 

10


 

Counterparty acknowledges that (a) during any Unwind Period Counterparty shall not have, and shall not attempt to exercise, any influence over how, when or whether to effect purchases of Shares by Deutsche (or its agent or affiliate) in connection with this Confirmation and (b) Counterparty is entering into the Agreement and this Confirmation in good faith and not as part of a plan or scheme to evade compliance with federal securities laws including, without limitation, Rule 10b-5 promulgated under the Exchange Act.

 

Counterparty hereby agrees with Deutsche that during any Unwind Period Counterparty shall not communicate, directly or indirectly, any Material Non-Public Information (as defined herein) to any Equity Derivatives Group Personnel (as defined below).  For purposes of this Transaction, “Material Non-Public Information” means information relating to Counterparty or the Shares that (x) has not been widely disseminated by wire service, in one or more newspapers of general circulation, by communication from Counterparty to its shareholders or in a press release, or contained in a public filing made by Counterparty with the Securities and Exchange Commission and (y) a reasonable investor might consider to be of importance in making an investment decision to buy, sell or hold Shares.  For the avoidance of doubt and solely by way of illustration, information should be presumed “material” if it relates to such matters as dividend increases or decreases, earnings estimates, changes in previously released earnings estimates, significant expansion or curtailment of operations, a significant increase or decline of orders, significant merger or acquisition proposals or agreements, significant new products or discoveries, extraordinary borrowing, major litigation, liquidity problems, extraordinary management developments, purchase or sale of substantial assets, or other similar information  For purposes of this Transaction, “Equity Derivatives Group Personnel” means any employee of Deutsche or its affiliates who effects purchases or sales of Shares in connection with this Agreement.

 

(iii)          Counterparty shall, at least one day prior to the first day of any Unwind Period, notify Deutsche of the total number of Shares purchased in Rule 10b-18 purchases of blocks pursuant to the once-a-week block exception contained in Rule 10b-18(b)(4) by or for Counterparty or any of its affiliated purchasers during each of the four calendar weeks preceding the first day of the Unwind Period and during the calendar week in which the first day of the Unwind Period occurs (“Rule 10b-18 purchase”, “blocks” and “affiliated purchaser” each being used as defined in Rule 10b-18).

 

(iv)                              During any Unwind Period, Counterparty shall (a) notify Deutsche prior to the opening of trading in the Shares on any day on which Counterparty makes, or expects to be made, any public announcement (as defined in Rule 165(f) under the Securities Act of any merger, acquisition, or similar transaction involving a recapitalization relating to Counterparty (other than any such transaction in which the consideration consists solely of cash and there is no valuation period), (b) promptly notify Deutsche following any such announcement that such announcement has been made, and (c) promptly deliver to Deutsche following the making of any such announcement information indicating (1) Counterparty’s average daily Rule 10b-18 purchases (as defined in Rule 10b-18) during the three full calendar months preceding the date of the announcement of such transaction and (2) Counterparty’s block purchases (as defined in Rule 10b-18) effected pursuant to paragraph (b)(4) of Rule 10b-18 during the three full calendar months preceding the date of the announcement of such transaction.  In addition, Counterparty shall promptly notify Deutsche of the earlier to occur of the completion of such transaction and the completion of the vote by target shareholders.

 

(v)                                 Neither Counterparty nor any of its affiliates shall take or refrain from taking any action (including, without limitation, any direct purchases by Counterparty or any of its affiliates, or any purchases by a party to a derivative transaction with Counterparty or any of its affiliates), either under this Confirmation, under an agreement with another party or otherwise, that might cause any purchases of Shares by Deutsche or any of its affiliates in connection with any Cash Settlement or Net Stock Settlement of this Transaction not to meet the requirements of the safe harbor provided by Rule 10b-18 if such purchases were made by Counterparty.

 

(vi)                              Counterparty will not engage in any “distribution” (as defined in Regulation M) that would cause a “restricted period” (as defined in Regulation M) to occur during any Unwind Period.

 

11



 

Miscellaneous:

 

Acceleration Events.

