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Definitive Proxy Statement

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Definitive Additional Materials

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2019 Long-Term Equity Alignment Award

2018 – 2019 Management Team Transitions

•    In 2018, AMG announced that Chairman and CEO Sean M. Healey had been diagnosed with ALS, a terminal disease, and the Board appointed Nathaniel Dalton, who had been with AMG for over 20 years, to succeed Mr. Healey as CEO. Mr. Healey was appointed Executive Chairman. Mr. Dalton served as CEO for one year

•    In early 2019, as part of its multi-year succession plan transitioning to the next generation, the Board appointed Jay C. Horgen (formerly CFO) as President and then as CEO, and Mr. Horgen brought together a group of next generation management, including the recruitment of a new CFO, Thomas M. Wojcik, to lead the Company forward. The Board, including Mr. Horgen, continues to focus on developing and enhancing the senior management team, to maintain a breadth and depth of talent that ensures that AMG is well-positioned to continue to refine and execute against its strategy

•    Throughout these transitions, the Compensation Committee has focused on the levels of equity held by senior team members, and the duration of vesting of awards across the group, taking into account the multitude of new roles and positions, expected future contributions and stockholder feedback regarding perceived low levels of equity ownership among senior team members

•    In August of 2019, in recognition of stockholder feedback (further detailed below), as well as the need to further equitize management and retain key executives against the backdrop of significant organizational change, the Committee granted our CEO, CFO, and other members of the next-generation management team, special one-time Long-Term Equity Alignment Awards

Long-Term Equity Alignment Award

Award Rationale

Award Structure

Aligns executives with stockholders and galvanizes the team around the goal of long-term shareholder value creation over an extended time horizon of at least seven years

Awards were a mix of Options and RSUs, 100% of which included a rigorous and transparent performance hurdle based on Return on Equity (ROE)

•    One-time awards, at a time of unique transition among the management team, to accomplish specific alignment goals

•    The Compensation Committee considered levels of equity held by senior team members and the duration of vesting of awards across the group, taking into account the multitude of new roles and positions, expected future contributions, and stockholder feedback regarding perceived low levels of equity ownership among senior team members

•    The Compensation Committee has not granted one-time awards of this type and magnitude before, and currently has no expectation of doing so again in the future

•    Structure and notional levels of the grant took into account stockholder feedback that executives should hold more equity, to further align management exposure to, and incentives with, stockholder value creation

•    Key goals of the grant were (i) stability in the next-generation senior management team and (ii) further alignment of management incentives with stockholders, using an award structure designed to:

–   galvanize the team around the goal of long-term shareholder value creation

–   lengthen the duration of existing equity incentives through the additional Equity Holding Policy

–   recognize and incent a broader group of next-generation executives

•    Award is in keeping with AMG’s pay-for-performance philosophy—if the team does not achieve results in the form of both a higher stock price and strong ROE results, awards will expire with little or no value

•    Average ROE aligns management incentives with the strategic goals of both (i) growing earnings and (ii) effective stewardship of shareholder capital, over a long-term period

–   ROE targets were set based on historic and projected performance levels that incent management to control costs and deploy capital to maximize stockholder value creation

–   This metric is used by other financial services companies as an objective measure of management’s effectiveness at using stockholder equity to generate earnings and to encourage responsible long-term planning

•    CEO award amounts reflect approximately 7x current annual performance-based equity awards, mirroring the 7-year holding period

•    Partially replaced annual compensation in 2019, through the Committee’s discretionary reduction of CEO Annual Performance-Based Incentive Compensation for 2019 by approximately 23%, and is expected to replace a portion of Annual Performance-Based Incentive Compensation over at least three years

Restricted Stock Unit Component

•    Ratable vesting through August 2023, in years 3, 4 and 5

•    Each tranche is only delivered if a 12% Average ROE target is met; if target is not met, the tranche is forfeited

