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(Mark One)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
OR
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
(State or other jurisdiction of
incorporation or organization)
04-3218510
(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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock ($0.01 par value)
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
____________________________________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes
No
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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
No
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
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this
chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a
smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
(Do not check if a smaller
reporting company)
Smaller reporting company
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
At June 30, 2015, the aggregate market value of the common stock held by non-affiliates of the registrant, based upon
the closing price of $218.60 on that date on the New York Stock Exchange, was $11,842,794,467. Calculation of holdings by
non-affiliates is based upon the assumption, for this purpose only, that executive officers, directors and any persons holding
10% or more of the registrant’s common stock are affiliates. There were 53,991,797 shares of the registrant’s common stock
outstanding on February 22, 2016.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of
Shareholders to be held on or about June 14, 2016 are incorporated by reference into Part III.
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PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
FORM 10-K
TABLE OF CONTENTS
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accountant Fees and Services
Exhibits, Financial Statement Schedules
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15
15
15
15
16
18
19
34
35
72
72
72
73
73
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Forward-Looking Statements
PART I
Certain matters discussed in this Annual Report on Form 10-K, in our other filings with the Securities and Exchange
Commission, in our press releases and in oral statements made with the approval of an executive officer may
constitute“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These
statements include, but are not limited to, statements related to our expectations regarding the performance of our business,
our financial results, our liquidity and capital resources and other non-historical statements, and may be prefaced with words
such as “outlook,” “guidance,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,”
“approximately,” “predicts,” “projects,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these
words or other comparable words. Such statements are subject to certain risks and uncertainties, including, among others, the
factors discussed under the caption “Item 1A. Risk Factors.”
These factors (among others) could affect our financial performance and cause actual results to differ materially from
historical earnings and those presently anticipated and projected. Forward-looking statements speak only as of the date they
are made, and we will not undertake and we specifically disclaim any obligation to release publicly the result of any revisions
which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to
reflect the occurrence of events, whether or not anticipated. In that respect, we caution readers not to place undue reliance on
any such forward-looking statements.
Item 1. Business
We are a global asset management company with equity investments in leading boutique investment management firms,
which we refer to as our “Affiliates.” Our innovative partnership approach allows each Affiliate’s management team to own
significant equity in their firm and maintain operational autonomy. Our strategy is to generate shareholder value through the
growth of existing Affiliates, as well as through investments in new and additional investments in existing Affiliates. In
addition, we provide centralized assistance to our Affiliates in strategic matters, marketing, distribution, product development
and operations. As of December 31, 2015, our aggregate assets under management were $611.3 billion (approximately $628
billion pro forma for investments which have since closed), in more than 500 investment products across a broad range of
active return-oriented strategies and distribution channels.
We hold meaningful equity interests in each of our Affiliates. In certain cases, we own a majority interest while in other
cases we own a minority interest. In all cases, Affiliate management retains a significant equity interest in their own firm.
Affiliate management equity ownership (along with our ownership) aligns our interests, enhances Affiliate management equity
incentives and preserves Affiliate management's opportunity to participate directly in the long-term future growth of their firms.
Our innovative partnership approach provides Affiliate management with a degree of liquidity and financial diversification and
ensures that our Affiliates maintain investment and operational autonomy in managing their businesses, as well as their unique
entrepreneurial culture and independence.
Given our permanent partnership approach, when we own a majority of the equity interests, we address the ongoing
succession planning issues facing the Affiliate’s principal owners as they transition incentives to future generations by
facilitating the transfer of equity over time to the next generation of Affiliate management. In cases in which we own a
minority of the equity interests, we typically do not have an obligation to repurchase Affiliate equity interests, but may make
additional investments to further facilitate Affiliate ownership transition.
Although we invest in boutique investment management firms that we anticipate will grow independently, given our
permanent partnership approach, we assist our Affiliates with their growth by providing access to the resources and scale of a
global asset management company.
We are focused on investing in the highest quality boutique investment management firms globally, including traditional,
alternative and wealth management firms, specializing in an array of active return-oriented investment strategies. We identify
high quality boutique firms based on our thorough understanding of the asset management industry and we have developed
long-term relationships with a significant number of these firms. Within our target universe, we seek strong and stable
boutiques with the best growth prospects, especially with respect to the growth potential for their areas of focus, such as global
equities or alternative strategies. These boutiques are typically characterized by a strong multi-generational management team
with focused investment discipline, entrepreneurial culture, a commitment to building longer-term success, and active return-
oriented strategies sold across multiple distribution channels. We anticipate that we will have significant additional investment
opportunities across the global asset management industry, most often in independent boutique investment management firms,
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but also including the potential for investments resulting from subsidiary divestitures, secondary sales and other special
situations.
We are well positioned to execute upon these investment opportunities through our established process of identifying and
cultivating investment prospects, our broad industry relationships, and our substantial experience and expertise in structuring
and negotiating transactions. We have a strong reputation as an outstanding partner to our existing Affiliates, and are widely
recognized in the marketplace as providing an innovative solution for the needs of the highest quality boutique investment
management firms in the world.
Investment Management Operations
As of December 31, 2015, we managed $611.3 billion in predominately active return-oriented assets in our three principal
distribution channels: Institutional, Mutual Fund and High Net Worth. These active return-oriented strategies primarily
comprise global equities and alternative products, rather than indexing strategies, exchange traded funds, fixed income or
money market products, which generally carry lower fee rates than active return-oriented strategies. Given our strategy to grow
our existing Affiliates, as well as partner with additional boutique investment management firms, we expect to continue to grow
our business by adding active return-oriented strategies. We believe our geographic diversification across active return-
oriented strategies in over 500 products in our three distribution channels helps to mitigate our exposure to risks created by
changing market environments. The following table provides information regarding the composition of our total assets under
management by active return-oriented strategy:
(in billions)
Assets under Management
Global Equities(1)
Alternatives(2)
U.S. Equities
Other(3)
Total(4)
__________________________
December 31,
2013
Percentage
of Total
December 31,
2014
Percentage
of Total
December 31,
2015
Percentage
of Total
$
$
211.6
128.4
140.2
57.1
537.3
39% $
24%
26%
11%
100% $
237.2
171.2
153.2
58.6
620.2
38% $
28%
25%
9%
100% $
226.1
197.3
133.1
54.8
611.3
37%
32%
22%
9%
100%
(1) Global Equities include emerging market assets under management of 10%, 10% and 9% of total assets under management
in 2013, 2014 and 2015, respectively.
(2) Alternatives primarily include assets under management in long and short public equity, control equity, managed futures,
multi-strategy, and other alternative vehicles and hedge fund strategies, as well as energy and infrastructure investments
and primary and secondary private equity strategies. Alternatives generate earnings from (i) management fees from
products subject to lock-ups or similar restrictions, (ii) management fees from products not subject to such restrictions and
(iii) performance fees and carried interest.
(3) Other primarily includes fixed income assets under management including municipal bond, total return and other fixed
income strategies.
(4) Total assets under management includes less than 1% of exchange traded, index and money market funds.
Distribution Channels
Through our Affiliates, we manage assets in three principal distribution channels. A summary of selected financial data
attributable to our operations for each distribution channel is included in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in Item 7. The following table provides information regarding the composition of our
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total assets under management by distribution channel:
(in billions)
Assets under Management
Institutional
Mutual Fund
High Net Worth
Total
Institutional Distribution Channel
December 31,
2013
Percentage
of Total
December 31,
2014
Percentage
of Total
December 31,
2015
Percentage
of Total
$
$
300.6
169.4
67.3
537.3
56% $
32%
12%
100% $
355.6
188.4
76.2
620.2
57% $
31%
12%
100% $
347.5
175.8
88.0
611.3
57%
29%
14%
100%
Through our Affiliates, we manage active return-oriented strategies primarily through separate accounts for large
institutional investors world-wide including foundations, endowments, sovereign wealth funds and retirement plans for
corporations and municipalities.
Our Affiliates’ institutional investment services and products are distributed by sales and marketing professionals
developing new institutional business through direct sales efforts and established relationships with consultants around the
world. Our global distribution platform operates in key markets to extend the reach of our Affiliates’ own business development
efforts, including offices in Sydney, serving institutional investors in Australia and New Zealand; London, serving institutional
investors in the United Kingdom and continental Europe; Zurich, serving institutional investors in Switzerland; Dubai, serving
institutional investors in the Middle East; and Hong Kong, serving institutional investors in Asia. Our global distribution efforts
are designed to provide the necessary resources and expertise to ensure that our Affiliates’ products and services are responsive
to the evolving demands of the global marketplace. Our Affiliates currently manage assets for non-U.S. clients in more than 50
countries, including all major developed markets.
Mutual Fund Distribution Channel
Through our Affiliates and AMG Funds, our U.S. retail platform, we provide advisory or sub-advisory services to active
return-oriented mutual funds, UCITS and other retail products. These products are distributed globally to retail and institutional
clients directly and through intermediaries, including independent investment advisors, retirement plan sponsors, broker-
dealers, major fund marketplaces, wrap sponsor platforms and bank trust departments.
High Net Worth Distribution Channel
Through our Affiliates, we provide advisory services to high net worth and ultra-high net worth individuals, families,
trusts, foundations, endowments and retirement plans. Direct services to these clients include customized investment
counseling, investment management, financial, tax and estate planning and family office services.
Through our Affiliates, we also provide advisory services to high net worth individuals through managed account
relationships with intermediaries such as brokerage firms and, through AMG Funds, provide enhanced managed account
distribution and administration capabilities to individual managed account clients.
Our Innovative Structure and Relationship with Affiliates
We establish and maintain long-term partnerships with management of our Affiliates, believing that Affiliate management
equity ownership (along with our ownership) aligns our interests, enhances Affiliate management equity incentives and
preserves management’s incentive to continue to grow their businesses. Our innovative partnership approach allows for
management of our Affiliates to retain equity sufficient to address their particular needs and ensures that our Affiliates maintain
investment and operational autonomy in managing their businesses, as well as their unique entrepreneurial culture and
independence. Although the equity structure of each investment is tailored to meet the needs of the particular Affiliate, in all
cases, we maintain a meaningful equity interest in the firm, with a significant equity interest retained by Affiliate management.
Each of our Affiliates operates through distinct entities, typically organized as limited liability companies or limited
partnerships (or equivalent non-U.S. forms), which affords us the flexibility to design a separate operating agreement for each
Affiliate that reflects our arrangements with respect to governance, economic participation, equity incentives and the other
terms of our relationship. In each case, the operating agreement provides for a governance structure that gives Affiliate
management the authority to manage and operate the business on a day-to-day basis. The operating agreement also reflects the
specific terms of our economic participation in the Affiliate, which in each case is structured to ensure alignment of our and
Affiliate management’s economic interests (a “structured partnership interest”). Our structured partnership interests consist
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primarily of structures through which we share in the Affiliate’s revenue without regard to expenses. Our structured partnership
interests also include structures through which we share in the Affiliate’s revenue less certain agreed-upon expenses.
When we own a majority of the equity interests in an Affiliate and share in the Affiliate’s revenue without regard to
expenses, a set percentage of revenue is allocated to fund operating expenses, including compensation (the “Operating
Allocation”), while the remaining revenue (the “Owners’ Allocation”) is allocated to us and Affiliate management in proportion
to our respective ownership interests (see Exhibit 1). We and Affiliate management therefore participate in any increases or
decreases in revenue through the Owners’ Allocation, and Affiliate management also participates in any increases or decreases
in margin through the Operating Allocation.
Exhibit 1 (Typical Structured Partnership Interest)
When we own a minority of the equity interests in an Affiliate and share in the Affiliate’s revenue without regard to
expenses, we are allocated a set percentage of revenue, with the remaining revenue allocated to fund operating expenses and
distributions to Affiliate management.
In structured partnership interests in which we share in an Affiliate’s revenue without regard to expenses, our contractual
share of revenue generally has priority over distributions to Affiliate management.
When our structured partnership interest is calculated by reference to an Affiliate’s revenue less certain agreed-upon
expenses, whether we own a majority or minority of the equity interests in the Affiliate, we are allocated a set percentage of
revenue net of the agreed categories of expenses, thereby participating in any increases or decreases in both revenue and the
expenses that are included in the calculation.
When we own a majority of the equity interests in an Affiliate, we consolidate the Affiliate’s financial results in our
revenue and operating expenses and primarily use structures in which we share in the Affiliate’s revenue without regard to
expenses. When we own a minority interest, we use the equity method of accounting under which the Affiliate’s financial
results are reported (net of intangible amortization) in Income from equity method investments in our Consolidated Statements
of Income, and are not included in our revenue and operating expenses. For these equity method investments, we either share
in the Affiliate’s revenue without regard to expenses or share in the Affiliate’s revenue less certain agreed-upon expenses.
From time to time, we may change the structure of our arrangements with an Affiliate in order to better support the
Affiliate’s growth strategy.
Competition
In our three principal distribution channels, our Affiliates compete with a large number of other domestic and foreign
investment management firms, as well as with subsidiaries of larger financial organizations. These firms may have significantly
greater financial, technological and marketing resources, captive distribution and assets under management and many offer an
even broader array of investment products and services. Certain Affiliates are active in the same distribution channels and, from
time to time, may compete with each other for clients. In addition, there are relatively few barriers to entry for new investment
management firms, especially in the Institutional distribution channel. We believe that the most important factors affecting our
Affiliates’ ability to compete for clients in our three principal distribution channels are the:
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•
•
performance records, investment style, discipline and reputation of our Affiliates and their management teams;
depth and continuity of client relationships;
• maintenance of strong business relationships with major intermediaries;
•
•
•
diversity of products and level of client service offered;
continued success of our global distribution platform; and
continued development, either organically or through new investments, of investment strategies to meet the changing
needs of investors.
The relative importance of each of these factors can vary depending on the distribution channel and the type of investment
management service involved, as well as general market conditions. Our Affiliates’ ability to retain and increase assets under
management would be adversely affected if client accounts underperform in comparison to relevant benchmarks or peer
groups, or if key personnel leave an Affiliate. The ability to compete with other investment management firms also depends, in
part, on the relative attractiveness of our Affiliates’ investment philosophies, methods under then-prevailing market trends, fees
or a combination of these factors. Our Affiliates represent a diverse group of boutique investment management firms with
predominantly active return-oriented strategies, rather than indexing strategies, exchange traded funds, fixed income or money
market products, which generally carry lower fee rates. Changes in investor risk tolerance or investment preferences could
result in investor allocation away from active return-oriented products.
We compete with a number of acquirers of and investors in investment management firms, including other investment
management companies, private equity firms, sovereign wealth funds and larger financial organizations. We believe that the
most important factors affecting our ability to compete for future investments are the:
•
degree to which target firms view our investment model, equity incentive structures and access to economies of scale
as preferable (financially, operationally or otherwise) to acquisition or investment arrangements offered by others; and
•
reputation and performance of our Affiliates, by which target firms may judge us and our future prospects.
Government Regulation
Our and our Affiliates’ businesses are subject to complex and extensive regulation by various regulatory authorities and
exchanges in jurisdictions around the world. This regulatory environment may be altered without notice by new laws or
regulations, revisions to existing laws or regulations or new or revised interpretations or guidance. Global financial regulatory
reform initiatives are likely to result in more stringent regulation, and changes in laws or regulations and their application to us
or our Affiliates could require that we or our Affiliates incur substantial cost or curtail operations or investment offerings. Our
or our Affiliates’ businesses may be subject to regulatory inquiry or scrutiny by regulatory authorities, and regulatory
authorities may also conduct examinations or inspections of our operations or those of our Affiliates with or without notice.
Any determination of a failure to comply with laws or regulations could result in disciplinary or enforcement action with
penalties that may include the disgorgement of fees, fines, suspensions or censure of individual employees or revocation or
limitation of business activities or registration. Even in the absence of wrongdoing, regulatory inquiries or proceedings could
cause substantial expenditures of time and capital and result in reputational damage.
AMG Funds is comprised of two advisers registered with the U.S. Securities and Exchange Commission (SEC) under the
Investment Advisers Act of 1940 (Advisers Act), and they collectively sponsor over 70 U.S. mutual funds registered under the
Investment Company Act of 1940 (Investment Company Act) that are managed by Affiliates and unrelated investment
managers. A number of our Affiliates also serve as advisers to mutual funds sponsored by them or by third parties. The
Advisers Act imposes numerous obligations on registered investment advisers, including fiduciary duties, recordkeeping
requirements, operational requirements and compliance and disclosure obligations. The Investment Company Act imposes
additional obligations on fund advisers, including investment restrictions and other governance, compliance, reporting and
fiduciary obligations relating to the management of mutual funds. Rulemaking proposed by the SEC in 2015 may create
additional reporting requirements for advisers and funds, and additional requirements for mutual funds in the areas of liquidity
management and the use of derivatives. If adopted as proposed, the derivatives rule could negatively impact our Affiliates’
ability to manage certain products and impose additional compliance and operational costs.
Outside of the U.S., Affiliated Managers Group Limited (AMG Limited) is regulated by the Financial Conduct Authority
in the United Kingdom, and is authorized as a promoter in Ireland by the Central Bank of Ireland. AMG Limited serves as the
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promoter for our Irish UCITS platform, which sponsors UCITS funds managed by Affiliates and marketed by AMG Limited in
the UK and Europe. AMG Limited’s branch, AMG Limited (Dubai), is regulated as a representative office by the Dubai
Financial Services Authority. Affiliated Managers Group (Hong Kong) Limited is regulated by the Securities and Futures
Commission in Hong Kong, and Affiliated Managers Group Pty Ltd is regulated by the Australian Securities and Investments
Commission in Australia.
Our Affiliates’ investment management operations are also subject to regulation by U.S. and non-U.S. authorities and
exchanges. The majority of our Affiliates are registered as investment advisers under the Advisers Act, and many of our
Affiliates are also subject to non-U.S. regulatory oversight. We have Affiliates domiciled in a number of jurisdictions, and
these Affiliates are subject to extensive regulation under the laws and regulations of and supervision by governmental
authorities in each of these jurisdictions. Our Affiliates also offer their products and services in many countries around the
world, and are subject to various requirements relating to such activities. Many of our Affiliates also sponsor registered and
unregistered funds in the U.S. and in other jurisdictions, including Guernsey, Jersey, Ireland, Luxembourg, British Virgin
Islands and the Cayman Islands, and are subject to regulatory requirements in those jurisdictions and in the jurisdictions where
those funds may be offered. Our Affiliates invest in publicly-traded securities of issuers across the globe and are subject to
requirements in numerous jurisdictions for reporting of beneficial ownership positions and other requirements. Virtually all
aspects of the asset management business, including strategy and product-related sales and distribution activities, are subject to
regulation. These laws, rules and regulations are primarily intended to protect the clients of asset managers, and generally grant
supervisory agencies and regulatory bodies broad administrative powers, including the power to set minimum capital
requirements and limit or restrict an investment adviser from conducting its business in the event of a failure to comply with
such laws and regulations, to suspend registered employees and to invoke censures or fines for both the regulated business and
its employees.
We and our Affiliates are also subject to the Employee Retirement Income Security Act of 1974, as amended (ERISA), and
related regulations, with respect to their retirement plan clients. ERISA imposes duties on persons who are fiduciaries under
ERISA, and prohibits certain transactions involving related parties to a retirement plan. The Department of Labor administers
ERISA and regulates investment advisers who service retirement plan clients and has been increasingly active in proposing and
adopting additional regulations applicable to the asset management industry.
We and certain of our Affiliates are also members of the National Futures Association and regulated by the Commodity
Futures Trading Commission (CFTC) with respect to the management of mutual funds and other products that utilize futures,
swaps or other derivative products. The Commodity Exchange Act and CFTC regulations impose additional operational, risk
management and compliance burdens.
In addition, we and certain of our Affiliates are registered broker-dealers and members of the Financial Industry Regulatory
Authority (FINRA), for the purpose of distributing funds or other asset management products. These broker-dealers are subject
to net capital rules that mandate that they maintain certain levels of capital. FINRA has adopted extensive regulatory
requirements relating to sales practices, registration of personnel, compliance and supervision, and compensation and
disclosure. FINRA and the SEC conduct periodic examinations of member broker-dealers. The SEC, FINRA and state
securities commissions may also conduct administrative proceedings that can result in censure, fine, suspension or expulsion of
a broker-dealer, its officers or registered employees. These administrative proceedings, whether or not resulting in adverse
findings, can require substantial expenditures and can have an adverse impact on the reputation or business of a broker-dealer.
We and our Affiliates may also be subject to regulatory capital requirements, including those of federal, state and non-U.S.
regulatory agencies. Our and our Affiliates’ regulatory capital, as defined, meets or exceeds all minimum requirements.
Due to the extensive laws and regulations to which we and our Affiliates are subject, we must devote substantial time,
expense and effort to remaining current on, and addressing, legal and regulatory compliance matters. We and our Affiliates
have experienced legal teams and compliance professionals in place to address the legal, regulatory and compliance
requirements relating to our global operations, and have in place relationships with various legal and regulatory advisors in
each of the countries where we and our Affiliates have business interests. Each of our Affiliates has established a compliance
program to address regulatory compliance requirements for its operations, and provides ongoing reporting to us on compliance
matters.
Employees and Corporate Organization
As of December 31, 2015, we had approximately 3,200 employees, the substantial majority of which were employed full-
time by our Affiliates. Neither we nor our Affiliates are subject to any collective bargaining agreements, and we believe that our
and our Affiliates’ labor relations are good. We were formed in 1993 as a corporation under the laws of the State of Delaware.
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Our Web Site
Our web site is www.amg.com. Our web site provides information about us, and from time to time we may use it as a
distribution channel of material company information. We routinely post financial and other important information regarding
the Company in the “Investor Relations” section of our web site and we encourage investors to consult that section regularly.
That section of our web site includes a link to another web site where one can obtain, free of charge, copies of our Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, including exhibits, and any
amendments to those reports filed or furnished with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934, as amended. We make these reports available through our web site as soon as reasonably practicable after our
electronic filing of such materials with, or the furnishing of them to, the SEC. The information contained or incorporated on our
web site is not a part of this Annual Report on Form 10-K.
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Item 1A. Risk Factors
We and our Affiliates face a variety of risks that are substantial and inherent in our businesses, including markets, liquidity,
credit, operational, legal and regulatory risks. The following are some of the more important factors that could affect our and
our Affiliates’ businesses. Certain statements in “Risk Factors” are forward-looking statements. See “Forward-Looking
Statements.”
Our financial results depend on the receipt of investment management fees by our Affiliates, which are impacted by market
returns and investment performance.
Investment management fees are typically based on the market value of assets under management, and fees will be
adversely affected by declines in the capital markets and in the equity markets in particular. In certain instances, our Affiliates
are paid fees based on investment performance on an absolute basis or relative to a benchmark and, as such, are directly
dependent upon investment results that may vary substantially from year to year. Unfavorable market performance and
volatility in the capital markets or in the prices of specific securities may impact the ability to market products and services and
reduce our assets under management, which in turn may adversely affect the fees payable to our Affiliates and, ultimately, our
results of operations and financial condition. These factors may also impact the ability to market products and services
available through AMG Funds, which in turn may adversely affect the fees payable to us and our Affiliates. Additionally,
global economic conditions, exacerbated by changes in the equity or debt marketplaces, unanticipated changes in currency
exchange rates, interest rates, inflation rates, the yield curve, financial crises, war, terrorism, natural disasters or other factors
that are difficult to predict affect equity markets and the levels of our assets under management. Because our assets under
management are largely concentrated in equity products, our financial results are particularly susceptible to downturns in the
equity markets, or a decline in the assets invested in the equity markets.
Our growth strategy depends upon the continued growth of our existing Affiliates and upon making investments in new
boutique investment management firms or additional investments in existing Affiliates.
Our Affiliates may not maintain their respective levels of performance or contribute to our growth at their historical or
currently anticipated levels. Also, our Affiliates may be unable to carry out their management succession plans, which may
adversely affect their operations and revenue streams and thus our results of operations.
The continued success of our investment program will depend upon our ability to find suitable firms in which to invest or
make additional investments in existing Affiliates, our ability to negotiate agreements with such firms on acceptable terms, and
our ability to raise the capital necessary to finance such transactions. We cannot be certain that we will be successful in making
investments in such firms or that they will have favorable operating results following our investment, which could have an
adverse effect on our business, financial condition and results of operations.
Our financial results would be adversely affected by any reduction in our assets under management, and may be impacted
by changes in the relative levels of assets under management among our Affiliates.
Investment management fees are primarily based on a percentage of the value of assets under management, and vary with
the nature of the account or product managed. Any decrease in the total level of our assets under management generally, as a
result of either a decline in market value of such assets, including due to exchange rate fluctuations or net outflows, would
reduce our revenue and profitability. Through our Affiliates, we primarily manage active return-oriented products, rather than
indexing strategies, exchange traded funds, fixed income or money market products, all of which generally carry lower fee
rates. Changes in investor risk tolerance or investment preferences could result in investor allocations away from active return-
oriented products or adversely impact our Affiliates’ ability to maintain existing advisory relationships and fee structures.
Additionally, our structured partnership interests are tailored to meet the needs of each Affiliate and are therefore varied, and
our revenue and profitability may be adversely affected by changes in the relative performance and the relative levels of assets
under management among our Affiliates, independent of overall effective fee rates and our total level of assets under
management. Further, certain Affiliates contribute significantly to our earnings and therefore declines in the market value of
assets or net outflows at such Affiliates could have a disproportionate adverse impact on our earnings. Fluctuations in the
amount and mix of our assets under management may be attributable in part to market conditions outside of our control. Any
decrease in the level of our assets under management or adverse changes in the mix among our Affiliates could negatively
impact our financial condition and results of operations.