 

(i)                                     Stock Borrow Event.  If in Deutsche’s reasonable judgment, (a) Deutsche is not able hedge its exposure under this Transaction because insufficient Shares are made available for borrowing by securities lenders or (b) Deutsche would incur a cost to borrow (or to maintain a borrow of) sufficient Shares to hedge its exposure under this Transaction that is equal to or greater than 100 basis points per annum per any Share (each of (a) and (b), a “Stock Borrow Event”), then Deutsche shall be entitled to designate any Scheduled Trading Day prior to the date the Number of Shares is first reduced to zero to be a Settlement Date, by providing Counterparty at least two Scheduled Trading Days’ notice prior to the relevant Settlement Date, and to designate the number of Settlement Shares for the relevant Settlement Date, which shall not exceed the number of Shares as to which the relevant Stock Borrow Event relates.

 

(ii)                                  Dividends.  If on any day after the Trade Date, Counterparty declares a distribution, issue or dividend to existing holders of the Shares of (a) any cash dividends in excess of USD 0.00 per Share or (b) share capital or other securities of another issuer acquired or owned (directly or indirectly) by Counterparty as a result of a spin-off or similar transaction or (c) any other type of securities (other than Shares), rights or warrants or other assets, in any case for payment (cash or other consideration) at less than the prevailing market price, as determined by Deutsche, then Deutsche shall be entitled to designate any Scheduled Trading Day prior to the date the Number of Shares is first reduced to zero to be a Settlement Date, by providing Counterparty at least three Scheduled Trading Days’ notice prior to the relevant Settlement Date, and to designate the number of Settlement Shares for the relevant Settlement Date.

 

(iii)                               Stock Price Event.  If at any time after the Trade Date the traded price per Share on the Exchange is less than or equal to USD 22.50, then Deutsche shall be entitled at any time thereafter to designate one or more Scheduled Trading Days prior to the date the Number of Shares is first reduced to zero to be a Settlement Date, by providing Counterparty at least ten Scheduled Trading Days’ notice prior to the relevant Settlement Date, and to designate the number of Settlement Shares for the relevant Settlement Date.

 

(iv)                              Board Approval of Merger Event.  If on any day after the Trade Date, the board of directors of Counterparty votes to approve any action that, if consummated, would constitute a Merger Event, then Counterparty shall notify Deutsche of such occurrence within one Scheduled Trading Day after such occurrence and Deutsche shall be entitled to designate any Scheduled Trading Day prior to the date the Number of Shares is first reduced to zero to be a Settlement Date, by providing Counterparty at least twenty Scheduled Trading Days’ notice prior to the relevant Settlement Date, and to designate the number of Settlement Shares for the relevant Settlement Date.

 

(v)                                 ISDA Termination.  In lieu of (a) designating an Early Termination Date as the result of an Event of Default or Termination Event, (b) terminating this Transaction and determining a Cancellation Amount as the result of an Additional Disruption Event, or (c) terminating this Transaction and determining an amount payable in connection with an Extraordinary Event to which Cancellation and Payment would otherwise be applicable, Deutsche shall be entitled to designate any Scheduled Trading Day prior to the date the Number of Shares is first reduced to zero to be a Settlement Date with respect to the Number of Shares as the Settlement Shares.

 

(vi)                              Termination Settlement.  Notwithstanding anything to the contrary herein, in the Agreement or in the Equity Definitions, if a Settlement Date is designated by Deutsche as the result of one of the foregoing sub-paragraphs (i) through (v), Physical Settlement shall apply to the relevant Settlement Shares.

 

Private Placement and Registration Procedures.  If Counterparty notifies Deutsche that it is unable to comply with the provisions of sub-paragraph (ii) of “Agreements and Acknowledgments Regarding Shares” above because of a change in law or a change in the policy of the Securities and Exchange Commission or its staff, or Deutsche notifies Counterparty that in its reasonable opinion any Shares to be delivered to Deutsche by Counterparty may not be freely returned by Deutsche to securities lenders as described under such sub-paragraph (ii), or otherwise constitute “restricted securities” as defined in Rule 144 under the Securities Act (the date such notification is effective being the “Determination Date”), then Counterparty may elect to effect the delivery of any such Shares (the “Restricted

 

12



 

Shares”) pursuant to either clause (i) or (ii) below, unless waived by Deutsche, on the later of (A)(1) if Private Placement Settlement is applicable, the tenth Scheduled Trading Day following the Determination Date or (2) if Registration Settlement is applicable, the thirtieth calendar day following the Determination Date (or if such day is not a Clearance System Business Day, the next Clearance System Business Day), (B) the date such delivery would otherwise be due pursuant to the terms of this Confirmation and (C) the Clearance System Business Day following notice by Deutsche to Counterparty of the number of Shares to be delivered pursuant to these “Private Placement and Registration Procedures”; provided that if Counterparty does not so elect within three Scheduled Trading Days of the Determination Date, Counterparty shall be deemed to have elected clause (i) below.

