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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 10-Q
(Mark One)
 
 
ý
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2016
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to          
Commission File Number 001-13459
 
Affiliated Managers Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware
 
04-3218510
(State or other jurisdiction
of incorporation or organization)
 
(IRS Employer Identification Number)
777 South Flagler Drive, West Palm Beach, Florida 33401
(Address of principal executive offices)
(800) 345-1100
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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Large accelerated filer ý
 
Accelerated filer o
 
Non-accelerated filer o
 (Do not check if a smaller
reporting company)
 
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
There were 53,872,047 shares of the registrant’s common stock outstanding on August 1, 2016.
 



PART I—FINANCIAL INFORMATION
Item 1.
Financial Statements
AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data)
(unaudited)
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2015
 
2016
 
2015
 
2016
Revenue
$
646.6

 
$
554.1

 
$
1,281.6

 
$
1,099.5

Operating expenses:
 
 
 
 
 
 
 
Compensation and related expenses
292.2

 
232.1

 
544.9

 
458.7

Selling, general and administrative
114.3

 
96.6

 
223.0

 
192.5

Intangible amortization and impairments
28.1

 
28.6

 
55.9

 
55.3

Depreciation and other amortization
4.6

 
5.0

 
9.0

 
10.0

Other operating expenses
12.2

 
10.0

 
22.1

 
22.5

 
451.4

 
372.3

 
854.9

 
739.0

Operating income
195.2

 
181.8

 
426.7

 
360.5

Income from equity method investments
60.1

 
65.2

 
113.2

 
133.2

Other non-operating (income) and expenses:
 
 
 
 
 
 
 
Investment and other income
(16.0
)
 
(11.6
)
 
(16.7
)
 
(15.6
)
Interest expense
22.5

 
21.9

 
44.7

 
44.0

Imputed interest expense and contingent payment arrangements
(13.2
)
 
0.8

 
(40.4
)
 
(1.1
)
 
(6.7
)
 
11.1

 
(12.4
)
 
27.3

Income before income taxes
262.0

 
235.9

 
552.3

 
466.4

Income taxes
72.1

 
53.2

 
141.7

 
109.7

Net income
189.9

 
182.7

 
410.6

 
356.7

Net income (non-controlling interests)
(61.2
)
 
(75.3
)
 
(153.9
)
 
(144.7
)
Net income (controlling interest)
$
128.7

 
$
107.4

 
$
256.7

 
$
212.0

Average shares outstanding (basic)
54.6

 
53.8

 
54.7

 
53.9

Average shares outstanding (diluted)
57.5

 
56.5

 
57.7

 
56.5

Earnings per share (basic)
$
2.36

 
$
2.00

 
$
4.70

 
$
3.93

Earnings per share (diluted)
$
2.31

 
$
1.97

 
$
4.58

 
$
3.89

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

2


AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(unaudited)
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2015
 
2016
 
2015
 
2016
Net income
$
189.9

 
$
182.7

 
$
410.6

 
$
356.7

Other comprehensive income (loss):
 
 
 
 
 
 
 
Foreign currency translation adjustment
48.5

 
(53.9
)
 
(11.6
)
 
(55.9
)
Change in net realized and unrealized gain (loss) on derivative securities, net of tax
(0.7
)
 
0.3

 
2.0

 
(0.8
)
Change in net unrealized gain (loss) on investment securities, net of tax
47.9

 
(14.0
)
 
56.6

 
(24.8
)
Other comprehensive income (loss)
95.7

 
(67.6
)
 
47.0

 
(81.5
)
Comprehensive income
285.6

 
115.1

 
457.6

 
275.2

Comprehensive income (non-controlling interests)
(44.4
)
 
(57.3
)
 
(151.2
)
 
(121.4
)
Comprehensive income (controlling interest)
$
241.2

 
$
57.8

 
$
306.4

 
$
153.8

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

3


AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in millions)
(unaudited)
 
December 31,
2015
 
June 30,
2016
Assets
 
 
 
Cash and cash equivalents
$
563.8

 
$
360.4

Receivables
391.2

 
471.8

Investments in marketable securities
199.9

 
203.6

Other investments
149.3

 
142.5

Fixed assets, net
114.1

 
112.1

Goodwill
2,668.4

 
2,653.5

Acquired client relationships, net
1,686.4

 
1,584.4

Equity method investments in Affiliates
1,937.1

 
2,450.4

Other assets
59.2

 
56.0

Total assets
$
7,769.4

 
$
8,034.7

Liabilities and Equity
 
 
 
Payables and accrued liabilities
$
729.4

 
$
578.1

Senior bank debt
643.3

 
898.4

Senior notes
937.1

 
938.2

Convertible securities
299.0

 
300.3

Deferred income taxes
565.7

 
610.5

Other liabilities
213.3

 
179.7

Total liabilities
3,387.8

 
3,505.2

Commitments and contingencies (Note 8)


 


Redeemable non-controlling interests
612.5

 
745.0

Equity:
 
 
 
Common stock
0.6

 
0.6

Additional paid-in capital
597.2

 
527.7

Accumulated other comprehensive loss
(18.1
)
 
(76.3
)
Retained earnings
2,679.3

 
2,891.3

 
3,259.0

 
3,343.3

Less: Treasury stock, at cost
(421.9
)
 
(424.6
)
Total stockholders' equity
2,837.1

 
2,918.7

Non-controlling interests
932.0

 
865.8

Total equity
3,769.1

 
3,784.5

Total liabilities and equity
$
7,769.4

 
$
8,034.7

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

4


AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
(unaudited)
 
 
 
Total Stockholders’ Equity
 
 
 
 
 
Shares Outstanding
 
Common
Stock
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained
Earnings
 
Treasury
Stock at
Cost
 
Non-
controlling
Interests
 
Total
Equity
December 31, 2014
55.8

 
$
0.6

 
$
672.2

 
$
31.8

 
$
2,163.3

 
$
(240.9
)
 
$
1,016.2

 
$
3,643.2

Net income
—

 
—

 
—

 
—

 
256.7

 
—

 
153.9

 
410.6

Other comprehensive income
—

 
—

 
—

 
44.3

 
—

 
—

 
2.7

 
47.0

Share-based compensation
—

 
—

 
17.0

 
—

 
—

 
—

 
—

 
17.0

Common stock issued under share-based incentive plans
—

 
—

 
(123.4
)
 
—

 
—

 
172.7

 
—

 
49.3

Tax benefit from share-based incentive plans
—

 
—

 
42.3

 
—

 
—

 
—

 
—

 
42.3

Share repurchases
—

 
—

 
—

 
—

 
—

 
(278.7
)
 
—

 
(278.7
)
Investments in Affiliates
—

 
—

 
—

 
—

 
—

 
—

 
15.3

 
15.3

Affiliate equity activity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Affiliate equity expense
—

