What changed in this filing

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Item 1. Financial Statements

2022-05-06 compared with 2021-11-05 · 249 added, 309 removed, 487 unchanged (53% of the section changed)

3 unchanged sentences

(in millions, except per share data)

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2020 2021 2020 2021

For the Three Months Ended March 31,

Consolidated revenue $ 559.1 $ 607.3

7 unchanged sentences

Total consolidated expenses 378.5 395.1

Equity method income (loss) (net) 17.0 35.9 ( 78.8 ) 125.1

Equity method income (net) 51.7 48.6

Investment and other income 32.3 13.6

12 unchanged sentences

(in millions)

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2020 2021 2020 2021

For the Three Months Ended March 31,

Net income $ 214.1 $ 218.7

1 unchanged sentence

Foreign currency translation gain (loss) 23.8 ( 11.8 )

Change in net realized and unrealized gain (loss) on derivative financial instruments 0.2 ( 1.9 ) ( 2.1 ) ( 1.0 )

Change in net realized and unrealized gain on derivative financial instruments 0.5 0.0

Other comprehensive income (loss), net of tax 24.3 ( 11.8 )

6 unchanged sentences

(in millions)

2020 September 30,

2021 March 31,

Cash and cash equivalents $ 908.5 $ 501.0

17 unchanged sentences

Common stock ($ 0.01 par value, 153.0 shares authorized;

58.5 shares outstanding in 2020 and 2021)

58.5 shares issued in 2021 and 2022)

Additional paid-in capital 651.6 557.4

12 unchanged sentences

(in millions)

Three Months Ended September 30, 2020 Total Stockholders’ Equity

Three Months Ended March 31, 2021 Total Stockholders’ Equity

Stock Additional

4 unchanged sentences

Interests Total

June 30, 2020 $ 0.6 $ 768.2 $ ( 170.4 ) $ 3,819.3 $ ( 1,563.0 ) $ 487.2 $ 3,341.9

December 31, 2020 $ 0.6 $ 728.9 $ ( 98.3 ) $ 4,005.5 $ ( 1,857.0 ) $ 537.6 $ 3,317.3

Net income — — — 149.9 — 64.2 214.1

Other comprehensive income, net of tax — — 15.5 — — 9.4 24.9

Other comprehensive income (loss), net of tax — — 24.5 — — ( 0.2 ) 24.3

Share-based compensation — 9.7 — — — — 9.7

Common stock issued under share-based incentive plans — ( 44.3 ) — — 34.1 — ( 10.2 )

Repurchases of junior convertible securities — ( 2.9 ) — — — — ( 2.9 )

Share repurchases — 17.3 — — ( 227.3 ) — ( 210.0 )

8 unchanged sentences

Distributions to non-controlling interests — — — — — ( 102.6 ) ( 102.6 )

September 30, 2020 $ 0.6 $ 764.1 $ ( 154.9 ) $ 3,890.1 $ ( 1,651.0 ) $ 479.5 $ 3,328.4

Three Months Ended September 30, 2021 Total Stockholders’ Equity

March 31, 2021 $ 0.6 $ 619.7 $ ( 73.8 ) $ 4,154.9 $ ( 2,050.2 ) $ 536.1 $ 3,187.3

Three Months Ended March 31, 2022 Total Stockholders’ Equity

Stock Additional

4 unchanged sentences

Interests Total

June 30, 2021 $ 0.6 $ 539.3 $ ( 64.8 ) $ 4,263.4 $ ( 2,128.9 ) $ 548.3 $ 3,157.9

Net income — — — 128.4 — 80.0 208.4

Other comprehensive loss, net of tax — — ( 18.9 ) — — ( 2.7 ) ( 21.6 )

Share-based compensation — 21.2 — — — — 21.2

Common stock issued under share-based incentive plans — ( 7.8 ) — — 1.4 — ( 6.4 )

Repurchases of junior convertible securities — ( 1.3 ) — — — — ( 1.3 )

Share repurchases — — — — ( 100.0 ) — ( 100.0 )

Dividends ($ 0.01 per share)

— — — ( 0.3 ) — — ( 0.3 )

Affiliate equity activity:

Affiliate equity compensation — 2.5 — — — 8.9 11.4

Issuances — — — — — 0.5 0.5

Purchases — 1.2 — — — ( 2.4 ) ( 1.2 )

Changes in redemption value of Redeemable non-controlling interests — 0.9 — — — — 0.9

Transfers to Redeemable non-controlling interests — — — — — ( 0.1 ) ( 0.1 )

Capital contributions and other — — — — — ( 2.5 ) ( 2.5 )

Distributions to non-controlling interests — — — — — ( 67.4 ) ( 67.4 )

September 30, 2021 $ 0.6 $ 556.0 $ ( 83.7 ) $ 4,391.5 $ ( 2,227.5 ) $ 562.6 $ 3,199.5

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

AFFILIATED MANAGERS GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in millions)

Nine Months Ended September 30, 2020 Total Stockholders' Equity

Stock Additional

Capital Accumulated

Comprehensive Loss Retained

Earnings Treasury

Interests Total

December 31, 2021 $ 0.6 $ 651.6 $ ( 87.9 ) $ 4,569.5 $ ( 2,347.4 ) $ 924.2 $ 3,710.6

Impact of adoption of new accounting standards (see Note 2) — ( 80.6 ) — 4.5 — — ( 76.1 )

Net income — — — 146.0 — 72.7 218.7

10 unchanged sentences

Changes in redemption value of Redeemable non-controlling interests — 7.0 — — — — 7.0

Transfers to Redeemable non-controlling interests — — — — — ( 5.6 ) ( 5.6 )

Capital contributions and other — — — — — 23.8 23.8

Distributions to non-controlling interests — — — — — ( 122.5 ) ( 122.5 )

September 30, 2020 $ 0.6 $ 764.1 $ ( 154.9 ) $ 3,890.1 $ ( 1,651.0 ) $ 479.5 $ 3,328.4

Nine Months Ended September 30, 2021 Total Stockholders' Equity

Stock Additional

Capital Accumulated

Comprehensive

Income (Loss) Retained

Earnings Treasury

Interests Total

December 31, 2020 $ 0.6 $ 728.9 $ ( 98.3 ) $ 4,005.5 $ ( 1,857.0 ) $ 537.6 $ 3,317.3

Net income — — — 387.3 — 219.4 606.7

Other comprehensive income (loss), net of tax — — 14.6 — — ( 3.9 ) 10.7

Share-based compensation — 44.5 — — — — 44.5

Common stock issued under share-based incentive plans — ( 54.1 ) — — 36.8 — ( 17.3 )

Repurchases of junior convertible securities — ( 6.1 ) — — — — ( 6.1 )

Share repurchases — 17.3 — — ( 407.3 ) — ( 390.0 )

Dividends ($ 0.03 per share)

— — — ( 1.3 ) — — ( 1.3 )

Affiliate equity activity:

Affiliate equity compensation — 9.6 — — — 36.5 46.1

Issuances — ( 16.7 ) — — — 21.0 4.3

Purchases — 9.5 — — — 13.2 22.7

Changes in redemption value of Redeemable non-controlling interests — ( 176.9 ) — — — — ( 176.9 )

Transfers to Redeemable non-controlling interests — — — — — ( 3.9 ) ( 3.9 )

Capital contributions and other — — — — — 3.6 3.6

Distributions to non-controlling interests — — — — — ( 260.9 ) ( 260.9 )

September 30, 2021 $ 0.6 $ 556.0 $ ( 83.7 ) $ 4,391.5 $ ( 2,227.5 ) $ 562.6 $ 3,199.5

March 31, 2022 $ 0.6 $ 557.4 $ ( 93.2 ) $ 4,719.4 $ ( 2,515.4 ) $ 924.4 $ 3,593.2

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

2 unchanged sentences

(in millions)

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Cash flow from (used in) operating activities:

4 unchanged sentences

Deferred income tax expense 17.8 20.2

Equity method loss (income) (net) 78.8 ( 125.1 )

Equity method income (net) ( 51.7 ) ( 48.6 )

Distributions of earnings received from equity method investments 157.9 173.1

4 unchanged sentences

Sales of securities by consolidated Affiliate sponsored investment products 23.7 10.3

Decrease (increase) in receivables 9.0 ( 81.0 )

(Increase) decrease in other assets ( 8.5 ) 22.5

(Decrease) increase in payables, accrued liabilities, and other liabilities ( 136.7 ) 80.1

Increase in receivables ( 86.6 ) ( 52.2 )

Decrease (increase) in other assets 11.2 ( 1.8 )

Decrease in payables, accrued liabilities, and other liabilities ( 72.6 ) ( 196.5 )

