e10vq
Table of Contents

 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2010
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number 1-13908
(INVESCO LOGO)
Invesco Ltd.
(Exact Name of Registrant as Specified in Its Charter)
     
Bermuda   98-0557567
(State or Other Jurisdiction of   (I.R.S. Employer
Incorporation or Organization)   Identification No.)
     
1555 Peachtree Street, N.E., Suite 1800, Atlanta, GA   30309
(Address of Principal Executive Offices)   (Zip Code)
Registrant’s telephone number, including area code: (404) 892-0896
Securities registered pursuant to Section 12(b) of the Act:
     
Title of Each Class   Name of Exchange on Which Registered
     
Common Shares, $0.20 par value per share   New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ   Accelerated filer o   Non-accelerated filer o   Smaller reporting company o
        (Do not check if a smaller reporting company)    
     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes o No þ
     As of June 30, 2010, the most recent practicable date, 468,130,948 of the company’s common shares and common share equivalents par value $0.20 per share, were outstanding.
 
 

 


 

TABLE OF CONTENTS
     We include cross references to captions elsewhere in this Quarterly Report on Form 10-Q, which we refer to as this “Report,” where you can find related additional information. The following table of contents tells you where to find these captions.
             
        Page
PART I — Financial Information        
  Financial Statements (unaudited)        
 
  Condensed Consolidated Balance Sheets     3  
 
  Condensed Consolidated Statements of Income     4  
 
  Condensed Consolidated Statements of Cash Flows     5  
 
  Condensed Consolidated Statements of Changes in Equity     6  
 
  Notes to the Condensed Consolidated Financial Statements     7  
  Management’s Discussion and Analysis of Financial Condition and Results of Operations     44  
  Quantitative and Qualitative Disclosures about Market Risk     94  
  Controls and Procedures     95  
 
           
PART II — Other Information        
  Legal Proceedings     96  
  Risk Factors     96  
  Unregistered Sales of Equity Securities and Use of Proceeds     96  
  Defaults upon Senior Securities     97  
  Submission of Matters to a Vote of Security Holders     97  
  Exhibits     98  
 
  Signatures     99  
 EX-10.1
 EX-10.2
 EX-31.1
 EX-31.2
 EX-32.1
 EX-32.2
 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT

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Item 1.   Financial Statements
Invesco Ltd.
Condensed Consolidated Balance Sheets
(Unaudited)
                 
    As of
$ in millions, except share data   June 30, 2010   December 31, 2009
ASSETS
               
 
               
Current assets:
               
Cash and cash equivalents
    555.6       762.0  
Cash and cash equivalents of consolidated investment products
    301.7       28.0  
Unsettled fund receivables
    685.2       383.1  
Accounts receivable
    326.0       289.3  
Accounts receivable of consolidated investment products
    100.5        
Investments
    314.0       182.4  
Prepaid assets
    67.7       57.6  
Other current assets
    91.0       77.9  
Deferred tax asset, net
    64.8       57.7  
Assets held for policyholders
    1,151.5       1,283.0  
 
               
Total current assets
    3,658.0       3,121.0  
Non-current assets:
               
Investments
    147.7       157.4  
Investments of consolidated investment products
    6,788.5       685.0  
Prepaid assets
    5.9       16.2  
Other non-current assets
    19.7       13.0  
Deferred sales commissions
    40.3       23.8  
Deferred tax asset, net
          65.8  
Property and equipment, net
    232.1       220.7  
Intangible assets, net
    1,322.8       139.1  
Goodwill
    6,688.9       6,467.6  
 
               
Total non-current assets
    15,245.9       7,788.6  
 
               
Total assets
    18,903.9       10,909.6  
 
               
 
               
LIABILITIES AND EQUITY
               
 
               
Current liabilities:
               
Unsettled fund payables
    643.6       367.9  
Income taxes payable
    58.8       82.8  
Other current liabilities
    596.4       559.9  
Other current liabilities of consolidated investment products
    324.7       4.8  
Policyholder payables
    1,151.5       1,283.0  
 
               
Total current liabilities
    2,775.0       2,298.4  
Non-current liabilities:
               
Long-term debt
    1,395.7       745.7  
Long-term debt of consolidated investment products
    5,404.4        
Deferred tax liabilities, net
    258.0        
Other non-current liabilities
    250.7       244.7  
 
               
Total non-current liabilities
    7,308.8       990.4  
 
               
Total liabilities
    10,083.8       3,288.8  
 
               
Commitments and contingencies (See Note 15)
               
Equity:
               
Equity attributable to common shareholders:
               
Common shares ($0.20 par value; 1,050.0 million authorized; 471.2 million shares issued as of June 30, 2010, and December 31, 2009)
    94.2       91.9  
Participating preferred shares ($0.20 par value; 25,000 authorized as of June 30, 2010; 19,212 shares issued as of June 30, 2010)
           
Additional paid-in-capital
    6,249.3       5,688.4  
Treasury shares
    (846.4 )     (892.4 )
Retained earnings
    1,678.7       1,631.4  
Retained earnings appropriated for investors in consolidated investment products
    719.5        
Accumulated other comprehensive income/(loss), net of tax
    213.6       393.6  
 
               
Total equity attributable to common shareholders
    8,108.9       6,912.9  
Equity attributable to noncontrolling interests in consolidated entities
    711.2       707.9  
 
               
Total equity
    8,820.1       7,620.8  
 
               
Total liabilities and equity
    18,903.9       10,909.6  
 
               
See accompanying notes.

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Invesco Ltd.
Condensed Consolidated Statements of Income
(Unaudited)
                                 
    Three months Ended     Six months Ended  
    June 30,     June 30,  
$ in millions, except per share data   2010     2009     2010     2009  
Operating revenues:
                               
Investment management fees
    627.9       501.6       1,221.4       938.1  
Service and distribution fees
    139.4       100.4       251.9       189.4  
Performance fees
    3.5       8.0       4.9       18.9  
Other
    16.2       15.1       27.9       27.3  
 
                       
Total operating revenues
    787.0       625.1       1,506.1       1,173.7  
 
                       
 
                               
Operating expenses:
                               
Employee compensation
    260.5       229.0       498.1       464.8  
Third-party distribution, service and advisory
    220.7       166.3       416.3       314.5  
Marketing
    35.2       23.9       63.5       50.8  
Property, office and technology
    55.8       48.6       109.3       94.5  
General and administrative
    64.1       46.9       114.1       76.9  
Transaction and integration
    79.3             96.5        
 
                       
Total operating expenses
    715.6       514.7       1,297.8       1,001.5  
 
                       
 
                               
Operating income
    71.4       110.4       208.3       172.2  
 
                       
 
                               
Other income/(expense):
                               
Equity in earnings of unconsolidated affiliates
    10.4       7.5       16.2       10.0  
Interest income
    1.8       1.2       3.4       6.0  
Interest income of consolidated investment products
    53.1             105.6        
Gains/(losses) of consolidated investment products, net
    187.2       (48.4 )     290.3       (134.9 )
Interest expense
    (14.1 )     (16.5 )     (26.5 )     (32.4 )
Interest expense of consolidated investment products
    (25.6 )           (46.4 )      
Other gains and losses, net
    (9.3 )     10.0       (11.4 )     5.8  
 
                       
Income before income taxes, including gains and losses attributable to noncontrolling interests
    274.9       64.2       539.5       26.7  
Income tax provision
    (36.7 )     (36.0 )     (86.8 )     (56.3 )
 
                       
Net income/(loss), including gains and losses attributable to noncontrolling interests
    238.2       28.2       452.7       (29.6 )
(Gains)/losses attributable to noncontrolling interests in consolidated entities, net
    (197.4 )     47.5       (316.9 )     136.0  
 
                       
Net income attributable to common shareholders
    40.8       75.7       135.8       106.4  
 
                       
 
                               
Earnings per share:
                               
— basic
  $ 0.09     $ 0.18     $ 0.30     $ 0.26  
— diluted
  $ 0.09     $ 0.18     $ 0.30     $ 0.26  
Dividends declared per share
  $ 0.11     $ 0.1025     $ 0.2125     $ 0.2025  
See accompanying notes.

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Invesco Ltd.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
                 
    Six months ended June 30,
$ in millions   2010   2009
Operating activities:
               
Net income/(loss), including gains attributable to noncontrolling interests of $316.9 million during the six months ended June 30, 2010 (losses of $136.0 million during the six months ended June 30, 2009)
    452.7       (29.6 )
Adjustments to reconcile net income/(loss) to net cash used in operating activities:
               
Amortization and depreciation
    39.1       32.7  
Share-based compensation expense
    55.5       43.9  
Purchase of trading investments
    (1,360.6 )     (38.0 )
Proceeds from sale of trading investments
    1,298.1       8.9  
Other gains and losses, net
    11.4       (5.8 )
(Gains)/losses of consolidated investment products, net
    (290.3 )     134.9  
Tax benefit from share-based compensation
    44.8       31.6  
Excess tax benefits from share-based compensation
    (12.3 )      
Equity in earnings of unconsolidated affiliates
    (16.2 )     (10.0 )
Dividends from unconsolidated affiliates
    2.3       25.8  
Changes in operating assets and liabilities:
               
(Increase)/decrease in cash held by consolidated investment products
    (92.5 )     25.6  
(Increase)/decrease in receivables
    (288.3 )     (362.5 )
Increase/(decrease) in payables
    92.9       139.7  
 
               
Net cash used in operating activities
    (63.4 )     (2.8 )
 
               
 
               
Investing activities:
               
Purchase of property and equipment
    (35.7 )     (17.1 )
Disposal of property and equipment
          0.3  
Purchase of available-for-sale investments
    (20.4 )     (3.3 )
Proceeds from sale of available-for-sale investments
    11.2       16.4  
Purchase of investments by consolidated investment products
    (1,090.2 )     (17.2 )
Proceeds from sale of investments by consolidated investment products
    1,241.1       9.7  
Returns of capital in investments of consolidated investment products
    44.4       8.5  
Purchase of other investments
    (36.3 )     (19.8 )
Proceeds from sale of other investments
    39.0       20.4  
Acquisition of businesses (cash paid $770.0 million, less cash acquired $57.8 million)
    (712.2 )      
 
               
Net cash used in investing activities
    (559.1 )     (2.1 )
 
               
 
               
Financing activities:
               
Issuance of new shares
          441.8  
Proceeds from exercises of share options
    6.2       9.6  
Dividends paid
    (93.7 )     (80.2 )
Excess tax benefits from share-based compensation
    12.3        
Capital invested into consolidated investment products
    2.0       2.8  
Capital distributed by consolidated investment products
    (40.1 )     (24.5 )
Repayments of debt of consolidated investment products
    (102.4 )      
Net borrowings/(repayments) under credit facility
    650.0       (12.0 )
Repayments of senior notes
          (103.0 )
Acquisition of remaining noncontrolling interest in subsidiary
          (10.3 )
 
               
Net cash provided by financing activities
    434.3       224.2  
 
               
 
               
(Decrease)/increase in cash and cash equivalents
    (188.2 )     219.3  
Foreign exchange movement on cash and cash equivalents
    (18.2 )     13.2  
Cash and cash equivalents, beginning of period
    762.0       585.2  
 
               
Cash and cash equivalents, end of period
    555.6       817.7  
 
               
 
               
Supplemental Cash Flow Information:
               
Interest paid
    (21.6 )     (31.9 )
Interest received
    3.2       6.3  
Taxes paid
    (79.5 )     (31.2 )
See accompanying notes.

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Invesco Ltd.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
                                                                         
    Equity Attributable to Common Shareholders        
                                            Retained                
                                            Earnings                
                                            Appropriated for           Non-    
                                            Investors in   Accumulated   Controlling    
            Participating   Additional                   Consolidated   Other   Interests in    
    Common   Preferred   Paid-in-   Treasury   Retained   Investment   Comprehensive   Consolidated   Total
$ in millions   Shares   Shares   Capital   Shares   Earnings   Products   Income   Entities   Equity
January 1, 2010
    91.9             5,688.4       (892.4 )     1,631.4             393.6       707.9       7,620.8  
Adoption of FASB Statement No. 167
                            5.2       274.3       (5.2 )           274.3  
 
                                                                       
January 1, 2010, as adjusted
    91.9             5,688.4       (892.4 )     1,636.6       274.3       388.4       707.9       7,895.1  
Net income, including gains and losses attributable to noncontrolling interests
                            135.8       277.4             39.5       452.7  
Other comprehensive income:
                                                                       
Currency translation differences on investments in overseas subsidiaries
                                  37.1       (186.1 )           (149.0 )
Change in accumulated OCI related to employee benefit plans
                                        7.0             7.0  
Change in net unrealized gains on available-for-sale investments
                                        6.0             6.0  
Tax impacts of changes in accumulated other comprehensive income balances
                                        (1.7 )           (1.7 )
 
                                                                       
Total comprehensive income
                                                    315.0  
Change in noncontrolling interests in consolidated entities, net
                                              (36.2 )     (36.2 )
Business Combination
    2.3             566.9                   130.7                   699.9  
Dividends
                            (93.7 )                       (93.7 )
Employee share plans:
                                                                       
Share-based compensation
                55.5                                     55.5  
Vested shares
                (59.1 )     59.1                                
Exercise of options
                (14.7 )     20.9                               6.2  
Tax impact of share-based payment
                12.3                                     12.3  
Purchase of shares
                      (34.0 )                             (34.0 )
 
                                                                       
June 30, 2010
    94.2             6,249.3       (846.4 )     1,678.7       719.5       213.6       711.2       8,820.1  
 
                                                                       
                                                         
    Equity Attributable to Common Shareholders   Non-    
                                    Accumulated   Controlling    
            Additional                   Other   Interests in    
    Common   Paid-in-   Treasury   Retained   Comprehensive   Consolidated   Total
$ in millions   Shares   Capital   Shares   Earnings   Loss   Entities   Equity
January 1, 2009
    85.3       5,352.6       (1,128.9 )     1,476.3       (95.8 )     906.7       6,596.2  
Net income/(loss), including gains and losses attributable to noncontrolling interests
                      106.4             (136.0 )     (29.6 )
Other comprehensive income:
                                                       
Currency translation differences on investments in overseas subsidiaries
                            319.5             319.5  
Change in minimum pension liability
                                    (3.5 )             (3.5 )
Change in net unrealized gains on available-for-sale investments
                            3.1             3.1  
Adoption of FSP FAS 115-2
                            (1.5 )           (1.5 )
Tax impacts of changes in accumulated other comprehensive income balances
                            2.0             2.0  
 
                                                       
Total comprehensive income
                                        290.0  
 
                                                       
Adoption of FSP FAS 115-2
                      1.5                   1.5  
 
                                                       
Change in noncontrolling interests in consolidated entities, net
                                  (61.9 )     (61.9 )
Issuance of new shares
    6.6       435.2                               441.8  
Dividends
                      (80.2 )                 (80.2 )
Employee share plans:
                                                   
Share-based compensation
          43.9                               43.9  
Vested shares
          (83.2 )     83.2                          
Exercise of options
          (15.8 )     25.4                         9.6  
Tax impact of share-based payment
          (2.5 )                             (2.5 )
Modification of share-based payment awards
          (13.0 )                             (13.0 )
Purchase of shares
                (12.3 )                       (12.3 )
Acquisition of remaining noncontrolling interest in subsidiary
          (8.9 )                       (1.4 )     (10.3 )
 
                                                       
June 30, 2009
    91.9       5,708.3       (1,032.6 )     1,504.0       223.8       707.4       7,202.8  
 
                                                       
See accompanying notes.

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Invesco Ltd.
Notes to the Condensed Consolidated Financial Statements
1. ACCOUNTING POLICIES
Corporate Information
     Invesco Ltd. (Parent) and all of its consolidated entities (collectively, the company or Invesco) provide retail, institutional and high-net-worth clients with an array of global investment management capabilities. The company’s sole business is investment management.
Basis of Accounting and Consolidation
     The accompanying Condensed Consolidated Balance Sheets, Statements of Income, Statements of Cash Flows, and Statement of Changes in Equity (together, the Condensed Consolidated Financial Statements) have not been audited and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the company’s Annual Report on Form 10-K for the year ended December 31, 2009. In the opinion of management, the Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for the fair presentation of the financial condition and results of operations for the interim periods presented. All significant intercompany transactions, balances, revenues and expenses are eliminated upon consolidation.
     The Condensed Consolidated Financial Statements have been prepared in accordance with U.S. GAAP and consolidate the financial statements of the Parent, all of its controlled subsidiaries, any variable interest entities (VIEs) required to be consolidated, and any non-VIE general partnership investments where the company is deemed to have control. Control is deemed to be present when the Parent holds a majority voting interest or otherwise has the power to govern the financial and operating policies of the subsidiary so as to obtain the benefits from its activities. The company provides investment management services to, and has transactions with, various private equity funds, real estate funds, fund-of-funds, collateralized loan obligations (CLOs), and other investment products sponsored by the company for the investment of client assets in the normal course of business. The company serves as the investment manager, making day-to-day investment decisions concerning the assets of these products. Certain of these entities are considered to be VIEs.
     The company follows the provisions of Accounting Standards Codification (ASC) Topic 810, “Consolidation,” when accounting for VIEs, including Accounting Standards Update (ASU) No. 2010-10, “Amendments for Certain Investment Funds” (ASU 2010-10), detailed in “Accounting Pronouncements Recently Adopted and Pending Accounting Pronouncements” below. VIEs, or entities in which the risks and rewards of ownership are not directly linked to voting interests, for which the company is the primary beneficiary are consolidated. For all investment products with the exception of CLOs, if the company is deemed to have a variable interest in, and to have the majority of rewards/risks of ownership associated with, these entities, then the company is deemed to be their primary beneficiary and is required to consolidate these entities. For CLOs, if the company is deemed to have the power to direct the activities of the CLO that most significantly impact the CLO’s economic performance, and the obligation to absorb losses/right to receive benefits from the CLO that could potentially be significant to the CLO, then the company is deemed to be the CLO’s primary beneficiary and is required to consolidate the CLO. Investment products that are consolidated are referred to as consolidated investment products in the accompanying Condensed Consolidated Financial Statements.
     A significant portion of consolidated investment products are CLOs. CLOs are investment vehicles created for the sole purpose of issuing collateralized loan instruments that offer investors the opportunity for returns that vary with the risk level of their investment. The notes issued by the CLOs are backed by diversified collateral asset portfolios consisting primarily of loans or structured debt. For managing the collateral for the CLO entities, the company earns investment management fees, including in some cases subordinated management fees, as well as contingent incentive fees. The company has invested in certain of the entities, generally taking a portion of the unrated, junior subordinated position. The company’s investments in CLOs are generally subordinated to other interests in the entities and entitles the company and other subordinated tranche investors to receive the residual cash flows, if any, from the entities. Investors in the CLOs have no recourse against the company for any losses sustained in the CLO structure.