Historically, equity markets and our common stock have been volatile.
The market price of our common stock historically has experienced and may continue to experience volatility, and the
broader equity markets have experienced and may again experience significant price and volume fluctuations. In addition, our
announcements of our quarterly operating results, including changes in net client cash flows and aggregate assets under
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management, changes in general conditions in the economy or the financial markets and other developments affecting us, our
Affiliates or our competitors could cause the market price of our common stock to fluctuate substantially.
If our reputation is harmed, we could suffer losses in our business and financial results.
Our business depends on earning and maintaining the trust and confidence of our Affiliates and our stockholders. Our
reputation is critical to our business and is vulnerable to threats that may be difficult or impossible to control, and costly or
impossible to remediate. For example, failure to comply with applicable laws, rules or regulations, errors in our public reports
or litigation against us or any of our Affiliates, or the publicity surrounding these events, even if satisfactorily addressed, could
adversely impact our reputation, our relationships with our Affiliates and our ability to negotiate agreements with boutique
investment management firms, as well as negatively impact our financial condition and results of operations.
Our and our Affiliates’ businesses are highly regulated.
Our and our Affiliates’ businesses are subject to complex and extensive regulation by various regulatory and self-
regulatory authorities and exchanges in jurisdictions around the world, as detailed in “Government Regulation” in Item 1.
These laws and regulations impose requirements, restrictions and limitations on our and our Affiliates’ businesses, and
compliance with these laws and regulations results in significant cost and expense. If we or any of our Affiliates were to fail to
comply with applicable laws, rules or regulations or be named as a subject of an investigation or other regulatory action, the
public announcement and potential publicity surrounding any such investigation or action could have a material adverse effect
on our stock price and result in increased costs even if we or our Affiliates were found not to have violated such laws, rules or
regulations. The failure to satisfy regulatory requirements could subject us or our Affiliates to civil liability, criminal liability or
sanctions that might materially impact our or our Affiliates’ businesses. Further, some of these laws and regulations limit the
types of activities in which we or our Affiliates may engage, and any failure to manage our respective businesses to ensure
compliance with applicable regulations and to avoid becoming subject to additional regulations could have a material adverse
effect on our and our Affiliates’ businesses. As investment advisers, our Affiliates and AMG Funds are subject to numerous
obligations, fiduciary duties and other regulatory requirements, where non-compliance could result in censure or termination of
adviser status, litigation or reputational harm, any of which could have a material adverse effect on our stock price and results
of operations.
In the U.S., the Dodd-Frank Wall Street Reform and Consumer Protection Act, which represented a comprehensive
overhaul of the financial services regulatory environment, continues to drive federal agencies to implement numerous new
rules, which may impose additional restrictions and limitations on our and our Affiliates’ businesses as they are adopted.
Rulemaking proposed by the SEC in 2015 may create additional reporting requirements for advisers and funds, and additional
requirements for mutual funds in the areas of liquidity management and the use of derivatives. If adopted as proposed, the
derivatives rule could negatively impact our Affiliates’ ability to manage certain products and impose additional compliance
and operational costs.
Changes in laws or regulatory requirements, or the interpretation or application of such laws and regulatory requirements
by regulatory authorities, can occur without notice and could have a material adverse impact on our and our Affiliates’ financial
results and mode of operations. Globally, proposals have called for more stringent regulation of the financial services industry
in which we and our Affiliates operate, which may make it more likely that changes will occur that could adversely affect our
and our Affiliates’ businesses, our access to capital and the market for our common stock. Regulators continue to consider
whether asset managers or funds, or certain asset management products or activities, should be designated as systemically
important, and therefore subject to additional regulation. In the United Kingdom and Europe, our and our Affiliates’ businesses
may be impacted by financial services reform initiatives enacted or under consideration in the European Union. These new
laws and regulations may also result in increased compliance costs and expenses, and non-compliance may result in fines and
penalties.
Our and our Affiliates’ international operations are subject to foreign risks, including political, regulatory, economic and
currency risks.
We and certain of our Affiliates operate offices or advise clients outside the U.S., and several Affiliates are based outside
the U.S. Accordingly, we and certain of our Affiliates are subject to risks inherent in doing business internationally, in addition
to the risks our businesses face more generally. These risks may include changes in applicable laws and regulatory
requirements, difficulties in staffing and managing foreign operations, longer payment cycles, difficulties in collecting
investment advisory fees receivable, different, and in some cases, less stringent legal, regulatory and accounting regimes,
political instability, fluctuations in currency exchange rates, expatriation controls, expropriation risks and potential adverse tax
consequences. In addition, we and certain of our Affiliates are required to maintain minimum levels of capital, and such capital
requirements may be increased from time to time, which may have the effect of limiting withdrawals of capital, repayment of
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intercompany loans and payment of distributions to us by these Affiliates. These or other risks related to our and our Affiliates’
non-U.S. operations may have an adverse effect on our business, financial condition and results of operations.
Failure to comply with the applicable laws, rules, regulations, codes, directives, notices or guidelines in any jurisdiction
outside of the U.S. could result in a wide range of penalties and disciplinary actions, including fines, censures and the
suspension or expulsion from a particular jurisdiction or market or the revocation of licenses, any of which could adversely
affect our or our Affiliates’ reputations and operations. Regulators in jurisdictions outside of the U.S. could also change their
policies or laws in a manner that might restrict or otherwise impede the ability to offer our Affiliates’ investment products and
services in their respective markets, or we or our Affiliates may be unable to keep up with, or adapt to, the ever changing,
complex regulatory requirements in such jurisdictions or markets, which could further negatively impact our business.
Changes in tax laws or exposure to additional income tax liabilities could have a material impact on our financial
condition, results of operations and liquidity.
We are subject to income taxes as well as non-income-based taxes in both the U.S. and various jurisdictions outside of the
U.S. and are subject to ongoing tax audits in such jurisdictions and may be subject to future tax audits. We regularly assess the
likely outcomes of these audits in order to determine the appropriateness of our tax provision. However, tax authorities may
disagree with certain positions we have taken and assess additional taxes and/or penalties and interest. There can be no
assurance that we will accurately predict the outcomes of these audits, and the actual outcomes of these audits could have a
material impact on our financial condition.
Further, changes in tax laws or tax rulings could materially impact our effective tax rate or have a significant impact on our
future financial condition and results of operations. The U.S. Congress and other government agencies in jurisdictions in which
we do business have maintained a focus on the taxation of multinational companies. For example, the Organization for
Economic Co-operation and Development, which represents a coalition of member countries, is contemplating changes to
numerous international tax principles through its base erosion and profit-shifting project, including interest deductibility,
transfer pricing and eligibility for the benefits of double tax treaties, which could increase tax uncertainty and costs. In addition,
proposals for fundamental U.S. corporate tax reform, if enacted, could change the amount of taxes we are required to pay and
have a significant impact on our financial condition.
Our Affiliates’ autonomy limits our ability to alter their management practices and policies, and we may be held responsible
for liabilities incurred by certain of them.
Although our agreements with our Affiliates typically give us the authority to control and/or vote with respect to certain of
their business activities, we generally are not directly involved in managing our Affiliates’ day-to-day activities, including
investment management policies and procedures, fee levels, marketing, product development, client relationships, employment
and compensation programs and compliance activities. As a consequence, our financial condition and results of operations may
be adversely affected by problems stemming from the day-to-day operations of our Affiliates, where weaknesses or failures in
internal processes or systems or other operational challenges could lead to a disruption of our Affiliates’ operations, liability to
their clients, exposure to disciplinary action or reputational harm.
Some of our Affiliates are limited liability companies or limited partnerships (or equivalent non-U.S. forms) of which we,
or entities controlled by us, are the general partner or managing member. Consequently, to the extent that any of these Affiliates
incur liabilities or expenses that exceed their ability to pay for them, we may be directly or indirectly liable for their payment.
Similarly, an Affiliate’s payment of distributions to us may be subject to claims by potential creditors, and an Affiliate may
default on distributions that are payable to us. In addition, with respect to each of these Affiliates, we may be held liable in
some circumstances as a control person for the acts of the Affiliate or its employees. Our Affiliates also may face various
claims, litigation or complaints from time to time and we cannot predict the eventual outcome of such matters or whether any
matters could become material to a particular Affiliate or us in any reporting period. While we and our Affiliates maintain
errors and omissions and general liability insurance in amounts believed to be adequate to cover certain potential liabilities, we
cannot be certain that we will not have claims that exceed the limits of available insurance coverage, that the insurers will
remain solvent and will meet their obligations to provide coverage or that insurance coverage will continue to be available to us
and our Affiliates with sufficient limits and at a reasonable cost. A judgment in excess of available insurance coverage could
have a material adverse effect on our financial condition and results of operations.
The agreed-upon expense allocation under our structured partnership interests in which we share in the Affiliate’s revenue
without regard to expenses may not be large enough to pay for all of the respective Affiliate’s operating expenses.
In the case of our typical structured partnership interests, such Affiliates have agreed to pay us a specified percentage of
their respective revenue, while using the remainder of revenue to pay that Affiliate’s operating expenses and for distributions to
Affiliate management. We may not anticipate and reflect in those agreements possible changes in the revenue and operating
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expense base of any Affiliate, and the revenue remaining after our specified percentage may not be large enough to pay for all
of an Affiliate’s operating expenses. While our distributions generally have priority, we may elect to defer the receipt of our
share of an Affiliate’s revenue to permit the Affiliate to fund such operating expenses, or we may restructure our relationship
with an Affiliate with the aim of maximizing the long-term benefits to us, but we cannot be certain that any such deferral or
restructured relationship would be of any greater benefit to us. Such a deferral or restructured relationship may have an adverse
effect on our near-term or long-term financial condition and results of operations.
When our structured partnership interest is calculated by reference to the Affiliate’s revenue less certain agreed-upon
expenses, we have direct exposure to fluctuations in revenue and operating expenses.
In the case of our structured partnership interests that are calculated by reference to an Affiliate’s revenue less certain
agreed-upon expenses, we are allocated a set percentage of the Affiliate’s revenue net of the agreed categories of expenses,
thereby participating in any increases or decreases in both revenue and the expenses that are included in the calculation. This
structure allows us to benefit from any decrease in the expenses that are included in the calculation, but also exposes us directly
to any increase in such expenses, which we may not anticipate and which could be significant. Further, the impact of such
decreases and increases in such expenses at these Affiliates on our earnings and our stock price could increase if the portion of
our earnings derived from such Affiliates increases.
Our industry is highly competitive.
Our Affiliates compete with a broad range of domestic and foreign investment management firms, including public and
private investment advisors, firms associated with securities broker-dealers, financial institutions, insurance companies, private
equity firms, sovereign wealth funds and other entities that serve our three principal distribution channels. This competition
may reduce the fees that our Affiliates can obtain for investment management services. We believe that our Affiliates’ ability to
compete effectively with other firms in our three distribution channels depends upon our Affiliates’ products, investment
performance, reputations, and client-servicing capabilities, and the marketing and distribution of their investment products,
among other factors. (See “Competition” in Item 1.) Our Affiliates may not compare favorably with their competitors in any or
all of these categories. From time to time, our Affiliates may also compete with each other for clients. Further, our Affiliates’
ability to compete with other investment management firms also depends, in part, on the relative attractiveness of their
investment philosophies, methods under then-prevailing market trends, fees or a combination of these factors. Our Affiliates
represent a diverse group of boutique investment management firms with predominantly active return-oriented products, rather
than indexing strategies, exchange traded funds, fixed income or money market products, which generally carry lower fee rates.
Changes in investor risk tolerance or investment preferences could result in investor allocation away from active return-
oriented products.
The market for acquisitions of interests in boutique investment management firms is highly competitive. Many other
public and private financial services companies, including commercial and investment banks, private equity firms, sovereign
wealth funds, insurance companies and investment management firms, which may have significantly greater resources than we
do, also invest in or buy boutique investment management firms. Further, our innovative partnership approach with our
Affiliates is designed to provide enhanced incentives for management owners while enabling us to protect our interests,
including through structured partnership interests and long-term employment agreements with key members of the firm. Target
investment management firms may prefer investments in their firms under terms and structures offered by our competitors. We
cannot guarantee that we will be able to compete effectively with such companies, that new competitors will not enter the
market or that such competition will not make it more difficult or not feasible for us to maintain existing investments or to
make new investments in boutique investment management firms.
The failure to consummate announced investments in new boutique investment management firms could have an adverse
effect on our financial condition and results of operations.
Consummation of our announced investments are generally subject to a number of closing conditions, contingencies and
approvals, including but not limited to obtaining certain consents of the boutique investment management firms’ clients. In the
event that an announced transaction is not consummated, we may experience a decline in the price of our common stock to the
extent that the then-current market price reflects a market assumption that we will complete the announced transaction. In
addition, the fact that a transaction did not close after we announced it publicly may negatively affect our ability and prospects
to consummate transactions in the future. Finally, we must pay costs related to these investments, including transaction fees,
even if the investments are not completed, which may have an adverse effect on our financial condition and results of
operations.
We expect that we will need to raise additional capital in the future, and existing or future resources may not be available to
us in sufficient amounts or on acceptable terms.
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While we believe that our existing cash resources and cash flow from operations will be sufficient to meet our working
capital needs for normal operations for the foreseeable future, our continuing acquisitions of interests in new boutique
investment management firms and existing Affiliates may require additional capital. In addition, we are contingently liable to
make additional purchase payments (of up to $252.1 million through 2019) upon the achievement of specified financial targets
in connection with certain of our prior acquisitions. As of December 31, 2015, we expected to make payments of $14.0 million
(none in 2016) to settle such obligations. We also have committed to co-invest in certain investment partnerships, which may
be called in future periods.
Subject to certain limitations, majority-owned Affiliate equity interests generally provide holders the conditional right to
put equity interests to us over time. Because these obligations are conditional and dependent upon the individual equity-
holder’s decision to sell his or her equity, it is difficult to predict the frequency and magnitude of these repurchases (our
Redeemable non-controlling interests balance at December 31, 2015 was $612.5 million). We may also call all or a portion of
these equity interests upon, among other events, the termination of an equity holder’s employment, although these rights may
be limited or suspended in certain circumstances. These obligations may require more cash than is then available from
operations. Thus, we may need to raise capital by making additional borrowings or by selling shares of our common stock or
other equity or debt securities, or to otherwise refinance a portion of these obligations.
As of December 31, 2015, we had outstanding total debt of $1.9 billion. Our level of indebtedness may increase if we fund
one or more future acquisitions through borrowings under our credit facilities. This additional indebtedness could increase our
vulnerability to general adverse economic and industry conditions and will require us to dedicate a greater portion of our cash
flow from operations to payments on our indebtedness.
The financing activities described above could increase our interest expense, decrease our Net income (controlling interest)
or dilute the interests of our existing stockholders. In addition, our access to further capital, and the cost of capital we are able
to access, is influenced by a number of factors, including the state of global credit and equity markets, interest rates, credit
spreads and our credit ratings. We are rated A3 by Moody’s Investors Service and BBB+ by Standard & Poor’s Ratings
Services. The rating agencies could decide to downgrade our ratings or the entire investment management industry, thereby
making it difficult to access capital markets. In addition, a reduction in our credit rating could increase our borrowing costs.
Our debt agreements impose certain covenants relating to the conduct of our business, including financial covenants under
our credit facilities, and, if amounts borrowed or outstanding under these agreements were subject to accelerated
repayment, we may not have sufficient assets or liquidity to repay such amounts in full.
Our credit facilities require us to maintain specified financial ratios, including a maximum leverage ratio and a minimum
interest coverage ratio, and also contain customary affirmative operating covenants and negative covenants that, among other
things, place certain limitations on our and our subsidiaries’ ability to incur debt, merge or transfer assets and on our ability to
create liens. The indentures governing our senior notes also contain restrictions on our ability to merge or transfer assets and on
our ability to create liens. The breach of any covenant (either due to our actions or, in the case of financial covenants, due to a
significant and prolonged market driven decline in our operating results) could result in a default under the applicable debt
agreement. In the event of any such default, lenders that are party to the credit facilities could refuse to make further extensions
of credit to us. Further, in the event of certain defaults, amounts borrowed under the credit facilities and/or outstanding under
the senior notes, together with accrued interest and other fees, could become immediately due and payable. If any indebtedness
under the credit facilities or the indentures governing the senior notes was subject to accelerated repayment, we might not have
sufficient liquid assets to repay such indebtedness in full.
We have substantial intangibles on our balance sheet, and any impairment of our intangibles could adversely affect our
results of operations.
At December 31, 2015, our total assets were $7.8 billion, of which $4.4 billion were intangible assets, and $1.9 billion
were equity method investments in Affiliates, an amount comprised primarily of intangible assets. We cannot be certain that we
will realize the value of such intangible assets. An impairment of our intangible assets or an other than temporary decline in the
value of our equity investments could adversely affect our financial condition and results of operations.
We and our Affiliates rely on certain key personnel and cannot guarantee their continued service.
We depend on the efforts of our executive officers and our other officers and employees. Our executive officers, in
particular, play an important role in the stability and growth of our existing Affiliates and in identifying potential investment
opportunities for us. We do not have employment agreements with our executive officers, although each has a significant
deferred equity interest in the Company and is subject to non-solicitation and non-competitive restrictions that may be triggered
upon their departure. However, there is no guarantee that these officers will remain with the Company.
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In addition, our Affiliates depend heavily on the services of key principals, who in many cases have managed their firms
for many years. These principals often are primarily responsible for their firm’s investment decisions. Although we use a
combination of economic incentives, transfer restrictions and, in some instances, non-solicitation agreements and employment
agreements in an effort to retain key management personnel, there is no guarantee that these principals will remain with their
firms. Since certain Affiliates contribute significantly to our revenue, the loss of key management personnel at these Affiliates
could have a disproportionate adverse impact on our business.
Our or our Affiliates’ controls and procedures may fail or be circumvented, our or our Affiliates’ risk management policies
and procedures may be inadequate, and operational risk could adversely affect our or our Affiliates’ reputation and
financial position.
We and our Affiliates have adopted various controls, procedures, policies and systems to monitor and manage risk in our
and their businesses. While we currently believe that our and our Affiliates’ operational controls are effective, we cannot
provide assurance that those controls, procedures, policies and systems will always be adequate to identify and manage the
internal and external risks in our and our Affiliates’ various businesses. Furthermore, we or our Affiliates may have errors in
our business processes or fail to implement proper procedures in operating our businesses, which may expose us or our
Affiliates to risk of financial loss or failure to comply with a regulatory requirement. We and our Affiliates are also subject to
the risk that employees or contractors, or other third parties may deliberately seek to circumvent established controls to commit
fraud or act in ways that are inconsistent with controls, policies and procedures. The financial and reputational impact of
control failures can be significant.
In addition, our and our Affiliates’ businesses and the markets in which we and our Affiliates operate are continuously
evolving. If our or our Affiliates’ risk framework is ineffective, either because of a failure to keep pace with changes in the
financial markets, regulatory requirements, our or our Affiliates’ businesses, counterparties, clients or service providers or for
other reasons, we or our Affiliates could incur losses, suffer reputational damage or be out of compliance with applicable
regulatory or contractual mandates or expectations.
Provisions in our organizational documents, Delaware law and our debt agreements could delay or prevent a change in
control of our company.
Provisions in our charter and by-laws and anti-takeover provisions under Delaware law could discourage, delay or prevent
an unsolicited change in control in the Company. These provisions may also have the effect of making it more difficult for
third parties to replace our current management without the consent of our Board of Directors. Provisions in our charter and by-
laws that could delay or prevent an unsolicited change in control include:
•
•
the ability of our Board of Directors to issue preferred stock and to determine the terms, rights and preferences of the
preferred stock without stockholder approval; and
the prohibition on the right of stockholders to call meetings or act by written consent and limitations on the right of
stockholders to present proposals or make nominations at stockholder meetings.
Delaware law also imposes restrictions on mergers and other business combinations between us and any holder of 15
percent or more of our outstanding common stock. In addition, our credit facilities and the indentures governing our senior
notes contain various covenants that limit our ability, among other things, to consolidate, merge, sell, or otherwise dispose of all
or substantially all of our assets. Further, given our permanent partnership approach, which is designed to preserve our
Affiliates’ investment and operational autonomy and independence, a change in control may also be viewed negatively by our
Affiliates, impacting their relationship with us.
These anti-takeover provisions and other factors may inhibit a change of control in circumstances that could give our
stockholders the opportunity to realize a premium over the market price in our common stock, and may result in negative
impacts on our financial results in periods following a change of control.
The sale or issuance of substantial amounts of our common stock could adversely impact the price of our common stock.
The sale or issuance of substantial amounts of our common stock in the public market could adversely impact its price. In
connection with our financing activities, we have issued securities and entered into contracts, including our junior convertible
trust preferred securities and forward equity agreements, that may result in the issuance of our common stock upon the
occurrence of certain events. We also have exercisable options outstanding and unvested restricted stock that have been
awarded under our share-based incentive plans. Additionally, we have the right to settle certain Affiliate equity repurchase
obligations with shares of our common stock. Moreover, in connection with future financing activities, we may issue
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additional convertible securities or shares of our common stock, including through forward equity transactions. Any such
issuance of shares of our common stock could have the effect of substantially diluting the interests of our current equity
holders. In the event that a large number of shares of our common stock are sold in the public market, the price of our common
stock may fall.
Failure to maintain and properly safeguard an adequate technology infrastructure may limit our or our Affiliates’ growth,
result in losses or disrupt our or our Affiliates’ businesses.
Our and our Affiliates’ businesses are reliant upon financial, accounting and technology systems and networks to process,
transmit and store information, including sensitive client and proprietary information, and to conduct many business activities
and transactions with clients, advisors, vendors and other third parties. The failure to implement, maintain and safeguard an
infrastructure commensurate with the size and scope of our and our Affiliates’ businesses could impede productivity and
growth, which could adversely impact our financial condition and results of operations. Further, we and our Affiliates rely on
third parties for certain aspects of our respective businesses, including financial intermediaries and technology infrastructure
and service providers, including brokers, custodians, administrators and other agents, and these parties are also susceptible to
similar risks.
Although we and our Affiliates take protective measures and endeavor to modify them as circumstances warrant, computer
systems, software, networks and mobile devices, and those of third parties on whom we and our Affiliates rely, may be
vulnerable to cyber attacks, breaches, unauthorized access, theft, misuse, computer viruses or other malicious code and other
events that could have a security impact. If any such events occur, it could jeopardize confidential, proprietary or other
sensitive information of ours, our Affiliates and our respective clients, employees or counterparties that may be stored in, or
transmitted through, internal or third-party computer systems, networks and mobile devices, or could otherwise cause
interruptions or malfunctions in our and our Affiliates’ operations or those of our respective clients or counterparties. Despite
efforts to ensure the integrity of systems and networks, it is possible that we, our Affiliates or third party service providers may
not be able to anticipate or to implement effective preventive measures against all threats, especially because the techniques
used change frequently and can originate from a wide variety of sources. As a result, we or our Affiliates could experience
disruption, significant losses, increased costs, reputational harm, regulatory actions or legal liability, any of which could have a
material adverse effect on our financial condition and results of operations. We or our Affiliates may be required to spend
significant additional resources to modify protective measures or to investigate and remediate vulnerabilities or other
exposures, and we or our Affiliates may be subject to litigation and financial losses that are either not insured against fully or
not fully covered through any insurance that we or our Affiliates maintain.
Our financial results could be adversely affected by the financial stability of other financial institutions.
We and our Affiliates routinely execute transactions with various counterparties in the financial services industry.
Historical market volatility highlights the interconnection of the global markets and demonstrates how the deteriorating
financial condition of one institution may materially and adversely impact the performance of other institutions. We and our
Affiliates may be exposed to credit, operational or other risk in the event that a counterparty with whom we or our Affiliates
transact defaults on its obligations, or if there are other unrelated systemic failures in the markets.
Investment management contracts are subject to termination on short notice.
Through our Affiliates, we derive almost all of our revenue from clients pursuant to investment management contracts.
While certain Affiliates’ private equity and alternative products have long-term commitment periods, many of our Affiliates’
investment management contracts are terminable by the client without penalty upon relatively short notice (typically not longer
than 60 days) and may not be assignable without consent. We cannot be certain that our Affiliates will be able to retain their
existing clients or attract new clients. If their clients withdraw a substantial amount of funds, it is likely to harm our results. In
addition, investment management contracts with mutual funds are subject to annual approval by each fund’s board of directors.
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Item 1B. Unresolved Staff Comments
There are no unresolved written comments that were received from the SEC staff 180 days or more before the end of our
fiscal year relating to our periodic or current reports under the Securities Exchange Act of 1934, as amended.
Item 2. Properties
We conduct our operations around the world using a combination of leased and owned facilities. While we believe we
have suitable property resources currently, we will continue to evaluate our property needs and will complement these
resources as necessary.
Our principal offices are located at 777 South Flagler Drive, West Palm Beach, Florida; 600 Hale Street, Prides Crossing,
Massachusetts; and 35 Park Lane, London, England. We also lease offices in Conshohocken, Pennsylvania; Greenwich,
Connecticut; Chicago, Illinois; Sydney, Australia; Toronto, Canada; Zurich, Switzerland; Hong Kong; and Dubai, United Arab
Emirates. In addition, each of our Affiliates leases office space in the city or cities in which it conducts business, as appropriate
for their respective business needs from time to time.
Item 3. Legal Proceedings
From time to time, we and our Affiliates may be parties to various claims, suits, complaints and regulatory inquiries,
certain of which are described in the notes to our Consolidated Financial Statements. Currently, there are no such claims, suits,
complaints or regulatory inquiries against us or our Affiliates that, in our opinion, would have a material adverse effect on our
financial position, liquidity or results of operations.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Our common stock is traded on the New York Stock Exchange (symbol: AMG). The following table sets forth the high and
low prices as reported on the New York Stock Exchange since January 1, 2014 for the periods indicated.