 
—

 
4.1

 
—

 
—

 
—

 
43.3

 
47.4

Issuances
—

 
—

 
2.1

 
—

 
—

 
—

 
0.6

 
2.7

Repurchases
—

 
—

 
24.3

 
—

 
—

 
—

 
—

 
24.3

Changes in Redemption value of Redeemable non-controlling interests
—

 
—

 
(137.3
)
 
—

 
—

 
—

 
—

 
(137.3
)
Transfers to Redeemable non-controlling interests
—

 
—

 
—

 
—

 
—

 
—

 
(22.8
)
 
(22.8
)
Capital Contributions by Affiliate equity holders
—

 
—

 
—

 
—

 
—

 
—

 
6.5

 
6.5

Distributions to non-controlling interests
—

 
—

 
—

 
—

 
—

 
—

 
(230.0
)
 
(230.0
)
June 30, 2015
55.8

 
$
0.6

 
$
501.3

 
$
76.1

 
$
2,420.0

 
$
(346.9
)
 
$
985.7

 
$
3,636.8
























5



AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)
(in millions)
(unaudited)

 
 
 
Total Stockholders’ Equity
 
 
 
 
 
Shares Outstanding
 
Common
Stock
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained
Earnings
 
Treasury
Stock at
Cost
 
Non-
controlling
Interests
 
Total
Equity
December 31, 2015
55.8

 
$
0.6

 
$
597.2

 
$
(18.1
)
 
$
2,679.3

 
$
(421.9
)
 
$
932.0

 
$
3,769.1

Net income
—

 
—

 
—

 
—

 
212.0

 
—

 
144.7

 
356.7

Other comprehensive loss
—

 
—

 
—

 
(58.2
)
 
—

 
—

 
(23.3
)
 
(81.5
)
Share-based compensation
—

 
—

 
20.0

 
—

 
—

 
—

 
—

 
20.0

Common stock issued under share-based incentive plans
—

 
—

 
(29.6
)
 
—

 
—

 
30.7

 
—

 
1.1

Tax benefit from share-based incentive plans
—

 
—

 
0.4

 
—

 
—

 
—

 
—

 
0.4

Share repurchases
—

 
—

 
—

 
—

 
—

 
(33.4
)
 
—

 
(33.4
)
Issuance costs and other
—

 
—

 
(1.0
)
 
—

 
—

 
—

 
—

 
(1.0
)
Affiliate equity activity:


 


 


 


 


 


 


 


Affiliate equity expense
—

 
—

 
2.8

 
—

 
—

 
—

 
8.7

 
11.5

Issuances
—

 
—

 
(6.0
)
 
—

 
—

 
—

 
11.5

 
5.5

Repurchases
—

 
—

 
12.6

 
—

 
—

 
—

 
0.5

 
13.1

Changes in Redemption value of Redeemable non-controlling interests
—

 
—

 
(68.7
)
 
—

 
—

 
—

 
—

 
(68.7
)
Transfers to Redeemable non-controlling interests
—

 
—

 
—

 
—

 
—

 
—

 
(20.3
)
 
(20.3
)
Capital Contributions by Affiliate equity holders
—

 
—

 
—

 
—

 
—

 
—

 
1.0

 
1.0

Distributions to non-controlling interests
—

 
—

 
—

 
—

 
—

 
—

 
(189.0
)
 
(189.0
)
June 30, 2016
55.8

 
$
0.6

 
$
527.7

 
$
(76.3
)
 
$
2,891.3

 
$
(424.6
)
 
$
865.8

 
$
3,784.5

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

6


AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
 
For the Six Months Ended June 30,
 
2015
 
2016
Cash flow from (used in) operating activities:
 
 
 
Net income
$
410.6

 
$
356.7

Adjustments to reconcile Net income to net Cash flow from operating activities:
 
 
 
Intangible amortization and impairments
55.9

 
55.3

Depreciation and other amortization
9.0

 
10.0

Deferred income tax provision
59.7

 
50.4

Imputed interest expense and contingent payment arrangements
(40.4
)
 
(1.1
)
Income from equity method investments, net of amortization
(113.2
)
 
(133.2
)
Distributions received from equity method investments
222.7

 
205.1

Amortization of issuance costs
4.0

 
2.4

Share-based compensation and Affiliate equity expense
67.1

 
33.2

Other non-cash items
(6.6
)
 
(3.9
)
Changes in assets and liabilities:
 
 
 
Increase in receivables
(54.3
)
 
(50.0
)
Increase in other assets
(5.2
)
 
(47.6
)
Decrease in payables, accrued liabilities and other liabilities
(138.8
)
 
(136.2
)
Cash flow from operating activities
470.5

 
341.1

Cash flow from (used in) investing activities:
 
 
 
Investments in Affiliates
(32.0
)
 
(551.4
)
Purchase of fixed assets
(11.7
)
 
(8.6
)
Purchase of investment securities
(4.8
)
 
(8.0
)
Sale of investment securities
18.2

 
28.0

Cash flow used in investing activities
(30.3
)
 
(540.0
)
Cash flow from (used in) financing activities:
 
 
 
Borrowings of senior debt
523.3

 
585.0

Repayments of senior debt and convertible securities
(556.0
)
 
(330.0
)
Issuance of common stock
53.2

 
7.7

Repurchase of common stock
(314.8
)
 
(33.4
)
Note and contingent payments
9.4

 
3.0

Distributions to non-controlling interests
(230.0
)
 
(189.0
)
Affiliate equity issuances and repurchases
(25.1
)
 
(71.7
)
Excess tax benefit from share-based compensation
42.3

 
0.4

Other financing items
(3.3
)
 
13.9

Cash flow from (used in) financing activities
(501.0
)
 
(14.1
)
Effect of foreign exchange rate changes on cash and cash equivalents
(1.3
)
 
(15.7
)
Net decrease in cash and cash equivalents
(62.1
)
 