Option Award Component

•    5-year cliff vesting in August 2024

•    Awards are subject to rigorous, transparent Average ROE performance targets over a 5-year performance period

–   If Average ROE is 16%, 100% of the award will vest

–   A ratable portion will vest if Average ROE is between 12% and 20%, for delivery of between 50% and, in the circumstance of exceptional performance, a maximum of 150% of the initial award

•    Option structure creates a secondary performance condition — recipients only realize value from the awards if AMG’s stock price increases from the grant date strike price of $74.49 per share

Equity Holding Policy

•    Recipients are subject to additional restrictions on sales of AMG stock, for the remainder of their AMG service

–   No sales permitted by CEO unless vested, unrestricted shares held exceeds 2x Total Annual Compensation (inclusive of base salary and incentive awards)

–   Required level for other officers of 1x Total Annual Compensation

–   Alignment RSUs must be held for at least 6 years after grant (through 2025), and Alignment Option Shares must be held for 7 years after grant (through 2026)

Award Amounts

•    $18.0 million for our CEO (40% Alignment Options and 60% Alignment RSUs; allocated options were limited by equity plan rules and would otherwise have constituted a majority of the allocation to the CEO)

•    $5.6 million for our CFO (80% Alignment Options and 20% Alignment RSUs)

•

Average ROE is a multi-faceted performance measure, incorporating two key financial metrics: the Company’s generation of Economic Net Income in the numerator, and the stewardship of stockholder capital in the denominator.  In order for the Company to meet Average ROE goals in percentage rates at the mid- to high-teens, both earnings growth and capital allocation and stewardship (including the effective return of capital to stockholders) are highly consequential. We believe Average Return on Equity is an appropriate performance measure that creates long-term alignment with stockholders and requires the achievement of strong results across numerous strategic decisions over time which inform the multi-metric ROE target.  Further, when coupled with long-term vesting and performance measurement periods, and with awards subject to AMG’s claw-back policy, we believe the award design using ROE actively discourages inappropriate risk-taking and ensures that executives have significant ownership value tied to long-term performance, not short-term stock price or earnings results.

•

The target levels of Average ROE used for the Alignment Award were set at a range of levels, to incent executives towards a range of potential outcomes over multiple forward periods extending through 2023.

o

The Alignment RSUs were divided into three tranches, each with a separate multi-year measurement period ending on December 31, 2020, 2021, and 2022, respectively, and using an Average ROE target of 12%, 200 basis points above our current weighted average cost of equity, to promote continued performance at a maintenance-level target over multiple forward periods. The Alignment RSUs were awarded to address shareholder concerns regarding under-equitization of the senior management team, and are at risk, with no shares delivered if Average ROE does not meet the 12% target.

o

The Alignment Options created an opportunity to earn additional value in circumstances of exceptional performance over a single long-duration performance period with five-year cliff vesting, using a range of Average ROE targets extending 600 – 1000 basis points above our current weighed cost of equity.  The option structure also creates a secondary performance condition, in that the recipients only realize value from the awards if AMG’s stock price increases from the grant date strike price of $74.49 per share, regardless of the level of Average ROE achieved.

•

Business Initiatives should be measured against a range of targets, including those that reflect the evolution of the operating environment and strategic actions over the course of the year:  Pre-setting short-term quantitative goals in the business and strategic category of our cash bonus scorecard would, in our view, risk creating incentives with unintended outcomes that are not aligned with long-term shareholder value creation.  For example, setting a specific target for a number of new Affiliate investments or a specific AUM level could incent management to pursue transactions or strategic decisions that they otherwise would not.  A dynamic business will necessarily change over time and must operate in evolving markets, and strategic decisions must incorporate a multitude of factors that cannot be predicted or distilled into a quantifiable measurement.  Instead, the Compensation Committee assesses performance each year against a consistent framework, but takes into account the then-current environment and strategic goals. We provide detailed disclosure to explain why particular decisions were made, in our Proxy Statement, and confirm the views of stockholders on those decisions through a robust engagement process that has occurred over many years.  Attempting to use pre-set targets for these qualitative categories would constrain the Committee from assessing performance and could create distorted and harmful incentives for executives in positioning the business in response to changes in the industry and business throughout the year.