 

(i)                                     If Counterparty is obligated to settle the Transaction with Restricted Shares (a “Private Placement Settlement”), then delivery of Restricted Shares by Counterparty shall be effected in customary private placement procedures with respect to such Restricted Shares reasonably acceptable to Deutsche; provided that Counterparty may not elect a Private Placement Settlement if, on the date of its election, it has taken, or caused to be taken, any action that would make unavailable either the exemption pursuant to Section 4(2) of the Securities Act for the sale by Counterparty to Deutsche (or any affiliate designated by Deutsche) of the Restricted Shares or the exemption pursuant to Section 4(1) or Section 4(3) of the Securities Act for resales of the Restricted Shares by Deutsche (or any such affiliate of Deutsche).  The Private Placement Settlement of such Restricted Shares shall include customary representations, covenants, blue sky and other governmental filings and/or registrations, indemnities to Deutsche, due diligence rights (for Deutsche or any designated buyer of the Restricted Shares by Deutsche), opinions and certificates, and such other documentation as is customary for private placement agreements, all reasonably acceptable to Deutsche.  In the case of a Private Placement Settlement, Deutsche shall, in its good faith discretion, adjust the amount of Restricted Shares to be delivered to Deutsche hereunder in a commercially reasonable manner to reflect the fact that (A) such Restricted Shares may not be freely returned to securities lenders by Deutsche and may only be saleable by Deutsche at a discount to reflect the lack of liquidity in Restricted Shares and (B) Deutsche will incur carrying costs and other costs in connection with its hedge unwind activity relating to such Private Placement Settlement; provided that in no event will Counterparty be required to deliver to Deutsche a number of Restricted Shares in excess of (i) the Initial Number of Shares multiplied by two, minus (ii) the aggregate number of Shares delivered by Counterparty to Deutsche hereunder prior to the date of such delivery (the “Maximum Delivery Amount”).  If Deutsche adjusts the amount of Restricted Shares, it shall provide Counterparty with a statement indicating in reasonable detail how such share adjustment was determined.

 

If Counterparty delivers any Restricted Shares in respect of this Transaction, Counterparty agrees that (A) such Shares may be transferred by and among Deutsche and its affiliates and (B) after the “holding period” specified in Rule 144(d)(ii) under the Securities Act has elapsed, Counterparty shall promptly remove, or cause the transfer agent for the Shares to remove, any legends referring to any transfer restrictions from such Shares upon delivery by Deutsche (or such affiliate of Deutsche) to Counterparty or such transfer agent of any seller’s and broker’s representation letters customarily delivered by Deutsche or its affiliates in connection with resales of restricted securities pursuant to Rule 144 under the Securities Act, each without any further requirement for the delivery of any certificate, consent, agreement, opinion of counsel, notice or any other document, any transfer tax stamps or payment of any other amount or any other action by Deutsche (or such affiliate of Deutsche).

 

(ii)                                  If Counterparty elects to settle the Transaction pursuant to this clause (ii) (a “Registration Settlement”), then Counterparty shall promptly (but in any event no later than the Scheduled Trading Day immediately prior to the date delivery of the Shares is due pursuant to the terms of these “Private Placement and Registration Procedures”) file and use its reasonable efforts to make effective under the Securities Act a registration statement or supplement or amend an outstanding registration statement in form and substance reasonably satisfactory to Deutsche, to cover the resale of Restricted Shares (the “Registered Shares”) in accordance with customary resale registration procedures, including covenants, conditions, representations, underwriting discounts, commissions, indemnities, due diligence rights, opinions and certificates, and such other documentation as is customary for equity resale underwriting agreements, all reasonably acceptable to Deutsche.  If Deutsche, in its reasonable discretion, is not satisfied with such procedures and documentation or if a Settlement Date is designated by Deutsche pursuant to the “Acceleration Events” provisions above, Private Placement Settlement shall apply and Counterparty shall effect delivery of Restricted Shares by the tenth Scheduled Trading Day following notification from Deutsche.  In the case of a Registration Settlement, Deutsche shall, in its good faith discretion, adjust the amount of Registered Shares