(228.7
)
Cash and cash equivalents at beginning of period
550.6

 
563.8

Cash assumed upon consolidation of Affiliate sponsored investment products
—

 
25.3

Cash and cash equivalents at end of period
$
488.5

 
$
360.4

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

7
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



1.
Basis of Presentation and Use of Estimates
The Consolidated Financial Statements of Affiliated Managers Group, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair statement of the results have been included. All intercompany balances and transactions have been eliminated. Certain reclassifications have been made to the prior period’s financial statements to conform to the current period’s presentation. Operating results for interim periods are not necessarily indicative of the results that may be expected for any other period or for the full year. The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 includes additional information about its operations, financial position and accounting policies, and should be read in conjunction with this Quarterly Report on Form 10-Q.
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
All amounts in these notes, except per share data in the text and tables herein, are stated in millions unless otherwise indicated.
2.
Recent Accounting Developments
On January 1, 2016, the Company adopted several updates to accounting standards as follows:
•
Accounting Standards Update (“ASU”) 2015-02, Consolidation: Amendments to the Consolidation Analysis (“ASU 2015-02: Consolidation”);
•
ASU 2015-03, Interest - Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs;
•
ASU 2015-07, Fair Value Measurement: Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or Its Equivalent); and
•
ASU 2015-16, Business Combinations: Simplifying the Accounting for Measurement-Period Adjustments.
The adoption of these updates did not have a significant impact on the Company’s Consolidated Financial Statements.
In May 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU 2014-09, Revenue from Contracts with Customers, as amended. The new standard provides a comprehensive model for revenue recognition. The standard is effective for interim and fiscal periods beginning after December 15, 2017. The Company is evaluating the impact of this standard on its Consolidated Financial Statements.
In January 2016, the FASB issued ASU 2016-01, Fair Value: Recognition and Measurement of Financial Assets and Liabilities.  Under the new standard, all equity investments in unconsolidated entities (other than those accounted for using the equity method of accounting) will generally be measured at fair value through earnings.  The standard is effective for interim and fiscal periods beginning after December 15, 2017.  The Company is evaluating the impact of this standard on its Consolidated Financial Statements.
In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize assets and liabilities arising from most operating leases on the statement of financial position. The standard is effective for interim and fiscal periods beginning after December 15, 2018. The Company is evaluating the impact of this standard on its Consolidated Financial Statements.
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which simplifies the accounting for share-based payment transactions, including the income tax consequences, classification of awards and classification in the statement of cash flows. The standard is effective for interim and fiscal periods beginning after December 15, 2016. The Company is evaluating the impact of this standard on its Consolidated Financial Statements.
In March 2016, the FASB issued ASU 2016-07, Investments - Equity Method and Joint Ventures: Simplifying the Transition to the Equity Method of Accounting, which simplifies the equity method of accounting by eliminating the need to apply the equity method retroactively to an investment that subsequently qualifies for such accounting treatment. The standard

8
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


is effective for interim and fiscal periods beginning after December 15, 2016. The Company is evaluating the impact of this standard on its Consolidated Financial Statements.
3.
Principles of Consolidation
The Company assesses consolidation requirements pursuant to ASU 2015-02: Consolidation, which was adopted using the modified retrospective method and resulted in an effective date of adoption of January 1, 2016.

In evaluating whether an investment must be consolidated, the Company evaluates the risk, rewards, and significant terms of each of its Affiliate and other investments to determine if its investments are considered a voting rights entity (“VRE”) or a variable interest entity (“VIE”). An entity is a VRE when the total equity investment at risk is sufficient to enable the entity to finance its activities independently and when the equity holders have the obligation to absorb losses, the right to receive residual returns and the right to direct the activities of the entity that most significantly impact its economic performance. An entity is a VIE when it lacks one or more of the characteristics of a VRE. Assessing whether an entity is a VRE or VIE involves judgment. Upon the occurrence of certain events, management reviews and reconsiders its previous conclusion regarding the status of an entity as a VRE or a VIE.

The Company consolidates VREs when it has control over significant operating, financial and investing decisions of the investment or holds the majority voting interest. The Company consolidates VIEs when it has a controlling financial interest, 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.

Investments in Affiliates
For the Company’s consolidated Affiliates, the portion of the Owners’ Allocation allocated to Affiliate management is included in Net income (non-controlling interests) in the Consolidated Statements of Income. Non-controlling interests on the Consolidated Balance Sheets include capital and undistributed Operating and Owners’ Allocation owned by Affiliate management of the Company’s consolidated Affiliates. The effect of any changes in the Company’s equity interests in its consolidated Affiliates resulting from the issuance or repurchase of an Affiliate’s equity by the Company or one of its Affiliates is included as a component of stockholders’ equity, net of the related income tax effect in the period of the change. The current redemption value of non-controlling interests has been presented as Redeemable non-controlling interests on the Consolidated Balance Sheets.

AMG applies the equity method of accounting to investments where AMG does not hold a controlling equity interest but has the ability to exercise significant influence over operating and financial matters. Other investments in which AMG owns less than a 20% interest and does not exercise significant influence are accounted for under the cost method. Under the cost method, income is recognized as dividends when, and if, declared.

Affiliate Sponsored Investment Products

The Company’s consolidated Affiliates sponsor various investment products where they also act as the investment advisor, and in some cases these products are considered VIEs. These investment products are typically owned primarily by third-party investors; however, certain products are capitalized with seed capital investments from Affiliates.

Investors are generally entitled to substantially all of the economics of these VIEs, except for the management and performance fees earned by Affiliates or any gains or losses attributable to Affiliates’ investments in these products. As a result, Affiliates do not generally consolidate these VIEs unless the Affiliate’s interest in the product is considered substantial. When consolidating these VIEs, 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 reflected in Other operating expenses in the Consolidated Statements of Income. Purchases and sales of securities are presented within Decrease in payables, accrued liabilities and other liabilities and Increase in other assets, respectively, in the Consolidated Statements of Cash Flows. When Affiliates no longer control these products, due to a reduction in ownership or other reasons, the products are deconsolidated.
4.
Investments in Marketable Securities

9
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Investments in marketable securities at December 31, 2015 and June 30, 2016 were $199.9 million and $203.6 million, respectively. The following is a summary of the cost, gross unrealized gains and losses and fair value of investments classified as available-for-sale and trading:
 
Available-for-Sale
 
Trading
 
December 31,
2015
 
June 30,
2016
 
December 31,
2015
 
June 30,
2016
Cost
$
104.7

 
$
73.1

 
$
19.8

 
$
96.8

Unrealized Gains
77.6

 
36.0

 
1.9

 
5.2

Unrealized Losses
(1.8
)
 
(1.5
)
 
(2.3
)
 
(6.0
)
Fair Value
$
180.5

 
$
107.6

 
$
19.4

 
$
96.0

In the six months ended June 30, 2015, the Company realized gains on investments classified as available-for-sale of $7.9 million, all of which occurred in the three months ended June 30, 2015. In the three and six months ended June 30, 2016, the Company realized gains on investments classified as available-for-sale of $7.5 million and $9.2 million, respectively. These gains were recorded in Investment and other income. There were no significant realized gains or losses on investments classified as trading in the three and six months ended June 30, 2015 and 2016.
5.
Variable Interest Entities
The Company’s consolidated Affiliates act as investment managers for certain investment entities that are considered VIEs, and in connection with the adoption of ASU 2015-02: Consolidation, certain investment entities previously accounted for as VIEs no longer met the criteria for being a VIE and certain VREs became VIEs and were either consolidated or disclosed as VIEs.