•

Pre-set financial performance targets should be re-set each year to reflect the most recent state of the business and appropriately balance growth and risk management incentives on a forward-looking basis:  Our cash bonus scorecard measures performance against pre-established financial targets, measuring Economic earnings per share and EBITDA margin against performance targets set during the year each year.  Those targets are intentionally not consistent from year to year, and for the 2019 performance year they were set at a lower level than those used for the 2018 performance year.  This process is consistent with the important role of the Compensation Committee, to set goals each year that are appropriate to incent executives, based on informed views of performance expectations, with a range of outcomes depending on whether those goals were exceeded and under what circumstances.  The suggestion that our financial targets should be identical from year-to-year is not aligned with the reality of managing a dynamic business.  The asset management business in particular is highly variable, given the impact of financial markets – and in AMG’s case, resultant performance fees – which can change in ways that are difficult to predict or control.  Using fixed targets each year would constrain the Committee from setting achievable goals aligned with the current growth strategy, and could encourage inappropriate risk-taking or create unintended incentives.

•

The recent report published by Glass Lewis regarding our Annual Meeting proposals states that the majority of awards granted to our CEO used performance measurement periods of one year.  This is not the case – the Alignment Options are subject to Average ROE performance targets measured over a five-year performance period ending December 31, 2023, and the tranches of Alignment RSUs are subject to an Average ROE performance target measured over three-, four-, and five-year periods, ending on December 31, 2020, 2021 and 2022, respectively.

•

The recent report published by ISS regarding our Annual Meeting proposals includes an incorrect Company Peer Group.  As disclosed in our Proxy Statement, we revised our Peer Group in 2019 to remove BlackRock, Inc. and add Ares Management Corporation and Janus Henderson Group plc, to reflect companies with revenue and market capitalizations that are more in line with our own, and to include additional firms with significant assets under management in alternative strategies.  The ISS report lists a Company Peer group that still includes BlackRock and does not show the addition of Ares and Janus Henderson and, as a result, reports peer median relative pay and other statistics that are not consistent with the data used by our Compensation Committee.

Date of

Estimated Future Payouts

Under Non-Equity

Incentive Plan Awards(1)

Estimated Future Payouts

Under Equity

Incentive Plan Awards

Grant

Date

Fair Value

Name

Grant

Date

Committee

Action

Threshold

($)

Target

($)

Maximum

($)

Threshold

(#)

Target

(#)

Maximum

(#)

of Stock

Awards ($)

Jay C. Horgen

1/22/2020

—

—

2,000,000

—

—

—

—

—

8/15/2019

(2)

—

—

—

—

—

143,966

—

10,724,000

8/15/2019

(3)

—

—

—

—

—

400,000

600,000

7,276,000

2/5/2019

(4)

1/27/2019

—

—

—

—

12,725

—

1,400,000

2/5/2019

(5)

1/27/2019

—

—

—

—

19,087

33,402

2,100,000

Sean M. Healey

1/22/2020

—

—

2,775,000

—

—

—

—

—

2/5/2019

(4)

1/27/2019

—

—

—

—

17,315

—

1,905,000

2/5/2019

(5)

1/27/2019

—

—

—

—

11,543

20,200

1,270,000

Nathaniel Dalton

1/22/2020

—

—

1,000,000

—

—

—

—

—

2/5/2019

(4)

1/27/2019

—

—

—

—

16,361

—

1,800,000

2/5/2019

(5)

1/27/2019

—

—

—

—

24,541

42,947

2,700,000

Thomas M. Wojcik

1/22/2020

—

—

800,000

—

—

—

—

—

8/15/2019

(2)

