RESULTS FOR THE FINANCIAL YEAR ENDED 31 DEC 2015

RNS Number : 9345P

Man Group plc

24 February 2016

Press Release

24 February 2016

RESULTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015

Key points

· Fund under Management (FUM) up 8% to $78.7 billion (31 December 2014: $72.9 billion)

o Gross sales of $22.9 billion (2014: $21.9 billion)

o Redemptions of $22.6 billion (2014: $18.6 billion)

o Net inflows of $0.3 billion (2014: net inflows $3.3 billion)

o Investment movement of $2.4 billion (2014: $3.6 billion)

o FX translation effects and other movements of -$3.0 billion (2014: -$4.3 billion)

o Acquisition of Silvermine, NewSmith and the BAML fund of hedge funds portfolio completed during the first half of the year, adding $6.1 billion to FUM

· Adjusted profit before tax (PBT) of $400 million in 2015 (2014: $481 million):

o Net management fee profit broadly in line with 2014

o Net performance fee profit down following a very strong year in 2014

· Statutory PBT for the year ended 31 December 2015 of $184 million (2014: $384 million)

· Proposed final dividend of 4.8 cents per share bringing total dividend for the year to 10.2 cents (2014: 10.1 cents)

· Surplus regulatory capital of $453 million at 31 December 2015 (2014: $419m); $480 million pro-forma for inclusion of H2 profits and final dividend

Summary financials	Page ref.	Year ended 31 Dec 2015	Year ended 31 Dec 2014
		$	$
Funds under management (end of period)	4	78.7bn	72.9bn
Net management fee revenue¹	17,18,32	759m	715m
Performance fees²	18,32	326m	367m
Net revenues		1,076m	1,082m
Compensation	19,33	(462m)	(391m)
Other costs (including asset services)	19,33,34	(209m)	(201m)
Net finance expense	20,34	(14m)	(9m)
Adjusted profit before tax	20,31	400m	481m
Adjusted net management fee profit before tax	20,21	194m	198m
Adjusted net performance profit before tax	20,21	206m	283m
Adjusting items³	20,31	(216m)	(97m)
Statutory profit before tax	17,25	184m	384m
Diluted statutory EPS⁴	36,37	10.0c	20.5c
Adjusted diluted EPS⁴	36,37	21.1c	24.4c
Adjusted diluted management fee EPS⁴	36,37	10.2c	10.1c

¹ Includes gross management and other fees, distribution costs, and share of income from associates. ² Includes income and gains on investments and other instruments and third party share of losses relating to interests in consolidated funds. ³ The adjusting items in the year of $216 million, as detailed in Note 2 to the financial statements on page 31, relate to certain non-recurring items or those resulting from acquisition or disposal related activities.⁴ The reconciliation of diluted statutory EPS to the adjusted EPS measures is included in Note 11 to the financial statements (page 37).

Manny Roman, Chief Executive Officer of Man Group, said:

"Against a backdrop of challenging market conditions, 2015 was another year of good progress for Man Group. We have delivered against our strategic objectives, continuing to enhance our investment capabilities through the successful integration of three acquisitions that completed in the first half of the year and the appointment of some high calibre investment managers to the firm. FUM increased by 8% driven by acquisitions and flows were slightly positive in the year with net inflows of $2.9 billion in the second half.

Looking forward, the on-going volatility in the markets in which we operate remains very challenging and, accordingly, the risk appetite of our clients might impact flows. However, we now have a more diversified offering and a range of attractive options for growth, which have strengthened the firm and enhanced our resilience as a business."

Dividend and share repurchase

The Board confirms that it will recommend a final dividend of 4.8 cents per share for the financial year to 31 December 2015, giving a total dividend of 10.2 cents per share for the year. This dividend will be paid at the rate of 3.40 pence per share.

Man's dividend policy is to pay at least 100% of adjusted management fee earnings per share in each financial year by way of ordinary dividend. In addition, the Group expects to generate significant surplus capital over time, primarily from net performance fee earnings. Available surpluses, after taking into account required capital (including accruals for future earn-out payments), potential strategic opportunities and a prudent buffer, will be distributed to shareholders over time, by way of higher dividend payments and/or share repurchases. Whilst the Board continues to consider dividends as the primary method of returning capital to shareholders, it will continue to execute share repurchases when advantageous.

This year we have decided to retain all of the surplus capital generated by the business to fund potential acquisitions. Last year, we reviewed a large number of acquisition opportunities but were unable to find transactions on sensible terms. The board believes that, given evolving market dynamics, there is sufficient probability of finding attractive acquisitions to execute this year that we have decided to retain all of our surplus capital. Conditions may of course change and we will review the decision in the course of this year and retain the ability to execute buybacks if advantageous to do so.

Dates for the 2015 final dividend

Ex-dividend date	21 April 2016
Record date	22 April 2016
Payment date	13 May 2016

Results presentation, audio webcast and dial in details
There will be a presentation by the management team at 08:45am (UK time) on 24 February 2016 at our City office; 2 Swan Lane, London, EC4R 3AD. A copy of the presentation will be made available on the Group's website at www.man.com. There will also be a live audio webcast available on https://www.man.com/GB/results which will also be available on demand from later in the day. The dial-in and replay telephone numbers are as follows:

Audio Details

Participant Dial In Number(s)

UK Toll Number: +44 (0) 20 3003 2666

UK Toll-Free Number: 0808 109 0700

US Toll Number: +1 212 999 6659

US Toll-Free Number: 1 866 966 5335

7 Day Replay

UK Toll Number: +44 (0) 20 8196 1998

UK Toll Free Number: 0800 633 8453

US Toll Free Number: 1 866 595 5357

Playback Pin Code: 1270989#

Enquiries

Fiona Smart / Andrea Waters

Head of Investor Relations

+44 20 7144 2030 / 3508

fiona.smart@man.com / andrea.waters@man.com

Rosanna Konarzewski

Global Head of Communications & Marketing

+44 20 7144 1000

Rosanna.konarzewski@man.com

Finsbury

Michael Turner / James Bradley

+44 20 7251 3801

About Man Group

Man Group is one of the world's largest independent alternative investment managers, and a leader in liquid investment strategies. Across its four investment managers (Man AHL, Man FRM, Man GLG and Man Numeric), Man Group has diverse hedge funds strategies and long only products across equity, credit, managed futures, convertibles, emerging markets and multi-manager solutions. At 31 December 2015, Man Group's funds under management were $78.7 billion.

Man Group also supports many awards, charities and initiatives around the world, including sponsorship of the Man Booker literary prizes. Further information can be found at www.man.com.

Forward looking statements and other important information

This document contains forward-looking statements with respect to the financial condition, results and business of Man Group plc. By their nature, forward-looking statements involve risk and uncertainty and there may be subsequent variations to estimates. Man Group plc's actual future results may differ materially from the results expressed or implied in these forward-looking statements.

The content of the websites referred to in this announcement is not incorporated into and does not form part of this announcement. Nothing in this announcement should be construed as or is intended to be a solicitation for or an offer to provide investment advisory services.

FUNDS UNDER MANAGEMENT ANALYSIS

Three months to 31 December 2015


$bn	FUM at 30 September 2015	Sales	Reds	Net inflows/ (Outflows)	Investment movement	FX	Other	Acq.	FUM at 31 December 2015
Alternative	44.8	3.4	(2.7)	0.7	(0.2)	(0.3)	(0.4)	0.0	44.6
Quant (AHL / Numeric)	17.1	0.6	(0.6)	0.0	(0.5)	0.0	(0.2)	0.0	16.4
Discretionary (GLG)	17.4	0.6	(1.6)	(1.0)	0.4	(0.4)	(0.1)	0.0	16.3
Fund of funds (FRM)	10.3	2.2	(0.5)	1.7	(0.1)	0.1	(0.1)	0.0	11.9
Long Only	30.5	3.3	(2.3)	1.0	1.6	(0.3)	0.0	0.0	32.8
Quant (Numeric / AHL)	16.9	1.6	(0.6)	1.0	0.7	0.0	0.0	0.0	18.6
Discretionary (GLG)	13.6	1.7	(1.7)	0.0	0.9	(0.3)	0.0	0.0	14.2
Guaranteed	1.5	0.0	(0.2)	(0.2)	(0.1)	0.0	0.1	0.0	1.3
Total	76.8	6.7	(5.2)	1.5	1.3	(0.6)	(0.3)	0.0	78.7

Year to 31 December 2015

$bn	FUM at 31 December 2014	Sales	Reds	Net inflows / (Outflows)	Investment movement	FX	Other	Acq.	FUM at 31 December 2015
Alternative	38.2	11.9	(9.4)	2.5	0.8	(1.5)	(0.6)	5.2	44.6
Quant (AHL / Numeric)	12.9	4.7	(2.0)	2.7	0.6	(0.4)	0.6	0.0	16.4
Discretionary (GLG)	14.5	3.9	(4.7)	(0.8)	0.4	(0.9)	(1.0)	4.1	16.3
Fund of funds (FRM)	10.8	3.3	(2.7)	0.6	(0.2)	(0.2)	(0.2)	1.1	11.9
Long Only	32.7	11.0	(12.8)	(1.8)	1.7	(0.7)	0.0	0.9	32.8
Quant (Numeric / AHL)	16.7	4.4	(2.6)	1.8	0.1	0.0	0.0	0.0	18.6
Discretionary (GLG)	16.0	6.6	(10.2)	(3.6)	1.6	(0.7)	0.0	0.9	14.2
Guaranteed	2.0	0.0	(0.4)	(0.4)	(0.1)	(0.2)	0.0	0.0	1.3
Total	72.9	22.9	(22.6)	0.3	2.4	(2.4)	(0.6)	6.1	78.7

FUM by Manager

$bn	31 Dec 2015	30 Sep 2015	30 Jun 2015	31 Mar 15	31 Dec 2014
AHL	16.9	17.9	15.8	16.5	14.4
AHL Diversified (inc. Guaranteed)	4.1	4.4	4.3	5.1	4.7
AHL Alpha	3.9	4.0	3.0	3.7	3.1
AHL Evolution	2.7	3.0	2.9	3.0	2.8
AHL Dimension	4.1	4.2	3.6	2.4	1.8
Europe and Asia Plus	1.2	1.1	1.2	1.7	1.9
Other specialist styles	0.9	1.2	0.8	0.6	0.1
Numeric	19.0	17.2	18.4	17.8	16.7
Global	10.8	9.3	9.7	9.6	9.1
Emerging markets	2.1	1.9	2.5	2.4	1.9
US	4.8	4.6	4.7	4.3	4.3
Alternatives	1.3	1.4	1.5	1.5	1.4
GLG	30.5	31.0	33.3	33.3	30.5
Alternatives	16.3	17.4	18.0	17.2	14.5
Europe equity *	3.7	3.7	3.4	3.7	3.8
North America equity	1.3	2.2	2.5	2.2	2.2
UK equity	0.2	0.3	0.5	0.3	0.3
Other equity	0.5	0.6	0.6	0.5	0.8
Convertibles	4.0	4.0	4.0	3.8	3.8
Market Neutral	0.6	0.6	0.7	0.7	0.9
US credit (Silvermine and Ore Hill)**	4.2	4.2	4.5	4.5	0.8
European CLO (Pemba)**	0.9	1.0	1.0	0.8	1.0
Multi-strategy *	0.9	0.8	0.8	0.7	0.9*
Long only	14.2	13.6	15.3	16.1	16.0
Japan equity	8.6	7.7	8.7	10.3	10.2
Global equity	0.4	0.6	0.8	1.3	1.3
Europe equity	2.0	1.7	1.6	1.2	1.1
UK equity	0.8	0.6	0.6	0.5	0.6
NewSmith	0.7	0.8	0.9	n/a	n/a
Fixed income	1.7	2.2	2.7	2.8	2.8
FRM	12.3	10.7	11.3	10.5	11.3
Infrastructure	2.8	1.1	1.6	1.7	1.8
Direct access	0.4	0.4	0.5	0.6	0.7
Segregated	2.6	3.1	3.0	3.0	3.3
Diversified FoHF	4.6	4.2	4.6	3.2	3.5
Thematic FoHF	1.5	1.5	1.1	1.4	1.5
Guaranteed	0.4	0.4	0.5	0.6	0.5
Total	78.7	76.8	78.8	78.1	72.9

*Multi-strategy was re-classified from European equity at 31 December 2014

** $0.3 billion of FuM re-classified from US credit to European CLO

Investment performance
	Total Return		Annualised Return
	3 months to 31 Dec 2015	12 months to 31 Dec 2015	3 years to 31 Dec 2015	5 years to 31 Dec 2015
AHL/MAN SYSTEMATIC STRATEGIES
AHL Diversified¹	-5.2%	-2.7%	8.1%	3.0%
AHL Alpha²	-2.5%	1.5%	7.1%	3.6%
AHL Evolution³	-4.6%	3.2%	13.2%	14.7%
AHL Dimension⁴	-0.2%	6.9%	8.5%	4.3%
MSS TailProtect⁵	-4.7%	-7.5%	-11.0%	-5.5%
MSS Europe⁶	5.1%	7.9%	10.6%	n/a
GLG ALTERNATIVES
Equity
Europe
GLG European Long Short Fund⁷	3.4%	7.6%	3.0%	4.3%
Man GLG European Equity Alternative UCITS Fund⁸	3.3%	6.9%	2.4%	n/a
Man GLG European Alpha Alternative UCITS Fund⁹	0.0%	-0.5%	1.6%	2.0%
UK
GLG Alpha Select Fund¹⁰	2.6%	4.7%	7.0%	2.1%
Man GLG Alpha Select UCITS Fund¹¹	2.6%	4.3%	6.7%	1.7%
Global
Man GLG Cred-Eq Alternative Class¹²	0.4%	-2.4%	n/a	n/a
Man GLG Value Opportunity¹³	-3.4%	-2.0%	n/a	n/a
Convertibles
GLG Global Convertible Fund¹⁴	2.5%	1.2%	2.9%	2.2%
Man GLG Global Convertible UCITS Fund¹⁵	2.6%	3.4%	4.9%	3.7%
Market neutral
GLG Market Neutral Fund¹⁶	-0.6%	-0.2%	0.6%	4.0%
Man GLG European Distressed Fund¹⁷	-3.7%	-2.0%	3.0%	4.9%
Multi-strategy
GLG Multi-Strategy Fund¹⁸	1.7%	6.1%	3.4%	2.2%
Man GLG Global opportunity Fund¹⁹	-0.3%	1.0%	0.2%	-1.3%
GLG LONG ONLY
Man GLG Japan CoreAlpha Equity Fund²⁰	7.7%	12.9%	26.0%	13.1%
Man GLG Global Equity UCITS Fund²¹	2.9%	0.6%	11.8%	7.2%
Man GLG Strategic Bond Fund²²	-1.7%	-4.6%	2.4%	n/a
Man GLG Undervalued Assets Fund²³	4.3%	10.0%	n/a	n/a
Man GLG European Equity Fund²⁴	4.0%	10.9%	15.8%	9.0%
Man GLG UK Select Fund²⁵	6.0%	3.3%	12.1%	7.4%
Man GLG Continental European Growth Fund²⁶	11.0%	30.9%	21.2%	13.3%
FRM
FRM Diversified II²⁷	-0.7%	1.0%	3.2%	2.0%

Investment performance (Cont'd)

	Total return		Annualised return
	3 months to 31 Dec 2015	12 months to 31 Dec 2015	3 years to 31 Dec 2015		5 years to 31 Dec 2015
NUMERIC ALTERNATIVES
US Market Neutral	-0.9%	8.0%	2.9%	5.0%
World Market Neutral	-0.6%	4.1%	5.6%	5.9%

NUMERIC LONG ONLY
Global & International
Global Core	4.8%	3.1%	n/a	n/a
MSCI World	5.5%	-0.9%	n/a	n/a
Relative Return	-0.7%	4.0%	n/a	n/a
Europe Core (EUR)	5.4%	12.6%	16.8%	12.4%
MSCI Europe	5.3%	8.2%	11.5%	8.4%
Relative Return	0.1%	4.4%	5.3%	4.0%
Japan Core (JPY)	10.6%	14.1%	25.8%	16.1%
MSCI Japan	9.8%	9.9%	23.0%	12.9%
Relative Return	0.8%	4.2%	2.8%	3.2%
International Small Cap	5.6%	10.6%	14.0%	10.4%
Custom MSCI World Ex-US	5.8%	5.5%	8.6%	5.2%
Relative Return	-0.2%	5.1%	5.4%	5.2%
Emerging Markets Alpha	-1.7%	-12.0%	0.8%	2.3%
MSCI Emerging Markets Alpha	0.7%	-14.9%	-6.8%	-4.8%
Relative Return	-2.4%	2.9%	7.6%	7.1%
Emerging Markets Core	-1.0%	-12.3%	n/a	n/a
MSCI Emerging Markets Alpha	0.7%	-14.9%	n/a	n/a
Relative Return	-1.7%	2.6%	n/a	n/a
US Large Cap
Core	4.0%	0.8%	17.9%	15.1%
Russell 1000	6.5%	0.9%	15.0%	12.4%
Relative Return	-2.5%	-0.1%	2.9%	2.7%
Value	4.1%	-0.6%	16.8%	14.5%
Russell 1000 Value	5.6%	-3.8%	13.1%	11.3%
Relative Return	-1.5%	3.2%	3.7%	3.2%
All Cap Core	3.3%	-1.4%	15.9%	14.2%
Russell 3000	6.3%	0.5%	14.7%	12.2%
Relative Return	-3.0%	-1.9%	1.2%	2.0%
Large Cap Core	4.5%	1.0%	18.7%	15.5%
S&P 500	7.0%	1.4%	15.1%	12.6%
Relative Return	-2.5%	-0.4%	3.6%	2.9%
US Small Cap
Small Cap Core	3.1%	-3.8%	14.2%	12.1%
Russell 2000	3.6%	-4.4%	11.7%	9.2%
Relative Return	-0.5%	0.6%	2.5%	2.9%
Small Cap Value	1.3%	-5.1%	13.3%	11.5%
Russell 2000 Value	2.9%	-7.5%	9.1%	7.7%
Relative Return	-1.6%	2.4%	4.2%	3.8%
Small Cap Growth	4.5%	-2.8%	15.7%	13.0%
Russell 2000 Growth	4.3%	-1.4%	14.3%	10.7%
Relative Return	0.2%	-1.4%	1.4%	2.3%