2014
First quarter
Second quarter
Third quarter
Fourth quarter
2015
First quarter
Second quarter
Third quarter
Fourth quarter
High
Low
$ 219.39
206.19
214.41
216.49
$ 180.85
176.85
192.34
174.43
$ 221.46
230.63
221.80
190.74
$ 191.36
211.98
164.54
141.68
The closing price for a share of our common stock as reported on the New York Stock Exchange on February 22, 2016 was
$134.99. As of February 22, 2016, there were 19 stockholders of record, including banks, brokers and other financial
institutions holding shares in omnibus accounts for their customers (in total representing substantially all of the beneficial
holders of our common stock).
We have not declared a cash dividend with respect to the periods presented. We do not currently anticipate paying cash
dividends on our common stock as we intend to retain earnings to finance new Affiliate investments, repay indebtedness, pay
interest and income taxes, repurchase debt securities and shares of our common stock when appropriate, and develop our
existing business.
Issuer Purchases of Equity Securities
Period
October 1-31, 2015
November 1-30, 2015
December 1-31, 2015
Total
__________________________
Total Number of
Shares
Purchased
Average Price
Paid Per Share
Total Number of Shares
Purchased as Part of
Publicly Announced Plans
or Programs
— $
201,038
—
201,038
—
169.82
—
169.82
—
201,038
—
201,038
Maximum Number of
Shares that May Yet Be
Purchased Under
Outstanding Plans or
Programs(1)
2,491,068
2,290,030
2,290,030
(1) Our Board of Directors has periodically authorized share repurchase programs, most recently in May 2015 authorizing us
to repurchase up to 3.0 million shares of our common stock. Purchases may be made from time to time, at management's
discretion. As of December 31, 2015, 2.3 million shares remained available for repurchase under the May 2015 program,
which does not expire.
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The following graph compares the cumulative stockholder return on our common stock from December 31, 2010 through
December 31, 2015, with the cumulative total return, during the same period, on the Standard & Poor’s 500 Index, the
Standard & Poor’s 500 Financial Sector Index and a peer group comprised of AllianceBernstein Holding L.P., Ameriprise
Financial, Inc., BlackRock, Inc., Eaton Vance Corp., Franklin Resources, Inc., Invesco Ltd., Legg Mason, Inc., T. Rowe Price
Group, Inc. and Waddell & Reed Financial, Inc. The comparison assumes the investment of $100 on December 31, 2010 in our
common stock and each of the comparison indices and, in each case, assumes reinvestment of all dividends.
17
Table of Contents
Item 6. Selected Financial Data
The following table presents selected financial data for the last five years. This data should be read in conjunction with,
and is qualified in its entirety by reference to, the Consolidated Financial Statements and accompanying notes included
elsewhere in this Annual Report on Form 10-K.
(in millions, except as noted and per share data)
Assets under Management (at period end, in billions)
Average Assets under Management (in billions)
Statement of Income Data
Revenue
Net income
Net income (controlling interest)
Earnings per share (diluted)
Other Financial Data
EBITDA (controlling interest)(1)
Economic net income (controlling interest)(1)
Economic earnings per share(1)
Balance Sheet Data
Total assets
Long-term debt
Redeemable non-controlling interests
Total equity
__________________________
For the Years Ended December 31,
2011
2012
2013
2014
2015
$
327.5
$
431.8
$
537.3
$ 620.2
$
611.3
330.6
381.2
483.8
585.9
623.9
$ 1,704.8
$ 1,805.5
$ 2,188.8
$2,510.9
$ 2,484.5
359.6
164.9
3.11
411.4
174.0
3.28
669.6
360.5
6.55
785.6
452.1
8.01
833.7
516.0
9.28
$
471.3
$
543.4
$
819.9
$ 900.8
$
942.2
351.0
6.62
408.8
7.71
570.1
10.31
644.4
11.45
691.2
12.55
$ 5,218.9
$ 6,187.1
$ 6,318.8
$7,698.1
$ 7,784.8
1,198.2
1,630.6
1,383.7
1,894.9
1,894.8
451.8
477.5
641.9
645.5
612.5
2,499.6
3,041.4
3,144.6
3,643.2
3,769.1
(1) EBITDA (controlling interest) and Economic net income (controlling interest), including Economic earnings per share, are
non-GAAP performance measures and are discussed in “Supplemental Performance Measures” in Item 7.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations of Affiliated
Managers Group, Inc. and its subsidiaries (collectively, the “Company”) should be read in conjunction with the “Forward-
looking Statements” section set forth in Part I and the “Risk Factors” section set forth in Item 1A of Part I of this Annual
Report on Form 10-K and in any more recent filings with the U.S. Securities and Exchange Commission, each of which
describes these risks, uncertainties and other important factors in more detail.
Executive Overview
The following executive overview summarizes the significant trends affecting our results of operations and financial
condition. This overview and the remainder of this Management’s Discussion and Analysis of Financial Condition and Results
of Operations should be read in conjunction with the Consolidated Financial Statements of the Company and the notes thereto
contained elsewhere in this Annual Report on Form 10-K.
We are a global asset management company with equity investments in leading boutique investment management firms,
which we refer to as our “Affiliates.” Our innovative partnership approach allows each Affiliate’s management team to own
significant equity in their firm and maintain operational autonomy. Our strategy is to generate shareholder value through the
growth of existing Affiliates, as well as through investments in new and additional investments in existing Affiliates. In
addition, we provide centralized assistance to our Affiliates in strategic matters, marketing, distribution, product development
and operations.
We hold meaningful equity interests in each of our Affiliates. In certain cases, we own a majority interest while in other
cases we own a minority interest. In all cases, Affiliate management retains a significant equity interest in their own firm.
Affiliate management equity ownership (along with our ownership) aligns our interests, enhances Affiliate management equity
incentives and preserves Affiliate management's opportunity to participate directly in the long-term future growth of their firms.
Our innovative partnership approach provides Affiliate management with a degree of liquidity and financial diversification and
ensures that our Affiliates maintain investment and operational autonomy in managing their businesses, as well as their unique
entrepreneurial culture and independence.
Given our permanent partnership approach, when we own a majority of the equity interests, we address the ongoing
succession planning issues facing the Affiliate’s principal owners as they transition incentives to future generations by
facilitating the transfer of equity over time to the next generation of Affiliate management. In cases in which we own a
minority of the equity interests, we typically do not have an obligation to repurchase Affiliate equity interests, but may make
additional investments to further facilitate Affiliate ownership transition.
We completed majority investments in Baker Street Advisors, LLC on April 1, 2015 and myCIO Wealth Partners, LLC on
October 1, 2015. We also completed minority investments in Abax Investments (Pty) Ltd on December 18, 2015 and Ivory
Investment Management, L.P. on December 31, 2015, both of which are accounted for under the equity method of accounting.
In addition, subsequent to year end we completed minority investments in Systematica Investments L.P. and Baring Private
Equity Asia on January 4, 2016, both of which will also be accounted for under the equity method of accounting. Following
the close of these transactions, Affiliate management will continue to hold a significant portion of the equity in their respective
businesses and direct their day-to-day operations.
For the year ended December 31, 2015, Net income (controlling interest) was $516.0 million, and Earnings per share
(diluted) was $9.28, representing a 16% increase over the prior year. For the year ended December 31, 2014, Net income
(controlling interest) was $452.1 million, and Earnings per share (diluted) was $8.01.
For the year ended December 31, 2015, EBITDA (controlling interest) was $942.2 million, Economic net income
(controlling interest) was $691.2 million, and Economic earnings per share was $12.55, representing a 10% increase over the
prior year. For the year ended December 31, 2014, EBITDA (controlling interest) was $900.8 million, Economic net income
(controlling interest) was $644.4 million, and Economic earnings per share was $11.45. EBITDA (controlling interest) and
Economic net income (controlling interest), including Economic earnings per share, are non-GAAP performance measures and
are discussed in “Supplemental Performance Measures.”
For the year ended December 31, 2015, our assets under management decreased 1% to $611.3 billion, primarily due to a
$15.7 billion decrease from changes in markets and a $11.1 billion decrease from changes in foreign exchange rates, partially
offset by $21.3 billion from investments in new Affiliates.
The table below shows our financial highlights:
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Table of Contents
(in millions, except as noted and per share data)
Assets under management (in billions)
Average assets under management (in billions)
Revenue
Net income (controlling interest)
Earnings per share (diluted)
EBITDA (controlling interest)(1)
Economic net income (controlling interest)(1)
Economic earnings per share(1)
__________________________
2013
2014
% Change
2015
% Change
$ 537.3
$ 620.2
483.8
585.9
2,188.8
2,510.9
360.5
6.55
452.1
8.01
15% $ 611.3
21%
623.9
15% 2,484.5
25%
22%
516.0
9.28
$ 819.9
$ 900.8
10% $ 942.2
570.1
10.31
644.4
11.45
13%
11%
691.2
12.55
(1)%
6 %
(1)%
14 %
16 %
5 %
7 %
10 %
(1) EBITDA (controlling interest) and Economic net income (controlling interest), including Economic earnings per share, are
non-GAAP performance measures and are discussed in “Supplemental Performance Measures.”
Supplemental Performance Measures
EBITDA (controlling interest)
As supplemental information, we provide a non-GAAP measure referred to as EBITDA (controlling interest). EBITDA
(controlling interest) represents the controlling interest’s operating performance before our share of interest expense, income
taxes, depreciation and amortization. We believe that many investors use this information when comparing the financial
performance of companies in the investment management industry. EBITDA, as calculated by us, may not be consistent with
computations of EBITDA by other companies. This non-GAAP performance measure is provided in addition to, but not as a
substitute for, Net income (controlling interest) or any other GAAP measure of financial performance or liquidity.
The following table provides a reconciliation of Net income (controlling interest) to EBITDA (controlling interest):
(in millions)
Net income (controlling interest)
Interest expense
Imputed interest expense and contingent payment arrangements(1)
Income taxes
Depreciation and other amortization
Intangible amortization and impairments(2)
EBITDA (controlling interest)
__________________________
2013
2014
2015
$
360.5
$
452.1
$
87.3
31.7
185.0
6.5
148.9
76.6
30.1
213.4
7.6
121.0
$
819.9
$
900.8
$
516.0
88.9
(40.3)
251.3
7.9
118.4
942.2
(1) During 2013, we adjusted our estimate of contingent payment obligations and recognized a loss totaling $10.3 million.
During 2014, we redeemed our 2006 junior convertible securities and recognized a loss of $18.8 million. During 2015, we
adjusted our estimate of our contingent payment obligations and recorded a gain of $44.7 million. These amounts are
included in Imputed interest expense and contingent payment arrangements in the Consolidated Statements of Income.
(2) Our reported intangible amortization includes amortization attributable to our non-controlling interests, which is not added
back to Net income (controlling interest) to measure our EBITDA (controlling interest). Further, for our equity method
Affiliates, we do not separately report revenue or expenses (including intangible amortization) in our Consolidated
Statements of Income. Our share of these Affiliates’ amortization is reported in Income from equity method investments.
The following table summarizes the Intangible amortization and impairments shown above:
20
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(in millions)
Reported Intangible amortization and impairments
Intangible amortization—non-controlling interests
Equity method intangible amortization
Total
Economic Net Income (controlling interest)
2013
128.2
(21.0)
41.7
148.9
$
$
2014
122.2
(33.5)
32.3
121.0
2015
115.4
(31.3)
34.3
118.4
$
$
$
$
As supplemental information, we provide non-GAAP performance measures that we refer to as Economic net income
(controlling interest) and Economic earnings per share. We consider Economic net income (controlling interest) an important
measure of our financial performance, as we believe it best represents our operating performance before our share of non-cash
expenses relating to our acquisition of interests in our Affiliates. Economic net income (controlling interest) and Economic
earnings per share are used by our management and Board of Directors as our principal performance benchmarks, as well as
one of the measures for aligning executive compensation with stockholder value. These measures are provided in addition to,
but not as a substitute for, Net income (controlling interest) and Earnings per share (diluted), or any other GAAP measure of
financial performance or liquidity.
Under our Economic net income (controlling interest) definition, we add to Net income (controlling interest) our share of
intangible amortization (including equity method intangible amortization) and impairments, deferred taxes related to intangible
assets, and other economic items, which include non-cash imputed interest expense (principally related to the accounting for
convertible securities and contingent payment arrangements) and certain Affiliate equity expenses. We add back intangible
amortization and impairments attributable to acquired client relationships because these expenses do not correspond to the
changes in value of these assets, which do not diminish predictably over time. The portion of deferred taxes generally
attributable to intangible assets (including goodwill) is added back because we believe it is unlikely these accruals will be used
to settle material tax obligations. We add back non-cash imputed interest expense and reductions or increases in contingent
payment arrangements because it better reflects our contractual interest obligations. We add back non-cash expenses relating to
certain transfers of equity between Affiliate management when these transfers have no dilutive effect to our shareholders.
Economic earnings per share represents Economic net income (controlling interest) divided by the average shares
outstanding (adjusted diluted). In this calculation, the potential share issuance in connection with our convertible securities is
measured using a “treasury stock” method. Under this method, only the net number of shares of common stock equal to the
value of these securities in excess of par, if any, are deemed to be outstanding. We believe the inclusion of net shares under a
treasury stock method best reflects the benefit of the increase in available capital resources (which could be used to repurchase
shares of common stock) that occurs when these securities are converted and we are relieved of our debt obligation. This
method does not take into account any increase or decrease in our cost of capital in an assumed conversion.
The following table provides a reconciliation of Net income (controlling interest) to Economic net income (controlling
interest):
(in millions, except per share data)
Net income (controlling interest)
Intangible amortization and impairments(1)
Intangible-related deferred taxes(2)
Other economic items(3)
Economic net income (controlling interest)
Average shares outstanding (diluted)
Assumed issuance of junior convertible securities shares
Dilutive impact of senior convertible securities shares
Dilutive impact of junior convertible securities shares
Average shares outstanding (adjusted diluted)
Economic earnings per share
__________________________
2013
$ 360.5
148.9
38.1
22.6
$ 570.1
56.7
(2.0)
0.4
0.2
55.3
$ 10.31
2014
$ 452.1
121.0
47.8
23.5
$ 644.4
58.4
(2.2)
—
0.1
56.3
$ 11.45
2015
$ 516.0
118.4
77.7
(20.9)
$ 691.2
57.2
(2.2)
—
0.1
55.1
$ 12.55
(1) See Note (2) to the table in the “EBITDA (controlling interest)” section.
(2)
In 2013 and 2015, we recorded reductions in the corporate tax rate in the United Kingdom, which decreased our
intangible-related deferred taxes by $7.2 million and $6.5 million, respectively. In addition, in 2013 and 2014, we
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recorded reductions in our intangible-related deferred taxes for the restructuring of our foreign operations of $5.9 million
and $24.5 million, respectively.
(3) During 2013, we adjusted our estimate of contingent payment obligations and recognized a loss totaling $10.3 million
($6.3 million net of tax). During 2014, we redeemed our 2006 junior convertible securities and recognized a loss of $18.8
million ($11.6 million net of tax). During 2015, we adjusted our estimate of our contingent payment obligations and
recorded a gain of $44.7 million ($27.8 million net of tax). These amounts are included in Imputed interest expense and
contingent payment arrangements in the Consolidated Statements of Income.
Assets under Management
The following table presents changes in our reported assets under management by distribution channel:
Statement of Changes
(in billions)
December 31, 2012
Client cash inflows
Client cash outflows
Net client cash flows
New investments
Market changes
Foreign exchange(1)
Other
December 31, 2013
Client cash inflows
Client cash outflows
Net client cash flows
New investments
Market changes
Foreign exchange(1)
Other
December 31, 2014
Client cash inflows
Client cash outflows
Net client cash flows
New investments
Market changes
Foreign exchange(1)
Other
December 31, 2015
__________________________
Institutional
Mutual Fund
$
254.3
$
121.9
$
$
45.4
(28.0)
17.4
—
33.8
(2.5)
(2.4)
300.6
52.1
(31.9)
20.2
25.2
10.6
(3.9)
2.9
52.7
(31.1)
21.6
—
25.6
0.4
(0.1)
$
169.4
$
42.9
(43.1)
(0.2)
14.4
7.3
(2.5)
—
$
355.6
$
188.4
$
55.1
(48.4)
6.7
7.0
(15.0)
(6.4)
(0.4)
347.5
$
48.3
(59.5)
(11.2)
3.0
(1.4)
(3.0)
(0.0)
High Net
Worth
Total
$
$
$
55.6
10.9
(9.2)
1.7
3.0
7.9
(0.8)
(0.1)
67.3
10.7
(9.3)
1.4
4.1
4.4
(0.9)
(0.1)
76.2
14.2
(12.7)
1.5
11.3
0.7
(1.7)
(0.0)
431.8
109.0
(68.3)
40.7
3.0
67.3
(2.9)
(2.6)
537.3
105.7
(84.3)
21.4
43.7
22.3
(7.3)
2.8
620.2
117.6
(120.6)
(3.0)
21.3
(15.7)
(11.1)
(0.4)
611.3
$
175.8
$
88.0
$
(1) Foreign exchange reflects the impact of translating non-U.S. dollar denominated assets under management into U.S.
dollars for reporting purposes.
The following table presents changes in our average assets under management, EBITDA (controlling interest) and Net
income (controlling interest) by distribution channel:
22
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(in millions, except as noted)
2013
2014
% Change
2015
% Change
For the Years Ended December 31,
Average Assets under Management (in billions)
Including equity method Affiliates
Institutional
Mutual Fund
High Net Worth
Total
EBITDA (controlling interest)(1)
Institutional
Mutual Fund
High Net Worth
Total
Net income (controlling interest)
Institutional
Mutual Fund
High Net Worth
Total
__________________________
$
277.1
$
$
$
$
$
145.7
61.0
483.8
493.3
246.1
80.5
819.9
219.9
103.4
37.2
$
$
$
$
$
360.5
$
334.0
178.5
73.4
585.9
482.8
324.9
93.1
900.8
227.0
180.1
45.0
452.1
21 % $
23 %
20 %
353.4
187.5
83.0
21 % $
623.9
(2)% $
32 %
16 %
494.6
351.3
96.3
10 % $
942.2
3 % $
74 %
21 %
25 % $
229.3
229.7
57.0
516.0
6%
5%
13%
6%
2%
8%
3%
5%
1%
28%
27%
14%
(1) EBITDA (controlling interest) is a non-GAAP performance measure and is discussed in “Supplemental Performance
Measures.”
Results of Operations
When we own a majority of the equity interests of an Affiliate, we consolidate the Affiliate’s financial results in our
revenue and operating expenses and primarily use structured partnership interests in which we share in the Affiliate’s revenue
without regard to expenses. When we own a minority interest, we use the equity method of accounting and our share of the
Affiliate’s financial results is reported (net of intangible amortization) in Income from equity method investments. For these
equity method Affiliates, we either share in the Affiliate’s revenue without regard to expenses or share in the Affiliate’s revenue
less certain agreed-upon expenses. Additional investments in existing or new Affiliates will generally impact our financial
results in the year of investment and, depending upon the timing, in the following year when the full-year financial results of
the Affiliate investment are reflected in our financial statements.
Revenue
We derive most of our revenue from asset-based and performance fees from investment management services. Asset-based
fees are typically determined as a percentage fee charged on the value of a client’s assets under management. Performance fees
are billed based upon investment performance, typically on an absolute basis or relative to a benchmark.
Performance fees are typically billed less frequently than asset-based fees and, although performance fees inherently
depend on investment performance and will vary from period to period, we anticipate performance fees will be a recurring
component of our revenue.
Our revenue is generally determined by the level of our average assets under management and the composition of our
assets across our distribution channels and active return-oriented strategies within our distribution channels, which realize
different fee rates. Our ratio of asset-based fees to average assets under management (“ratio of average fee rates”) is calculated
as asset-based fees divided by average assets under management and may change as a result of new investments, client cash
flows, market changes, including foreign exchange rate changes, or changes in contractual fees. Therefore, changes in this ratio
should not necessarily be viewed as an indicator of changes in contractual fee rates billed by our Affiliates to their clients.
Average assets under management reflect the particular billing patterns of products and client accounts. Therefore, we
believe average assets under management more closely correlates to the billing cycle of each distribution channel and, as such,
provides a more meaningful relationship to revenue. In the Mutual Fund distribution channel, average assets under
management generally represent an average of the daily net assets under management. For the Institutional and High Net Worth
distribution channels, an account that bills in advance is included in the calculation of average assets under management on the
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basis of beginning of period assets under management, while an account that bills in arrears is reflected on the basis of end of
period assets under management. Assets under management attributable to any investments in new Affiliates are included on a
weighted average basis for the period from the closing date of the respective new investment.
The following table summarizes our consolidated Affiliates’ average assets under management and revenue by distribution
channel:
Average Assets under Management (in billions)(1)
For the Years Ended December 31,
2013
2014
% Change
2015
% Change
Institutional
Mutual Fund
High Net Worth
Total
Revenue (in millions)(2)
Institutional
Mutual Fund
High Net Worth
Total
__________________________
$
169.4
$
116.3
49.1
188.6
141.7
57.5
11% $
22%
17%
186.4
143.2
66.8
334.8
$
387.8
16% $
396.4
948.7
$ 1,022.8
1,023.0
1,242.6
217.1
$ 2,188.8
245.5
$ 2,510.9
8% $
979.4
21% 1,238.2
266.9
13%
15% $ 2,484.5
$
$
(1)%
1 %
16 %
2 %
(4)%
0 %
9 %
(1)%
(1) Amounts do not include assets under management at equity method Affiliates, which are summarized separately in the
“Income from equity method investments” section.
(2)
In 2013, 2014 and 2015, revenue attributable to clients domiciled outside the U.S. was approximately 38%, 37% and 40%
of total revenue, respectively.
Our revenue decreased $26.4 million or 1% in 2015, primarily from a $146.5 million or 6% decrease in asset-based fees at
existing Affiliates. This decrease in asset-based fees was principally the result of a 5% decline in average assets under
management and a decline in our ratio of average fee rates, which reduced asset-based fees by $108.5 million or 5% and $38.0
million or 1%, respectively. The decline in our average fee rates was due to changes in the composition of our assets under
management across our distribution channels. The decrease in revenue was partially offset by a $131.8 million or 5% increase
in asset-based fees from the full year results of our 2014 and 2015 investments in new Affiliates.
Our revenue increased $322.1 million or 15% in 2014, primarily from a $257.6 million or 12% increase in asset-based fees
at existing Affiliates. This increase in asset-based fees was the result of a 12% increase in average assets under management.
The increase in revenue was also the result of a $67.3 million or 3% increase in asset-based fees from our 2014 investments in
new Affiliates.
The following discusses the changes in our revenue by distribution channel.
Institutional Distribution Channel
Our revenue in the Institutional distribution channel decreased $43.4 million or 4% in 2015, primarily from a $66.8 million
or 6% decrease in asset-based fees at existing Affiliates. This decrease in asset-based fees was principally the result of a 6%
decline in average assets under management and a decline in our ratio of average fee rates, which reduced asset-based fees by
$53.2 million or 5% and $13.6 million or 1%, respectively. The decline in our ratio of average fee rates was due to a change in
the composition of our assets under management within the distribution channel, primarily from decreases in assets under
management in products that realize comparatively higher fee rates, partially offset by an increase in assets under management
in products that realized comparatively lower fee rates. The decrease in revenue was also the result of a $15.8 million or 2%
decrease in performance fees. These decreases in revenue were partially offset by a $39.3 million or 4% increase in asset-based
fees from the full year results of our 2014 and 2015 investments in new Affiliates.
Our revenue in the Institutional distribution channel increased $74.1 million or 8% in 2014, primarily from a $49.7 million
or 5% increase in asset-based fees at existing Affiliates. This increase in asset-based fees was principally the result of an 8%
increase in average assets under management, which increased asset-based fees $75.3 million or 8% partially offset by a
decline in our ratio of average fee rates, which decreased asset-based fees by $25.6 million or 3%. The decline in our ratio of
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average fee rates was due to a change in the composition of our assets under management within the distribution channel,
primarily from decreases in assets under management in products that realize comparatively higher fee rates, partially offset by
an increase in assets under management in products that realized comparatively lower fee rates. The increase in revenue was
also the result of a $26.9 million or 3% increase in asset-based fees from our 2014 investments in new Affiliates.
Mutual Fund Distribution Channel
Our revenue in the Mutual Fund distribution channel decreased $4.4 million or less than 1% in 2015, primarily from an
$84.1 million or 7% decrease in asset-based fees at existing Affiliates. This decrease in asset-based fees was principally the
result of a 7% decline in average assets under management, which reduced asset-based fees by $83.6 million or 7%. The
decrease in revenue was partially offset by a $74.1 million or 6% increase in asset-based fees from the full year results of our
2014 investments in new Affiliates.
Our revenue in the Mutual Fund distribution channel increased $219.6 million or 21% in 2014, primarily from a $183.3
million or 18% increase in asset-based fees at existing Affiliates. This increase in asset-based fees was the result of a 19%
increase in average assets under management. The increase in revenue was also the result of a $25.8 million or 2% increase in
asset-based fees from our 2014 investments in new Affiliates, as well as an increase in performance and other fees of $10.6
million or 1%.