The Company's Affiliates’ involvement with unconsolidated VIEs is generally limited to that of a service provider, and their investment, if any, represents an insignificant interest in the relevant investment entities’ assets under management. The Company's Affiliates’ exposure to risk in these entities is generally limited to any capital contribution it has made or is required to make and any earned but uncollected management fees. The Company has not issued any investment performance guarantees to these VIEs or their investors.
The net assets and liabilities of unconsolidated VIEs and the Company’s maximum risk of loss were as follows:
 
December 31, 2015
 
June 30, 2016
Category of Investment
Unconsolidated
VIE Net Assets
 
Carrying Value and
Maximum Exposure
to Loss
 
Unconsolidated
VIE Net Assets
 
Carrying Value and
Maximum Exposure
to Loss
Affiliate sponsored investment products
$
6,688.9

 
$
1.4

 
$
1,550.0

 
$
1.1

    
In addition, several of the Company’s Affiliates accounted for under the equity method are considered VIEs.  The unconsolidated assets, net of liabilities and non-controlling interests, of these Affiliates were approximately $1.2 billion and $1.3 billion as of December 31, 2015 and June 30, 2016, respectively.  The Company’s carrying value and maximum exposure to loss for these Affiliates was approximately $1.9 billion and $2.4 billion as of December 31, 2015 and June 30, 2016, respectively.
6.
Debt
Senior Bank Debt
The Company has a senior unsecured multicurrency revolving credit facility (the “revolver”) and a senior unsecured term loan facility (the “term loan” and, together with the revolver, the “credit facilities”).  In June 2016, the Company amended the revolver to increase commitments from $1.3 billion to $1.45 billion, and amended the term loan to increase borrowings from $350.0 million to $385.0 million. Subject to certain conditions, the Company may further increase the commitments under the revolver by up to $350.0 million and borrow up to an additional $65.0 million under the term loan.  The credit facilities both mature on September 30, 2020. 


10
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


The credit facilities contain financial covenants with respect to leverage and interest coverage, as well as customary affirmative and negative covenants, including limitations on priority indebtedness, asset dispositions and fundamental corporate changes, and certain customary events of default.
7.
Forward Equity and Equity Distribution Program
In June 2016, the Company entered into an agreement to sell approximately 2.9 million shares of the Company’s common stock at a price of $167.25 per share (a “forward equity agreement”). The Company has the option to cash or net share settle all or a portion of the agreement in one or more transactions over the next twelve months.  As of June 30, 2016, no portion of this forward equity agreement had been settled.
Separately, the Company entered into equity distribution and forward equity agreements with several major securities firms under which the Company, from time to time, may issue and sell shares (immediately or on a forward basis) having an aggregate sales price of up to $500.0 million. These agreements replaced the Company’s previous forward equity program. As of June 30, 2016, no sales have occurred under these agreements.
8.
Commitments and Contingencies
From time to time, the Company and its Affiliates may be subject to claims, legal proceedings and other contingencies in the ordinary course of their business activities. Any such matters are subject to various uncertainties, and it is possible that some of these matters may be resolved in a manner unfavorable to the Company or its Affiliates. The Company and its Affiliates establish accruals, as necessary, for matters for which the outcome is probable and the amount of the liability can be reasonably estimated. The Company and its consolidated Affiliates have no significant accruals as of June 30, 2016.
Third Avenue Management LLC (“Third Avenue”), one of the Company’s consolidated Affiliates, has been named as a defendant in various legal actions relating to the liquidation and closure of the Third Avenue Focused Credit Fund. The Company has been named as a co-defendant in one of these actions, as a purported control person. Third Avenue and the Company believe that the claims in these actions are without merit and intend to defend against them vigorously.
The Company and certain Affiliates operate under regulatory authorities that require that they maintain minimum financial or capital requirements. Management is not aware of any significant violations of such requirements.
The Company has committed to co-invest in certain Affiliate sponsored investment products. As of June 30, 2016, these unfunded commitments were $87.5 million and may be called in future periods. In connection with a past acquisition agreement, the Company is contractually entitled to reimbursement from a prior owner of one of the Company’s Affiliates for $15.3 million of these commitments if they are called.
As of June 30, 2016, the Company was contingently liable, upon achievement by certain Affiliates of specified financial targets, to make payments through 2019 of up to $84.9 million associated with its consolidated Affiliates and $316.5 million associated with its equity method Affiliates. As of June 30, 2016, the Company expects to make payments of $10.3 million (none in 2016) of the $84.9 million related to consolidated Affiliates and no payments in 2016 related to its equity method Affiliates.
Affiliate equity interests provide holders with a conditional right to put their interests to the Company over time (see Note 14). In addition, in connection with an investment in an Affiliate accounted for under the equity method, the Company entered into an arrangement with a minority owner of the Affiliate that gives such owner the right to sell a portion of its ownership interest in the Affiliate to the Company annually beginning in 2018. The purchase price of these conditional purchases will be at fair market value on the date of the transaction.
9.
Fair Value Measurements
The following tables summarize the Company’s financial assets and liabilities that are measured at fair value on a recurring basis:

11
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


 
 
 
Fair Value Measurements
 
December 31,
2015
 
 
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
Significant Other Observable Inputs (Level 2)
 
Significant Other Unobservable Inputs (Level 3)
Financial Assets
 
 
 
 
 
 
 
Cash equivalents
$
65.9

 
$
65.9

 
$
—

 
$
—

Investments in marketable securities(1)
 
 
 
 
 
 
 
Trading securities
19.4

 
19.4

 
—

 
—

Available-for-sale securities
180.5

 
180.5

 
—

 
—

Other investments(2)
23.3

 
20.7

 
2.6

 
—

Financial Liabilities
 
 
 
 
 
 
 
Contingent payment arrangements(3)
$
10.2

 
$
—

 
$
—

 
$
10.2

Affiliate equity obligations(3)(4)
62.3

 
—

 
—

 
62.3



 
 
 
Fair Value Measurements
 
June 30,
2016
 
 
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
Significant Other Observable Inputs (Level 2)
 
Significant Other Unobservable Inputs (Level 3)
Financial Assets
 
 
 
 
 
 
 
Cash equivalents
$
27.3

 
$
27.3

 
$
—

 
$
—

Investments in marketable securities(1)
 
 
 
 
 
 
 
Trading securities
96.0

 
96.0

 
—

 
—

Available-for-sale securities
107.6

 
107.6

 
—

 
—

Other investments(2)
6.4

 
4.0

 
2.4

 
—

Financial Liabilities
 
 
 
 
 
 
 
Contingent payment arrangements(3)
$
8.0

 
$
—

 
$
—

 
$
8.0

Affiliate equity obligations(3)(4)
27.0

 
—

 
—

 
27.0

Foreign currency forward contracts(3)
0.8

 
—

 
0.8

 
—

__________________________

(1) 
Principally investments in equity securities.
(2) 
The Company adopted ASU 2015-07 and no longer includes $126.0 million and $136.1 million as of December 31, 2015 and June 30, 2016, respectively, of investments in certain entities for which fair value was measured using net asset value (“NAV”) as a practical expedient.
(3) 
Amounts are presented within Other liabilities.
(4) 
The Company adopted ASU 2015-07 and no longer includes $75.0 million and $73.2 million as of December 31, 2015 and June 30, 2016, respectively, of liabilities for which fair value was measured using NAV as a practical expedient. These liabilities were previously included in Obligations to related parties and upon removal, the remaining liabilities were re-labeled Affiliate equity obligations.
The following are descriptions of the significant financial assets and liabilities measured at fair value and the fair value methodologies used.
Cash equivalents consist primarily of highly liquid investments in daily redeeming money market funds, which are classified as Level 1.