Investment performance (Cont'd)

		Total return			Annualised return
		12 months to 31 Dec 2015		12 months to 31 Dec 2015	3 years to 31 Dec 2015		5 years to 31 Dec 2015
Indices
World stocks²⁸		6.3%	2.0%		12.9%	9.5%
World bonds²⁹		0.1%	1.3%		3.2%	3.9%
Corporate bonds³⁰		0.4%	-1.0%		2.6%	7.1%

Hedge fund indices
HFRI Fund of Funds Composite Index³¹		0.8%	-0.2%		4.0%	2.1%
HFRI Fund Weighted Composite Index³¹		0.7%	-1.1%		3.6%	2.3%
HFRX Global Hedge Fund Index³¹		-0.6%	-3.6%		0.7%	-0.7%
HFRX Fund of Funds Conservative Index³¹		0.1%	0.5%		3.7%	2.3%
Style indices
Barclay BTOP 50 Index³²		0.0%	-1.0%		3.9%	1.0%
HFRI Equity Hedge (Total) Index³¹		1.8%	-0.9%		4.9%	2.6%
HFRI EH: Equity Market Neutral Index³¹		1.2%	4.3%		4.6%	2.9%
HFRI Macro (Total) Index³¹		-0.1%	-1.2%		1.3%	-0.1%
HFRI Relative Value (Total) Index³¹		-0.2%	-0.3%		3.6%	4.2%

	Source: Man database, Bloomberg, MSCI and Source. There is no guarantee of trading performance and past or projected performance is not a reliable indicator of future performance. Returns may increase or decrease as a result of currency fluctuations.

	1) Represented by Man AHL Diversified plc from 26 March 1996 to 29 October 2012, and by Man AHL Diversified (Guernsey) USD Shares - Class A from 30 October 2012 to date. The representative product was changed at the end of October 2012 due to legal and/or regulatory restrictions on Man AHL Diversified plc preventing the product from accessing the Programme's revised target allocations. Both funds are valued weekly; however, for comparative purposes, statistics have been calculated using the best quality price that is available at each calendar month end, using estimates where a final price is unavailable. Where a price, either estimate or final is unavailable on a calendar month end, the price on the closest date prior to the calendar month end has been used.
	2) Represented by AHL Alpha plc from 17 October 1995 to 30 September 2012, and by AHL Strategies PCC Limited: Class Y AHL Alpha USD Shares from 1 October 2012 to 30 September 2013. The representative product was changed at the end of September 2012 due to the provisioning of fund liquidation costs in October 2012 for AHL Alpha plc, which resulted in tracking error compared with other Alpha Programme funds. Both funds are valued weekly; however, for comparative purposes, statistics have been calculated using the best quality price that is available at each calendar month end, using estimates where a final price is unavailable. Where a price, either estimate or final is unavailable on a calendar month end, the price on the closest date prior to the calendar month end has been used. Both of the track records have been adjusted to reflect the fee structure of AHL Alpha (Cayman) Limited - USD Shares. From 30 September 2013, the actual performance of AHL Alpha (Cayman) Limited - USD Shares is displayed.
	3) Represented by AHL Strategies PCC: Class G AHL Evolution USD from 1 November 2006 to 30 November 2011; and by the performance track record of AHL Investment Strategies SPC: Class E AHL Evolution USD Notes from 1 December 2011 to 30 November 2012. From 1 December 2012, the track record of AHL (Cayman) SPC: Class A1 Evolution USD Shares has been shown. All returns shown are net of fees.
	4) Represented by AHL Strategies PCC Limited: Class B AHL Dimension USD Shares from 3 July 2006 to 31 May 2014, and by AHL Dimension (Cayman) Ltd - F USD Shares Class from 1 June 2014 until 28 February 2015 when AHL Dimension (Cayman) Ltd - A USD Shares Class is used. Representative fees of 1.5% Management Fee and 20% Performance Fee have been applied.
	5) Represented by TailProtect Limited Class B.
	6) Represented by the official performance of Man GLG Europe Plus Source ETF net of a 0.75% p.a. management fee and no performance fee. Provided by Source.
	7) Represented by GLG European Long Short Fund - Class D Unrestricted - EUR.
	8) Represented by Man GLG European Equity Alternative IN EUR.
	9) Represented by Man GLG European Alpha Alternative IN EUR.
	10) Represented by GLG Alpha Select Fund - Class C - EUR.
	11) Represented by Man GLG Alpha Select Alternative IN H EUR.
	12) Represented by Man GLG Cred-Eq Alternative Class IN EUR.
	13) Represented by Man GLG Value Opportunity Class B USD Unrestricted.
	14) Represented by GLG Global Convertible Fund - Class A - USD.
	15) Represented by Man GLG Global Convertible UCITS Fund - Class IM USD.
	16) Represented by GLG Market Neutral Fund - Class Z Unrestricted - USD.
	17) Represented by Man GLG European Distressed Fund - Class A - USD.
	18) Represented by the gross return of Man GLG Multi-Strategy Fund - Class A - USD Shares until 31 December 2012. From 1 January 2013 the performance of Man Multi-Strategy Fund - Class G - USD Shares is displayed.
	19) Represented by Man GLG Global Opportunity Fund - Class Z - USD.
	20) Represented by Man GLG Japan CoreAlpha Equity Fund - Class C to Class I JPY (28/01/2010).
	21) Represented by Man GLG Global Equity Fund - Class I T USD to Class I USD (13/05/2011).
	22) Represented by Man GLG Strategic Bond Fund Class A.
	23) Represented by Man GLG Undervalued Assets Fund - C Accumulation Shares.
	24) Represented by Man GLG European Equity Class I EUR.
	25) Represented by Man GLG UK Select Fund Class A.
	26) Represented by Man GLG Continental European Growth Fund Class A Accumulation Shares
	27) Represented by FRM Diversified II USD A.
	28) Represented by MSCI World Net Total Return Index hedged to USD.
	29) Represented by Citigroup World Government Bond Index hedged to USD (total return).
	30) Represented by Citigroup High Grade Corp Bond TR.
	31) HFRI and HFRX index performance over the past 4 months is subject to change.
	32) The historic Barclay BTOP 50 Index data is subject to change.

	Please note that the dates in brackets represent the date of the join in the linked track records.

chief executive's review

2015 has been another challenging year in terms of trading conditions and investor risk appetite. Against this backdrop we continued to focus on delivering superior risk adjusted returns for our clients, creating a more diversified product offering, integrating our recently acquired businesses and running the Group efficiently.

Overview

Performance across our investment managers during 2015, while mixed was reasonable against a difficult market backdrop. AHL's momentum strategies had a strong start to the year but were impacted by reversals in the second and fourth quarters. GLG's equity long short strategies had a good year and the majority of its long only strategies ended the year ahead of benchmarks, although certain strategies were some way behind. Numeric posted strong net outperformance versus benchmark and FRM's performance was solid. Flows were slightly positive in the year with net outflows of $2.6 billion in the first half of the year broadly offset by net inflows of $2.9 billion in the second half of the year. The acquisitions of Silvermine, NewSmith and the BAML fund of funds portfolio at the beginning of the year drove an 8% increase in funds under management to $78.7 billion at 31 December 2015. Adjusted management fee profit before tax was down 2% and adjusted management fee EPS was up 1% at 10.2 cents. Total adjusted profit before tax decreased however by 17% compared to 2014 mainly as a result of lower AHL performance fees. Our business continues to be strongly cash generative with adjusted EBITDA (a good proxy for operating cash flow) of $422 million, compared to $492 million in 2014.

Progress against strategic priorities

Performance¹

Investment performance continues to be the most important factor in our success.

AHL's momentum strategies ended 2015 with performance ranging from -2.7% (AHL Diversified) to +3.2% (AHL Evolution). Returns were impacted by the sharp reversal in European bond markets at the end of April and in grain markets during June, and by volatility in equities and FX, particularly in the fourth quarter. By contrast, AHL's multi-strategy quantitative fund AHL Dimension, which has assets of $4.1 billion, had a much better year and was up 6.9%.

Numeric's range of strategies performed well in 2015 with overall net asset weighted outperformance versus benchmark of 3.0%². The stronger performing strategies were the active extension (130/30) international strategies that outpaced their respective benchmarks.

2015 was a year of two halves for discretionary hedge fund performance at GLG. While the majority of our alternative strategies produced solid alpha, returns were largely generated in the first half. In the subsequent six months, investors were forced to navigate violent sector rotations while buffeted with bouts of volatility. However, GLG's alternative funds were resilient; the flagship European Long Short strategy posted a net return of 7.6% whilst funds from the recently acquired NewSmith business delivered strong performance, highlighting a smooth integration. Within credit and convertibles, GLG's strategies generally delivered positive returns against a backdrop of US rate uncertainty and heightened volatility in some sectors.

In equities, GLG's long only strategies broadly outperformed markets. The flagship Japan CoreAlpha strategy built on its impressive long-term track record, slightly outperforming the TOPIX's 2015 return of 12.1%. The Continental European Growth strategy finished the year with 26% excess return and the Undervalued Assets strategy returned 9.0% above the FTSE all-share. A handful of strategies underperformed with the Strategic Bond and North American equity strategies underperforming their relevant benchmarks by 5.2% and 10.7% respectively.

FRM products had mainly positive performance during 2015 with FRM Diversified II making a positive return of 1.0%, 0.5% ahead of its benchmark.

1 Figures shown net of representative management and performance fees.

2 Numeric's net asset weighted alpha for the year to 31 December 2015 is calculated using the asset weighted average of the performance relative to the benchmark for all non-restricted strategy composites (representing approximately two-thirds of Numeric's FUM) available net of the highest management fees and, as applicable, performance fees that can be charged.

chief executive's review (Cont'd)

Business development

During the year we made good progress in integrating the businesses acquired during 2014 and we continued to develop options for growth across our investment businesses.

We saw strong organic growth at AHL during the year with $2.1 billion of net flows. The business continues to become more diversified by product with over 60% of assets now in non-traditional strategies. The Numeric business continues to perform well and since acquisition in September 2014, Numeric has raised gross assets of $6.5 billion, with total FUM increasing 25% to $19.0 billion. During the year good progress was made to integrate Numeric's operations onto the Man platform.

At GLG we completed the acquisitions of Silvermine and NewSmith at the beginning of the year and we continue to attract talent to broaden out both our alternatives and long only product offering. In the Alternatives business Himanshu Gulati joined in early 2015 as Head of US Special Situations and we have added a number of talented managers to our European Equity alternatives team, including Moni Sternbach who is managing our European Mid-Cap alternative equity strategy. In the long only business we appointed Guillermo Osses as Head of Emerging Market Debt, while Simon Pickard and Edward Cole joined the firm to run an Unconstrained Emerging Market Equity strategy. Recent hires continue to make progress; Pierre-Henri Flamand's Value Opportunities strategy has performed well since its launch in 2014, Henry Dixon's Undervalued Asset strategy continues to perform well and is raising assets with FUM of over $450 million, while Rory Powe's European Equity strategy has had very strong performance and we are beginning to market that strategy.

At FRM, we completed the acquisition of the fund of funds business of Bank of America Merrill Lynch, adding a $1.1 billion portfolio of multi-strategy and strategy-focused funds to FRM, supported by a proven distribution platform. From an asset raising perspective we made good progress in our managed accounts offering and were awarded a $2.0 billion mandate by a large US-based State Pension Plan and two fund of funds mandates from UK local government pension schemes, totalling $0.4 billion during the year.

To complement our organic growth, we continue to look at other possible acquisitions, in the private markets, fund of funds and long only spaces, seeking to ensure we remain disciplined on price, structure and cultural fit. The asset management M&A environment was very robust last year, and despite reviewing a large number of opportunities we were unable to find acquisition targets on reasonable terms. We remain patient.

Distribution effectiveness

2015 saw a 5% increase in gross sales to $22.9 billion, with strong Numeric sales being partially offset by lower sales of GLG equity long short strategies compared to 2014. Sales for the year included mandates from three different institutional clients which were each over $1 billion. Redemptions during the year were $22.6 billion, up from $18.6 billion in 2014 and included $2.8 billion of redemptions from one client in the Japan Core Alpha strategy despite strong performance.

The majority of the demand continues to come from institutions with institutional sales in the period constituting 67% of total sales. Over the past five years our business has become much more institutional in nature with 74% of FUM now run for institutions globally. Our third-party retail business continues to be extremely important to us, but we hope to be a beneficiary over time of a continued trend whereby large institutional clients seek to put more money to work with fewer managers. This trend has been seen in our own business over the last three years and presents an opportunity for us in the long run.

From a geographical perspective EMEA continues to be our biggest market, with sales from this region comprising 61% of the total in 2015. The critical North American market remains a key geographical focus for future growth and $5 billion of total sales were from the Americas in 2015, up around 160% from 2014. 24% of assets are now managed on behalf of North American clients. Sales from the Asia Pacific region comprised 17% of the total which included three mandates totalling $1.6 billion.

chief executive's review (Cont'd)

Efficiency

Having completed the cost reduction programme ahead of schedule in 2014, our focus in 2015 shifted towards sustaining our focus on efficiency and ensuring that our cost base enables us to address both the opportunities and risks in our business appropriately. We continue to invest in new investment talent as outlined above and there are a number of areas in which we are investing in the infrastructure of our business which will be reflected in increased capital expenditure over the next few years.

Our balance sheet remains strong and liquid and as we have previously outlined we have increased the capacity of our seed capital programme to help to grow the business as we launch new products over time. Our surplus capital stands at around $480 million proforma for second half earnings and our final dividend and accordingly we retain the flexibility to take advantage of acquisition opportunities.

Objectives for 2016

Performance

· Continued focus on research at AHL by delivering new models and accessing new markets

· Collaboration between AHL and Numeric to further enhance research efforts in both managers

· Focus on improving areas of underperformance in certain GLG alternatives and long only strategies in 2015

Distribution

· Market AHL's strategies given their solid three year track record

· Continue to leverage Man Group's global distribution capability to grow assets in acquired businesses

· Continue to improve coverage and asset raising in the US

· At FRM continue to partner with institutional clients to provide managed account solutions and advisory services for their hedge fund allocations

· Continue to develop relationships with existing clients with a focus on both asset raising as well as asset retention

Growth

· Continue to innovate at AHL by delivering new strategies and accessing new data

· Continue to look for high-calibre investment talent at GLG to support the growth of our existing products as well as to support the expansion of our alternatives and long only product offering

· Continue to focus on the US as a region for growth both from a distribution and acquisition perspective

· Continue to look at other possible acquisitions for example in private markets and long only strategies ensuring that we remain disciplined on price, structure and cultural fit

Operating efficiency and capital discipline

· Focus on sustaining our efficiency and ensuring that our cost base enables us to address the risks and opportunities in our business appropriately

· Maintain focus on balance sheet efficiency including ensuring our seeding portfolio is managed effectively

chief financial officer's review

Overview

Our financial results in 2015 reflect mixed performance against a challenging market backdrop, with a range of returns across AHL's strategies, a solid year for GLG and FRM's strategies, and strong net outperformance from Numeric compared to benchmarks.

FUM increased by 8% from $72.9 billion at the beginning of the year to $78.7 billion at 31 December 2015. We added $6.1 billion of FUM through the acquisitions of Silvemine, NewSmith and the BAML fund of funds business, with the remainder of the movement in FUM reflecting net inflows of $0.3 billion for the year and positive investment performance of $2.4 billion, partly offset by adverse foreign currency and other movements ($3.0 billion).

Net management fee revenue increased by 6% from $715 million to $759 million in 2015, primarily as a result of the increase in average FUM of 29%, driven by the inclusion of Numeric FUM for a full year in 2015 and FUM acquired in the first half of 2015. Offsetting this, average net management fee margins have continued to decline over the year as a result of the ongoing mix shift toward lower margin institutional assets and long only funds, with institutional assets now constituting 74% of total FUM and long only constituting 42% of total FUM.