Cash flow from operating activities 188.9 145.0

Cash flow from (used in) investing activities:

Investments in Affiliates ( 2.4 ) ( 144.9 )

Return of capital from equity method investments — 3.4

Investments in Affiliates, net of cash acquired ( 11.8 ) ( 147.8 )

Purchase of fixed assets ( 0.7 ) ( 3.7 )

3 unchanged sentences

Cash flow from (used in) financing activities:

Borrowings of senior bank debt, senior notes, and junior subordinated notes 874.8 200.0

Repayments of senior bank debt and junior convertible securities ( 15.0 ) ( 16.5 )

3 unchanged sentences

Affiliate equity (purchases) / issuances (net) ( 15.0 ) 6.3

Subscriptions to consolidated Affiliate sponsored investment products, net of redemptions 23.1 4.4

Other financing items ( 18.1 ) ( 58.9 )

1 unchanged sentence

Effect of foreign currency exchange rate changes on cash and cash equivalents 2.6 ( 6.2 )

Net increase in cash and cash equivalents 392.0 92.2

Net decrease in cash and cash equivalents ( 273.5 ) ( 407.5 )

Cash and cash equivalents at beginning of period 1,039.7 908.5

Effect of deconsolidation of Affiliates and Affiliate sponsored investment products ( 2.2 ) ( 3.9 )

Cash and cash equivalents at end of period $ 766.2 $ 501.0

16 unchanged sentences

Recently Adopted Accounting Standards

Effective January 1, 2021, the Company adopted Accounting Standard Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes.

The adoption of this standard did not have a significant impact on the Company’s Consolidated Financial Statements.

Recent Accounting Developments

In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-06, Debt with Conversion and Other Options and Derivatives and Hedging - Contracts in Entity’s Own Equity, which simplifies the accounting for convertible instruments and also modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted earnings per share calculation.

The standard is effective for interim and annual periods beginning after December 15, 2021 for the Company and its consolidated Affiliates, and is effective for interim and annual periods beginning after December 15, 2023 for the Company’s Affiliates accounted for under the equity method.

The Company’s adoption of ASU 2020-06 will result in the Company accounting for its convertible debt instrument as a single liability measured at amortized cost and will modify how certain equity instruments that may be settled in cash or shares, at the Company’s option, impact the calculation of Earnings per share (diluted).

The Company plans to adopt the standard using a modified retrospective method.

Assuming no further repurchases of its convertible debt instruments, the Company currently estimates the adoption of this standard will result in increases in Debt and beginning Retained Earnings of $ 102.4 million and $ 4.6 million, respectively, and decreases in Additional paid-in-capital and Deferred income tax liability (net) of $ 81.4 million and $ 25.6 million, respectively.

While the potential dilution to the calculation of Earnings per share (diluted) could be material and depends upon a number of factors, such as current share price, number of convertible shares, and conversion price, if the standard was adopted in the current period, Earnings per share (diluted) would not be significantly impacted.

Effective January 1, 2022, the Company adopted Accounting Standard Update (“ASU”) 2020-06, Debt with Conversion and Other Options and Derivatives and Hedging - Contracts in Entity’s Own Equity using a modified retrospective method.

ASU 2020-06 removes the separate liability and equity accounting for the Company’s junior convertible securities.

Consequently, the Company’s junior convertible securities are accounted for wholly as debt and are carried at their face value less unamortized debt issuance costs.

The adoption resulted in increases in Debt and beginning Retained earnings of $ 101.5 million and $ 4.5 million, respectively, and decreases in Additional paid-in-capital and Deferred income tax liability (net) of $ 80.6 million and $ 25.4 million, respectively.

As a result of the adoption of ASU 2020-06, the Company also updated its Earnings Per Share accounting policy as described below.

Earnings Per Share

The calculation of Earnings per share (basic) is based on the weighted average number of shares of the Company’s common stock outstanding during the period.

Earnings per share (diluted) is similar to Earnings per share (basic), but adjusts for the dilutive effect of the potential issuance of incremental shares of the Company’s common stock.

The Company had share-based compensation awards outstanding during the periods presented with vesting provisions subject to certain performance conditions.

These awards are excluded from the calculation of Earnings per share (diluted) if the performance condition has not been met as of the end of the reporting period.

The Company has agreements with Affiliate equity holders that provide the Company a conditional right to call and holders a conditional right to put their interests to the Company at certain intervals.

These arrangements are presented at their current redemption value as Redeemable non-controlling interests.

The Company may settle these interests in cash or, subject to the terms of the applicable agreement, shares of its common stock, or other forms of consideration, at its option.

Prior to 2022, the Company excluded any potential dilutive effect from possible share settlements of Redeemable non-controlling interests as the Company currently intends to settle in cash.

Upon adoption of ASU 2020-06, the Company must assume the settlement of all of its Redeemable non-controlling interests using the maximum number of shares permitted under its arrangements.

Purchases are assumed to occur at the beginning of the reporting period.

The Company acquires the rights to the underlying Affiliate equity when purchased, and therefore, the earnings that would be acquired (net of tax) are assumed to increase Net income (controlling interest) in the computation of Earnings per share (diluted).

The issuance of shares and the related income acquired are excluded from the calculation if an assumed purchase of Redeemable non-controlling interests would be anti-dilutive to diluted earnings per share.

The Company had junior convertible securities outstanding during the periods presented and is required to apply the if-converted method to these securities in its calculation of Earnings per share (diluted).

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

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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.

Investments in Marketable Securities

The following table summarizes the cost, gross unrealized gains, gross unrealized losses, and fair value of Investments in marketable securities:

2020 September 30,

2021 March 31,

Cost $ 73.2 $ 81.7

2 unchanged sentences

Fair value $ 78.5 $ 81.1

As of December 31, 2020 and September 30, 2021, Investments in marketable securities include consolidated Affiliate sponsored investment products with fair values of $ 52.3 million and $ 19.0 million, respectively.

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

As of December 31, 2021 and March 31, 2022, Investments in marketable securities include consolidated Affiliate sponsored investment products with fair values of $ 42.9 million and $ 41.5 million, respectively.

Other Investments

Other investments consist of investments in funds advised by the Company’s Affiliates that are carried at net asset value (“NAV”) as a practical expedient and investments without readily determinable fair values.

The income or loss related to these investments is recorded in Investment and other income on the Consolidated Statements of Income.

Other investments consist of investments in funds advised by the Company’s Affiliates that are carried at net asset value (“NAV”) as a practical expedient and other investments without readily determinable fair values.

Any gain or loss related to these investments is recorded in Investment and other income on the Consolidated Statements of Income.

Investments Measured at NAV as a Practical Expedient

The Company’s Affiliates sponsor investment products in which the Company and its consolidated Affiliates may make general partner and seed capital investments.

The Company uses the NAV of these investments as a practical expedient for their fair values.

The following table summarizes the fair value of these investments and any related unfunded commitments:

December 31, 2020 September 30, 2021

The Company’s Affiliates sponsor investment funds in which the Company and its consolidated Affiliates may make general partner and seed capital investments.

These funds operate in partnership form and apply the specialized fair value accounting for investment companies.

The Company accounts for its interests in these funds using the equity method of accounting and is required to retain the specialized accounting of the investment companies.

Because the funds’ investments do not have readily determinable fair values, the Company uses the NAV of these investments as a practical expedient for their fair values.

The following table summarizes the fair values of these investments and any related unfunded commitments:

December 31, 2021 March 31, 2022

Category of Investment Fair Value Unfunded

5 unchanged sentences

$ 324.8 $ 156.3 $ 343.7 $ 152.8

(1) The Company accounts for the majority of its interests in private equity funds under the equity method of accounting and uses NAV as a practical expedient, one quarter in arrears (adjusted for current period calls and distributions), to determine the fair value.

___________________________

(1) The Company accounts for the majority of its interests in private equity funds one quarter in arrears (adjusted for current period calls and distributions).

These funds primarily invest in a broad range of third-party funds and direct investments.

2 unchanged sentences

Investments are generally redeemable on a daily, monthly, or quarterly basis.

(3) Fair value attributable to the controlling interest was $ 164.4 million and $ 217.7 million as of December 31, 2020 and September 30, 2021, respectively.

(3) Fair value attributable to the controlling interest was $ 224.4 million and $ 238.3 million as of December 31, 2021 and March 31, 2022, respectively.

Investments Without Readily Determinable Fair Values

The following table summarizes the cost, cumulative upward adjustments, and carrying amount of investments without readily determinable fair values:

2020 September 30,

The Company made an investment in a private corporation where it does not exercise significant influence.

Because this investment does not have a readily determinable fair value, the Company has elected to measure this investment at its cost minus impairments, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

or similar investments in the private corporation.