12
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Investments in marketable securities consist primarily of investments in publicly traded securities and in funds advised by Affiliates that are valued using NAV. Publicly traded securities and investments in daily redeeming funds that calculate NAVs are classified as Level 1.
Other investments consist primarily of funds advised by Affiliates that are valued using NAV. Investments in daily redeeming funds that calculate NAVs are classified as Level 1. Investments in funds that permit redemptions monthly or quarterly are classified as Level 2.
Contingent payment arrangements represent the present value of the expected future settlement of contingent payment arrangements related to the Company’s investments in consolidated Affiliates. The significant unobservable inputs that are used in the fair value measurement of these obligations are growth and discount rates. Increases in the growth rate result in a higher obligation while an increase in the discount rate results in a lower obligation.
Affiliate equity obligations include agreements to repurchase Affiliate equity. The significant unobservable inputs that are used in the fair value measurement of the agreements to repurchase Affiliate equity are growth and discount rates. Increases in the growth rate result in a higher obligation while an increase in the discount rate results in a lower obligation.
Foreign currency forward contracts use model-derived valuations in which all significant inputs are observable in active markets to determine fair value.
It is the Company’s policy to value financial assets or liabilities transferred as of the beginning of the period in which the transfer occurs. There were no significant transfers of financial assets or liabilities between Level 1 and Level 2 in the three months ended June 30, 2015 and 2016.
Level 3 Financial Assets and Liabilities
The following tables present the changes in Level 3 liabilities:
 
For the Three Months Ended June 30,
 
2015
2016
 
Contingent Payment Arrangements
 
Affiliate Equity Obligations
 
 
Contingent Payment Arrangements
 
Affiliate Equity Obligations
Balance, beginning of period
$
31.5

 
$
16.8

 
 
$
7.8

 
$
35.6

Net (gains) losses
(13.8
)
(1) 
—

 
 
0.2

(1) 
—

Purchases and issuances
6.5

 
49.6

 
 
—

 
9.7

Settlements and reductions
(17.5
)
 
(8.1
)
 
 
—

 
(18.3
)
Balance, end of period
$
6.7

 
$
58.3

 
 
$
8.0

 
$
27.0

 
 
 
 
 
 
 
 
 
Net change in unrealized (gains) losses relating to instruments still held at the reporting date
$
(13.8
)
(1) 
$
—

 
 
$
0.2

(1) 
$
—


 
 
 
 
 
2016
 
Contingent Payment Arrangements
 
Affiliate Equity Obligations
 
 
Contingent Payment Arrangements
 
Affiliate Equity Obligations
Balance, beginning of period
$
59.3

 
$
21.5

 
 
$
10.2

 
$
62.3

Net gains/losses
(41.6
)
(1) 
—

 
 
(2.2
)
(1) 
—

Purchases and issuances
6.5

 
65.0

 
 
—

 
39.8

Settlements and reductions
(17.5
)
 
(28.2
)
 
 
—

 
(75.1
)
Balance, end of period
$
6.7

 
$
58.3

 
 
$
8.0

 
$
27.0

 
 
 
 
 
 
 
 
 
Net change in unrealized (gains) losses relating to instruments still held at the reporting date
$
(41.6
)
(1) 
$
—

 
 
(2.2
)
(1) 
$
—

___________________________


13
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


(1) 
Accretion and changes to the Company’s contingent payment arrangements are recorded in Imputed interest expense and contingent payment arrangements.
The following table presents certain quantitative information about the significant unobservable inputs used in valuing the Company’s Level 3 financial liabilities:
 
Quantitative Information About Level 3 Fair Value Measurements
 
Valuation
Techniques
 
Unobservable
Input
 
Fair Value at
December 31,
2015
 
Range at
December 31, 2015
 
Fair Value at June 30, 2016
 
Range at June 30, 2016
Contingent payment arrangements
Discounted cash flow
 
Growth rates
 
$
10.2

 
3% - 8%
 
$
8.0

 
6% - 8%
 
 
 
Discount rates
 
 

 
15%
 
 

 
15%
Affiliate equity obligations
Discounted cash flow
 
Growth rates
 
62.3

 
1% - 9%
 
27.0

 
4% - 12%
 
 
 
Discount rates
 
 

 
14% - 15%
 
 

 
12% - 16%
Investments in Certain Entities that Calculate Net Asset Value
The Company uses the NAV of certain investments as their fair value. The NAVs that have been provided by the investees have been derived from the fair values of the underlying assets and liabilities as of the measurement dates. The following table summarizes the nature of these investments and any related liquidity restrictions or other factors that may impact the ultimate value realized:
 
December 31, 2015
 
June 30, 2016
Category of Investment
Fair Value
 
Unfunded
Commitments
 
Fair Value
 
Unfunded
Commitments
Private equity funds(1)
$
126.0

 
$
76.8

 
$
136.1

 
$
87.5

Other funds(2)
72.3

 
—

 
33.5

 
—

 
$
198.3

 
$
76.8

 
$
169.6

 
$
87.5

___________________________

(1) 
These funds primarily invest in a broad range of private equity funds, as well as make direct investments. Distributions will be received as the underlying assets are liquidated over the life of the funds, which is generally up to 15 years.  
(2) 
These are multi-disciplinary funds that invest across various asset classes and strategies, including long/short equity, credit and real estate. Investments are generally redeemable on a daily, monthly or quarterly basis.
Other Financial Assets and Liabilities Not Carried at Fair Value
The carrying amount of Cash and cash equivalents, Receivables, and Payables and accrued liabilities approximates fair value because of the short-term nature of these instruments. The carrying value of notes receivable approximates fair value because interest rates and other terms are at market rates. The carrying value of Senior bank debt approximates fair value because the debt has variable interest based on selected short-term rates. The following table summarizes the Company’s other financial liabilities not carried at fair value:
 
December 31, 2015
 
June 30, 2016
 
 
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
 
Fair Value Hierarchy
Senior notes
$
944.6

 
$
966.3

 
$
944.9

 
$
982.4

 
Level 2
Convertible securities
305.2

 
483.6

 
306.3

 
470.7

 
Level 2
10.
Intangible Assets
Consolidated Affiliates

14
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


The following tables present the change in Goodwill and components of Acquired client relationships, net for the Company’s consolidated Affiliates:
 