Performance fee revenues have decreased by 11% from $340 million to $302 million, largely as a result of lower performance fees from AHL after a strong year in 2014, partially offset by an increase in performance fees from Numeric following strong performance.

As Manny has noted, Man continues to focus on cost efficiency as a source of value. This year total costs before adjusting items increased by $79 million, driven largely by the impact of acquisitions, the compensation structure of certain GLG strategies and adverse year on year foreign exchange movements.

As a result of these revenue and cost drivers, our adjusted profit before tax was $400 million, down 17% from $481 million the prior year, and adjusted diluted earnings per share were 21.1 cents (2014: 24.4 cents). Our statutory profit before tax was $184 million (2014: $384 million), reflecting adjusting items of $216 million, which primarily relate to amortisation of purchased intangible assets and increases in the fair value of the contingent consideration payable in relation to Numeric as a result of better than expected flows and margins. The business continues to generate strong operating cash flows. Cash flows from operating activities, excluding working capital movements, were $402 million for the year.

Our balance sheet remains strong and liquid with net tangible assets of $0.7 billion or 41 cents per share at 31 December 2015. Our regulatory capital surplus is $453 million at 31 December 2015, and we have a net cash position of $437 million. We continue to enhance the efficiency of our capital and funding. We renegotiated our revolving credit facility during the year, reducing it in size from $1,525 million to $1,000 million, and with a reduction in costs and an extension to June 2020. In the first half, we completed a $175 million share repurchase, acquiring 3% of our issued share capital.

Key performance indicators (KPIs)

Our financial KPIs illustrate and measure the relationship between the investment experience of our fund investors, our financial performance and the creation of shareholder value over time. Our KPIs are used on a regular basis to evaluate progress against our four key priorities: performance, distribution, growth and efficiency.

The results of our KPIs this year continue to reflect the volatile operating environment, with strong net investment outperformance for Numeric, solid performance from FRM and GLG, and mixed performance for AHL with AHL Diversified, the KPI strategy, underperforming other AHL strategies. Net inflows achieved in quant strategies were almost completely offset by outflows in discretionary strategies. The shift towards lower margin institutional assets has continued to lower blended net management fee margins, however the discipline we have maintained regarding our cost base has reduced the impact on our profitability and EPS growth.

chief financial officer's review (cont'd)

The investment performance KPI measures the net investment performance for our four managers (AHL, Numeric, GLG and FRM). For AHL, GLG and FRM, investment performance is represented by key funds against relevant benchmarks. The Numeric KPI has been added with effect from 1 January 2015, and monitors the net asset weighted outperformance or underperformance (alpha)¹ based on a predetermined benchmark by strategy. The target for the investment performance KPI is to exceed the relevant benchmarks. The key funds and the relevant benchmarks are AHL Diversified vs. three key peer asset managers for AHL (the target being to beat two of the three peers), the GLG Alternative Strategies Dollar-Weighted Composite vs. HFRX for GLG and FRM Diversified II vs. HFRI Fund of Funds Conservative Index for FRM. For Numeric, net asset weighted alpha¹ is based on a benchmark against competitors by Numeric strategy. The performance of the key funds compared to the benchmarks gives an indication of the competitiveness of our investment performance against similar alternative investment styles offered by other investment managers. This measures our ability to deliver superior long-term performance to investors. We achieved three out of the four performance targets. FRM and GLG both met the benchmark in 2015 as their performance metrics exceeded their relevant benchmark. Numeric had positive net alpha in 2015 and therefore met the KPI. AHL did not meet the target for 2015 as the performance of its key fund was below all three of the relevant peer benchmarks. Further investment performance information is provided on pages 6 to 10.

The second KPI measures adjusted management fee EBITDA as a percentage of net revenues (gross management fee revenue and income from associates less cash distribution costs). Our adjusted management fee EBITDA margin is a measure of our underlying profitability. The adjusted management fee EBITDA margin of 27.2% was within the target range for the year ended 31 December 2015. This margin has been declining as a result of the roll off of higher margin guaranteed product FUM and the general product mix shift from higher margin retail assets to lower margin institutional and long only assets.

The third KPI measures net FUM flows for the period as a percentage of opening FUM, with net flows defined as gross sales less gross redemptions. Net flows are the measure of our ability to attract and retain investor capital. FUM drives our financial performance in terms of our ability to earn management fees. Net flows were within the target range in 2015 with a net inflow of 0.4%, compared to a net inflow of 6.1% for the year to 31 December 2014. The reduced level of net inflows in 2015 is largely as a result of higher redemptions, including a large one-off redemption from the Japan CoreAlpha fund during the period.

The fourth KPI measures our adjusted management fee EPS growth, where adjusted management fee EPS is calculated using post-tax profits excluding net performance fees and adjusting items, divided by the weighted average diluted number of shares. The target is growth of 0%-20% plus RPI each year. Adjusted management fee EPS growth measures the overall effectiveness of our business model, and drives both our dividend policy and the value generated for shareholders. The adjusted management fee EPS growth of 1.0% was not within the target range of 0%-20% plus RPI of 1.2% for 2015. The adjusted management fee EPS growth of 1.0% in 2015 is a result of the accretive impact of the share repurchase programme which has reduced the number of shares, largely offset by a 2% decrease in net management fee profits.

1 Numeric's net asset weighted alpha for the year to 31 December 2015 is calculated using the asset weighted average of the performance relative to the benchmark for all non-restricted strategy composites (representing approximately two-thirds of Numeric's FUM) available net of the highest management fees and, as applicable, performance fees that can be charged.

chief financial officer's review (cont'd)

Funds Under Management (FUM)

	Alternative			Long only
$bn	Quant (AHL/Numeric)	Discretionary (GLG)	Fund of funds (FRM)	Quant (AHL/Numeric)	Discretionary (GLG)	Total excluding Guaranteed	Guaranteed	Total
FUM at 31 December 2014	12.9	14.5	10.8	16.7	16.0	70.9	2.0	72.9
Sales	4.7	3.9	3.3	4.4	6.6	22.9	-	22.9
Redemptions	(2.0)	(4.7)	(2.7)	(2.6)	(10.2)	(22.2)	(0.4)	(22.6)
Net inflows/(outflows)	2.7	(0.8)	0.6	1.8	(3.6)	0.7	(0.4)	0.3
Investment movement	0.6	0.4	(0.2)	0.1	1.6	2.5	(0.1)	2.4
Foreign currency movement	(0.4)	(0.9)	(0.2)	-	(0.7)	(2.2)	(0.2)	(2.4)
Other movements	0.6	(1.0)	(0.2)	-	-	(0.6)	-	(0.6)
Acquisitions of Silvermine, BAML fund of fund assets and NewSmith	-	4.1	1.1	-	0.9	6.1	-	6.1
FUM at 31 December 2015	16.4	16.3	11.9	18.6	14.2	77.4	1.3	78.7

Quant alternative products (AHL/Numeric)

Quant alternative FUM increased by 27% during the year, primarily as a result of net inflows and positive investment performance. Sales were $4.7 billion, which included three institutional mandates totalling $2.4 billion into the Dimension and Alpha strategies. Redemptions were $2.0 billion, and were mainly from retail investors in AHL Diversified and AHL Alpha. The positive investment movement was a result of strong performance for AHL Dimension, AHL Evolution, and AHL Alpha. Negative foreign exchange movements were due to 18% of Quant alternatives FUM being denominated in Australian Dollars. The positive other movements relate to re-gearing.

Discretionary alternative products (GLG)

Discretionary alternative FUM increased by $1.8 billion during the year. The acquisitions of Silvermine and NewSmith added $4.1 billion to FUM. Net outflows of $800 million were mainly from European and North American equity strategies. The positive investment performance was driven by strong performance in the equity long short strategies. Negative foreign exchange movements related primarily to the strengthening of the US Dollar against the Euro and Sterling. At 31 December 2015, 56% of Discretionary alternative FUM was denominated in US Dollars, 36% in Euros and 3% was in Sterling. The negative other movements relate to Silvermine and Pemba maturities.

Fund of funds products (FRM)

Fund of funds FUM increased by $1.1 billion during the year, primarily as a result of the Bank of America Merrill Lynch fund of funds portfolio acquisition in the first half of the year. Sales of $3.3 billion included $2.0 billion from a large North American based pension fund into an infrastructure mandate. Redemptions of $2.7 billion included $700 million from a European pension fund's infrastructure investment and $600 million from FRM Diversified strategies. The negative investment performance primarily related to some of the larger managed account mandates. The negative foreign exchange movements were primarily due to the strengthening of the US Dollar against the Japanese Yen and Euro. At 31 December 2015, 56% of alternative fund of fund FUM was denominated in US Dollars, 31% in Yen and 5% in Euro.

chief financial officer's review (cont'd)

Quant long only products (AHL/Numeric)

Quant long only FUM increased by $1.9 billion during the year, primarily as a result of net inflows. The net inflows for Numeric mainly related to $900 million for Numeric Global Strategies, $800 million for Numeric US Small Cap strategies, and $400 million for Numeric Emerging Markets. Although investment performance in quant long only products was broadly flat for the year, net asset weighted outperformance for Numeric in 2015 was 3.0% alpha¹. At 31 December 2015, 98% of quant long only FUM was denominated in US Dollars.

Discretionary long only (GLG)

Discretionary long only FUM decreased by 11%, driven by net outflows. Sales were $6.6 billion and included $4.4 billion into Japan CoreAlpha, $800 million into global fixed income strategies, $600 million into European equity strategies and $400 million into UK equity strategies. Redemptions were $10.2 billion, of which $7.2 billion related to Japan CoreAlpha, including $2.8 billion of redemptions from a single client in the first half of the year. The positive investment performance was primarily a result of strong investment performance from Japan CoreAlpha. The NewSmith acquisition added $900 million to discretionary long only FUM. Negative foreign exchange movements related to the strengthening of the US Dollar against Sterling and Japanese Yen. At 31 December 2015, 58% of discretionary long only FUM was denominated in Sterling, 19% was in Yen and 14% was in US Dollars.

Guaranteed products

Guaranteed product FUM, our highest margin product grouping, reduced by $700 million in 2015. There were no sales during the year and redemptions totalled $400 million. The weighted average life to maturity of the guaranteed product range is 3.6 years, with $500 million scheduled to mature in 2016, the majority of which will mature during H1 2016, and $100 million in 2017. Investment performance for guaranteed products was negative during the year. Negative foreign exchange movements were as a result of 67% of FUM being denominated in Australian Dollars.

Summary income statement

Investment performance and fund flows drive the economics of our business. Management fees are typically charged for providing investment management services at a percentage of each fund entity's gross investment exposure or NAV. Performance fees are typically charged as a percentage of investment performance above a benchmark return or previous higher valuation 'high water mark'.

Man is fundamentally a people business and the majority of our costs comprise payments to individuals whether they are our investment managers who manage investor assets, third-party intermediaries or internal sales staff who distribute our products, or the teams that manage our operations and infrastructure.

chief financial officer's review (cont'd)

$m	Year ended 31 December 2015	Year ended 31 December 2014
Management and other fees	833	810
Share of after tax profit of associates	3	9
Distribution costs	(77)	(104)
Net management fee revenue	759	715
Performance fees (including investment income/gains¹)	326	367
Net revenue	1,085	1,082
Asset servicing	(32)	(27)
Compensation	(462)	(391)
Other costs	(177)	(174)
Total costs	(671)	(592)
Net finance expense	(14)	(9)
Adjusted profit before tax	400	481
Adjusting items	(216)	(97)
Statutory profit before tax	184	384
Adjusted net management fee profit before tax	194	198
Adjusted net performance fee profit before tax	206	283
Diluted EPS (statutory)	10.0 cents	20.5 cents
Adjusted net management fee EPS	10.2 cents	10.1 cents
Adjusted diluted EPS	21.1 cents	24.4 cents

1 Includes the adding back of $9 million (2014: nil) of third-party share of losses relating to line-by-line consolidated fund
entities.

Gross management fees and margins

Gross management fees increased by 3% during the year. While average assets went up 29% year on year, the total gross management fee margin decreased from 131 basis points for the year ended 31 December 2014 to 106 basis points for the year ended 31 December 2015. The total net management fee margin (defined as gross management fees less external distribution costs) has decreased from 114 basis points to 96 basis points in 2015. These reductions are due to a continued mix shift towards institutional assets, particularly in the alternatives quant category, and the full year impact of including Numeric's assets (acquired in September 2014) which have a blended margin of around 40 basis points. The reduction in margin is less at the net level as there are higher distribution costs associated with retail FUM than institutional FUM. This product mix shift and consequent reduction in overall margin is likely to continue as we sell more open ended alternative and long only product, particularly to institutions, and there are no sales of guaranteed products.

During 2015, the alternatives quant net management fee margin reduced by 50 basis points as a result of the continued mix shift towards institutional assets, with around 80% of the net inflows from institutional investors into AHL Dimension and AHL Alpha, where the gross margin was around 1%. The inclusion of a full year of Numeric quant alternatives assets, which have a margin of around 1%, has also been a contributing factor. Going forward, it is expected that this margin will decline further with the continued shift towards institutional assets.

chief financial officer's review (cont'd)

Net management fee revenue

	Year ended 31 December 2015		Year ended 31 December 2014
	$m	Net margin	$m	Net margin
Quant alternatives	235	1.5%	188	1.9%
Discretionary alternatives	170	1.0%	207	1.2%
Fund of fund alternatives	83	0.8%	96	0.9%
Quant long only	60	0.3%	20	0.3%
Discretionary long only	121	0.8%	109	0.7%
Guaranteed	78	4.6%	73	4.1%
Other income¹	9		13
Net management fee revenues before share of after tax profit of associates	756	1.0%	706	1.1%
Share of after tax profit of associates	3		9
Net management fee revenues	759		715

1 Other income primarily relates to distribution income from externally managed products.

Net management fee margins in the discretionary alternative category reduced by 26 basis points during the year, primarily as a result of the Silvermine acquisition in the first half where margins are around 44 basis points.

The net margin for the fund of funds category was 6 basis points lower compared to 2014. Looking forward we would expect the alternatives fund of fund margin to trend down as we see a greater proportion of sales into lower margin mandates, including infrastructure managed account mandates where margins are between 15 to 25 basis points.

The long only quant net management fee margin has remained consistent with the prior year at 34 basis points as the Numeric inflows in 2015 have been at a similar margin to the existing long only quant FUM.

The long only discretionary net management fee margin increased by 7 basis points as a result of $2.8 billion of redemptions from a single client which were assets at a lower margin than the existing long only discretionary FUM.

The guaranteed product net management fee margin increased by 59 basis points compared to the year ended 31 December 2014. In 2014, the margin decreased as a result of one-off accelerated amortisation of placement fees related to redemptions and the net de-gear in the first half of the year.

Performance fees (including investment income/gains)

Gross performance fees for the year were $302 million compared to $340 million in 2014, $218 million (2014: $272 million) from AHL (including $22 million relating to guaranteed products, compared to $25 million in 2014), $37 million (2014: $37 million) from GLG, $40 million (2014: $23 million) from Numeric and $7 million (2014: $8 million) from FRM. At 31 December 2015, around 42% of AHL open ended products ($7 billion) were above performance fee high water mark and of the $7.4 billion performance fee eligible Numeric products, 92% were outperforming the relevant benchmark at 31 December 2015. Around 34% of eligible GLG assets ($3.7 billion) were above high water mark and around a further 38% ($4.1 billion) within 5% of earning performance fees, and FRM performance fee eligible products were on average approximately 4.3% below high water mark.

chief financial officer's review (cont'd)

Man Group benefits from a portfolio of performance fee streams across a variety of strategies that are charged on a regular basis at different points in the year. 98% of AHL FUM is performance fee eligible, of which 64% have performance fees that crystallise annually, 23% daily or weekly, and 13% monthly. The majority of GLG's performance fees crystallise semi-annually in June or December. Around 50% of Numeric performance fee eligible FUM crystallises annually in November, with the remainder crystallising at various points during the year.

Investment gains of $24 million (2014: $27 million), including the adding back of $9 million of third party share of losses (2014: nil), primarily relate to gains on seeding investments. Third party share of losses relates to certain fund entities in which Man holds an investment which require line-by-line consolidation of the fund into the Group's results, as a result of a control assessment as defined by the applicable accounting standards. The funds requiring line-by-line consolidation in the year to 31 December 2015 made a loss, and therefore the $9 million credit represents the third party share of these losses.

Distribution costs

Distribution costs comprised $74 million of investor servicing fees and $3 million of placement fees.

Investor servicing fees are paid to intermediaries for ongoing investor servicing. Servicing fees have decreased by $15 million to $74 million in 2015 primarily due to the continued mix shift towards institutional assets, particularly in the alternatives quant category, and the roll-off of guaranteed product FUM.

Placement fees are paid for product launches or sales and are capitalised and amortised over the expected investment holding period. The reduction in placement fees is due to limited new payments in recent years and the roll-off of amortisation of the previously capitalised balances.

Asset servicing

Asset servicing costs (including custodial, valuation, fund accounting and registrar functions) were $32 million (2014: $27 million). Asset servicing costs equate to around 5 to 6 basis points on FUM, excluding Numeric, and vary depending on transaction volumes, the number of funds, and fund NAVs. The $5 million increase in asset servicing compared to 2014 is largely due to the increase in average FUM over the year.