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     All of the investments held and notes issued by consolidated investment products are presented at fair value in the company’s Condensed Consolidated Balance Sheet at June 30, 2010, and interest income and expense of consolidated CLOs is presented as other income/(expense) in the company’s Condensed Consolidated Income Statement for the six months ended June 30, 2010. The surplus of consolidated CLO assets over consolidated CLO liabilities is reflected in the company’s Condensed Consolidated Balance Sheet as retained earnings appropriated for investors in consolidated investment products. Current period gains/(losses) attributable to investors in consolidated CLOs are included in (gains)/losses attributable to noncontrolling interests in consolidated entities in the Condensed Consolidated Statement of Income and in the retained earnings appropriated for investors in consolidated investment products in the Condensed Consolidated Balance Sheet, as they are considered noncontrolling interests of the company. See Note 12, “Consolidated Investment Products,” for additional details.
     The company also consolidates certain private equity funds that are structured as partnerships in which the company is the general partner receiving a management and/or performance fee. Private equity investments made by the underlying funds consist of direct investments in, or fund investments in other private equity funds that hold direct investments in, equity or debt securities in operating companies that are generally not initially publicly traded. Private equity funds are considered investment companies and are therefore accounted for under the Accounting Standards Codification (ASC) Topic 946, “Financial Services — Investment Companies.” The company has retained the specialized industry accounting principles of these investment products in its Condensed Consolidated Financial Statements. See Note 12, “Consolidated Investment Products,” for additional details.
     Non-VIE general partnership investments are deemed to be controlled by the company and are consolidated under a voting interest entity (VOE) model, unless the limited partners have the substantive ability to remove the general partner without cause based upon a simple majority vote or can otherwise dissolve the partnership, or unless the limited partners have substantive participating rights over decision-making.
     If the company determines that it does not control the private equity partnership funds in which it has invested, the equity method of accounting is used to account for the company’s investment in these entities. The equity method of accounting is also used to account for investments in joint ventures and noncontrolled subsidiaries in which the company’s ownership is between 20 and 50 percent. Equity investments are carried initially at cost (subsequently adjusted to recognize the company’s share of the profit or loss of the investee after the date of acquisition) and are included in investments on the Condensed Consolidated Balance Sheets. The proportionate share of income or loss is included in equity in earnings of unconsolidated affiliates in the Condensed Consolidated Statements of Income. If the company determines that it does not control CLOs in which it has invested, the company accounts for its investments as available-for-sale investments.
     The financial statements have been prepared primarily on the historical cost basis; however, certain items are presented using other bases such as fair value, where such treatment is required or voluntarily elected. The financial statements of subsidiaries, with the exception of consolidated investment products as discussed above, are prepared for the same reporting year as the Parent and use consistent accounting policies, which, where applicable, have been adjusted to U.S. GAAP from local generally accepted accounting principles or reporting regulations. The financial information of the consolidated CLOs is included in the company’s consolidated financial statements on a one-month lag. Noncontrolling interests in consolidated entities and retained earnings appropriated for investors in consolidated investment products represent the interests in certain entities consolidated by the company either because the company has control over the entity or has determined that it is the primary beneficiary, but of which the company does not own all of the entity’s equity.
     In preparing the financial statements, management is required to make estimates and assumptions that affect reported revenues, expenses, assets, liabilities and disclosure of contingent liabilities. The primary estimates relate to investment valuation, goodwill impairment and taxes. Use of available information and application of judgment are inherent in the formation of estimates. Actual results in the future could differ from such estimates and the differences may be material to the financial statements.
Reclassifications
     The presentation of certain prior period reported amounts has been reclassified to be consistent with the current presentation. Such reclassifications had no impact on net income or equity attributable to common shareholders.
Accounting Pronouncements Recently Adopted and Pending Accounting Pronouncements
     In December 2007, the FASB issued Statement No. 141 (revised 2007), “Business Combinations (FASB Statement No. 141(R)),” and Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (FASB

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Statement No. 160).” Under FASB Statement No. 141(R), which is now encompassed in ASC Topic 805, “Business Combinations,” the acquirer must recognize, with certain exceptions, 100% of the fair values of assets acquired, liabilities assumed, and noncontrolling interests in acquisitions of less than 100% controlling interest when the acquisition constitutes a change in control of the acquired entity. Additionally, when an acquirer obtains partial ownership in an acquiree, an acquirer recognizes and consolidates assets acquired, liabilities assumed and any noncontrolling interests at 100% of their fair values at that date regardless of the percentage ownership in the acquiree. As goodwill is calculated as a residual, all goodwill of the acquired business, not just the acquirer’s share, is recognized under this “full-goodwill” approach. Contingent consideration obligations that are elements of consideration transferred are recognized as of the acquisition date as part of the fair value transferred in exchange for the acquired business. Acquisition-related costs incurred in connection with a business combination shall be expensed. FASB Statement No. 160, which is now encompassed in ASC Topic 810, “Consolidation,” establishes new accounting and reporting standards for noncontrolling interests (formerly known as “minority interests”) in a subsidiary and for the deconsolidation of a subsidiary. FASB Statement No. 141(R) and FASB Statement No. 160 became effective for the company on January 1, 2009. FASB Statement No. 141(R) was applied prospectively, while FASB Statement No. 160 required retroactive adoption of the presentation and disclosure requirements for existing noncontrolling interests but prospective adoption of all of its other requirements. The adoption of FASB Statement No. 141(R) amended the definition of a business, which led to a change in the company’s basis, but not the company’s conclusion, of determining that it has one reporting unit for goodwill impairment purposes. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations, Critical Accounting Policies and Estimates – Goodwill” for additional information. The company completed the acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments (the “acquired business” or the “acquisition”) on June 1, 2010. See Note 4, “Business Combination and Integration” for additional details.
     In February 2008, the FASB issued Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157 (FSP FAS 157-2).” FSP FAS 157-2, which is now encompassed in ASC Topic 820, amended FASB Statement No. 157 to delay the effective date for nonfinancial assets and nonfinancial liabilities except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (that is, at least annually). For items within its scope, FSP FAS 157-2 delayed the effective date of FASB Statement No. 157 to January 1, 2009. As of January 1, 2008, Invesco applied the fair value measurement and disclosure provisions of FASB Statement No. 157 to its financial assets and financial liabilities that are recognized or disclosed at fair value in the financial statements. As of January 1, 2009, Invesco applied the fair value measurement and disclosure provisions of FASB Statement No. 157 to nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a non-recurring basis. Those items include: (1) nonfinancial assets and nonfinancial liabilities initially measured at fair value in a business combination or other new basis event, but not measured at fair value in subsequent periods; (2) nonfinancial long-lived assets measured at fair value for an impairment assessment under FASB Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets;” (now encompassed in ASC Topic 360, “Property, Plant and Equipment”); (3) nonfinancial liabilities for exit or disposal activities initially measured at fair value under FASB Statement No. 146, “Accounting for Costs Associated with Exit or Disposal Activities;” (now encompassed in ASC Topic 420, “Exit or Disposal Cost Obligations”) and (4) nonfinancial assets and nonfinancial liabilities measured at fair value in the second step of a goodwill impairment test. The adoption of FSP FAS 157-2 did not have a material impact on the company’s financial statements.
     In April 2008, the FASB issued Staff Position No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” (FSP FAS 142-3). FSP FAS 142-3, which is now encompassed in ASC Topic 350, “Intangibles – Goodwill and Other” (ASC Topic 350), amended the factors that should be considered in developing renewal or extension assumptions used to determine the useful life over which to amortize the cost of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets,” also now encompassed in ASC Topic 350. FSP FAS 142-3 required an entity to consider its own assumptions about renewal or extension of the term of the arrangement, consistent with its expected use of the asset. FSP FAS 142-3 was intended to improve the consistency between the useful life of an intangible asset determined under FASB Statement No. 142 and the period of expected cash flows used to measure the fair value of the asset under FASB Statement No. 141(R) (now encompassed in ASC Topic 805) and other U.S. GAAP. The guidance provided by FSP FAS 142-3 for determining the useful life of a recognized intangible asset was to be applied prospectively to intangible assets acquired after the effective date, which is January 1, 2009. FSP FAS 142-3 did not have a material impact on the company’s financial statements.
     During June 2008, the FASB issued Staff Position No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (FSP EITF 03-6-1). FSP EITF 03-6-1, which is now encompassed in ASC Topic 260, “Earnings Per Share” (ASC Topic 260), addressed whether instruments granted in share-based payment transactions are participating securities prior to vesting and need to be included in the earnings allocation in computing earnings per share (EPS) under the two-class method described in FASB Statement No. 128, “Earnings Per Share,” also now encompassed in ASC Topic 260. The guidance in the FSP EITF 03-6-1 provided that only those unvested share-based payment awards that contain nonforfeitable rights to

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dividends or dividend equivalents are participating securities that should be included in the calculation of basic EPS under the two-class method. The FASB concluded that the holder of a share-based award receives a noncontingent transfer of value each time the entity declares a dividend, and therefore the share-based award meets the definition of a participating security. FSP EITF 03-6-1 was effective for financial statements issued for fiscal years beginning after December 15, 2008, with all prior period EPS data being adjusted retrospectively. The adoption of FSP EITF 03-6-1 on January 1, 2009, required the company to include unvested restricted stock units (RSUs) that contain nonforfeitable dividend equivalents as outstanding common shares for purposes of calculating basic EPS. The adoption of FSP EITF 03-6-1 did not have a material impact on the company’s calculation of diluted EPS for periods prior to January 1, 2009.
     In December 2008, the FASB issued FASB Staff Position No. FAS 140-4 and FIN 46(R)-8, “Disclosures about Transfers of Financial Assets and Interests in Variable Interest Entities (FSP FAS 140-4 and FIN 46(R)-8),” which became effective for the company on March 31, 2009. FSP FAS 140-4 and FIN 46(R)-8, which is now encompassed in ASC Topic 860, “Transfers and Servicing,” required additional disclosures by public entities with a) continuing involvement in transfers of financial assets to a special purpose entity or b) a variable interest in a variable interest entity. The adoption of FSP FAS 140-4 and FIN 46(R)-8 did not have a material impact on the company’s financial statements. See Note 12, “Consolidated Investment Products,” for additional disclosures.
     In January 2009, the FASB issued Staff Position No. EITF 99-20-1, “Amendments to the Impairment Guidance of EITF Issue No. 99-20 (FSP EITF 99-20-1),” which became effective for the company on March 31, 2009. FSP EITF 99-20-1, which is now encompassed in ASC Topic 325, revised the impairment guidance provided by EITF 99-20 for beneficial interests to make it consistent with the requirements of FASB Statement No. 115 (now encompassed in ASC Topic 320) for determining whether an impairment of other debt and equity securities is other-than-temporary. FSP EITF 99-20-1 eliminated the requirement to rely exclusively on market participant assumptions about future cash flows and permitted the use of reasonable management judgment of the probability that the holder will be unable to collect all amounts due. Instead, FSP 99-20-1 required that an other-than-temporary impairment be recognized when it is probable that there has been an adverse change in the holder’s estimated cash flows. FSP EITF 99-20-1 did not have a material impact on the company’s financial statements.
     On April 9, 2009, the FASB issued three Staff Positions (FSPs) intended to provide additional application guidance and enhance disclosures regarding fair value measurements and impairments of securities. FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions that Are Not Orderly (FSP FAS 157-4),” now encompassed in ASC Topic 820, provided guidelines for making fair value measurements more consistent with the principles presented in FASB Statement No. 157. FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments (FSP FAS 107-1),” now encompassed in ASC Topic 825, enhanced consistency in financial reporting by increasing the frequency of fair value disclosures. FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2),” now encompassed in ASC Topic 320-10-65, provided additional guidance designed to create greater clarity and consistency in accounting for and presenting impairment losses on securities.
     FSP FAS 157-4 addressed the measurement of fair value of financial assets when there is no active market or where the price inputs being used could be indicative of distressed sales. FSP FAS 157-4 reaffirmed the definition of fair value already reflected in FASB Statement No. 157, which is the price that would be paid to sell an asset in an orderly transaction (as opposed to a distressed or forced transaction) at the measurement date under current market conditions. FSP FAS 157-4 also reaffirmed the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive. FSP FAS 157-4 became effective for the company for the period ended June 30, 2009. The application of FSP FAS 157-4 did not have a material impact on the Consolidated Financial Statements. See Note 2, “Fair Value of Assets and Liabilities,” and Note 12, “Consolidated Investment Products,” for additional details.
     FSP FAS 107-1 was issued to improve the fair value disclosures for any financial instruments that are not currently reflected on the balance sheets of companies at fair value. Prior to issuing FSP FAS 107-1, fair values of these assets and liabilities were only disclosed on an annual basis. FSP FAS 107-1 required these disclosures on a quarterly basis, providing qualitative and quantitative information about fair value estimates for all financial instruments not measured on the balance sheet at fair value. FSP FAS 107-1 became effective for the company for the period ended June 30, 2009, which required the company to make annual disclosures in its interim financial statements, which are included in Note 2, “Fair Value of Assets and Liabilities,” Note 3, “Investments,” and Note 7, “Debt.”
     FSP FAS 115-2 was intended to improve the consistency in the timing of impairment recognition and provide greater clarity to investors about the credit and noncredit components of impaired debt securities that are not expected to be sold. FSP FAS 115-2 required increased and more timely disclosures sought by investors regarding expected cash flows, credit losses, and an aging of

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securities with unrealized losses. The company adopted FSP FAS 115-2 on April 1, 2009. Upon adoption, the company recorded a cumulative effect adjustment of $1.5 million to the April 1, 2009, opening balance of retained earnings with a corresponding adjustment to accumulated other comprehensive income.
     In May 2009, the FASB issued Statement No. 165, “Subsequent Events” (FASB Statement No. 165). FASB Statement No. 165, which is now encompassed in ASC Topic 855, “Subsequent Events,” established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, FASB Statement No. 165 provided clarity around the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosure that an entity should make about events or transactions that occurred after the balance sheet date. FASB Statement No. 165 was effective for interim and annual financial reporting periods ending after June 15, 2009, and was applied prospectively. On February 24, 2010, the FASB issued Accounting Standards Update 2010-09, “Amendments to Certain Recognition and Disclosure Requirements” (ASU 2010-09). ASU 2010-09 amended the guidance on subsequent events to remove the requirement for Securities and Exchange Commission filers to disclose the date through which an entity has evaluated subsequent events.
     In June 2009, the FASB issued Statement No. 166, “Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140,” (FASB Statement No. 166), which addresses the effects of eliminating the qualifying special-purpose entity concept from FASB Statement No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (FASB Statement No. 140), and will generally subject those entities to the consolidation guidance applied to other VIEs as provided by FASB Statement No. 167, “Amendments to FASB Interpretation No. 46(R)” (FASB Statement No. 167). FASB Statement No. 166 is now encompassed in ASC Topic 860. FASB Statement No. 167 is now encompassed in ASC Topic 810. Specifically, FASB Statement No. 166 introduces the concept of a participating interest, which will limit the circumstances where the transfer of a portion of a financial asset will qualify as a sale, assuming all other derecogntion criteria are met, and clarifies and amends the derecogntion criteria for determining whether a transfer qualifies for sale accounting. FASB Statement No. 166 will be applied prospectively to new transfers of financial assets occurring on or after January 1, 2010. The adoption of FASB Statement No. 166 did not have a material impact on the company’s Consolidated Financial Statements.
     In June 2009, the FASB issued Statement No. 167, which amends certain provisions of FIN 46(R). Specifically, FASB Statement No. 167 amends certain provisions for determining whether an entity is a VIE, it requires a qualitative rather than a quantitative analysis to determine whether the company is the primary beneficiary of a VIE, it amends FIN 46(R)’s consideration of related party relationships in the determination of the primary beneficiary of a VIE by providing an exception regarding de facto agency relationships in certain circumstances, it requires continuous assessments of whether the company is a VIE’s primary beneficiary, and it requires enhanced disclosures about the company’s involvement with VIEs, which are generally consistent with those disclosures required by FSP FAS 140-4 and FIN 46(R)-8 discussed above. In February 2010, the FASB issued ASU 2010-10, a deferral of the effective date of FASB Statement No. 167 for a reporting entity’s interests in certain investment funds which have attributes of investment companies, for which the reporting entity does not have an obligation to fund losses, and which are not structured as securitization entities. In addition, the deferral applies to a reporting entity’s interest in money market fund-type products. The company has determined that all of its managed funds with the exception of certain collateralized loan obligation products (CLOs) qualify for the deferral.
     FASB Statement No. 167, which was effective January 1, 2010, had a significant impact on the presentation of the company’s financial statements, as its provisions required the company to consolidate certain CLOs that were not previously consolidated. The cumulative effect adjustment upon adoption of FASB Statement No. 167 at January 1, 2010, resulted in an appropriation of retained earnings and a reclassification of other comprehensive income into retained earnings of $274.3 million and $5.2 million, respectively. The company’s Consolidated Statement of Income for the six months ended June 30, 2010, reflect the elimination of $17.6 million in management fees earned from these CLOs, and the addition of $105.6 million in interest income, $46.4 million in interest expense, and $243.2 million in net other gains. The $281.2 million net income impact during the six months ended June 30, 2010, of consolidation of these CLOs is largely offset by gains/(losses) attributable to investors in noncontrolling interests of $277.4 million. Prior to the adoption of FASB Statement No. 167, the company accounted for its investments in these CLOs as available-for-sale investments, with changes in the value of the company’s interests being recorded through other comprehensive income. After the adoption of FASB Statement No. 167, the change in value of the company’s investments in these CLOs is reflected in the company’s net income. For the six months ended June 30, 2010, the net impact to the company of its investments in these CLOs was $3.8 million. The Condensed Consolidated Balance Sheet at June 30, 2010, reflects the consolidation of $6.5 billion in assets held and $5.4 billion in debt issued by these CLOs, despite the fact that the assets cannot be used by the company, nor is the company obligated for the debt. Retained earnings appropriated for investors of consolidated investment products of $719.5 million is presented as part of the

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company’s total equity, reflecting the excess of the consolidated CLOs’ assets over their liabilities, attributable to noncontrolling third-party investors in their consolidated CLOs at June 30, 2010. In addition, the company’s Condensed Consolidated Cash Flow Statement for the six months ended June 30, 2010, reflects the cash flows of these CLOs. In accordance with the standard, prior periods have not been restated to reflect the consolidation of these CLOs.
     Upon adoption of FASB Statement No. 167, the assets and liabilities of the consolidated CLOs were measured at fair value, as the determination of the carrying amounts was not practicable. The company has elected the fair value option under ASC Topic 825-10-25 to measure the assets and liabilities of all consolidated CLOs at fair value subsequent to the date of initial adoption of FASB Statement No. 167, as the company has determined that measurement of the notes issued by consolidated CLOs at fair value better correlates with the value of the assets held by consolidated CLOs, which are held to provide the cash flows for the note obligations. See Note 12, “Consolidated Investment Products,” for a consolidating balance sheet at June 30, 2010.
     In July 2009, the FASB issued Statement No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – A Replacement of FASB Statement No. 162,” (FASB Statement No. 168). FASB Statement No. 168 replaced the existing hierarchy of U.S. Generally Accepted Accounting Principles with the FASB ASC as the single source of authoritative U.S. accounting and reporting standards applicable for all nongovernmental entities, with the exception of guidance issued by the U.S. Securities and Exchange Commission and its staff. FASB Statement No. 168 is now encompassed in ASC Topic 105, “Generally Accepted Accounting Principles,” and was effective July 1, 2009. The company has replaced references to FASB accounting standards with ASC references, where applicable and relevant, in this Report.
     In August 2009, the FASB issued Accounting Standards Update 2009-05, “Fair Value Measurements and Disclosures (Topic 820) – Measuring Liabilities at Fair Value” (ASU 2009-05). ASU 2009-05 amends Topic 820 by providing additional guidance (including illustrative examples) clarifying the measurement of liabilities at fair value. When a quoted price in an active market for the identical liability is not available, the amendments in ASU 2009-05 require that the fair value of a liability be measured using one or more of the listed valuation techniques that should maximize the use of relevant observable inputs and minimize the use of unobservable inputs. In addition, the amendments in ASU 2009-05 clarify that when estimating the fair value of a liability, an entity is not required to include a separate input or adjustment to the other inputs relating to the existence of a restriction that prevents the transfer of the liability. The amendments also clarify how the price of a traded debt security (i.e., an asset value) should be considered in estimating the fair value of the issuer’s liability. The amendments in ASU 2009-05 became effective for the company on October 1, 2009. The company has made the required disclosures in Note 7, “Debt.”
     In September 2009, the FASB issued Accounting Standards Update 2009-12, “Investments in Certain Entities that Calculate Net Asset Value per Share (or Its Equivalent)” (ASU 2009-12). ASU 2009-12 amends ASC Topic 820 to provide further guidance on how to measure the fair value of investments in alternative investments, such as hedge, private equity, real estate, venture capital, offshore and fund of funds. ASU 2009-12 permits, as a practical expedient, the measurement of fair value of an investment on the basis of the net asset value per share of the investment (or its equivalent) if the net asset value of the investment (or its equivalent) is calculated in a manner consistent with ASC Topic 946, “Financial Services — Investment Companies,” including measurement of all or substantially all of the fund’s underlying investments at fair value in accordance with ASC Topic 820. ASU 2009-12 is effective for interim and annual periods ending after December 15, 2009. The adoption of ASU 2009-12 did not have a material impact on the Consolidated Financial Statements.
     In January 2010, the FASB issued Accounting Standards Update 2010-06, “Improving Disclosures about Fair Value Measurements” (ASU 2010-06). ASU 2010-06 amends Topic 820 to require a number of additional disclosures regarding fair value measurements. Specifically, ASU 2010-06 requires entities to disclose: (1) the amount of significant transfers between Level 1 and Level 2 of the fair value hierarchy and the reasons for these transfers; (2) the reasons for any transfers in or out of Level 3; and (3) information in the reconciliation of recurring Level 3 measurements about purchases, sales, issuances and settlements on a gross basis. ASU 2010-06 also clarifies existing fair value disclosures about the appropriate level of disaggregation and about inputs and valuation techniques for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the rollforward of activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The company has made the required disclosures in Note 12, “Consolidated Investment Products.”

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2. FAIR VALUE OF ASSETS AND LIABILITIES
     The carrying value and fair value of financial instruments is presented in the below summary table. The fair value of financial instruments held by consolidated investment products is presented in Note 12, “Consolidated Investment Products.”
                                         
    June 30, 2010   December 31, 2009
    Footnote   Carrying           Carrying    
$ in millions   Reference   Value   Fair Value   Value   Fair Value
Cash and cash equivalents
            555.6       555.6       762.0       762.0  
Available for sale investments
    3       130.6       130.6       92.7       92.7  
Assets held for policyholders
            1,151.5       1,151.5       1,283.0       1,283.0  
Trading investments
    3       160.0       160.0       84.6       84.6  
Support agreements
    15       (2.5 )     (2.5 )     (2.5 )     (2.5 )
Policyholder payables
            (1,151.5 )     (1,151.5 )     (1,283.0 )     (1,283.0 )
Financial instruments sold, not yet purchased
            (0.2 )     (0.2 )            
Derivative liabilities
            (0.2 )     (0.2 )            
Long-term debt
    7       (1,395.7 )     (1,428.3 )     (745.7 )     (765.5 )
     A three-level valuation hierarchy exists for disclosure of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:
    Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
 
    Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
 
    Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement.
     An asset or liability’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
     There are three types of valuation approaches: a market approach, which uses observable prices and other relevant information that is generated by market transactions involving identical or comparable assets or liabilities; an income approach, which uses valuation techniques to convert future amounts to a single, discounted present value amount; and a cost approach, which is based on the amount that currently would be required to replace the service capacity of an asset.
     The following is a description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.
Cash equivalents
     Cash equivalents carried at fair value include cash investments in money market funds. Cash investments in money market funds are valued under the market approach through the use of quoted market prices in an active market, which is the net asset value of the underlying funds, and are classified within level 1 of the valuation hierarchy.
Available-for-sale investments
     Available-for-sale investments include amounts seeded into affiliated investment products and investments in affiliated unconsolidated CLOs. Seed money is valued under the market approach through the use of quoted market prices available in an active market and is classified within level 1 of the valuation hierarchy. Seed money investments are investments held in Invesco managed funds with the purpose of providing capital to the funds during their development periods. These investments are recorded at fair value using quoted market prices in active markets; there is no modeling or additional information needed to arrive at the fair values of these investments. CLOs are valued using an income approach through the use of certain observable and unobservable inputs. Due to current liquidity constraints within the market for CLO products that require the use of unobservable inputs, these investments are classified as level 3 within the valuation hierarchy.