The following table summarizes the cost, cumulative unrealized gains, and carrying amount of investments without readily determinable fair values:

2021 March 31,

Cost $ 8.5 $ 8.5

Cumulative upward adjustments 5.3 25.0

Cumulative unrealized gains 41.9 41.9

Carrying amount $ 50.4 $ 50.4

During the three and nine months ended September 30, 2021, the Company recorded an upward adjustment of $ 19.7 million based on an observable price change in the underlying investment.

During the three months ended March 31, 2022, the Company recorded no gains or losses on the underlying investment.

The following table presents the changes in Other investments:

For the Three Months Ended March 31,

Measured at NAV as a Practical Expedient Without Readily Determinable Fair Values Total Measured at NAV as a Practical Expedient Without Readily Determinable Fair Values Total

Balance, beginning of period $ 243.4 $ 13.8 $ 257.2 $ 324.8 $ 50.4 $ 375.2

Net realized and unrealized gains (1)

29.8 — 29.8 15.3 — 15.3

Purchases and commitments 18.1 — 18.1 15.1 — 15.1

Sales and distributions ( 12.4 ) — ( 12.4 ) ( 11.5 ) — ( 11.5 )

Balance, end of period $ 278.9 $ 13.8 $ 292.7 $ 343.7 $ 50.4 $ 394.1

__________________________

(1) Recognized in Investment and other income.

Fair Value Measurements

The following tables summarize the Company’s financial assets and liabilities that are measured at fair value on a recurring basis:

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Fair Value Measurements

4 unchanged sentences

Financial Liabilities (2)

Contingent payment obligations $ 40.3 $ — $ — $ 40.3

Affiliate equity purchase obligations 12.6 — — 12.6

Derivative financial instruments 0.8 — 0.8 —

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Fair Value Measurements

September 30,

Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

3 unchanged sentences

Financial Liabilities (2)

Contingent payment obligations $ 31.4 $ — $ — $ 31.4

Affiliate equity purchase obligations 47.6 — — 47.6

4 unchanged sentences

Level 3 Financial Liabilities

The following table presents the changes in level 3 liabilities for Affiliate equity purchase obligations:

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2020 2021 2020 2021

The following table presents the changes in level 3 liabilities:

For the Three Months Ended March 31,

Contingent Payment Obligations Affiliate

Equity Purchase

Obligations Contingent Payment Obligations Affiliate

Equity Purchase

Balance, beginning of period $ — $ 22.0 $ 40.3 $ 12.6

5 unchanged sentences

Balance, end of period $ — $ 66.1 $ 31.4 $ 47.6

Net change in unrealized (gains) losses relating to instruments still held at the reporting date $ — $ — $ — $ —

Net change in unrealized gains relating to instruments still held at the reporting date $ — $ — $ ( 8.9 ) $ ( 0.3 )

___________________________

(1) Accretion expense for these arrangements and obligations is recorded in Interest expense in the Consolidated Statements of Income.

(2) Includes transfers from Redeemable non-controlling interests.

(1) Gains and losses resulting from changes to expected payments are included in Other expenses (net) and the accretion of these obligations is included in Interest expense in the Consolidated Statements of Income.

(2) Affiliate equity purchase obligation activity includes transfers from Redeemable non-controlling interests.

The following table presents certain quantitative information about the significant unobservable inputs used in valuing the Company’s level 3 fair value measurements:

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Quantitative Information About Level 3 Fair Value Measurements

December 31, 2020 September 30, 2021

December 31, 2021 March 31, 2022

Techniques Unobservable

1 unchanged sentence

Fair Value Range Weighted Average (1)

Contingent payment obligations Monte Carlo Simulation Volatility $ 40.3 13 % - 25 %

13 % $ 31.4 18 % - 25 %

Discount rates 1 % - 2 %

2 % 3 % - 3 %

Affiliate equity purchase obligations Discounted cash flow Growth rates (2)

3 unchanged sentences

15 % 15 % - 18 %

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

___________________________

1 unchanged sentence

(2) Represents growth rates of asset- and performance-based fees.

Contingent payment obligations represent the present value of the expected future settlement amounts related to the Company’s investments in its consolidated Affiliates.

Affiliate equity purchase obligations include agreements to purchase Affiliate equity.

As of September 30, 2021, there were no changes to growth or discount rates that had a significant impact to Affiliate equity purchase obligations recorded in prior periods.

As of March 31, 2022, there were no changes to growth or discount rates that had a significant impact to Affiliate equity purchase obligations recorded in prior periods.

Other Financial Assets and Liabilities Not Carried at Fair Value

4 unchanged sentences

The following table summarizes the Company’s other financial liabilities not carried at fair value:

December 31, 2020 September 30, 2021

December 31, 2021 March 31, 2022

Carrying Value Fair Value Carrying Value Fair Value Fair Value Hierarchy

10 unchanged sentences

When the Company lacks such control, but is deemed to have significant influence, the Company accounts for the VRE under the equity method.

Other investments with readily determinable fair values in which the Company does not have rights to exercise significant influence are recorded at fair value on the Consolidated Balance Sheets, with changes in fair value included in Investment and other income.

Investments with readily determinable fair values in which the Company does not have rights to exercise significant influence are recorded at fair value on the Consolidated Balance Sheets, with changes in fair value included in Investment and other income.

The Company consolidates VIEs when it is the primary beneficiary of the entity, which is defined as having the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE.

Substantially all of the Company’s

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

consolidated Affiliates considered VIEs are controlled because the Company holds a majority of the voting interests or it is the managing member or general partner.

Substantially all of the Company’s consolidated Affiliates considered VIEs are controlled because the Company holds a majority of the voting interests or it is the managing member or general partner.

Furthermore, an Affiliate’s assets can be used for purposes other than the settlement of the respective Affiliate’s obligations.

1 unchanged sentence

Investments in Affiliates

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Substantially all of the Company’s Affiliates are considered VIEs and are either consolidated or accounted for under the equity method.

A limited number of the Company’s Affiliates are considered VREs and most of these are accounted for under the equity method.

When an Affiliate is consolidated, the portion of the earnings attributable to Affiliate management’s equity ownership is included in Net income (non-controlling interests) in the Consolidated Statements of Income.

Undistributed earnings attributable to Affiliate managements’ equity ownership, along with their share of any tangible or intangible net assets, are presented within Non-controlling interests on the Consolidated Balance Sheets.

Affiliate equity interests where the holder has certain rights to demand settlement are presented, at their current redemption values, as Redeemable non-controlling interests on the Consolidated Balance Sheets.

When an Affiliate is consolidated, the portion of the earnings attributable to Affiliate management’s and any co-investor’s equity ownership is included in Net income (non-controlling interests) in the Consolidated Statements of Income.

Undistributed earnings attributable to Affiliate management’s and any co-investor’s equity ownership, along with their share of any tangible or intangible net assets, are presented within Non-controlling interests on the Consolidated Balance Sheets.

The Company periodically issues, sells, and purchases the equity of its consolidated Affiliates.

Because these transactions take place between entities that are under common control, any gains or losses attributable to these transactions are required to be included in Additional paid-in capital in the Consolidated Balance Sheets, net of any related income tax effects in the period the transaction occurs.

When an Affiliate is accounted for under the equity method, the Company’s share of an Affiliate’s earnings or losses, net of amortization and impairments, is included in Equity method income (loss) (net) in the Consolidated Statements of Income and the carrying value of the Affiliate is reported in Equity method investments in Affiliates (net) in the Consolidated Balance Sheets.

When an Affiliate is accounted for under the equity method, the Company’s share of an Affiliate’s earnings or losses, net of amortization and impairments, is included in Equity method income (net) in the Consolidated Statements of Income and the carrying value of the Affiliate is reported in Equity method investments in Affiliates (net) in the Consolidated Balance Sheets.

Deferred taxes recorded on intangible assets upon acquisition of an Affiliate accounted for under the equity method are presented on a gross basis within Equity method investments in Affiliates (net) and Deferred income tax liability (net) in the Consolidated Balance Sheets.

2 unchanged sentences

Where the Company believes that such declines may have occurred, the Company determines the amount of impairment using valuation methods, such as discounted cash flow analyses.

Impairments are recorded as an expense in Equity method income (loss) (net) to reduce the carrying value of the Affiliate to its fair value.

Impairments are recorded as an expense in Equity method income (net) to reduce the carrying value of the Affiliate to its fair value.

