Affiliated Managers Group Inc (AMG) 2002 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Affiliated Managers Group fourth quarter conference call. Fit, all participants are in a listen only mode following today's presentation instructions will be given for the question and answer session. If anyone needs assistance at any time during the conference, please press the star followed by the zero. As a reminder this conference is being recorded today Wednesday January 29, 2003. I would now like to turn the call over to Mr. John McNamara.

Good morning. Thank you again for joining Affiliated Managers Group to discuss results for the fourth quarter and full year 2002. By now, you should have received the earnings (ph) release. If anyone needs a copy call my office at 212-445-8435 and we'll fax you a copy immediately following the call. With us on the line from AMG are William Nutt (ph) Chairman and CEO, Sean Healey (ph) President and Chief Operating Officer. Darrell Crate (ph). And Nate Dalton. (ph)

Certain discussions will contain forward-looking statements. Actual results and timing of -- could differ from that contemplated due to a number of factors, including changes in securities or financial markets or in general economic conditions, competition for acquisitions in investment management firms an the investment and financial performance of the companies existing affiliates and other risks detailed under the caption cautionary statements in the companies a form 10K. In discussion with the AMG's quarterly results an business prospects. Certain of AMG's affiliates will be used. The bench marks compared against are deemed by AMG to be the appropriate bench marks. Investment management service are provided by the affiliates of AMG and not AMG itself. The information provided is not an or solicitation for any investment product or service. I'll now turn the call over to Bill Nutt.

Thank you, John. Good morning, everyone. Welcome to AMG's conference call discussing our operating and financial results for the fourth quarter and the full year. I'm Bill Nutt, AMG's Chairman and CEO. With me today are Sean Healey our President and Chief Operating Officer and Darrell Crate our chief financial officer and Nate Dalton Executive Vice President in charge of affiliate development. I would like to begin today's call with an overview of our operating results and financial highlights for both the quarter and the full year. Sean will then provide additional details about our operating results.

Finally, Darrell will take us through the financials. As always, we look forward to your questions at the end of the call. And have asked Nate to join us to respond to any questions you may have regarding our affiliate development area where we've executed several new initiatives this year. Let me begin by summarizing AMG's results for the quarter and the year just ended. As you saw in the release, we reported cash earnings of $1.13 for the quarter and $4.41 for the year. Our affiliates benefited from the slight rebound in the equity markets in the fourth quarter and overall our earnings continued to be stable throughout this very difficult year for the equity markets. Stepping back for a moment, as you know, 2002 marks the third consecutive year of significant declines in the equity markets. Making this period one of the most difficult bear markets in history.

These market conditions have been challenging for almost all investment managers, including many of our affiliates. While none of us knows when the market environment will change, we do know that it will change. And when it does, given the strength of our business model and the performance of our affiliates during these difficult quarter, AMG will be well positioned for continued growth. As we have said in the past, the consistent consistency of our results reflects the diversity among our affiliates in terms of investment style, client type and distribution channel. But more broadly, we believe the stability of our earnings also evidences the strength and success of AMG's business strategy. Our affiliates are among the very best mid size specialty investment firms with proven investment disciplines and long-term performance records.

With retained direct equity ownership in their firm, our affiliate manage verse a powerful incentive to continue to produce strong financial and investment performance results. Our affiliate development team made significant progress this year in working with affiliates on an individual and collective basis to enhance the growth and profitability of their businesses. For example, this year, we launched several new initiatives including our first multi affiliate separate account product called multiple attribute portfolios or maps and a new distribution panel, the portfolio (ph) services group for affiliate products in the broker/dealer channel.

We are also very pleased with our continued progress in the new investment area in 2002, the highlight of which was, of course, the addition of third avenue management to our group of affiliates. Third avenue management, the highly regarded adviser to the third avenue value family of no load mutual funds strengthens our presence in the mutual fund distribution channel and also enables us to gain exposure to real estate and distressed debt investments.

Third avenue has an excellent long-term track we are pleased to welcome the firm to our group of affiliates. Looking forward, although the uncertainty in the equity market environment has resulted in a broad decline in transaction activity throughout the industry as you would expect, we were have been actively working to cultivate relationships with many of the best mid sized asset management firms and over the long-term remain optimistic about our ability to achieve continued growth through making new investments. With that, I'll turn to Sean to discuss our operating results in greater detail.