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Assets held for policyholders
     Assets held for policyholders represent investments held by one of the company’s subsidiaries, which is an insurance entity that was established to facilitate retirement savings plans in the U.K. The assets held for policyholders are accounted for at fair value pursuant to ASC Topic 944, “Financial Services — Insurance,” and are comprised primarily of affiliated unitized funds. The assets are measured at fair value under the market approach based on the quoted prices of the underlying funds in an active market and are classified within level 1 of the valuation hierarchy. The policyholder liabilities are indexed to the value of the assets held for policyholders.
Trading investments
     Trading investments include investments held to economically hedge against costs the company incurs in connection with certain deferred compensation plans in which the company participates, as well as trading and investing activities in equity and debt securities entered into in its capacity as sponsor of unit investment trusts (UITs).
     Investments related to deferred compensation plans
     Investments related to deferred compensation plans are primarily invested in affiliated funds that are held to economically hedge current and non-current deferred compensation liabilities. Investments related to deferred compensation plans are valued under the market approach through the use of quoted prices in an active market and are classified within level 1 of the valuation hierarchy.
     UIT-related equity and debt securities
     At June 30, 2010, UIT-related equity and debt securities consisted of investments in corporate stock, UITs, U.S. state and political subdivisions. Each is discussed more fully below.
     Corporate stock
     The company temporarily holds investments in corporate stock for purposes of creating a UIT. Corporate stocks are valued under the market approach through use of quoted prices on an exchange. To the extent these securities are actively traded, valuation adjustments are not applied and they are categorized in Level 1 of the fair value hierarchy; otherwise, they are categorized in Level 2.
     UITs
     The company may hold units of its sponsored UITs at period-end for sale in the primary market or secondary market. Equity UITs are valued under the market approach through use of quoted prices on an exchange. Fixed income UITs are valued using recently executed transactions, market price quotations (where observable), bond spreads, or credit default swap spreads. The spread data used is for the same maturity as the underlying bond. If the spread data does not reference the issuer, then data that references a comparable issuer is used. When observable price quotations are not available, fair value is determined based on cash flow models with yield curves, bond or single name credit default spreads, and recovery rates based on collateral value as key inputs. Depending on the nature of the inputs, these investments are categorized as Level 1, 2, or 3.
     U.S. state and political subdivision securities
     U.S. state and political subdivision (collectively ‘municipals’) securities are valued using recently executed transactions, market price quotations (where observable), bond spreads, or credit default swap spreads. The spread data used is for the same maturity as the underlying bond. If the spread data does not reference the issuer, then data that references a comparable issuer is used. When observable price quotations are not available, fair value is determined based on cash flow models with yield curves, bond or single name credit default spreads, and recovery rates based on collateral value as key inputs. Depending on the nature of the inputs, these investments are categorized as Level 1, 2, or 3.
     UIT-related derivative contracts and hedging strategies
     The company uses U.S. Treasury futures, which are types of derivative financial instruments, to economically hedge fixed income UIT inventory and securities in order to mitigate market risk. Open futures contracts are marked to market daily through earnings, which is recorded in the company’s consolidated statement of income in other revenue, along with the mark-to-market on the underlying trading securities held. Fair values of derivative contracts in an asset position are included in other assets in the company’s consolidated statement of position. Fair values of derivative contracts in a liability position are included in other liabilities in the company’s consolidated statement of position. These derivative contracts are valued under the market approach through use of quoted prices in an active market and are classified within Level 1 of the valuation hierarchy. Additionally, to economically hedge the market risk associated with equity UITs temporarily held as trading investments, the company will hold short corporate equity or ETF positions. These transactions are recorded as financial instruments sold, not yet purchased, and are valued in the same manner as corporate stock.

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     The following table presents, for each of the hierarchy levels described above, the carrying value of the company’s assets and liabilities, including major security type for equity and debt securities, which are measured at fair value on the face of the statement of financial position as of June 30, 2010.
                                 
    As of June 30, 2010
            Quoted Prices in        
            Active Markets for   Significant Other   Significant
    Fair Value   Identical Assets   Observable Inputs   Unobservable Inputs
$ in millions   Measurements   (Level 1)   (Level 2)   (Level 3)
Current assets:
                               
Cash equivalents:
                               
Money market funds
    199.2       199.2              
Investments:*
                               
Available-for-sale:
                               
Seed money
    130.0       130.0              
Trading investments:
                               
Investments related to deferred compensation plans
    143.3       143.3              
UIT-related equity and debt securities
                               
Corporate stock
    1.5       1.5              
UITs
    2.0       2.0              
U.S. state and political subdivisions securities
    13.2             13.2        
Assets held for policyholders
    1,151.5       1,151.5              
 
                               
Total current assets
    1,640.7       1,627.5       13.2        
 
                               
Non-current assets:
                               
Investments — available-for-sale*:
                               
CLOs**
    0.6                   0.6  
 
                               
Total assets at fair value
    1,641.3       1,627.5       13.2       0.6  
 
                               
 
                               
Current liabilities:
                               
UIT-related financial instruments sold, not yet purchased:
                               
Corporate equities
    (0.2 )     (0.2 )            
UIT-related derivative liabilities
    (0.2 )     (0.2 )            
 
                               
Total liabilities at fair value
    (0.4 )     (0.4 )            
 
                               
 
*   Current foreign time deposits of $23.5 million and other current investments of $0.5 million are excluded from this table. Other non-current equity and cost method investments of $142.6 million and $4.5 million, respectively, are also excluded from this table. These investments are not measured at fair value, in accordance with applicable accounting standards.
 
**   The company adopted FASB Statement No. 167, now encompassed in ASC Topic 810, “Consolidation,” on January 1, 2010, resulting in the consolidation of CLOs for which the company has an underlying investment of $21.8 million at June 30, 2010 (before consolidation). In accordance with the standard, prior periods have not been restated to reflect the consolidation of these CLOs.

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     The following table presents, for each of the hierarchy levels described above, the carrying value of the company’s assets that are measured at fair value as of December 31, 2009:
                                 
    As of December 31, 2009
            Quoted Prices in        
            Active Markets for   Significant Other   Significant
    Fair Value   Identical Assets   Observable Inputs   Unobservable Inputs
$ in millions   Measurements   (Level 1)   (Level 2)   (Level 3)
Current assets:
                               
Cash equivalents:
                               
Money market funds
    498.6       498.6              
Investments:*
                               
Available-for-sale:
                               
Seed money
    74.8       74.8              
Trading investments:
                               
Investments related to deferred compensation plans
    84.6       84.6              
Assets held for policyholders
    1,283.0       1,283.0              
 
                               
Total current assets
    1,941.0       1,941.0              
 
                               
Non-current assets:
                               
Investments — available-for-sale:
                               
CLOs
    17.9                   17.9  
 
                               
Total assets at fair value
    1,958.9       1,941.0             17.9  
 
                               
 
*   Current foreign time deposits of $22.5 million and other current investments of $0.5 million are excluded from this table. Other non-current equity method and other investments of $134.7 million and $4.8 million, respectively, are also excluded from this table. These investments are not measured at fair value, in accordance with applicable accounting standards.
     The following table shows a reconciliation of the beginning and ending fair value measurements for level 3 assets during the three and six month periods ending June 30, 2010, which are comprised solely of CLOs, and are valued using significant unobservable inputs:
                 
    Three months   Six months
    Ended June 30,   Ended June 30,
$ in millions   2010   2010
Beginning balance
    0.4       17.9  
Adoption of FASB Statement No. 167*
          (17.4 )
 
               
Beginning balance, as adjusted
    0.4       0.5  
Net unrealized gains and losses included in accumulated other comprehensive income/(loss)**
    0.2       0.1  
Purchases and issuances
           
Other-than-temporary impairment included in other gains and losses, net
           
Return of capital
           
 
               
Ending balance
    0.6       0.6  
 
               
 
*   The company adopted FASB Statement No. 167, now encompassed in ASC Topic 810, “Consolidation,” on January 1, 2010, resulting in the consolidation of CLOs for which the company has an underlying investment of $21.8 million at June 30, 2010 (before consolidation). The adjustment of $17.4 million in the table above reflects the elimination of the company’s equity interest upon adoption. In accordance with the standard, prior periods have not been restated to reflect the consolidation of these CLOs.
 
**   Of these net unrealized gains and losses included in accumulated other comprehensive income/(loss), $0.2 million for the three months ended June 30, 2010 and $0.1 million for the six months ended June 30, 2010 are attributed to the change in unrealized gains and losses related to assets still held at June 30, 2010.

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     The following table shows a reconciliation of the beginning and ending fair value measurements for level 3 assets during the three and six month periods ending June 30, 2009, which were comprised solely of CLOs (prior to the adoption of FASB Statement No. 167), and were valued using significant unobservable inputs:
                 
    Three months   Six months
    Ended June 30,   Ended June 30,
$ in millions   2009   2009
Beginning balance
    13.5       17.5  
Net unrealized gains and losses included in accumulated other comprehensive income/(loss)*
    0.8       0.9  
Purchases and issuances
           
Other-than-temporary impairment included in other gains and losses, net
    (0.8 )     (4.4 )
Return of capital
    (0.1 )     (0.6 )
 
               
Ending balance
    13.4       13.4  
 
               
 
*   Of these net unrealized gains and losses included in accumulated other comprehensive income/(loss), $0.8 million for the three months ended June 30, 2009, and $0.9 million for the six months ended June 30, 2009, are attributed to the change in unrealized gains and losses related to assets still held at June 30, 2009.
3. INVESTMENTS
     The disclosures below include details of the company’s investments. Investments held by consolidated investment products are detailed in Note 12, “Consolidated Investment Products.”
Current Investments
                 
    As of
    June 30,   December 31,
$ in millions   2010   2009
Available-for-sale investments:
               
Seed money
    130.0       74.8  
Trading investments:
               
Investments related to deferred compensation plans
    143.3       84.6  
UIT-related equity and debt securities
    16.7        
Foreign time deposits
    23.5       22.5  
Other
    0.5       0.5  
 
               
Total current investments
    314.0       182.4  
 
               
Non-current Investments
                 
    As of
    June 30,   December 31,
$ in millions   2010   2009
Available-for-sale investments:
               
CLOs
    0.6       17.9  
Equity method investments
    142.6       134.7  
Other
    4.5       4.8  
 
               
Total non-current investments
    147.7       157.4  
 
               
     The portion of trading gains and losses for the six months ended June 30, 2010, that relates to trading securities still held at June 30, 2010, was $6.6 million net loss.

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     Realized gains and losses recognized in the income statement during the year from investments classified as available-for-sale are as follows:
                                                 
    For the Three months Ended June 30, 2010   For the Six months Ended June 30, 2010
            Gross   Gross           Gross   Gross
    Proceeds   Realized   Realized   Proceeds   Realized   Realized
$ in millions   from Sales   Gains   Losses   from Sales   Gains   Losses
Current available-for-sale investments
    3.7       0.3             10.6       0.7       (0.5 )
Non-current available-for-sale investments
    0.4                   0.6              
     Upon the sale of available-for-sale securities, net realized gains of $0.3 million and $0.2 million were transferred from accumulated other comprehensive income into the Condensed Consolidated Statements of Income during three and the six months ended June 30, 2010, respectively. The specific identification method is used to determine the realized gain or loss on securities sold or otherwise disposed.
     Gross unrealized holding gains and losses recognized in other accumulated comprehensive income from available-for-sale investments are presented in the table below:
                                                                 
    June 30, 2010   December 31, 2009
            Gross   Gross                   Gross   Gross    
            Unrealized   Unrealized                   Unrealized   Unrealized    
            Holding   Holding   Fair           Holding   Holding   Fair
$ in millions   Cost   Gains   Losses   Value   Cost   Gains   Losses   Value
Current:
                                                               
Seed money
    129.4       5.1       (4.5 )     130.0       74.7       5.9       (5.8 )     74.8  
 
                                                               
Current available-for-sale investments
    129.4       5.1       (4.5 )     130.0       74.7       5.9       (5.8 )     74.8  
Non-current:
                                                               
CLOs*
    0.3       0.3             0.6       12.6       5.3             17.9  
 
                                                               
Non-current available-for-sale investments:
    0.3       0.3             0.6       12.6       5.3             17.9  
 
                                                               
 
    129.7       5.4       (4.5 )     130.6       87.3       11.2       (5.8 )     92.7  
 
                                                               
 
*   The company adopted FASB Statement No. 167, now encompassed in ASC Topic 810, “Consolidation,” on January 1, 2010, resulting in the consolidation of CLOs for which the company has an underlying investment of $21.8 million at June 30, 2010 (before consolidation). In accordance with the standard, prior periods have not been restated to reflect the consolidation of these CLOs.
     Available-for-sale debt securities as of June 30, 2010, by maturity, are set out below:
         
    Available-for-Sale
$ in millions   (Fair Value)
Less than one year
     
One to five years
     
Five to ten years
    0.6  
Greater than ten years
     
 
       
Total available-for-sale
    0.6  
 
       
     The following table provides the breakdown of available-for-sale investments with unrealized losses at June 30, 2010:
                                                 
    Less Than 12 Months   12 Months or Greater   Total
            Gross           Gross           Gross
            Unrealized           Unrealized           Unrealized
$ in millions   Fair Value   Losses   Fair Value   Losses   Fair Value   Losses
Seed money (124 funds)
    62.1       (4.0 )     7.1       (0.5 )     69.2       (4.5 )

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     The following table provides the breakdown of available-for-sale investments with unrealized losses at December 31, 2009:
                                                 
    Less Than 12 Months   12 Months or Greater   Total
            Gross           Gross           Gross
            Unrealized           Unrealized           Unrealized
$ in millions   Fair Value   Losses   Fair Value   Losses   Fair Value   Losses
Seed money (44 funds)
    5.7       (0.3 )     25.1       (5.5 )     30.8       (5.8 )
     The company has reviewed investment securities for other-than-temporary impairment in accordance with its accounting policy and has recognized other-than-temporary impairment charges of $4.0 million and $6.1 million on seed money investments during the three and six months ended June 30, 2010, respectively, as discussed in Note 2, “Fair Value of Assets and Liabilities.”
     The gross unrealized losses of seed money investments at June 30, 2010, were primarily caused by declines in the market value of the underlying securities in the seeded funds and foreign exchange movements. After conducting a review of the financial condition and near-term prospects of the underlying securities in the seeded funds as well as the severity and duration of the impairment, the company does not consider any material portion of its gross unrealized losses on these securities to be other-than-temporarily impaired. The securities are expected to recover their value over time and the company has the intent and ability to hold the securities until this recovery occurs.
     As discussed in Note 1, “Accounting Policies,” the company adopted FSP FAS 115-2, now encompassed in ASC Topic 320, on April 1, 2009. Upon adoption, the company recorded a cumulative effect adjustment of $1.5 million to the April 1, 2009, opening balance of retained earnings with a corresponding adjustment to accumulated other comprehensive income, representing the non-credit component of previously-recognized other-than-temporary impairment (OTTI). During the six months ended June 30, 2010, there were no charges to other comprehensive income from other-than-temporary impairment related to non-credit related factors. A rollforward of the cumulative credit-related other-than-temporary impairment charges recognized in earnings for which some portion of the impairment was recorded in other comprehensive income is as follows:
                 
    Three months ended   Six months ended
In millions   June 30, 2010   June 30, 2010
Beginning balance
    0.8       18.8  
Adoption of FASB Statement No. 167*
          (18.0 )
 
               
Beginning balance, as adjusted
    0.8       0.8  
Additional credit losses recognized during the period related to securities for which:
               
No OTTI has been previously recognized
           
OTTI has been previously recognized
           
 
               
Ending balance
    0.8       0.8  
 
               
 
*   The company adopted FASB Statement No. 167, now encompassed in ASC Topic 810, “Consolidation,” on January 1, 2010, resulting in the consolidation of CLOs for which the company has an underlying investment of $21.8 million at June 30, 2010 (before consolidation). Of the $18.8 million cumulative credit-related OTTI balance at January 1, 2010, $18.0 million relates to CLOs that were consolidated into the company’s Condensed Consolidated Balance Sheet, resulting in the elimination of our equity interest.
4. BUSINESS COMBINATION AND INTEGRATION
     On June 1, 2010, Invesco acquired from Morgan Stanley its retail asset management business, including Van Kampen Investments (the “acquired business” or the “acquisition”), in exchange for an aggregate of 30.9 million shares of common stock and participating preferred stock on an as converted basis and $770.0 million in cash.
     The acquired business brings in assets under management across the equity, fixed income and alternative asset classes (including mutual funds, variable insurance funds, separate accounts and unit investment trusts).
     Each participating preferred shares issued to Morgan Stanley is convertible into 1,000 common shares upon transfer by Morgan Stanley to an unrelated third party. The 30.9 million shares issued to Morgan Stanley include 11.7 million common shares and 19.2 million participating preferred shares as converted to common shares.

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     The transaction was accounted for under the acquisition method of accounting. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of the transaction. Substantially all of the $362.7 million excess of the purchase price over the fair value of assets acquired and liabilities and non-controlling interests assumed was recorded as nondeductible goodwill. The goodwill balance resulted primarily from an opening balance sheet net deferred tax liability of $307.8 million which reflects a carryover tax basis in certain assets that were acquired.
     The following table summarizes the initial estimate of amounts of identified assets acquired and liabilities assumed at the acquisition date, as well as the consideration transferred to acquire Morgan Stanley’s retail asset management business, including Van Kampen Investments.
         
$ in millions   Fair Value Estimate
ASSETS
       
Cash and cash equivalents
    57.8  
Cash of consolidated investment products
    4.4  
Investments
    71.4  
Investments of consolidated investment products
    762.3  
Receivables
    81.1  
Receivables of consolidated investment products
    11.6  
Property and equipment
    3.2  
Institutional relationships intangible
    18.0  
Sub-Advised relationships intangible
    54.0  
Fund management contracts intangible
    1,047.0  
Distribution relationships intangible
    40.0  
Distribution agreements intangible
    17.0  
Trademarks / Trade Names intangible
    13.0  
Goodwill
    362.7  
Other assets
    18.8  
 
       
Total assets
    2,562.3  
LIABILITIES AND APPROPRIATED EQUITY
       
Accruals and accounts payables
    (135.6 )
Other current liabilities of consolidated investment products
    (16.3 )
Deferred taxation, net
    (307.8 )
Long-term debt of consolidated investment products
    (630.2 )
Retained earnings appropriated for investors of consolidated investment products
    (130.7 )
 
       
Total liabilities and appropriated equity
    (1,220.6 )
 
       
Total identifiable net assets
    1,341.7  
 
       
 
       
Summary of consideration:
       
Cash paid
    770.0  
Payable to seller
    2.5  
Capital stock at fair value
    569.2  
 
       
Total cash and stock consideration
    1,341.7  
 
       
     The 30.9 million aggregate common shares and participating preferred shares as converted to common shares issued to Morgan Stanley had a total fair value of $567.8 million based on the company’s opening market price of $18.38 per share on June 1, 2010, the acquisition date. The vested portion of replacement employee share based awards had a fair value of $1.4 million.
     Operating revenues and net income of the acquired business from June 1 through June 30, 2010, were approximately $67.0 million and $11.2 million, respectively, which represents the incremental impact of the acquired business and does not represent the stand-alone results of the acquired business. Immediately following the acquisition date, the company commenced the integration of the acquired business with its pre-existing operations. The integration of the acquired business is largely complete as of the date of this Report; as such, the company does not expect to be able to disclose the amount of operating revenues and earnings generated by the acquired business for periods subsequent to June 30, 2010. The following unaudited proforma summary presents consolidated information of the Company as if the business combination had occurred on January 1, 2009, the earliest period presented herein. Transaction and integration expenses have been removed from the proforma information as they are deemed to be costs directly

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attributable to the acquired business. These pro forma results are not indicative of the actual results of operations that would have been achieved nor are they indicative of future results of operations.
                 
    For the three months ended June 30,
$ in millions   2010   2009
Operating Revenues
    925.2       796.2  
Net income
    124.7       76.8  
                 
    For the six months ended June 30,
$ in millions   2010   2009
Operating Revenues
    1,823.8       1,453.6  
Net income
    254.6       97.6  
     During the three and six months ended June 30, 2010, the company incurred $79.3 million, and $96.5 million, respectively, of transaction and integration costs ($64.5 million and $79.8 million net of taxation, respectively). Transaction and integration costs include acquisition-related charges incurred during the period to effect a business combination, including legal, regulatory, advisory, valuation, and other professional or consulting fees, general and administrative costs, including travel costs related to the transaction and the costs of temporary staff involved in executing the transaction, and post-closing costs of integrating the acquired business into the company’s existing operations including incremental costs associated with achieving synergy savings. The following table presents acquisition-related and integration-related charges incurred during the period.
                 