The unconsolidated assets, net of liabilities and non-controlling interests of Affiliates accounted for under the equity method considered VIEs, and the Company’s carrying value and maximum exposure to loss, were as follows:

December 31, 2020 September 30, 2021

December 31, 2021 March 31, 2022

Unconsolidated

5 unchanged sentences

Affiliates accounted for under the equity method $ 1,864.7 $ 2,023.0 $ 1,742.0 $ 2,089.9

As of December 31, 2020 and September 30, 2021, the carrying value and maximum exposure to loss for all of the Company’s Affiliates accounted for under the equity method was $ 2,074.8 million and $ 2,085.2 million, respectively, including Affiliates accounted for under the equity method considered VREs of $ 112.7 million and $ 108.5 million, respectively.

As of December 31, 2021 and March 31, 2022, the carrying value and maximum exposure to loss for all of the Company’s Affiliates accounted for under the equity method was $ 2,134.4 million and $ 2,195.2 million, respectively, including Affiliates accounted for under the equity method considered VREs of $ 111.4 million and $ 105.3 million, respectively.

Affiliate Sponsored Investment Products

3 unchanged sentences

Third-party investors in Affiliate sponsored investment products are generally entitled to substantially all of the economics of these products, except for the asset- and performance-based fees earned by the Company’s Affiliates or any gains or losses attributable to the Company’s or its Affiliates’ investments in these products.

As a result, the Company generally does not consolidate these products unless the Company’s or its consolidated Affiliate’s interest in the product is considered substantial.

When the Company’s or its consolidated Affiliates’ interests are considered substantial and the products are consolidated, the

As a result, the Company generally does not consolidate these products.

However, for certain products, the Company’s consolidated Affiliates, as the investment manager, have the power to direct the activities of the investment product and have an exposure to the economics of the VIE that is more than insignificant, though generally only for a short period while the product is established and has yet to attract significant other investors.

When the products are consolidated, the Company retains the specialized investment company accounting principles of the underlying products, and all of the underlying investments are carried at fair value in Investments in marketable securities in the Consolidated Balance Sheets, with corresponding changes in the investments’ fair values included in Investment and other income.

Purchases and sales of securities are presented within purchases and sales by consolidated

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Company retains the specialized investment company accounting principles of the underlying products, and all of the underlying investments are carried at fair value in Investments in marketable securities in the Consolidated Balance Sheets, with corresponding changes in the investments’ fair values included in Investment and other income.

Purchases and sales of securities are presented within purchases and sales by consolidated Affiliate sponsored investment products in the Consolidated Statements of Cash Flows, respectively, and the third-party investors’ interests are recorded in Redeemable non-controlling interests.

Affiliate sponsored investment products in the Consolidated Statements of Cash Flows, respectively, and the third-party investors’ interests are recorded in Redeemable non-controlling interests.

When the Company or its consolidated Affiliates no longer control these products, due to a reduction in ownership or other reasons, the products are deconsolidated with only the Company’s or its consolidated Affiliate’s investment in the product reported from the date of deconsolidation.

1 unchanged sentence

The net assets of unconsolidated VIEs attributable to Affiliate sponsored investment products, and the Company’s carrying value and maximum exposure to loss, were as follows:

December 31, 2020 September 30, 2021

December 31, 2021 March 31, 2022

Unconsolidated

6 unchanged sentences

The following table summarizes the Company’s Debt:

2020 September 30,

2021 March 31,

Senior bank debt $ 349.9 $ 349.9

5 unchanged sentences

Unamortized discounts and debt issuance costs are presented within the Consolidated Balance Sheets as an adjustment to the carrying value of the associated debt.

Effective January 1, 2022, the Company adjusted the carrying value of its junior convertible securities (see Note 2).

Senior Bank Debt

The Company has a $ 1.25 billion senior unsecured multicurrency revolving credit facility (the “revolver”) and a $ 350.0 million senior unsecured term loan facility (the “term loan” and, together with the revolver, the “credit facilities”).

The Company amended and restated the revolver in October 2021, extending the maturity from January 18, 2024 to October 23, 2026, and amended the term loan in January 2021 and June 2021, and further amended and restated the term loan in October 2021, extending the maturity from January 18, 2023 to October 23, 2026.

Through these amendments, the Company also reduced applicable rates for the revolver and the term loan, and provided for customary LIBOR succession provisions.

The commercial terms of the revolver and the term loan otherwise remain the same.

Both the revolver and the term loan mature on October 23, 2026.

Subject to certain conditions, the Company may increase the commitments under the revolver by up to an additional $ 500.0 million and may borrow up to an additional $ 75.0 million under the term loan.

The Company pays interest on any outstanding obligations under the credit facilities at specified rates, currently based either on an applicable LIBOR or prime rate, plus a marginal rate determined based on its credit rating.

As of September 30, 2021, the interest rate for the Company’s borrowings under the term loan was LIBOR plus 0.85 %.

As of December 31, 2020 and September 30, 2021, the Company had no outstanding borrowings under the revolver.

As of September 30, 2021, the Company had senior notes outstanding.

The Company pays interest on any outstanding obligations under the credit facilities at specified rates, currently based either on an applicable LIBOR rate (subject to customary LIBOR succession provisions) or prime rate, plus a marginal rate determined based on its credit rating.

As of March 31, 2022, the interest rate for the Company’s borrowings under the term loan was LIBOR plus 0.85 %.

As of December 31, 2021 and March 31, 2022, the Company had no outstanding borrowings under the revolver.

As of March 31, 2022, the Company had senior notes outstanding.

The carrying value of the senior notes is accreted to the principal amount at maturity over the remaining life of the underlying instrument.

The principal terms of the senior notes outstanding as of September 30, 2021 were as follows:

The principal terms of the senior notes outstanding as of March 31, 2022 were as follows:

AFFILIATED MANAGERS GROUP, INC.

13 unchanged sentences

Junior Subordinated Notes

As of September 30, 2021, the Company had junior subordinated notes outstanding.

As of March 31, 2022, the Company had junior subordinated notes outstanding.

The carrying value of the junior subordinated notes is accreted to the principal amount at maturity over the remaining life of the underlying instrument.

The principal terms of the junior subordinated notes outstanding as of September 30, 2021 were as follows:

The principal terms of the junior subordinated notes outstanding as of March 31, 2022 were as follows:

Junior Subordinated Notes 2060

15 unchanged sentences

Junior Convertible Securities

As of September 30, 2021, the Company had 5.15 % junior convertible trust preferred securities outstanding (the “junior convertible securities”) with a carrying value of $ 301.4 million.

The carrying value is accreted to the principal amount at

Effective January 1, 2022, the Company adopted ASU 2020-06.

As of March 31, 2022, the Company had $ 386.3 million of principal outstanding in its 5.15 % junior convertible trust preferred securities (the “junior convertible securities”), maturing in 2037.

The junior convertible securities bear interest at a rate of 5.15 % per annum, payable quarterly in cash.

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

maturity ($ 404.7 million) over a remaining life of approximately 16 years.

As of December 31, 2021 and March 31, 2022, the unamortized issuance costs related to the junior convertible securities were $ 3.9 million and $ 3.7 million, respectively.

The follow table presents interest expense recognized in connection with the junior convertible securities:

For the Three Months Ended March 31,

Contractual interest expense $ 5.4 $ 5.0

Amortization of debt issuance costs 0.1 0.1

Amortization of debt discount 0.8 —

Total $ 6.3 $ 5.1

Effective interest rate 6.01 % 5.24 %

Holders of the junior convertible securities have no rights to put these securities to the Company.

The holder may convert the securities to 0.2558 shares of common stock per $ 50.00 junior convertible security, equivalent to an adjusted conversion price of $ 195.47 per share.

The conversion rate is subject to adjustments as described in the Amended and Restated Declaration of Trust of AMG Capital Trust II and the related indenture, both dated October 17, 2007 and filed as exhibits to the Company’s most recent Annual Report on Form 10-K.

Upon conversion, holders will receive cash or shares of the Company’s common stock, or a combination thereof, at the Company’s election.

The Company may redeem the junior convertible securities, subject to its stock trading at or above certain specified levels over specified times periods, and may also repurchase junior convertible securities in the open market or in privately negotiated transactions from time to time at management’s discretion.

During the nine months ended September 30, 2021, the Company paid $ 28.7 million to repurchase a portion of its junior convertible securities, resulting in reductions of $ 26.1 million and $ 6.1 million in Debt and Additional paid-in capital, respectively.

As a result of these repurchases, the Company also reduced its Deferred income tax liability (net) by $ 6.2 million.

Derivative Financial Instruments

The Company and its Affiliates may use derivative financial instruments to offset exposure to changes in interest rates, foreign currency exchange rates, and markets.

In the first quarter of 2020, the Company terminated its pound sterling-denominated forward foreign currency contracts and its corresponding collar contracts, which were designated as net investment hedges, and upon settlement, the Company received net proceeds of $ 24.9 million.