 

13



 

to be delivered to Deutsche hereunder in a commercially reasonable manner to reflect the fact that Deutsche will incur carrying costs and other costs in connection with its hedge unwind activity relating to such Registered Settlement; provided that in no event will Counterparty be required to deliver to Deutsche a number of Registered Shares in excess of the Maximum Delivery Amount.  If Deutsche adjusts the amount of Registered Shares, it shall provide Counterparty with a statement indicating in reasonable detail how such share adjustment was determined.

 

Indemnity.  Counterparty agrees to indemnify Deutsche and its affiliates and their respective directors, officers, employees, agents and controlling persons (Deutsche and each such affiliate or person being an “Indemnified Party”) from and against any and all losses, claims, damages and liabilities, joint and several, incurred by or asserted against such Indemnified Party arising out of, in connection with, or relating to, the execution or delivery of this Confirmation, the performance by the parties hereto of their respective obligations under the Transaction, any breach of any covenant or representation made by Counterparty in this Confirmation or the Agreement or the consummation of the transactions contemplated hereby and will reimburse any Indemnified Party for all reasonable expenses (including reasonable legal fees and expenses) as they are incurred in connection with the investigation of, preparation for, or defense of any pending or threatened claim or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party thereto, except to the extent resulting from Deutsche’s gross negligence or willful misconduct.

 

Waiver of Trial by Jury.  EACH OF COUNTERPARTY AND DEUTSCHE HEREBY IRREVOCABLY WAIVES (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF ITS STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE TRANSACTION OR THE ACTIONS OF DEUTSCHE OR ITS AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT HEREOF.

 

Governing Law/Jurisdiction.  This Confirmation shall be governed by the laws of the State of New York without reference to the conflict of laws provisions thereof.  The parties hereto irrevocably submit to the exclusive jurisdiction of the courts of the State of New York and the United States Court for the Southern District of New York in connection with all matters relating hereto and waive any objection to the laying of venue in, and any claim of inconvenient forum with respect to, these courts.

 

Method of Delivery.  Whenever delivery of funds or other assets is required hereunder by or to Counterparty, such delivery shall be effected through DBSI.  In addition, all notices, demands and communications of any kind relating to the Transaction between Deutsche and Counterparty shall be transmitted exclusively through DBSI.

 

EITF 00-19; Alternative Settlement.  The parties hereby agree that all documentation with respect to this Transaction is intended to qualify this Transaction as an equity instrument for purposes of EITF Issue No. 00-19.  If, subject to “Netting and Set-off” below, Counterparty owes Deutsche any amount in connection with this Transaction pursuant to Section 12.7 or 12.9 of the Equity Definitions (except in the case of an Extraordinary Event in which the consideration or proceeds to be paid to holders of Shares as a result of such event consists solely of cash) or pursuant to Section 6(d)(ii) of the Agreement (except in the case of an Event of Default in which Counterparty is the Defaulting Party or a Termination Event in which Counterparty is the Affected Party, other than (x) an Event of Default of the type described in Section 5(a)(iii), (v), (vi) or (vii) of the Agreement or (y) a Termination Event of the type described in Section 5(b)(i), (ii), (iii), (iv), or (v) of the Agreement that in the case of either (x) or (y) resulted from an event or events outside Counterparty’s control) (a “Payment Obligation”), Counterparty shall have the right, in its sole discretion, to satisfy any such Payment Obligation by delivery of Termination Delivery Units (as defined below) by giving irrevocable telephonic notice to Deutsche, confirmed in writing within one Scheduled Trading Day, between the hours of 9:00 a.m. and 4:00 p.m. New York time on the Closing Date or Early Termination Date, as applicable (“Notice of Termination Delivery”).  Upon Notice of Termination Delivery, Counterparty shall deliver to Deutsche a number of Termination Delivery Units having a cash value equal to the amount of such Payment Obligation (such number of Termination Delivery Units to be delivered to be determined by the Calculation Agent acting in a commercially reasonable manner, taking into account whether the Termination Delivery Units so delivered are freely tradable).  Settlement relating to any delivery of Termination Delivery Units pursuant to this provision shall occur within three Scheduled Trading Days.  “Termination Delivery Unit” means (A) in the case of a Termination Event, an Event of Default or an Extraordinary Event (other than an Insolvency, Nationalization, Merger Event or Tender Offer), one Share or (B) in the case of an Insolvency, Nationalization,