    For the three months ended   For the six months ended
$ in millions   June 30, 2010   June 30, 2010
Acquisition-related charges
    4.4       5.4  
Integration-related charges
    74.9       91.1  
 
               
Total transaction and integration charges(1)
    79.3       96.5  
 
               
 
(1)   The company incurred $4.3 million of acquisition-related costs and $6.5 million of integration-related costs during 2009, which is not reflected in this table.
     Integration charges include costs associated with activities that do not represent ongoing costs of the fully integrated combined organization, such as severance and employee-related charges, costs associated with proxy solicitation to fund shareholders and other integration-related charges. The company expects to incur an additional $13.4 million of severance and employee-related charges and $54.3 million of additional integration-related charges during 2010 and 2011.
5. INTANGIBLE ASSETS
     The following table presents the major classes of the company’s finite-lived intangible assets at June 30, 2010, and December 31, 2009:
                                 
    Weighted Average            
    Amortization   Gross Book   Accumulated   Net Book
    Period (years)   Value   Amortization   Value
$ in millions                                
June 30, 2010
                               
Management contracts
    8.7       174.5       (81.4 )     93.1  
Customer relationships
    12.0       40.0       (0.3 )     39.7  
Distribution agreements
    4.0       17.0       (0.4 )     16.6  
Trademarks / Trade Names
    2.0       13.0       (0.5 )     12.5  
Other
    5.0       3.1       (2.5 )     0.6  
 
                               
Total
    8.6       247.6       (85.1 )     162.5  
 
                               
 
                               
December 31, 2009
                               
Management contracts
    9.3       103.4       (75.8 )     27.6  
Other
    5.0       2.8       (1.9 )     0.9  
 
                               
Total
    9.0       106.2       (77.7 )     28.5  
 
                               

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     Where evidence exists that the underlying management contracts are renewed annually at little or no cost to the company, the management contract intangible asset is assigned an indefinite life. The acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments, added $1,047.0 million of indefinite-lived intangible assets to the company’s Condensed Consolidated Balance Sheet at June 1, 2010, as discussed in Note 4, “Business Combination and Integration,” above. Indefinite-lived intangible assets, which total $1,160.3 million at June 30, 2010 (December 31, 2009: $110.6 million) primarily relate to fund management contracts acquired during the June 1, 2010 acquisition.
     Amortization expense was $5.2 million and $8.3 million, respectively, during the three and six months ended June 30, 2010 (three and six months ended June 30, 2009: $3.1 million and $6.3 million, respectively) and is included within General and Administrative expenses in the Condensed Consolidated Statements of Income. Estimated amortization expense for each of the five succeeding fiscal years based upon the company’s intangible assets at June 30, 2010, is as follows:
         
Years Ended June 30,        
$ in millions        
2011
    33.7  
2012
    27.7  
2013
    20.6  
2014
    18.5  
2015
    12.4  
6. GOODWILL
     The table below details changes in the goodwill balance:
                         
    Gross Book   Accumulated   Net Book
$ in millions   Value   Impairment   Value
January 1, 2009
    5,983.4       (16.6 )     5,966.8  
Business combinations
    34.2             34.2  
Foreign exchange
    466.6             466.6  
 
                       
December 31, 2009
    6,484.2       (16.6 )     6,467.6  
 
                       
 
                       
January 1, 2010
    6,484.2       (16.6 )     6,467.6  
Business combinations
    388.5             388.5  
Foreign exchange
    (167.2 )           (167.2 )
 
                       
June 30, 2010
    6,705.5       (16.6 )     6,688.9  
 
                       
     The acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments, added $362.7 million of goodwill to the company’s Condensed Consolidated Balance Sheet at June 1, 2010, as discussed in Note 4, “Business Combination and Integration,” above. The April 3, 2010, earn-out calculation related to the 2006 acquisition of W.L. Ross & Co. resulted in an addition to goodwill and a non-interest bearing note payable to the sellers of $25.8 million, payable at the next measurement date, October 3, 2010 (2009 earn-out goodwill addition: $34.2 million). See Note 15, “Commitments and Contingencies,” for additional information.

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7. DEBT
     The disclosures below include details of the company’s debt. Debt of consolidated investment products is detailed in Note 12, “Consolidated Investment Products.”
                                 
    June 30, 2010   December 31, 2009
    Carrying           Carrying    
$ in millions   Value   Fair Value   Value   Fair Value
Unsecured Senior Notes*:
                               
5.625% — due April 17, 2012
    215.1       226.7       215.1       227.0  
5.375% — due February 27, 2013
    333.5       351.3       333.5       343.4  
5.375% — due December 15, 2014
    197.1       200.3       197.1       195.1  
Floating rate credit facility terminated May 24, 2010
                       
Floating rate credit facility expiring May 23, 2013
    650.0       650.0              
 
                               
Total debt
    1,395.7       1,428.3       745.7       765.5  
Less: current maturities of total debt
                       
 
                               
Long-term debt
    1,395.7       1,428.3       745.7       765.5  
 
                               
 
*   The company’s Senior Note indentures contain certain restrictions on mergers or consolidations. Beyond these items, there are no other restrictive covenants in the indentures.
     The fair market value of the company’s total debt was determined by market quotes provided by Bloomberg. In the absence of an active market, the company relies upon the average price quoted by brokers for determining the fair market value of the debt. The level of trading, both in number of trades and amount of Notes traded, has increased to a level that the company believes market quotes to be a reasonable representation of the current fair market value of the Notes.
Analysis of Borrowings by Maturity:
         
$ in millions   June 30, 2010
2011
     
2012
    215.1  
2013
    983.5  
2014
    197.1  
Thereafter
     
 
       
Total debt
    1,395.7  
 
       
     On May 24, 2010, the company terminated its existing $500.0 million credit facility and entered into a new $1,250.0 million credit facility. Amounts borrowed under the credit facility are repayable at maturity on May 23, 2013,
     At June 30, 2010, the outstanding balance on the credit facility was $600.0 million and the weighted average interest rate on the credit facility was 1.73%. Borrowings under the credit facility will bear interest at (i) LIBOR for specified interest periods or (ii) a floating base rate (based upon the highest of (a) the Bank of America prime rate, (b) the Federal Funds rate plus 0.50% and (c) LIBOR for an interest period of one month plus 1.00%), plus, in either case, an applicable margin determined with reference to the company’s credit ratings and specified credit default spreads. Based on credit ratings as of June 30, 2010, of the company and such credit default spreads, the applicable margin for LIBOR-based loans was 1.075% and for base rate loans was 0.075%. In addition, the company is required to pay the lenders a facility fee on the aggregate commitments of the lenders (whether or not used) at a rate per annum which is based on the company’s credit ratings. Based on credit ratings as of June 30, 2010, the annual facility fee was equal to 0.30%.
     The credit agreement governing the credit facility contains customary restrictive covenants on the company and its subsidiaries. Restrictive covenants in the credit agreement include, but are not limited to: prohibitions on creating, incurring or assuming any liens; entering into certain restrictive merger arrangements; selling, leasing, transferring or otherwise disposing of assets; making a material change in the nature of the business; making material amendments to organic documents; making a significant accounting policy change in certain situations; entering into transactions with affiliates; incurring certain indebtedness through the non-guarantor subsidiaries. Many of these restrictions are subject to certain minimum thresholds and exceptions. Financial covenants under the credit agreement include: (i) the quarterly maintenance of a debt/EBITDA ratio, as defined in the credit agreement, of not greater than 3.25:1.00 through December 31, 2011, and not greater than 3.00:1.00 thereafter, (ii) a coverage ratio (EBITDA, as defined in the

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credit agreement/interest payable for the four consecutive fiscal quarters ended before the date of determination) of not less than 4.00:1.00.
     The credit agreement governing the credit facility also contains customary provisions regarding events of default which could result in an acceleration or increase in amounts due, including (subject to certain materiality thresholds and grace periods) payment default, failure to comply with covenants, material inaccuracy of representation or warranty, bankruptcy or insolvency proceedings, change of control, certain judgments, ERISA matters, cross-default to other debt agreements, governmental action prohibiting or restricting the company or its subsidiaries in a manner that has a material adverse effect and failure of certain guaranty obligations.
     The lenders (and their respective affiliates) may have provided, and may in the future provide, investment banking, cash management, underwriting, lending, commercial banking, leasing, foreign exchange, trust or other advisory services to the company and its subsidiaries and affiliates. These parties may have received, and may in the future receive, customary compensation for these services.
8. SHARE CAPITAL
     Movements in the number of common shares and common share equivalents issued are represented in the table below:
                 
    Six months Ended   Six months Ended
In millions   June 30, 2010   June 30, 2009
Common shares issued — beginning balance
    459.5       426.6  
Issue of new shares
    11.7       32.9  
 
               
Common shares issued — ending balance
    471.2       459.5  
Less: Treasury shares for which dividend and voting rights do not apply
    (22.3 )     (32.7 )
 
               
Common shares outstanding
    448.9       426.8  
Participating preferred shares, on an as converted basis
    19.2        
 
               
Common shares and common share equivalents outstanding
    468.1       426.8  
 
               
     Total treasury shares at June 30, 2010, were 35.3 million (June 30, 2009: 45.7 million), including 13.0 million unvested restricted stock awards (June 30, 2009: 13.0 million) for which dividend and voting rights apply.
     Separately, an aggregate of 1.4 million shares were withheld on vesting events during the six months ended June 30, 2010, to meet employees’ withholding tax obligations (six months ended June 30, 2009: 1.1 million shares). The value of these shares withheld was $34.0 million (six months ended June 30, 2009: $12.3 million). Approximately $1.4 billion remained authorized under the company’s share repurchase plan at June 30, 2010.
     On June 1, 2010, Invesco acquired Morgan Stanley’s retail asset management business, including Van Kampen Investments. In connection with this transaction, Invesco issued to Morgan Stanley 19,212 shares of Series A convertible participating preferred stock (“participating preferred shares”). Each participating preferred share is convertible into 1,000 common shares upon transfer of the shares by Morgan Stanley to an unrelated third party. Each participating preferred share participates in dividends on a basis equal to common shares. The participating preferred shares are non-voting except as otherwise provided by applicable law and benefit from a liquidation preference of $0.01 per share.
9. OTHER COMPREHENSIVE INCOME
     The components of accumulated other comprehensive income, which includes our proportionate share of equity method investees’ accumulated other comprehensive income, were as follows:
                 
    June 30,   December 31,
$ in millions   2010   2009
Net unrealized gains/(losses) on available-for-sale investments
    6.2       5.4  
Tax on unrealized losses/(gains) on available-for-sale investments
    (1.4 )     (1.6 )
Cumulative foreign currency translation adjustments
    255.9       442.0  
Tax on cumulative foreign currency translation adjustments
    2.0       2.0  
Employee benefit plan liability adjustments
    (67.5 )     (74.5 )
Tax on employee benefit plan liability adjustments
    18.4       20.3  
 
               
Total accumulated other comprehensive income
    213.6       393.6  
 
               

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     Total other comprehensive income details are presented below:
                                 
    Three months Ended   Six months Ended
    June 30,   June 30,
$ in millions   2010   2009   2010   2009
Net income/(loss), including gains and losses attributable to noncontrolling interests
    238.2       28.2       452.7       (29.6 )
Adoption of FSP FAS 115-2
          (1.5 )           (1.5 )
Unrealized holding gains and losses on available-for-sale investments*
    (3.7 )     6.6       0.1       (2.3 )
Tax on net unrealized holding gains and losses on available-for-sale investments
    0.5       (0.2 )     0.3       (1.2 )
Reclassification adjustments for net gains and losses on available-for-sale investments included in net income
    3.7       0.5       5.9       5.4  
Tax on reclassification adjustments for net gains and losses on available-for-sale investments included in net income
    (0.1 )           (0.2 )     0.4  
Foreign currency translation adjustments**
    (96.7 )     391.6       (149.0 )     319.5  
Tax on foreign currency translation adjustments
          0.9             0.8  
Adjustments to employee benefit plan liability
    1.7       (3.9 )     7.0       (3.5 )
Tax on adjustments to pension liability
    (0.3 )     2.2       (1.8 )     2.0  
 
                               
Total comprehensive income/(loss)
    143.3       424.4       315.0       290.0  
 
                               
 
*   The company adopted FASB Statement No. 167, now encompassed in ASC Topic 810, “Consolidation,” on January 1, 2010, resulting in the consolidation of certain CLOs. Upon adoption, accumulated other comprehensive income was reduced by $5.2 million, as accumulated net unrealized gains at January 1, 2010, relating to the company’s investments in certain CLOs were reclassified into retained earnings upon their consolidation.
 
**   Included in this amount is $32.0 million and $37.1 million for the three and six months ended June 30, 2010, respectively, related to foreign currency translation adjustments attributable to consolidated investment products. Such amounts form part of the company’s total comprehensive income but are presented in retained earnings appropriated for investors in consolidated investment products rather than accumulated other comprehensive income.
10. TAXATION
     At June 30, 2010, the total amount of gross unrecognized tax benefits was $38.6 million as compared to the December 31, 2009, total amount of $39.0 million.
     The company and its subsidiaries file annual income tax returns in the United States (“U.S.”) federal jurisdiction, various U.S. state and local jurisdictions, and in numerous foreign jurisdictions. A number of years may elapse before an uncertain tax position, for which the company has unrecognized tax benefits, is finally resolved. To the extent that the company has favorable tax settlements, or determines that accrued amounts are no longer needed due to a lapse in the applicable statute of limitations or other reasons, such liabilities, as well as the related interest and penalty, would be reversed as a reduction of income tax expense (net of federal tax effects, if applicable) in the period such determination is made.
11. EARNINGS PER SHARE
     Basic earnings per share is calculated by dividing net income attributable to common shareholders by the weighted average number of shares outstanding during the periods, excluding treasury shares. Diluted earnings per share is computed using the treasury stock method, which requires computing share equivalents and dividing net income attributable to common shareholders by the total weighted average number of shares and share equivalents outstanding during the periods.
     On June 1, 2010, Invesco acquired Morgan Stanley’s retail asset management business, including Van Kampen Investments. In connection with this transaction, Invesco issued to Morgan Stanley 19,212 participating preferred shares. Each participating preferred share is convertible into 1,000 common shares upon transfer of the shares by Morgan Stanley to an unrelated third party. Each participating preferred share participates in dividends on a basis equal to common shares. Due to the similarities in terms between the company’s participating preferred shares and common shares, and the fact that the number of participating preferred shares outstanding and the dividends payable on participating preferred shares would not change the amount of basic or diluted EPS, the company considers the participating preferred shares to be common share equivalents. As such, the company has included the outstanding participating preferred shares, as converted to common shares, in the calculation of average basic and diluted shares outstanding for the three and six months ended June 30, 2010.

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     The calculation of earnings per share is as follows:
                         
    Net Income              
    Attributable to              
    Common     Weighted Average     Per Share  
In millions, except per share data   Shareholders     Number of Shares     Amount  
For the three months ended June 30, 2010
                       
Basic earnings per share
  $ 40.8       455.0     $ 0.09  
Dilutive effect of share-based awards
          2.8        
 
                 
Diluted earnings per share
  $ 40.8       457.8     $ 0.09  
 
                 
 
                       
For the three months ended June 30, 2009
                       
Basic earnings per share
  $ 75.7       410.6     $ 0.18  
Dilutive effect of share-based awards
          6.2        
 
                 
Diluted earnings per share
  $ 75.7       416.8     $ 0.18  
 
                 
                         
    Net Income              
    Attributable to              
    Common     Weighted Average     Per Share  
In millions, except per share data   Shareholders     Number of Shares     Amount  
For the six months ended June 30, 2010
                       
Basic earnings per share
  $ 135.8       447.0     $ 0.30  
Dilutive effect of share-based awards
          3.1        
 
                 
Diluted earnings per share
  $ 135.8       450.1     $ 0.30  
 
                 
 
                       
For the six months ended June 30, 2009
                       
Basic earnings per share
  $ 106.4       401.3     $ 0.26  
Dilutive effect of share-based awards
          6.2        
 
                 
Diluted earnings per share
  $ 106.4       407.5     $ 0.26  
 
                 
     See Note 13, “Share-based Compensation,” for a summary of share awards outstanding under the company’s share-based payment programs. These programs could result in the issuance of common shares that would affect the measurement of basic and diluted earnings per share.
     Options to purchase 9.2 million shares at a weighted average exercise price of 2,053 pence were outstanding for the six months ended June 30, 2010 (six months ended June 30, 2009: 13.2 million share options at a weighted average exercise price of 1,845 pence), but were not included in the computation of diluted earnings per share because the option’s exercise price was greater than the average market price of the shares and therefore their inclusion would have been anti-dilutive.
     There were no contingently issuable shares excluded from the diluted earnings per share computation for the six months ended June 30, 2010 (six months ended June 30, 2009: 1.6 million contingently issuable shares), because the necessary performance conditions for the shares to be issuable had not yet been satisfied at the end of the respective period. There were no contingently issuable shares that were excluded from the computation of diluted earnings per share during the six months ended June 30, 2010 and 2009, due to their inclusion being anti-dilutive.
12. CONSOLIDATED INVESTMENT PRODUCTS
     The company provides investment management services to, and has transactions with, various private equity funds, real estate funds, fund-of-funds, CLOs and other investment entities sponsored by the company for the investment of client assets in the normal course of business. The company serves as the investment manager, making day-to-day investment decisions concerning the assets of the products and generally has a small investment in certain of these products to demonstrate “skin in the game” to other potential unaffiliated investors in these products. Certain of these investments are considered to be variable interest entities (VIEs). If the company is the primary beneficiary of the VIEs, then the investment products are consolidated into the company’s financial statements. Other partnership entities are consolidated under a voting interest entity (VOE) model where the company is the general partner and is presumed to have control, in the absence of simple majority kick-out rights to remove the general partner, simple majority liquidation rights to dissolve the partnership, or any substantive participating rights of the other limited partners.

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     The company’s risk with respect to each investment is limited to its equity ownership and any uncollected management fees. Therefore, the gains or losses of consolidated investment products have not had a significant impact on the company’s results of operations, liquidity or capital resources. The company has no right to the benefits from, nor does it bear the risks associated with, these investments, beyond the company’s minimal direct investments in, and management fees generated from, the investment products. If the company were to liquidate, these investments would not be available to the general creditors of the company, and as a result, the company does not consider investments held by consolidated investment products to be company assets.
     CLOs
     For CLO entities, as discussed in Note 1, “Accounting Policies,” and Note 2, “Fair Value of Assets and Liabilities,” the company generally invests in a portion of the unrated, junior subordinated positions. The company’s investments in CLOs are generally subordinated to other interests in the entities and entitle the company and other subordinated tranche investors to receive the residual cash flows, if any, from the entities. The company’s underlying investments in the CLOs of $22.4 million (before consolidation) at June 30, 2010 (December 31, 2009: $17.9 million) represent its maximum risk of loss.
     Prior to the adoption of FASB Statement No. 167, now encompassed in ASC Topic 810, “Consolidation” (discussed in Note 1, “Accounting Policies”), the company’s ownership interests, which were classified as available-for-sale investments on the company’s Consolidated Balance Sheets, combined with its other interests (management and incentive fees), were quantitatively assessed to determine if the company is the primary beneficiary of these entities. The company determined, for periods prior to the adoption of FASB Statement No. 167, that it did not absorb the majority of the expected gains or losses from the CLOs and therefore was not their primary beneficiary.
     Effective January 1, 2010, upon the adoption of FASB Statement No. 167, the company determined that it was the primary beneficiary of certain CLOs, as it has the power to direct the activities of the CLOs that most significantly impact the CLOs’ economic performance, and the obligation to absorb losses/right to receive benefits from the CLOs that could potentially be significant to the CLOs. The primary beneficiary assessment includes an analysis of the rights of the company in its capacity as investment manager. In certain CLOs, the company’s role as investment manager provides that the company contractually has the power, as defined in FASB Statement No. 167, to direct the activities of the CLOs that most significantly impact the CLOs’ economic performance, such as managing the collateral portfolio and its credit risk. In other CLOs, the company determined that it does not have this power in its role as investment manager due to certain restrictions that limit its ability to manage the collateral portfolio and its credit risk. Additionally, the primary beneficiary assessment includes an analysis of the company’s rights to receive benefits and obligation to absorb losses associated with its first loss position and management/incentive fees. As part of this analysis, the company uses a quantitative model to corroborate its qualitative assessments. The quantitative model includes an analysis of the expected performance of the CLOs and a comparison of the company’s absorption of this performance relative to the other investors in the CLOs. The company has determined that it could receive significant benefits and/or absorb significant losses from certain CLOs in which it holds a first loss position and has the right to significant fees. It was determined that the company’s benefits and losses from certain other CLOs could not be significant, particularly in situations where the company does not hold a first loss position and where the fee interests are based upon a fixed percentage of collateral asset value.
     The company generally invests in only a portion of the unrated, junior subordinated positions. This subordinated interest can take the form of (1) subordinated notes, (2) income notes or (3) preference/preferred shares. The company has determined that, although the junior tranches have certain characteristics of equity, they should be accounted for and disclosed as debt on the company’s Condensed Consolidated Balance Sheet, as the subordinated and income notes have a stated maturity indicating a date for which they are mandatorily redeemable. The preference shares are also classified as debt, as redemption is required only upon liquidation or termination of the CLO and not of the company.
     The collateral assets of the CLOs are held solely to satisfy the obligations of the CLOs. The company has no right to the benefits from, nor does it bear the risks associated with, the collateral assets held by the CLOs, beyond the company’s minimal direct investments in, and management fees generated from, the CLOs. If the company were to liquidate, the collateral assets would not be available to the general creditors of the company. Additionally, the investors in the CLOs have no recourse to the general credit of the company for the notes issued by the CLOs.
     Private equity, real estate and fund-of-funds (partnerships)
     For investment products that are structured as partnerships and are determined to be VIEs, including private equity funds, real estate funds and fund-of-funds products, the company evaluates the structure of the partnership to determine if it is the primary beneficiary of the investment product. This evaluation includes assessing the rights of the limited partners to transfer their economic interests in the investment product. If the limited partners lack objective rights to transfer their economic interests, they are considered

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to be de facto agents of the company, resulting in the company determining that it is the primary beneficiary of the investment product. The company generally takes less than a 1% investment in these entities as the general partner. Interests in unconsolidated private equity funds, real estate funds and fund-of-funds products are classified as equity method investments in the company’s Consolidated Balance Sheets.
     On July 8, 2009, the U.S. Treasury announced the launch of the Public-Private Investment Program (PPIP), which was designed to support market functioning and facilitate price discovery in the asset-based securities markets, to allow banks and other financial institutions to re-deploy capital, and to extend new credit to households and businesses. Under this program, the U.S. Treasury will invest up to $30.0 billion of equity and debt into funds established with private sector investment managers and private investors for the purpose of purchasing legacy securities. The U.S. Treasury has partnered with eight investment management firms, including Invesco, in the PPIP. The company determined that certain feeder funds within the Invesco-sponsored PPIP partnership structure are VIEs; however, the company is not their primary beneficiary, as it does not absorb the majority of the expected gains or losses from these funds. Additionally, the company does not have any capital invested or committed into these funds. Other funds within the PPIP structure are VOEs; however, the company as general partner is not deemed to control these entities due to the presence of substantive kick-out or liquidation rights.
     Other investment products
     As discussed in Note 15, “Commitments and Contingencies,” the company has entered into contingent support agreements for two of its investment trusts to enable them to sustain a stable pricing structure, creating variable interests in these VIEs. The company earns management fees from the trusts and has a small investment in one of these trusts. The company was not deemed to be the primary beneficiary of these trusts after considering any explicit and implicit variable interests in relation to the total expected gains and losses of the trusts. The maximum committed amount under the support agreements, which represents the company’s maximum risk of loss, is equivalent to the amount of support that the trusts required as of June 30, 2010, to maintain the net asset value of the trusts at $1.00 per share. The recorded fair value of the guarantees related to these agreements at June 30, 2010, was estimated to be $2.5 million (December 31, 2009: $2.5 million), which was recorded as a guarantee obligation in other current liabilities in the Consolidated Balance Sheet. The fair value of these agreements is lower than the maximum support amount reflecting management’s estimation that the likelihood of funding under the support agreement is low, as significant investor redemptions out of the trusts before the scheduled maturity of the underlying securities or significant credit default issues of the securities held within the trusts’ portfolios would be required to trigger funding by the company.
     In June 2009, the company invested in the initial public offering of Invesco Mortgage Capital Inc. (NYSE: IVR), a real estate investment trust which is managed by the company. The company purchased 75,000 common shares of IVR at $20.00 per share and 1,425,000 limited partner units at $20.00 per unit through private placements for a total of $30.0 million. The company determined that IVR is a VIE and that its investment represents a variable interest. The company’s ownership interests, which are classified as equity method investments on the company’s Consolidated Balance Sheets, combined with its other interests (management fees), were quantitatively assessed to determine if the company is the primary beneficiary of IVR. The company determined that it did not absorb the majority of the expected gains or losses from IVR and therefore is not its primary beneficiary.
     At June 30, 2010, the company’s maximum risk of loss in significant VIEs in which the company is not the primary beneficiary is presented in the table below.
                         