The net proceeds from the termination of the contracts are presented within sale of investment securities in the Consolidated Statements of Cash Flows.

The Company has an interest rate swap contract (the “interest rate swap”) with a large financial institution (the “swap counterparty”), which will expire in March 2023.

The interest rate swap, which is designated as a cash flow hedge, is used to exchange a portion of the Company’s LIBOR-based interest payments for fixed-rate interest payments.

Under the contract, the Company receives payments based on one month LIBOR and makes payments based on an annual fixed-rate of 0.5135 % on a notional amount of $ 250.0 million.

The terms of the contract also require the Company and the swap counterparty to post cash collateral in certain circumstances throughout the duration of the contract.

As of September 30, 2021, the Company held no cash collateral from the swap counterparty, and the swap counterparty held $ 1.1 million of cash collateral from the Company.

Certain of the Company’s Affiliates use forward foreign currency contracts to hedge the risk of foreign exchange rate movements, which are designated as cash flow hedges.

The Company assesses hedge effectiveness on a quarterly basis.

For derivative financial instruments designated as cash flow hedges, the Company uses a qualitative method of assessing hedge effectiveness by comparing the notional amounts, timing of payments, currencies (for the forward foreign currency contracts), and interest rates (for the interest rate swap).

Upon termination of these instruments or the repayment of the Company’s outstanding LIBOR-based borrowings, any gain or loss recorded in Accumulated other comprehensive loss in the Consolidated Balance Sheets will be reclassified into earnings.

Changes in the fair values of cash flow hedges are reported in Change in net realized and unrealized gain (loss) on derivative financial instruments in the Consolidated Statements of Comprehensive Income.

Changes in the fair values of the effective net investment hedges are reported in Foreign currency translation gain (loss) in the Consolidated Statements of Comprehensive Income.

Upon the sale or liquidation of the underlying investment, any gain or loss remaining in Accumulated other comprehensive loss will be reclassified to earnings.

The following table summarizes the Company’s and its Affiliates’ derivative financial instruments measured at fair value on a recurring basis:

December 31, 2020 September 30, 2021

Assets Liabilities Assets Liabilities

Forward foreign currency contracts $ 3.5 $ ( 2.3 ) $ 1.0 $ ( 1.4 )

Interest rate swap — ( 1.9 ) — ( 1.1 )

Total $ 3.5 $ ( 4.2 ) $ 1.0 $ ( 2.5 )

The Company and certain of its consolidated Affiliates have entered into contracts that do not include set-off rights and are therefore presented on a gross basis in Other assets and Other liabilities;

they were $ 3.5 million and $ 4.2 million, respectively, as of December 31, 2020, and $ 1.0 million and $ 2.5 million, respectively, as of September 30, 2021.

The following table summarizes the effects of derivative financial instruments on the Consolidated Statements of Comprehensive Income and the Consolidated Statements of Income:

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For the Three Months Ended September 30,

Gain (Loss) Recognized in Other Comprehensive Income Gain Reclassified from Accumulated Other Comprehensive Loss into Earnings Gain (Loss) Recognized in Earnings from Excluded Components (1)

Forward foreign currency contracts $ 0.4 $ 0.1 $ — $ ( 2.0 ) $ 0.4 $ —

Interest rate swap ( 0.1 ) — — 0.1 — —

Total $ 0.3 $ 0.1 $ — $ ( 1.9 ) $ 0.4 $ —

For the Nine Months Ended September 30,

Gain (Loss) Recognized in Other Comprehensive Loss Gain Reclassified from Accumulated Other Comprehensive Loss into Earnings Gain Recognized in Earnings from Excluded Components (1)

Gain (Loss) Recognized in Other Comprehensive Income Gain Reclassified from Accumulated Other Comprehensive Loss into Earnings Gain (Loss) Recognized in Earnings from Excluded Components (1)

Forward foreign currency contracts $ 64.9 $ 0.4 $ 2.8 $ ( 1.6 ) $ 1.4 $ —

Put options ( 47.7 ) — — — — —

Call options ( 1.3 ) — — — — —

Interest rate swap ( 2.1 ) — — 0.7 — —

Total $ 13.8 $ 0.4 $ 2.8 $ ( 0.9 ) $ 1.4 $ —

___________________________

(1) The excluded components of the forward foreign currency contracts were recognized in earnings on a straight-line basis over the respective period of the contracts as a reduction to Interest expense.

The Company may redeem the junior convertible securities if the closing price of its common stock for 20 trading days in a period of 30 consecutive trading days exceeds 130 % of the then prevailing conversion price, and may also repurchase junior convertible securities in the open market or in privately negotiated transactions from time to time at management’s discretion.

During the three months ended March 31, 2021 and 2022, the Company paid $ 15.0 million and $ 16.5 million, respectively, to repurchase a portion of its junior convertible securities, and as a result of these repurchases, the Company reduced its Deferred income tax liability (net) by $ 3.3 million and $ 2.7 million, respectively.

Commitments and Contingencies

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The Company has committed to co-invest in certain Affiliate sponsored investment products.

As of September 30, 2021, these unfunded commitments were $ 114.1 million and may be called in future periods.

As of September 30, 2021, the Company was contingently liable to make payments of $ 188.0 million related to the achievement of specified financial targets by certain of its Affiliates accounted for under the equity method, of which $ 40.5 million may become payable in 2022 and $ 147.5 million may become payable from 2023 through 2029.

As of September 30, 2021, the Company expected to make payments of approximately $ 15 million.

In the event certain financial targets are not met at one of the Company’s Affiliates, the Company may receive payments of up to $ 12.5 million and also has the option to reduce its ownership interest and receive an incremental payment of $ 25.0 million.

Affiliate equity interests provide holders at consolidated Affiliates with a conditional right to put their interests to the Company over time.

In connection with one of the Company’s investments in an Affiliate accounted for under the equity method, a minority owner has the right to elect to sell a portion of its ownership interest in the Affiliate to the Company annually.

If the minority owner sells its interest to the Company, the Company will continue to account for the Affiliate under the equity method.

In the fourth quarter of 2020, the Company was notified by the minority owner that it may elect to sell a 5 % interest in the Affiliate to the Company.

In the first quarter of 2021, with the consent of the Company, the

As of March 31, 2022, these unfunded commitments were $ 152.8 million and may be called in future periods.

In connection with certain of its consolidated Affiliates, as of March 31, 2022, the Company was obligated to make deferred payments and was contingently liable to make payments as follows:

Earliest Payable

Controlling Interest Co-Investor Total 2022 2023 2024 2025

Deferred payment obligations $ 215.2 $ 49.8 $ 265.0 $ 200.0 $ 21.7 $ 43.3 $ —

Contingent payment obligations (1)

23.9 7.5 31.4 — — 30.0 1.4

__________________________

(1) Fair value as of March 31, 2022.

The Company is contingently liable to make maximum contingent payments of up to $ 110.0 million ($ 24.9 million attributable to the co-investor), of which $ 100.0 million and $ 10.0 million may become payable in 2024 and 2025, respectively.

The Company had liabilities for deferred and contingent payment obligations related to certain of its investments in Affiliates accounted for under the equity method.

As of March 31, 2022, the Company was obligated to make payments of up to $ 83.3 million, all of which is payable in 2022.

Liabilities for deferred and contingent payments are included in Other liabilities.

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

minority owner rescinded this notice.

As of September 30, 2021, the minority owner maintained a 14 % ownership interest in the Affiliate.

As of March 31, 2022, the Company was contingently liable to make payments of $ 147.5 million related to the achievement of specified financial targets by certain of its Affiliates accounted for under the equity method, all of which may become payable from 2023 through 2029.

As of March 31, 2022, the Company expected to make payments of approximately $ 13 million.

In the event certain financial targets are not met at one of the Company’s Affiliates accounted for under the equity method, the Company may receive payments of up to $ 12.5 million and also has the option to reduce its ownership interest and receive an incremental payment of $ 25.0 million.

Affiliate equity interests provide holders at consolidated Affiliates with a conditional right to put their interests to the Company over time.

The Company and certain of its consolidated Affiliates operate under regulatory authorities that require the maintenance of minimum financial or capital requirements.

The Company’s management is not aware of any significant violations of such requirements.

On July 2, 2021, the Company entered into a definitive agreement to acquire a majority equity interest in Parnassus Investments, an ESG-dedicated fund manager.

On October 1, 2021, the Company completed its investment for upfront cash consideration of $ 300.4 million, deferred consideration of $ 150.2 million which is payable in the fourth quarter of 2022, and a contingent payment obligation related to the achievement of specified financial targets of up to $ 75.1 million which may become payable from 2024 through 2026.