 

14



 

Merger Event or Tender Offer, a unit consisting of the number or amount of each type of property received by a holder of one Share (without consideration of any requirement to pay cash or other consideration in lieu of fractional amounts of any securities) in such Insolvency, Nationalization, Merger Event or Tender Offer; provided that if such Insolvency, Nationalization, Merger Event or Tender Offer involves a choice of consideration to be received by holders, such holder shall be deemed to have elected to receive the maximum possible amount of cash.

 

Disclosure. Effective from the date of commencement of discussions concerning the Transaction, each of Deutsche and Counterparty and each of their employees, representatives, or other agents may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the Transaction and all materials of any kind (including opinions or other tax analyses) relating to such tax treatment and tax structure.

 

Right to Extend.  Deutsche may postpone any Settlement Date or any other date of valuation or delivery, with respect to some or all of the relevant Settlement Shares, if Deutsche determines, in its discretion, that such extension is reasonably necessary or appropriate to enable Deutsche to effect purchases of Shares in connection with its hedging activity hereunder or under any other Equity Contract in a manner that would, if Deutsche were Counterparty or an affiliated purchaser of Counterparty, be in compliance with applicable legal and regulatory requirements, as determined by Deutsche based upon the advice of outside counsel of national standing.

 

Counterparty Share Repurchases.  Counterparty agrees not to repurchase any Shares if, immediately following such purchase, the Number of Shares under this Confirmation and all other Equity Contracts (as defined in “Netting and Set-off” below) would be equal to or greater than 8.0% of the number of then-outstanding Shares or such lower number of Shares as Deutsche notifies Counterparty would, in the reasonable judgment of outside counsel of national standing for Deutsche, present legal or regulatory issues for Deutsche.

 

Limit on Beneficial Ownership.  Notwithstanding any other provisions hereof, Deutsche shall not be entitled to receive Shares hereunder (whether in connection with the purchase of Shares on any Settlement Date or otherwise) to the extent (but only to the extent) that such receipt would result in Deutsche and its affiliates (i) directly or indirectly beneficially owning (as such term is defined for purposes of Section 13(d) of the Exchange Act) at any time in excess of 4.9% of the outstanding Shares or (ii) having direct or indirect ownership or control (for purposes of the Bank Holding Company Act of 1956, as amended) at any time in excess of 4.9% of the outstanding Shares.  Any purported delivery hereunder shall be void and have no effect to the extent (but only to the extent) that such delivery would result in Deutsche and its affiliates directly or indirectly so beneficially owning or so owning or controlling in excess of 4.9% of the outstanding Shares.  If any delivery owed to Deutsche hereunder is not made, in whole or in part, as a result of this provision, Counterparty’s obligation to make such delivery shall not be extinguished and Counterparty shall make such delivery as promptly as practicable after, but in no event later than one Exchange Business Day after, Deutsche gives notice to Counterparty that such delivery would not result in Deutsche and its affiliates directly or indirectly so beneficially owning or so owning or controlling in excess of 4.9% of the outstanding Shares.

 

Commodity Exchange Act.  Each of Deutsche and Counterparty agrees and represents that it is an “eligible contract participant” as defined in Section 1a(12) of the U.S. Commodity Exchange Act, as amended (the “CEA”), the Agreement and this Transaction are subject to individual negotiation by the parties and have not been executed or traded on a “trading facility” as defined in Section 1a(33) of the CEA.

 

Securities Act.  Each of Deutsche and Counterparty agrees and represents that it is a “qualified institutional buyer” as defined in Rule 144A under the Securities Act, or an “accredited investor” as defined under the Securities Act.