Thank you, Bill. Good morning, everyone. As bill mentioned, notwithstanding the challenges of a difficult equity market environment our affiliates produced solid results in the quarter and the full year with strong relative performance and positive client cash flows among our affiliates with higher fee rates contributing to the consistency of our earnings throughout 2002. But it was a difficult quarter in terms of client cash flows, we're please that overall flows were positive for the year. Despite negative flows of 260 million and managed accounts for the fourth quarter which resulted in a decline of 1.2 million in annualized EBITDA. For the year, our nut clients generated cash flows of 383 million results in an addition of 1.9 million to our annualized EBITDA. We remain confident about our prospects for growth going forward given the strong relative performance of many of our affiliates. As one indication, many of our affiliates generated material fees for the year. As you would expect past year market generally favored our --most notably (inaudible) brown the largest product the five star global value fund ranks in the top quart I'll within its morningstar category for the past one, three and five years. In I (inaudible), several of our growth or -- managers also -- well compared to their peers and bench Marx. For example, Freiss associates produced top results in brandywine and brandywine blue funds in 2002. Indeed the brandywine blue fund ranks in the top two percent for the year. Frontier also had a good year with its largest products. Small cap growth producing top quart I'll results.

Looking at results more broadly within each of our three main distribution channels. The broker sold area remained challenging this quarter but the ultra high net worth counseling (ph) clients (ph) at affiliates such as Welsh and Forbes continue to be highly stable. With respect to the mutual fund channel, we are well positioned with over 80 percent of our EBITDA generated by mutual funds rated four or five stars by morning star, client cash flows in the mutual fund channel were positive for the fourth quarter and the full year and are positive -- in the first period of this year. Generally speaking, once again, value oriented funds such as though advised by (inaudible), third avenue and sky line had the highest flows. In the institutional channel, declines in aggressive growth products were offset by new client mandates at firms such as front fear, -- manage, first quad grant, a (inaudible) manager and systemic a value manager. Turning to our affiliate development initiatives we worked throughout the year on affiliates on both the individual and collective basis to promote growth through scale economies and new (inaudible) bus opportunities. Among our major accomplishments in 2002 was the launch of maps a broker sold separate account product which now includes over nine portfolios offered by two independent distributors and which uses six investment products from six different affiliates. In addition, we recently announced the formation of portfolio services group or PSD to distribute broker sold separate account products including maps for AMG affiliate whose do not currently participate in this channel. With that I'll turn it over to Darrell for discussion of our financials.

Thanks, John. Good morning, everyone. As you saw in the release, we reported cash EPS. $1.13 for the fourth quarter. 3 cents above first call consensus estimate with performance fees contributing just over two pen this. As I've indicated in the past performance fees are not included in analyst estimates. We reported GAAP earnings per share for the quarter of 60 cents. EBITDA was 33.3 million for the quarter and quarter to quarter our margin of EBITDA distribution decreased from 22.2 basis points (ph) in the third quarter to 22.1 basis points in the fourth quarter of 2002 as we recognized some performance fee when -- were offset by our ownership of third avenue for the quarter. Going forward we believe a basis points 21 will be appropriate. Holding company expenses were 5.8 million for the quarter, a slight increase over the third quarter. We expect run rate holding company expenses to be just under $5 million per quarter in 2003 which is a decrease from last year attributable to an anticipated decrease in compensation expense. With regard to taxes, our tax rate in the fourth quarter was 40 percent and we expect this rate to be appropriate for the beginning of 2003. Looking ahead, we expect our tax rate to increase slightly to 41 percent in the second half of 2003 as a result of an increase in revenues from affiliates subject to New York tax. And this includes third avenue. Our cash tax rate for the quarter was 11.9 percent and our permanent deferred taxes were 6.2 million in the fourth quarter reflecting a full quarter's ownership of third avenue. We expect them to remain at this level until we make additional investments. Amortization for the quarter was $4 million. Again, reflecting the full quarter's ownership of third avenue. Depreciation was 1.5 million for the quarter and modestly increased by 100,000 through the next year. Interest expense decreased by 300,000 from the fourth quarter to the third reflecting lower debt ball LANs.