High Net Worth Distribution Channel
Our revenue in the High Net Worth distribution channel increased $21.4 million or 9% in 2015. The increase in revenue
was primarily the result of an $18.4 million or 7% increase in asset-based fees from the full year results of our 2014 and 2015
investments in new Affiliates. The increase in revenue was also the result of a $4.3 million or 2% increase in asset-based fees
at existing Affiliates. This increase in asset-based fees was principally the result of a 5% increase in average assets under
management, which increased asset-based fees by $10.9 million or 4%, partially offset by a decline in our ratio of average fee
rates, which decreased asset-based fees by $6.6 million or 2%. The decline in our ratio of average fee rates was due to a change
in the composition of our assets under management within the distribution channel, primarily from decreases in assets under
management in products that realize comparatively higher fee rates, partially offset by increases in assets under management in
products that realize comparatively lower fee rates.
Our revenue in the High Net Worth distribution channel increased $28.4 million or 13% in 2014, primarily from a $18.1
million or 8% increase in asset-based fees at existing Affiliates. This increase in asset-based fees was principally the result of
an 11% increase in average assets under management, which increased asset-based fees $22.6 million or 10%, partially offset
by a decline in our ratio of average fee rates, which decreased asset-based fees $4.5 million or 2%. The decline in our ratio of
average fee rates was due to a change in the composition of our assets under management within the distribution channel,
primarily from decreases in assets under management in products that realize comparatively higher fee rates, partially offset by
increases in assets under management in products that realize comparatively lower fee rates. The increase in revenue was also
the result of a $14.6 million or 7% increase in asset-based fees from our 2014 investments in new Affiliates, partially offset by
a $4.3 million or 2% decline in performance and other fees.
Operating Expenses
The following table summarizes our consolidated operating expenses:
For the Years Ended December 31,
(in millions)
2013
2014
% Change
2015
% Change
Compensation and related expenses
$
947.5
$
1,030.5
9 % $
1,027.7
Selling, general and administrative
Intangible amortization and impairments
Depreciation and other amortization
Other operating expenses
Total operating expenses
427.2
128.2
14.0
37.8
485.5
122.2
16.9
40.6
14 %
(5)%
21 %
7 %
443.8
115.4
18.8
43.8
$
1,554.7
$
1,695.7
9 % $
1,649.5
0 %
(9)%
(6)%
11 %
8 %
(3)%
A substantial portion of our operating expenses was incurred by our consolidated Affiliates, the substantial majority of
which was incurred by Affiliates through which we share in revenue without regard to expenses. For these Affiliates, the
Affiliate’s Operating Allocation percentage generally determines its operating expenses. Accordingly, our operating expenses
are impacted by increases or decreases in each Affiliate’s revenue and corresponding increases or decreases in their respective
Operating Allocation.
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Compensation and related expenses decreased $2.8 million in 2015, primarily as a result of decreases in compensation
expenses at existing Affiliates of $46.8 million and compensation expenses associated with Affiliate equity transactions of
$15.9 million. These decreases were partially offset by an increase in compensation expenses from the full year results of our
2014 and 2015 investments in new Affiliates of $56.9 million.
Compensation and related expenses increased $83.0 million or 9% in 2014, primarily as a result of increases in
compensation expense at existing Affiliates of $33.4 million, compensation expense from our 2014 investments in new
Affiliates of $28.6 million, and compensation expense associated with Affiliate equity transactions of $12.1 million.
Selling, general and administrative expenses decreased $41.7 million or 9% in 2015, primarily from decreases in sub-
advisory and distribution expenses of $50.0 million at our Affiliates in the Mutual Fund distribution channel and a decrease in
acquisition-related professional fees of $5.8 million. These decreases were partially offset by an increase of $18.2 million from
the full year results of our 2014 and 2015 investments in new Affiliates.
Selling, general and administrative expenses increased $58.3 million or 14% in 2014, primarily from increases in sub-
advisory and distribution expenses of $34.7 million at our Affiliates in the Mutual Fund distribution channel, an increase of
$9.5 million from our 2014 investments in new Affiliates, and an increase in acquisition-related professional fees of $6.4
million.
Intangible amortization and impairments decreased $6.8 million or 6% in 2015 and $6.0 million or 5% in 2014. The
decrease in 2015 was primarily due to a reduction of $7.1 million resulting from certain assets being fully amortized in 2014.
The decrease in 2014 was primarily due to a reduction of $30.2 million resulting from certain assets being fully amortized in
2013. This was partially offset by 2014 increases of $24.2 million in amortization of definite-lived assets at existing and new
2014 Affiliates.
Income from Equity Method Investments
When we own a minority interest in an Affiliate, we either share in the Affiliate’s revenue without regard to expenses or
share in the Affiliate’s revenue less certain agreed-upon expenses. When we share in the Affiliate’s revenue without regard to
expenses, we are allocated a set percentage of revenue, with the remaining revenue available to the Affiliate to fund its
operating expenses and distributions to Affiliate management. When we share in the Affiliate’s revenue less certain agreed-
upon expenses our distributions are calculated by reference to the Affiliate’s revenue net of the agreed-upon categories of
expenses.
For minority investments, we are required to use the equity method of accounting. Under the equity method of accounting,
we only recognize our share of the Affiliate’s revenue less certain agreed-upon expenses, net of equity method amortization.
Our equity method Affiliates derive most of their revenue from asset-based and performance fees from investment
management services. Asset-based fees are typically determined as a percentage fee charged on the value of a client’s assets
under management. Performance fees are billed based upon investment performance, typically on an absolute basis or relative
to a benchmark, primarily on our liquid and illiquid alternative and equity products.
Performance fees are typically billed less frequently than asset-based fees and, although performance fees inherently
depend on investment performance and will vary from period to period, we anticipate performance fees will be a recurring
component of our Income from equity method investments.
Average assets under management reflect the particular billing patterns of Affiliate products and client accounts. Therefore,
we believe average assets under management more closely correlates to product and client account billing cycles and, as such,
provides a more meaningful relationship to equity method earnings. Average assets under management at equity method
Affiliates are calculated consistent with our average assets under management at consolidated Affiliates. Our equity method
Affiliates operate primarily in the Institutional distribution channel.
The following table summarizes our equity method Affiliates’ average assets under management, equity method earnings
(our share of their revenue or profit), as applicable, and equity method amortization:
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Average Assets under Management (in billions)
Income from equity method investments (in
millions)
Equity method earnings
Equity method amortization
Total
$
$
$
For the Years Ended December 31,
2013
2014
% Change
2015
% Change
149.0
$
198.1
33 % $
227.5
15%
349.5
41.7
307.8
$
$
314.0
32.3
281.7
(10)% $
(23)%
(8)% $
323.2
34.3
288.9
3%
6%
3%
Equity method earnings increased $9.2 million or 3% in 2015, primarily from a $50.7 million increase in earnings from the
full year results of our additional investment in an existing Affiliate in 2014 and our investments in new Affiliates in 2015. This
increase was partially offset by a $41.6 million decline in performance and advisory fees at existing Affiliates. Equity method
amortization increased $2.0 million or 6% in 2015, primarily as a result a $4.3 million increase from the full year impact of our
Affiliate investments in 2014, partially offset by a $2.3 million decrease related to certain assets being fully amortized in 2014
and 2015.
Equity method earnings decreased $35.5 million or 10% in 2014, primarily from a $79.3 million decline in performance
fees. This decrease was partially offset by a $28.7 million increase in equity method earnings at existing Affiliates, as well as a
$15.1 million increase in equity method earnings from the full year results of our 2013 and 2014 investments in new Affiliates.
Equity method amortization decreased $9.4 million or 23% in 2014, primarily from a reduction of $20.6 million as a result of
certain assets being fully amortized in 2013. This decrease was partially offset by an increase of $10.9 million of intangible
amortization from our 2014 investments in new and existing Affiliates.
Other Non-Operating (Income) and Expenses
The following table summarizes non-operating income and expense data:
(in millions)
2013
2014
% Change
2015
% Change
For the Years Ended December 31,
Investment and other (income) expense
Interest expense
Imputed interest expense and contingent payment
arrangements
Income taxes
__________________________
$
(40.8) $
87.3
(23.3)
76.6
31.7
194.1
30.1
227.9
(1) Percentage change is not meaningful.
(43)% $
(12)%
(5)%
17 %
(15.3)
88.9
(40.3)
256.9
(34)%
16 %
N.M.(1)
13 %
Investment and other income decreased $8.0 million or 34% in 2015, principally as a result of a $20.3 million decrease in
the fair value of Affiliate investments, partially offset by $9.0 million of realized gains on the sales of available-for-sale
securities.
Investment and other (income) expense decreased $17.5 million or 43% in 2014, principally as a result of a $10.5 million
decrease primarily in the fair value of Affiliate investments and a $7.2 million gain on the sale of a foreign office in 2013,
which did not reoccur in 2014.
Interest expense increased $12.3 million or 16% in 2015, primarily as a result of the issuance of our senior notes in
February 2014 and 2015, which collectively increased interest expense by $13.2 million.
Interest expense decreased $10.7 million or 12% in 2014, primarily as a result of the settlement of our 2006 junior
convertible securities in 2014 and the settlement of our 2008 senior convertible securities in 2013, which collectively reduced
interest expense by $27.6 million. This decrease was partially offset by interest expense of $15.6 million on our senior notes
issued in 2014.
Imputed interest expense and contingent payment arrangements decreased $70.4 million and $1.6 million in 2015 and
2014, respectively. The decrease in 2015 was primarily a result of a $44.7 million gain on the revaluation of our contingent
payment arrangements in 2015 and an $18.8 million loss recognized on the settlement of our 2006 junior convertible securities
in 2014 which did not reoccur in 2015. The decrease in 2014 was primarily a result of a $10.3 million loss on the revaluation
of our contingent payment arrangements in 2013 which did not reoccur in 2014 and a $9.9 million decrease in imputed interest
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from the settlement of our 2008 senior convertible securities in 2013, partially offset by an $18.8 million loss recognized on the
settlement of our 2006 junior convertible securities in 2014.
Our effective tax rate increased 0.7% from 32.1% in 2014 to 32.8% in 2015. This increase was primarily from 2014
benefits that did not reoccur at the same level in 2015. These benefits include gains from restructuring certain of our foreign
operations and a reduction of our state net operating loss valuation allowances. In the restructuring, we established foreign
subsidiaries that were deemed permanent in duration and reversed previously recognized intangible-related deferred tax
liabilities. In 2015, our effective tax rate decreased as a result of the ongoing tax benefits from the restructuring of our foreign
operations in 2014 and our indefinite deferral of foreign earnings in 2015. Our effective tax rate also decreased in 2015 as a
result of the benefit of a reduction in corporate tax rates in the United Kingdom and other factors. Collectively, these factors
reduced our effective tax rate 5.2% in 2014 and 4.5% in 2015.
Our effective tax rate decreased 1.8% from 33.9% in 2013 to 32.1% in 2014. This decrease was primarily due to the
benefits of restructuring certain of our foreign operations and a reduction of our state net operating loss valuation allowances in
2014. In 2013, we recognized a benefit due to a reduction in corporate tax rates in the United Kingdom which did not reoccur
in 2014. Collectively, these factors reduced our effective tax rates 5.2% in 2014 and 3.4% in 2013.
Net Income
The previously discussed changes in revenue and expenses had the following effect on Net income:
(in millions)
Net income
Net income (non-controlling interests)
Net income (controlling interest)
Liquidity and Capital Resources
For the Years Ended December 31,
2013
2014
% Change
2015
% Change
$
$
669.6
309.1
360.5
785.6
333.5
452.1
17% $
8%
25%
833.7
317.7
516.0
6 %
(5)%
14 %
In 2015, we met our cash requirements primarily through cash generated by operating activities, borrowings under our
revolver and proceeds from the issuance of senior notes. Our principal uses of cash were to repurchase shares of our common
stock, make investments in new Affiliates, make distributions to Affiliate management and repay borrowings under our
revolver.
We expect that our principal uses of cash for the foreseeable future will be for investments in new and existing Affiliates,
distributions to Affiliate management, share repurchases, payment of principal and interest on outstanding debt and general
working capital purposes. We anticipate that cash flows from operations, together with borrowings under our revolver and
proceeds from any forward equity transactions, will be sufficient to support our cash flow needs for the foreseeable future.
Cash and cash equivalents were $563.8 million and $550.6 million at December 31, 2015 and 2014, respectively, including
$98.6 million and $51.0 million in our wholly-owned foreign subsidiaries. If we repatriated our foreign cash and cash
equivalents, we do not anticipate that we would need to accrue or pay any significant U.S. taxes.
The following summarizes our operating, investing and financing cash flow activities:
(in millions)
Operating cash flow
Investing cash flow
Financing cash flow
Operating Cash Flow
For the Years Ended December 31,
2013
2014
2015
$
$
957.1
(50.3)
(869.1)
$
1,392.2
(1,268.1)
(32.9)
1,204.8
(324.5)
(854.1)
The decrease in cash flows from operations in 2015 as compared to 2014 resulted principally from a $186.9 million
decrease in payables, accrued liabilities and other liabilities, which primarily resulted from an increase in payments of accrued
compensation and distributions during 2015 as compared to 2014.
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The increase in cash flows from operations in 2014 as compared to 2013 resulted principally from a $333.8 million
increase in net income adjusted for distributions from equity method investments and non-cash charges, a $128.3 million
decrease in receivables and a $32.7 million increase in payables, accrued liabilities and other liabilities.
Investing Cash Flow
Net cash flows used in investing activities decreased $943.6 million in 2015 as compared to 2014, primarily due to a
$947.3 million decrease in cash used to make investments in Affiliates. Net cash flow used in investing activities increased $1.2
billion in 2014 as compared to 2013, primarily due to a $1.2 billion increase in cash used to make investments in Affiliates.
Financing Cash Flow
Cash flows used in financing activities increased $821.2 million in 2015 as compared to 2014. This was primarily a result
of a $493.2 million decrease in borrowings of senior debt, a $235.4 million decrease in repayments of senior debt and
convertible securities as well as a $222.9 million increase in repurchases of common stock. These increases were partially
offset by a $138.0 million decrease in distributions to non-controlling interests. We used available cash and borrowings under
our credit facility to finance our investments in new Affiliates in 2015.
Cash flows used in financing activities decreased $836.2 million in 2014 as compared to 2013. This was primarily a result
of a $986.5 million increase in borrowings of senior debt, and a $180.7 million decrease in repayments of senior debt and
convertible securities. These decreases were partially offset by a $302.3 million increase in distributions to non-controlling
interests.
The following table summarizes certain key financial data relating to our outstanding indebtedness:
(in millions)
Senior bank debt
Senior notes
Convertible securities
Senior Bank Debt
2013
December 31,
2014
$
525.0
$
855.0
$
340.0
518.7
736.8
303.1
2015
645.0
944.6
305.2
In 2015, we entered into a $1.3 billion senior unsecured multicurrency revolving credit facility (the “revolver”) and a
$350.0 million senior unsecured term loan facility (the “term loan” and, together with the revolver, the “credit facilities”). The
credit facilities, which replaced previous credit facilities, both mature on September 30, 2020.
A portion of the proceeds from the credit facilities was used to refinance our previous $1.25 billion senior unsecured
revolving facility and $250.0 million senior unsecured term loan and for the redemption of a portion of our 5.25% senior
unsecured notes due 2022 (the “2022 senior notes”).
Subject to certain conditions, we may increase commitments under the revolver by up to an additional $500.0 million and
may borrow up to an additional $100.0 million under the term loan. We pay interest on any outstanding obligations under the
revolver and on the term loan at specified rates, based either on the LIBOR rate or the prime rate as in effect from time to time.
Under the terms of our credit facilities we are required to meet two financial ratio covenants. The first of these covenants is
a maximum ratio of debt to EBITDA (the “bank leverage ratio”) of 3.25x. The second covenant is a minimum EBITDA to cash
interest expense ratio of 3.00x (the “bank interest coverage ratio”). For purposes of calculating these ratios, share-based
compensation and Affiliate equity expense are added back to EBITDA. The credit facilities are also subject to customary
affirmative and negative covenants, including limitations on priority indebtedness, asset dispositions and fundamental corporate
changes, and certain customary events of default. Many of these conditions and restrictions are subject to certain minimum
thresholds and exceptions. As of December 31, 2015, our bank leverage and bank interest coverage ratios were 1.6x and 12.4x,
respectively, and we were in compliance with all terms of our credit facilities. As of December 31, 2015, we had $1.0 billion of
remaining capacity under our revolver, and could borrow all such capacity and remain in compliance with our credit facilities.
We are currently rated A3 by Moody’s Investors Services and BBB+ by Standard & Poor’s Rating Agencies. A downgrade
of our credit rating would have no significant financial effect on any of our credit facilities or securities (or otherwise trigger a
default), other than a ratings downgrade to below investment grade in the context of a change of control.
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Table of Contents
Senior Notes
In 2015, we redeemed, canceled and retired all $140.0 million principal amount outstanding of our 2022 senior notes at a
redemption price equal to 100% of the principal amount plus accrued and unpaid interest.
In February 2015, we issued additional senior notes, and at December 31, 2015 had three senior notes outstanding, the
principal terms of which are summarized below.
Issue date
Maturity date
Potential Call Date
Par value (in millions)
Call Price
Stated coupon
Coupon frequency
__________________________
2024
Senior
Notes
February 2014
February 2024
Any Time (1)
2025
Senior
Notes
February 2015
August 2025
Any Time (1)
$
400.0
As Defined (1)
4.25%
Semi-annually
$
350.0
As Defined (1)
3.50%
Semi-annually
$
2042
Senior
Notes
August 2012
August 2042
August 2017
200.0
At Par
6.375%
Quarterly
(1) The 2024 and 2025 senior notes may be redeemed at any time, in whole or in part, at a make-whole redemption price plus
accrued and unpaid interest.
Convertible Securities
In 2014, we delivered a notice to redeem all $300.0 million principal amount of our outstanding 2006 junior convertible
securities. In lieu of redemption, substantially all holders of the 2006 junior convertible securities elected to convert their
securities into a defined number of shares. We issued 1.9 million shares of our common stock in connection with the
conversion. All of the 2006 junior convertible securities have been canceled and retired.
At December 31, 2015, we had junior convertible trust preferred securities outstanding that were issued in 2007 (the “2007
junior convertible securities”). The carrying value ($305.2 million as of December 31, 2015) is accreted to the principal
amount at maturity ($430.8 million) over a remaining life of approximately 22 years. The 2007 junior convertible securities
bear interest at 5.15% per annum, payable quarterly in cash. Each $50 security is convertible, at any time, into 0.25 shares of
our common stock, which represents a conversion price of $200 per share. Holders of the securities have no rights to put these
securities to us. Upon conversion, holders will receive cash or shares of our common stock, or a combination thereof at our
election. We may redeem the 2007 junior convertible securities if the closing price of our common stock exceeds $260 per
share for 20 trading days in a period of 30 consecutive trading days. These convertible securities are considered contingent
payment debt instruments under federal income tax regulations, which require us to deduct interest in an amount greater than
our reported Interest expense. These deductions result in annual deferred tax liabilities of $9.4 million. These deferred tax
liabilities will be reclassified directly to stockholders’ equity if our common stock is trading above certain thresholds at the time
of the conversion of the securities.
Forward Equity Sale Agreement
We may sell shares of our common stock under a forward equity agreement. At December 31, 2015, we had
approximately $250 million remaining notional amount that was available to sell under the forward equity agreement.
Affiliate Equity
Many of our agreements provide us with a conditional right to call and Affiliate management and our officers with the
conditional right to put their Affiliate equity interests to us at certain intervals. In cases where we own a minority interest in an
Affiliate, we do not typically have such put and call arrangements. The purchase price of these conditional purchases is
generally calculated based upon a multiple of the Affiliate’s cash flow distributions, which is intended to represent fair value.
Affiliate management are also permitted to sell their equity interests to other individuals or entities in certain cases, subject to
our approval or other restrictions.
Our current redemption value of $612.5 million for these interests has been presented as Redeemable non-controlling
interests on our Consolidated Balance Sheets. Although the timing and amounts of these purchases are difficult to predict, we
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Table of Contents
repurchased $165.0 million of Affiliate equity during 2015, and expect to repurchase approximately $100 million in 2016. In
the event of a repurchase, we become the owner of the cash flow associated with the repurchased Affiliate equity.
Commitments
From time to time, we and our Affiliates may be subject to claims, legal proceedings and other contingencies in the
ordinary course of our and our Affiliates’ 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 us or our Affiliates. We establish accruals, as
necessary, for matters for which the outcome is probable and the amount of the liability can be reasonably estimated. We had no
significant accruals as of December 31, 2015.
We and certain of our Affiliates operate under regulatory authorities, which require that they maintain minimum financial
or capital requirements. We are not aware of any significant violations of such requirements as of December 31, 2015.
We have committed to co-invest in certain investment partnerships. As of December 31, 2015, these unfunded
commitments totaled $76.8 million and may be called in future periods. In connection with a past acquisition agreement, we
are contractually entitled to reimbursement from a prior owner for $15.2 million of these commitments if they are called.
As of December 31, 2015, we were contingently liable, upon achievement by certain Affiliates of specified financial
targets, to make payments through 2019 of up to $85.6 million associated with our consolidated Affiliates and $166.5 million
associated with our equity method Affiliates. We expect to make payments of $14.0 million (none in 2016) to settle such
obligations. Subsequent to year end, we completed minority investments which included contingent payment obligations of up
to $150.0 million (none in 2016).
Share Repurchases
Our Board of Directors has periodically authorized share repurchase programs, most recently in May 2015. During 2015,
we repurchased 1.7 million shares at an average price per share of $209.39. As of December 31, 2015, 2.3 million shares
remained available for repurchase under the May 2015 program, which does not expire.
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2015. Contractual debt obligations include
cash payment of fixed interest.
(in millions)
Contractual Obligations(1)
Senior bank debt
Senior notes
Junior convertible securities
Leases(2)
Affiliate equity
Total contractual obligations
Contingent Obligations
Contingent payment obligations(3)
__________________________
Total
2016
2017-2018
2019-2020
Thereafter
Payments Due
$
645.0
$
— $
— $
645.0
$
1,558.1
919.0
240.7
62.3
3,425.1
14.0
$
$
$
$
42.1
22.2
36.0
62.3
84.0
44.4
64.7
—
162.6
$
193.1
— $
12.0
$
$
84.0
44.4
57.9
—
831.3
2.0
$
$
—
1,348.0
808.0
82.1
—
2,238.1
—
(1) This table does not include liabilities for commitments to co-invest in certain investment partnerships or uncertain tax
positions of $76.8 million and $26.9 million as of December 31, 2015, respectively as we cannot predict when such
obligations will be paid.
(2) The controlling interest portion is $10.7 million through 2016, $22.0 million in 2017-2018, $20.7 million in 2019-2020 and
$38.7 million thereafter.
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(3) The contingent payment obligations disclosed in the table represent the expected settlement amounts associated with our
investments in new Affiliates. The maximum settlement amount through 2016 is $116.7 million, $123.6 million in
2017-2018, $11.8 million in 2019-2020 and none thereafter.
Recent Accounting Developments
See Note 1 of the Consolidated Financial Statements.
Critical Accounting Estimates and Judgments
The preparation of financial statements and related disclosures in conformity with GAAP requires us to make judgments,
assumptions, and estimates that affect the amounts reported in the Consolidated Financial Statements and accompanying notes.
The following are our critical accounting estimates and judgments used in the preparation of the Consolidated Financial
Statements, and actual results could differ materially from the amounts reported.
Fair Value Measurements
Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. These standards establish a fair value hierarchy that
gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to
unobservable inputs.
We make judgments to determine the fair value of certain assets, liabilities and equity interests when allocating the
purchase price of our new investments, when revaluing our contingent payment arrangements, when we issue or repurchase
equity interests and when we test our intangible assets or equity and cost method investments for impairment.
In determining fair values, we make assumptions about the growth rates, profitability and useful lives of existing and
prospective client accounts, and consider historical and current market multiples, tax benefits, credit risk, interest rates and
discount rates. We consider the reasonableness of our assumptions by comparing our valuation conclusions to observed market
transactions, and in certain instances consult with third-party valuation firms.
Goodwill
Goodwill represents the future economic benefits arising from assets acquired in a business combination that are not
individually identified and separately recognized, and is reported within the segments in which the Affiliate operates. Our
goodwill impairment assessments are performed annually at the reporting unit level (in our case, our three distribution
channels), or more frequently, should circumstances suggest fair value has declined below the related carrying value. If we
determine that the fair value has declined below our related carrying value, an impairment is recognized to reduce the carrying
value to its fair value. We completed our annual goodwill impairment assessment and no impairments were identified. For
purposes of our assessment, we considered various qualitative factors (including market multiples for asset management
businesses) and determined that it was more likely than not that the fair value of each of our reporting units was greater than its
respective carrying amount, including goodwill. Only a substantial decline in the fair value of any of our reporting units would
indicate that an impairment may exist.
Indefinite-Lived Intangible Assets
Indefinite-lived intangible assets are comprised of investment advisory contracts between our Affiliates and their
sponsored registered investment companies. Because the contracts are with the registered investment companies themselves,
and not with the underlying investors, and the contracts between our Affiliates and the registered investment companies are
typically renewed on an annual basis, industry practice under GAAP is to consider the contract life to be indefinite and, as a
result, not amortizable.
We perform indefinite-lived intangible asset impairment tests annually, or more frequently should circumstances suggest
fair value has declined below the related carrying value. If we determine that the fair value has declined below our related
carrying value, an impairment is recognized to reduce the carrying value to its fair value. We completed our annual impairment
assessment and no impairments were identified. For purposes of our assessment, we considered various qualitative factors
(including market multiples) and determined that it was more likely than not that the fair value of each asset was greater than
its carrying amount. Only a substantial decline in the fair value would indicate that an impairment may exist.