 

ERISAEach of Deutsche and Counterparty agrees and represents that the assets used in the Transaction (a) are not assets of any “plan” (as such term is defined in Section 4975 of the U.S. Internal Revenue Code (the “Code”)) subject to Section 4975 of the Code or any “employee benefit plan” (as such term is defined in Section 3(3) of the U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) subject to Title I of ERISA, and (b) do not constitute “plan assets” (as such term is defined in Section 3(42) of ERISA).

 

Bankruptcy Status.  Deutsche acknowledges and agrees that this Confirmation is not intended to convey to Deutsche rights with respect to the transactions contemplated hereby that are senior to the claims of Counterparty’s common stockholders in any U.S. bankruptcy proceedings of Counterparty; provided, however, that nothing herein

 

15



 

shall be deemed to limit Deutsche’s right to pursue remedies in the event of a breach by Counterparty of its obligations and agreements with respect to this Confirmation and the Agreement; and provided, further, that nothing herein shall limit or shall be deemed to limit Deutsche’s rights in respect of any transaction other than this Transaction.

 

No Collateral.  The parties acknowledge that this Transaction is not secured by any collateral that would otherwise secure the obligations of Counterparty herein under or pursuant to the Agreement.  Without limiting the generality of the foregoing, this Transaction will not be considered to create obligations covered by any collateral credit support annex to the Agreement and will be disregarded for the purposes of calculating any exposures pursuant to any such annex.

 

Netting and Set-offDeutsche agrees not to set-off or net amounts due from Counterparty with respect to this Transaction against amounts due from Deutsche to Counterparty under obligations other than Equity Contracts.  Section 2(c) of the Agreement as it applies to payments due with respect to this Transaction shall remain in effect and is not subject to the first sentence of this provision.  The parties agree that Section 6(f) of the Agreement is amended and restated to read as follows:

 

“(f)          Upon the occurrence of an Event of Default or Termination Event with respect to Counterparty as the Defaulting Party or the Affected Party (“X”), Deutsche (“Y”) will have the right (but not be obliged) without prior notice to X or any other person to set-off or apply any obligation of X under an Equity Contract owed to Y (or any Affiliate of Y) (whether or not matured or contingent and whether or not arising under this Agreement, and regardless of the currency, place of payment or booking office of the obligation) against any obligation of Y (or any Affiliate of Y) under an Equity Contract owed to X (whether or not matured or contingent and whether or not arising under this Agreement, and regardless of the currency, place of payment or booking office of the obligation).  Y will give notice to the other party of any set-off effected under this Section 6(f).

 

“Equity Contract” shall mean for purposes of this Section 6(f) any Transaction relating to Shares sold pursuant to the Distribution Agreement.

 

If any obligation is unascertained, Y may in good faith estimate that obligation and set-off in respect of the estimate, subject to the relevant party accounting to the other when the obligation is ascertained.

 

Nothing in this Section 6(f) shall be effective to create a charge or other security interest.  This Section 6(f) shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other right to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise).”

 

Tax Representations.

 

(i)                                     For the purpose of Section 3(e) of the Agreement, each party makes the following representation:

 

(A)                              It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 9(h) of the Agreement and any other payments of interest and penalty charges for late payment) to be made by it to the other party under the Agreement.

 

(B)                                In making this representation, a party may rely on (i) the accuracy of any representations made by the other party pursuant to Section 3(f) of this Agreement, (ii) the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of the Agreement, and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of the Agreement, and (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of the Agreement, provided that it shall not be a breach of this representation where reliance is placed on

 

16



 

clause (ii) above and the other party does not deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its legal or commercial position.

 

(ii)           For the purpose of Section 3(f) of the Agreement:

 

(A)          Deutsche makes the following representation(s):

 

(1)                                  It is a “foreign person” within the meaning of the applicable U.S. Treasury Regulations concerning information reporting and backup withholding tax.

 

(2)                                  Each payment received or to be received by it under this Transaction will be effectively connected with its conduct of a trade or business in the United States.

 

(B)                                Counterparty represents that it is a “U.S. person” (as that term is used in section 1.1441-4(a)(3)(ii) of United States Treasury Regulations) for United States federal income tax purposes.

 

(iii)                               For the purpose of Section 4(a)(i) of the Agreement, promptly upon execution of this Confirmation, Counterparty shall provide to Deutsche a valid and duly executed IRS Form W-9 and any required attachments thereto.