 
Goodwill
 
 
Institutional
 
Mutual Fund
 
High Net Worth
 
Total
Balance, as of December 31, 2015
 
$
1,141.3

 
$
1,119.5

 
$
407.6

 
$
2,668.4

Foreign currency translation
 
2.1

 
(21.4
)
 
4.4

 
(14.9
)
Balance, as of June 30, 2016
 
$
1,143.4

 
$
1,098.1

 
$
412.0

 
$
2,653.5

 
Acquired Client Relationships
 
Definite-lived
 
Indefinite-lived
 
Total
 
Gross Book
Value
 
Accumulated
Amortization
 
Net Book
Value
 
Net Book
Value
 
Net Book
Value
Balance, as of December 31, 2015
$
1,301.8

 
$
(680.4
)
 
$
621.4

 
$
1,065.0

 
$
1,686.4

Intangible amortization and impairments
—

 
(53.4
)
 
(53.4
)
 
(1.9
)
 
(55.3
)
Foreign currency translation
(7.0
)
 
—

 
(7.0
)
 
(39.7
)
 
(46.7
)
Balance, as of June 30, 2016
$
1,294.8

 
$
(733.8
)
 
$
561.0

 
$
1,023.4

 
$
1,584.4

Definite-lived acquired client relationships are amortized over their expected useful lives. As of June 30, 2016, these relationships were being amortized over a weighted average life of approximately ten years. The Company recognized amortization expense for these relationships of $28.1 million and $55.9 million for the three and six months ended June 30, 2015, respectively, as compared to $26.7 million and $53.4 million for the three and six months ended June 30, 2016, respectively. Based on relationships existing as of June 30, 2016, the Company estimates that its consolidated annual amortization expense will be approximately $110 million for each of the next five years.
As of June 30, 2016, the fair values of the indefinite-lived intangible assets at two of the Company’s Affiliates, both managers of global equity funds, have recently experienced declines, and further declines in the fair values of these assets could result in future impairments.
Equity Method Investments in Affiliates
The Company completed minority investments in Systematica Investments L.P. and Baring Private Equity Asia (“Baring”) on January 4, 2016 for $551.4 million in the aggregate. The Company’s purchase price allocations were measured using financial models that include assumptions of expected market performance, net client flows and discount rates. The consideration paid to Baring will be deductible for U.S. tax purposes over a 15-year life.
The intangible assets at the Company’s equity method Affiliates consist of definite-lived and indefinite-lived acquired client relationships and goodwill. As of June 30, 2016, the definite-lived relationships were being amortized over a weighted average life of approximately twelve years. The Company recognized amortization expense for these relationships of $8.7 million and $17.5 million for the three and six months ended June 30, 2015, respectively, as compared to $14.8 million and $29.0 million for the three and six months ended June 30, 2016, respectively. Based on relationships existing as of June 30, 2016, the Company estimates the annual amortization expense will be approximately $60 million for each of the next five years.
11.
Related Party Transactions
A prior owner of one of the Company’s Affiliates retained an interest in certain of the Affiliate’s private equity investment partnerships. The prior owner’s interest is presented in the Company’s Consolidated Balance Sheets as either a liability in Other liabilities or as Non-controlling interests, depending on the structure of the prior owner’s investments in the partnerships. The total liability was $75.0 million and $73.2 million at December 31, 2015 and June 30, 2016, respectively. The total non-controlling interest was $5.1 million and $4.0 million at December 31, 2015 and June 30, 2016, respectively.
In certain cases, Affiliate management owners and Company officers may serve as trustees or directors of certain mutual funds from which the Affiliate earns advisory fee revenue.
The Company had liabilities to related parties for contingent payment arrangements in connection with certain business combinations. The total payable was $10.2 million and $8.0 million as of December 31, 2015 and June 30, 2016, respectively, and was included in Other liabilities. For the three months ended June 30, 2015, the Company made payments of $17.5 million

15
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


associated with these liabilities. In 2016, no such payments have been made. For the three and six months ended June 30, 2015, the Company adjusted its estimate of its contingent payment obligations and, accordingly, recorded gains attributable to the controlling interest of $15.0 million and $44.7 million, respectively. For the six months ended June 30, 2016, the Company adjusted its estimates of its contingent payment obligations and, accordingly, recorded gains attributable to the controlling interest of $2.8 million, all of which occurred in the three months ended March 31, 2016. These amounts are included in Imputed interest expense and contingent payment arrangements in the Consolidated Statements of Income.
See Notes 13 and 14 for information on transactions in Affiliate equity.
12.
Share-Based Compensation
The following is a summary of share-based compensation expense:
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2015
 
2016
 
2015
 
2016
Share-based compensation
$
9.1

 
$
10.8

 
$
17.0

 
$
20.0

Tax benefit
3.5

 
4.2

 
6.6

 
7.7

The Company has $70.6 million and $94.1 million of unrecognized share-based compensation as of December 31, 2015 and June 30, 2016, respectively, which will be recognized over a weighted average period of approximately three years (assuming no forfeitures).
Stock Options
The following table summarizes the transactions of the Company’s stock options:
 
Stock Options
 
Weighted Average
Exercise Price
 
Weighted Average
Remaining
Contractual Life
(years)
Unexercised options outstanding - December 31, 2015
1.4

 
$
96.18

 
 
Options granted
0.4

 
122.40

 
 
Options exercised
(0.1
)
 
77.77

 
 
Unexercised options outstanding - June 30, 2016
1.7

 
103.78

 
2.9
Exercisable at June 30, 2016
1.2

 
95.93

 
1.7

For the six months ended June 30, 2015 and 2016, the Company granted stock options with fair values of $0.5 million and $16.0 million, respectively. Stock options generally vest over a period of three to four years and expire seven years after the grant date. All options have been granted with exercise prices equal to the closing price of the Company’s common stock on the grant date. In certain circumstances, option awards also require certain performance conditions to be satisfied in order for the options to be exercised.
The fair value of options granted was estimated using the Black-Scholes option pricing model. For the six months ended June 30, 2015 and 2016, the weighted average fair value of options granted was $54.13 and $38.90, per option, respectively, based on the weighted-average grant date assumptions stated below.

 
 
For the Six Months Ended June 30,
 
 
2015
 
2016
Dividend yield
 
—
%
 
—
%
Expected volatility(1)
 
27.9
%
 
30.6
%
Risk-free interest rate(2)
 
1.3
%
 
1.6
%
Expected life of options (in years)(3)
 
5.0

 
5.7

Forfeiture rate
 
—
%
 
—
%
___________________________


16
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


(1) 
Expected volatility is based on historical and implied volatility.

(2) 
Risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of the grant.