Looking ahead, we anticipate reporting 5.3 million of interest expense in the first quarter. This expense will be generated by the coupon on the mandatory convertible and some anticipated outstandings under our revolver as we make scheduled payments in the first quarter. Stockholders equity was 571.9 million. Turning to our capital structure as we mentioned last quarter, we closed a new revolving senior credit fast led by a strong group of banks. As of the fourth quarter, we had no borrowings outstanding and 250 million dollars of capacity under that facility. During the quarter, we used cash flow from operations for opportunistic repurchases of our stock, our total share repurchases in the quarter amounted to 46,800 shares or just over $2 million. As of today, we have over 1 million shares remaining authorized for repurchase under the existing repurchase program. Turning to guidance on future earnings, when we look at analysts' estimates we see an unusually large range from highest to lowest dependent upon where the market was at the time the estimate was established. Rather than provide a single point estimate, we would say the following. Assuming the equity markets were to appreciate 8 percent for the full year, we would expect cash earnings per share to be within the range of $4.65 to $4.75. As you had would anticipate in addition to market growth assumptions this guidance also includes related expectations about our affiliate growth rates a mix in affiliate contribution and substantial changes in the equity markets and all these things would, of course, impact these expectation. I would be happy to answer any questions.

Ladies and gentlemen, at this time we will begin the question and answer session. If you would like to ask a question please press the star followed by a one on your push button phone. If you would like to key line from the polling process please press the star followed by a two. You'll hear a three tone prompt. Questions will be polled in the order they received. If you are using a handset you would need to replace the handset before pushing numbers. First call comes from Mark Constant (ph) from Lehman Brothers.

Good morning, guys. I just and wad to make sure I heard a couple of thing, Darrell you mentioned in your -- one was a share repurchase 2 million.

Yeah, $2 million. That's just about 47,000 shares.

Okay. And the performance fees you said were about two cents. Was the -- affiliate share of owners allocation and minority interest expense were those roughly proportional to the rest of the organization on those fees or did they skew those ratios?

They were -- the ratios were about in line.

So does it -- if I gross net back up to a million dollars or so performance fee is that about right?

I would say revenues just under $3 million.

Okay. I'll have to follow up with you on doing that.

Yeah, of course the ratio of EBITDA to ending period under management is going to be higher and those sorts of ratios because there's a little bit more revenue relative to the asset base.

Okay. We can straighten that out after.

I would be happy to follow up.

And your holding company expense expect -- a little less than $5 million a quarter with lower (inaudible), can you speak to what your plans are for the use of equity in the next year and what you've done this year in terms of option or restricted stock cash?

I think, you know, specifically if you're referring to what's going on at the FAS V and how they're thinking about -- with the, we particularly have no plans to get out in front of the industry or the FAS V with regard to plans on how we're going to be looking at options from an accounting perspective.

Option last year, mark, were in the range of actually lower than the prior year and our expectation is that we'll continue to use options going forward, but obviously as Darrell said, we are certainly watching as I'm sure all companies are what the developments are in FAS V.

But option, the value of options grant in the year are less than they were in '01? Is that accurate?

The stock is such an undervalued point, we would say the options are very valuable.

Just from a black (inaudible) standpoint on the granted value basis?

Yes, they were less than the prior year. In a fairly consistent pattern that you've seen. But lower than the prior year.

Okay. And that assumption of less than 5 million doesn't assume any change it that policy?

That does not include options.

Right. Right. Okay. But it is not predicated on increasing the options I guess is what I'm asking?

No.

Nate, if you could also talk a little bit about perhaps some of the new distribution initiatives, not just as you talked about the releases and some of your investor presentation what you're striving (ph) to do, but also sort of the cost versus reward if you will the ROI in those initiatives and what AMG is funding of that versus the benefit you're receiving?

Sure. The way we have been pursuing these initiatives if you look at whether it's PSG or others, is in each case to build off of an existing platform at an affiliate. So rather than having all the startup expenses building something out. We're really in each case leveraging the existing infrastructure that we have in affiliates. So for example, with portfolio (inaudible) group, we're using one of our affiliates, the bump group, that already had the client service infrastructure, relationships with sponsors, all of those are already in place. So the incremental cost from AMG's standpoint is very, very small. That is the way in which we're going to be pursuing these kind of cross affiliates initiatives.

Yes. Thank you.

Mark, thanks.

Thank you. Our next question comes from Mark Wayne (ph) with William Blair and Company. Go ahead.

Good morning.

Just a couple questions to start. What was holding company cash at the end of the year?

Holding company cash at the end of the year was probably about a million dollars.

And do you have a pro forma number for the fourth quarter of 2001 for the adoption of FAS 142 or what would the contribution have been?

I don't have for the year, but for the quarter the FAS D adjustment is just about five cents.

Five cents. Five cents pickup in the fourth quarter?

Yeah, five cent pickup. If you were to take the 2001 number quarter and add about four-and-a-half cents to it, you would get to the adjusted number for FAS 142 EPS.