                    Company’s Maximum
$ in millions   Footnote Reference   Carrying Value   Risk of Loss
CLO investments
    2       0.6       0.6  
Partnership and trust investments
          17.0       17.0  
Investments in Invesco Mortgage Capital Inc.
          31.3       31.3  
Support agreements*
    12       (2.5 )     36.0  
 
                       
Total
                    84.9  
 
                       
 
*   As of June 30, 2010, the committed support under these agreements was $36.0 million with an internal approval mechanism to increase the maximum possible support to $66.0 million at the option of the company.
     FASB Statement No. 167, which was effective January 1, 2010, had a significant impact on the presentation of the company’s financial statements, as its provisions required the company to consolidate certain CLOs that were not previously consolidated. The cumulative effect adjustment upon adoption of FASB Statement No. 167 at January 1, 2010, resulted in an appropriation of retained earnings and a reclassification of other comprehensive income into retained earnings of $274.3 million and $5.2 million, respectively.

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The company’s Consolidated Statement of Income for the six months ended June 30, 2010, reflect the elimination of $17.6 million in management fees earned from these CLOs, and the addition of $105.6 million in interest income, $46.4 million in interest expense, and $243.2 million in net other gains. The $281.2 million net income impact during the six months ended June 30, 2010, of consolidation of these CLOs is largely offset by gains/(losses) attributable to investors in noncontrolling interests of $277.4 million. Prior to the adoption of FASB Statement No. 167, the company accounted for its investments in these CLOs as available-for-sale investments, with changes in the value of the company’s interests being recorded through other comprehensive income. After the adoption of FASB Statement No. 167, the change in value of the company’s investments in these CLOs is reflected in the company’s net income. For the six months ended June 30, 2010, the net impact to the company of its investments in these CLOs was $3.8 million. The Condensed Consolidated Balance Sheet at June 30, 2010, reflects the consolidation of $6.5 billion in assets held and $5.4 billion in debt issued by these CLOs, despite the fact that the assets cannot be used by the company, nor is the company obligated for the debt. Retained earnings appropriated for investors of consolidated investment products of $719.5 million is presented as part of the company’s total equity, reflecting the excess of the consolidated CLOs’ assets over their liabilities, attributable to noncontrolling third-party investors in their consolidated CLOs at June 30, 2010. In accordance with the standard, prior periods have not been restated to reflect the consolidation of these CLOs.
During the six months ended June 30, 2010, entities with the following balance sheets were consolidated:
Balance Sheet
         
    VIEs
$ in millions   consolidated
During the six months ended June 30, 2010*
       
Current assets
    254.6  
Non-current assets
    6,188.1  
 
       
Total assets
    6,442.7  
 
       
Current liabilities
    154.2  
Non-current liabilities
    5,883.4  
 
       
Total liabilities
    6,037.6  
 
       
Total equity
    405.1  
 
       
Total liabilities and equity
    6,442.7  
 
       
 
*   The amounts consolidated in this table reflect the initial consolidation of CLOs at the adoption of FASB Statement No. 167 on January 1, 2010 as well as the initial consolidation of certain CLOs acquired in the June 1, 2010, acquisition.
     During the six months ended June 30, 2009, the company deconsolidated $53.3 million of investments held by consolidated investment products and related noncontrolling interests in consolidated entities as a result of determining that the company is no longer the primary beneficiary. The amounts deconsolidated from the Condensed Consolidated Balance Sheet are illustrated in the table below. There was no net impact to the Condensed Consolidated Statement of Income for the six months ended June 30, 2009, from the deconsolidation of these investment products.
Balance Sheet
         
    Amounts
    deconsolidated
$ in millions   under FIN 46(R)
During six months ended June 30, 2009
       
Current assets
     
Non-current assets
    53.3  
 
       
Total assets
    53.3  
 
       
Current liabilities
     
Non-current liabilities
     
 
       
Total liabilities
     
 
       
Equity attributable to common shareholders
     
Equity attributable to noncontrolling interests in consolidated entities
    53.3  
 
       
Total liabilities and equity
    53.3  
 
       

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     The following tables reflect the impact of consolidation of investment products into the Condensed Consolidated Balance Sheets as of June 30, 2010, and December 31, 2009, and the Condensed Consolidated Statements of Income for the three and six months ended June 30, 2010, and 2009.
Condensed Consolidating Balance Sheets
                                                 
    Before           Other            
$ in millions   Consolidation*   CLOs - VIEs **   VIEs   VOEs   Eliminations   Total
As of June 30, 2010
                                               
Current assets
    3,255.7       382.6       4.6       34.6       (19.5 )     3,658.0  
Non-current assets
    8,492.8       6,107.3       64.6       616.5       (35.3 )     15,245.9  
 
                                               
Total assets
    11,748.5       6,489.9       69.2       651.1       (54.8 )     18,903.9  
 
                                               
Current liabilities
    2,450.2       340.4       0.7       3.2       (19.5 )     2,775.0  
Long-term debt of consolidated investment products
          5,426.2                   (21.8 )     5,404.4  
Other non-current liabilities
    1,904.4                                 1,904.4  
 
                                               
Total liabilities
    4,354.6       5,766.6       0.7       3.2       (41.3 )     10,083.8  
 
                                               
Retained earnings attributable to investors in consolidated investment products
          723.3                   (3.8 )     719.5  
Other equity attributable to common shareholders
    7,389.4             0.2       9.5       (9.7 )     7,389.4  
Equity attributable to noncontrolling interests in consolidated entities
    4.5             68.3       638.4             711.2  
 
                                               
Total liabilities and equity
    11,748.5       6,489.9       69.2       651.1       (54.8 )     18,903.9  
 
                                               
                                         
    Before   Other            
$ in millions   Consolidation*   VIEs   VOEs   Eliminations   Total
As of December 31, 2009
                                       
Current assets
    3,089.8       4.2       27.0             3,121.0  
Non-current assets
    7,111.8       67.9       617.1       (8.2 )     7,788.6  
 
                                       
Total assets
    10,201.6       72.1       644.1       (8.2 )     10,909.6  
 
                                       
Current liabilities
    2,293.6       0.7       4.1             2,298.4  
Non-current liabilities
    990.4                         990.4  
 
                                       
Total liabilities
    3,284.0       0.7       4.1             3,288.8  
 
                                       
Total equity attributable to common shareholders
    6,912.9       0.2       8.0       (8.2 )     6,912.9  
Equity attributable to noncontrolling interests in consolidated entities
    4.7       71.2       632.0             707.9  
 
                                       
Total liabilities and equity
    10,201.6       72.1       644.1       (8.2 )     10,909.6  
 
                                       
 
*   The Before Consolidation column includes Invesco’s equity interest in the investment products subsequently consolidated, accounted for as equity method and available-for-sale investments.
 
**   The company adopted FASB Statement No. 167 on January 1, 2010, resulting in the consolidation of certain CLOs. In accordance with the standard, prior periods have not been restated to reflect the consolidation of these CLOs. Prior to January 1, 2010, the company was not deemed to be the primary beneficiary of these CLOs.

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Condensed Consolidating Statements of Income
                                                 
    Before           Other            
$ in millions   Consolidation*   CLOs - VIEs **   VIEs   VOEs   Eliminations   Total
Three months ended June 30, 2010
                                               
Total operating revenues
    799.3                         (12.3 )     787.0  
Total operating expenses
    712.9       10.2       0.6       4.2       (12.3 )     715.6  
 
                                               
Operating income
    86.4       (10.2 )     (0.6 )     (4.2 )           71.4  
Equity in earnings of unconsolidated affiliates
    10.6                         (0.2 )     10.4  
Interest income
    1.8       54.3                   (1.2 )     54.9  
Other investment income/(losses)
    (9.3 )     158.1       1.3       27.8             177.9  
Interest expense
    (14.1 )     (26.8 )                 1.2       (39.7 )
 
                                               
Income before income taxes, including gains and losses attributable to noncontrolling interests
    75.4       175.4       0.7       23.6       (0.2 )     274.9  
Income tax provision
    (36.7 )                             (36.7 )
 
                                               
Net income, including gains and losses attributable to noncontrolling interests
    38.7       175.4       0.7       23.6       (0.2 )     238.2  
(Gains)/losses attributable to noncontrolling interests in consolidated entities, net
    (0.1 )     (173.0 )     (0.7 )     (23.6 )           (197.4 )
 
                                               
Net income attributable to common shareholders
    38.6       2.4                   (0.2 )     40.8  
 
                                               
                                         
    Before                
$ in millions   Consolidation*   VIEs   VOEs   Eliminations   Total
Three months ended June 30, 2009
                                       
Total operating revenues
    625.3       0.1       0.7       (1.0 )     625.1  
Total operating expenses
    514.6       0.5       0.6       (1.0 )     514.7  
 
                                       
Operating income
    110.7       (0.4 )     0.1             110.4  
Equity in earnings of unconsolidated affiliates
    6.5                   1.0       7.5  
Interest income
    1.2                         1.2  
Other investment income/(losses)
    10.0       (1.8 )     (46.6 )           (38.4 )
Interest expense
    (16.5 )                       (16.5 )
 
                                       
Income before income taxes, including gains and losses attributable to noncontrolling interests
    111.9       (2.2 )     (46.5 )     1.0       64.2  
Income tax provision
    (36.0 )                       (36.0 )
 
                                       
Net income/(loss), including gains and losses attributable to noncontrolling interests
    75.9       (2.2 )     (46.5 )     1.0       28.2  
(Gains)/losses attributable to noncontrolling interests in consolidated entities, net
    (0.2 )     2.2       45.5             47.5  
 
                                       
Net income attributable to common shareholders
    75.7             (1.0 )     1.0       75.7  
 
                                       
 
*   The Before Consolidation column includes Invesco’s equity interest in the investment products, accounted for as equity method and available-for-sale investments.
 
**   The company adopted FASB Statement No. 167 on January 1, 2010, resulting in the consolidation of certain CLOs In accordance with the standard, prior periods have not been restated to reflect the consolidation of these CLOs. Prior to January 1, 2010, the company was not deemed to be the primary beneficiary of these CLOs.

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    Before           Other            
$ in millions   Consolidation*   CLOs - VIEs **   VIEs   VOEs   Eliminations   Total
Six months ended June 30, 2010
                                               
Total operating revenues
    1,528.8                   0.2       (22.9 )     1,506.1  
Total operating expenses
    1,291.9       21.2       1.0       6.6       (22.9 )     1,297.8  
 
                                               
Operating income
    236.9       (21.2 )     (1.0 )     (6.4 )           208.3  
Equity in earnings of unconsolidated affiliates
    16.6                         (0.4 )     16.2  
Interest income
    3.4       107.4                   (1.8 )     109.0  
Other investment income/(losses)
    (11.4 )     243.2       4.5       42.6             278.9  
Interest expense
    (26.5 )     (48.2 )                 1.8       (72.9 )
 
                                               
Income before income taxes, including gains and losses attributable to noncontrolling interests
    219.0       281.2       3.5       36.2       (0.4 )     539.5  
Income tax provision
    (86.8 )                             (86.8 )
 
                                               
Net income, including gains and losses attributable to noncontrolling interests
    132.2       281.2       3.5       36.2       (0.4 )     452.7  
(Gains)/losses attributable to noncontrolling interests in consolidated entities, net
    (0.2 )     (277.4 )     (3.5 )     (35.8 )           (316.9 )
 
                                               
Net income attributable to common shareholders
    132.0       3.8             0.4       (0.4 )     135.8  
 
                                               
                                         
    Before                
$ in millions   Consolidation*   VIEs   VOEs   Eliminations   Total
Six months ended June 30, 2009
                                       
Total operating revenues
    1,175.5       0.3       1.9       (4.0 )     1,173.7  
Total operating expenses
    999.7       1.0       4.8       (4.0 )     1,001.5  
 
                                       
Operating income
    175.8       (0.7 )     (2.9 )           172.2  
Equity in earnings of unconsolidated affiliates
    7.9                   2.1       10.0  
Interest income
    6.0                         6.0  
Other investment income/(losses)
    5.8       (16.5 )     (118.4 )           (129.1 )
Interest expense
    (32.4 )                       (32.4 )
 
                                       
Income before income taxes, including gains and losses attributable to noncontrolling interests
    163.1       (17.2 )     (121.3 )     2.1       26.7  
Income tax provision
    (56.3 )                       (56.3 )
 
                                       
Net income/(loss), including gains and losses attributable to noncontrolling interests
    106.8       (17.2 )     (121.3 )     2.1       (29.6 )
(Gains)/losses attributable to noncontrolling interests in consolidated entities, net
    (0.3 )     17.2       119.1             136.0  
 
                                       
Net income attributable to common shareholders
    106.5             (2.2 )     2.1       106.4  
 
                                       
 
*   The Before Consolidation column includes Invesco’s equity interest in the investment products, accounted for as equity method and available-for-sale investments.
 
**   The company adopted FASB Statement No. 167 on January 1, 2010, resulting in the consolidation of certain CLOs In accordance with the standard, prior periods have not been restated to reflect the consolidation of these CLOs. Prior to January 1, 2010, the company was not deemed to be the primary beneficiary of these CLOs.

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     The carrying value of investments held and notes issued by consolidated investment products is also their fair value. The following table presents the fair value hierarchy levels of investments held and notes issued by consolidated investment products, which are measured at fair value as of June 30, 2010:
                                 
    As of June 30, 2010
            Quoted Prices in   Significant    
            Active Markets   Other   Significant
    Fair Value   for Identical   Observable   Unobservable
$ in millions   Measurements   Assets (Level 1)   Inputs (Level 2)   Inputs (Level 3)
Assets:
                               
CLO collateral assets:
                               
Bank loans
    5,780.8             5,780.8        
Bonds
    250.8       250.8              
Equity securities
    75.7       75.7              
Private equity fund assets:
                               
Equity securities
    117.1       8.0             109.1  
Investments in other private equity funds
    553.6                   553.6  
Debt securities issued by in U.S. Treasury
    10.5       10.5              
Liabilities:
                               
CLO notes
    (5,404.4 )                 (5,404.4 )
     The following table presents the fair value hierarchy levels of the carrying value of investments held by consolidated investment products, which are measured at fair value as of December 31, 2009:
                                 
    As of December 31, 2009
            Quoted Prices in   Significant    
            Active Markets   Other   Significant
    Fair Value   for Identical   Observable   Unobservable
$ in millions   Measurements   Assets (Level 1)   Inputs (Level 2)   Inputs (Level 3)
Private equity fund assets:
                               
Equity securities
    117.2       7.0             110.2  
Investments in other private equity funds
    556.9                   556.9  
Debt securities issued by U.S. Treasury
    10.9       10.9              
     The following table shows a reconciliation of the beginning and ending fair value measurements for level 3 assets using significant unobservable inputs:
                                 
    Three months   Three months   Six months Ended   Six months Ended
$ in millions   Ended June 30, 2010   Ended June 30, 2009   June 30, 2010   June 30, 2009
Beginning balance
    665.5       674.7       667.1       761.0  
Purchases, sales, issuances and settlements, net
    (30.1 )     4.1       (47.3 )     6.2  
Gains and losses included in the Condensed Consolidated Statement of Income*
    27.3       (46.4 )     42.9       (134.8 )
 
                               
Ending balance
    662.7       632.4       662.7       632.4  
 
                               
 
*   Included in gains and losses of consolidated investment products in the Condensed Consolidated Statement of Income for the three and six months ended June 30, 2010, are $23.5 million and $42.1 million, respectively, in net unrealized gains attributable to investments held at June 30, 2010, by consolidated investment products (three and six months ended June 30, 2009: $38.3 million and $125.3 million, respectively, attributable to investments still held at June 30, 2009).

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     The following table shows a reconciliation of the beginning and ending fair value measurements for level 3 liabilities using significant unobservable inputs:
                 
    Three months    
    Ended June 30,   Six months Ended
$ in millions   2010*   June 30, 2010*
Beginning balance
    (5,119.1 )     (5,234.9 )
Purchases, sales, issuances and settlements/prepayments, net
    55.0       102.4  
Acquisition of business
    (630.2 )     (630.2 )
Gains and losses included in the Condensed Consolidated Statement of Income
    119.0       55.9  
Foreign exchange
    170.9       302.4  
 
               
Ending balance
    (5,404.4 )     (5,404.4 )
 
               
 
*   The company adopted FASB Statement No. 167 on January 1, 2010, resulting in the consolidation of certain CLOs. In accordance with the standard, prior periods have not been restated to reflect the consolidation of these CLOs. Prior to January 1, 2010, the company was not deemed to be the primary beneficiary of these CLOs.
     Fair value of consolidated CLOs
     The collateral assets held by consolidated CLOs are primarily invested in senior secured bank loans, bonds, and equity securities. Bank loan investments, which comprise the majority of consolidated CLO portfolio collateral, are senior secured corporate loans from a variety of industries, including but not limited to the aerospace and defense, broadcasting, technology, utilities, household products, healthcare, oil and gas, and finance industries. Bank loan investments mature at various dates between 2010 and 2018, pay interest at Libor or Euribor plus a spread of between 0.25% and 11%, and typically range in credit rating categories from BBB down to unrated. At June 30, 2010, the unpaid principal balance exceeded the fair value of the senior secured bank loans and bonds by approximately $345 million. Less than 3% of the collateral assets are in default as of June 30, 2010. CLO investments are valued based on price quotations provided by an independent third-party pricing source. For bank loan investments, in the event that the third-party pricing source is unable to price an investment, other relevant factors, data and information are considered, including: i) information relating to the market for the investment, including price quotations for and trading in the investment and interest in similar investments and the market environment and investor attitudes towards the investment and interests in similar investments; ii) the characteristics of and fundamental analytical data relating to the investment, including, for senior secured corporate loans, the cost, size, current interest rate, period until next interest rate reset, maturity and base lending rate, the terms and conditions of the senior secured corporate loan and any related agreements, and the position of the senior secured corporate loan in the borrower’s debt structure; iii) the nature, adequacy and value of the senior secured corporate loan’s collateral, including the CLO’s rights, remedies and interests with respect to the collateral; iv) for senior secured corporate loans, the creditworthiness of the borrower, based on an evaluation of its financial condition, financial statements and information about the business, cash flows, capital structure and future prospects; v) the reputation and financial condition of the agent and any intermediate participants in the senior secured corporate loan; and vi) general economic and market conditions affecting the fair value of the senior secured corporate loan.
     In a typical CLO structure, notes are issued in tranches and are categorized into varying degrees of subordination. Each tranche has a different level of credit protection or risk exposure than another. There is generally a senior (“A”) class of securities and one or more junior subordinated (“B,” “C,” etc.) classes that function as protective layers for the “A” class. The senior classes have first claim on the cash that the CLO receives, and the more junior classes receive repayment only after the more senior classes have repaid. Because of the cascading effect between classes, this arrangement is often referred to as a cash flow waterfall. In the event that the underlying collateral asset pool becomes insufficient to make payments on the notes, the loss is absorbed first by the subordinated tranches, and the upper-level tranches remain unaffected until the losses exceed the entire amount of the subordinated tranches. The senior securities are typically AAA-rated, signifying a lower risk, while the lower-credit quality subordinated classes receive a lower credit rating, signifying a higher risk. The most junior class (often called the equity class) is the most exposed to payment risk. In some cases the equity class receives no coupon (either fixed or floating), but only the residual cash flow (if any) after all the other classes have been paid.
     Notes issued by consolidated CLOs mature at various dates between 2014 and 2024 and have a weighted average maturity of 10.1 years. The notes are issued in various tranches with different risk profiles. The interest rates are generally variable rates based on Libor or Euribor plus a pre-defined spread, which varies from 0.21% for the more senior tranches to 7.50% for the more subordinated tranches. At June 30, 2010, the outstanding balance on the notes issued by consolidated CLOs exceeds their fair value by approximately $1.4 billion. The investors in this debt are not affiliated with the company and have no recourse to the general credit of the company for this debt. Notes issued by CLOs are recorded at fair value using an income approach, driven by cash flows expected to be received from the portfolio collateral assets. Fair value is determined using current information, notably market yields and