 

(iv)                              For the purpose of Section 4(a)(i) of the Agreement, Deutsche shall provide to Counterparty a valid and duly executed IRS Form W-8ECI and any required attachments thereto (A) promptly upon execution of this Confirmation, (B) promptly upon reasonable demand by Counterparty and (C) promptly upon learning that any Form previously provided by Deutsche has become obsolete or incorrect.

 

Change of Account.  Section 2(b) of the Agreement is hereby amended by the addition after the word “delivery” in the first line thereof of the phrase “to another account in the same legal and tax jurisdiction”.

 

17



 

Please check this Confirmation and confirm that the foregoing correctly sets forth the terms of our agreement by signing in the space provided below and returning to Deutsche a facsimile of the fully-executed Confirmation.  Originals shall be provided for your execution upon your request.  Deutsche will make the time of execution of the Transaction available upon request.

 

Deutsche is regulated by the Financial Services Authority.

 

Very truly yours,

 

 

DEUTSCHE BANK AG, LONDON BRANCH

 

 

 

 

 

By:

/s/ Lars Kestner

 

 

Name: Lars Kestner

 

 

Title: Managing Director

 

 

 

 

 

By:

/s/ Peter Lambrakis

 

 

Name: Peter Lambrakis

 

 

Title: Managing Director

 

 

 

 

 

DEUTSCHE BANK SECURITIES INC.,

 

acting solely as agent in connection with this Transaction

 

 

 

By:

/s/ Lars Kestner

 

 

Name: Lars Kestner

 

 

Title: Managing Director

 

 

 

 

 

By:

/s/ Peter Lambrakis

 

 

Name: Peter Lambrakis

 

 

Title: Managing Director

 

 

 

Counterparty hereby agrees to, accepts and confirms the terms of the foregoing as of the Trade Date.

 

AFFILIATED MANAGERS GROUP, INC.

 

 

By:

/s/ John Kingston, III

 

 

Name: John Kingston, III

 

 

Title: Executive Vice President,

 

 

          General Counsel and Secretary

 

 

Signature page to Registered Forward

Transaction Confirmation

 



 

ANNEX A

 

 

Deutsche Bank

 

 

 

Deutsche Bank AG, London Branch

 

Winchester house

 

1 Great Winchester St,

 

London EC2N 2DB

 

Telephone: 44 20 7545 8000

 

 

 

c/o Deutsche Bank Securities Inc.

 

60 Wall Street

 

New York, NY 10005

 

Telephone: (212) 250-2500

 

PRICING SUPPLEMENT

 

DATE:

[               ]

 

 

TO:

Affiliated Managers Group, Inc.

 

600 Hale Street

 

Prides Crossing, MA 01965

ATTENTION:

Darrell Crate

FACSIMILE:

(617) 747-3380

 

 

FROM:

Deutsche Bank AG, London Branch

TELEPHONE:

44 20 7545 0556

FACSIMILE:

44 11 3336 2009

 

Ladies and Gentlemen:

 

This Pricing Supplement is the Pricing Supplement contemplated by the Registered Forward Transaction dated as of July 31, 2009 (the “Confirmation”) between Affiliated Managers Group, Inc. (“Counterparty”) and Deutsche Bank AG, London Branch (“Deutsche”).

 

DEUTSCHE BANK AG, LONDON BRANCH IS NOT REGISTERED AS A BROKER OR DEALER UNDER THE U.S. SECURITIES EXCHANGE ACT OF 1934.  DEUTSCHE BANK SECURITIES INC. (“DBSI”) HAS ACTED SOLELY AS AGENT IN CONNECTION WITH THE TRANSACTION AND HAS NO OBLIGATION, BY WAY OF ISSUANCE, ENDORSEMENT, GUARANTEE OR OTHERWISE WITH RESPECT TO THE PERFORMANCE OF EITHER PARTY UNDER THE TRANSACTION.  AS SUCH, ALL DELIVERY OF FUNDS, ASSETS, NOTICES, DEMANDS AND COMMUNICATIONS OF ANY KIND RELATING TO THIS TRANSACTION BETWEEN DEUTSCHE BANK AG, LONDON BRANCH, AND COUNTERPARTY SHALL BE TRANSMITTED EXCLUSIVELY THROUGH DEUTSCHE BANK SECURITIES INC.  DEUTSCHE BANK AG, LONDON BRANCH IS NOT A MEMBER OF THE SECURITIES INVESTOR PROTECTION CORPORATION (SIPC).