Compensation costs

Compensation costs comprise fixed base salaries, benefits, variable bonus compensation (cash and amortisation of deferred compensation arrangements) and associated social security costs.

Total compensation costs, excluding adjusting items, increased from $391 million in 2014 to $462 million in 2015, an increase from 36% to 43% of net revenue. This was driven by the increase in headcount due to current and prior year acquisitions ($34 million), higher GLG performance related compensation ($24 million), and a less favourable hedged US Dollars to Pounds sterling rate in 2015 compared to the hedged rate in 2014 ($10 million). The compensation structure for the GLG equity long short strategies teams is based on gross profits, which in 2015 were in excess of performance fees generated by the strategies given they started the year below high water mark. Additionally, compensation costs include an increased year-on-year charge of $5 million as a result of the 2014 change in application of the accounting policy for deferred compensation, which impacts the charges relating to deferred share and fund awards granted from 2015 onwards.

Other costs

Other costs, excluding adjusting items, were $177 million for the year compared to $174 million for the year to 31 December 2014. These comprise cash costs of $161 million (2014: $150 million) and depreciation and amortisation of $16 million (2014: $24 million). The $11 million, or 7%, increase in cash costs reflects the impact of the less favourable hedged sterling rate in 2015 ($10 million) and to a lesser extent the costs of the newly acquired businesses ($6 million), partially offset by continued efforts to remain disciplined on costs which has resulted in a lower underlying other costs base compared to 2014. The $8 million decrease in depreciation and amortisation is due to lower capital expenditure in recent years, which is expected to increase in the future due to higher 2015 investment in operating platforms and business infrastructure ($13 million) and planned capital expenditure of between $40 million and $50 million over the next two to three years.

chief financial officer's review (cont'd)

Net finance expense

Net finance expense, excluding adjusting items, was $14 million for the year (2014: $9 million). The increase is due to the full year interest charge for the ten-year fixed rate reset callable guaranteed subordinated notes (Tier 2 capital) issued in September 2014, as well as the write off the remaining $2 million of capitalised costs relating to the previous revolving credit facility, which was renegotiated in June 2015. Finance expense includes a charge of $3 million relating to the undrawn revolving credit facility, which is as a result of the annual charge reducing from $4 million to $2 million on renegotiation of the facility in June 2015.

Adjusted profit before taxes

Adjusted profit before tax is $400 million compared to $481 million for the previous year. The adjusting items in the year of $216 million (pre-tax) are summarised in the table below and detailed in Note 2 to the Group financial statements. The directors consider that the Group's profit is most meaningful when considered on a basis which excludes acquisition and disposal related items (including non-cash items such as amortisation of purchased intangible assets and deferred tax movements relating to the recognition of tax losses in the US), impairment of assets, restructuring costs, and certain non-recurring gains or losses, which therefore reflects the recurring revenues and costs that drive the Group's cash flow.

Adjusting items $m	Year ended 31 December 2015
Acquisition related professional fees and other integration costs	(4)
Impairment of FRM goodwill	(41)
Insurance recovery for legal claims	6
Revaluation of contingent consideration creditors	(62)
Unwind of contingent consideration discount	(17)
Amortisation of acquired intangible assets	(92)
Other adjusting items (net)	(6)
Total adjusting items (excluding tax)	(216)
Recognition of deferred tax asset (see opposite)	11

Adjusted net management fee and net performance fee profit before tax

Adjusted net management fee profit before tax was $194 million compared to $198 million in 2014 as the increase in gross management fees was more than offset by an increase in costs. Adjusted net performance fee profit before tax of $206 million (2014: $283 million) for the year reflects the lower performance fees of AHL, in conjunction with the above outlined GLG bonus allocation which is not directly attributable to performance fees generated in the year.

chief financial officer's review (cont'd)

$m	Year ended 31 December 2015	Year ended 31 December 2014
Gross management and other fees	833	810
Share of after tax profit of associates	3	9
Less:
Distribution costs	(77)	(104)
Asset services	(32)	(27)
Compensation	(351)	(310)
Other costs	(177)	(174)
Net finance expense	(5)	(6)
Adjusted net management fee profit before tax	194	198

Performance fees	302	340
Gains on investments and other financial instruments¹	24	27
Less:
Compensation	(111)	(81)
Finance expense	(9)	(3)
Adjusted net performance fee profit before tax	206	283

1 Includes the adding back of third party share of losses relating to interests in consolidated funds as shown on the Group income statement.

Taxation

The effective tax rate on adjusted profits was 10% for the year, which is consistent with the effective tax rate for 2014. This is lower than the underlying rate of around 13% due to the release of tax provisions that are no longer needed.

The underlying rate of 13% in 2015 is lower than the underlying rate of 17% in 2014 due to a lower UK tax rate and a higher proportion of profits being earned in the US where we are paying a minimal level of tax due to relief from available past operating losses and tax amortisation of acquired intangible assets. We have $225 million of accumulated US tax losses which we can offset against the future profits from US entities and will reduce taxable profits. In addition, we have $537 million of tax deductible goodwill and intangibles, largely relating to the Numeric (2014) and Ore Hill (2008) acquisitions, which is amortised for tax purposes in the US over 15 years and which will also reduce the US taxable profit in future periods. We therefore continue to expect not to pay federal tax in the US for a significant number of years. Based on forecast US taxable profits and consistent with the methodology applied in 2014, Man has recognised a deferred tax asset of $19 million, which represents probable tax savings over a three year forecast period due to utilisation of these losses and tax amortisation of intangibles. This has resulted in an $11 million credit to the tax expense in 2015, following an $8 million credit in 2014, which are included as adjusting items.

Cash earnings (EBITDA)

The Group continues to generate strong cash earnings. As the Group has a number of non-cash items in the income statement it is important to focus on cash earnings to measure the true earnings generation of our business. The table below gives a reconciliation of adjusted profit before tax to adjusted EBITDA. The main differences are net finance expense, depreciation and amortisation, and deferred compensation charges relating to share and fund product awards. Our adjusted EBITDA/net revenue margin was 38.8% (2014: 44.8%), which can be divided between margin on management fees of 27.2% (2014: 30.3%) and performance fees of 66.0% (2014: 73.8%). The EBITDA management fee margin has decreased compared to 2014 as a result of the continued product mix shift from higher margin retail assets to lower margin institutional and long only assets, and the EBITDA performance fee margin has decreased largely as a result of performance fee variable compensation paid in relation to certain GLG strategies, as outlined on page 33.

chief financial officer's review (cont'd)

Reconciliation of adjusted PBT to adjusted EBITDA

$m	Year ended 31 December 2015	Year ended 31 December 2014
Adjusted PBT	400	481
Add back:
Net finance expense	14	9
Depreciation	13	21
Amortisation of capitalised computer software and placement fees	6	18
Current year amortisation of deferred compensation	53	42
Less: Deferred compensation awards relating to the current year	(64)	(79)
Adjusted EBITDA	422	492

Balance sheet

The Group's balance sheet is strong and liquid.

Cash and cash equivalents have decreased during the year largely as a result of dividends on ordinary shares ($193 million), the share repurchase and associated costs ($176 million) and a net increase in seeding investments ($173 million) and the purchase of Silvermine, NewSmith and the BAML fund of funds business, net of cash acquired ($38 million), partially offset by other cash inflows from operating activities ($528 million). Goodwill and other intangibles have decreased in 2015 due to amortisation of $98 million, partially offset by the acquisitions of Silvermine, NewSmith and the BAML fund of funds business.

Balance sheet $m	31 December 2015	31 December 2014
Cash and cash equivalents	607	738
Fee and other receivables	303	396
Total liquid assets	910	1,134
Payables	(750)	(697)
Net liquid assets	160	437
Investments in fund products and other investments	581	460
Pension asset	48	45
Investments in associates	30	30
Leasehold improvements and equipment	44	52
Total tangible assets	863	1,024
Borrowings	(149)	(149)
Net deferred tax liability	(10)	(36)
Net tangible assets	704	839
Goodwill and other intangibles	1,511	1,595
Shareholders' equity	2,215	2,434

chief financial officer's review (cont'd)

Liquidity

Operating cash flows were $355 million during the year and cash and cash equivalents balances were $586 million at year end, excluding cash relating to consolidated fund entities.

$m	Year ended 31 December 2015
Cash at 31 December 2014	738
Operating cash flows before working capital movements	402
Working capital movements (including seeding)	(47)
Payment of dividends	(193)
Acquisition of subsidiaries, net of cash acquired	(38)
Share repurchase (including costs)	(176)
Payment of acquisition related contingent consideration	(46)
Other movements	(33)
Cash and cash equivalents	607
Less cash held by consolidated fund entities	(21)
Cash at 31 December 2015	586

Working capital movements principally relate to an increase in seeding investments of $173 million, including fair value adjustments, partially offset by a decrease in loans to funds of $53 million and a decrease in fee receivables of $71 million at the year end.

In June we renegotiated our revolving credit facility, reducing its size from $1,525 million to $1,000 million, and extending the maturity to 2020 (with two one-year extension options). The facility remains available and undrawn and the reduction in the size of the facility, coupled with an improved credit rating from Fitch (from BBB to BBB+), has resulted in annual commitment fee savings of around $3 million. The management of liquidity and capital are explained in Note 15 and Note 23 to the financial statements, respectively.

Going concern

The directors have concluded that there is a reasonable expectation that Man has adequate resources to continue in operational existence for the foreseeable future, and have accordingly prepared the Group financial statements on a going concern basis.

Regulatory capital

Man is compliant with the FCA's capital standards and has continued to maintain significant surplus regulatory capital throughout the year. At 31 December 2015, surplus regulatory capital over the regulatory capital requirements was $453 million.

The increase in the Group financial resources of $48 million during 2015 primarily relates to:

(1) H2 2014 post-tax net performance fee income and other reserve movements of $169 million;

(2) H1 2015 post-tax net performance fee income and other reserve movements of $113 million (H2 2015 performance fees will be added once audited in February 2016); partly offset by

(3) The share repurchase programme of $176 million (including costs); and

(4) The acquisitions of Silvermine, NewSmith and the BAML fund of funds business, which have increased the intangibles deduction from Tier 1 capital by $58 million.

The increase in the Group financial resources requirement of $14 million primarily relates to a net increase of $53 million driven by seeding investments in fund products, partly offset by the impact of a lower capital requirement on various receivables balances ($14 million), loans to funds ($14 million) and cash ($11 million).

chief financial officer's review (cont'd)

Group's regulatory capital position

$m	31 December 2015	31 December 2014
Permitted share capital and reserves	2,087	2,101
Less deductions (primarily goodwill and other intangibles)	(1,485)	(1,564)
Available Tier 1 Group capital	602	537
Lower Tier 2 capital - subordinated debt	149	149
Other Tier 2 capital	3	20
Group financial resources	754	706
Less financial resources requirement	(301)	(287)
Surplus capital	453	419

As at 31 December 2015 there has been no change to the Internal Capital Guidance scalar that is applied as part of the calculation of the financial resources requirement.

Group income statement

$m	Note	Year ended 31 December 2015	Year ended 31 December 2014
Revenue:
Gross management and other fees	3	833	810
Performance fees	3	302	340
		1,135	1,150
Income or gains on investments and other financial instruments	4	15	27
Third-party share of losses relating to interests in consolidated funds	16.3	9	-
Revaluation of contingent consideration	2	(62)	17
Distribution costs	5	(77)	(104)
Asset servicing	6	(32)	(27)
Amortisation of acquired intangible assets	13	(92)	(72)
Compensation	7	(462)	(394)
Other costs	8	(181)	(202)
Impairment of FRM goodwill	13	(41)	-
Share of after tax profit of associates	20	3	9
Loss on disposal of subsidiaries and other interests	2	-	(4)
Finance expense	9	(34)	(19)
Finance income	9	3	3
Profit before tax		184	384
Taxation expense	10	(13)	(19)
Statutory profit for the year attributable to owners of the Parent Company		171	365

Earnings per share:	11
Basic (cents)		10.1	20.8
Diluted (cents)		10.0	20.5

Adjusted profit before tax	2	400	481

Group statement of comprehensive income

$m	Year ended 31 December 2015	Year ended 31 December 2014
Statutory profit for the year attributable to owners of the Parent Company	171	365
Other comprehensive (expense)/income:
Remeasurements of post-employment benefit obligations	(21)	(21)
Current tax credited on pension revaluation	4	4
Deferred tax credited on pension revaluation	2	-
Items that will not be reclassified to profit or loss	(15)	(17)
Available for sale investments:
Transfers from Group statement of comprehensive income upon sale or impairment	(1)	-
Cash flow hedges:
Valuation losses taken to equity	(9)	(16)
Transfer to Group income statement	18	(17)
Deferred tax credited on cash flow hedge movements	2	3
Net investment hedge	14	13
Foreign currency translation	(21)	(24)
Recycling of FX revaluation on liquidation of subsidiaries	(1)	-
Items that may be subsequently reclassified to profit or loss	2	(41)
Other comprehensive expense for the year (net of tax)	(13)	(58)
Total comprehensive income for the year attributable to owners of the Parent Company	158	307

Group balance sheet

$m	Note	At 31 December 2015	At 31 December 2014
Assets
Cash and cash equivalents	15	607	738
Fee and other receivables	17	303	396
Investments in fund products and other investments	16	598	307
Pension asset		48	45
Investments in associates	20	30	30
Leasehold improvements and equipment	21	44	52
Goodwill and acquired intangibles	13	1,497	1,582
Other intangibles	14	14	13
Deferred tax assets¹	10	59	47
		3,200	3,210
Non-current assets held for sale	16	188	186
Total assets		3,388	3,396
Liabilities
Trade and other payables	18	660	581
Provisions	19	58	65
Current tax liabilities		32	51
Third-party interest in consolidated funds	16	136	-
Borrowings	15	149	149
Deferred tax liabilities¹	10	69	83
		1,104	929
Non-current liabilities held for sale	16	69	33
Total liabilities		1,173	962
Net Assets		2,215	2,434

Equity
Capital and reserves attributable to the owners of the Parent Company	23	2,215	2,434

Note:

1 The deferred tax assets and deferred tax liabilities, which were presented on a net basis on the face of the Group balance sheet in the Annual Report for the year ended 31 December 2014, have been reclassified in the comparative to provide the gross figures as included in Note 10.

Group cash flow statement $m	Note	Year ended 31 December 2015	Year ended 31 December 2014
Cash flows from operating activities
Profit for the period		171	365
Adjustments for:
Income tax		13	19
Net finance expense		31	16
Share of after tax profits of associates		(3)	(9)
Revaluation of contingent consideration		62	(17)
Loss on disposal of subsidiaries and other interests		-	4
Reassessment of the litigation provision		-	(6)
Depreciation and impairment of leasehold improvements and equipment		13	21
Amortisation of acquired intangible assets		92	72
Amortisation of other intangible assets		5	16
Share-based payment expense		18	11
Fund product based payment charge¹		35	30
Impairment of FRM goodwill		41	-
Defined benefit pension plans (including repayments/(contributions))		(27)	3
Other non-cash movements		16	(16)
		467	509
Changes in working capital:
Decrease in receivables		101	12
Increase in other financial assets^2,3		(118)	(139)
Decrease in payables		(30)	(242)
Cash generated from operations		420	140
Interest paid		(16)	(3)
Income tax paid		(49)	(13)
Cash flows from operating activities		355	124

Cash flows from investing activities
Purchase of leasehold improvements and equipment		(5)	(3)
Purchase of other intangible assets		(7)	(9)
Acquisition of subsidiaries and other intangibles, net of cash acquired		(38)	(227)
Payment of contingent consideration in relation to acquisitions		(46)	(8)
Interest received		2	3
Dividends received from associates		3	10
Cash flows from investing activities		(91)	(234)

Cash flows from financing activities
Proceeds from issue of ordinary shares		7	2
Proceeds from borrowings (net of costs)		-	149
Purchase of own shares by the Employee Trusts and Partnerships		(33)	(16)
Share repurchase programme (including costs)		(176)	(116)
Dividends paid to Company shareholders		(193)	(163)
Cash flows from financing activities		(395)	(144)
Net decrease in cash		(131)	(254)
Cash at the beginning of the year		738	992
Cash at year end³	15	607	738

Notes:

1 In the current year the fund product based payment charge has been separately identified as a non-cash charge, a change in presentation within operating cash flows compared to the prior year when this was included within changes in working capital. The directors consider that this better reflects the nature of these movements.

2 For the comparative period 'Purchase of investments in fund products for deferred compensation awards and other investments' and 'Net proceeds from sale of investments in fund products for deferred compensation awards and other investments' have been reclassified from investing activities to 'Increase in other financial assets' within operating activities. The directors consider that this better reflects the nature of these cash flows and matches these with the related underlying transactions.