This transaction was financed with available cash.

On September 27, 2021, the Company entered into a definitive agreement to acquire a majority equity interest in Abacus Capital Group LLC (“Abacus”), a real estate investment manager focused on the U.S.

multifamily sector.

Following the close of the transaction, Abacus partners will continue to hold a substantial portion of the equity of the business and direct its day-to-day operations.

The transaction, which is expected to close during the fourth quarter of 2021, is subject to customary closing conditions and regulatory approvals.

Goodwill and Acquired Client Relationships

2 unchanged sentences

Foreign currency translation ( 5.5 )

Balance, as of September 30, 2021 $ 2,658.5

As of September 30, 2021, the Company completed its annual impairment assessment on goodwill and no impairment was indicated.

Balance, as of March 31, 2022 $ 2,683.7

Acquired Client Relationships (Net)

7 unchanged sentences

Foreign currency translation ( 2.8 ) 2.3 ( 0.5 ) ( 10.0 ) ( 10.5 )

Balance, as of September 30, 2021 $ 1,166.4 $ ( 1,052.0 ) $ 114.4 $ 903.8 $ 1,018.2

Balance, as of March 31, 2022 $ 1,361.4 $ ( 1,038.1 ) $ 323.3 $ 1,620.0 $ 1,943.3

Definite-lived acquired client relationships at the Company’s consolidated Affiliates are amortized over their expected period of economic benefit.

The Company recorded amortization expense within Intangible amortization and impairments in the Consolidated Statements of Income for these relationships of $ 7.0 million and $ 48.2 million for the three and nine months ended September 30, 2020, respectively, and $ 8.9 million and $ 25.3 million for the three and nine months ended September 30, 2021, respectively.

Based on relationships existing as of September 30, 2021, the Company estimates that its consolidated amortization expense will be approximately $ 9 million for the remainder of 2021, approximately $ 30 million in each of 2022 and 2023, approximately $ 15 million in 2024, and approximately $ 10 million in each of 2025 and 2026.

In the second quarter of 2020, the Company agreed with a consolidated Affiliate to strategically reposition their business and to sell its equity interest in the Affiliate.

The Company recorded an expense in Intangible amortization and impairments of $ 32.8 million attributable to the controlling interest ($ 60.3 million in aggregate) to reduce the carrying value of the Affiliate’s acquired client relationships to zero as of June 30, 2020.

In the third quarter of 2020, the Company sold its interest in the Affiliate.

In the third quarter of 2020, the Company completed an impairment assessment of the indefinite-lived acquired client relationships at one of its Affiliates, and determined that the fair value of the asset had declined below its carrying value.

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Accordingly, the Company recorded an expense in Intangible amortization and impairments of $ 12.5 million attributable to the controlling interest ($ 14.0 million in aggregate) to reduce the carrying value of the asset to fair value.

The decline in the fair value was a result of a projected decline in assets under management that decreased the forecasted revenue associated with the asset.

The fair value of the asset was determined using a discounted cash flow analysis, a level 3 fair value measurement that included a projected growth rate of ( 14 )% for assets under management, a discount rate of 15 % for asset-based fees, and a market participant tax rate of 25 %.

In addition, in the third quarter of 2020, the Company recorded an expense in Intangible amortization and impairments of $ 7.4 million attributable to the controlling interest ($ 10.9 million in aggregate) to reduce the carrying value of an indefinite-lived acquired client relationship to zero due to the closure of one of its Affiliate’s retail investment products.

As of September 30, 2021, no impairments of indefinite-lived acquired client relationships were indicated.

If financial markets become depressed for a prolonged period as a result of the novel coronavirus global pandemic (“COVID-19”) or other factors, the fair values of these assets could drop below their carrying values resulting in future impairments.

The Company recorded amortization expense within Intangible amortization and impairments in the Consolidated Statements of Income for these relationships of $ 7.5 million and $ 12.6 million for the three months ended March 31, 2021 and 2022, respectively.

Based on relationships existing as of March 31, 2022, the Company estimates that its consolidated amortization expense will be approximately $ 40 million for the remainder of 2022, approximately $ 50 million in 2023, and approximately $ 35 million in each of 2024, 2025, 2026, and 2027.

In the first quarter of 2022, the Company completed its purchase price allocations for Parnassus Investments and Abacus Capital Group LLC, and no material changes were made to the provisional allocations.

As of March 31, 2022, no impairments of indefinite-lived acquired client relationships were indicated.

Equity Method Investments in Affiliates

In the first and second quarters of 2021, the Company completed minority investments in Boston Common Asset Management LLC (“Boston Common”) and OCP Asia Limited (“OCP Asia”), respectively.

The majority of the consideration paid for both Boston Common and OCP Asia is deductible for U.S.

On January 14, 2022, the Company completed an additional investment in Systematica Investments (“Systematica”), an innovative technology-driven systematic manager.

The Company expects the majority of the consideration paid for Systematica to be deductible for U.S.

tax purposes over a 15-year life.

The Company’s purchase price allocation for each investment was measured using financial models that included assumptions of expected market performance, net client cash flows, and discount rates.

The Company’s purchase price allocation for the investment was measured using a discounted cash flow analysis that included assumptions of expected market performance, net client cash flows, and discount rates.

The financial results of certain Affiliates accounted for under the equity method are recognized in the Consolidated Financial Statements one quarter in arrears.

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Equity method investments in Affiliates (net) consisted of the following:

2021 March 31,

Goodwill $ 1,264.4 $ 1,360.3

Definite-lived acquired client relationships (net) 470.1 536.1

Indefinite-lived acquired client relationships (net) 174.4 174.5

Undistributed earnings and tangible capital 225.5 124.3

Equity method investments in Affiliates (net) $ 2,134.4 $ 2,195.2

The following table presents the change in Equity method investments in Affiliates (net):

5 unchanged sentences

Distributions of earnings ( 173.1 )

Return of capital ( 3.4 )

Foreign currency translation 6.3

Balance, as of September 30, 2021 $ 2,085.2

Other ( 3.8 )

Balance, as of March 31, 2022 $ 2,195.2

Definite-lived acquired client relationships at the Company’s Affiliates accounted for under the equity method are amortized over their expected period of economic benefit.

The Company recognized amortization expense for these relationships of $ 34.3 million and $ 110.5 million for the three and nine months ended September 30, 2020, respectively, and $ 29.3 million and $ 93.8 million for the three and nine months ended September 30, 2021, respectively.

Based on relationships existing as of September 30, 2021, the Company estimates the amortization expense attributable to its Affiliates will be approximately $ 30 million for the remainder of 2021, approximately $ 80 million in each of 2022 and 2023, and approximately $ 50 million in each of 2024, 2025, and 2026.

In the first quarter of 2020, the Company recorded a $ 140.0 million expense to reduce the carrying value of an Affiliate to fair value.

The decline in the fair value was a result of a decline in assets under management and a reduction in projected growth, which decreased the forecasted revenue associated with the investment.

The fair value of the investment was determined using a probability-weighted discounted cash flow analysis, a level 3 fair value measurement, that included projected compounded growth in assets under management over the first five years of ( 2 )%, discount rates of 11 % and 20 % for asset- and performance-based fees, respectively, and a market participant tax rate of 25 %.

Based on the discounted cash flow analysis, the Company concluded that the fair value of its investment had declined below its carrying value and that the decline was other-than-temporary.

The Company recognized amortization expense for these relationships of $ 35.2 million and $ 23.3 million for the three months ended March 31, 2021 and 2022, respectively.

Based on relationships existing as of March 31, 2022, the Company estimates the amortization expense attributable to its Affiliates will be approximately $ 70 million for the remainder of 2022, approximately $ 85 million in 2023, approximately $ 50 million in each of 2024 and 2025, approximately $ 45 million in 2026, and approximately $ 40 million in 2027.

As of March 31, 2022, the estimated fair values of the Company’s Affiliates accounted for under the equity method exceeded their carrying values.

The Company had liabilities for deferred and contingent payment obligations related to certain of its investments in Affiliates accounted for under the equity method.

The Company had 19 and 21 Affiliates accounted for under the equity method as of March 31, 2021 and 2022, respectively.

The majority of these Affiliates are partnerships with structured interests that define how the Company will participate in Affiliate earnings, typically based upon a fixed percentage of revenue reduced by, in some cases, certain agreed-upon expenses.

The partnership agreements do not define a fixed percentage for the Company’s ownership of the equity of the Affiliate.

These percentages would be subject to a separate future negotiation if an Affiliate were to be sold or liquidated.