What about flows in the map product. Can you provide any details on -- actually that's a tough market sales environment, that market right now, but can you talk specifically about how that product is gaining any traction?

Thanks.

The maps product which we launched at the beginning of the year would first sponsor and then the second sponsor sort of mid way through the year, traction has been building and good. There's been an education process in terms of the client, but both sponsor level and sort of broker level that we've had to go through, but traction is good and we've raised you know I would say just under call it a hundred million or so throughout the year in that product. So which is again, given the facts that we have only been on one sponsor for most of the year good (inaudible). We've obviously been spending a lot of our time with the product going out to other sponsors as well and doing the due diligence process (inaudible) hopefully we'll be seeing additional sponsors coming on line shortly.

And so you suggested, Bill, that acquisition activity there's a lot of discussions but you refer to doing deals over a long period of time. You've got the cash capacity in the revolver of 250 million dollars. Let's say that you have after tax cash flow of 100 million dollars in 2003 and 15 to 20 percent of that is used to repurchase some of the equity that's coming back. Could you anticipate then being more aggressive on the share repurchase for the balance of the year? What's your thoughts there?

Well, as I said, given the current market environment, we expect reduced level of new investment activity over the near term, meaning perhaps the next two quarters or more. That said, we spend a good deal of time continuing developing, strengthening, we use the word cultivate relationships with the best of the mid size firms. And we're going to find those and maybe some other opportunities for example divestitures or those who made acquisitions in the asset management business during the later '90s that may have found for strategic reasons this isn't where they wish to have their capital invested that those will come out. I don't think the decision vis-a-vis when we see those. Of course we're only one half of the decision. We're on the buy side. The firms need to reach the conclusion that they're going to sell at a -- so we can never ensure were that will occur, but that decision whether to make those kinds of new investments doesn't really impact the repurchase decision. The repurchase decision is largely a separate one. As I think Darrell has said many times, many dollar of cash flow that comes in is used first to pay down debt, then to look at new investments and three, when it is opportunistic and were the price clearly justifies it we'll make repurchases.

But you've got no bank debt outstanding right now so there's nothing to pay down in the near term holding company cash is minimal so you may need to build that back up a little bit. But then you have, you know, $75 million of excess cash for the balance of the year and it seems like you have tremendous capacity within the revolver if in fact something comes up within the next couple of quarters. Is that pair?

This is Darrell. I think you're looking at the balance sheet just right. What the end of year balance sheet doesn't show is there's a couple of payments that need to be made in the first quarter, taxes and these types of things. So we will have a little bit of debt we can amortize with the cash flow coming in but you're right, we'll be conscious about maintaining modest (inaudible) but also make the colors that come in the company are used the best way to generating (inaudible) and (ph) cash EPS and that could certainly mean stock repurchases.

Good enough.

That's why I also wanted to be clear with you folks that we've got about a million that's authorized. So it's something we're constantly conscious about.

Thank you sir (ph). Our next question comes from Michael Freudenstein (ph) from J.P. Morgan.

Just wanted to does first off all your relative performance this quarter T looks like in terms (ph) of where you actually ended up you out performed the market. I wonder if you could competent on that. And I didn't hear your commentary about where the out glows came from. If you could comment on that as well.

Sean Healey It's Sean. I guess to answer that broadly, it can be misleading to look at just the overall asset level and back out or adjust for flows and say okay, this is what you did. If you look by affiliate,(inaudible) our largest affiliate as we said had an excellent quarter continuing to be very highly rated, we talked about Freiss and how well they did. Other affiliates, they're relative performance, we think, is quite strong in aggregate especially among the larger affiliates. But if you're in an (inaudible) growth manager and that style is out of favor, the relative performance is, of course, important, but the results are and flows are really going to have to wait until the style becomes more in favor. So I would say broadly among the larger affiliates we feel very good about how they're positioned, you know, one data point that we mentioned is performance fees. Another by at least among managers who have mutual fund products 80 percent are -- or 80 percent by EBITDA contribution are four and five star funds et cetera. So broadly speaking, it wasn't our best quarter by any means, but I think we feel very good about how folks are positioned on our a performance basis looking forward. With respect to flows, the mutual fund flows were good throughout the year in the other categories we effectively break even. For example as I mentioned in the institutional area, we did have outflows over the course of the year and especially affiliates managing aggressive growth products, but we were pleased by inflows with for institutional clients at other affiliates with different styles. And in the high net worth area we also were roughly break even, probably negative on an overall flow basis but in terms of the earnings contribution roughly break even. And looking forward, I mention this, but Nate, you may have the specific figures, but we're very pleased with the numbers we're seeing, at least the data that's readily available in the mutual fund area. You know, strongly oppose, I would say, year-to-date.