3 Includes $21 million (2014: nil) of restricted cash relating to consolidated fund entities (Note 16).

Group statement of changes in equity

$m	Equity attributable to owners of the Parent Year ended 31 December 2015			Equity attributable to owners of the Parent Year ended 31 December 2014
$m	Share capital and capital reserves	Revaluation reserves and retained earnings	Total equity	Share capital and capital reserves	Revaluation reserves and retained earnings	Total equity
At beginning of the year	1,193	1,241	2,434	1,191	1,216	2,407
Profit for the year	-	171	171	-	365	365
Other comprehensive (expense)/income	-	(13)	(13)	-	(58)	(58)
Total comprehensive income for the year	-	158	158	-	307	307
Share-based payments	7	15	22	2	11	13
Purchase of own shares by the Employee Trusts	-	(30)	(30)	-	(14)	(14)
Share repurchase programme (including costs)	-	(176)	(176)	-	(116)	(116)
Dividends	-	(193)	(193)	-	(163)	(163)
At year end (Note 23)	1,200	1,015	2,215	1,193	1,241	2,434

The proposed final dividend would reduce shareholders' equity by $81 million (2014: $106 million) subsequent to the balance sheet date.

Details of share capital and capital reserves, revaluation reserves and retained earnings and related movements are included in Note 23.

Notes to the Group financial statements

1. Basis of preparation

In preparing the financial information in this statement the Group has applied policies which are in accordance with the International Financial Reporting Standards as adopted by the European Union at 31 December 2015. Details of the Group's accounting policies can be found in the Group's Annual Report for the year ended 31 December 2014. The financial information included in this statement does not constitute the Group's statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2015, upon which the auditors have issued an unqualified report, will shortly be delivered to the Registrar of Companies.

The Annual Report and the Notice of the Company's 2016 Annual General Meeting (AGM) will be posted to shareholders on 9 March 2016. The Annual General Meeting will be held on Friday 6 May 2016 at 10am at Man Group's offices at Riverbank House, 2 Swan Lane, London EC4R 3AD.

Man's relationship with independent fund entities

Man acts as the investment manager/advisor to fund entities. Man assesses such relationships on an ongoing basis to determine whether each fund entity is controlled and therefore consolidated into the Group's results. Having considered all significant aspects of Man's relationships with fund entities, the directors are of the opinion that, although Man manages the assets of certain fund entities, where Man does not hold an investment in the fund entity the characteristics of control are not met, and that for most fund entities: the existence of independent boards of directors at the fund entities; rights which allow for the removal of the investment manager/advisor; the influence of investors; limited exposure to variable returns; and the arm's length nature of Man's contracts with the fund entities, indicate that Man does not control the fund entities and their associated assets, liabilities and results should not be consolidated into the Group financial statements. Assessment of the control characteristics for all relationships with fund entities led to the consolidation of nine fund entities for the year ended 31 December 2015 (2014: five), as detailed in Note 16.

Impact of new accounting standards

There were no new or amended accounting standards adopted by Man in the current year which had a significant impact.

2. Adjusted profit before tax

Statutory profit before tax is adjusted to give a better understanding of the underlying profitability of the business. The directors consider that the Group's profit is most meaningful when considered on a basis which excludes acquisition and disposal related items (including non-cash items such as amortisation of purchased intangible assets and deferred tax movements relating to the recognition of tax losses in the US), impairment of assets, restructuring costs, and certain non-recurring gains or losses, which therefore reflects the recurring revenues and costs that drive the Group's cash flow. The directors are consistent in their approach to the classification of adjusting items period to period, maintaining an appropriate symmetry between losses and gains and the reversal of any accruals previously classified as adjusting items. These are explained in detail either below or in the relevant note.

$m	Note	Year ended 31 December 2015	Year ended 31 December 2014
Statutory profit before tax		184	384
Adjusting items:
Litigation, regulatory and other settlements	8	(6)	24
Reassessment of the litigation provision		-	(6)
Acquisition and disposal related:
Amortisation of acquired intangible assets	13	92	72
Impairment of FRM goodwill	13	41	-
Revaluation of contingent consideration	13	62	(17)
Unwind of contingent consideration discount	9	17	7
Other costs - professional fees and other integration costs	8	4	9
Compensation - restructuring	7	-	3
Recycling of FX revaluation to the Group income statement on liquidation of subsidiaries	8	(1)	-
Loss on disposal of subsidiaries and other interests		-	4
Other costs - restructuring	8	7	1
Adjusted profit before tax		400	481
Tax on adjusted profit¹		(39)	(46)
Adjusted profit after tax		361	435

Note:

1 The difference of $26 million (2014: $27 million) between tax on statutory profit and tax on adjusted profit is made up of a tax credit of $15 million (2014: $19 million credit) on adjusting items and a tax credit of $11 million (2014: $8 million) relating to the recognition of a deferred tax asset which is classified as an adjusting item (Note 10).

The credit of $6 million to litigation, regulatory and other settlements in 2015 relates to an insurance recovery of prior year costs incurred in association with legal claims, which were included as an adjusting item in previous years, and the 2014 charge relates to legal claims which are partially linked to this recovery. In 2014 the $6 million reduction in the litigation provision relates to reassessment of potential legal claims (Note 19).

Amortisation of acquired intangibles primarily relates to investment management contracts and brands recognised on the acquisition of GLG, FRM and Numeric. Amortisation charges relating to Numeric of $18 million are included for a full year in 2015, and $7 million relates to the newly acquired Silvermine, NewSmith and BAML fund of funds business intangibles (Note 13).

The FRM goodwill was impaired by $41 million during the first half of the year, largely as a result of lower sales and higher redemptions of fund of funds products than anticipated (Note 13).

The revaluation of contingent consideration is an adjustment to the fair value of expected acquisition earn-out payments. The charge of $62 million in the current year primarily relates to Numeric, with a $61 million increase in the contingent consideration creditor as a result of increased management fee margins compared to forecast, as well as higher than forecast FUM due to flows and performance in 2015. The revaluation credit in 2014 relates to FRM, primarily as a result of lower than anticipated net management fee run rates since acquisition.

The unwind of the discount on contingent consideration in 2015 primarily relates to Numeric ($12 million), with the remainder arising from the FRM, Silvermine, NewSmith, BAML fund of funds and Pine Grove contingent consideration, and is included within finance expense (Note 9).

Acquisition related professional fees and other integration costs of $4 million relate to the acquisitions of the Silvermine, NewSmith, BAML fund of funds and Numeric businesses. In 2014 the acquisition related compensation and other costs relate to staff termination, legal and other advisory fees relating to the Numeric and Pine Grove transactions, as well as the costs of integrating our operating platforms. Compensation costs incurred as part of restructuring are accounted for in full at the time the obligation arises, following communication of the formal plan, and include payments in lieu of notice, enhanced termination costs, and accelerated share-based payment and fund product based charges.

In 2015, some of the Group's foreign subsidiaries were liquidated, which had accumulated foreign currency translation reserves of $1 million at the date of liquidation. Upon liquidation of these subsidiaries the related foreign currency translation gain was recycled to the Group income statement. The $4 million loss on disposal of subsidiaries and other interests in 2014 is the result of the Group selling two of its subsidiaries to local management in May 2014.

Other restructuring costs principally relate to an increase in the onerous property lease provision relating to Riverbank House (our main London office and headquarters), as a result of a contractual market-linked rental increase triggered in 2015, consistent with treatment of this onerous lease as an adjusting item upon initial recognition. In 2014, the $1 million of restructuring costs relates to an onerous lease on our New York property.

3. Revenue

Fee income is Man's primary source of revenue, which is derived from the investment management agreements that we have in place with the fund entities. Fees are generally based on an agreed percentage of the valuation of net asset value (NAV) or FUM and are typically charged in arrears. Management fees net of rebates, which include all non-performance related fees and interest income from loans to fund products, are recognised in the year in which the services are provided.

Performance fees net of rebates relate to the performance of the funds managed during the year and are recognised when the quantum of the fee can be estimated reliably and has crystallised. This is generally at the end of the performance period or upon early redemption by a fund investor. Until the performance period ends market movements could significantly move the NAV of the fund products. For AHL, GLG and FRM strategies, Man will typically only earn performance fee income on any positive investment returns in excess of the high water mark, meaning we will not be able to earn performance fee income with respect to positive investment performance in any year following negative performance until that loss is recouped, at which point a fund investor's investment surpasses the high water mark. Numeric performance fees are earned only when performance is in excess of a predetermined strategy benchmark (positive alpha), with performance fees being generated for each strategy either based on achieving positive alpha (which resets at a predetermined interval, i.e. every one to three years) or exceeding high water mark.

4. Income or gains on investments and other financial instruments

The net gains on investments and other financial instruments primarily relate to gains on seeding investments.

5. Distribution costs

Year ended 31 December 2015

Year ended

31 December 2014

Distribution costs

104

Distribution costs paid to external intermediaries are directly related to their marketing activity and the investors serviced by them. The distribution expense is therefore variable with FUM and the associated management fee income.

Distribution costs of $77 million (2014: $104 million) comprise investor servicing fees of $74 million (2014: $89 million) and product placement fees of $3 million (2014: $15 million). Servicing fees, which are paid to intermediaries for ongoing investor servicing and are expensed as incurred, have decreased primarily as a result of the continued mix shift towards institutional assets, particularly in the quant alternatives category, and the roll-off of guaranteed product FUM. Placement fees, which are paid for product launches or sales and are capitalised and amortised over the expected investment holding period (Note 14), have reduced due to limited new payments in recent years and the roll-off of amortisation of the previously capitalised balances.

6. Asset servicing

Asset servicing includes custodial, valuation, fund accounting and registrar functions performed by third parties under contract to Man, on behalf of the funds. The cost of these services is based on FUM, and vary depending on transaction volumes, the number of funds, and fund NAVs.

7. Compensation

$m	Year ended 31 December 2015	Year ended 31 December 2014
Salaries	158	136
Variable cash compensation	212	174
Share-based payment charge	18	12
Fund product based payment charge	35	30
Social security costs	33	33
Pension costs	6	6
Compensation costs - before adjusting items	462	391
Acquisition related costs (Note 2)	-	3
Total compensation costs	462	394

Compensation is our largest cost and an important component of our ability to retain and attract talent at Man. In the short term the variable component of compensation adjusts with revenues and profitability of the relevant business units. In the medium term the active management of headcount can reduce fixed compensation, if required.

Compensation costs in total are $462 million (2014: $391 million), before adjusting items, or 43% of net revenue (2014: 36%). Net revenue is defined as gross management and other fees, performance fees, income or gains on investments and other financial instruments, share of after tax profit of associates, less distribution costs. Salaries and variable cash compensation are charged to the Group income statement in the year in which they are incurred, and include partner drawings.

The increase in total compensation costs is due to the increase in headcount as a result of the Silvermine and NewSmith acquisitions (Note 13), as well as inclusion of Numeric and Pine Grove for the full year in 2015, a less favourable hedged Pounds sterling to USD rate in 2015 (1.66) compared to the hedged rate in 2014 (1.52), and higher GLG performance related compensation. The compensation structure for the GLG equity long short strategies teams is based on gross profits, which in 2015 were in excess of performance fees generated by the strategies given they started the year below high water mark. Additionally, compensation costs include an increased year-on-year charge of $5 million as a result of the 2014 change in application of the accounting policy for deferred compensation, which impacts the charges relating to deferred share and fund awards granted from 2015 onwards.

The accounting for share-based and fund product based compensation arrangements is detailed in Note 22. The unamortised deferred compensation at year end is $49 million (2014: $22 million), largely increasing as a result of the change in application of accounting policy for deferred awards which weights the related vesting expense more in the future compared to previously, which has a weighted average remaining vesting period of 2.1 years (2014: 1.3 years).

Pension costs relate to Man's defined contribution and defined benefit plans.

8. Other costs

$m	Year ended 31 December 2015	Year ended 31 December 2014
Occupancy	34	33
Technology and communication	34	32
Temporary staff, recruitment, consultancy and managed services	20	25
Legal fees and other professional fees	17	13
Benefits	13	12
Travel and entertainment	12	9
Audit, accountancy, actuarial and tax fees	8	8
Insurance	7	7
Marketing and sponsorship	6	6
Other cash costs, including irrecoverable VAT	10	5
Total other costs before depreciation and amortisation and adjusting items	161	150
Depreciation and amortisation	16	24
Other costs - before adjusting items	177	174
Acquisition and disposal related (Note 2)	4	9
Litigation, regulatory and other settlements (Note 2)	(6)	24
Reassessment of litigation provision (Note 2)	-	(6)
Restructuring (Note 2)	7	1
Recycling of FX revaluation on liquidation of subsidiaries	(1)	-
Total other costs	181	202

Other costs, before depreciation and amortisation and adjusting items, are $161 million in the year, compared to $150 million in the prior year, which reflects the impact of the less favourable hedged Pounds Sterling to USD rate in 2015 and, to a lesser extent, a full year of other costs relating to prior year acquisitions and a portion of the Silvermine and NewSmith businesses acquired in 2015 (Note 13), partially offset by continued efforts to remain disciplined on costs which has resulted in a lower underlying other costs base compared to 2014.

9. Finance expense and finance income

$m	Year ended 31 December 2015	Year ended 31 December 2014
Finance income:
Interest on cash deposits and US Treasury bills	3	3
Total finance income	3	3
Finance expense:
Interest payable on borrowings	(9)	(3)
Revolving credit facility costs and other (Note 15)	(8)	(9)
Total finance expense - before adjusting items	(17)	(12)
Unwind of contingent consideration discount (Note 2)	(17)	(7)
Total finance expense	(34)	(19)

Interest payable on borrowings has increased for the year ended 31 December 2015 due to the inclusion of a full year of interest expense on the notes issued in September 2014 (Note 15).

10. Taxation

$m	Year ended 31 December 2015	Year ended 31 December 2014
Analysis of tax charge/(credit) for the year:
Current tax:
UK corporation tax on profits of the period	37	54
Foreign tax	15	17
Adjustments to tax charge in respect of previous periods	(17)	(30)
Total current tax	35	41
Deferred tax:
Origination and reversal of temporary differences	(11)	(14)
Recognition of US deferred tax asset	(11)	(8)
Total deferred tax	(22)	(22)
Total tax charge	13	19

Man is a global business and therefore operates across many different tax jurisdictions. Income and profits are allocated to these different jurisdictions based on transfer pricing methodologies set in accordance with the laws of the jurisdictions in which we operate. The effective tax rate results from the combination of taxes paid on earnings attributable to the tax jurisdictions in which they arise. The majority of the Group's profit was earned in the UK, Switzerland and the US. The current effective tax rate of 7% (2014: 5%) differs from the underlying rate principally as a result of the incremental recognition of a US deferred tax asset of $11 million (2014: $8 million), as detailed on the following page, and the reassessment of tax exposures in Europe during the year, partly offset by the impairment of the FRM goodwill on which no tax relief is received. The effective tax rate is otherwise consistent with this earnings profile. The effective tax rate on adjusted profits (Note 2) is 10% (2014: 10%).

The tax on Man's total profit before tax is lower than the amount that would arise using the theoretical effective tax rate applicable to profits/(losses) of the consolidated companies as follows:

$m	Year ended 31 December 2015	Year ended 31 December 2014
Profit before tax	184	384
Theoretical tax charge at UK rate: 20.25% (2014: 21.50%)	37	83
Effect of:

Overseas tax rates compared to UK	(8)	(20)
Adjustments to tax charge in respect of previous periods	(17)	(30)
Impairment of goodwill and other adjusting items	9	(1)
Share-based payments	(2)	(3)
Recognition of US deferred tax asset	(11)	(8)
Other	5	(2)

Total tax charge	13	19

In the current year the adjustments to the tax charge in respect of previous periods largely relates to the reassessment of tax exposures in the UK and Switzerland. In 2014 this primarily related to the release of $25 million due to reassessment of tax exposures associated with our Asia Pacific operations.

Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is calculated at the rates expected to be applied when the deferred tax asset or liability is realised.

Movements in deferred tax are as follows:

$m	Year ended 31 December 2015	Year ended 31 December 2014
Deferred tax liability
At 1 January	(83)	(97)
Credit to the income statement	14	14
Deferred tax liability at 31 December	(69)	(83)
Deferred tax asset
At 1 January	47	39
Credit to the income statement	8	8
Credit directly to equity	4	2
Other currency differences	-	(2)
Deferred tax asset at 31 December	59	47

The deferred tax liability of $69 million (2014: $83 million) relates to deferred tax arising on acquired intangible assets.

The deferred tax asset of $59 million (2014: $47 million) principally relates to US tax losses and intangible assets of $19 million (2014: $8 million), defined benefit pension schemes of $9 million (2014: $8 million), employee share schemes of $15 million (2014: $17 million), and tax allowances over depreciation of $11 million (2014: $14 million). The deferred tax asset income statement credit of $8 million (2014: $8 million) relates to the recognition of the deferred tax asset in respect of US losses of $11 million (2014: $8 million), a decrease in the deferred tax asset on employee share schemes of $2 million (2014: $7 million increase), a decrease in the deferred tax asset arising on tax allowances over depreciation of $3 million (2014: $4 million) and an increase in the deferred tax asset on other temporary differences of $2 million (2014: $3 million decrease in deferred tax liability). The credit to other revenue reserves of $4 million (2014: $2 million) relates to movements in the pension accrual and unrealised cash flow hedge balance.