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projected cash flows of collateral assets based on forecasted default and recovery rates that a market participant would use in determining the current fair value of the notes, taking into account the overall credit quality of the issuers and the company’s past experience in managing similar securities. Market yields, default rates and recovery rates used in the company’s estimate of fair value vary based on the nature of the investments in the underlying collateral pools. In periods of rising market yields, default rates and lower debt recovery rates, the fair value, and therefore the carrying value, of the notes may be adversely affected. The current liquidity constraints within the market for CLO products require the use of certain unobservable inputs for CLO valuation. Once the undiscounted cash flows of the collateral assets have been determined, the company applies appropriate discount rates that a market participant would use, to determine the discounted cash flow valuation of the notes.
     The significant inputs for the valuation model of the notes issued by consolidated CLOs include a cumulative average default rate of 4.6%, an average long-term recovery rate of 72.8%, and an average reinvestment rate of Libor plus 445 basis points. The discount rate applied to the undiscounted cash flows of the collateral assets was derived by utilizing the applicable forward rate curves and appropriate spreads.
     Fair value of consolidated private equity funds
     Consolidated private equity funds are generally structured as partnerships. Generally, the investment strategy of underlying holdings in these partnerships is to seek capital appreciation through direct investments in public or private companies with compelling business models or ideas or through investments in partnership investments that also invest in similar private or public companies. Various strategies may be used. Companies targeted could be distressed organizations, targets of leveraged buyouts or fledgling companies in need of venture capital. Investees of these consolidated investment products may not redeem their investment until the partnership liquidates. Generally, the partnerships have a life that range from seven to twelve years unless dissolved earlier. The general partner may extend the partnership term up to a specified period of time as stated in the Partnership Agreement. Some partnerships allow the limited partners to cause an earlier termination upon the occurrence of certain events as specified in the Partnership Agreement.
     For private equity partnerships, fair value is determined by reviewing each investment for the sale of additional securities of an issuer to sophisticated investors or for investee financial conditions and fundamentals. Publicly traded portfolio investments are carried at market value as determined by their most recent quoted sale, or if there is no recent sale, at their most recent bid price. For these investments held by consolidated investment products, level 1 classification indicates that fair values have been determined using unadjusted quoted prices in active markets for identical assets that the partnership has the ability to access. Level 2 classification may indicate that fair values have been determined using quoted prices in active markets but give effect to certain lock-up restrictions surrounding the holding period of the underlying investments.
     The fair value of level 3 investments held by consolidated investment products are derived from inputs that are unobservable and which reflect the limited partnerships’ own determinations about the assumptions that market participants would use in pricing the investments, including assumptions about risk. These inputs are developed based on the partnership’s own data, which is adjusted if information indicates that market participants would use different assumptions. The partnerships which invest directly into private equity portfolio companies (direct private equity funds) take into account various market conditions, subsequent rounds of financing, liquidity, financial condition, purchase multiples paid in other comparable third-party transactions, the price of securities of other companies comparable to the portfolio company, and operating results and other financial data of the portfolio company, as applicable.
     The partnerships which invest into other private equity funds (funds of funds) take into account information received from those underlying funds, including their reported net asset values and evidence as to their fair value approach, including consistency of their fair value application. These investments do not trade in active markets and represent illiquid long-term investments that generally require future capital commitments. While the partnerships’ reported share of the underlying net asset values of the underlying funds is usually the most significant input in arriving at fair value and is generally representative of fair value, other information may also be used to value such investments at a premium or discount to the net asset values as reported by the funds, including allocations of priority returns within the funds as well as any specific conditions and events affecting the funds.
     Unforeseen events might occur that would subsequently change the fair values of these investments, but such changes would be inconsequential to the company due to its minimal investments in these products (and the large offsetting noncontrolling interests resulting from their consolidation). Any gains or losses resulting from valuation changes in these investments are substantially offset by resulting changes in gains and losses attributable to noncontrolling interests in consolidated entities and therefore do not have a material effect on the financial condition, operating results (including earnings per share), liquidity or capital resources of the company’s common shareholders.

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13. SHARE-BASED COMPENSATION
     The company issues equity-settled share-based awards to certain employees, which are measured at fair value at the date of grant, in accordance with ASC Topic 718, “Compensation — Stock Compensation.” The fair value determined at the grant date is expensed, based on the company’s estimate of shares that will eventually vest, on a straight-line or accelerated basis over the vesting period. The initial forfeiture rate applied to most grants is 5% per year, based upon the company’s historical experience with respect to employee turnover. Fair value for share awards representing equity interests identical to those associated with shares traded in the open market is determined using the market price at the grant date. Fair value is measured by use of the Black Scholes valuation model for certain share awards that do not include dividend rights, and fair value was measured by use of a stochastic model (a lattice-based model) for share option awards.
     The company recognized total expenses of $55.5 million in the six months ended June 30, 2010 (June 30, 2009: $43.9 million) related to equity-settled share-based payment transactions. The total income tax benefit recognized in the Consolidated Statements of Income for share-based compensation arrangements was $21.6 million for the six months ended June 30, 2010 (June 30, 2009: $15.2 million).
     Cash received from the exercise of share options granted under share-based compensation arrangements was $6.2 million in the six months ended June 30, 2010 (June 30, 2009: $9.6 million). The total tax benefit realized from share based payment awards was $44.8 million in the six months ended June 30, 2010 (June 30, 2009: $31.6 million).
Share Awards
     Share awards are broadly classified into two categories: time-vested and performance-vested share awards. Share awards are measured at fair value at the date of grant and are expensed, based on the company’s estimate of shares that will eventually vest, on a straight-line or accelerated basis over the vesting period.
     Time-vested awards vest ratably over or cliff-vest at the end of a period of continued employee service. Performance-vested awards cliff-vest at the end of or vest ratably over a defined vesting period of continued employee service upon the company’s attainment of certain performance criteria, generally the attainment of cumulative earnings per share growth targets at the end of the vesting period reflecting a compound annual growth rate of between 10.0% and 15.0% per annum during a three-year period. Time-vested and performance-vested share awards are granted in the form of restricted share awards (RSAs) or restricted share units (RSUs). Dividends accrue directly to the employee holder of RSAs, and cash payments in lieu of dividends are made to employee holders of certain RSUs. There is therefore no discount to the fair value of these share awards at their grant date. Movements on share awards priced in Pounds Sterling prior to the company’s primary share listing moving to the New York Stock Exchange from the London Stock Exchange, which occurred on December 4, 2007, in connection with the redomicile of the company from the U.K. to Bermuda, are detailed below:
                                                 
    Six months ended June 30, 2010   Six months ended June 30, 2009
                    Weighted Average                   Weighted Average
    Time-   Performance-   Grant Date   Time-   Performance-   Grant Date
    Vested   Vested   Fair Value (£ Sterling)   Vested   Vested   Fair Value (£ Sterling)
Millions of shares, except fair values
                                               
Unvested at the beginning of period
    5.4       2.0       11.24       10.2       6.0       9.62  
Forfeited during the period
          (1.4 )     12.02       (0.2 )     (0.1 )     8.77  
Modification of share-based payment awards*
                            (1.4 )     9.37  
Vested and distributed during the period
    (1.1 )     (0.5 )     8.93       (1.5 )     (2.2 )     8.32  
 
                                               
Unvested at the end of the period
    4.3       0.1       11.86       8.5       2.3       10.14  
 
                                               
 
*   During the six months ended June 30, 2009, the company modified the terms of 1.4 million equity-settled share-based payment awards such that the awards are now deferred cash awards. As a result of this modification, $13.0 million was reclassified out of additional paid in capital and into other current and non-current liabilities on the Condensed Consolidated Balance Sheet during the period. There was no impact to the Condensed Consolidated Statement of Income or earnings per share as a result of this modification.

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     Subsequent to the company’s primary share listing moving to the New York Stock Exchange, shares are now priced in U.S. dollars. Movements on share awards priced in U.S. dollars are detailed below:
                                 
    Six months ended June 30, 2010   Six months ended June 30, 2009
            Weighted Average           Weighted Average
    Time-   Grant Date   Time-   Grant Date
    Vested   Fair Value ($)   Vested   Fair Value ($)
Millions of shares, except fair values
                               
Unvested at the beginning of period
    11.6       15.24       3.5       26.67  
Granted during the period
    9.9       19.19       8.9       11.47  
Forfeited during the period
    (0.1 )     21.55             16.41  
Vested and distributed during the period
    (2.8 )     14.48       (0.6 )     26.58  
 
                               
Unvested at the end of the period
    18.6       17.42       11.8       15.27  
 
                               
     Share awards outstanding at June 30, 2010, had a weighted average remaining contractual life of 1.93 years.
Share Options
     The company has not granted share option awards since 2005. All share options awards, therefore, were granted prior to the December 4, 2007, redomicile from the United Kingdom to Bermuda and relisting from the London Stock Exchange (where the predecessor company’s ordinary shares traded in Pounds Sterling) to the New York Stock Exchange (where the company’s common shares now trade in U.S. Dollars). The company maintains its two historical share option plans which have outstanding share options: The 2000 Share Option Plan and the No. 3 Executive Share Option Scheme. All remaining outstanding share option awards were fully vested and were expensed by the company over the applicable vesting periods (the latest of which ended prior to December 31, 2008). At the time of their grants, the exercise prices of the share options were denominated in the company’s trading currency, which was Pounds Sterling. The company did not change the accounting for share options at the redomicile/relisting date, because the share options were not modified at that date. The exercise price remains in Pounds Sterling and was not changed to U.S. Dollars. Therefore, upon exercise of the share options, the Pounds Sterling exercise price will be converted into U.S. Dollars using the spot foreign exchange rate in effect on the exercise date.
     The share option plans provided for a grant price equal to the quoted market price of the company’s shares on the date of grant. If the options remain unexercised after a period of 10 years from the date of grant, the options expire. Furthermore, options are forfeited if the employee leaves the company before the options vest. The options outstanding at June 30, 2010, had a range of exercise prices from 50 pence to 3,360 pence, and a weighted average remaining contractual life of 2.26 years (for options exercisable at June 30, 2010, the weighted average remaining contractual life is 2.26 years). The total intrinsic value of options exercised during the six months ended June 30, 2010 and 2009, was $4.5 million and $2.7 million, respectively. At June 30, 2010, the aggregate intrinsic value of options outstanding and options exercisable was $33.5 million and $33.5 million, respectively. The market price of the company’s common stock at June 30, 2010, was $16.83.
     Changes in outstanding share option awards are as follows:
                                 
    Six months ended June 30, 2010   Six months ended June 30, 2009
            Weighted Average           Weighted Average
    Options   Exercise Price   Options   Exercise Price
    (millions of shares)   (£ Sterling)   (millions of shares)   (£ Sterling)
Outstanding at the beginning of the period
    16.4       14.99       23.1       14.06  
Forfeited during the period
    (0.3 )     19.34       (0.7 )     18.05  
Exercised during the period
    (0.8 )     6.09       (0.6 )     7.94  
 
                               
Outstanding at the end of the period
    15.3       15.39       21.8       14.08  
 
                               
Exercisable at the end of the period
    15.3       15.39       21.6       14.24  
 
                               

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14. RETIREMENT BENEFIT PLANS
Defined Contribution Plans
     The company operates defined contribution retirement benefit plans for all qualifying employees. The assets of the plans are held separately from those of the company in funds under the control of trustees. When employees leave the plans prior to vesting fully in the contributions, the contributions payable by the company are reduced by the amount of forfeited contributions.
     The total amounts charged to the Condensed Consolidated Statements of Income for the six months ended June 30, 2010 and 2009, of $23.3 million and $22.0 million, respectively, represent contributions paid or payable to these plans by the company at rates specified in the rules of the plans. As of June 30, 2010, accrued contributions of $9.0 million (December 31, 2009: $17.1 million) for the current year will be paid to the plans when due.
Defined Benefit Plans
     The company maintains legacy defined benefit pension plans for qualifying employees of its subsidiaries in the U.K., Ireland, Germany, Taiwan and the U.S. All defined benefit plans are closed to new participants, and the U.S. plan benefits have been frozen. The company also maintains a postretirement medical plan in the U.S., which was closed to new participants in 2005. In 2006, the plan was amended to eliminate benefits for all participants who will not meet retirement eligibility by 2008. The assets of all defined benefit schemes are held in separate trustee-administered funds. Under the plans, the employees are generally entitled to retirement benefits based on final salary at retirement.
     The components of net periodic benefit cost in respect of these defined benefit plans are as follows:
                                                                 
    Three months Ended June 30,   Six months Ended June 30,
    Retirement Plans   Medical Plan   Retirement Plans   Medical Plan
$ in millions   2010   2009   2010   2009   2010   2009   2010   2009
Service cost
    1.0       3.4             0.1       2.0       6.7       0.1       0.2  
Interest cost
    3.9       4.9       0.6       0.7       7.8       9.8       1.3       1.3  
Expected return on plan assets
    (3.5 )     (5.2 )     (0.1 )     (0.1 )     (6.9 )     (10.5 )     (0.2 )     (0.2 )
Amortization of prior service cost
                (0.5 )     (0.5 )                 (1.0 )     (1.0 )
Amortization of net actuarial (loss)/gain
    0.6       0.2       0.9       1.0       1.3       0.5       1.8       2.1  
 
                                                               
Net periodic benefit cost
    2.0       3.3       0.9       1.2       4.2       6.5       2.0       2.4  
 
                                                               
     The estimated amounts of contributions expected to be paid to the plans during 2010 is $7.9 million for retirement plans, with no expected contribution to the medical plan.
     The Patient Protection and Affordable Care Act that was signed into law in the U.S. on March 23, 2010, and its related modifications as part of the Health Care and Education Reconciliation Act of 2010 did not have a material impact on the company’s financial statements during the six months ended June 30, 2010. The company is evaluating whether these new laws may require any longer-term changes in our benefit plans.
15. COMMITMENTS AND CONTINGENCIES
     Commitments and contingencies may arise in the ordinary course of business.
     The company has transactions with various private equity, real estate and other investment entities sponsored by the company for the investment of client assets in the normal course of business. Many of the company’s investment products are structured as limited partnerships. The company’s investment may take the form of the general partner or a limited partner, and the entities are structured such that each partner makes capital commitments that are to be drawn down over the life of the partnership as investment opportunities are identified. At June 30, 2010, the company’s undrawn capital commitments were $85.5 million (December 31, 2009: $77.6 million).
     The volatility and valuation dislocations that occurred from 2007 to the date of this Report in certain sectors of the fixed income market have generated pricing issues in many areas of the market. As a result of these valuation dislocations, during the fourth quarter of 2007, Invesco elected to enter into contingent support agreements for two of its investment trusts to enable them to sustain a stable pricing structure. These two trusts are unregistered trusts that invest in fixed income securities and are available only to limited types

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of sophisticated investors. In June 2010, the agreements were amended to extend the term through December 31, 2010. As of June 30, 2010, the total committed support under these agreements was $36.0 million with an internal approval mechanism to increase the maximum possible support to $66.0 million at the option of the company. The recorded fair value of the guarantees related to these agreements at June 30, 2010, was estimated to be $2.5 million (December 31, 2009: $2.5 million), which was recorded in other current liabilities on the Condensed Consolidated Balance Sheet. No payments have been made under either agreement nor has Invesco realized any losses from the support agreements through the date of this Report. These trusts were not consolidated because the company was not deemed to be the primary beneficiary.
     A subsidiary of the company has received assessments from the Canada Revenue Agency (CRA) for goods and services tax (GST) related to various taxation periods from April 1999 to December 2006 in the amount of $20.9 million related to GST on sales charges collected from investors upon the redemption of certain mutual funds. The company has objected to the assessments and sought remedial action in the Ontario Superior Court of Justice. In November 2009, the company was successful in such remedial action and, as a result, anticipates successfully contesting the assessments. As a result of such actions, the CRA is currently considering its next steps and has not responded to the company in this regard. Management believes that the CRA’s claims are unfounded and that this assessment is unlikely to stand, and accordingly no provision has been recorded in the Consolidated Financial Statements.
Acquisition Contingencies
     Contingent consideration related to acquisitions includes the following:
    Earn-outs relating to the Invesco PowerShares acquisition. A contingent payment of up to $500.0 million could be due in October 2011, five years after the date of acquisition, based on compound annual growth in management fees (as defined and adjusted pursuant to the acquisition agreement) from an assumed base of $17.5 million at closing. The Year 5 management fees will be reduced by $50.0 million, for purposes of the calculation, since the second contingent payment was earned. For a compound annual growth rate (CAGR) in Year 5 below 15%, no additional payment will be made. For a CAGR in Year 5 between 15% and 75%, $5.0 million for each CAGR point above 15%, for a maximum payment of $300.0 million for a 75% CAGR. For a CAGR in Year 5 between 75% and 100%, $300.0 million, plus an additional $8.0 million for each CAGR point above 75%, for a maximum total payment of $500.0 million for a 100% CAGR.
 
    Earn-outs relating to the WL Ross acquisition. Contingent payments of up to $55.0 million are due each year for the five years following the October 2006 date of acquisition based on the size and number of future fund launches in which W.L. Ross & Co. is integrally involved. The maximum remaining contingent payments of $110.0 million would require annual fund launches to total $4.0 billion. The April 3, 2010, earn-out calculation resulted in an addition to goodwill and a non-interest bearing note payable to the sellers of $25.8 million, payable at the next measurement date, October 3, 2010.
Legal Contingencies
     Following the industry-wide regulatory investigations in 2003 and 2004, multiple lawsuits based on market timing allegations were filed against various parties affiliated with Invesco. These lawsuits were consolidated in the United States District Court for the District of Maryland, together with market timing lawsuits brought against affiliates of other mutual fund companies, and on September 29, 2004, three amended complaints were filed against company-affiliated parties: (1) a putative shareholder class action complaint brought on behalf of shareholders of AIM funds formerly advised by Invesco Funds Group, Inc.; (2) a derivative complaint purportedly brought on behalf of certain AIM funds and the shareholders of such funds; and (3) an ERISA complaint purportedly brought on behalf of participants in the company’s 401(k) plan. The company and plaintiffs have reached settlements in principle of these lawsuits. The proposed settlements, which are subject to court approval, call for a payment by the company of $9.8 million, recorded in general and administrative expenses in the Consolidated Statement of Income in 2007, in exchange for dismissal with prejudice of all pending claims. In addition, under the terms of the proposed settlements, the company may incur certain costs in connection with providing notice of the proposed settlements to affected shareholders. Based on information currently available, it is not believed that any such incremental notice costs will have any material effect on the consolidated financial position or results of operations of the company.
     The asset management industry also is subject to extensive levels of ongoing regulatory oversight and examination. In the United States and other jurisdictions in which the company operates, governmental authorities regularly make inquiries, hold investigations and administer market conduct examinations with respect to compliance with applicable laws and regulations. Additional lawsuits or regulatory enforcement actions arising out of these inquiries may in the future be filed against the company and related entities and individuals in the U.S. and other jurisdictions in which the company and its affiliates operate. Any material loss of investor and/or

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client confidence as a result of such inquiries and/or litigation could result in a significant decline in assets under management, which would have an adverse effect on the company’s future financial results and its ability to grow its business.
     In the normal course of its business, the company is subject to various litigation matters. Although there can be no assurances, at this time management believes, based on information currently available to it, that it is not probable that the ultimate outcome of any of these actions will have a material adverse effect on the consolidated financial condition or results of operations of the company.
16. GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
     Prior to the December 4, 2007, redomicile of the company from the United Kingdom to Bermuda and the relisting of the company from the London Stock Exchange to the New York Stock Exchange, INVESCO PLC (now known as Invesco Holding Company Limited), the Issuer, issued 4.5% $300.0 million senior notes due 2009, 5.625% $300.0 million senior notes due 2012, 5.375% $350.0 million senior notes due 2013 and 5.375% $200.0 million senior notes due 2014. These senior notes, are fully and unconditionally guaranteed as to payment of principal, interest and any other amounts due thereon by Invesco Ltd. (the Parent), together with the following wholly owned subsidiaries: Invesco Aim Management Group, Inc., Invesco Aim Advisers, Inc., Invesco North American Holdings, Inc., and Invesco Institutional (N.A.), Inc. (the Guarantors). On June 9, 2009, IVZ, Inc. also became a guarantor of the senior notes. On December 31, 2009, Invesco Aim Advisors, Inc. merged with Invesco Institutional (N.A.), Inc., which was renamed Invesco Advisors, Inc. The company’s remaining consolidated subsidiaries do not guarantee this debt. The guarantees of each of the Guarantors are joint and several. Presented below are Condensed Consolidating Balance Sheets as of June 30, 2010, and December 31, 2009, Condensed Consolidating Statements of Income for the three and six months ended June 30, 2010 and 2009, and Condensed Consolidating Statements of Cash Flows for the six months ended June 30, 2010 and 2009.