(3) 
Expected life of options (in years) is based on the Company’s historical data and expected exercise behavior.
Restricted Stock
The following table summarizes the transactions of the Company’s restricted stock units:
 
Restricted
Stock Units
 
Weighted
Average
Grant Date
Value
Unvested units - December 31, 2015
0.6

 
$
192.04

Units granted
0.2

 
122.43

Units vested
(0.1
)
 
176.59

Units forfeited
(0.1
)
 
180.30

Unvested units - June 30, 2016
0.6

 
169.40


For the six months ended June 30, 2015 and 2016, the Company granted awards with fair values of $48.6 million and $27.7 million, respectively. These awards were valued based on the closing price of the Company’s common stock on the date of grant and contain vesting conditions requiring service over a period of four years. In certain circumstances, awards also require certain performance conditions to be satisfied, and the Company may elect to settle the awards in shares of the Company’s common stock or cash.
13.
Redeemable Non-Controlling Interests
Affiliate equity interests provide holders with a ratable portion of ownership in one of the Company’s Affiliates. Affiliate equity holders generally have a conditional right to put their interests to the Company at certain intervals (between five and fifteen years from the date the equity interest is received or on an annual basis following an Affiliate equity holder’s departure). The current redemption value of the Company’s Affiliate equity interests is presented as Redeemable non-controlling interests on the Consolidated Balance Sheets. Changes in the current redemption value are recorded to Additional paid-in capital. The following table presents the changes in Redeemable non-controlling interests:
 
 
Redeemable Non-controlling Interests
Balance, as of December 31, 2015
 
$
612.5

Increase attributable to consolidated products
 
81.4

Repurchases of redeemable Affiliate equity
 
(37.9
)
Transfers from Non-controlling interests
 
20.3

Changes in redemption value
 
68.7

Balance, as of June 30, 2016
 
$
745.0


14.
Affiliate Equity
The Company’s Affiliates generally pay quarterly distributions to Affiliate equity holders. For the six months ended June 30, 2015 and 2016, distributions paid to Affiliate equity holders were $230.0 million and $189.0 million, respectively.

Sales and repurchases of Affiliate equity generally occur at fair value; however, the Company also grants Affiliate equity to its Affiliate partners, employees and officers as a form of compensation. If the equity is issued for consideration below the fair value of the equity or repurchased for consideration above the fair value of the equity, then such difference is recorded as compensation expense over the service period.
The following is a summary of Affiliate equity expense:

17
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2015
 
2016
 
2015
 
2016
Controlling interest
$
2.8

 
$
2.4

 
$
6.7

 
$
4.5

Tax benefit
(1.1
)
 
(0.9
)
 
(2.6
)
 
(1.7
)
Controlling interest, net
1.7

 
1.5

 
4.1

 
2.8

Non-controlling interests
37.9

 
4.8

 
43.3

 
8.7

Total
$
39.6

 
$
6.3

 
$
47.4

 
$
11.5

The following is a summary of unrecognized Affiliate equity expense:
Period
Controlling Interest
 
Remaining Life
 
Non-controlling Interests
 
Remaining Life
December 31, 2015
$
22.4

 
3 years
 
$
51.9

 
5 years
June 30, 2016
30.5

 
4 years
 
72.7

 
6 years
The Company periodically issues Affiliate equity interests to and repurchases Affiliate equity interests from Affiliate equity holders. For the six months end June 30, 2015 and 2016, the amount of cash paid for repurchases was $31.1 million and $75.3 million, respectively. For the six months ended June 30, 2015 and 2016, the total amount of cash received for issuances was $6.0 million and $3.6 million, respectively.

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 $22.6 million and $16.9 million at December 31, 2015 and June 30, 2016, respectively, and was included in Other assets. The total payable was $62.3 million and $27.0 million as of December 31, 2015 and June 30, 2016, respectively, and was included in Other liabilities.

Effects of Changes in the Company’s Ownership in Affiliates

The Company periodically acquires interests from, and transfers interests to, Affiliate equity holders. Because these transactions do not result in a change of control, any gain or loss related to these transactions is recorded to Additional paid-in capital, which increases or decreases the controlling interest’s equity. No gain or loss related to these transactions is recognized in the Company’s Consolidated Statements of Income or Comprehensive Income.

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 discloses the cumulative effect that ownership changes had on the controlling interest’s equity related only to Affiliate equity transactions that settled during the periods:
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2015
 
2016
 
2015
 
2016
Net income (controlling interest)
$
128.7

 
$
107.4

 
$
256.7

 
$
212.0

Increase in controlling interest paid-in capital from purchases and sales of Affiliate equity issuances
0.5

 
(2.5
)
 
1.0

 
(3.4
)
Decrease in controlling interest paid-in capital related to Affiliate equity repurchases
(29.1
)
 
(3.8
)
 
(32.6
)
 
(21.3
)
Net income attributable to controlling interest and transfers (to) or from Non-controlling interests
$
100.1

 
$
101.1

 
$
225.1

 
$
187.3

15.
Income Taxes
The consolidated income tax provision includes taxes attributable to the controlling interest and, to a lesser extent, taxes attributable to non-controlling interests as follows:

18
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2015
 
2016
 
2015
 
2016
Controlling interest:
 
 
 
 
 
 
 
Current tax
$
43.4

 
$
28.1

 
$
75.4

 
$
55.1

Intangible-related deferred taxes
20.7

 
21.3

 
41.1

 
43.4

Other deferred taxes
5.1

 
1.8

 
18.9

 
7.3

Total controlling interest
69.2

 
51.2

 
135.4

 
105.8

Non-controlling interests:
 
 
 
 
 
 
 
Current tax
$
3.1

 
$
2.2

 
$
6.6

 
$
4.2

Deferred taxes
(0.2
)
 
(0.2
)
 
(0.3
)
 