Definite-Lived Intangible Assets
Definite-lived intangible assets are comprised of investment advisory contracts between our Affiliates and their underlying
investors, and are amortized over their estimated useful lives. We monitor the useful lives of these assets and revise them, if
necessary. We review historical and projected attrition rates and other events that may influence our projections of the future
32
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economic benefit that we will derive from these relationships. Significant judgment is required to estimate the period that these
assets will contribute to our cash flows and the pattern over which these assets will be consumed. We are currently amortizing
our definite-lived intangible assets over an average useful life of approximately ten years.
We perform definite-lived intangible asset impairment tests annually, or more frequently should circumstances suggest fair
value has declined below the related carrying value. If we determine that the fair value has declined below our related carrying
value, an impairment is recognized to reduce the carrying value to its fair value. We assess each of our definite-lived acquired
client relationships for impairment by comparing their carrying value to the projected undiscounted cash flows of the acquired
relationships. We completed our annual assessment and noted that projected undiscounted cash flows over the remaining life of
each of these assets significantly exceed their carrying value and, accordingly, only a substantial decline in the undiscounted
cash flows underlying these assets would indicate that an impairment may exist.
Equity and Cost Method Investments
We evaluate equity and cost method investments for impairment by assessing whether the fair value of the investment has
declined below its carrying value for a period we consider other-than-temporary. If we determine that a decline in fair value
below our carrying value is other-than-temporary, an impairment is recognized to reduce the carrying value of the investment to
its fair value.
For companies with quoted market prices in active markets, we use these prices to determine the fair value of our equity
and cost method investments. For companies without quoted market prices in active markets, we determine the fair values by
applying a market multiple to the estimated cash flows of each investment. Our fair value multiples are supported by observed
transactions and discounted cash flow analyses that reflect assumptions of current and projected levels of Affiliate assets under
management, fee rates and estimated expenses.
We completed our annual evaluation of equity and cost method investments and no impairments were identified. Only a
substantial decline in the fair value of any of these investments for a period that is considered other-than-temporary would
indicate that an impairment may exist.
Contingent Payment Arrangements
We periodically enter into contingent payment arrangements in connection with our business combinations. In these
arrangements, the Company agrees to pay additional consideration upon achievement by certain Affiliates of specified financial
targets. For consolidated Affiliates, we estimate the fair value of these potential future obligations by discounting the projected
future payments (such estimates being dependent upon projected revenue) using current market rates. Our discount rates are
developed with input from third-party valuation firms.
We then accrete these obligations to their expected payment amounts until they are measured. If the expected payment
amounts subsequently change, the obligations are reduced or increased in the current period resulting in a gain or loss,
respectively. Both gains and losses resulting from changes to expected payments and the accretion of these obligations to their
expected payment amounts are reflected within Imputed interest expense and contingent payment arrangements in our
Consolidated Statements of Income.
Redeemable Non-controlling Interests
Redeemable non-controlling interests represent the currently redeemable value of Affiliate equity interests. We may pay for
these Affiliate equity purchases in cash, shares of our common stock or other forms of consideration, at our election.
We generally value these interests upon their transfer or repurchase by applying market multiples to cash flows, which is
intended to represent fair value. The use of different assumptions could change the value of these interests, including the
amount of compensation expense, if any, that we may report upon their transfer or repurchase.
Income Taxes
Tax regulations often require income and expense to be included in our tax returns in different amounts and in different
periods than are reflected in the Consolidated Financial Statements. Deferred taxes are established to reflect the temporary
differences between the inclusion of items of income and expense in the Consolidated Financial Statements and their reporting
on our tax returns. Our overall tax position requires us to estimate the expected realization of tax assets and liabilities.
Additionally, we must assess whether to recognize the benefit of uncertain tax positions, and, if so, the appropriate amount of
the benefit.
We regularly assess our deferred tax assets in order to determine the need for valuation allowances. Our principal deferred
tax assets are state operating losses, foreign loss carryforwards and the indirect benefits of uncertain foreign tax positions. In
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our assessment, we make assumptions about future taxable income that may be generated to utilize these assets, which have
limited lives. If we determine that we are unlikely to realize the benefit of a deferred tax asset, we establish a valuation
allowance that would increase our tax expense in the period of such determination.
In our assessment of uncertain tax positions, we consider the probability that a tax authority would sustain our tax position
in an examination. For tax positions meeting a “more-likely-than-not” threshold, the amount recognized in the financial
statements is the benefit expected to be realized upon the ultimate settlement with the tax authority. For tax positions not
meeting this threshold, no benefit is recognized.
Our deferred tax liabilities are generated primarily from intangible assets and deferred revenue. Most of our intangible
assets are tax-deductible because we generally structure our Affiliate investments to be taxable to the sellers. We record
deferred taxes because a substantial majority of our intangible assets do not amortize for financial statement purposes, but do
amortize for tax purposes, thereby creating tax deductions. These liabilities will reverse only in the event of a sale of an
Affiliate or an impairment. We measure the estimated cost of such a reversal using enacted tax rates and projected state
apportionment percentages. Intangible-related deferred tax liabilities are not recorded on U.S. basis differences at our foreign
Affiliates when our investments are permanent in nature.
We operate in various locations outside the U.S. and generate earnings from our foreign subsidiaries. We would not
recognize a provision for U.S. income taxes or a deferred income tax liability on undistributed foreign earnings that are
indefinitely reinvested.
Share-Based Compensation and Affiliate Equity
We have share-based compensation arrangements covering directors, senior management and employees (including our
Affiliates). We calculate share-based compensation using the fair value of the awards on the grant date. Our share-based
compensation arrangements typically vest and become fully exercisable over three to five years of continued employment, and
in some cases, are further subject to certain performance or market conditions. We recognize expense net of expected
forfeitures on a straight-line basis over the requisite service period, including grants that are subject to graded vesting.
We estimate the fair value of stock option awards using the Black-Scholes option pricing model. The Black-Scholes model
requires us to make assumptions about the volatility of our common stock and the expected life of our stock options. In
measuring expected volatility, we consider both the historical volatility of our common stock, as well as the current implied
volatility from traded options.
For restricted stock awards with service or performance conditions, we determine the fair value of the awards using our
share price on the date of grant. For awards with market conditions, the fair value of the award is determined using a Monte
Carlo simulation with inputs for expected volatility, a risk-free rate and expected dividends. Our estimate of expected volatility
is developed in a manner consistent with that of our stock options.
From time to time, we grant equity interests in our Affiliates to Affiliate management and our officers, with vesting,
forfeiture and repurchase terms established at the date of grant. The fair value of the equity interests is determined as of the date
of grant using a discounted cash flow analysis. Key valuation assumptions include projected assets under management, fee
rates and discount rates.
International Operations
In connection with our international distribution initiatives, we have offices in Sydney, Australia; London, England;
Zurich, Switzerland; Hong Kong; and Dubai, United Arab Emirates. In addition, we have international operations through
Affiliates who are based outside of the U.S. or have significant operations outside of the U.S., or who provide some or a
significant part of their investment management services to non-U.S. clients. In the future, we may open additional offices, or
invest in other investment management firms that conduct a significant part of their operations outside of the U.S. There are
certain risks inherent in doing business internationally, such as changes in applicable laws and regulatory requirements,
difficulties in staffing and managing foreign operations, longer payment cycles, difficulties in collecting investment advisory
fees receivable, different and in some cases, less stringent regulatory and accounting regimes, political instability, fluctuations
in currency exchange rates, expatriation controls, expropriation risks and potential adverse tax consequences. There can be no
assurance that one or more of such factors will not have a material adverse effect on our international operations or our
Affiliates that have international operations and, consequently, on our business, financial condition and results of operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Assets Under Management Market Price Risk
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Our revenue, income from equity method investments and, therefore, our EBITDA (controlling interest) are derived
primarily from advisory fees that are typically determined as a percentage fee charged on the value of a client’s assets under
management and performance fees determined as a percentage of the returns realized on a client’s assets under management.
Such values are affected by changes in financial markets (including interest rates and foreign exchange rates) and, accordingly,
declines in the financial markets will negatively impact our revenue, income from equity method investments and, therefore our
EBITDA (controlling interest).
A proportional 1% increase or decrease in the value of our assets under management as of December 31, 2015, excluding
assets under management on which advisory fees are assessed on committed capital, would have resulted in an annualized
increase or decrease in advisory based fees, included in Revenue for our consolidated Affiliates and Income from equity
method investments for our equity method Affiliates, of $20.0 million and $2.1 million, respectively.
Interest Rate Risk
We have fixed rates of interest on our senior notes and on our junior convertible securities. While a change in market
interest rates would not affect the interest expense incurred on our fixed rate securities, such a change may affect the fair value
of these securities. We estimate that a 1% change in interest rates would have resulted in a net change in the value of our fixed
rate securities as of December 31, 2015 by $111.8 million. We pay a variable rate of interest on our revolver and term loan. We
estimate that a 1% increase in interest rates would increase the interest expense related to our variable rate debt under our
revolver and term loan outstanding as of December 31, 2015 by $6.5 million.
Foreign Currency Exchange Risk
Most of our revenue and expenses are denominated in U.S. dollars. A portion of our revenue and expenses are denominated
in foreign currencies, primarily Canadian dollars and pound sterling, and may be impacted by movements in currency exchange
rates. In addition, the valuations of our foreign Affiliates are impacted by fluctuations in foreign exchange rates, which could be
recorded as a component of stockholders’ equity. To illustrate the effect of possible changes in currency exchange rates, as of
December 31, 2015, a 1% change in the Canadian dollar and pound sterling to U.S. dollar exchange rates would have resulted
in an approximate $7.0 million change to stockholders’ equity and a $1.1 million change to income before income taxes.
During 2015, changes in currency exchange rates decreased stockholders’ equity by $71.0 million.
Derivative Risk
From time to time, we seek to offset our exposure to changing interest rates under our debt financing arrangements, and
our Affiliates seek to offset exposure to foreign currency exchange rates by entering into derivative contracts as described in
“Liquidity and Capital Resources.”
There can be no assurance that our hedging contracts will meet their overall objective of reducing our interest expense or
that we will be successful in obtaining hedging contracts in the future on our existing or any new indebtedness.
Item 8. Financial Statements and Supplementary Data
Management’s Report on Internal Control Over Financial Reporting
Management of Affiliated Managers Group, Inc. (the “Company”) is responsible for establishing and maintaining
adequate internal control over financial reporting. The Company’s internal control over financial reporting processes are
designed by, or under the supervision of, the Company’s chief executive and chief financial officers and effected by the
Company’s Board of Directors, management and other senior employees to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in
accordance with accounting principles generally accepted in the U.S.
The Company’s internal control over financial reporting includes policies and procedures that pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable
assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with
accounting principles generally accepted in the U.S., and that receipts and expenditures are being made only in accordance
with authorizations of management and the directors of the Company; and provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on
our financial statements.
As of December 31, 2015, management conducted an assessment of the effectiveness of the Company’s internal control
over financial reporting based on the framework established in Internal Control—Integrated Framework (2013) issued by the
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Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management has
determined that the Company’s internal control over financial reporting as of December 31, 2015 was effective.
Management has excluded Baker Street Advisors, LLC (“Baker Street”) and myCIO Wealth Partners, LLC (“myCIO”)
from its assessment of internal control over financial reporting as of December 31, 2015 because these entities were acquired
in business combinations in 2015. Baker Street and myCIO represent 0.1% and 0.6% of combined total assets and combined
total revenues, respectively, of the related Consolidated Financial Statement amounts as of and for the year ended
December 31, 2015.
The Company’s internal control over financial reporting as of December 31, 2015 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing in “Report
of Independent Registered Public Accounting Firm,” which expresses an unqualified opinion on the effectiveness of the
Company’s internal control over financial reporting as of December 31, 2015.
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To the Board of Directors and Stockholders of Affiliated Managers Group, Inc.:
Report of Independent Registered Public Accounting Firm
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income,
comprehensive income, changes in equity and cash flows present fairly, in all material respects, the financial position of
Affiliated Managers Group, Inc. and its subsidiaries at December 31, 2015 and December 31, 2014, and the results of their
operations and their cash flows for each of the three years in the period ended December 31, 2015 in conformity with
accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement
schedule listed under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal
Control - Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Company's management is responsible for these financial statements and financial statement schedule, for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item
8. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the
Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement
and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the
financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As described in Management's Report on Internal Control Over Financial Reporting, management has excluded Baker
Street Advisors, LLC and myCIO Wealth Advisors LLP from its assessment of internal controls over financial reporting as of
December 31, 2015 because they were acquired by the Company in a purchase business combination during 2015. We have
also excluded Baker Street Advisors, LLC and myCIO Wealth Advisors LLP, from our audit of internal control over financial
reporting. Baker Street Advisors, LLC and myCIO Wealth Advisors LLP are controlled subsidiaries of the Company whose
total assets and total revenues represent 0.1% and 0.6%, respectively, of the related consolidated financial statement amounts
as of and for the year ended December 31, 2015.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 24, 2016
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AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data)
Revenue
Operating expenses:
Compensation and related expenses
Selling, general and administrative
Intangible amortization and impairments
Depreciation and other amortization
Other operating expenses
Operating income
Income from equity method investments
Other non-operating (income) and expenses:
Investment and other (income) expense
Interest expense
Imputed interest expense and contingent payment arrangements
Income before income taxes
Income taxes
Net income
Net income (non-controlling interests)
Net income (controlling interest)
Average shares outstanding (basic)
Average shares outstanding (diluted)
Earnings per share (basic)
Earnings per share (diluted)
For the Years Ended December 31,
2013
2014
2015
$
2,188.8
$
2,510.9
$
2,484.5
947.5
427.2
128.2
14.0
37.8
1,554.7
634.1
307.8
(40.8)
87.3
31.7
78.2
863.7
194.1
669.6
(309.1)
360.5
53.1
56.7
6.79
6.55
$
$
$
1,030.5
1,027.7
485.5
122.2
16.9
40.6
1,695.7
815.2
281.7
(23.3)
76.6
30.1
83.4
1,013.5
227.9
785.6
(333.5)
452.1
55.0
58.4
8.22
8.01
$
$
$
443.8
115.4
18.8
43.8
1,649.5
835.0
288.9
(15.3)
88.9
(40.3)
33.3
1,090.6
256.9
833.7
(317.7)
516.0
54.3
57.2
9.49
9.28
$
$
$
The accompanying notes are an integral part of the Consolidated Financial Statements.
38
Table of Contents
AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
Net income
Other comprehensive income (loss):
Foreign currency translation gain (loss)
Change in net realized and unrealized gain (loss) on derivative
securities, net of tax
Change in net unrealized gain (loss) on investment securities, net of
tax
Other comprehensive income (loss)
Comprehensive income
Comprehensive income (non-controlling interests)
Comprehensive income (controlling interest)
$
For the Years Ended December 31,
2013
2014
2015
$
669.6
$
785.6
$
833.7
(19.6)
1.0
11.5
(7.1)
662.5
(311.1)
351.4
$
(62.0)
0.3
3.4
(58.3)
727.3
(317.4)
409.9
$
(93.2)
1.9
22.1
(69.2)
764.5
(298.4)
466.1
The accompanying notes are an integral part of the Consolidated Financial Statements.
39
Table of Contents
AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except par value)
Assets
Cash and cash equivalents
Receivables
Investments in marketable securities
Other investments
Fixed assets, net
Goodwill
Acquired client relationships, net
Equity method investments in Affiliates
Other assets
Total assets
Liabilities and Equity
Payables and accrued liabilities
Senior bank debt
Senior notes
Convertible securities
Deferred income taxes, net
Other liabilities
Total liabilities
Commitments and contingencies (Note 10)
Redeemable non-controlling interests
Equity:
Common stock ($0.01 par value, 153.0 shares authorized; 55.8 shares outstanding in
2014 and 2015)
Additional paid-in capital
Accumulated other comprehensive income (loss)
Retained earnings
Less: Treasury stock, at cost (1.2 shares in 2014 and 2.0 shares in 2015)
Total stockholders’ equity
Non-controlling interests
Total equity
Total liabilities and equity
December 31,
2014
2015
$
$
$
550.6
425.9
172.6
167.2
95.4
2,652.8
1,778.4
1,783.5
71.7
7,698.1
808.3
855.0
736.8
303.1
491.7
214.5
3,409.4
563.8
391.2
199.9
149.3
114.1
2,668.4
1,686.4
1,937.1
74.6
7,784.8
729.4
645.0
944.6
305.2
565.7
213.3
3,403.2
645.5
612.5
0.6
672.2
31.8
2,163.3
2,867.9
(240.9)
2,627.0
1,016.2
3,643.2
7,698.1
$
0.6
597.2
(18.1)
2,679.3
3,259.0
(421.9)
2,837.1
932.0
3,769.1
7,784.8
$
$
$
$
The accompanying notes are an integral part of the Consolidated Financial Statements.
40
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AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
Total Stockholders’ Equity
December 31, 2012
Net income
Other comprehensive income (loss)
Share-based compensation
Common stock issued under share-based incentive plans
Tax benefit from share-based incentive plans
Settlement of senior convertible securities
Shares repurchases
Forward equity
Affiliate equity activity:
Affiliate equity expense
Issuances
Repurchases
Changes in Redemption value of Redeemable non-controlling interests
Transfers to Redeemable non-controlling interests
Capital Contributions by Affiliate equity holders
Distributions to non-controlling interests
December 31, 2013
Net income
Other comprehensive income (loss)
Share-based compensation
Common stock issued under share-based incentive plans
Tax benefit from share-based incentive plans
Settlement of senior convertible securities
Shares repurchases
Forward equity
Investments in Affiliates
Affiliate equity activity:
Affiliate equity expense
Issuances
Repurchases
Changes in Redemption value of Redeemable non-controlling interests
Transfers to Redeemable non-controlling interests
Capital Contributions by Affiliate equity holders
Distributions to non-controlling interests
December 31, 2014
Net income
Other comprehensive income (loss)
Share-based compensation
Shares
Outstanding
Common
Stock
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
$
$
$
53.9
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
53.9
—
—
—
—
—
1.9
—
—
—
—
—
—
—
—
—
—
55.8
—
—
—
0.5
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
0.5
—
—
—
—
—
0.1
—
—
—
—
—
—
—
—
—
—
0.6
—
—
—
$
$
$
868.5
—
—
27.5
(53.2)
20.7
(130.7)
—
(44.0)
34.7
(19.9)
(32.9)
(190.8)
—
—
—
479.9
—
—
29.3
(134.4)
60.2
276.4
—
(45.0)
—
29.2
—
19.6
(43.0)
—
—
—
672.2
—
—
34.2
$
$
$
41
79.1
—
(5.1)
—
—
—
—
—
—
—
—
—
—
—
—
—
74.0
—
(42.2)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
31.8
—
(49.9)
—
Retained
Earnings
$ 1,350.7
360.5
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$ 1,711.2
452.1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$ 2,163.3
516.0
—
—
Treasury
Stock at
Cost
Non-
controlling
Interests
$ (214.6) $
—
—
—
98.9
—
—
(15.7)
—
—
—
—
—
—
—
—
$ (131.4) $
—
—
—
129.1
—
—
(238.6)
—
—
—
—
—
—
—
—
—
$ (240.9) $
—
—
—
957.2
309.1
(2.0)
—
—
—
—
—
—
15.9
30.9
(20.9)
—
(19.5)
6.8
(267.1)
1,010.4
333.5
(16.1)
—
—
—
—
—
—
235.0
37.0
10.8
(19.6)
(22.7)
17.3
(569.4)
1,016.2
317.7
(19.3)
—
Total
Equity
$ 3,041.4
669.6
(7.1)
27.5
45.7
20.7
(130.7)
(15.7)
(44.0)
50.6
11.0
(53.8)
(190.8)
(19.5)
6.8
(267.1)
$ 3,144.6
785.6
(58.3)
29.3
(5.3)
60.2
276.5
(238.6)
(45.0)
235.0
66.2
10.8
—
(43.0)
(22.7)
17.3
(569.4)
$ 3,643.2
833.7
(69.2)
34.2
Table of Contents
Common stock issued under share-based incentive plans
Tax benefit from share-based incentive plans
Settlement of senior convertible securities
Forward equity
Shares repurchases
Investments in Affiliates
Affiliate equity activity:
Affiliate equity expense
Issuances
Repurchases
Changes in Redemption value of Redeemable non-controlling interests
Transfers to Redeemable non-controlling interests
Capital Contributions by Affiliate equity holders
Distributions to non-controlling interests
December 31, 2015
—
—
—
—
—
—
—
—
—
—
—
—
—
55.8
$
—
—
—
—
—
—
—
—
—
—
—
—
—
0.6
$
(131.0)
44.5
—
—
—
—
10.4
0.1
48.4
(81.6)
—
—
—
597.2
$
—
—
—
—
—
—
—
—
—
—
—
—
185.0
—
—
—
(366.0)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(18.1) $ 2,679.3
—
—
—
—
—
—
—
$ (421.9) $
—
—
—
—
—
33.8
54.0
44.5
—
—
(366.0)
33.8
51.6
1.6
(0.4)
—
(49.5)
11.7
(431.4)
932.0
62.0
1.7
48.0
(81.6)
(49.5)
11.7
(431.4)
$ 3,769.1
The accompanying notes are an integral part of the Consolidated Financial Statements.
42
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AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Cash flow from (used in) operating activities:
Net income
Adjustments to reconcile Net income to net cash flow from operating activities:
Intangible amortization and impairments
Depreciation and other amortization
Deferred income tax provision
Imputed interest expense and contingent payment arrangements
Income from equity method investments, net of amortization
Distributions received from equity method investments
Amortization of issuance costs
Share-based compensation and Affiliate equity expense
Other non-cash items
Changes in assets and liabilities:
(Increase) decrease in receivables
(Increase) decrease in other assets
Increase (decrease) in payables, accrued liabilities and other liabilities
Cash flow from operating activities
Cash flow from (used in) investing activities:
Investments in Affiliates
Purchase of fixed assets
Purchase of investment securities
Sale of investment securities
Cash flow used in investing activities
Cash flow from (used in) financing activities:
Borrowings of senior debt
Repayments of senior debt and convertible securities
Issuance of common stock
Repurchase of common stock
Note and contingent payments
Distributions to non-controlling interests
Affiliate equity issuances and repurchases
Excess tax benefit from share-based compensation
Settlement of forward equity sale agreement
Other financing items
Cash flow used in financing activities
Effect of foreign exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosure of cash flow information:
Interest paid
Income taxes paid
Supplemental disclosure of non-cash financing activities:
Settlement of 2006 junior convertible securities
Stock issued under incentive plans
Stock received in settlement of liability
Payables recorded for Share repurchases
Payables recorded for Affiliate equity repurchases
For the Years Ended December 31,
2013
2014
2015
$
669.6
$
785.6
$
833.7
128.2
14.0
27.7
31.7
(307.8)
226.6
9.6
84.1
10.4
(101.8)
(12.8)
177.6
957.1
(26.3)
(24.0)
(11.4)
11.4
(50.3)
760.0
(1,201.3)
48.2
(15.7)
(41.0)
(267.1)
(118.1)
17.3
(44.0)
(7.4)
(869.1)
1.5
39.2
430.4
469.6
87.4
82.8
—
1.3
0.5
—
4.0
$
$
122.2
16.9
62.8
30.1
(281.7)
366.9
7.6
113.7
3.8
26.5
(7.1)
144.9
1,392.2
(1,245.0)
(19.2)
(21.2)
17.3
(1,268.1)
1,746.5
(1,020.6)
41.4
(190.8)
14.4
(569.4)
(65.7)
61.5
(45.0)
(5.2)
(32.9)
(10.2)
81.0
469.6
550.6
67.9
110.7
217.8
63.6
44.7
47.8
21.5
$
$
115.4
18.8
94.7
(40.3)
(288.9)
346.1
8.1
102.7
(5.8)
56.1
6.2
(42.0)
1,204.8
(297.7)
(38.2)
(13.5)
24.9
(324.5)
1,253.3
(1,256.0)
57.8
(413.7)
20.5
(431.4)
(120.6)
44.5
0.1
(8.6)
(854.1)
(13.0)
13.2
550.6
563.8
76.4
89.6
—
10.7
3.6
—
62.3
$
$
The accompanying notes are an integral part of the Consolidated Financial Statements.
43
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business and Summary of Significant Accounting Policies
(a) Organization and Nature of Operations
Affiliated Managers Group, Inc. (“AMG” or the “Company”) is a global asset management company with equity
investments in leading boutique investment management firms, referred to as “Affiliates.” AMG’s Affiliates provide
investment management services globally to institutional clients, mutual funds and high net worth individuals.
Each of AMG’s Affiliates operate through distinct entities, typically organized as limited liability companies or limited
partnerships (or equivalent non-U.S. forms), which affords AMG the flexibility to design a separate operating agreement for
each Affiliate. The operating agreements reflect the specific terms of AMG’s economic participation in the Affiliate (a
“structured partnership interest”). AMG’s structured partnership interests consist primarily of structures through which AMG
shares in the Affiliate’s revenue without regard to expenses. AMG’s structured partnership interests also include structures
through which AMG shares in the Affiliate’s revenue less certain agreed-upon expenses. When AMG owns a majority of the
equity interests in an Affiliate and shares in the Affiliate’s revenue without regard to expenses, a set percentage of revenue is
allocated to fund operating expenses, including compensation (the “Operating Allocation”), while the remaining revenue (the
“Owners’ Allocation”) is allocated to AMG and Affiliate management in proportion to their respective ownership interests.