 

For all purposes under the Confirmation:

 

(a)                                  the Hedge Completion Date is [                    ];

 

Chairman of the Supervisory Board: Clemens Börsig

Board of Managing Directors: Hermann-Josef Lamberti, Josef Ackermann, Dr. Hugo Banziger, Anthony Dilorio

 

Deutsche Bank AG is regulated by the FSA for the conduct of designated investment business in the UK, is a member of the London Stock Exchange and is a limited liability company incorporated in the Federal Republic of Germany HRB No. 30 000 District Court of Frankfurt am Main; Branch Registration No. in England and Wales BR000005, Registered address: Winchester House, 1 Great Winchester Street, London EC2N 2DB.

 

A-1



 

(b)                                 the Number of Shares shall be [                    ], subject to further adjustment in accordance with the terms of the Confirmation;

 

(c)                                  the Initial Forward Price shall be USD [                    ]; and

 

(d)                                 the Final Date shall be [                    ].

 

Signature page to Pricing Supplement to

Registered Forward Transaction Confirmation

 

A-2



 

Please check this Pricing Supplement and confirm that the foregoing correctly sets forth the terms of our agreement by signing in the space provided below and returning to Deutsche a facsimile of the fully-executed Pricing Supplement.  Originals shall be provided for your execution upon your request.

 

Deutsche is regulated by the Financial Services Authority.

 

Very truly yours,

 

DEUTSCHE BANK AG, LONDON BRANCH

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

DEUTSCHE BANK SECURITIES INC.,

 

acting solely as agent in connection with this Transaction

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

Confirmed as of the date first above written:

 

 

 

AFFILIATED MANAGERS GROUP, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

Signature page to Pricing Supplement to

Registered Forward Transaction Confirmation

 

A-3




QuickLinks -- Click here to rapidly navigate through this document


Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302(a)
OF THE SARBANES-OXLEY ACT OF 2002

I, Sean M. Healey, certify that:

    1.
    I have reviewed this Quarterly Report on Form 10-Q of Affiliated Managers Group, Inc.;

    2.
    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

    3.
    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

    4.
    The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

    a)
    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

    b)
    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

    c)
    Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

    d)
    Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

    5.
    The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

    a)
    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

    b)
    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 6, 2009    
    /s/ SEAN M. HEALEY

Sean M. Healey
President and Chief Executive Officer



QuickLinks


QuickLinks -- Click here to rapidly navigate through this document


Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302(a)
OF THE SARBANES-OXLEY ACT OF 2002

I, Darrell W. Crate, certify that:

    1.
    I have reviewed this Quarterly Report on Form 10-Q of Affiliated Managers Group, Inc.;

    2.
    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

    3.
    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

    4.
    The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

    a)
    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

    b)
    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

    c)
    Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

    d)
    Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

    5.
    The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

    a)
    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

    b)
    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 6, 2009    
    /s/ DARRELL W. CRATE

Darrell W. Crate
Executive Vice President,
Chief Financial Officer and Treasurer



QuickLinks


QuickLinks -- Click here to rapidly navigate through this document


Exhibit 32.1

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Quarterly Report on Form 10-Q of Affiliated Managers Group, Inc. (the "Company") for the period ended June 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Sean M. Healey, President and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that to his knowledge:

    (1)
    the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

    (2)
    the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 6, 2009        
    By:   /s/ SEAN M. HEALEY

Sean M. Healey
President and Chief Executive Officer



QuickLinks


QuickLinks -- Click here to rapidly navigate through this document


Exhibit 32.2

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Quarterly Report on Form 10-Q of Affiliated Managers Group, Inc. (the "Company") for the period ended June 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Darrell W. Crate, Executive Vice President, Chief Financial Officer and Treasurer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that to his knowledge:

    (1)
    the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

    (2)
    the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 6, 2009        
    By:   /s/ DARRELL W. CRATE

Darrell W. Crate
Executive Vice President,
Chief Financial Officer and Treasurer



QuickLinks