The Group has accumulated deferred tax assets in the US of $172 million (2014: $191 million). These assets principally comprise accumulated operating losses from existing operations and future amortisation of goodwill and intangibles assets generated from acquisitions that will be available to offset future taxable profits in the US. In the prior year, $8 million of these was recognised for the first time, triggered by the acquisition of Numeric, which gave rise to a higher degree of certainty that the US business will earn taxable profits in future periods. A deferred tax asset of $19 million has been recognised on the Group balance sheet in the current year, representing amounts which can be offset against probable future taxable profits, an increase of $11 million from that recognised at 31 December 2014. Probable future taxable profits are considered to be forecast profits for the next three years only, consistent with the Group's business planning horizon. As a result of the recognised deferred tax asset and the remaining unrecognised available US deferred tax assets of $153 million (2014: $183 million), Man does not expect to pay federal tax on any taxable profits it may earn in the US for a number of years. Accordingly, any movements in this US tax asset are classified as an adjusting item in Note 2.

11. Earnings per ordinary share (EPS)

The calculation of basic EPS is based on post-tax profit of $171 million compared to a profit of $365 million in the prior year, and ordinary shares of 1,694,081,544 (2014: 1,754,177,715), being the weighted average number of ordinary shares on issue during the period after excluding the shares owned by the Man Employee Trusts. For diluted EPS, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares, being ordinary shares of 1,714,925,166 (2014: 1,778,702,369).

The details of movements in the number of shares used in the basic and dilutive EPS calculation are provided below.

	Year ended 31 December 2015		Year ended 31 December 2014
	Total number (million)	Weighted average (million)	Total number (million)	Weighted average (million)
Number of shares at beginning of year	1,756.3	1,756.3	1,823.7	1,823.7
Issues of shares	3.5	1.9	1.4	1.1
Repurchase of own shares	(59.0)	(42.0)	(68.8)	(45.9)
Number of shares at period end	1,700.8	1,716.2	1,756.3	1,778.9
Shares owned by Employee Trusts	(22.1)	(22.1)	(21.1)	(24.8)
Basic number of shares	1,678.7	1,694.1	1,735.2	1,754.1
Share awards under incentive schemes		17.1		21.2
Employee share options		3.7		3.4
Diluted number of shares		1,714.9		1,778.7

The reconciliation from EPS to adjusted EPS is given below:

	Year ended 31 December 2015			Year ended 31 December 2014
	Basic and diluted post-tax earnings $m	Basic earnings per share cents	Diluted earnings per share cents	Basic and diluted post-tax earnings $m	Basic earnings per share cents	Diluted earnings per share cents
Earnings per share	171	10.1	10.0	365	20.8	20.5
Items for which EPS has been adjusted (Note 2)	216	12.7	12.6	97	5.5	5.4
Tax adjusting items (Note 2)	(26)	(1.5)	(1.5)	(27)	(1.5)	(1.5)
Adjusted earnings per share	361	21.3	21.1	435	24.8	24.4
Adjusted net performance fee profit before tax	(206)	(12.1)	(12.1)	(283)	(16.2)	(15.9)
Tax on adjusted net performance fee profits	20	1.2	1.2	27	1.7	1.6
Adjusted management fee earnings per share	175	10.4	10.2	179	10.3	10.1

12. Dividends

$m	Year ended 31 December 2015	Year ended 31 December 2014
Ordinary shares
Final dividend paid for the year to 31 December 2014 - 6.1 cents (2013: 5.3 cents)	104	95
Interim dividend paid for the six months to 30 June 2015 - 5.4 cents (2014: 4.0 cents)	89	68
Dividends paid during the year	193	163
Proposed final dividend for the year to 31 December 2015 - 4.8 cents (2014: 6.1 cents)	81	106

Dividend distribution to the Company's shareholders is recognised directly in equity in Man's financial statements in the period in which the dividend is paid or, if required, approved by the Company's shareholders.

13. Goodwill and acquired intangibles

$m	Year ended 31 December 2015			Year ended 31 December 2014
$m	Goodwill	IMCs and other acquired intangibles¹	Total	Goodwill	IMCs and other acquired intangibles¹	Total
Cost:
At beginning of the year	2,359	924	3,283	2,231	726	2,957
Acquisition of business²	22	36	58	137	198	335
Currency translation	(10)	-	(10)	(8)	-	(8)
Other adjustment³	-	-	-	(1)	-	(1)
At year end	2,371	960	3,331	2,359	924	3,283
Amortisation and impairment:
At beginning of the year	(1,423)	(278)	(1,701)	(1,423)	(206)	(1,629)
Amortisation	-	(92)	(92)	-	(72)	(72)
Impairment⁴	(41)	-	(41)	-	-	-
At year end	(1,464)	(370)	(1,834)	(1,423)	(278)	(1,701)
Net book value at year end	907	590	1,497	936	646	1,582
Allocated to cash generating units as follows:
AHL	454	-	454	461	-	461
GLG	222	392	614	201	431	632
FRM	97	37	134	140	36	176
Numeric	134	161	295	134	179	313

Notes:

1 Includes investment management contracts (IMCs), brand names and distribution channels.

2 Acquisition of business relates to Silvermine, NewSmith and the BAML fund of funds business for the year ended 31 December 2015, and to Numeric and Pine Grove in 2014.

3 The 2014 other adjustment of $1 million relates to the disposal of goodwill as a result of the sale of a subsidiary to local management during the year.

4 The 2015 impairment of $41 million relates to FRM.

Goodwill

Goodwill represents the excess of the consideration transferred over the fair value of the identifiable net assets of the acquired business at the date of acquisition.

Goodwill is carried on the Group balance sheet at cost less accumulated impairment. Goodwill has an indefinite useful life, is not subject to amortisation and is tested for impairment annually, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying value exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

Investment management contracts, distribution channels and brand names

Investment management contracts (IMCs), distribution channels and brand names are recognised at the present value of the expected future cash flows and are amortised on a straight-line basis over the expected useful lives, which are between three and 13 years.

Allocation of goodwill to cash generating units

For statutory accounting impairment review purposes, the Group has identified four cash generating units (CGUs): AHL, GLG, FRM and Numeric. Silvermine Capital Management LLC (Silvermine) and NewSmith LLP (NewSmith) were acquired during the year, and have been incorporated into the GLG CGU. The BAML fund of funds IMCs purchased during the year have been allocated to the FRM CGU. Further details of these are provided below.

Calculation of recoverable amounts for cash generating units

The recoverable amounts of the Group's CGUs are assessed each year using a value in use calculation. The value in use calculation gives a higher valuation compared to a fair value less cost to sell approach, as this would exclude some of the revenue synergies available to Man through its ability to distribute products using its well established distribution channels, which may not be fully available to other market participants.

The value in use calculations at 31 December 2015 use cash flow projections based on the Board approved financial plan for the year to 31 December 2016 and a further two years of projections (2017 and 2018) plus a terminal value. The valuation analysis is based on best practice guidance whereby a terminal value is calculated at the end of a short discrete budget period and assumes, after this three year budget period, no growth in asset flows above the long-term growth rate. In order to determine the value in use of each CGU, it is necessary to notionally allocate the majority of the Group's cost base, relating to operations, product structuring, distribution and support functions, which are managed on a centralised basis.

The key assumptions used in the value in use calculations are represented by the compound average annualised growth in FUM over the three year budget period and the discount rates and terminal value multiples applied to the modelled cash flows. The assumptions are derived from past experience and consideration of current market inputs. The value in use calculations are sensitive to small changes in the key assumptions, in particular in relation to the compound average annualised growth in FUM over the three year forecast period. Sensitivity analysis of this assumption is given in each of the AHL, GLG, FRM and Numeric sections below. The terminal value is calculated based on the projected closing FUM at 31 December 2018 and applying a mid-point of a range of historical multiples to the forecast cash flows associated with management and performance fees. A bifurcated discount rate has been applied to the modelled cash flows to reflect the different risk profile of net management fee income and net performance fee income. The discount rates are based on the Group's weighted average cost of capital using a risk free interest rate, together with an equity risk premium and an appropriate beta derived from consideration of Man's beta, similar alternative asset managers', and the asset management sector as a whole.

The Numeric CGU value in use calculation, presented for the first time in the year ended 31 December 2015, has been determined on a pre-tax basis. We consider that this is the most appropriate basis for Numeric given the complexity involved in determining the value of Numeric's future tax obligations, given we do not expect to pay federal tax in the US for a number of years (Note 10). The value in use calculations for AHL, FRM and GLG continue to be presented on a post-tax basis, consistent with the year ended 31 December 2014.

The recoverable amount of each CGU has been assessed at 31 December 2015. The key assumptions applied to the value in use calculations for each of the CGUs are shown in the table below, and the results of the valuations are further explained in the following sections.

	AHL	GLG	FRM	Numeric
Compound average annualised growth in FUM (over three years)	18%	6%	8%	13%
Discount rate¹
- Net management fees	11%²	11%²	11%²	13%
- Net performance fees	17%³	17%³	17%³	20%
Terminal value (mid-point of range of historical multiples)^1,4
- Management fees	13.0x	13.0x	12.0x	12.0x
- Performance fees	5.5x	5.5x	5.0x	4.8x

Notes:

1 These are presented on a post-tax basis for the AHL, GLG and FRM CGUs, and on a pre-tax basis for the Numeric CGU, in line with the value in use calculations.

2 The pre-tax equivalent of the net management fees discount rates is 13% for each of the AHL, GLG and FRM CGUs.

3 The pre-tax equivalent of the net performance fees discount rates is 20% for each of the AHL, GLG and FRM CGUs.

4 The implied terminal growth rates for the AHL, GLG, FRM and Numeric CGUs are 1%, 2%, 2% and 4%, respectively.

AHL cash generating unit

The AHL value in use calculation at 31 December 2015 indicates a value of $3.7 billion, with around $3.2 billion of headroom over the carrying value of the AHL business. Therefore, no impairment charge is deemed necessary at 31 December 2015 (2014: nil). The valuation at 31 December 2015 is around $0.7 billion higher than the value in use calculation at 31 December 2014, primarily as a result of increased opening FUM as a result of lower than forecast redemptions and higher performance fees on this FUM base, partially offset by a decrease in alternatives margins as a result of the continued mix shift towards lower margin alternatives products.

The table below shows scenarios whereby the key assumptions are changed to stressed assumptions, indicating the modelled headroom or impairment that would result. Each assumption, or set of assumptions, is stressed in isolation. The results of these sensitivities make no allowance for actions that management would take if such market conditions persisted. 

			Discount rates (post-tax)		Multiples (post-tax)
	Compound average annualised growth in FUM¹		Management fee/ Performance fee		Management fee/ Performance fee
Stressed to:	22%	-3%	10%/16%	12%/18%	14.0x/6.5x	12.0x/4.5x
Modelled headroom/(impairment) ($m)	4,289	(1)	3,338²	3,188²	3,620³	2,904³

Notes:

1 The compound average annualised growth in FUM has been stressed in a downside scenario to determine the point at which impairment would arise.

2 An increase/decrease of $75 million.

3 An increase/decrease of $358 million.

GLG cash generating unit

The GLG value in use calculation at 31 December 2015 indicates a value of $900 million, with around $270 million of headroom over the carrying value of the GLG business. Therefore, no impairment charge is deemed necessary at 31 December 2015 (2014: nil). The valuation at 31 December 2015 is around $100 million higher than the value in use calculation at 31 December 2014, primarily due to a change in FUM mix, with higher opening alternatives FUM as a result of higher sales than previously forecast, which attracts a higher margin, and lower opening long only FUM as a result of higher redemptions than expected.

				Discount rates (post-tax)		Multiples (post-tax)
	Compound average annualised growth in FUM¹			Management fee/ Performance fee		Management fee/ Performance fee
Stressed to:	8%	4%	0%	10%/16%	12%/18%	14.0x/6.5x	12.0x/4.5x
Modelled headroom/(impairment) ($m)	495	(1)	(359)	288²	250²	345³	193³

Notes:

1 The compound average annualised growth in FUM has been stressed in a downside scenario to determine both the point at which impairment would arise and 0%.

2 An increase/decrease of $19 million.

3 An increase/decrease of $76 million.

FRM cash generating unit

For the six months to 30 June 2015 an impairment of $41 million was recognised in relation to the FRM goodwill, largely as a result of lower sales and higher redemptions of fund of funds products than anticipated.

The FRM value in use calculation at 31 December 2015 indicates a value of $200 million, with around $50 million of headroom over the carrying value of the FRM business. Therefore, no further impairment charge is deemed necessary at 31 December 2015. The valuation at 31 December 2015 is higher than the value in use calculation at 30 June 2015, primarily as a result of an increase in FUM due to higher sales than previously forecast, as well as an increase in management fee margins on new sales.

The table overleaf shows scenarios whereby the key assumptions are changed to stressed assumptions, indicating the modelled headroom or impairment that would result. Each assumption, or set of assumptions, is stressed in isolation. The results of these sensitivities make no allowance for actions that management would take if such market conditions persisted.

				Discount rates (post-tax)		Multiples (post-tax)
	Compound average annualised growth in FUM¹			Management fee/ Performance fee		Management fee/ Performance fee
Stressed to:	10%	6%	0%	10%/16%	12%/18%	13.0x/6.0x	11.0x/4.0x
Modelled headroom/(impairment) ($m)	122	(1)	(135)	59²	49²	70³	38³

Notes:

1 The compound average annualised growth in FUM has been stressed in a downside scenario to determine both the point at which impairment would arise and 0%.

2 An increase/decrease of $5 million.

3 An increase/decrease of $16 million.

For the year ended 31 December 2014 there was no impairment charge.

Numeric cash generating unit

The Numeric value in use calculation at 31 December 2015 indicates a value of $330 million, with around $30 million of headroom over the carrying value of the Numeric business. Therefore, no impairment charge is deemed necessary at 31 December 2015 (2014: nil).

				Discount rates (pre-tax)		Multiples (pre-tax)
	Compound average annualised growth in FUM¹			Management fee/ Performance fee		Management fee/ Performance fee
Stressed to:	15%	11%	0%	12%/19%	14%/21%	13.0x/5.8x	11.0x/3.8x
Modelled headroom/(impairment) ($m)	70	(1)	(160)	41²	27²	58³	10³

Notes:

1 The compound average annualised growth in FUM has been stressed in a downside scenario to determine both the point at which impairment would arise and 0%.

2 An increase/decrease of $7 million.

3 An increase/decrease of $24 million.

Acquisition of Silvermine

On 20 January 2015, Man acquired the entire issued share capital of Silvermine, a Connecticut-based leveraged loan manager with $3.8 billion of funds under management at the date of acquisition across nine active collateralised loan obligation ("CLO") structures. The consideration to Silvermine owners is comprised of $26 million in cash up-front, including $3 million for acquired working capital, and two deferred amounts, payable following the first (up to $17 million) and fifth (up to $30 million) anniversaries of closing, based on run rate management fees at the time (valued at $15 million). The deferred consideration payable is equivalent to an earn-out and deemed to be a financial liability measured initially at fair value, with any subsequent fair value movements recognised through the Group income statement.

Values for the acquired business at the date of acquisition are set out below.

$m	Book value	Fair value adjustments	Provisional value
Fees and other receivables	4	-	4
Intangible assets	-	17	17
Trade and other payables	(1)	-	(1)
Net assets acquired	3	17	20
Goodwill on acquisition			21
Net assets acquired including goodwill			41

Purchase consideration:
Cash consideration			26
Contingent consideration			15
Total consideration			41

The fair value adjustments relate to the recognition of investment management contracts of $16 million and brand of $1 million. These intangible assets are recognised at the present value of the expected future cash flows generated from the assets and are amortised on a straight-line basis over their expected lives of five and ten years respectively. Goodwill primarily represents the increased footprint in the US and a presence within the CLO market, as well as Silvermine's skilled workforce.

Acquisition costs incurred as a result of the Silvermine transaction have been expensed and do not form part of goodwill, and are classified as an adjusting item (Note 2).

The pre-tax profit for the Silvermine business since acquisition date is $8.7 million. If Silvermine had been acquired at the beginning of the financial year, the pre-tax profit for Silvermine would have been $9.2 million. Silvermine revenue for the period since the acquisition date is $16.6 million, and if the acquisition had taken place at the beginning of the financial year, the revenue would have been $17.5 million.

Acquisition of NewSmith

On 24 April 2015, Man acquired the investment management business of NewSmith, an equity investment manager with $1.2 billion of funds under management at the date of acquisition.

Provisional values for the acquired business at the date of acquisition are set out below.

$m	Book value	Fair value adjustments	Provisional value
Cash and cash equivalents	1	-	1
Fees and other receivables	3	-	3
Intangible assets	-	12	12
Trade and other payables	(1)	-	(1)
Net assets acquired	3	12	15
Goodwill on acquisition			-
Net assets acquired including goodwill			15

Purchase consideration:
Cash consideration			10
Contingent consideration			5
Total consideration			15

The fair value adjustments relate to the recognition of investment management contracts of $12 million. These intangible assets are recognised at the present value of the expected future cash flows generated from the assets and are amortised on a straight-line basis over their expected life of four years.

Acquisition costs incurred as a result of the NewSmith transaction have been expensed and do not form part of goodwill, and are classified as an adjusting item (Note 2).

The pre-tax profit for the NewSmith business since acquisition date is $5 million, which includes management fee revenues of $6 million and performance fees of $4 million.

BAML fund of funds acquisition

In April and May 2015 Man made an asset purchase for the BAML fund of fund investment management contracts valued at $7 million. These are recognised at the present value of the expected future cash flows generated from the assets and are amortised on a straight-line basis over their expected life of three years.

14. Other intangibles

$m	Year ended 31 December 2015			Year ended 31 December 2014
$m	Placement fees	Capitalised computer software	Total	Placement fees	Capitalised computer software	Total
Cost:
At beginning of the year	66	58	124	74	69	143
Additions	1	6	7	-	9	9
Reclassifications¹	-	(4)	(4)	-	-	-
Redemptions/disposals	(4)	(4)	(8)	(8)	(20)	(28)
At year end	63	56	119	66	58	124
Aggregate amortisation and impairment:
At beginning of the year	(61)	(50)	(111)	(54)	(63)	(117)
Redemptions/disposals	3	4	7	6	16	22
Reclassifications¹	-	4	4	-	-	-
Amortisation	(2)	(3)	(5)	(13)	(3)	(16)
At year end	(60)	(45)	(105)	(61)	(50)	(111)
Net book value at year end	3	11	14	5	8	13

Note:

1 Relate to reclassifications of nil net book value assets from capitalised computer software to computer hardware (Note 21).

Placement fees

Placement fees are paid to distributors for fund product launches or sales. The majority of placement fees paid up-front are capitalised as intangible assets which represent the contractual right to benefit from future income from providing investment management services. The amortisation period is based on management's estimate of the weighted average period over which Man expects to earn economic benefits from the investor in each product, estimated to be five years on a straight-line basis. The placement fee intangible is assessed for impairment annually. Amortisation expense, including any accelerated charges arising from redemptions, is included in distribution costs in the Group income statement.

Capitalised computer software

Costs that are directly associated with the procurement or development of identifiable and unique software products, which will generate economic benefits exceeding costs beyond one year, are recognised as capitalised computer software. Capitalised computer software is amortised on a straight-line basis over its estimated useful life (three years) and is subject to regular impairment reviews. Amortisation of capitalised computer software is included in Other costs in the Group income statement.

15. Cash, liquidity and borrowings

Liquidity and borrowings

Total liquidity resources aggregate to $1,586 million at 31 December 2015 (2014: $2,263 million) and comprise cash and cash equivalents of $586 million (2014: $738 million), excluding $21 million of cash held relating to consolidated fund entities (Note 16), and the undrawn committed revolving credit facility of $1,000 million (2014: $1,525 million). Cash and cash equivalents at year end comprises $250 million (2014: $291 million) of cash at bank on hand, and $336 million (2014: $447 million) in short-term deposits, net of overdrafts of nil (2014: nil). Cash ring-fenced for regulated entities totalled $35 million (2014: $24 million).

Liquidity resources support ongoing operations and potential liquidity requirements under stressed scenarios. The amount of potential liquidity requirements is modelled based on scenarios that assume stressed market and economic conditions. With the exception of committed purchase arrangements, the funding requirements for Man relating to the investment management process are discretionary. The liquidity profile of Man is monitored on a daily basis and the stressed scenarios are updated regularly. The Board reviews Man's funding resources at each Board meeting and on an annual basis as part of the strategic planning process. Man's available liquidity is considered sufficient to cover current requirements and potential requirements under stressed scenarios.

Cash is invested in accordance with strict limits consistent with the Board's risk appetite, which consider both the security and availability of liquidity. Accordingly, cash is held in short-term bank deposits and on-demand deposit bank accounts. At 31 December 2015 the $586 million cash balance (excluding cash held by consolidated fund entities) is held with 22 banks (2014: $738 million with 22 banks). The single largest counterparty bank exposure of $100 million is held with an A+ rated bank (2014: $100 million with an AA- rated bank). At 31 December 2015, balances with banks in the AA ratings band aggregate to $239 million (2014: $284 million) and balances with banks in the A ratings band aggregate to $293 million (2014: $453 million).

In September 2014 Man issued $150 million ten year fixed rate reset callable guaranteed subordinated notes (Tier 2 notes), with associated issuance costs of $1 million. The Tier 2 notes were issued with a fixed coupon of 5.875% until 15 September 2019. The notes may be redeemed in whole at Man's option on 16 September 2019 at their principal amount, subject to FCA approval. If the notes are not redeemed at this time then the coupon will reset to the five year mid-swap rate plus 4.076% and the notes will be redeemed on 16 September 2024 at their principal amount.

$m	31 December 2015
$m	Total	Less than 1 year	2 years	3 years	Greater than 3 years
Borrowings: 2024 fixed rate reset callable guaranteed subordinated notes	149	-	-	-	149

Cash and cash equivalents¹	586	586	-	-	-
Undrawn committed revolving credit facility	1,000	-	-	-	1,000
Total liquidity	1,586	586	-	-	1,000

$m	31 December 2014
$m	Total	Less than 1 year	2 years	3 years	Greater than 3 years
Borrowings: 2024 fixed rate reset callable guaranteed subordinated notes	149	-	-	-	149

Cash and cash equivalents	738	738	-	-	-
Undrawn committed revolving credit facility	1,525	-	70	120	1,335
Total liquidity	2,263	738	70	120	1,335

Note:

1 Excludes $21 million of restricted cash held by consolidated fund entities (Note 16).

Borrowings are initially recorded at fair value net of transaction costs incurred, and are subsequently measured at amortised cost. The difference between the amount repayable at maturity on the borrowings and the carrying value is amortised over the period up to the expected maturity of the associated debt in accordance with the effective interest rate method. At 31 December 2015, the fair value of borrowings is $157 million (2014: $154 million).

The committed revolving credit facility of $1,525 million was refinanced during 2015 and replaced with a new committed syndicated revolving loan facility of $1,000 million which was undrawn at 31 December 2015. The new facility was put in place as a five year facility and includes the option for Man to request the banks to extend the maturity date by one year on each of the first and second anniversaries. The participant banks have the option to accept or decline Man's request. The facility is currently scheduled to mature in June 2020. To maintain maximum flexibility, the revolving credit facility does not include financial covenants.

Foreign exchange and interest rate risk

Man is subject to risk from changes in interest rates and foreign exchange rates on monetary assets and liabilities. A 10% strengthening/weakening of the USD against all other currencies, with all other variables held constant, would have resulted in a foreign exchange loss/gain of $2 million (2014: $6 million loss/gain), with a corresponding impact on equity. This exposure is based on USD balances held by non-USD functional currency entities and non-USD balances held by USD functional currency entities within the Group. In respect of Man's monetary assets and liabilities which earn/incur interest indexed to floating rates, as at 31 December 2015 a 50bp increase/decrease in interest rates, with all other variables held constant, would have resulted in a $2 million increase or a $1 million decrease (2014: $2 million increase or $1 million decrease) in net interest income.

In limited circumstances, the Group uses derivative financial instruments to hedge its risk associated with foreign exchange movements. Where fixed foreign currency denominated costs are hedged, the associated derivatives may be designated as cash flow hedges. Effective unrealised gains or losses on these instruments are recognised within the cash flow hedge reserve in equity and, when realised, these are reclassified to the Group income statement in the same line as the hedged item. The realisation of foreign currency operating cash flows and the associated forward foreign currency derivative contracts generally arise on a monthly basis. The fair value of derivatives held in relation to the Group's cash flow hedges at 31 December 2015 is $7 million (2014: $15 million). The Group also hedges its exposure to net investments in foreign operations through forward foreign exchange contracts where appropriate, with any effective gains or losses recognised in other comprehensive income and accumulated in the cumulative translation adjustment reserve within equity. The fair value of derivatives held in relation to the Group's net investment hedges at 31 December 2015 is nil (2014: $3 million). Any ineffective portion of these hedges is recognised immediately in profit or loss, and is included within the income or gains on investments and other financial instruments.

16. Investments in fund products and other investments

$m	31 December 2015
$m	Financial assets at fair value through profit or loss	Available-for-sale financial assets	Loans and receivables	Total investments in fund products and other investments	Net non-current assets held for sale	Total investments
Investments in fund products and other investments comprise:
Loans to fund products	-	-	41	41	-	41
Other investments in fund products	224	-	-	224	119	343
Other investments	-	4	-	4	-	4
Investments in funds relating to line-by-line consolidated funds	329	-	-	329	-	329
	553	4	41	598	119	717

$m	31 December 2014
$m	Financial assets at fair value through profit or loss	Available- for-sale financial assets	Loans and receivables	Total investments in fund products and other investments	Net non- current assets held for sale	Total investments
Investments in fund products and other investments comprise:
Loans to fund products	-	-	94	94	-	94
Other investments in fund products	207	2	-	209	153	362
Other investments	-	4	-	4	-	4
	207	6	94	307	153	460

Man's seeding investments are included in various Group balance sheet line items. In summary, the total seeding investments portfolio is made up as follows:

$m	Note	31 December 2015	31 December 2014
Loans to funds	16.1	41	94
Other investments in fund products	16.2	224	209
Less those used to hedge deferred compensation awards	16.2	(71)	(68)
Consolidated investments in funds - held for sale	16.3	119	153
Consolidated investments in funds - line-by-line consolidation	16.3	213	-
Seeding investments portfolio		526	388

16.1. Loans to fund products

Loans to fund products are short-term advances primarily to Man guaranteed products, which are made to assist with the financing of the leverage associated with the structured products. The loans are repayable on demand and are carried at amortised cost using the effective interest rate method. The average balance during the year is $75 million (2014: $80 million). Loans to fund products have decreased compared to the prior year as guaranteed product FUM has decreased together with the associated leveraging. The liquidity requirements of guaranteed products together with commitments to provide financial support which give rise to loans to funds are subject to our routine liquidity stress testing and any liquidity requirements are met by available cash resources, or the committed revolving credit facility.

Loans to fund products expose Man to credit risk and therefore the credit decision making process is subject to limits consistent with the Board's risk appetite. The carrying value represents Man's maximum exposure to this credit risk. Loans are closely monitored against the assets held in the funds. The largest single loan to a fund product at 31 December 2015 is $7 million (2014: $14 million). Fund entities are not externally rated, but our internal modelling indicates that fund products have a probability of default that is equivalent to a credit rating of A.

16.2. Other investments in fund products

Man uses capital to invest in our fund products as part of our ongoing business to build our product breadth and to trial investment research developments before we market the products to investors. These seeding investments are generally held for less than one year. Where Man is deemed not to control the fund, these are classified as other investments in fund products. Other investments in fund products are classified primarily at fair value through profit or loss, with movements in fair value being recognised through income or gains on investments and other financial instruments. Purchases and sales of investments are recognised on trade date.

Other investments in fund products are not actively traded and the valuation at the fund level cannot be determined by reference to other available prices. The fair values of investments in fund products are derived from the reported NAVs of each of the fund products, which in turn are based upon the value of the underlying assets held within each of the fund products and the anticipated redemption horizon of the fund product. The valuation of the underlying assets within each fund product is determined by external valuation service providers based on an agreed valuation policy and methodology. Whilst these valuations are performed independently of Man, Man has established oversight procedures and due diligence processes to ensure that the NAVs reported by the external valuation service providers are reliable and appropriate. Man makes adjustments to these NAVs where the anticipated redemption horizon or events or circumstances indicate that the NAVs are not reflective of fair value. The fair value hierarchy of financial assets is disclosed in Note 24.

Investments in fund products expose Man to market risk and therefore this process is subject to limits consistent with the Board's risk appetite. The largest single investment in fund products is $170 million (2014: $51 million). The market risk from seeding investments is modelled using a value at risk methodology using a 95% confidence interval and one year time horizon. The value at risk is estimated to be $55 million at 31 December 2015 (2014: $26 million).

Fund investment for deferred compensation arrangements

At 31 December 2015 investments in fund products included $71 million (2014: $68 million) of fund products related to deferred compensation arrangements. Employees are subject to mandatory deferral arrangements and as part of these arrangements employees can elect to have their deferral in a designated series of Man fund products. The changes in the fair value of the fund product awards are recognised over the relevant vesting period, which means the compensation expense changes based on the value of the designated fund products. The fund product investments are held to offset this change in compensation during the vesting period and at vesting the value of the fund investment is delivered to the employee. The fund product investments are recorded at fair value with any gains or losses during the vesting period recognised as income or gains on investments and other financial instruments in the Group income statement.

16.3. Consolidation of investments in funds

Seed capital invested into funds may at times be significant, and therefore the fund may be deemed to be controlled by the Group (Note 1). The fund is consolidated into the Group's results from the date control commences until it ceases. The Group's seeding investment portfolio has grown during 2015. In 2015 nine (2014: five) investments in funds have met the control criteria and therefore been consolidated, either classified as held for sale or consolidated on a line-by-line basis as detailed below.

Held for sale

Where the Group acquired the controlling stake exclusively with a view to subsequent disposal through sale or dilution and it is considered highly probable that it will relinquish control within a year, the investment in the controlled fund is classified as held for sale. The seeded fund is recognised in the Group balance sheet as non-current assets and liabilities held for sale, with the interests of any other parties included within non-current liabilities held for sale. Amounts recognised are measured at the lower of the carrying amount and fair value less costs to sell.

The non-current assets and liabilities held for sale are as follows:

$m	31 December 2015	31 December 2014
Non-current assets held for sale	188	186
Non-current liabilities held for sale	(69)	(33)
Investments in fund products held for sale	119	153

Investments cease to be classified as held for sale when the fund is no longer controlled by the Group, at which time they are classified as financial assets at fair value through profit or loss (Note 16.2). Loss of control may eventuate through sale of the investment or a dilution in the Group's holding. If a held for sale fund remains under the control of the Group for more than one year, and it is unlikely that the Group will reduce or no longer control its investment in the short-term, it will cease to be classified as held for sale and will be consolidated on a line-by-line basis as below. Two investments in funds which were classified as held for sale in 2014 have been consolidated on a line-by-line basis for the year ending 31 December 2015. We expect these seed investments will be sold in the short-term.

Management fee income earned from fund entities classified as held for sale was $1 million for the year ended 31 December 2015 (2014: $1 million).

Line-by-line consolidation

The investments relating to the three funds (2014: nil) which are controlled and are consolidated on a line-by-line basis are included within the Group balance sheet and income statement as follows:

$m	31 December 2015
Balance Sheet
Cash and cash equivalents	21
Transferrable securities¹	329
Accounts payable	(1)
Net assets of line-by-line consolidated fund entities	349
Third party interest in consolidated funds	(136)
Net investment held by Man	213

Income statement
Net losses on investments²	(16)
Management fee expenses³	(4)
Net losses of line-by-line consolidated fund entities	(20)
Third party share of losses relating to interests in consolidated funds	9
Losses attributable to net investment held by Man	(11)

Notes:

1 Included within Investments in fund products and other investments.

2 Included within Income or gains on investments and other financial instruments.

3 Relates to management fees paid by the funds to Man during the year, and is eliminated within gross management and other fees in the Group income statement.

17. Fee and other receivables

$m	31 December 2015	31 December 2014
Fee receivables	63	134
Prepayments and accrued income	171	204
Derivative financial instruments	2	3
Other receivables	67	55
	303	396

Fee and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method. Fee receivables and accrued income represent management and performance fees from fund products and are received in cash when the funds' net asset values are determined. All fees are deducted from the NAV of the respective funds by the independent administrators and therefore the credit risk of fee receivables is minimal. No balances are overdue or delinquent at year end. At 31 December 2015, $12 million (2014: $8 million) of other receivables are expected to be settled after 12 months.

For the Open Ended Investment Collective (OEIC) funds businesses, Man acts as the intermediary for the collection of subscriptions due from customers and payable to the funds, and for redemptions receivable from funds and payable to customers. At 31 December 2015 the amount included in other receivables is $26 million (2014: $19 million). The unsettled fund payable is recorded in trade and other payables.

Details of derivatives used to hedge foreign exchange risk are included in Note 15. Other derivative financial instruments, which consist primarily of foreign exchange contracts, are measured at fair value through profit or loss.

The notional value of all derivative financial assets is $134 million (2014: $280 million). All derivatives are held with external banks with ratings of A or higher and mature within one year. During the year, there were $12 million net realised and unrealised gains arising from derivatives (2014: $3 million net losses). Derivatives are classified as Level 2 under Man's fair value hierarchy (Note 24).

18. Trade and other payables

$m	31 December 2015	31 December 2014
Accruals	322	289
Trade payables	32	35
Deferred consideration	206	150
Derivative financial instruments	8	15
Other payables	92	92
	660	581

Accruals primarily relate to compensation accruals. Trade payables include payables relating to the OEIC funds business of $25 million at 31 December 2015 (2014: $20 million). Deferred consideration relates to the amounts payable in respect of acquisitions (Note 24). Other payables include servicing fees payable to distributors and redemption proceeds due to investors.

Payables are initially recorded at fair value and subsequently measured at amortised cost. Included in trade and other payables at 31 December 2015 are balances of $178 million (2014: $109 million) that are expected to be settled after more than 12 months, which relate to deferred consideration. Man's policy is to meet its contractual commitments and pay suppliers according to agreed terms.