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Condensed Consolidating Balance Sheets
                                                 
            Non-                    
$ in millions   Guarantors   Guarantors   Issuer   Parent   Eliminations   Consolidated
As of June 30, 2010
                                               
Assets held for policyholders
          1,151.5                         1,151.5  
Other current assets
    207.3       2,270.1       2.8       26.3             2,506.5  
 
                                               
Total current assets
    207.3       3,421.6       2.8       26.3             3,658.0  
 
                                               
Goodwill
    2,357.4       3,912.8       418.7                   6,688.9  
Investments in subsidiaries
    1,236.8       5.7       4,508.1       7,531.1       (13,281.7 )      
Other non-current assets
    505.1       8,041.6       7.0       3.3             8,557.0  
 
                                               
Total assets
    4,306.6       15,381.7       4,936.6       7,560.7       (13,281.7 )     18,903.9  
 
                                               
Policyholder payables
          1,151.5                         1,151.5  
Other current liabilities
    38.8       1,578.3       5.7       0.7             1,623.5  
 
                                               
Total current liabilities
    38.8       2,729.8       5.7       0.7             2,775.0  
 
                                               
Intercompany balances
    1,381.6       (1,562.8 )     748.8       (567.6 )            
Non-current liabilities
    677.7       5,866.7       745.7       18.7             7,308.8  
 
                                               
Total liabilities
    2,098.1       7,033.7       1,500.2       (548.2 )           10,083.8  
 
                                               
Total equity attributable to common shareholders
    2,208.5       7,636.8       3,436.4       8,108.9       (13,281.7 )     8,108.9  
 
                                               
Equity attributable to noncontrolling interests in consolidated entities
          711.2                         711.2  
 
                                               
Total equity
    2,208.5       8,348.0       3,436.4       8,108.9       (13,281.7 )     8,820.1  
 
                                               
Total liabilities and equity
    4,306.6       15,381.7       4,936.6       7,560.7       (13,281.7 )     18,903.9  
 
                                               
 
            Non-                
$ in millions   Guarantors   Guarantors   Issuer   Parent   Eliminations   Consolidated
As of December 31, 2009
                                               
Assets held for policyholders
          1,283.0                         1,283.0  
Other current assets
    211.5       1,591.7       3.1       31.7             1,838.0  
 
                                               
Total current assets
    211.5       2,874.7       3.1       31.7             3,121.0  
 
                                               
Goodwill
    2,302.8       3,709.4       455.4                   6,467.6  
Investments in subsidiaries
    714.9       5.7       4,697.7       6,859.3       (12,277.6 )      
Other non-current assets
    147.5       1,165.2       4.9       3.4             1,321.0  
 
                                               
Total assets
    3,376.7       7,755.0       5,161.1       6,894.4       (12,277.6 )     10,909.6  
 
                                               
Policyholder payables
          1,283.0                         1,283.0  
Other current liabilities
    35.7       972.2       7.1       0.4             1,015.4  
 
                                               
Total current liabilities
    35.7       2,255.2       7.1       0.4             2,298.4  
 
                                               
Intercompany balances
    956.8       (1,660.0 )     722.1       (18.9 )            
Non-current liabilities
    31.5       213.1       745.8                   990.4  
 
                                               
Total liabilities
    1,024.0       808.3       1,475.0       (18.5 )           3,288.8  
 
                                               
Total equity attributable to common shareholders
    2,352.7       6,238.8       3,686.1       6,912.9       (12,277.6 )     6,912.9  
 
                                               
Equity attributable to noncontrolling interests in consolidated entities
          707.9                         707.9  
 
                                               
Total equity
    2,352.7       6,946.7       3,686.1       6,912.9       (12,277.6 )     7,620.8  
 
                                               
Total liabilities and equity
    3,376.7       7,755.0       5,161.1       6,894.4       (12,277.6 )     10,909.6  
 
                                               

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Condensed Consolidating Statements of Income
                                                 
            Non-                
$ in millions   Guarantors   Guarantors   Issuer   Parent   Eliminations   Consolidated
For the three months ended June 30, 2010
                                               
Total operating revenues
    230.1       556.9                         787.0  
Total operating expenses
    183.3       528.5       0.2       3.6             715.6  
 
                                               
Operating income/(loss)
    46.8       28.4       (0.2 )     (3.6 )           71.4  
Equity in earnings of unconsolidated affiliates
    3.2       7.0       22.6       44.2       (66.6 )     10.4  
Other income/(expense)
    (26.7 )     235.3       (15.7 )     0.2             193.1  
 
                                               
Income before income taxes, including gains and losses attributable to noncontrolling interests
    23.3       270.7       6.7       40.8       (66.6 )     274.9  
Income tax provision
    (6.5 )     (28.1 )     (2.1 )                 (36.7 )
 
                                               
Net income, including gains and losses attributable to noncontrolling interests
    16.8       242.6       4.6       40.8       (66.6 )     238.2  
(Gains)/losses attributable to noncontrolling interests in consolidated entities, net
          (197.4 )                       (197.4 )
 
                                               
Net income attributable to common shareholders
    16.8       45.2       4.6       40.8       (66.6 )     40.8  
 
                                               
 
            Non-                
$ in millions   Guarantors   Guarantors   Issuer   Parent   Eliminations   Consolidated
For the three months ended June 30, 2009
                                               
Total operating revenues
    127.8       497.3                         625.1  
Total operating expenses
    102.7       409.7       (0.2 )     2.5             514.7  
 
                                               
Operating income/(losses)
    25.1       87.6       0.2       (2.5 )           110.4  
Equity in earnings of unconsolidated affiliates
    12.5       21.7       31.3       78.0       (136.0 )     7.5  
Other income/(expense)
    (0.9 )     (63.8 )     10.8       0.2             (53.7 )
 
                                               
Income before income taxes and noncontrolling interest
    36.7       45.5       42.3       75.7       (136.0 )     64.2  
Income tax provision
    (9.7 )     (23.1 )     (3.2 )                 (36.0 )
 
                                               
Net income, including losses attributable to noncontrolling interests
    27.0       22.4       39.1       75.7       (136.0 )     28.2  
(Gains)/Losses attributable to the noncontrolling interests in consolidated entities, net of tax
          47.5                         47.5  
 
                                               
Net income attributable to common shareholders
    27.0       69.9       39.1       75.7       (136.0 )     75.7  
 
                                               

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            Non-                
$ in millions   Guarantors   Guarantors   Issuer   Parent   Eliminations   Consolidated
For the six months ended June 30, 2010
                                               
Total operating revenues
    411.3       1,094.8                         1,506.1  
Total operating expenses
    323.7       967.2       0.8       6.1             1,297.8  
 
                                               
Operating income/(loss)
    87.6       127.6       (0.8 )     (6.1 )           208.3  
Equity in earnings of unconsolidated affiliates
    2.9       13.0       72.0       144.0       (215.7 )     16.2  
Other income/(expense)
    (44.7 )     392.1       (30.3 )     (2.1 )           315.0  
 
                                               
Income/(loss) before income taxes, including gains and losses attributable to noncontrolling interests
    45.8       532.7       40.9       135.8       (215.7 )     539.5  
Income tax provision
    (23.9 )     (64.9 )     2.0                   (86.8 )
 
                                               
Net income, including gains and losses attributable to noncontrolling interests
    21.9       467.8       42.9       135.8       (215.7 )     452.7  
(Gains)/losses attributable to noncontrolling interests in consolidated entities, net
          (316.9 )                       (316.9 )
 
                                               
Net income attributable to common shareholders
    21.9       150.9       42.9       135.8       (215.7 )     135.8  
 
                                               
 
            Non-                
$ in millions   Guarantors   Guarantors   Issuer   Parent   Eliminations   Consolidated
For the six months ended June 30, 2009
                                               
Total operating revenues
    245.3       928.4                         1,173.7  
Total operating expenses
    194.5       799.8       0.7       6.5             1,001.5  
 
                                               
Operating income/(loss)
    50.8       128.6       (0.7 )     (6.5 )           172.2  
Equity in earnings of unconsolidated affiliates
    14.7       40.1       51.1       115.0       (210.9 )     10.0  
Other income/(expense)
    (1.6 )     (149.2 )     (2.6 )     (2.1 )           (155.5 )
 
                                               
Income before income taxes, including gains and losses attributable to noncontrolling interests
    63.9       19.5       47.8       106.4       (210.9 )     26.7  
Income tax provision
    (18.4 )     (18.8 )     (19.1 )                 (56.3 )
 
                                               
Net income, including gains and losses attributable to noncontrolling interests
    45.5       0.7       28.7       106.4       (210.9 )     (29.6 )
(Gains)/losses attributable to noncontrolling interests in consolidated entities, net of tax
          136.0                         136.0  
 
                                               
Net income attributable to common shareholders
    45.5       136.7       28.7       106.4       (210.9 )     106.4  
 
                                               
Condensed Consolidating Statements of Cash Flows
 
            Non-                
$ in millions   Guarantors   Guarantors   Issuer   Parent   Eliminations   Consolidated
For the six months ended June 30, 2010
                                               
Net cash (used in)/provided by operating activities
    (38.2 )     (99.3 )     59.4       47.9       (33.2 )     (63.4 )
Net cash (used in)/provided by investing activities
    (660.1 )     363.4       (59.3 )     (9.3 )     (193.8 )     (559.1 )
Net cash (used in)/provided by financing activities
    650.0       (403.8 )           (38.9 )     227.0       434.3  
 
                                               
(Decrease)/increase in cash and cash equivalents
    (48.3 )     (139.7 )     0.1       (0.3 )           (188.2 )
 
                                               
 
            Non-                
$ in millions   Guarantors   Guarantors   Issuer   Parent   Eliminations   Consolidated
For the six months ended June 30, 2009
                                               
Net cash (used in)/provided by operating activities
    (15.5 )     98.3       118.2       46.2       (250.0 )     (2.8 )
Net cash (used in)/provided by investing activities
    (4.5 )     2.4                         (2.1 )
Net cash (used in)/provided by financing activities
          139.6       (119.4 )     (46.0 )     250.0       224.2  
 
                                               
(Decrease)/increase in cash and cash equivalents
    (20.0 )     240.3       (1.2 )     0.2             219.3  
 
                                               

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17. SUBSEQUENT EVENTS
     On July 27, 2010, the company declared a second quarter 2010 dividend of 11 cents per share, payable on September 9, 2010, to common and participating preferred shareholders of record at the close of business on August 23, 2010.
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
     The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Condensed Consolidated Financial Statements and related Notes thereto, which appear elsewhere in this Report. Except for the historical financial information, this Report may include statements that constitute “forward-looking statements” under the United States securities laws. Forward-looking statements include information concerning possible or assumed future results of our operations, expenses, earnings, liquidity, cash flows and capital expenditures, industry or market conditions, assets under management, acquisition activities and the effect of completed acquisitions, debt levels and our ability to obtain additional financing or make payments on our debt, regulatory developments, demand for and pricing of our products and other aspects of our business or general economic conditions. In addition, when used in this Report, the documents incorporated by reference herein or such other documents or statements, words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “projects,” “forecasts,” and future or conditional verbs such as “will,” “may,” “could,” “should,” and “would,” and any other statement that necessarily depends on future events, are intended to identify forward-looking statements.
     Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Although we make such statements based on assumptions that we believe to be reasonable, there can be no assurance that actual results will not differ materially from our expectations. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in our most recent Form 10-K and subsequent Forms 10-Q, filed with the Securities and Exchange Commission.
References
     In this Report, unless otherwise specified, the terms “we,” “our,” “us,” “company,” “Invesco,” and “Invesco Ltd.” refer to Invesco Ltd., a company incorporated in Bermuda, and its subsidiaries.
Executive Overview
     The following executive overview summarizes the significant trends affecting our results of operations and financial condition for the periods presented. This overview and the remainder of this management’s discussion and analysis supplements, and should be read in conjunction with, the Condensed Consolidated Financial Statements of Invesco Ltd. and its subsidiaries and the notes thereto contained elsewhere in this Report.
     Invesco is a leading independent global investment manager with offices in 22 countries. As of June 30, 2010, we managed $557.7 billion in assets for retail, institutional and high-net-worth investors around the world. By delivering the combined power of our distinctive worldwide investment management capabilities, Invesco provides a comprehensive array of enduring solutions for our clients. We have a significant presence in the institutional and retail segments of the investment management industry in North America, UK, Europe and Asia-Pacific, with clients in more than 150 countries.
     Risk aversion came to the fore during the second quarter as doubts about the sovereign debt of Greece, Spain, Portugal, Ireland, and Italy unnerved investors. Global equity markets experienced significant declines as investors sought the safe haven of U.S. Treasury securities. The declines in the second quarter erased previous market gains achieved in the first quarter. The table below summarizes the second quarter and first half returns of several major market indices for 2010 and 2009:
                                 
Index   Three months ended June 30,   Six months ended June 30,
    2010   2009   2010   2009
S&P 500
    (11.9 %)     15.2 %     (8.5 %)     3.2 %
FTSE 100
    (13.4 %)     8.2 %     (8.9 %)     (3.3 %)
Nikkei 225
    (15.4 %)     22.8 %     (11.0 %)     12.4 %
MSCI Emerging Market Index
    (9.1 %)     33.6 %     (7.2 %)     34.6 %

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     Investor concerns about European sovereign debt and the sustainability of the economic recovery pressured global equity markets during the second quarter of 2010. The S&P 500 index posted its worst quarterly performance since the final three months of 2008 when the global financial crisis was in full swing declining over 11%. Steep declines were felt in most global markets with the FTSE 100 down just over 13% and the Nikkei 225 index down over 15%.
     The strong returns in the corporate credit markets during the first quarter also ended with the increase in sovereign debt worries in Europe. As borrowing costs in Greece and other European nations soared, corporations found it more difficult to borrow as well. Corporate bond yields rose relative to U.S. Treasuries and new debt issuance ground to a halt as investors pulled money out of riskier credits and purchased the safer U.S. Treasury bonds. As a result of the flight to safety, U.S. Treasury bond prices jumped and yields, which move in the opposite direction of price, fell. U.S. Treasury securities returned 4.7% during the second quarter.
     A significant portion of our business and assets under management (AUM) is based outside of the U.S. The strengthening or weakening of the U.S. dollar against other currencies, primarily the Pound Sterling and the Canadian dollar, will impact our reported revenues and expenses from period to period. Additionally, our revenues are directly influenced by the level and composition of our AUM. Therefore, movements in global capital market levels, net new business inflows (or outflows) and changes in the mix of investment products between asset classes and geographies may materially affect our revenues from period to period. The returns from most global capital markets decreased in the three and six months ended June 30, 2010, which resulted in market depreciation in our AUM of $24.2 billion and $14.5 billion during the respective period; additionally the change in foreign exchange rates reduced AUM by $3.4 billion and $7.9 billion during the respective period. AUM at June 30, 2010, were $557.7 billion.
     Summary operating information is presented in the table below:
                                 
    Three months ended June 30,   Six months ended June 30,
U.S. GAAP Financial Measures Summary   2010   2009   2010   2009
Operating revenues
  $ 787.0 m   $ 625.1 m   $ 1,506.1 m   $ 1,173.7 m
Operating margin
    9.1 %     17.7 %     13.8 %     14.7 %
Net income attributable to common shareholders
  $ 40.8 m   $ 75.7 m   $ 135.8 m   $ 106.4 m
Diluted EPS
  $ 0.09     $ 0.18     $ 0.30     $ 0.26  
Average assets under management (in billions)
  $ 480.5     $ 401.5     $ 465.0     $ 377.9  
                                 
    Three months ended June 30,   Six months ended June 30,
Non-GAAP Financial Measures Summary   2010   2009   2010   2009
Net revenues(1)
  $ 589.0 m   $ 470.1 m   $ 1,133.4 m   $ 881.7 m
Adjusted operating margin(2)
    32.0 %     26.9 %     32.8 %     23.3 %
Adjusted net income(3)
  $ 125.4 m   $ 87.3 m   $ 245.4 m   $ 129.7 m
Adjusted EPS(3)
  $ 0.27     $ 0.21     $ 0.55     $ 0.32  
Average assets under management (in billions)
  $ 480.5     $ 401.5     $ 465.0     $ 377.9  
 
(1)   Net revenues are operating revenues less third-party distribution, service and advisory expenses, plus our proportional share of the net revenues of our joint venture investments, plus management fees earned from, less other revenue recorded by, consolidated investment products. See “Schedule of Non-GAAP Information” for the reconciliation of operating revenues to net revenues.
 
(2)   Adjusted operating margin is adjusted operating income divided by net revenues. Adjusted operating income includes operating income plus our proportional share of the operating income of our joint venture investments, transaction and integration charges, amortization of acquisition-related prepaid compensation and other intangibles, and the operating income impact of the consolidation of investment products. See “Schedule of Non-GAAP Information” for the reconciliation of operating income to adjusted operating income.
 
(3)   Adjusted net income is net income attributable to common shareholders adjusted to add back transaction and integration charges, amortization of acquisition-related prepaid compensation and other intangibles, and the tax cash flow benefits resulting from tax amortization of goodwill and indefinite-lived intangible assets. Adjusted net income excludes the net income of consolidated investment products, and the net income impact of deferred compensation plans. By calculation, adjusted EPS is adjusted net income divided by the weighted average number of shares outstanding (for diluted EPS). See “Schedule of Non-GAAP Information” for the reconciliation of net income to adjusted net income.

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     On June 1, 2010, the company completed the acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments (the “acquired business” or the “acquisition”), in exchange for a combination of $770.0 million in cash paid and 30.9 million common shares and common share equivalents. The acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments, added assets under management across equity, fixed income and alternatives (including mutual funds, variable insurance funds, separate accounts and unit investment trusts). More specifically, this combination will:
    Expand the depth and breadth of the company’s investment strategies, enabling the company to offer an even more comprehensive range of investment capabilities and vehicles to its clients around the world;
 
    Enhance the company’s ability to serve U.S. clients by positioning Invesco among the leading U.S. asset managers by assets under management (AUM), diversity of investment teams and client profile;
 
    Deepen Invesco’s relationships with clients and strengthen its overall distribution capabilities; and
 
    Further strengthen its position in the Japanese investment management market.
     Current estimates indicate that the transaction will yield total adjusted earnings accretion in the first year after the close of the transaction of between 22 and 24 cents per share.

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     Investment Capabilities Performance Overview
     Invesco’s first strategic priority is to achieve strong investment performance over the long-term for our clients. Performance in our equities capabilities, as measured by the percentage of AUM ahead of benchmark and ahead of peer median, has generally been strong with some pockets of outstanding performance and some areas where we have been challenged. Within our equity asset class, U.S. Value, Continental European, and Global ex-U.S. and Emerging Markets have generally had strong relative performance versus competitors and versus benchmark over three- and five-year periods. Near term investment performance in our Canadian equities has seen a strong turnaround as 68% of assets are ahead of peers and benchmark. On a one-year basis, U.K. equity performance has lagged against both competitors and benchmarks; however long-term performance remains strong with over 91% of assets ahead of peers and benchmarks on a 3- and 5- year basis. Within our fixed income asset class, the global fixed income products have had at least 80% of AUM ahead of benchmark and peers over one-, three-, and five-year periods. Our money market capability had at least 93% of AUM ahead of peers on a one-, three-, and five-year basis.
                                                 
    Benchmark Comparison   Peer Group Comparison
    % of AUM Ahead of   % of AUM In Top Half of
    Benchmark   Peer Group
    1yr   3yr   5yr   1yr   3yr   5yr
Equities
                                               
U.S. Core
    17 %     87 %     88 %     35 %     59 %     75 %
U.S. Growth
    62 %     62 %     76 %     47 %     52 %     62 %
U.S. Value
    63 %     93 %     94 %     86 %     92 %     92 %
Sector
    73 %     72 %     71 %     41 %     49 %     61 %
U.K.
    10 %     94 %     94 %     5 %     91 %     95 %
Canadian
    68 %     64 %     3 %     68 %     36 %     25 %
Asian
    51 %     49 %     73 %     59 %     55 %     60 %
Continental European
    91 %     78 %     94 %     85 %     75 %     73 %
Global
    59 %     65 %     81 %     64 %     37 %     39 %
Global Ex U.S. and Emerging Markets
    86 %     94 %     94 %     92 %     91 %     90 %
 
                                               
Balanced  
Balanced
    46 %     75 %     73 %     71 %     67 %     74 %
 
                                               
Fixed Income
                                               
Money Market
    40 %     74 %     71 %     97 %     94 %     93 %
U.S. Fixed Income
    84 %     35 %     59 %     69 %     64 %     62 %
Global Fixed Income
    94 %     80 %     87 %     95 %     80 %     80 %
 
Note:   AUM measured in the one-, three-, and five-year peer group rankings represents 60%, 60%, and 58% of total Invesco AUM, respectively, and AUM measured versus benchmark on a one-, three-, and five-year basis represents 72%, 71%, and 65% of total Invesco AUM, respectively, as of 6/30/10. Peer group rankings are sourced from a widely-used third party ranking agency in each fund’s market (Lipper, Morningstar, Russell, Mercer, eVestment Alliance, SITCA) and asset-weighted in USD. Rankings are as of prior quarter-end for most institutional products and prior month-end for Australian retail funds due to their late release by third parties. Rankings for the most representative fund in each GIPS composite are applied to all products within each GIPS composite. Excludes Invesco PowerShares, W.L. Ross & Co., Invesco Private Capital, non-discretionary direct real estate products and CLOs. Certain funds and products were excluded from the analysis because of limited benchmark or peer group data. Had these been available, results may have been different. These results are preliminary and subject to revision. Performance assumes the reinvestment of dividends. Past performance is not indicative of future results and may not reflect an investor’s experience.