On March 16, 2022, the Company and other parties entered into a Securities Purchase and Merger Agreement with EQT AB (“EQT”), a public company listed on Nasdaq Stockholm (EQT.ST), under which the Company and each of the other owners agreed to sell their respective equity interests in Baring Private Equity Asia (“BPEA”), an Affiliate accounted for by the Company under the equity method, to EQT, in connection with the announced strategic combination of BPEA and EQT.

Pursuant to the terms of the agreement, the Company will receive $ 240.0 million in cash and 28.68 million EQT ordinary shares ( 25 % of which are subject to a six -month lock-up), and will retain a portion of future carry in certain existing funds.

The Company acquired its interest in BPEA for $ 187.5 million in 2016 and, as of March 31, 2022, its carrying value was $ 138.0 million.

BPEA will continue to be included in the Company’s results until closing of the transaction, which is expected to occur in the fourth quarter of 2022, subject to customary closing conditions.

The Company’s gain on the transaction will be taxable at closing.

Related Party Transactions

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

As of September 30, 2021, the estimated fair values of the Company’s Affiliates accounted for under the equity method exceeded their carrying values.

If financial markets become depressed for a prolonged period as a result of COVID-19 or other factors, or the financial performance of an Affiliate worsens as a result of net client cash outflows or performance, regardless of the performance of financial markets, the fair values of these assets could drop below their carrying values for periods considered other-than-temporary, resulting in future impairments.

As of September 30, 2021, the Company was obligated to make deferred and contingent payments of $ 103.9 million related to certain of its Affiliates accounted for under the equity method, of which $ 63.9 million is payable in 2021, although this amount may be funded in future periods, and $ 40.0 million is payable in 2022.

Related Party Transactions

A prior owner of one of the Company’s consolidated Affiliates retains interests in certain of the Affiliate’s private equity partnerships and, as a result, is a related party of the Company.

The prior owner’s interests are presented within Other liabilities and were $ 35.4 million and $ 31.7 million as of December 31, 2020 and September 30, 2021, respectively.

The prior owner’s interests are presented within Other liabilities and were $ 28.5 million and $ 26.7 million as of December 31, 2021 and March 31, 2022, respectively.

The Company may invest from time to time in funds or products advised by its Affiliates.

The Company’s executive officers and directors may invest from time to time in funds advised or products offered by its Affiliates on substantially the same terms as other investors.

The Company’s executive officers and directors may invest from time to time in funds advised or products offered by its Affiliates, or receive other investment services provided by its Affiliates, on substantially the same terms as other investors.

In addition, the Company and its Affiliates earn asset- and performance-based fees and incur distribution and other expenses for services provided to Affiliate sponsored investment products.

Affiliate management owners and the Company’s officers may serve as trustees or directors of certain investment vehicles from which the Company or an Affiliate earns fees.

The Company has related party transactions in association with its deferred and contingent payment arrangements, and Affiliate equity transactions, as more fully described in Notes 9, 11, 14, and 15.

The Company has related party transactions in association with its deferred and contingent payment obligations, and Affiliate equity transactions, as more fully described in Notes 8, 10, 13, and 14.

Share-Based Compensation

The following table presents share-based compensation expense:

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2020 2021 2020 2021

For the Three Months Ended March 31,

Share-based compensation $ 9.7 $ 14.7

1 unchanged sentence

As of December 31, 2021, the Company had unrecognized share-based compensation expense of $ 70.9 million.

As of September 30, 2021, the Company had unrecognized share-based compensation expense of $ 82.5 million, which will be recognized over a weighted average period of approximately three years (assuming no forfeitures).

As of March 31, 2022, the Company had unrecognized share-based compensation expense of $ 105.3 million, which will be recognized over a weighted average period of approximately three years (assuming no forfeitures).

Restricted Stock

6 unchanged sentences

Performance condition changes 0.0 139.30

Unvested units - September 30, 2021 1.1 94.22

For the nine months ended September 30, 2020 and 2021, the Company granted restricted stock units with fair values of $ 31.6 million and $ 27.8 million, respectively.

Unvested units - March 31, 2022 1.2 102.84

For the three months ended March 31, 2021 and 2022, the Company granted restricted stock units with fair values of $ 26.7 million and $ 45.3 million, respectively.

These restricted stock units were valued based on the closing price of the Company’s common stock on the grant date and the number of shares expected to vest.

Restricted stock units containing vesting conditions generally require service over a period of three years to four years and may also require the satisfaction of

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

certain performance conditions.

Restricted stock units containing vesting conditions generally require service over a period of three years to four years and may also require the satisfaction of certain performance conditions.

For awards with performance conditions, the number of restricted stock units expected to vest may change over time depending upon the performance level achieved.

1 unchanged sentence

The following table summarizes transactions in the Company’s stock options:

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Stock Options Weighted Average

6 unchanged sentences

Performance condition changes 0.0 139.31

Unexercised options outstanding - September 30, 2021 3.3 78.21 4.8

Exercisable at September 30, 2021 0.2 131.74 1.6

For the nine months ended September 30, 2020 and 2021, the Company granted stock options with fair values of $ 4.4 million and $ 2.0 million, respectively.

Unexercised options outstanding - March 31, 2022 3.2 77.82 4.4

Exercisable at March 31, 2022 0.1 132.30 1.6

For the three months ended March 31, 2021 and 2022, the Company granted stock options with fair values of $ 0.8 million and $ 1.8 million, respectively.

Stock options generally vest over a period of three years to five years and expire seven years after the grant date.

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For awards with performance conditions, the number of stock options expected to vest may change over time depending upon the performance level achieved.

The weighted average fair value of options granted was $ 18.23 and $ 54.19 , per option, for the nine months ended September 30, 2020 and 2021, respectively.

The weighted average fair value of options granted was $ 50.04 and $ 47.84 , per option, for the three months ended March 31, 2021 and 2022, respectively.

The Company uses the Black-Scholes option pricing model to determine the fair value of options.

The weighted average grant date assumptions used to estimate the fair value of stock options granted were as follows:

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Dividend yield 0.0 % 0.0 %

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Changes in the current redemption value are recorded to Additional paid-in capital.

When the Company receives a put notice and, therefore, has an unconditional obligation to purchase Affiliate equity interests, the interests are reclassified from Redeemable non-controlling interests to Other liabilities.

When the Company has an unconditional obligation to purchase Affiliate equity interests, the interests are reclassified from Redeemable non-controlling interest to Other liabilities at current fair value.

Changes in fair value are recorded to Other expenses (net).

The following table presents the changes in Redeemable non-controlling interests:

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Balance, as of December 31, 2021 (1)

Decrease attributable to consolidated Affiliate sponsored investment products ( 17.1 )

Increase attributable to consolidated Affiliate sponsored investment products 0.4

Transfers to Other liabilities ( 28.5 )

Transfers from Non-controlling interests 3.9

Changes in redemption value ( 7.0 )

Balance, as of September 30, 2021 (1)

Balance, as of March 31, 2022 (1)

___________________________

(1) As of December 31, 2020 and September 30, 2021, Redeemable non-controlling interests include consolidated Affiliate sponsored investment products primarily attributable to third-party investors of $ 35.4 million and $ 18.3 million, respectively.

(1) As of December 31, 2021 and March 31, 2022, Redeemable non-controlling interests include consolidated Affiliate sponsored investment products primarily attributable to third-party investors of $ 25.0 million and $ 25.4 million, respectively.

Affiliate Equity

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The Company’s Affiliates generally pay quarterly distributions to Affiliate equity holders.

Distributions paid to non-controlling interest Affiliate equity holders were $ 249.1 million and $ 260.9 million, for the nine months ended September 30, 2020 and 2021, respectively.

The Company periodically purchases Affiliate equity from and issues Affiliate equity to the Company’s consolidated Affiliate partners and its officers under agreements that provide the Company a conditional right to call and Affiliate equity holders the conditional right to put their Affiliate equity interests to the Company at certain intervals.

Distributions paid to non-controlling interest Affiliate equity holders were $ 102.6 million and $ 122.5 million, for the three months ended March 31, 2021 and 2022, respectively.

The Company periodically purchases Affiliate equity from and issues Affiliate equity to the Company’s consolidated Affiliate partners and other parties under agreements that provide the Company a conditional right to call and Affiliate equity holders the conditional right to put their Affiliate equity interests to the Company at certain intervals.

The Company has the right to settle a portion of these purchases in shares of its common stock.

For Affiliates accounted for under the equity method, the Company does not typically have such put and call arrangements.

For the nine months ended September 30, 2020 and 2021, the amount of cash paid for purchases was $ 249.6 million and $ 65.9 million, respectively.

For the nine months ended September 30, 2020 and 2021, the total amount of cash received for issuances was $ 17.1 million and $ 18.1 million, respectively.