(0.3
)
Total non-controlling interests
2.9

 
2.0

 
6.3

 
3.9

Provision for income taxes
$
72.1

 
$
53.2

 
$
141.7

 
$
109.7

Income before income taxes (controlling interest)
$
197.9

 
$
158.7

 
$
392.1

 
$
317.8

Effective tax rate attributable to controlling interest(1)
35.0
%
 
32.3
%
 
34.5
%
 
33.3
%
__________________________

(1) 
Taxes attributable to the controlling interest divided by Income before income taxes (controlling interest).
The Effective tax rate attributable to the controlling interest was 35.0% and 34.5% for the three and six months ended June 30, 2015, respectively, as compared to 32.3% and 33.3% for the three and six months ended June 30, 2016, respectively. The decrease resulted primarily from a decrease in Income before income taxes attributable to the controlling interest as well as the effect of foreign operations.  
Income tax expense for the three months ended June 30, 2015 and 2016 each included the benefit of indefinite deferrals of foreign earnings of $6.3 million. Income tax expense for the six months ended June 30, 2015 and 2016 each included the benefit of indefinite deferrals of foreign earnings of $12.5 million.
As of December 31, 2015 and June 30, 2016, the Company carried a liability for uncertain tax positions of $26.9 million and $26.6 million, respectively. Included in these amounts was $1.8 million and $1.6 million as of December 31, 2015 and June 30, 2016, respectively, for interest and related charges. At December 31, 2015 and June 30, 2016, this liability also included $25.3 million and $25.4 million, respectively, for tax positions that, if recognized, would affect the Company’s effective tax rate.
The Company periodically has tax examinations in the U.S. and foreign jurisdictions. Examination outcomes, and any related settlements, are subject to significant uncertainty. The completion of examinations may result in the payment of additional taxes and/or the recognition of tax benefits.
16.
Earnings Per Share
The calculation of basic earnings per share is based on the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted earnings per share is similar to basic earnings per share, but adjusts for the dilutive effect of the potential issuance of incremental shares of the Company’s common stock. The following is a reconciliation of the numerator and denominator used in the calculation of basic and diluted earnings per share available to common stockholders.

19
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2015
 
2016
 
2015
 
2016
Numerator
 
 
 
 
 
 
 
Net income (controlling interest)
$
128.7

 
$
107.4

 
$
256.7

 
$
212.0

Convertible securities interest expense, net
3.8

 
3.9

 
7.6

 
7.7

Net income (controlling interest), as adjusted
$
132.5

 
$
111.3

 
$
264.3

 
$
219.7

Denominator
 
 
 
 
 
 
 
Average shares outstanding (basic)
54.6

 
53.8

 
54.7

 
53.9

Effect of dilutive instruments:
 
 
 
 
 
 
 
Stock options and restricted stock
0.7

 
0.5

 
0.8

 
0.4

Junior convertible securities
2.2

 
2.2

 
2.2

 
2.2

Average shares outstanding (diluted)
57.5

 
56.5

 
57.7

 
56.5

For the three months ended March 31, 2016, the Company repurchased 0.2 million shares of common stock, at an average share price of $161.16, under a share repurchase program approved by the Company’s Board of Directors.
Average shares outstanding (diluted) in the table above exclude the anti-dilutive effect of the following items:
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2015
 
2016
 
2015
 
2016
Stock options and restricted stock units
0.1

 
0.2

 
0.1

 
0.3

Shares subject to forward sale agreement
—

 
2.9

 
—

 
2.9

17.
Comprehensive Income
The following tables show the tax effects allocated to each component of Other comprehensive income:
 
For the Three Months Ended June 30,
 
2015
 
2016
 
Pre-Tax
 
Tax Benefit
(Expense)
 
Net of Tax
 
Pre-Tax
 
Tax Benefit
(Expense)
 
Net of Tax
Foreign currency translation adjustment
$
48.5

 
$
—

 
$
48.5

 
$
(53.9
)
 
$
—

 
$
(53.9
)
Change in net realized and unrealized gain (loss) on derivative securities
(0.6
)
 
(0.1
)
 
(0.7
)
 
0.3

 
(0.0)

 
0.3

Change in net unrealized gain (loss) on investment securities
76.5

 
(28.6
)
 
47.9

 
(23.0
)
 
9.0

 
(14.0
)
Other comprehensive income (loss)
$
124.4

 
$
(28.7
)
 
$
95.7

 
$
(76.6
)
 
$
9.0

 
$
(67.6
)
 
For the Six Months Ended June 30,
 
2015
 
2016
 
Pre-Tax
 
Tax Benefit
(Expense)
 
Net of Tax
 
Pre-Tax
 
Tax Benefit
(Expense)
 
Net of Tax
Foreign currency translation adjustment
$
(11.6
)
 
$
—

 
$
(11.6
)
 
$
(55.9
)
 
$
—

 
$
(55.9
)
Change in net realized and unrealized gain (loss) on derivative securities
2.2

 
(0.2
)
 
2.0

 
(0.8
)
 
(0.0)

 
(0.8
)
Change in net unrealized gain (loss) on investment securities
90.7

 
(34.1
)
 
56.6

 
(40.4
)
 
15.6

 
(24.8
)
Other comprehensive income (loss)
$
81.3

 
$
(34.3
)
 
$
47.0

 
$
(97.1
)
 
$
15.6

 
$
(81.5
)


20
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


The components of accumulated other comprehensive income (loss), net of taxes, attributable to the controlling interest and non-controlling interests are as follows:
 
Foreign
Currency
Translation
Adjustment
 
Realized and
Unrealized Gains (Losses)
on Derivative
Securities
 
Unrealized
Gains (Losses)
on Investment
Securities (1)
 
Total
Balance, as of December 31, 2015
$
(98.6
)
 
$
0.3

 
$
45.0

 
$
(53.3
)
Other comprehensive loss before reclassifications
(55.9
)
 
(0.4
)
 
(34.4
)
 
(90.7
)
Amounts reclassified
—

 
(0.4
)
 
9.6

 
9.2

Net other comprehensive loss
(55.9
)
 
(0.8
)
 
(24.8
)
 
(81.5
)
Balance, as of June 30, 2016
$
(154.5
)
 
$
(0.5
)
 
$
20.2

 
$
(134.8
)
__________________________

(1) 
See Note 4 for amounts reclassified from Other comprehensive income.
18.
Segment Information
Management has determined that the Company operates in three business segments representing the Company’s three principal distribution channels: Institutional, Mutual Fund and High Net Worth, each of which has different client relationships. The following tables summarize the Company’s financial results for each of its business segments:
 
For the Three Months Ended June 30,
 
2015
 
2016
 
Revenue
 
Net income (controlling interest)
 
Revenue
 
Net income (controlling interest)
Institutional
$
255.4

 
$
59.6

 
$
220.1

 
$
51.1

Mutual Fund
323.0

 
56.1

 
264.9

 
44.8

High Net Worth
68.2

 
13.0

 
69.1

 
11.5

Total
$
646.6

 
$
128.7

 
$
554.1

 
$
107.4


 
For the Six Months Ended June 30,
 
2015
 
2016
 
Revenue
 
Net income (controlling interest)
 
Revenue
 
Net income (controlling interest)
Institutional
$
508.3

 
$
108.3

 
$
447.4

 
$
111.0

Mutual Fund
641.3

 
123.8

 
515.2

 
78.1

High Net Worth
132.0

 
24.6

 
136.9

 
22.9

Total
$
1,281.6

 
$
256.7

 
$
1,099.5

 
$
212.0


 
Total Assets
 
December 31, 2015
 
June 30, 2016
Institutional
$
3,717.1

 
$
3,676.1

Mutual Fund
3,070.5

 
3,362.8

High Net Worth
981.8

 
995.8

Total
$
7,769.4

 
$
8,034.7