—

—

—

—

—

14,767

—

1,100,000

8/15/2019

(3)

—

—

—

—

—

248,763

373,145

4,525,000

5/7/2019

(6)

4/27/2019

—

—

—

—

35,824

—

3,370,680

Hugh P. B. Cutler

1/22/2020

—

—

600,000

—

—

—

—

—

2/5/2019

(4)

1/27/2019

—

—

—

—

4,363

—

480,000

2/5/2019

(5)

1/27/2019

—

—

—

—

6,544

11,452

720,000

David M. Billings

1/22/2020

—

—

1,100,000

—

—

—

—

—

2/5/2019

(4)

1/27/2019

—

—

—

—

2,181

—

240,000

2/5/2019

(5)

1/27/2019

—

—

—

—

3,272

5,726

360,000

(1)

Represents performance-based cash bonuses awarded to each named executive officer in recognition of performance in 2019. See footnote (1) to the Summary Compensation Table for additional details regarding these awards.

(2)

Represents Alignment RSUs granted in August 2019 under the 2013 Stock Plan, divided into three equal tranches vesting on August 15, 2021, 2022 and 2023, respectively (subject to the grantee being employed by the Company on such date (and with certain limited exceptions in the case of death, disability or certain terminations of employment in connection with a change in control) and the grantee’s compliance with the Company’s Equity Holding Policy). The number of shares of common stock of the Company underlying each tranche that may be issued and distributed for each restricted stock unit is based on the Company’s level of achievement measured against pre-established performance targets measuring the Company’s Average Return on Equity for each tranche over three-, four- and five-year measurement periods ending on December 31, 2020, 2021 or 2022, respectively. The grant date fair value has been computed in accordance with FASB ASC Topic 718, and assumes that the target level of Average Return on Equity will be achieved.

(3)

Represents Alignment Options granted in August 2019 under the 2011 Option Plan, vesting in full on August 15, 2024 (subject to continued employment through the vesting date (with certain limited exceptions in the case of death, disability or certain terminations of employment in connection with a change in control) and the grantee’s compliance with the Company’s Equity Holding Policy). The number of shares of common stock of the Company underlying each stock option award that may become exercisable is based on the Company’s level of achievement measured against pre-established performance targets measuring the Company’s Average Return on Equity for a five-year measurement period ending on December 31, 2023. The grant date fair value was determined using the Black-Scholes option pricing model, and assumes the mid-point level of Average Return on Equity will be achieved.

(4)

Represents 2018 Long-Term Deferred Equity Awards granted in February 2019 under the 2013 Stock Plan in recognition of performance in 2018, vesting in four equal installments on January 1, 2020, 2021, 2022 and 2023, subject to continued employment through each vesting date (with certain limited exceptions in the case of death, disability or certain terminations of employment in connection with a change in control). The grant date fair value has been computed in accordance with FASB ASC Topic 718.

(5)

Represents 2018 Long-Term Performance Achievement Awards granted in February 2019 under the 2013 Stock Plan in recognition of performance in 2018, vesting in full on January 1, 2022, subject to continued employment through the vesting date (with certain limited exceptions in the case of death, disability or certain terminations of employment in connection with a change in control). The number of shares of common stock of the Company underlying each award that may be issued and distributed for each restricted stock unit is based on the Company’s level of achievement measured against pre-established performance targets measuring the Company’s Average Return on Equity over a three-year measurement period ending on December 31, 2021. The grant date fair value has been computed in accordance with FASB ASC Topic 718, and assumes that the mid-point level of Average Return on Equity will be achieved.

(6)

Represents an equity incentive award of restricted stock units granted in May 2019 under the 2013 Stock Plan to Mr. Wojcik in connection with the commencement of his employment with the Company, 2,480 units of which vested on May 23, 2019, with the remainder vesting in three equal installments on each of January 1, 2020, 2021 and 2022. The grant date fair value has been computed in accordance with FASB ASC Topic 718.