For the three months ended March 31, 2021 and 2022, the amount of cash paid for purchases was $ 27.4 million and $ 5.3 million, respectively.

For the three months ended March 31, 2021 and 2022, the total amount of cash received for issuances was $ 12.4 million and $ 11.6 million, respectively.

Sales and purchases of Affiliate equity generally occur at fair value;

however, the Company also grants Affiliate equity to its consolidated Affiliate partners and its officers as a form of compensation.

however, the Company also grants Affiliate equity to its consolidated Affiliate partners and other parties as a form of compensation.

If the equity is issued for consideration below the fair value of the equity, or purchased for consideration above the fair value of the equity, the difference is recorded as compensation expense in Compensation and related expenses in the Consolidated Statements of Income over the requisite service period.

The following table presents Affiliate equity compensation expense:

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2020 2021 2020 2021

For the Three Months Ended March 31,

Controlling interest $ 4.4 $ 1.7

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December 31, 2021 $ 41.9 6 years $ 294.1 7 years

September 30, 2021 47.6 5 years 108.1 4 years

March 31, 2022 41.8 5 years 313.2 7 years

The Company records amounts receivable from, and payable to, Affiliate equity holders in connection with the transfer of Affiliate equity interests that have not settled at the end of the period.

The total receivable was $ 9.6 million and $ 15.5 million as of December 31, 2020 and September 30, 2021, respectively, and was included in Other assets.

The total payable was $ 22.0 million and $ 47.7 million as of December 31, 2020 and September 30, 2021, respectively, and was included in Other liabilities.

The total receivable was $ 9.0 million and $ 7.7 million as of December 31, 2021 and March 31, 2022, respectively, and was included in Other assets.

The total payable was $ 12.6 million and $ 47.6 million as of December 31, 2021 and March 31, 2022, respectively, and was included in Other liabilities.

Effects of Changes in the Company’s Ownership in Affiliates

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Effects of Changes in the Company’s Ownership in Affiliates

The Company periodically acquires interests from, and transfers interests to, Affiliate equity holders.

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While the Company presents the current redemption value of Affiliate equity within Redeemable non-controlling interests, with changes in the current redemption value increasing or decreasing the controlling interest’s equity over time, the following table presents the cumulative effect that ownership changes had on the controlling interest’s equity related only to Affiliate equity transactions that settled during the applicable periods:

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2020 2021 2020 2021

For the Three Months Ended March 31,

Net income (controlling interest) $ 149.9 $ 146.0

Increase (decrease) in controlling interest paid-in capital from Affiliate equity issuances 2.9 — 1.6 ( 17.5 )

(Decrease) Increase in controlling interest paid-in capital from Affiliate equity issuances ( 0.5 ) 3.4

Decrease in controlling interest paid-in capital from Affiliate equity purchases ( 47.8 ) ( 25.9 )

Net income (loss) (controlling interest) including the net impact of Affiliate equity transactions $ 8.8 $ 127.2 $ ( 138.1 ) $ 312.6

Net income (controlling interest) including the net impact of Affiliate equity transactions $ 101.6 $ 123.5

The Company’s consolidated income tax provision includes taxes attributable to the controlling interest and, to a lesser extent, taxes attributable to the non-controlling interests.

The following table presents the consolidated provision for income taxes:

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2020 2021 2020 2021

For the Three Months Ended March 31,

Controlling interest:

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(1) Taxes attributable to the controlling interest divided by income before income taxes (controlling interest).

The Company’s effective tax rate (controlling interest) for the three months ended September 30, 2020 was higher than the marginal tax rate, primarily due to an $ 8.1 million deferred tax expense resulting from the revaluation of certain of the Company’s deferred tax liabilities due to an increase in the UK tax rate.

The Company’s effective tax rate (controlling interest) for the nine months ended September 30, 2020 was higher than the marginal tax rate, primarily due to an $ 8.1 million deferred tax expense resulting from the revaluation of certain of the Company’s deferred tax liabilities due to an increase in the UK tax rate, as well as a $ 3.6 million tax expense related to share-

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

based compensation, offset by a $ 5.5 million benefit related to uncertain tax positions in the period.

The Company’s effective tax rate (controlling interest) for the nine months ended September 30, 2021 was higher than the marginal tax rate, primarily due to a $ 19.2 million deferred tax expense resulting from the revaluation of certain deferred tax liabilities due to an increase in the UK tax rate enacted during the second quarter of 2021 .

The Company’s effective tax rate (controlling interest) for the three months ended March 31, 2021 was not significantly different than its marginal tax rate of 24.5%.

The Company’s effective tax rate (controlling interest) for the three months ended March 31, 2022 was higher than the marginal tax rate of 24.5%, primarily due to increases in non-deductible compensation expense and unrecognized tax benefits, partially offset by tax benefits from foreign operations.

Earnings Per Share

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Earnings per share (diluted) is similar to Earnings per share (basic), but adjusts for the dilutive effect of the potential issuance of incremental shares of the Company’s common stock.

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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:

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2020 2021 2020 2021

For the Three Months Ended March 31,

Net income (controlling interest) $ 149.9 $ 146.0

Income from hypothetical settlement of Redeemable non-controlling interests, net of taxes — 11.7

Interest expense on junior convertible securities, net of taxes 4.7 3.8

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Stock options and restricted stock units 0.6 1.2

Hypothetical issuance of shares to settle Redeemable non-controlling interests — 4.0

Junior convertible securities 2.2 2.0

Average shares outstanding (diluted) 45.4 46.9

Average shares outstanding (diluted) in the table above excludes stock options and restricted stock units that have not met certain performance conditions and items that have an anti-dilutive effect on Earnings per share (diluted).

Average shares outstanding (diluted) in the table above excludes stock options and restricted stock units that have not met certain performance conditions and instruments that have an anti-dilutive effect on Earnings per share (diluted).

The following is a summary of items excluded from the denominator in the table above:

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2020 2021 2020 2021

For the Three Months Ended March 31,

Stock options and restricted stock units 0.4 0.5

Junior convertible securities 2.2 — 2.2 —

The Company may settle portions of its Affiliate equity purchases in shares of its common stock.

Because it is the Company’s intention to settle these potential purchases in cash, the calculation of Average shares outstanding (diluted) excludes any potential dilutive effect from possible share settlements of Affiliate equity purchases.

For the three and nine months ended September 30, 2021, under its authorized share repurchase programs, the Company repurchased 0.6 million and 2.8 million shares of its common stock, respectively, at an average price per share of $ 161.02 and $ 141.58 , respectively.

Shares issuable to settle Redeemable non-controlling interests — 3.1

For the three months ended March 31, 2022, under its authorized share repurchase programs, the Company repurchased 1.3 million shares of its common stock, at an average price per share of $ 144.42 .

Comprehensive Income

The following table presents the tax effects allocated to each component of Other comprehensive income (loss):

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For the Three Months Ended September 30,

Pre-Tax Tax Expense Net of Tax Pre-Tax Tax Expense Net of Tax

Foreign currency translation gain (loss) $ 25.2 $ ( 0.5 ) $ 24.7 $ ( 19.0 ) $ ( 0.7 ) $ ( 19.7 )

Change in net realized and unrealized gain (loss) on derivative financial instruments 0.2 — 0.2 ( 1.9 ) 0.0 ( 1.9 )

Other comprehensive income (loss) $ 25.4 $ ( 0.5 ) $ 24.9 $ ( 20.9 ) $ ( 0.7 ) $ ( 21.6 )

For the Nine Months Ended September 30,

Pre-Tax Tax (Expense) Benefit Net of Tax Pre-Tax Tax Expense Net of Tax

For the Three Months Ended March 31,

Pre-Tax Tax Expense Net of Tax Pre-Tax Tax (Expense)

Benefit Net of Tax

Foreign currency translation gain (loss) $ 29.6 $ ( 5.8 ) $ 23.8 $ ( 11.3 ) $ ( 0.5 ) $ ( 11.8 )

2 unchanged sentences

The components of accumulated other comprehensive loss, net of taxes, were as follows:

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Adjustment Realized and

2 unchanged sentences

Balance, as of December 31, 2021 $ ( 155.1 ) $ 0.1 $ ( 155.0 )

Other comprehensive income before reclassifications 11.7 0.4 12.1

Other comprehensive loss before reclassifications ( 11.8 ) ( 0.4 ) ( 12.2 )

Amounts reclassified — 0.4 0.4

Net other comprehensive income (loss) ( 11.8 ) 0.0 ( 11.8 )

Balance, as of September 30, 2021 $ ( 150.2 ) $ ( 1.3 ) $ ( 151.5 )

Balance, as of March 31, 2022 $ ( 166.9 ) $ 0.1 $ ( 166.8 )

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements