Consolidation

The Consolidated Financial Statements include the accounts of Federated, Federated Funds and other entities in which Federated holds a controlling financial interest. Federated is involved with various entities in the normal course of business that may be deemed to be VREs or VIEs. From time to time, Federated invests in Federated Funds for general corporate investment purposes or, in the case of newly launched products, in order to provide investable cash to establish a performance history. Federated's investment in these Federated Funds represents its maximum exposure to loss. The assets of the consolidated Federated Funds are restricted for use by the respective Federated Fund. Generally, neither creditors of, nor equity investors in, the Federated Funds have any recourse to Federated’s general credit. Given that the entities follow investment company accounting, which prescribes fair-value accounting, a deconsolidation generally does not result in gains or losses for Federated. Receivables from all Federated Funds for advisory and other services totaled $22.7 million and $16.9 million at September 30, 2016 and December 31, 2015, respectively.

In the ordinary course of business, Federated may choose to waive certain fees or assume operating expenses of various Federated Funds for competitive, regulatory or contractual reasons. For the three and nine months ended September 30, 2016, Federated waived fees, including Voluntary Yield-related Fee Waivers, totaling $101.2 million and $322.0 million, respectively, of which $75.4 million and $240.3 million, respectively, related to waivers for money market funds which meet the scope exception of ASU 2015-02. Like other sponsors of investment companies, Federated in the ordinary course of business may make capital contributions to certain Federated money market funds in connection with the reorganization of such funds into certain affiliated Federated money market funds or in connection with the liquidation of a fund. In these instances, such capital contributions typically are intended to either cover realized losses or other permanent impairments to a fund's NAV or increase the market-based NAV per share of the investment company's portfolio that is being reorganized to equal the market-based NAV per share of the acquiring fund. There were no contributions for the three months ended September 30, 2016 and no material contributions for the nine months ended September 30, 2016. Under new money fund regulations, and SEC staff guidance issued in 2015, Federated is now required to report these types of capital contributions to the SEC as financial support to the investment company that is being reorganized or liquidated.

In accordance with Federated’s consolidation accounting policy, Federated first determines whether the entity being evaluated is a VRE or a VIE. Once this determination is made, Federated proceeds with its evaluation of whether to consolidate the entity. The disclosures below represent the results of such evaluations pertaining to September 30, 2016 and December 31, 2015.

(a) Consolidated Voting Rights Entities

Effective January 1, 2016, most of the Federated Funds now meet the definition of a VRE. Federated consolidates certain VREs when it is deemed to have control. As of September 30, 2016, consolidated VREs included on Federated's Consolidated Balance Sheets included $14.2 million in Investments—consolidated investment companies and $2.5 million in Redeemable noncontrolling interest in subsidiaries.

(b) Consolidated Variable Interest Entities

As of September 30, 2016 and December 31, 2015, Federated was deemed to be the primary beneficiary of, and therefore consolidated, several Federated Funds as a result of its controlling financial interest. Certain of the VIEs consolidated as of December 31, 2015 were deemed to be VREs upon adoption of ASU 2015-02 and have been excluded from the September 30, 2016 balances in the table below. See the Consolidated Voting Rights Entities section above for information on consolidated VREs as of September 30, 2016.

The following table presents the balances related to the consolidated Federated Fund VIEs that were included on the Consolidated Balance Sheets as well as Federated's net interest in the consolidated Federated Fund VIEs for each period presented:



(in millions)	September 30, 2016		December 31, 2015
Cash and cash equivalents	$	0.0	$	3.1
Investments—consolidated investment companies	44.8		25.4
Receivables	0.8		0.2
Less: Liabilities	1.2		3.0
Less: Redeemable noncontrolling interest in subsidiaries	27.4		8.7
Federated's net interest in the consolidated Federated Fund VIEs	$	17.0	$	17.0

Federated's net interest in the consolidated Federated Fund VIEs of $17.0 million at both September 30, 2016 and December 31, 2015, represents the value of Federated's economic ownership interest in these Federated Funds. The liabilities of the consolidated Federated Fund VIEs primarily represent investments sold short and operating liabilities of the entities. The liabilities as of September 30, 2016 and December 31, 2015 are primarily classified as Other current liabilities and Accounts payable and accrued expenses, respectively, on Federated’s Consolidated Balance Sheets.

In addition to the table above, Federated has a majority interest (50.5%) and acts as the general partner in Passport Research Ltd. (Passport), a limited partnership. Edward D. Jones & Co., L.P. is the limited partner with a 49.5% interest. The partnership is an investment adviser to one sponsored fund as of September 30, 2016 and was deemed to be a VIE upon adoption of ASU 2015-02. Assets totaling $6.9 million primarily representing Cash and cash equivalents, liabilities totaling $4.4 million primarily representing operating liabilities and $1.2 million included in Nonredeemable noncontrolling interest in subsidiary are included on the Consolidated Balance Sheets as of September 30, 2016. There was no change to the Consolidated Financial Statements as a result of the adoption of ASU 2015-02 as Passport had been consolidated as a VRE under the previous guidance. See Part II, Item 5 of Federated's Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 for additional information related to this partnership.

Other than those consolidated or deconsolidated upon the adoption of ASU 2015-02 (see Note (2)), Federated did not newly consolidate any VIEs or deconsolidate any material VIEs during the nine months ended September 30, 2016.

Federated's involvement with certain Federated Funds that are deemed to be VIEs includes serving as the investment manager, or at times, holding a minority interest or both. Federated’s variable interest is not deemed to absorb losses or receive benefits that could potentially be significant to the VIE. Therefore, Federated is not the primary beneficiary of these VIEs and has not consolidated these entities.

At September 30, 2016, Federated’s investment and maximum risk of loss related to non-consolidated VIEs was entirely related to two Federated Funds and totaled $1.5 million, which was recorded in Investments—affiliates on the Consolidated Balance Sheets. AUM for these non-consolidated Federated Funds totaled $22.6 million at September 30, 2016.

At December 31, 2015, Federated’s investment and maximum risk of loss related to non-consolidated VIEs were entirely related to Federated Funds and totaled $301.5 million. Of this amount, $159.7 million represented investments in money market funds included in Cash and cash equivalents. The remaining $141.8 million is primarily recorded in Investments—affiliates on the Consolidated Balance Sheets as of December 31, 2015. AUM for these non-consolidated Federated Funds totaled $268.0 billion at December 31, 2015.

Upon adoption of ASU 2015-02 effective January 1, 2016, certain of the non-consolidated VIEs included in the balances as of December 31, 2015 were deemed to be VREs or are money market funds which meet the scope exception and have been excluded from the September 30, 2016 balances above. See the Consolidated Voting Rights Entities section above for information on consolidated VREs as of September 30, 2016.