So not to over simply if I it then, but is it pair to characterize the 260 million in net redemptions as being largely institutional growth money?

Yeah, but the other areas that I mentioned that it certainly came out of the broker sold area where just, you know, the dynamics in that particular market place are not favoring equity products mainly, I would say.

Okay. I wanted to follow up on, not to get too nitpicky on the number, but selling general and administrative expenses were up a little bit more than we were expecting. Maybe you could comment on that, Darrell?

Yeah, you know, as I tried to say before, the expenses in many respects are a plug that fall out of our operating allocation, you know, as a component of revenue. So again, we don't manage to either a compensation benefits number nor an SG&A number at the individual affiliates. In many respects, the affiliates allocate their expense as appropriate given their practical (ph) location (ph) and then they report them up to us.

So is that more reflection then of a full quarter of third avenue perhaps.

Yeah, I mean in many respects. And I didn't want to be in sort of the endless beating drum on my prepared remarks with regard to numbers changing, but in most respects as the ratios have changed down, you know, starting at revenues through owner's allocation and our EBITDA contribution and ultimately cash earnings, the most significant influence was the third quarter of third avenue.

So circling back to the earlier question about the owners as allocation and performance (inaudible) aside you're also see the full impact of that so if we adjust for performance fees would that give us the run rate we should assume going forward.

Yes, yes, yes.

Okay. Great. And I guess that's about it for me, thanks a lot.

Great, thank you.

Thanks, Mike.

Thank you, sir. Our next question comes from Henry McVey (ph) from Morgan Stanley. Please go ahead.

Can you hear me?

Yes, good morning, Henry.

... questions. One I was thinking about the stated growth rate for the company is 20 percent. The first call consensus is 19. 475 to is five to eight (ph) percent. Can you walk us through how we should think about that. Second, I wanted to get a better breakdown of EBITDA. I know said 80 percent came from four to five stars but if you could update us to the percentage allocation so we could have a better feel as we monitor it going through '03?

Why don't I take the first half of the question which goes to growth rates and then Sean can talk a little bit about product. Again, you know, not too, you know, focus on specific estimates or what's out there for first call, but I would say when we look at our guidance, we're looking at a market that's growing 8 percent through the year. And I think we look at that possibly being a little bit more back ended than at the beginning of the year. We also would anticipate, we feel good about the blows that are added to that and again the leverage would add again to earnings. You can see right now that we don't have a whole lot of leverage. And also as I look at the -- at bring the earnings together. We have, as we look at growing cash earnings, again, that fixed amount of the deferred taxes that come from acquisitions that's in that number. So growing cash earnings at 20 percent would take, you know, a the lot of market and a much Morrow bust profile for folks coming into equity markets than I think we're anticipating. We feel very good about the way our products are positioned and we feel very good that worry going to get our strong fair share of blow, but when you add those things together in this year and in addition to the dynamics of how our income statement comes together, that's how we come up with what our number is.

But I guess, are you still, you guys still weren't to be out there with the 20 percent forecasted growth rate longer term?

Yeah, we haven't commented ever on the long-term growth rate. We've given guidance annually and sometimes during the year and we mentioned, in fact a broad range among analyst estimates for this year and provided our own range which depending on the analysts and the time period that they last made their estimate is above or below. So I don't think we would say more. And I don't know how often those long-term forecasts are put together. We feel very good about our competitive position versus our industry peers. And remember during this period we're assuming as we always do in these forward looking estimates, no performance fees, no contribution from new investments, et cetera and we feel pretty good about our track record of achieving those as well.

Okay. If you can just help us with the -- give us more color on the EBITDA so we can monitor it during the year?

Yeah, I guess I don't have at hand and I'm not sure I'm comfortable giving you precise percentages for each product. But just to give you a sense of the major products, Tweedy Browne, global value is obviously a very important product for them and for us. That's a five star fund with top quart I'll rankings as I mentioned in every time period. We feel very good about that product, the capacity et cetera, going forward. Less important to in terms of just the size of the assets under management is dweedy's American product which has a three rating currently. Other important and I'm not sure I'm getting these in exact order of earnings contributions, but I'm roughly so, the brandywine fund is a four star fund, brandywine blue. And that's obviously the major fund for Freiss. Brandywine blue is five star. Third avenue, their largest fund is third avenue value, that's four star. Their other funds which are rapidly growing are third avenue small cap and third avenue which is four star third avenue real estate which is five star. The manager's funds which given in part the percentage that we own of earnings from those funds is the two most important products there are special equity is a small cap product, that's four star. And international which is also four star.