When AMG owns a minority of the equity interests in an Affiliate and shares in the Affiliate’s revenue without regard to
expenses, AMG is allocated a set percentage of revenue, with the remaining revenue allocated to fund operating expenses and
distributions to Affiliate management. When AMG’s structured partnership interest is calculated by reference to an Affiliate’s
revenue less certain agreed upon expenses, whether AMG owns a majority or minority of the equity interests, AMG is allocated
a set percentage of the Affiliate’s revenue net of the agreed categories of expenses.
(b) Basis of Presentation and Use of Estimates
The financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”).
All dollar amounts, except per share data in the text and tables herein, are stated in millions unless otherwise indicated. Certain
reclassifications have been made to prior years’ financial statements to conform to the current year’s presentation. The
preparation of financial statements in conformity 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.
(c) Principles of Consolidation
Investments in Affiliates
The Company evaluates the risk, rewards, and significant terms of each of its Affiliate and other investments to determine
the appropriate method of accounting. Majority-owned or otherwise controlled investments are consolidated and all material
intercompany balances and transactions are eliminated.
For its 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
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. In cases where AMG applies the equity
method of accounting, it does not typically have an obligation to repurchase Affiliate equity interests. 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 Vehicles
The Company’s Affiliates sponsor various investment vehicles where they also act as the investment advisor. Certain of
these investment vehicles are variable interest entities (“VIEs”) while others are voting rights entities (“VREs”).
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
VIEs are consolidated if the Affiliate is determined to be the primary beneficiary (i.e., if it absorbs a majority of the
expected losses, or receives a majority of the expected residual returns). In determining whether the Affiliate is the primary
beneficiary, both qualitative and quantitative factors (e.g., the voting rights of the equity holders, economic participation of all
parties, including how fees are earned and paid, related party ownership, guarantees and implied relationships) are considered.
VREs are consolidated if the Affiliate is the managing member or general partner of the investment vehicle unless
unaffiliated investors have certain rights to remove the Affiliate from such role, have substantive participating rights or
otherwise control the investment vehicle.
(d) Cash and Cash Equivalents
The Company considers all highly liquid investments, including money market mutual funds, with original maturities of
three months or less to be cash equivalents. Cash equivalents are stated at cost, which approximates market value due to the
short-term maturity of these investments.
(e) Receivables
The Company’s Affiliates earn advisory and performance fees, which are billed based on the terms of the related contracts.
Billed but uncollected advisory and performance fees are presented within Receivables on the Consolidated Balance Sheets and
are generally short-term in nature.
Certain of the Company’s Affiliates in the United Kingdom act as an intermediary between clients and their sponsored
funds. Normal settlement periods on transactions initiated by these clients result in unsettled fund share receivables and
payables that are presented on a gross basis within Receivables and Payables and accrued liabilities on the Consolidated
Balance Sheets. The gross presentation of these receivables and offsetting payables reflects the legal relationship between the
underlying investor and the Company’s Affiliates.
(f) Investments in Marketable Securities
Investments in marketable securities are classified as either trading or available-for-sale and carried at fair value.
Unrealized gains or losses on investments classified as available-for-sale are reported, net of tax, as a separate component of
Accumulated other comprehensive income in Equity until realized when they are reported in Investment and other (income)
expense. Realized and unrealized gains or losses related to trading securities are reported within Investment and other (income)
expense in the period they occur on a specific identification basis. If a decline in the fair value of an available-for-sale
investment is determined to be other than temporary, the carrying amount of the asset is reduced to its fair value, and the
difference is charged to income in the period incurred.
(g) Fair Value Measurements
The Company determines the fair value of certain investment securities and other financial and non-financial assets and
liabilities. Fair value is determined based on the price that would be received for an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date, utilizing a hierarchy of three different valuation
techniques:
Level 1 - Unadjusted quoted market prices for identical instruments in active markets;
Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in
markets that are not active; and model-derived valuations whose inputs, or significant value drivers, are observable; and
Level 3 - Prices reflect the Company’s own assumptions concerning unobservable inputs to the valuation model. These
inputs require significant management judgment and reflect the Company’s assumptions that market participants would use in
pricing the asset or liability.
(h) Fixed Assets
Fixed assets are recorded at cost and depreciated using the straight-line method over their estimated useful lives. The
estimated useful lives of office equipment and furniture and fixtures range from three to ten years. Computer software
developed or obtained for internal use is amortized using the straight-line method over the estimated useful life of the software,
generally three to seven years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the
45
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
term of the lease, and buildings are amortized over their expected useful lives. The costs of improvements that extend the life
of a fixed asset are capitalized, while the cost of repairs and maintenance are expensed as incurred. Land is not depreciated.
(i) Leases
The Company and its Affiliates currently lease office space and equipment under various leasing arrangements. As these
leases expire, it can be expected that in the normal course of business they will be renewed or replaced. Leases are classified as
either capital leases or operating leases, as appropriate. Most lease agreements for office space that are classified as operating
leases contain renewal options, rent escalation clauses or other inducements provided by the landlord. Rent expense is accrued
to recognize lease escalation provisions and inducements provided by the landlord, if any, on a straight-line basis over the lease
term.
(j) Equity Investments in Affiliates
For equity method investments, the Company’s share of the Affiliate’s revenue without regard to expenses or the
Company’s share of the Affiliate’s revenue less certain agreed-upon expenses, net of any amortization of intangible assets
related to the Company’s investment, is included in Income from equity method investments. The Company’s share of income
taxes incurred directly by Affiliates accounted for under the equity method is recorded within income taxes because these taxes
generally represent the Company’s share of the taxes incurred by the Affiliate.
The Company periodically evaluates its equity method investments for impairment. In such impairment evaluations, the
Company assesses if the fair value of the investment has declined below its carrying value for a period considered to be other
than temporary. If the Company determines that a decline in fair value below the carrying value of the investment is other than
temporary, then the reduction in carrying value would be recognized in Income from equity method investments in the
Consolidated Statements of Income.
(k) Acquired Client Relationships and Goodwill
Each Affiliate in which the Company makes an investment has identifiable assets arising from contractual or other legal
rights with their clients (“acquired client relationships”). In determining the value of acquired client relationships, the Company
analyzes the net present value of these Affiliates’ existing client relationships based on a number of factors, including: the
Affiliate’s historical and potential future operating performance; the Affiliate’s historical and potential future rates of attrition
among existing clients; the stability and longevity of existing client relationships; the Affiliate’s recent, as well as long-term,
investment performance; the characteristics of the firm’s products and investment styles; the stability and depth of the
Affiliate’s management team; and the Affiliate’s history and perceived franchise or brand value.
The Company has determined that certain of its mutual fund acquired client relationships meet the criteria to be considered
indefinite-lived assets because the Company expects both the renewal of these contracts and the cash flows generated by these
assets to continue indefinitely. Accordingly, the Company does not amortize these intangible assets, but instead reviews these
assets annually or more frequently whenever events or circumstances occur indicating that the recorded indefinite-lived assets
may be impaired. Each reporting period, the Company assesses whether events or circumstances have occurred that indicate
that the indefinite life criteria are no longer met. If the indefinite life criteria are no longer met, the Company would assess
whether the carrying value of the assets exceeds its fair value, an impairment loss would be recorded in an amount equal to any
such excess and these assets would be reclassified to definite-lived.
The expected useful lives of definite-lived acquired client relationships are determined based on an analysis of the
historical and projected attrition rates of each Affiliate’s existing clients, and other factors that may influence the expected
future economic benefit the Company will derive from the relationships. The expected lives of definite-lived acquired client
relationships are analyzed annually or more frequently whenever events or circumstances have occurred that indicate the
expected useful lives may no longer be appropriate.
The Company tests for the possible impairment of indefinite and definite-lived intangible assets annually or more
frequently whenever events or changes in circumstances indicate that the carrying amount of the asset is not recoverable. If
such indicators exist, the Company compares the fair value of the asset to the carrying value of the asset. If the carrying value is
greater than the fair value, an impairment loss would be recorded in Intangible amortization and impairments.
Goodwill represents the future economic benefits arising from assets acquired in a business combination that are not
individually identified and separately recognized, and is reported within the segments in which the Affiliate operates. Goodwill
is not amortized, but is instead reviewed for impairment. The Company assesses goodwill for impairment at least annually, or
46
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
more frequently whenever events or circumstances occur indicating that the recorded goodwill may be impaired. If the carrying
amount of goodwill exceeds the fair value, an impairment loss would be recorded in Intangible amortization and impairments.
(l) Issuance Costs
Issuance costs related to Company’s senior bank debt are amortized over the remaining term of the credit facility and term
loan. Costs incurred to issue debt are amortized over the shorter of the period to the first investor put or the Company’s estimate
of the expected term of the security. Costs associated with financial instruments that are not required to be accounted for
separately as derivative instruments are charged directly to stockholders’ equity.
(m) Derivative Financial Instruments
The Company may utilize financial instruments, specifically interest rate derivative contracts to hedge certain interest rate
exposures. In entering into these contracts, the Company intends to offset cash flow gains and losses that occur on its existing
debt obligations with cash flow gains and losses on the contracts hedging these obligations.
From time to time, the Company’s Affiliates use foreign currency forward contracts to hedge the risk of currency exchange
rate movements. In entering into these contracts, the Affiliates intend to offset cash flow gains and losses on projected foreign
currency-denominated revenues and expenses as a result of variability in foreign currency exchange rates.
The Company records derivatives on the balance sheet at fair value. If the Company’s derivatives qualify as cash flow
hedges, the effective portion of the unrealized gain or loss is recorded in Accumulated other comprehensive income as a
separate component of stockholders’ equity and reclassified into earnings when the hedged cash flows are recorded in earnings.
Hedge effectiveness is generally measured by comparing the present value of the cumulative change in the expected future
variable cash flows of the hedged contract with the present value of the cumulative change in the expected future variable cash
flows of the hedged item. To the extent that the critical terms of the hedged item and the derivative are not identical, hedge
ineffectiveness would be reported in Investment and other (income) expense. If the Company’s derivatives do not qualify as
cash flow or fair value hedges, changes in the fair value of the derivatives are recognized as a gain or loss in Investment and
other (income) expense.
(n) Contingent Payment Arrangements
The Company periodically enters into contingent payment arrangements in connection with its business combinations. In
these arrangements, the Company agrees to pay additional consideration to the sellers to the extent that certain levels of revenue
growth are achieved. For consolidated Affiliates, the Company estimates the fair value of these potential future obligations at
the time a business combination is consummated and records a liability on its Consolidated Balance Sheet. The Company then
accretes the obligation to its expected payment amount over the period until the arrangement is measured. If the Company’s
expected payment amount subsequently changes, the obligation is reduced or increased in the current period resulting in a gain
or loss, respectively. Both gains and losses resulting from changes to expected payments and the accretion of these obligations
to their expected payment amounts are reflected within Imputed interest expense and contingent payment arrangements in the
Company’s Consolidated Statements of Income. For Affiliates accounted for under the equity method, the Company records a
liability when a payment becomes probable with a corresponding increase to the carrying value of the Affiliate.
(o) Income Taxes
The Company accounts for income taxes using the liability method. Under this method, deferred taxes are recognized for
the expected future tax consequences of temporary differences between the book carrying amounts and tax bases of the
Company’s assets and liabilities. Deferred tax liabilities are generally attributable to intangible assets, convertible securities and
deferred income. Deferred tax assets are generally attributable to deferred compensation, state and foreign loss carryforwards,
and the benefit of uncertain tax positions. Intangible-related deferred tax liabilities are not recorded on U.S. basis differences
related to the Company’s foreign investments in corporate stock because of the permanent nature of the Company’s
investments.
In measuring the amount of deferred taxes each period, the Company must project the impact on its future tax payments of
any reversal of deferred tax liabilities (which would increase the Company’s tax payments), and any use of its state and foreign
loss carryforwards (which would decrease its tax payments). In forming these estimates, the Company uses enacted federal,
state and foreign income tax rates and makes assumptions about the apportionment of future taxable income to jurisdictions in
which the Company has operations. An increase or decrease in foreign, federal or state income tax rates could have a material
impact on the Company’s deferred income tax liabilities and assets and would result in a current income tax charge or benefit.
47
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company recognizes the financial statement benefit of an uncertain tax position only after considering the probability
that a tax authority would sustain the position in an examination. For tax positions meeting a “more-likely-than-not” threshold,
the amount recognized in the financial statements is the benefit expected to be realized upon settlement with the tax authority.
For tax positions not meeting the threshold, no financial statement benefit is recognized. The Company recognizes interest and
other charges relating to unrecognized tax benefits as additional tax expense.
The Company regularly assesses the need for valuation allowances on its deferred tax assets, which would reduce these
assets to their recoverable amounts. In forming these estimates, the Company makes assumptions of future taxable income that
may be generated to utilize these assets, which have limited lives. If the Company determines that these assets will be realized,
the Company records an adjustment to the valuation allowance, which would decrease tax expense in the period such
determination was made. Likewise, should the Company determine that it would be unable to realize additional amounts of
deferred tax assets, an adjustment to the valuation allowance would be charged to tax expense in the period such determination
was made.
The Company operates in various locations outside the U.S. and generates earnings from its foreign subsidiaries. The
Company does not recognize a provision for U.S. income taxes or a deferred income tax liability on undistributed foreign
earnings that are indefinitely reinvested.
(p) Foreign Currency Translation
The assets and liabilities of Affiliates whose functional currency is not the U.S. dollar are translated into U.S. dollars using
exchange rates in effect as of the balance sheet date. The revenue and expenses of these Affiliates are translated into U.S.
dollars using average exchange rates for the relevant period. Because of the permanent nature of the Company’s investments,
net translation exchange gains and losses are excluded from Net income and recorded in Other comprehensive income. Foreign
currency transaction gains and losses are reflected in Investment and other (income) expense.
(q) Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of
cash investments. The Company maintains cash and cash equivalents, investments and, at times, certain financial instruments
with various high credit-quality financial institutions. These financial institutions are typically located in countries in which
AMG and its Affiliates operate. For AMG and certain Affiliates, cash deposits at a financial institution may exceed Federal
Deposit Insurance Corporation insurance limits.
(r) Revenue Recognition
The Company’s consolidated revenue primarily represents advisory fees billed by Affiliates for managing the assets of
clients. Asset-based advisory fees are recognized as services are rendered and are based upon a percentage of the value of client
assets managed. Any fees collected in advance are deferred and recognized as income over the period earned. Performance-
based advisory fees are generally assessed as a percentage of the investment performance realized on a client’s account,
generally over an annual period. Performance-based advisory fees are recognized when they are earned (i.e., when they become
billable to customers and are not subject to claw-back) based on the contractual terms of agreements and when collection is
reasonably assured. Carried interest is recognized upon the earlier of the termination of the investment product or when the
likelihood of claw-back is improbable. Also included in revenue are commissions earned by broker-dealers, recorded on a trade
date basis, and other service fees recorded as earned.
The Company’s Affiliates have contractual arrangements with third parties to provide certain distribution-related services.
These third parties are primarily compensated based on the value of client assets over time. Distribution-related revenues are
presented gross of any related expenses when the Affiliate is the principal in its role as primary obligor under its sales and
distribution arrangements. Distribution-related expenses are presented within Selling, general and administrative expenses.
(s) 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 Company had convertible securities outstanding during the periods presented and is required to apply the if-converted
method to these securities in its calculation of diluted earnings per share. Under the if-converted method, shares that are
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
issuable upon conversion are deemed outstanding, regardless of whether the securities are contractually convertible into the
Company’s common stock at that time. For this calculation, the interest expense (net of tax) attributable to these dilutive
securities is added back to Net income (controlling interest), reflecting the assumption that the securities have been converted.
Issuable shares for these securities and related interest expense are excluded from the calculation if an assumed conversion
would be anti-dilutive to diluted earnings per share.
(t) Share-Based Compensation Plans
The Company recognizes expenses for all share-based payments based on their grant date fair values over the requisite
service period.
The Company reports any tax benefits realized upon the exercise of stock options that are in excess of the expense
recognized for reporting purposes as a financing activity in the Company’s Consolidated Statements of Cash Flows. If the tax
benefit realized is less than the expense, the tax shortfall is recognized in stockholders’ equity. To the extent the expense
exceeds available windfall tax benefits, it is recognized in the Consolidated Statements of Income. The Company was permitted
to calculate its cumulative windfall tax benefits for the purposes of accounting for future tax shortfalls. The Company elected to
apply the long-form method for determining the pool of windfall tax benefits.
(u) Segment Information
Management has assessed and 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.
Revenue and income from equity method investments in the Institutional distribution channel is earned from relationships
with public and private client entities, including foundations, endowments, sovereign wealth funds and retirement plans for
corporations and municipalities. Revenue and income from equity method investments in the Mutual Fund distribution channel
is earned from advisory or sub-advisory relationships with active return oriented mutual funds, UCITS and other retail products.
Revenue and income from equity method investments in the High Net Worth distribution channel is earned from relationships
with high net worth and ultra-high net worth individuals, families, trusts, foundations, endowments and retirement plans.
In measuring Net income (controlling interest) by segment, the Company’s share of expenses incurred directly at Affiliates
and AMG Funds is allocated to a particular segment pro rata to the revenue generated by the Affiliate and AMG Funds in such
segment. All other operating and non-operating expenses not incurred directly by an Affiliate or AMG Funds are generally
allocated to segments based on the relative contribution to earnings of the applicable Affiliate or AMG Funds in each segment.
(v) Recent Accounting Developments
In May 2014, the Financial Accounting Standards Board (the “FASB”) issued a final standard on revenue from contracts
with customers. The new standard provides a comprehensive model for revenue recognition. The new 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 2015, the FASB issued a new standard that amended the current consolidation guidance. The new standard
changes the analysis required to determine whether an entity is a variable interest entity and should be consolidated. The new
standard is effective for interim and fiscal periods beginning after December 15, 2015. The Company is evaluating the impact
of this new standard on its Consolidated Financial Statements.
In April 2015, the FASB issued a new standard to reduce diversity in the presentation of debt issuance costs. The new
standard requires debt issuance costs to be presented on the balance sheet as a deduction from the related debt. The new
standard is effective for interim and fiscal periods beginning after December 15, 2015. The Company does not anticipate that
this new standard will have a material impact on its Consolidated Financial Statements.
In April 2015, the FASB issued a new standard amending the disclosure requirements for investments in certain entities
that calculate net asset value per share. The new standard removes, from the fair value hierarchy, investments for which the net
asset value is used as a practical measure of fair value. The new standard is effective for interim and fiscal periods beginning
after December 15, 2015. The Company does not anticipate that this new standard will have a material impact on its
Consolidated Financial Statements.
49
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In September 2015, the FASB issued a new standard requiring an acquirer to recognize and disclose adjustments to
provisional purchase price allocations, performed in connection with business combinations, in the reporting period in which
the adjustments are determined. The new standard is effective for interim and fiscal periods beginning after December 15,
2015. The Company is evaluating the impact of this new standard on its Consolidated Financial Statements.
In January 2016, the FASB issued a new standard that changes the accounting for equity investments, financial liabilities
under the fair value option and the presentation and disclosure requirements for financial instruments. Under the new guidance,
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 new standard is effective for interim and fiscal periods beginning
after December 15, 2017. The Company is evaluating the impact of this new standard on its Consolidated Financial
Statements.
2.
Investments in Marketable Securities
Investments in marketable securities at December 31, 2014 and 2015 were $172.6 million and $199.9 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:
Cost
Unrealized Gains
Unrealized Losses
Fair Value
Available-for-Sale
Trading
December 31, 2014
December 31, 2015
December 31, 2014
December 31, 2015
$
$
125.6
$
42.8
(18.1)
150.3
$
104.7
$
77.6
(1.8)
180.5
$
19.5
$
2.9
(0.1)
22.3
$
19.8
1.9
(2.3)
19.4
For the years ended December 31, 2014 and 2015, there were $3.4 million and $8.8 million, respectively, of realized gains
on investments classified as available-for-sale. These gains were recorded in Investment and other (income) expense. There
were no significant realized gains or losses on investments classified as trading for the years ended December 31, 2014 and
2015.
3. Other Investments
Other investments consist of investments in funds advised by Affiliates that are carried at fair value. The income or loss
related to these investments is classified within Investment and other (income) expense in the Consolidated Statements of
Income.
4. Variable Interest Entities
The Company’s consolidated Affiliates act as the investment manager for certain VIEs. These Affiliates are entitled to
receive management fees and may be eligible to receive performance fees. The Affiliates’ exposure to risk in these entities is
generally limited to any equity investment and any uncollected management or performance fees, neither of which were
significant at December 31, 2014 and 2015. These Affiliates do not have any investment performance guarantees to these VIEs.
Consolidated Affiliates are not the primary beneficiaries of any of these VIEs as their involvement is limited to that of a
service provider, and their investment, if any, represents an insignificant interest in the relevant fund’s assets under
management. Since these Affiliates’ variable interests will not absorb the majority of the variability of the VIE’s net assets,
these entities are not consolidated.
The net assets and liabilities of these unconsolidated VIEs and the Company’s maximum risk of loss were as follows:
December 31, 2014
December 31, 2015
Category of Investment
Sponsored investment funds
Unconsolidated
VIE Net Assets
$
8,550.4
Carrying Value and
Maximum Risk of Loss
1.2
$
$
Unconsolidated
VIE Net Assets
6,688.9
Carrying Value and
Maximum Risk of Loss
1.4
$
50
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5. Senior Bank Debt
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In 2015, the Company entered into a $1.3 billion senior unsecured multicurrency revolving credit facility (the “revolver”)
and a $350.0 million senior unsecured term loan facility (the “term loan” and, together with the revolver, the “credit facilities”).
The credit facilities, which replaced previous credit facilities, both mature on September 30, 2020.
Subject to certain conditions, the Company may increase commitments under the revolver by up to an additional $500.0
million and may borrow up to an additional $100.0 million under the term loan. The Company pays interest on any outstanding
obligations under the revolver and on the term loan at specified rates, based either on the LIBOR rate or the prime rate as in
effect from time to time.
As of December 31, 2014 and 2015, the Company had outstanding borrowings under the revolver of $605.0 million and
$295.0 million, respectively, and the weighted-average interest rate on outstanding borrowings was 1.40% and 2.52%,
respectively. As of December 31, 2014 and 2015, the Company had outstanding borrowings under the term loan of $250.0
million and $350.0 million, respectively, and the weighted-average interest rate on outstanding borrowings was 1.48% and
1.45%, respectively. The Company pays commitment fees on the unused portion of its revolver. In 2014 and 2015, these fees
amounted to $2.8 million and $1.9 million, respectively.
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 to certain customary events of default.
6. Senior Notes
In 2015, the Company redeemed, canceled and retired all $140.0 million principal amount outstanding of its 5.25% senior
unsecured notes due 2022 at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest.
In February 2015, the Company issued additional senior notes, and at December 31, 2015 had three senior notes
outstanding, the principal terms of which are summarized below.
Issue date
Maturity date
Potential Call Date
Par value (in millions)
Call Price
Stated coupon
Coupon frequency
__________________________
2024
Senior
Notes
2025
Senior
Notes
February 2014
February 2015
$
February 2024
Any Time (1)
400.0
As Defined (1)
4.25%
$
August 2025
Any Time (1)
350.0
As Defined (1)
3.50%
$
2042
Senior
Notes
August 2012
August 2042
August 2017
200.0
At Par
6.375%
Semi-annually
Semi-annually
Quarterly
(1) The 2024 and 2025 senior notes may be redeemed at any time, in whole or in part, at a make-whole redemption price plus
accrued and unpaid interest.
7. Convertible Securities
In 2014, the Company delivered a notice to redeem all $300.0 million principal amount of its outstanding junior
convertible trust preferred securities issued in 2006 (“2006 junior convertible securities”). In lieu of redemption, substantially
all holders of the 2006 junior convertible securities elected to convert their securities into a defined number of shares. The
Company issued 1.9 million shares of its common stock and recognized a loss of $18.8 million, which is included in Imputed
interest expense and contingent payment arrangements. All of the Company’s 2006 junior convertible securities have been
canceled and retired.
At December 31, 2015, the Company had junior convertible trust preferred securities outstanding that were issued in 2007
(“2007 junior convertible securities”).
51
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The carrying values of the Company’s convertible securities were as follows:
2007 junior convertible securities(1)
$
303.1
$
430.8
$
305.2
$
430.8
December 31, 2014
December 31, 2015
Carrying
Value
Principal Amount
at Maturity
Carrying
Value
Principal Amount
at Maturity
__________________________
(1) The carrying value is accreted to the principal amount at maturity over a remaining life of 22 years.
The 2007 junior convertible securities bear interest at 5.15% per annum, payable quarterly in cash. Each $50 security is
convertible, at any time, into 0.25 shares of the Company’s common stock, which represents a conversion price of $200 per
share. Holders of the securities have no rights to put these securities to the Company. Upon conversion, holders will receive
cash or shares of the Company’s common stock, or a combination thereof, at the Company’s election. The Company may
redeem the 2007 junior convertible securities if the closing price of its common stock exceeds $260 per share for 20 trading
days in a period of 30 consecutive trading days. These convertible securities are considered contingent payment debt
instruments under federal income tax regulations, which require the Company to deduct interest in an amount greater than its
reported interest expense. These deductions result in annual deferred tax liabilities of $9.4 million. These deferred tax
liabilities will be reclassified directly to stockholders’ equity if the Company’s common stock is trading above certain
thresholds at the time of the conversion of the securities.
8. Forward Equity Sale Agreement
The Company may sell shares of its common stock under a forward equity agreement. At December 31, 2015, the
Company had approximately $250 million remaining notional amount that was available to sell under the forward equity
agreement.
9. Derivative Financial Instruments
From time to time, the Company seeks to offset its exposure to changing interest rates under its debt financing
arrangements and certain of its Affiliates seek to offset their exposure to changing foreign currency exchange rates by entering
into derivative contracts.