Details of derivatives used to hedge foreign exchange risk are included in Note 15. Derivative financial instruments, which consist primarily of foreign exchange contracts, are measured at fair value through profit or loss.

The notional value of derivative financial liabilities at 31 December 2015 is $331 million (2014: $358 million). All derivative contracts mature within one year.

19. Provisions

$m	Onerous property lease contracts	Litigation	Restructuring	Total
As 1 January 2015	34	24	7	65
Charged/(credited) to the income statement:
Charge in the year	7	-	-	7
Unwinding of discount	1	-	-	1
Exchange differences	(2)	-	-	(2)
Used during the year/settlements	(8)	-	(5)	(13)
At 31 December 2015	32	24	2	58

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The $7 million charge for onerous property lease contracts relates to an increase in the Riverbank House onerous property lease provision as a result of a contractual market-linked rental increase (Note 2). Provisions for onerous property lease contracts represent the present value of the future lease payments that the Group is presently obliged to make under non-cancellable onerous operating lease contracts, less the future benefit expected to be generated from these, including sub-lease revenue where applicable. The unexpired terms of the onerous leases range from one to 20 years.

Provisions for restructuring are recognised when the obligation arises, following communication of the formal plan.

20. Investments in associates

Associates are entities in which Man holds an interest and over which it has significant influence but not control, and are accounted for using the equity method. In assessing significant influence Man considers the investment held and its power to participate in the financial and operating policy decisions of the investee through its voting or other rights.

Under the equity method associates are carried at cost plus (or minus) our share of cumulative post-acquisition movements in undistributed profits (or losses). Gains and losses on transactions between the Group and its associates are eliminated to the extent of the Group's interests in these entities. An impairment assessment of the carrying value of associates is performed annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, and any impairment is expensed in the Group income statement.

Man's investments in associates are as follows:

$m	Year ended 31 December 2015			Year ended 31 December 2014
$m	Nephila Capital Ltd	OFI MGA	Total	Nephila Capital Ltd	OFI MGA	Total
% ownership	18.75%¹	20%		18.75%¹	20%
At beginning of the year	28	2	30	28	3	31
Share of post-tax profit	3	-	3	9	-	9
Dividends received	(3)	-	(3)	(9)	(1)	(10)
At year end	28	2	30	28	2	30

Note:

1 18.75% represents Man's ownership of class B common shares. Man's participation in the profits of Nephila is governed by the share class rights and therefore does not relate proportionately to the ownership interest held. Man considers that this equity interest, Man's ability to veto Nephila's annual business plan, and the presence of a Man member on the Nephila board of directors provides Man with the power to participate in the financial and operating policy decisions, and equates to significant influence.

Nephila Capital Limited is an alternative investment manager based in Bermuda specialising in the management of funds which underwrite natural catastrophe reinsurance and invest in insurance-linked securities and weather derivatives, and OFI MGA is a French asset manager. Both Nephila Capital Limited and OFI MGA have a 31 December year end. Man has not provided any financial support to associates during the year to 31 December 2015 (2014: nil).

Commission income relating to sales of Nephila Capital Limited products totalled $14 million for the year ended 31 December 2015 (2014: $15 million), and is included within gross management and other fees in the Group income statement.

21. Leasehold improvements and equipment

$m	Year ended 31 December 2015			Year ended 31 December 2014
$m	Leasehold improvements	Equipment	Total	Leasehold improvements	Equipment	Total
Cost
At beginning of the year	114	103	217	119	114	233
Acquisition of business	-	-	-	2	-	2
Additions	2	5	7	1	2	3
Disposals	(2)	(6)	(8)	(8)	(13)	(21)
Reclassifications¹	-	4	4	-	-	-
At year end	114	106	220	114	103	217
Accumulated depreciation:
At beginning of the year	(76)	(89)	(165)	(78)	(87)	(165)
Charge for year	(7)	(6)	(13)	(6)	(15)	(21)
Accelerated depreciation	-	-	-	-	-	-
Disposals	1	5	6	8	13	21
Reclassifications¹	-	(4)	(4)	-	-	-
At year end	(82)	(94)	(176)	(76)	(89)	(165)
Net book value at year end	32	12	44	38	14	52

Note:

1 Relate to reclassifications of nil net book value assets from capitalised computer software (Note 14) to computer hardware.

All leasehold improvements and equipment are shown at cost less depreciation and impairment. Cost includes the original purchase price of the asset and costs directly attributable to bringing the asset to its working condition for its intended use. Depreciation is calculated using the straight-line method over the asset's estimated useful life, which for leasehold improvements is over the shorter of the life of the lease and the improvement and for equipment is between three and ten years.

22. Deferred compensation arrangements

Man operates cash and equity-settled share-based payment schemes as well as fund product based compensation arrangements.

During the year, $53 million (2014: $42 million) is included within compensation costs relating to share-based payment and deferred fund product plans, consisting of equity-settled share-based payments of $18 million (2014: $11 million), cash-settled share-based payments totalling nil (2014: $1 million), and deferred fund product plans of $35 million (2014: $30 million).

23. Capital management

Investor confidence is an important element in the sustainability of our business. That confidence comes, in part, from the strength of our capital base. Man has maintained significant surplus capital and available liquidity throughout the recent periods of market volatility. This capital has given Man flexibility to support our investors, intermediaries and financial partners and to allow them to make informed decisions regarding their investment exposures. This confidence gives our business credibility and sustainability.

We have a conservative capital and liquidity framework which allows us to invest in the growth of our business. We utilise capital to support the operation of the investment management process and the launch of new fund products. We view this as a competitive advantage which allows us to directly align our interests with those of investors and intermediaries.

Man monitors its capital requirements through continuous review of its regulatory and economic capital, including monthly reporting to the Risk and Finance Committee and the Board.

Share capital and capital reserves

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Own shares held through the Employee Trusts are recorded at cost, including any directly attributable incremental costs (net of tax), and are deducted from equity attributable to the Company's equity holders until the shares are transferred to employees or sold. Where such shares are subsequently sold, any consideration received, net of any directly attributable incremental transaction costs and the related tax effects, is included in equity attributable to the Company's equity holders.

Ordinary shares

Ordinary shares have a par value of 3^3/7 US cents per share (2014: 3^3/7 US cents per share) and represent 99.9% of issued share capital. All issued shares are fully paid. The shares have attached to them full voting, dividend and capital distribution (including on wind up) rights. They do not confer any rights of redemption. Ordinary shareholders have the right to receive notice of, attend, vote and speak at general meetings.

A holder of ordinary shares is entitled to one vote per ordinary share held when a vote is taken on a poll and one vote only when a vote is taken on a show of hands.

During the year ended 31 December 2015, $175 million shares were repurchased at an average price of 195.6p, buying back 59.0 million shares (2014: 68.8 million shares), which had an accretive impact on EPS of approximately 2%. $1 million of costs were incurred relating to the repurchase, largely relating to stamp duty. As at 23 February 2016, Man Group had an unexpired authority to repurchase up to 247,247,179 of its ordinary shares. A special resolution will be proposed at the forthcoming Annual General Meeting, pursuant to which the Company will seek authority to repurchase up to 254,951,571 of its ordinary shares, representing 14.99% of the issued share capital at 23 February 2016.

Deferred sterling shares

50,000 unlisted deferred sterling shares, representing 0.1% of the Company's issued share capital with a par value of £1 per share, were issued due to the redenomination of the ordinary share capital into USD. These shares are necessary for the Company to continue to comply with Section 763 of the Companies Act 2006. The deferred sterling shares are freely transferable and have no rights to participate in the profits of the Company, to attend, speak or vote at any general meeting and no right to participate in any distribution in a winding up except for a return of the nominal value in certain limited circumstances.

Issued and fully paid share capital

	Year ended 31 December 2015			Year ended 31 December 2014
	Ordinary shares Number	Unlisted deferred Sterling shares Number	Nominal value $m	Ordinary shares Number	Unlisted deferred Sterling shares Number	Nominal value $m
At 1 January	1,756,290,714	50,000	61	1,823,733,081	50,000	63
Issue of ordinary shares:
- Purchase and cancellation of own shares	(58,996,084)	-	(2)	(68,835,247)	-	(2)
- Partnership Plans and Sharesave	3,516,383	-	-	1,392,880	-	-
At 31 December	1,700,811,013	50,000	59	1,756,290,714	50,000	61

Share capital and reserves

$m	Share capital	Share premium account	Capital redemption reserve	Merger reserve	Reorganisation reserve	Total
At 1 January 2015	61	7	2	491	632	1,193
Purchase and cancellation of own shares	(2)	-	2	-	-	-
Share awards/options	-	7	-	-	-	7
At 31 December 2015	59	14	4	491	632	1,200

At 1 January 2014	63	5	-	491	632	1,191
Purchase and cancellation of own shares	(2)	-	2	-	-	-
Share awards/options	-	2	-	-	-	2
At 31 December 2014	61	7	2	491	632	1,193

Revaluation reserves and retained earnings

$m	Available-for-sale reserve	Cash flow hedge reserve¹	Own shares held by Employee Trusts	Cumulative translation adjustment¹	Profit and loss account	Total
At 1 January 2015	3	(16)	(62)	(14)	1,330	1,241
Currency translation difference	-	-	3	(11)	-	(8)
Share-based payments charge for the year	-	-	-	-	15	15
Purchase of own shares by the Employee Trusts	-	-	(30)	-	-	(30)
Disposal of own shares by the Employee Trusts	-	-	27	-	(27)	-
Deferred tax credited on cash flow hedge movements	-	2	-	-	-	2
Fair value losses taken to equity	-	(9)	-	-	-	(9)
Revaluation of defined benefit pension scheme	-	-	-	-	(21)	(21)
Current tax credited to reserves - pension scheme	-	-	-	-	4	4
Deferred tax credited to reserves - pension scheme	-	-	-	-	2	2
Transfer to Group income statement	(1)	18	-	-	-	17
Share repurchases	-	-	-	-	(176)	(176)
Dividends	-	-	-	-	(193)	(193)
Profit for the year	-	-	-	-	171	171
At 31 December 2015	2	(5)	(62)	(25)	1,105	1,015

$m	Available-for-sale reserve	Cash flow hedge reserve¹	Own shares held by Employee Trusts	Cumulative translation adjustment¹	Profit and loss account	Total
At 1 January 2014	3	14	(110)	4	1,305	1,216
Currency translation difference	-	-	7	(18)	-	(11)
Share-based payments charge for the year	-	-	-	-	9	9
Deferred tax credited to reserves - share-based payments	-	-	-	-	2	2
Purchase of own shares by the Employee Trusts	-	-	(14)	-	-	(14)
Disposal of own shares by the Employee Trusts	-	-	55	-	(55)	-
Deferred tax credited on cash flow hedge movements	-	3	-	-	-	3
Fair value losses taken to equity	-	(16)	-	-	-	(16)
Revaluation of defined benefit pension scheme	-	-	-	-	(21)	(21)
Current tax credited to reserves - pension scheme	-	-	-	-	4	4
Transfer to Group income statement	-	(17)	-	-	-	(17)
Share repurchases	-	-	-	-	(116)	(116)
Dividends	-	-	-	-	(163)	(163)
Profit for the year	-	-	-	-	365	365
At 31 December 2014	3	(16)	(62)	(14)	1,330	1,241

Notes:

1 Details of the Group's hedging arrangements are provided in Note 15.

24. Fair value of financial assets/liabilities

Man discloses the fair value measurement of financial assets and liabilities using three levels, as follows:

- Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

- Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices).

- Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The fair value of financial assets and liabilities can be analysed as follows:

$m	31 December 2015				31 December 2014
$m	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Financial assets held at fair value:
Investments in fund products and other investments (Note 16)	4	162	62	228	4	167	42	213
Investments in funds relating to consolidated fund entities (Note 16)	-	329	-	329	-	-	-	-
Derivative financial instruments (Note 17)	-	2	-	2	-	3	-	3
	4	493	62	559	4	170	42	216

Financial liabilities held at fair value:
Derivative financial instruments (Note 18)	-	8	-	8	-	15	-	15
Contingent consideration (Note 18)	-	-	206	206	-	-	145	145
	-	8	206	214	-	15	145	160

During the year, there were no significant changes in the business or economic circumstances that affected the fair value of Man's financial assets and no significant transfers of financial assets or liabilities held at fair value between categories. For investments in fund products, Level 2 investments comprise holdings primarily in unlisted, open-ended, active and liquid funds, such as seeding investments, which have weekly or daily pricing derived from third- party information.

A transfer into Level 3 would be deemed to occur where the level of prolonged activity, as evidenced by subscriptions and redemptions, is deemed insufficient to support a Level 2 classification. This, as well as other factors such as a deterioration of liquidity in the underlying investments, would result in a Level 3 classification. The material holdings within this category are priced on a recurring basis based on information supplied by third parties without adjustment. Liquidity premium adjustments of $2 million (2014: $2 million) have been applied to gated, suspended, side-pocketed or otherwise illiquid Level 3 investments. The range of liquidity premium adjustments is from 12% to 33% based on the expected timeframe for exit. A larger liquidity adjustment is applied where the exit is further in the future. Reasonable changes in the liquidity premium assumptions would not have a significant impact on the fair value.

The fair value of non-current assets and liabilities held for sale (Note 16.3) are equal to the carrying values of $188 million (2014: $186 million) and $69 million respectively (2014: $33 million), and would be classified within Level 2 ($108 million) and Level 3 ($11 million). In 2014 non-current assets and liabilities held for sale would have been classified as Level 2.

The basis of measuring the fair value of Level 3 investments is outlined in Note 16.2. The movements in Level 3 financial assets and financial liabilities measured at fair value are as follows:

$m	Year ended 31 December 2015			Year ended 31 December 2014
$m	Financial assets at fair value through profit or loss	Available-for-sale financial assets	Total	Financial assets at fair value through profit or loss	Available-for-sale financial assets	Total
Level 3 financial assets held at fair value
At beginning of the year	42	-	42	66	1	67
Purchases	25	-	25	2	-	2
Total gains in the Group statement of comprehensive income	9	-	9	5	-	5
Included in profit for the year	9	-	9	5	-	5
Included in other comprehensive income	-	-	-	-	-	-
Sales or settlements	(14)	-	(14)	(14)	(1)	(15)
Transfers into Level 3	-	-	-	-	-	-
Transfers out of Level 3	-	-	-	(17)	-	(17)
At year end	62	-	62	42	-	42
Total gains for the year included in the Group statement of comprehensive income for assets held at year end	9	-	9	5	-	5

$m	Year ended 31 December 2015	Year ended 31 December 2014
Level 3 financial liabilities held at fair value
At beginning of the year	145	44
Purchases	23	118
Total charges/(gains) in the Group statement of comprehensive income	79	(7)
Included in profit for the year	79	(7)
Included in other comprehensive income	-	-
Settlements	(41)	(10)
Other adjustments	-	-
At year end	206	145
Total charges/(gains) for the year included in the Group statement of comprehensive income for liabilities held at year end	79	(7)

The financial liabilities in Level 3 primarily relate to the contingent consideration payable at 31 December 2015 to the former owners of Numeric ($164 million), with the remaining $42 million relating to contingent consideration for other smaller acquisitions. In 2014 these largely relate to the contingent consideration payable in relation to the Numeric and FRM acquisitions.

For Numeric the contingent consideration relates to an ongoing 18.3% equity interest of Numeric management in the business and profit interests of 16.5%, pursuant to a call and put option arrangement. The call and put options structure means that it is virtually certain that Man will elect to, or be obliged to, purchase the interests held by Numeric management at five (call option) or five and a half (put option) years post-closing. The maximum aggregate amount payable by Man in respect of the option consideration is capped at $275 million.

The fair values are based on discounted cash flow calculations, which represent the expected future profits of each business as per the earn-out arrangements. The fair values are determined using a combination of inputs, such as weighted average cost of capital, high water mark levels, net management fee margins, performance, operating margins and the growth in FUM, as applicable. The discount rates applied are 11% for management fees and 17% for performance fees.

The most significant inputs into the valuations are as follows:

Year ended
31 December 2015

Numeric

Weighted average net management fee margin (over the remaining earn-out period)

0.5%

Compound growth in average FUM (over the remaining earn-out period)

12%

Changes in inputs would result in the following decrease/(increase) of the contingent consideration creditor:

	Year ended 31 December 2015 Numeric
Weighted average net management fee margin:
0.1% increase	34
0.1% decrease	(34)
Compound growth in average FUM:
1% increase	6
1% decrease	(6)

Increases/(decreases) in the fair value of the contingent consideration creditor would have a corresponding (expense)/gain in the Group income statement.

25. Other matters

Man Group is subject to various other claims, assessments, regulatory enquiries and investigations in the normal course of its business. The directors do not expect these enquiries to have a material adverse effect on the financial position of the Group.

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR UOOKRNKAUUAR

Companies

Man Group (EMG)

Thursday, 23rd May 2024

COMPANIES COVERED:

HL. QQ. AJB

Another day and another round of takeover talk with Hargreaves Lansdown being eyed by private equity suitors. AJ Bell also advances on upbeat earnings news whilst QinetiQ upgrades its profit guidance, too.

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