And just one final follow-up, Sean, is there anything you see changing on the broker channel? You're saying you're having -- I mean are the brokers changing their favor with the mutual fund product or is this just a blip on the radar screen?

I'll let Nate respond to that since he knows that channel well.

Sure. When Sean mentioned just to clarify one thing when Sean mentioned the brokerage -- he was speaking of the separate account high net worth component of it rather than the mutual fund component of it which you noted in your -- but going to what we see in that channel from a separate account standpoint, really do think the biggest impact has been the behavior across the equity products most broadly which is just a difficult environment for them last yore and in the fourth quarter. Beyond that, I think we have in the products when he in the channel historically, I think we have very good product that's well distribute and supported. And I think we have a good representation there. As we talked about with PSG, we're going to be broadening the product-debt (ph) available product to the channel and we're obviously participating in the newer sort of growing parts of the channel with products like the maps kinds of products. Is he I think we feel good about where we are in the channel going forward.

Not too put do fine a point on it, but our expectation going forward is that fixed income products (ph) are not always going to be in favor indeed there are scenarios one could imagine where people actually don't do well in such products and in that scenario where fixed income does poorly and equity does well we do very well.

And I would like to just go back to the growth question again and make one more point is that you know as we know, the earnings of asset management companies tend to lag the earnings power of the business and in appreciating markets. Again, that works the opposite way when markets have been less than favorable. So were we look at a range that's 465 to 475, one that's an estimate that just looks at the (inaudible) business and that's also an estimate that you can imagine the run rate of the business would be far higher than indicated in those earnings by the end of 2003 which f we were to achieve those results which has a much higher underlie egg growth rate from 2002 to 2003. I would also say that folks and our track record I think would certainly indicate that we're taking that cash that comes out of our business and we will put it in high RR opportunities and specifically investments over, you know, any intermediate to long-term period. So when we look out and if you were to say, gosh, Darrell, are you comfortable with your EP ---your cash earnings per share being 10 that 20 percent compound growth over a long period of time? I can feel good about that because we're going to have a substantial amount of cash out of this business that we are going to be able to put to work and I'm confident in ways that will be attractive to cash earnings per share over any intermediate to long-term period so that's how I get comfortable with higher long-term rates as compared to the point to point calculation and the way I would answer the question initially was and I think Sean was certainly making the echoing our view which is we'll compare our business to any other asset management business. You know, our collection of affiliates, we believe will grow in a very respectable way relative teen of the other competitors in our sector.

I mean I agree with (inaudible) I believe one is a growth rate out there for you guys is higher and financial outset growth is slowing. It's not a comment on the company, just what we seeing out.

that's helpful though, thank you very much.

Thanks, Henry.

Our next question comes from Robert Lee (ph) with --woods .

Thank you. Most of my questions have been answered. Just two quick ones. Later this year is there another follow-up payment for Freiss that comes up in the fall? And what was it you know approximate amount? And the second one is for your own targets for compensation, you know, has the board set those for the next year or so? And maybe, know, what are they?

Maybe Darrell.

I'll do the first one which is there is an incremental payment to Freiss, not in 2003, but in 2004.

Robert Lee Okay.

And today we anticipate that to be in the 60 to 70 million dollars range.

Robert Lee Okay. Great.

On compensation, I think Darrell gave you the basic figures which call for lower compensation this year based on the earnings expectation that we currently have. If we do better than what we have indicated as our estimate currently, then the compensation would rise above the level that Darrell indicated and if we do worse, it will be lower.

Thanks a lot.

Thanks, Robert.

Thank you, sir. Ladies and gentlemen if you have an additional question, please press the star followed by the one. If you are using speaker phone you'll need to lift your headset before pressing the numbers. We have no questions at this time. You may continue.

Thank you all for joining us this morning and participating in the call. In sum, while the market environment was difficult not only in the fourth quarter but for the whole year, we're pleased with our affiliates' relative performance and with our ability to produce stable earnings in a volatile period in the equity markets. Maybe more importantly though, we look forward to 2003 and to better equity market and feel that we're very well positioned both now and particularly when those markets turn. Again, thank you. Good-bye.

Ladies and gentlemen, this concludes the Affiliated Managers Group fourth quarter conference call. Thank you for participating in today's teleconference. You may now disconnect.