During 2015, the Company’s Affiliates realized $3.2 million of gains and $1.7 million of losses upon the settlement of
certain foreign currency forward contracts. Such realized gains and losses are presented in the Consolidated Statements of
Income within Revenue, Investment and other (income) expense or Operating expenses, depending on the risk being hedged.
10. 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 had no significant accruals as of December 31, 2015.
In the first quarter of 2016, Third Avenue Management LLC (“Third Avenue”), one of the Company’s consolidated
Affiliates, was named as a defendant in various legal actions relating to the liquidation and closure of the Third Avenue Focused
Credit Fund. The Company is not a party to any of these actions. Third Avenue believes that the claims in these actions are
without merit and intends to vigorously defend against them.
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 investment partnerships. As of December 31, 2015, these unfunded
commitments were $76.8 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 for $15.2 million of these commitments if they are
called.
52
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of December 31, 2015, Company was contingently liable, upon achievement by certain Affiliates of specified financial
targets, to make payments through 2019 of up to $85.6 million associated with its consolidated Affiliates and $166.5 million
associated with its equity method Affiliates. The Company expects to make payments of $14.0 million (none in 2016) of the
$85.6 million related to consolidated Affiliates and no payments related to the Company’s equity method Affiliates.
11. Fair Value Measurements
The following tables summarize the Company’s financial assets and liabilities that are measured at fair value on a recurring
basis:
Financial Assets
Cash equivalents
Investments in marketable securities(1)
Trading securities
Available-for-sale securities
Other investments
Financial Liabilities
Contingent payment arrangements(2)
Obligations to related parties(2)
Interest rate swaps
Foreign currency forward contracts(3)
Financial Assets
Cash equivalents
Investments in marketable securities(1)
Trading securities
Available for sale securities
Other investments
Financial Liabilities
Contingent payment arrangements(2)
Obligations to related parties(2)
__________________________
December 31,
2014
Fair Value Measurements
Level 1
Level 2
Level 3
$
59.1
$
59.1
$
— $
22.3
150.3
167.2
59.3
93.1
1.4
0.5
22.3
150.3
13.6
—
—
19.4
$
— $
— $
—
—
—
—
1.4
0.5
$
—
—
—
134.2
59.3
93.1
—
—
December 31,
2015
Fair Value Measurements
Level 1
Level 2
Level 3
$
65.9
$
65.9
$
— $
19.4
180.5
149.3
19.4
180.5
20.7
—
—
2.6
$
10.2
$
137.3
— $
—
— $
—
—
—
—
126.0
10.2
137.3
(1) Principally investments in equity securities.
(2) Amounts are presented within Other liabilities.
(3) Amounts are presented within Other assets or Other liabilities.
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 that are classified
as Level 1.
53
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Investments in marketable securities consist primarily of investments in publicly traded securities and in funds advised by
Affiliates that are valued using net asset value (“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 and 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. Investments in funds that are subject to longer redemption restrictions are classified as
Level 3. The fair value of Level 3 assets is primarily determined using NAV one quarter in arrears (adjusted for current period
calls and distributions).
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.
Obligations to related parties include agreements to repurchase Affiliate equity and liabilities, offsetting certain
investments that are held by the Company but economically attributable to a related party. 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. The
liability to a related party is measured based upon certain investments held by the Company, the fair value of which is
determined using NAV one quarter in arrears adjusted for current period calls and distributions.
Interest rate swaps and foreign currency forward contracts use model-derived valuations in which all significant inputs are
observable in active markets to determine the fair value of these derivatives.
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 from Level 1 to Level 2 in 2014 or 2015.
Level 3 Financial Assets and Liabilities
The following table presents the changes in Level 3 assets and liabilities:
For the Years Ended December 31,
2014
Contingent
Payment
Arrangements
Other
Investments
Obligations
to Related
Parties
Other
Investments
2015
Contingent
Payment
Arrangements
$
131.8
$
50.2
$
76.9
$
134.2
$
11.4 (1)
9.1 (2)
5.5 (3)
(5.5) (1)
59.3
(40.9) (2)
Obligations
to Related
Parties
$
93.1
4.6 (3)
17.4
(26.4)
—
—
—
—
96.7
(86.0)
—
16.3
(25.5)
6.5
9.3
164.1
(17.5)
(124.5)
—
—
$
134.2
$
59.3
$
93.1
$
126.0
$
10.2
$
137.3
$
17.1
$
9.1
$
(0.1)
$
6.1
$
(40.9)
$
(7.3)
Balance, beginning of
period
Net gains/losses
Purchases and
issuances
Settlements and
reductions
Net transfers in and/or
out of Level 3
Balance, end of
period
Net change in
unrealized gains/
losses relating to
instruments still held
at the reporting date
__________________________
(1) Gains and losses on Other investments are recorded in Investment and other (income) expense.
54
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(2) Accretion and changes to the Company’s contingent payment arrangements are recorded in Imputed interest expense and
contingent payment arrangements.
(3) Gains and losses associated with agreements to repurchase Affiliate equity are recorded in Imputed interest expense and
contingent payment arrangements. Gains and losses related to liabilities offsetting certain investments are recorded in
Investment and other (income) expense.
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,
2014
Range at
December 31,
2014
Fair Value at
December 31,
2015
Range at
December 31,
2015
Contingent payment arrangements
Discounted cash flow
Growth rates
$
59.3
6% $
10.2
Affiliate equity repurchase obligations Discounted cash flow
Growth rates
21.5
Discount rates
Discount rates
15%
5% - 9%
15% - 16%
62.3
3% - 8%
15%
1% - 9%
14% - 15%
Investments in Certain Entities that Calculate Net Asset Value
The Company uses the NAV of certain investments as their fair value. The NAVs provided by the investees have been
derived from the fair values of the underlying investments 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:
Category of Investment
Private equity(1)
Other funds(2)
__________________________
December 31, 2014
December 31, 2015
Fair Value
Unfunded
Commitments
Fair Value
Unfunded
Commitments
$
$
134.2
75.8
210.0
$
$
67.8
—
67.8
$
$
126.0
72.3
198.3
$
$
76.8
—
76.8
(1) These funds primarily invest in a broad range of private equity funds and make direct investments. Distributions will be
received as the underlying assets are liquidated over the life of the funds, which is generally 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 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, 2014
December 31, 2015
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
$
736.8
$
786.2
$
944.6
$
303.1
532.1
305.2
966.3
483.6
Fair Value
Hierarchy
Level 2
Level 2
Senior notes
Convertible securities
12. Business Combinations
55
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company completed majority investments in Baker Street Advisors, LLC (“Baker Street”) on April 1, 2015 and
myCIO Wealth Partners, L.P. (“myCIO”) on October 1, 2015. The Company’s provisional purchase price allocations were
measured using a financial model that includes assumptions of expected market performance, net client flows and discount
rates. The associated provisional amounts may be revised upon completion of the final valuation. The consideration paid (less
net tangible assets acquired) will be deductible for U.S. tax purposes over a 15-year life.
The purchase price allocation for these investments was as follows:
Consideration paid
Contingent payment obligations
Non-controlling interests
Enterprise value
Acquired client relationships
Tangible assets, net
Goodwill
Total
76.1
9.3
33.8
119.2
52.5
2.4
64.3
119.2
$
$
$
$
The excess of the enterprise value over the separately identifiable net assets acquired was recorded as goodwill and the
segment allocation was as follows:
Institutional
Mutual Fund
High Net Worth
Total
14.4%
—%
85.6%
Unaudited pro-forma financial results are set forth below, assuming these investments occurred on January 1, 2014 and the
Company’s structured partnership interests had been in effect for the entire period.
Revenue
Net income (controlling interest)
Earnings per share (basic)
Earnings per share (diluted)
For the Years Ended December 31,
2014 (Unaudited)
2015 (Unaudited)
$
2,538.2
$
454.5
8.26
8.05
2,499.4
517.9
9.53
9.31
The unaudited pro-forma financial results are not necessarily indicative of the financial results had the investments been
consummated at the beginning of the periods presented, nor are they necessarily indicative of the financial results expected in
future periods. The unaudited pro-forma financial results do not include the impact of transaction and integration related costs
or benefits that may be expected to result from these investments.
The Company’s new investments contributed $15.3 million and $1.3 million to the Company’s Revenue and earnings,
respectively, during 2015.
The Company had liabilities to related parties for contingent payment arrangements in connection with certain business
combinations. The total payable was $59.3 million and $10.2 million as of December 31, 2014 and 2015, respectively, and was
included in Other liabilities. The Company made no payments associated with these liabilities in 2014. In 2015, the Company
made payments of $17.5 million associated with these liabilities. During 2013, the Company adjusted its estimate of its
contingent payment obligations and recognized a loss totaling $10.3 million. During 2014, the Company made no such
adjustments. During 2015, the Company adjusted its estimate of its contingent payment obligations and recorded a gain of
$44.7 million.
56
Table of Contents
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. Goodwill and Acquired Client Relationships
The following tables present the change in Goodwill and components of Acquired client relationships, net of the
Company’s consolidated Affiliates:
Balance, as of December 31, 2013
Goodwill acquired
Foreign currency translation
Balance, as of December 31, 2014
Goodwill acquired
Foreign currency translation
Balance, as of December 31, 2015
Institutional
Mutual Fund
High Net Worth
Total
Goodwill
$
$
$
1,076.3
97.2
(14.4)
1,159.1
9.2
(27.0)
1,141.3
$
$
$
928.1
208.1
(10.9)
1,125.3
—
(5.8)
1,119.5
$
$
$
337.3
39.2
(8.1)
368.4
55.1
(15.9)
407.6
$
$
$
2,341.7
344.5
(33.4)
2,652.8
64.3
(48.7)
2,668.4
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, 2013
$
1,039.5
$
New Investments
Amortization and impairments
Foreign currency translation
220.3
—
(4.7)
Balance, as of December 31, 2014
$
1,255.1
$
New Investments
Amortization and impairments
Foreign currency translation
52.5
—
(5.8)
Balance, as of December 31, 2015
$
1,301.8
$
(442.8) $
—
(122.2)
—
(565.0) $
—
(115.4)
—
(680.4) $
596.7
$
864.0
$
1,460.7
220.3
(122.2)
(4.7)
690.1
52.5
(115.4)
(5.8)
621.4
$
$
244.7
—
(20.4)
1,088.3
—
—
(23.3)
1,065.0
$
$
465.0
(122.2)
(25.1)
1,778.4
52.5
(115.4)
(29.1)
1,686.4
Definite-lived acquired client relationships are amortized over their expected useful lives. As of December 31, 2015, these
relationships were being amortized over a weighted average life of approximately ten years. The Company recognized
amortization expense for these relationships of $122.2 million for the year ended December 31, 2014, as compared to $115.4
million for the year ended December 31, 2015. Based on relationships existing as of December 31, 2015, the Company
estimates that its consolidated annual amortization expense will be $110 million for each of the next five years.
During 2014 and 2015, the Company completed impairment assessments on its goodwill and definite-lived and indefinite-
lived acquired client relationships and no impairments were indicated.
14. Equity Method Investments in Affiliates
The Company completed minority investments in Abax Investments (Pty) Ltd on December 18, 2015 and Ivory Investment
Management, L.P. on December 31, 2015 for approximately $200 million. The Company’s provisional purchase price
allocations were measured using a financial model that includes assumptions of expected market performance, net client flows
and discount rates. The associated provisional amounts may be revised upon completion of the final valuation. The
consideration paid (less net tangible assets acquired) will be deductible for U.S. tax purposes over a 15-year life. Also during
2015, the Company paid $23.3 million related to a contingent payment obligation.
A portion of the purchase price attributable to the Company’s equity method Affiliates relates to definite-lived acquired
client relationships. As of December 31, 2015, the definite-lived acquired relationships were being amortized over a weighted
average life of approximately fourteen years. The Company recognized amortization expense for these relationships of $32.3
million for the year ended December 31, 2014, as compared to $34.3 million for the year ended December 31, 2015. Based on
relationships existing as of December 31, 2015, the Company estimates the annual amortization expense attributable to its
current equity-method Affiliates to be $37 million for each of the next five years.
57
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table presents summarized financial information for Affiliates accounted for under the equity method.
Revenue(1)
Net income
Assets(2)
Liabilities and Non-controlling interest(2)
__________________________
For the Years Ended December 31,
2013
2014
2015
$
$
1,589.6
1,321.9
$
1,869.3
253.8
2,217.1
431.5
December 31,
2014
2015
$
34,729.2
$
33,048.6
30,663.4
29,434.7
(1) Revenue includes advisory fees for asset management services and net investment income from consolidated investment
partnerships.
(2) Assets consist primarily of investment securities in consolidated investment partnerships, which are generally held by non-
controlling interests.
The Company’s share of undistributed earnings from equity method investments totaled $101.5 million as of December 31,
2015.
Subsequent to year end, the Company completed minority investments in Systematica Investments L.P. and Baring Private
Equity Asia on January 4, 2016 for approximately $550 million.
15. Fixed Assets and Lease Commitments
Fixed assets consisted of the following:
Building and leasehold improvements
Software
Equipment
Furniture and fixtures
Land, improvements and other
Fixed assets, at cost
Accumulated depreciation and amortization
Fixed assets, net
$
$
December 31,
2014
2015
$
104.7
84.1
40.8
38.3
17.5
18.7
199.4
(104.0)
95.4
$
45.4
39.9
22.4
18.6
231.0
(116.9)
114.1
The Company and its Affiliates lease office space and equipment for their operations. At December 31, 2015, the
Company’s aggregate future minimum payments for operating leases having initial or non-cancelable lease terms greater than
one year were payable as follows:
58
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2016
2017
2018
2019
2020
Thereafter
__________________________
Required Minimum
Payments (1)
$
36.0
33.7
31.0
29.5
28.4
82.1
(1) The controlling interest portion is $10.7 million through 2016, $11.0 million each in 2017 and in 2018, $10.6 million in
2019, $10.1 million in 2020 and $38.7 million thereafter.
Consolidated rent expense for 2013, 2014 and 2015 was $30.3 million, $30.5 million and $36.3 million, respectively.
16. Payables and Accrued Liabilities
Payables and accrued liabilities consisted of the following:
Accrued compensation and distributions
Unsettled fund share payables
Accrued income taxes
Accrued share repurchases
Accrued professional fees
Other
17. Related Party Transactions
December 31,
2014
2015
$
491.3
$
455.0
78.3
59.8
47.8
26.9
104.2
76.6
67.9
—
31.4
98.5
$
808.3
$
729.4
The Company has reflected a prior owner’s investments in certain private equity investment partnerships sponsored by an
Affiliate and recorded on the Company’s Consolidated Balance Sheet as either a liability in Other liabilities or as a Non-
controlling interest, depending on the structure of the prior owner’s investments in the partnerships. The total liability was
$71.6 million and $75.0 million at December 31, 2014 and 2015, respectively. The total non-controlling interest was $13.5
million and $5.1 million at December 31, 2014 and 2015, 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.
See Note 20 for information on transactions in Affiliate equity.
18. Stockholders’ Equity
Preferred Stock
The Company is authorized to issue up to 5.0 million shares of Preferred Stock. Any such Preferred Stock issued by the
Company may rank prior to common stock as to dividend rights, liquidation preference or both, may have full or limited voting
rights and may be convertible into shares of common stock.
Common Stock
The Company is authorized to issue up to 150.0 million shares of Voting Common Stock and 3.0 million shares of Class B
Non-Voting Common Stock. As more fully described in Note 8, the Company is party to a forward equity sale agreement under
which the Company may sell shares of its common stock.
59
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company’s Board of Directors has periodically authorized share repurchase programs, most recently in May 2015,
authorizing the Company to repurchase up to 3.0 million shares of its common stock. As of December 31, 2015, there were 2.3
million remaining shares available for repurchase under the May 2015 program, which does not expire. The timing and amount
of issuances and repurchases will be determined at the discretion of the Company’s management.
The following is a summary of the Company’s recent share repurchase activity:
Period
2013
2014
2015
Financial Instruments
Shares
Repurchased
Average
Price
$
0.1
1.2
1.7
184.89
204.72
209.39
The Company’s junior convertible securities contain an embedded right for holders to receive shares of the Company’s
common stock under certain conditions. These arrangements, as well as the forward equity sale agreement, meet the definition
of equity and are not required to be accounted for separately as derivative instruments.
19. Share-Based Compensation
Share-Based Incentive Plans
The Company has established various plans under which it is authorized to grant restricted stock, restricted stock units,
stock options and stock appreciation rights. Compensation payable under these plans is intended to qualify as performance-
based compensation within the meaning of Section 162(m) of the Internal Revenue Code. The Company may also grant cash
awards that can be notionally invested in one or more specified measurement funds, including the Company’s common stock.
Share-Based Incentive Compensation
The following is a summary of share-based compensation expense:
Period
2013
2014
2015
Share-Based
Compensation
Expense
Tax Benefit
$
$
27.5
29.3
34.2
10.6
11.3
13.2
The cash received for options exercised was $41.4 million and $57.8 million during the years ended December 31, 2014
and 2015, respectively. The actual tax benefit recognized from share-based incentive plans was $60.2 million and $44.5 million
during the years ended December 31, 2014 and 2015, respectively. The excess tax benefit classified as a financing cash flow
was $61.5 million, and $44.5 million during the years ended December 31, 2014 and 2015, respectively.
There was $56.8 million and $70.6 million of unrecognized compensation expense related to share-based compensation
arrangements as of December 31, 2014 and 2015, respectively. The unrecognized compensation expense at December 31, 2015
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:
60
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Unexercised options outstanding—January 1, 2015
Options granted
Options exercised
Options forfeited
Unexercised options outstanding—December 31, 2015
Exercisable at December 31, 2015
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life (years)
83.42
207.61
65.95
101.29
96.18
94.43
2.2
2.1
Stock Options
2.3
$
0.0
(0.9)
(0.0)
1.4
1.3
The Company granted stock options with fair values of $1.0 million, $0.6 million, and $1.0 million in 2013, 2014 and
2015, respectively. Stock options generally vest over a period of three to five years and expire seven to ten years after the grant
date. All options have been granted with exercise prices equal to the fair market value of the Company’s common stock on the
date of grant.
The Company generally uses treasury stock to settle stock option exercises. The total intrinsic value of options exercised
during the years ended December 31, 2013, 2014 and 2015 was $77.4 million, $92.6 million and $130.2 million, respectively.
As of December 31, 2015, the intrinsic value of exercisable options outstanding was $89.0 million and 3.5 million options are
available for future grant under the Company’s option plans.
The fair value of options granted was estimated using the Black-Scholes option pricing model. The weighted average fair
value of options granted during the years ended December 31, 2013, 2014 and 2015 was $61.82, $60.20, and $54.92 per option,
respectively, based on the weighted-average grant date assumptions stated below.
Dividend yield
Expected volatility(1)
Risk-free interest rate(2)
Expected life of options (in years)(3)
Forfeiture rate(3)
__________________________
For the Years Ended December 31,
2013
2014
2015
0.0%
34.4%
1.5%
5.0
0.0%
0.0%
29.7%
1.8%
5.0
0.0%
0.0%
26.7%
1.5%
5.0
0.0%
(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 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:
Unvested units—January 1, 2015
Units granted
Units vested
Units forfeited
Unvested units—December 31, 2015
61
Restricted
Stock
Weighted
Average
Grant Date
Value
0.4
$
0.3
(0.1)
(0.0)
0.6
182.83
197.59
174.19
190.23
192.04
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company granted awards with fair values of $53.5 million, $8.0 million, and $50.7 million in 2013, 2014 and 2015,
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 three to eight 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.
In 2013, the Company granted 0.1 million awards that vest when a required service period has been completed and if
certain market conditions are satisfied. The market conditions require separate 15%, 25% and 35% increases in the price of the
Company’s common stock to be achieved during the six-year term of the awards; however, shares underlying the awards are
eligible to be delivered, assuming the service conditions have been satisfied, only on the fourth, fifth and sixth anniversaries of
the grant date if the 15% market condition has been maintained. The awards were valued using a Monte Carlo simulation with
grant date assumptions for expected volatility (31.6%), risk-free interest rate (2.0%) and dividend yield (0.0%). The fair value
of the awards will be recognized as compensation over a service period of four years, which is the longer of the explicit service
period or the period the market condition is expected to be met.
As of December 31, 2015, the Company had 1.5 million shares available for grant under its plans.
20. Affiliate Equity
Affiliate equity interests provide holders with a ratable portion of ownership in one of the Company’s Affiliates. Affiliate
equity interests are allocated income in a manner that is consistent with the structured partnership interests in place at the
respective Affiliate. When the Company owns a share of the Affiliate’s revenue without regard to expenses, Affiliate equity
holders are allocated Owner’s Allocation in proportion to their respective ownership interests. When the Company owns a share
of the Affiliate’s revenue less certain agreed-upon expenses, Affiliate equity holders are allocated their share of revenue net of
the agreed categories of expenses. The Company’s Affiliates generally pay quarterly distributions to Affiliate equity holders.
Distributions paid to Affiliate equity holders were $267.1 million, $569.4 million and $431.4 million for the years ended
December 31, 2013, 2014 and 2015, respectively.
Affiliate equity interests provide the Company a conditional right to call (on an annual basis following an Affiliate equity
holder’s departure) and Affiliate equity holders have a conditional right to put their interests 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). Affiliate equity holders are also permitted to sell their equity interests to other individuals or entities in certain
cases, subject to the Company's approval or other restrictions. The purchase price of these conditional purchases are generally
calculated based upon a multiple of cash flow distributions, which is intended to represent fair value. The Company, at its
option, may pay for Affiliate equity purchases in cash, shares of its common stock or other forms of consideration and can
consent to the transfer of these interests to other individuals or entities.
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 requisite service period.
The following is a summary of Affiliate equity expense:
Controlling interest
Tax benefit
Controlling interest, net
Non-controlling interest
Total
2013
2014
2015
$
$
$
56.4
(21.7)
34.7
15.9
50.6
$
$
$
47.4
(18.2)
29.2
37.0
66.2
$
$
$
16.9
(6.5)
10.4
51.6
62.0
62
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following is a summary of unrecognized Affiliate equity expense:
Period
2013
2014
2015
Unrecognized Affiliate Equity Expense
Controlling
Interest
Remaining
Life
Non-
Controlling
Interest
Remaining
Life
$
36.1
29.5
22.4
3 years
$
3 years
3 years
32.1
41.6
51.9
7 years
6 years
5 years
The Company periodically issues Affiliate equity interests to and repurchases Affiliate equity interests from its Affiliate
partners. The amount paid for repurchases was $36.9 million, $32.6 million and $130.8 million for the years ended December
31, 2013, 2014 and 2015, respectively. The total amount received for issuances was $2.5 million, $11.0 million and $6.1
million for the years ended December 31, 2013, 2014 and 2015, respectively.
The Company records amounts receivable and payable to Affiliate partners in connection with the transfer of Affiliate
equity interests that have not settled at the end of the period. The total receivable was $20.8 million and $22.6 million at
December 31, 2014 and 2015, respectively, and was included in Other assets. The total payable was $29.3 million and $62.3
million as of December 31, 2014 and 2015, respectively, and was included in Other liabilities. The total amount received for
such receivables was $6.9 million, $9.7 million and $7.4 million for the years ended December 31, 2013, 2014 and 2015,
respectively. The total amount paid for such liabilities was $5.5 million, $4.4 million and $17.2 million for the years ended
December 31, 2013, 2014 and 2015, respectively.
The current redemption value of the Company’s Affiliate equity has been presented as Redeemable non-controlling
interests on the Company’s 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:
Balance, as of January 1
Repurchases of redeemable Affiliate equity
Transfers from Non-controlling interests
Changes in redemption value
Decrease attributable to consolidated products
Balance, as of December 31
2014
2015
641.9
(61.7)
22.7
43.0
(0.4)
645.5
$
$
645.5
(161.3)
49.5
81.6
(2.8)
612.5
$
$
During the years ended 2013, 2014 and 2015, the Company acquired interests from, and transferred interests to, holders of
Affiliate equity. The following schedule discloses the effect of changes in the Company’s ownership interests in its Affiliates
on the controlling interest’s equity:
Net income (controlling interest)
For the Years Ended December 31,
2013
2014
2015
$
360.5
$
452.1
$
516.0
Increase in controlling interest paid-in capital related to Affiliate equity issuances
13.1
2.5
0.7
Decrease in controlling interest paid-in capital related to Affiliate equity
repurchases
Net income attributable to controlling interest and transfers (to) or from Non-
controlling interests
(87.1)
(35.8)
(89.8)
$
286.5
$
418.8
$
426.9
21. Benefit Plans
The Company has three defined contribution plans consisting of a qualified employee profit-sharing plan covering
substantially all of its full-time employees and several of its Affiliates, and non-qualified plans for certain senior employees.
AMG’s other Affiliates generally have separate defined contribution retirement plans. Under each of the qualified plans, AMG
63
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
and each participating Affiliate, as the case may be, are able to make discretionary contributions for the benefit of qualified plan
participants up to Internal Revenue Service limits.
The Company has a Deferred Compensation Plan that provides officers and directors of the Company the opportunity to
voluntarily defer base salary, bonus payments and director fees, as applicable, on a pre-tax basis, and invest such deferred
amounts in one or more specified measurement funds. While the Company has no obligation to do so, the Deferred
Compensation Plan also provides the Company the opportunity to make discretionary contributions; in the event any such
contributions are made, contributed amounts will be subject to vesting and forfeiture provisions.
Consolidated expenses related to the Company’s benefit plans in 2013, 2014 and 2015 were $14.1 million, $17.2 million
and $18.7 million, respectively.
22. Income Taxes
The consolidated income tax provision included taxes attributable to the controlling interest and, to a lesser extent, taxes
attributable to non-controlling interests follows:
Controlling Interests:
Current tax
Intangible-related deferred taxes
Other deferred taxes
Total controlling interests
Non-controlling Interests:
Current tax
Deferred taxes
Total non-controlling interests
Provision for income taxes
Income before income taxes (controlling interest)
Effective tax rate attributable to controlling interests(1)
__________________________
For the Years Ended December 31,
2013
2014
2015
$
153.1
$
149.8
$
152.4
38.1
(6.2)
185.0
13.3
(4.2)
9.1
194.1
545.5
$
$
$
47.8
15.8
213.4
15.3
(0.8)
14.5
227.9
665.5
$
$
$
77.7
21.2
251.3
9.8
(4.2)
5.6
256.9
767.3
33.9%
32.1%
32.8%
$
$
$
(1) Taxes attributable to the controlling interest divided by Income before income taxes (controlling interest).
A summary of the consolidated provision for income taxes follows:
Current:
Federal
State
Foreign
Total current
Deferred:
Federal
State
Foreign
Total deferred
Provision for income taxes
For the Years Ended December 31,
2013
2014
2015
$
104.1
$
21.1
41.2
166.4
38.1
8.9
(19.3)
27.7
194.1
$
$
64
93.8
27.1
44.2
165.1
72.5
1.1
(10.8)
62.8
227.9
$
$
106.3
18.3
37.6
162.2
97.9
14.2
(17.4)
94.7
256.9
Table of Contents
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The components of income before income taxes consisted of the following:
Domestic
International
For the Years Ended December 31,
2013
2014
2015
$
$
604.0
259.7
863.7
$
$
784.1
229.5
1,013.6
$
$
827.6
263.0
1,090.6
The Company’s effective income tax rate differed from the amount computed by using income before income taxes and
applying the U.S. federal income tax rate because of the effect of the following items:
Tax at U.S. federal income tax rate
State income taxes, net of federal benefit(1)
Effect of foreign operations
Other
Effective tax rate (controlling interest)
Effect of income from non-controlling interests
Effect tax rate
__________________________
For the Years Ended December 31,
2013
2014
2015
35.0%
2.8
(2.5)
(1.4)
33.9
(11.4)
22.5%
35.0%
2.1
(5.3)
0.3
32.1
(9.6)
22.5%
35.0%
2.6
(3.5)
(1.3)
32.8
(9.2)
23.6%
(1) State income taxes included changes related to state valuation allowances.
In 2013, the Company realized deferred tax benefits of $7.2 million on investments in foreign subsidiaries deemed
permanent in duration (including $5.9 million for subsidiaries that became permanent in duration in 2013) and $11.2 million
($7.6 million to the controlling interest) from the revaluation of its deferred taxes resulting from a reduction in corporate tax
rates in the United Kingdom.
In 2014, the Company realized deferred tax benefits of $30.3 million on investments in foreign subsidiaries deemed
permanent in duration (including $24.5 million for subsidiaries that became permanent in duration in 2014) and reduced its
valuation allowance $6.5 million for state net operating loss carryforwards.
In 2015, the Company realized $17.1 million of tax benefits from investments in foreign subsidiaries deemed permanent in
duration and $5.0 million from its indefinite reinvestment of certain 2015 foreign earnings. In 2015, the Company also realized
$10.0 million ($6.5 million to the controlling interest) of deferred tax benefits resulting from a reduction in corporate tax rates
in the United Kingdom.
The Company did not provide for deferred taxes on the excess of the financial reporting basis over the tax basis in its
investments in foreign subsidiaries that were permanent in duration. This amount becomes taxable upon a repatriation of assets
from a sale or liquidation of the subsidiary. As of December 31, 2015, the amount of such difference was $188.1 million. The
deferred taxes not recognized at December 31, 2015 for this difference were $71.1 million.
The components of deferred tax assets and liabilities were as follows:
65
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Deferred Tax Assets
Deferred compensation
State net operating loss carryforwards
Tax benefit of uncertain tax positions
Accrued expenses
Foreign loss carryforwards
Other
Total deferred tax assets
Valuation allowance
Deferred tax assets, net of valuation allowance
Deferred Tax Liabilities
Intangible asset amortization
Non-deductible intangible amortization
Convertible securities interest
Deferred income
Other
Total deferred tax liabilities
Net deferred tax liability
December 31,
2014
2015
$
26.8
15.2
16.0
19.6
11.5
1.4
90.5
(18.4)
72.1
$
(270.9) $
(126.4)
(92.5)
(74.0)
—
(563.8)
(491.7) $
30.5
17.1
14.6
4.4
12.3
—
78.9
(20.5)
58.4
(320.2)
(109.8)
(99.8)
(92.8)
(1.5)
(624.1)
(565.7)
$
$
$
$
Deferred tax liabilities were primarily the result of tax deductions for the Company’s intangible assets and convertible
securities. The Company amortizes most of its intangible assets for tax purposes only, reducing its tax basis below its carrying
value for financial statement purposes and generating deferred taxes each reporting period. The Company’s convertible
securities also generate deferred taxes because the Company’s tax deductions are higher than the interest expense recorded for
financial statement purposes.
At December 31, 2015, the Company had state net operating loss carryforwards that expire over a 19-year period and
foreign loss carryforwards that expire over a 20-year period. The Company had established a valuation allowance to offset a
portion of these carryforwards because of the uncertainty of realizing their full value.
In 2014, the Company reduced its valuation allowance $15.7 million on state loss carryforwards from improved projections
of taxable income, and increased state uncertain tax positions by $9.2 million for a net $6.5 million state tax benefit. In 2014,
the Company also reduced its valuation allowance on loss carryforwards by $2.5 million.
In 2015, the Company increased its valuation allowance $2.1 million, principally for loss carryforwards deemed
unrealizable.
The Company had uncertain tax positions of $20.4 million, $28.8 million and $26.9 million as of December 31, 2013, 2014
and 2015, respectively. These amounts included $1.7 million, $1.6 million and $1.8 million of interest and related charges,
respectively. At December 31, 2013, 2014 and 2015, these liabilities also included $17.2 million, $26.4 million and $25.3
million, respectively, for tax positions that, if recognized, would affect the Company’s effective tax rate.
A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:
66
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Balance, as of January 1
Additions based on current year tax positions
Additions based on prior years’ tax positions
Reductions for prior years’ tax provisions
Reductions related to lapses of statutes of limitations
Additions (reductions) related to foreign exchange rates
Balance, as of December 31
For the Years Ended December 31,
2013
2014
2015
$
22.6
$
20.4
$
4.1
—
(0.1)
(5.4)
(0.8)
20.4
$
2.6
10.8
—
(4.1)
(0.9)
28.8
$
$
28.8
2.2
1.6
—
(4.3)
(1.4)
26.9
During 2014, uncertain tax positions increased $8.4 million, principally for the uncertain nature of several of its state net
operating loss carryforwards. During 2015, uncertain tax positions decreased $1.9 million, principally from changes in foreign
exchange rates. The Company does not anticipate that uncertain tax positions will change significantly over the next twelve
months.
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. The Company was generally no longer subject to income tax
examinations by any tax authorities for years before 2010.
23. Earnings Per Share
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.
Numerator
Net income (controlling interest)
Interest expense on convertible securities, net of taxes
Net income (controlling interest), as adjusted
Denominator
Average shares outstanding (basic)
Effect of dilutive instruments:
Stock options and other awards
Forward sale
Junior convertible securities
Average shares outstanding (diluted)
For the Years Ended December 31,
2013
2014
2015
$
$
360.5
10.5
371.0
$
$
452.1
15.2
467.3
$
$
53.1
1.3
0.3
2.0
56.7
55.0
1.2
0.0
2.2
58.4
516.0
15.3
531.3
54.3
0.7
—
2.2
57.2
During the years ended December 31, 2013, 2014 and 2015, the Company repurchased 0.1 million, 1.2 million and 1.7
million shares of common stock, respectively, at an average share price of $184.89, $204.72 and $209.39, respectively, under
the share repurchase programs approved by the Company’s Board of Directors.
The diluted earnings per share calculations in the table above excluded the anti-dilutive effect of the following shares:
Stock options and other awards
Senior convertible securities
Junior convertible securities
67
For the Years Ended December 31,
2013
2014
2015
0.1
2.1
2.2
0.0
—
0.4
0.0
—
—
Table of Contents
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As discussed further in Note 20, the Company may settle portions of its Affiliate equity purchases in shares of its common
stock. Because it is the Company’s intent to settle these potential repurchases in cash, the calculation of diluted earnings per
share excluded any potential dilutive effect from possible share settlements.
24. Comprehensive Income
The following tables show the tax effects allocated to each component of Other comprehensive income:
Foreign currency translation gain (loss)
Change in net realized and unrealized gain (loss) on derivative securities
Change in net unrealized gain (loss) on investment securities
Other comprehensive income (loss)
Foreign currency translation gain (loss)
Change in net realized and unrealized gain (loss) on derivative securities
Change in net unrealized gain (loss) on investment securities
Other comprehensive income (loss)
Foreign currency translation gain (loss)
Change in net realized and unrealized gain (loss) on derivative securities
Change in net unrealized gain (loss) on investment securities
Other comprehensive income (loss)
For the Year Ended December 31, 2013
Pre-Tax
Tax Benefit
(Expense)
Net of Tax
(19.6) $
1.5
19.5
1.4
$
— $
(0.5)
(8.0)
(8.5) $
(19.6)
1.0
11.5
(7.1)
For the Year Ended December 31, 2014
Pre-Tax
Tax Benefit
(Expense)
Net of Tax
(62.0) $
0.6
5.6
(55.8) $
— $
(0.3)
(2.2)
(2.5) $
(62.0)
0.3
3.4
(58.3)
For the Year Ended December 31, 2015
Pre-Tax
Tax Benefit
(Expense)
Net of Tax
(93.2) $
2.3
34.8
(56.1) $
— $
(0.4)
(12.7)
(13.1) $
(93.2)
1.9
22.1
(69.2)
$
$
$
$
$
$
The components of accumulated other comprehensive income (loss), net of taxes, were as follows:
Balance, as of December 31, 2013
Other comprehensive income (loss) before reclassifications
Amounts reclassified from other comprehensive income
Net other comprehensive income (loss)
Balance, as of December 31, 2014
Other comprehensive income (loss) before reclassifications
Amounts reclassified from other comprehensive income
Net other comprehensive income (loss)
Balance, as of December 31, 2015
__________________________
Foreign
Currency
Translation
Adjustment
Realized and
Unrealized
Losses on
Derivative
Securities
Unrealized Gain
(Loss) on
Investment
Securities (1)
Total
$
$
$
$
56.6
(62.0)
—
(62.0)
(5.4) $
(93.2)
—
(93.2)
(98.6) $
(1.9) $
0.3
0.0
0.3
(1.6) $
0.8
1.1
1.9
0.3
$
19.5
$
1.3
2.1
3.4
22.9
13.5
8.6
22.1
45.0
$
$
74.2
(60.4)
2.1
(58.3)
15.9
(78.9)
9.7
(69.2)
(53.3)
(1) See Note 2 for amounts reclassified from Other comprehensive income.
68
Table of Contents
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
25. Selected Quarterly Financial Data (Unaudited)
The following is a summary of the quarterly results of operations of the Company for the years ended December 31, 2014
and 2015.
Revenue
Operating income
Income before income taxes
Net income (controlling interest)
Earnings per share (diluted)
Revenue
Operating income
Income before income taxes
Net income (controlling interest)
Earnings per share (diluted)
26. Segment Information
$
$
2014
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$
593.1
193.9
208.2
77.2
1.40
$
636.3
198.4
239.1
99.1
1.75
2015
$
640.3
224.2
253.4
103.2
1.82
641.2
198.7
312.8
172.6
3.02
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$
635.0
231.4
290.3
128.0
2.27
$
646.6
195.2
262.0
128.7
2.31
$
613.1
215.2
249.1
109.0
1.98
589.8
193.2
289.2
150.3
2.72
Management has assessed and 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 table summarizes the Company’s financial results for each of the distribution channels:
Statements of Income
As of and for the Year Ended December 31, 2013
$
Institutional Mutual Fund
1,023.0
$
103.4
2,448.4
928.1
77.7
948.7
219.9
3,196.5
1,076.3
942.6
High Net
Worth
$
$
217.1
37.2
673.9
337.3
103.0
Total
2,188.8
360.5
6,318.8
2,341.7
1,123.3
As of and for the Year Ended December 31, 2014
$
Institutional Mutual Fund
1,242.6
$
180.1
3,082.0
1,125.3
150.3
1,022.8
227.0
3,739.8
1,159.1
1,533.8
High Net
Worth
$
$
245.5
45.0
876.3
368.4
99.4
Total
2,510.9
452.1
7,698.1
2,652.8
1,783.5
Revenue
Net income (controlling interest)
Total assets
Goodwill
Equity method investments in Affiliates
Revenue
Net income (controlling interest)
Total assets
Goodwill
Equity method investments in Affiliates
69
Table of Contents
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Revenue
Net income (controlling interest)
Total assets
Goodwill
Equity method investments in Affiliates
As of and for the Year Ended December 31, 2015
Institutional Mutual Fund
High Net
Worth
Total
$
979.4
$
1,238.2
$
266.9
$
2,484.5
229.3
3,725.9
1,141.3
1,609.3
229.7
3,075.5
1,119.5
185.7
57.0
983.4
407.6
142.1
516.0
7,784.8
2,668.4
1,937.1
In 2013, 2014 and 2015, revenue attributable to clients domiciled outside the U.S. was approximately 38%, 37% and 40%
of total revenue, respectively.
70
Table of Contents
(in millions)
Income Tax Valuation Allowance
Year Ending December 31,
2015
2014
2013
Other Allowances(1)
Year Ending December 31,
2015
2014
2013
__________________________
Schedule II
Valuation and Qualifying Accounts
Balance
Beginning of
Period
Additions
Charged to Costs
and Expenses
Additions
Charged to
Other Accounts
Deductions
Balance
End of Period
$
$
$
$
18.4
36.6
21.3
12.1
8.8
8.4
$
$
2.1
—
16.9
0.7
4.7
2.8
— $
—
—
— $
—
—
— $
18.2
1.6
$
2.2
1.4
2.4
20.5
18.4
36.6
10.6
12.1
8.8
(1) Other Allowances represented reserves on notes received in connection with transfers of our interests in certain Affiliates
as well as other receivable amounts, which we considered uncollectible.
71
Table of Contents
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, as of December 31, 2015, we carried out an evaluation under the
supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded, as of the end of the period covered by this report, that our
disclosure controls and procedures are effective to ensure that (i) information required to be disclosed by us in the reports we
file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission’s rules and forms, and (ii) such information is accumulated and communicated to our
management, including our principal executive officer and principal financial officers as appropriate to allow timely decisions
regarding required disclosure. In designing and evaluating our disclosure controls and procedures, we and our management
recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating
and implementing possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable
assurance of achieving their stated objectives and our principal executive officer and principal financial officers concluded that
our disclosure controls and procedures are effective at the reasonable assurance level. We review on an ongoing basis and
document our disclosure controls and procedures, and our internal control over financial reporting, and we may from time to
time make changes in an effort to enhance their effectiveness and ensure that our systems evolve with our business. See Item 8
for “Management’s Report on Internal Control over Financial Reporting,” which is incorporated by reference herein.
Our independent registered public accounting firm, PricewaterhouseCoopers LLP, has issued an attestation report on our
internal control over financial reporting, which is included in Item 8.
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act) occurred during the fiscal quarter ended December 31, 2015 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
72
Table of Contents
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Information required by this Item will be set forth in our proxy statement for our 2016 Annual Meeting of shareholders (to
be filed within 120 days after December 31, 2015) (the “Proxy Statement”), and is incorporated herein by reference.
Item 11. Executive Compensation.
Information required by this Item will be set forth in our Proxy Statement, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information required by this Item will be set forth in our Proxy Statement, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions and Director Independence.
Information required by this Item will be set forth in our Proxy Statement, and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services.
Information required by this Item will be set forth in our Proxy Statement, and is incorporated herein by reference.
73
Table of Contents
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) (1) Financial Statements: See Item 8 of this Annual Report on Form 10-K.
(2) Financial Statement Schedule: See Item 8 of this Annual Report on Form 10-K.
(3) Exhibits: See the Exhibit Index attached hereto and incorporated by reference herein.
74
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: February 24, 2016
AFFILIATED MANAGERS GROUP, INC.
(Registrant)
By:
/s/ SEAN M. HEALEY
Sean M. Healey
Chief Executive Officer and Chairman of the
Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Date
February 24, 2016
February 24, 2016
February 24, 2016
February 24, 2016
February 24, 2016
February 24, 2016
February 24, 2016
February 24, 2016
February 24, 2016
Signature
Title
/s/ SEAN M. HEALEY
Sean M. Healey
/s/ JAY C. HORGEN
Jay C. Horgen
/s/ SAMUEL T. BYRNE
Samuel T. Byrne
/s/ DWIGHT D. CHURCHILL
Dwight D. Churchill
/s/ GLENN EARLE
Glenn Earle
/s/ NIALL FERGUSON
Niall Ferguson
/s/ TRACY P. PALANDJIAN
Tracy P. Palandjian
/s/ PATRICK T. RYAN
Patrick T. Ryan
/s/ JIDE J. ZEITLIN
Jide J. Zeitlin
Chief Executive Officer and
Chairman of the Board of Directors
(Principal Executive Officer)
Chief Financial Officer and Treasurer
(Principal Financial and Principal
Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
75
Table of Contents
Exhibit Index
3.1 Amended and Restated Certificate of Incorporation(1)
3.2 Amendment to Amended and Restated Certificate of Incorporation(2)
3.3 Amendment to Amended and Restated Certificate of Incorporation(3)
3.4 Amended and Restated By-laws(4)
4.1 Specimen certificate for shares of common stock of the Registrant(1)
4.2 Amended and Restated Declaration of Trust of AMG Capital Trust II, dated as of October 17, 2007, by and among
Affiliated Managers Group, Inc., U.S. Bank National Association, successor in interest to Bank of America
National Trust Delaware, successor by merger to LaSalle National Trust Delaware, as Delaware Trustee, U.S. Bank
National Association, successor in interest to Bank of America, N.A., successor by merger to LaSalle Bank
National Association, as Property Trustee and Institutional Administrator, and the holders from time to time of
undivided beneficial interests in the assets of AMG Capital Trust II(5)
4.3 Indenture, dated as of October 17, 2007, by and between Affiliated Managers Group, Inc. and U.S. Bank National
Association, successor in interest to Bank of America, N.A., successor by merger to LaSalle Bank National
Association, as Debenture Trustee(5)
4.4 First Supplemental Indenture, dated as of January 10, 2014, by and between Affiliated Managers Group, Inc. and
U.S. Bank National Association, successor in interest to Bank of America, N.A., successor by merger to LaSalle
Bank National Association, as Debenture Trustee(6)
4.5 Guarantee Agreement, dated as of October 17, 2007, by and between Affiliated Managers Group, Inc. and U.S.
Bank National Association, successor in interest to Bank of America, N.A., successor by merger to LaSalle Bank
National Association, as Guarantee Trustee(5)
4.6 Indenture, dated as of August 8, 2012, by and between Affiliated Managers Group, Inc. and Wells Fargo Bank,
National Association, as Trustee(7)
4.7 First Supplemental Indenture related to the 6.375% Senior Notes due 2042, dated as of August 8, 2012, by and
between Affiliated Managers Group, Inc. and Wells Fargo Bank, National Association, as Trustee, including the
form of Global Note attached as Annex A thereto(7)
4.8 Indenture, dated as of February 11, 2014, by and between Affiliated Managers Group, Inc. and U.S. Bank National
Association, as Trustee(8)
4.9 Supplemental Indenture related to the 4.250% Senior Notes due 2024, dated as of February 11, 2014, by and
between Affiliated Managers Group, Inc. and U.S. Bank National Association, as Trustee, including the form of
Global Note attached as Annex A thereto(8)
4.10 Second Supplemental Indenture related to the 3.500% Senior Notes due 2025, dated as of February 13, 2015, by
and between Affiliated Managers Group, Inc. and U.S. Bank National Association, as Trustee, including the form
of Global Note attached as Annex A thereto(9)
10.1† Affiliated Managers Group, Inc. Defined Contribution Plan(10)
10.2† Affiliated Managers Group, Inc. Executive Incentive Plan (f/k/a Long-Term Executive Incentive Plan)(11)
10.3† Affiliated Managers Group, Inc. Amended and Restated 1997 Stock Option and Incentive Plan(12)
10.4† Affiliated Managers Group, Inc. Amended and Restated 2002 Stock Option and Incentive Plan(12)
10.5† Affiliated Managers Group, Inc. 2006 Stock Option and Incentive Plan(3)
10.6† Affiliated Managers Group, Inc. Amended and Restated Long-Term Stock and Investment Plan(6)
10.7† Affiliated Managers Group, Inc. Executive Retention Plan(13)
10.8† Affiliated Managers Group, Inc. Deferred Compensation Plan(14)
10.9† Affiliated Managers Group, Inc. Long-Term Equity Interests Plan 2010, LP(15)
10.10† Affiliated Managers Group, Inc. 2011 Stock Option and Incentive Plan(16)
10.11† Affiliated Managers Group, Inc. Long-Term Equity Interests Plan 2011, LP(17)
10.12† Affiliated Managers Group, Inc. Long-Term Equity Interests Plan, LP(18)
10.13† Affiliated Managers Group, Inc. 2013 Incentive Stock Award Plan(19)
10.14† Form of Restricted Stock Award Agreement pursuant to Affiliated Managers Group, Inc. 2013 Incentive Stock
Award Plan(20)
10.15† Form of Restricted Stock Unit Award Agreement pursuant to Affiliated Managers Group, Inc. 2013 Incentive Stock
Award Plan(21)
10.16† Form of Affiliated Managers Group, Inc. Award Agreement(6)
10.17† Form of Indemnification Agreement entered into by each Director and Executive Officer(22)
10.18† Service Agreement, dated as of June 7, 2011, by and between Affiliated Managers Group Limited and Andrew
Dyson(23)
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Table of Contents
10.19 Form of Distribution Agency Agreement, dated as of August 6, 2013(24)
10.20 Form of Confirmation Letter Agreement, dated as of August 6, 2013(24)
10.21 Credit Agreement, dated as of September 22, 2015, among Affiliated Managers Group, Inc., Bank of America,
N.A., and the several banks and other financial institutions from time to time party thereto as lenders, and the
exhibits and schedules thereto(25)
10.22 Term Credit Agreement, dated as of September 22, 2015, among Affiliated Managers Group, Inc., Bank of
America, N.A., and the several banks and other financial institutions from time to time party thereto as lenders, and
the exhibits and schedules thereto(25)
21.1 Schedule of Subsidiaries*
23.1 Consent of PricewaterhouseCoopers LLP*
31.1
31.2
32.1
32.2
101 The following financial statements from the Registrant’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2015 are filed herewith, formatted in XBRL (eXtensible Business Reporting Language): (i) the
Consolidated Statements of Income for the years ended December 31, 2015, 2014, and 2013, (ii) the Consolidated
Balance Sheets at December 31, 2015 and December 31, 2014, (iii) the Consolidated Statement of Equity for the
years ended December 31, 2015, 2014, and 2013, (iv) the Consolidated Statements of Cash Flows for the years
ended December 31, 2015, 2014, and 2013, and (v) the Notes to the Consolidated Financial Statements.
†
*
**
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
Indicates a management contract or compensatory plan
Filed herewith
Furnished herewith
Incorporated by reference to the Company’s Registration Statement on Form S-1 (No. 333-34679), filed August 29,
1997, as amended
Incorporated by reference to the Company’s Registration Statement on Form S-8 (No. 333-129748), filed
November 16, 2005
Incorporated by reference to the Company’s Proxy Statement on Schedule 14A (No. 001-13459), filed April 28, 2006
Incorporated by reference to the Company’s Current Report on Form 8-K (No. 001-13459), filed July 31, 2012
Incorporated by reference to the Company’s Current Report on Form 8-K (No. 001-13459), filed October 18, 2007
Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2013 (No. 001-13459), filed February 27, 2014
Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (No. 001-13459), filed August 8, 2012
Incorporated by reference to the Company’s Current Report on Form 8-K (No. 001-13459), filed February 11, 2014
Incorporated by reference to the Company’s Current Report on Form 8-K (No. 001-13459), filed February 13, 2015
Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
1999 (No. 001-13459), filed March 30, 2000
Incorporated by reference to the Company’s Proxy Statement on Schedule 14A (No. 001-13459), filed April 29, 2010
Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (No. 001-13459), filed May 10, 2004
Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (No. 001-13459), filed November 9,
2005
77
Table of Contents
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(25)
Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2008 (No. 001-13459), filed March 2, 2009, as amended
Incorporated by reference to the Company’s Current Report on Form 8-K (No. 001-13459), filed December 17, 2010
Incorporated by reference to the Company’s Proxy Statement on Schedule 14A (No. 001-13459), filed April 19, 2011
Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2011 (No. 001-13459), filed February 23, 2012
Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2012 (No. 001-13459), filed February 22, 2013
Incorporated by reference to the Company’s Proxy Statement on Schedule 14A (No. 001-13459), filed April 30, 2013
Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (No. 001-13459), filed November 12,
2013
Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (No. 001-13459), filed May 5, 2015
Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2010 (No. 001-13459), filed March 1, 2011
Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (No. 001-13459), filed May 8, 2012
Incorporated by reference to the Company’s Current Report on Form 8-K (No. 001-13459), filed August 6, 2013
Incorporated by reference to the Company’s Current Report on Form 8-K (No. 001-13459), filed September 22, 2015
78