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Results of Operations for the three months ended June 30, 2010, Compared with the three months ended June 30, 2009
Assets Under Management
  The company’s rolling presentation of AUM from period to period illustrates long-term inflows and outflows separately from the net flows into institutional money market funds. Long-term inflows and the underlying reasons for the movements in this line item include investments from new clients, existing clients adding new accounts/funds or contributions/subscriptions into existing accounts/funds, and new funding commitments into private equity funds. We present net flows into institutional money market funds separately, because shareholders of those funds typically utilize them as short-term funding vehicles, and because their flows are particularly sensitive to short-term interest rate movements. Long-term outflows and the underlying reasons for the movements in this line item include redemptions resulting from closed client accounts/funds, partial redemptions in continuing client accounts/funds, and reductions in funding commitments into private equity funds.
     There are numerous drivers of AUM inflows and outflows, from individual investor decisions to change their investment preferences to fiduciaries making broad asset allocation decisions on behalf of advised clients to reallocate investments within portfolios. We are not a party to these asset allocation decisions, as the company does not generally have access to the underlying investor’s decision-making process, including their risk appetite or short-term cash needs. Therefore, the company is not in a position to provide meaningful information regarding the drivers of inflows and outflows.
     To align our external reporting of AUM with how Invesco is portrayed in the industry and to reflect more fully the company’s revenue drivers, in the three months ended June 30, 2010, the company changed its definition of AUM to include assets with which the company is also associated: the PowerShares QQQ fund, DB PowerShares ETFs, and other passive assets. These products previously were not included in the company’s reported AUM, because the company does not receive investment management fees from these assets. These assets are marketed as Invesco products, and to include them as part of our AUM more accurately reflects the full size and capabilities of Invesco. Additionally, the company may receive meaningful performance, service, distribution, or transaction revenues from these assets. The inclusion of these assets as AUM changed the following data points from those previously disclosed:
                 
            Post-
    Previously   Reporting
$ in billions   Disclosed   Alignment
Ending AUM:
               
January 1, 2009
    357.2       377.1  
March 31, 2009
    348.2       369.0  
June 30, 2009
    388.7       414.4  
December 31, 2009
    423.1       459.5  
March 31, 2010
    419.6       457.7  
Average AUM:
               
Three months ended June 30, 2009
    376.5       401.5  
Six months ended June 30, 2009
    365.4       377.9  
Net revenue yield on AUM:
               
Three months ended June 30, 2009
    49.9 bps     46.8 bps
Six months ended June 30, 2009
    48.2 bps     46.7 bps
Net revenue yield on AUM before performance fees:
               
Three months ended June 30, 2009
    49.1 bps     46.0 bps
Six months ended June 30, 2009
    47.1 bps     45.7 bps
Gross revenue yield on AUM:
               
Three months ended June 30, 2009
    67.1 bps     62.8 bps
Six months ended June 30, 2009
    64.8 bps     62.7 bps
Gross revenue yield on AUM before performance fees:
               
Three months ended June 30, 2009
    66.2 bps     62.0 bps
Six months ended June 30, 2009
    63.8 bps     61.7 bps
     Additionally, as a result of the June 1, 2010, acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments (the “acquired business” or the “acquisition”), the company now manages unit investment trust (UIT) products,

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which are now categorized in this passive asset group, and for which we earn revenues related to transactional sales charges from the sale of these products and trading income arising from securities temporarily held to form new UIT products.
     AUM at June 30, 2010, were $557.7 billion (March 31, 2010: $457.7 billion; June 30, 2009: $414.4 billion). The June 1, 2010, acquisition added $114.6 billion in AUM at that date. During the three months ended June 30, 2010, net inflows increased AUM by $13.9 billion, while negative market movements decreased AUM by $24.2 billion. We also experienced net outflows in institutional money market funds of $0.9 billion, and decreases in AUM of $3.4 billion due to changes in foreign exchange rates during the three months ended June 30, 2010. During the three months ended June 30, 2009, net inflows increased AUM by $4.4 billion, and positive market movements increased AUM by $28.2 billion. We also experienced net inflows in institutional money market funds of $1.7 billion, and increases in AUM of $11.1 billion due to changes in foreign exchange rates during the three months ended June 30, 2009. Average AUM during the three months ended June 30, 2010, were $480.5 billion, compared to $401.5 billion for the three months ended June 30, 2009.
     Net flows increased AUM by $13.9 billion during the three months ended June 30, 2010 (three months ended June 30, 2009: $4.4 billion), and included net long-term inflows of ETF, UIT and passive AUM of $14.7 billion and other net long-term outflows of $0.8 billion. Net flows were driven by net inflows into our Institutional distribution channel of $15.7 billion, which resulted primarily from a $15.8 billion passive mandate in Japan, a post-close direct consequence of the newly acquired business. Our retail distribution channel experienced net outflows of $2.4 billion during the three months ended June 30, 2010, primarily in the equity asset class, while our high net worth distribution channel experienced net inflows of $0.6 billion.
     Market gains and losses/reinvestment of AUM includes the net change in AUM resulting from changes in market values of the underlying investments from period to period and reinvestment of client dividends. Market declines led to a $24.2 billion decrease in AUM during the three months ended June 30, 2010, compared to an increase of $28.2 billion in the comparative 2009 period. Of the total decrease in AUM resulting from market declines during the three months ended June 30, 2010, $21.1 billion of this decrease was due to the change in value of our equity asset class across all of our business components. Our alternatives and balanced asset classes were also negatively impacted by the change in market valuations during the period. During the three months ended June 30, 2010, our equity AUM decreased in line with equity markets globally from March 31, 2010. As discussed in the “Executive Overview” section of this Management’s Discussion and Analysis, the S&P 500 and the FTSE 100 indices decreased 11.9% and 13.4%, respectively, during the three months ended June 30, 2010. The decline in equity valuations impacted our retail distribution channel the most significantly. In contrast, of the $28.2 billion increase in AUM resulting from market increases during the three months ended June 30, 2009, $21.0 billion of this increase was due to the change in value of our equity asset class, in line with increases in the S&P 500 and the FTSE 100 indices of 15.2% and 8.2%, respectively, during that period.
     Foreign exchange rate movements in our AUM result from the effect of changes in foreign exchange rates from period to period as non-U.S.-Dollar denominated AUM is translated into U.S. Dollars, the reporting currency of the company. Foreign exchange rate movements led to a $3.4 billion decrease in AUM during the three months ended June 30, 2010, compared to an $11.1 billion increase in the comparative 2009 period. The impact of the change in foreign exchange rates in the three months ended June 30, 2010, was driven primarily by the marginal weakening of the Pounds Sterling relative to the U.S. Dollar, which was reflected in the translation of our Pounds Sterling-based AUM into U.S. Dollars, the marginal weakening of the Canadian Dollar relative to the U.S. Dollar, which was reflected in the translation of our Canadian Dollar-based AUM into U.S. Dollars, and to the marginal weakening of the Euro relative to the U.S. Dollar, which was reflected in the translation of our Euro-based AUM into U.S. Dollars. In contrast, the impact of the change in foreign exchange rates in the three months ended June 30, 2009, which led to an increase in AUM during that period of $11.1 billion, was driven by more significant strengthening of the Pounds Sterling, Canadian Dollar, and Euro to the U.S. Dollar.
     The table below illustrates the spot foreign exchange rates for translation into the U.S. Dollar, the reporting currency of the company, at June 30, 2010 and 2009, as compared with the rates that existed at March 31, 2010 and 2009:
                                 
    June 30, 2010   March 31, 2010   June 30, 2009   March 31, 2009
Pounds Sterling ($  per £)
    1.50       1.52       1.65       1.43  
Canadian Dollar (CAD per $)
    1.06       1.02       1.16       1.26  
Euro ($  per Euro)
    1.23       1.35       1.40       1.33  

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     Net revenue yield increased 2.2 basis points to 49.0 basis points in the three months ended June 30, 2010, from the three months ended June 30, 2009, level of 46.8 basis points, resulting from a 25.3% increase in net revenues and a 19.7% increase in average AUM from the three months ended June 30, 2009. The June 1, 2010, acquired business added $114.6 billion in AUM at that date, with an expected effective fee rate of approximately 47 basis points. Market driven changes in our asset mix significantly impact our net revenue yield calculation. Our equity AUM generally earn a higher net revenue rate than money market AUM. At June 30, 2010, equity AUM were $263.2 billion, representing 47% of our total AUM at that date; whereas at June 30, 2009, equity AUM were $155.6 billion, representing 37.5% of our total AUM at that date.
     Gross revenue yield on AUM increased 3.2 basis points to 66.0 basis points in the three months ended June 30, 2010, from the three months ended June 30, 2009, level of 62.8 basis points. Gross revenue yield, the most comparable U.S. GAAP-based measure to net revenue yield, is not considered by management to be a meaningful effective fee rate measure. The numerator of the gross revenue yield measure, operating revenues, excludes the management fees earned from consolidated investment products; however the denominator of the measure includes the AUM of these investment products. Therefore, the gross revenue yield measure is not considered representative of the company’s true effective fee rate from AUM. The company evaluates net revenue yield instead. See “Schedule of Non-GAAP Information” for a reconciliation of operating revenues (gross revenues) to net revenues.
     Changes in AUM were as follows:
                                                 
            AUM ex                   AUM ex    
            ETF, UIT &   ETF, UIT &           ETF, UIT   ETF, UIT &
    Total AUM   Passive   Passive   Total AUM   & Passive   Passive
$ in billions   2010   2010   2010   2009   2009   2009
March 31
    457.7       402.0       55.7       369.0       338.0       31.0  
Long-term inflows
    45.3       18.7       26.6       25.5       16.5       9.0  
Long-term outflows
    (31.4 )     (19.5 )     (11.9 )     (21.1 )     (14.4 )     (6.7 )
 
                                               
Long-term net flows
    13.9       (0.8 )     14.7       4.4       2.1       2.3  
Net flows in money market funds
    (0.9 )     (0.9 )           1.7       1.7        
Market gains and losses/reinvestment
    (24.2 )     (19.4 )     (4.8 )     28.2       22.7       5.5  
Acquisitions
    114.6       100.9       13.7                    
Foreign currency translation
    (3.4 )     (3.3 )     (0.1 )     11.1       10.9       0.2  
 
                                               
June 30
    557.7       478.5       79.2       414.4       375.4       39.0  
 
                                               
Average long-term AUM
    413.4       355.9       57.5       310.9       276.8       34.1  
Average institutional money market AUM
    67.1       67.1             90.6       90.6        
 
                                               
Average AUM
    480.5       423.0       57.5       401.5       367.4       34.1  
 
                                               
Gross revenue yield on AUM(1)
    66.0 bps     73.4 bps     12.0 bps     62.8 bps     67.4 bps     14.0 bps
Gross revenue yield on AUM before performance fees(1)
    65.7 bps     73.1 bps     12.0 bps     62.0 bps     66.5 bps     14.0 bps
Net revenue yield on AUM(2)
    49.0 bps     54.1 bps     12.0 bps     46.8 bps     49.9 bps     14.0 bps
Net revenue yield on AUM before performance fees(2)
    48.7 bps     53.8 bps     12.0 bps     46.0 bps     49.0 bps     14.0 bps
 
(1)   Gross revenue yield on AUM is equal to annualized total operating revenues divided by average AUM, excluding joint venture (JV) AUM. Our share of the average AUM in the second quarter for our JVs in China was $3.5 billion (first quarter 2010: $3.8 billion; second quarter 2009: $3.6 billion). It is appropriate to exclude the average AUM of our JVs for purposes of computing gross revenue yield on AUM, because the revenues resulting from these AUM are not presented in our operating revenues. Under U.S. GAAP, our share of the pre-tax earnings of the JVs is recorded as equity in earnings of unconsolidated affiliates on our Condensed Consolidated Statements of Income.
 
(2)   Net revenue yield on AUM is equal to annualized net revenues divided by average AUM. See “Schedule of Non-GAAP Information” for a reconciliation of operating revenues to net revenues.

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Our AUM by channel, by asset class, and by client domicile were as follows:
Total AUM by Channel(1)
                                 
                            Private
                            Wealth
$ in billions   Total   Retail   Institutional   Management
March 31, 2010 AUM
    457.7       244.3       197.8       15.6  
Long-term inflows
    45.3       23.0       21.2       1.1  
Long-term outflows
    (31.4 )     (25.4 )     (5.5 )     (0.5 )
 
                               
Long-term net flows
    13.9       (2.4 )     15.7       0.6  
Net flows in money market funds
    (0.9 )           (0.9 )      
Market gains and losses/reinvestment
    (24.2 )     (18.6 )     (4.8 )     (0.8 )
Acquisitions
    114.6       105.1       9.5        
Foreign currency translation
    (3.4 )     (2.4 )     (1.0 )      
 
                               
June 30, 2010 AUM
    557.7       326.0       216.3       15.4  
 
                               
 
                               
March 31, 2009 AUM(2)
    369.0       155.4       200.6       13.0  
Long-term inflows
    25.5       19.8       4.2       1.5  
Long-term outflows
    (21.1 )     (14.9 )     (4.7 )     (1.5 )
 
                               
Long-term net flows
    4.4       4.9       (0.5 )      
Net flows in money market funds
    1.7             1.7        
Market gains and losses/reinvestment
    28.2       22.4       5.0       0.8  
Foreign currency translation
    11.1       9.4       1.7        
 
                               
June 30, 2009 AUM
    414.4       192.1       208.5       13.8  
 
                               
ETF, UIT & Passive AUM by Channel(1)
                                 
                            Private
                            Wealth
$ in billions   Total   Retail   Institutional   Management
March 31, 2010 AUM
    55.7       49.7       6.0        
Long-term inflows
    26.6       10.6       16.0        
Long-term outflows
    (11.9 )     (11.9 )            
 
                               
Long-term net flows
    14.7       (1.3 )     16.0        
Net flows in money market funds
                       
Market gains and losses/reinvestment
    (4.8 )     (4.6 )     (0.2 )      
Acquisitions
    13.7       13.7              
Foreign currency translation
    (0.1 )           (0.1 )      
 
                               
June 30, 2010 AUM
    79.2       57.5       21.7        
 
                               
 
                               
March 31, 2009 AUM(2)
    31.0       28.0       3.0        
Long-term inflows
    9.0       9.0              
Long-term outflows
    (6.7 )     (6.7 )            
 
                               
Long-term net flows
    2.3       2.3              
Net flows in money market funds
                       
Market gains and losses/reinvestment
    5.5       5.0       0.5        
Foreign currency translation
    0.2             0.2        
 
                               
June 30, 2009 AUM
    39.0       35.3       3.7        
 
                               
See accompanying notes to these AUM tables on the following page.

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Total AUM by Asset Class(3)
                                                 
                    Fixed           Money    
$ in billions   Total   Equity   Income   Balanced   Market   Alternatives(4)
March 31, 2010 AUM
    457.7       198.5       79.5       40.6       72.6       66.5  
Long-term inflows
    45.3       33.9       5.4       2.1       0.6       3.3  
Long-term outflows
    (31.4 )     (19.4 )     (4.7 )     (2.2 )     (0.4 )     (4.7 )
 
                                               
Long-term net flows
    13.9       14.5       0.7       (0.1 )     0.2       (1.4 )
Net flows in money market funds
    (0.9 )                       (0.9 )      
Market gains and losses/reinvestment
    (24.2 )     (21.5 )     1.6       (1.9 )           (2.4 )
Acquisitions
    114.6       73.7       37.8       0.3       0.6       2.2  
Foreign currency translation
    (3.4 )     (2.0 )     (0.3 )     (0.7 )           (0.4 )
 
                                               
June 30, 2010 AUM
    557.7       263.2       119.3       38.2       72.5 (5)     64.5  
 
                                               
 
                                               
March 31, 2009 AUM(2)
    369.0       127.1       63.2       29.9       92.6       56.2  
Long-term inflows
    25.5       12.9       4.8       2.3       0.6       4.9  
Long-term outflows
    (21.1 )     (12.2 )     (3.2 )     (2.2 )     (0.8 )     (2.7 )
 
                                               
Long-term net flows
    4.4       0.7       1.6       0.1       (0.2 )     2.2  
Net flows in money market funds
    1.7                         1.7        
Market gains and losses/reinvestment
    28.2       21.0       2.1       3.4             1.7  
Foreign currency translation
    11.1       6.8       1.6       1.6       0.2       0.9  
 
                                               
June 30, 2009 AUM
    414.4       155.6       68.5       35.0       94.3       61.0  
 
                                               
ETF, UIT and Passive AUM by Asset Class(3)
                                                 
                    Fixed           Money    
$ in billions   Total   Equity   Income   Balanced   Market   Alternatives(4)
March 31, 2010 AUM
    55.7       34.3       4.6                   16.8  
Long-term inflows
    26.6       24.4       0.8                   1.4  
Long-term outflows
    (11.9 )     (9.7 )     (0.2 )                 (2.0 )
 
                                               
Long-term net flows
    14.7       14.7       0.6                   (0.6 )
Net flows in money market funds
                                   
Market gains and losses/reinvestment
    (4.8 )     (4.6 )     0.9                   (1.1 )
Acquisitions
    13.7       4.5       9.2                    
Foreign currency translation
    (0.1 )                             (0.1 )
 
                                               
June 30, 2010 AUM
    79.2       48.9       15.3                   15.0  
 
                                               
 
                                               
March 31, 2009 AUM(2)
    31.0       20.7       1.2                   9.1  
Long-term inflows
    9.0       5.5       0.6                   2.9  
Long-term outflows
    (6.7 )     (5.8 )                       (0.9 )
 
                                               
Long-term net flows
    2.3       (0.3 )     0.6                   2.0  
Net flows in money market funds
                                   
Market gains and losses/reinvestment
    5.5       4.2       0.1                   1.2  
Foreign currency translation
    0.2                               0.2  
 
                                               
June 30, 2009 AUM
    39.0       24.6       1.9                   12.5  
 
                                               
See accompanying notes to these AUM tables on the following page.

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Total AUM by Client Domicile(6)
                                                 
                                    Continental    
$ in billions   Total   U.S.   Canada   U.K.   Europe   Asia
March 31, 2010 AUM
    457.7       290.4       29.2       83.9       27.0       27.2  
Long-term inflows
    45.3       18.9       0.6       4.7       3.3       17.8  
Long-term outflows
    (31.4 )     (21.3 )     (1.8 )     (3.7 )     (3.2 )     (1.4 )
 
                                               
Long-term net flows
    13.9       (2.4 )     (1.2 )     1.0       0.1       16.4  
Net flows in money market funds
    (0.9 )     (1.7 )           (0.3 )     2.0       (0.9 )
Market gains and losses/reinvestment
    (24.2 )     (12.9 )     (1.4 )     (5.6 )     (1.4 )     (2.9 )
Acquisitions
    114.6       103.7       0.6       1.8       2.9       5.6  
Foreign currency translation
    (3.4 )           (1.2 )     (1.2 )     (1.0 )      
 
                                               
June 30, 2010 AUM
    557.7       377.1       26.0       79.6       29.6       45.4  
 
                                               
 
                                               
March 31, 2009 AUM(2)
    369.0       250.6       21.4       53.8       22.4       20.8  
Long-term inflows
    25.5       16.4       0.5       4.1       2.3       2.2  
Long-term outflows
    (21.1 )     (13.7 )     (1.3 )     (1.7 )     (2.1 )     (2.3 )
 
                                               
Long-term net flows
    4.4       2.7       (0.8 )     2.4       0.2       (0.1 )
Net flows in money market funds
    1.7       (0.1 )           0.1       1.3       0.4  
Market gains and losses/reinvestment
    28.2       16.2       2.7       4.8       1.7       2.8  
Foreign currency translation
    11.1             1.9       7.6       1.0       0.6  
 
                                               
June 30, 2009 AUM
    414.4       269.4       25.2       68.7       26.6       24.5  
 
                                               
ETF, UIT and Passive AUM by Client Domicile(6)
                                                 
                                    Continental    
$ in billions   Total   U.S.   Canada   U.K.   Europe   Asia
March 31, 2010 AUM
    55.7       53.1                   1.0       1.6  
Long-term inflows
    26.6       10.7                   0.1       15.8  
Long-term outflows
    (11.9 )     (11.8 )                 (0.1 )      
 
                                               
Long-term net flows
    14.7       (1.1 )                       15.8  
Net flows in money market funds
                                   
Market gains and losses/reinvestment
    (4.8 )     (4.0 )                 (0.1 )     (0.7 )
Acquisitions
    13.7       13.7                          
Foreign currency translation
    (0.1 )                             (0.1 )
 
                                               
June 30, 2010 AUM
    79.2       61.7                   0.9       16.6  
 
                                               
 
                                               
March 31, 2009 AUM(2)
    31.0       29.4                   0.6       1.0  
Long-term inflows
    9.0       8.9                   0.1        
Long-term outflows
    (6.7 )     (6.7 )                        
 
                                               
Long-term net flows
    2.3       2.2                   0.1        
Net flows in money market funds
                                   
Market gains and losses/reinvestment
    5.5       5.2                   0.1       0.2  
Foreign currency translation
    0.2                               0.2  
 
                                               
June 30, 2009 AUM
    39.0       36.8                   0.8       1.4  
 
                                               
 
(1)   Channel refers to the distribution channel from which the AUM originated. Institutional AUM originated from individual corporate clients, endowments, foundations, government authorities, universities, or charities. Retail AUM arose from client investments into funds available to the public with shares or units. Private Wealth Management AUM arose from high net worth client investments.
 
(2)   The beginning balances were adjusted to reflect certain asset reclassifications, including the previously discussed AUM reporting alignment to include ETF, UIT and passive AUM.
 
(3)   Asset classes are descriptive groupings of AUM by common type of underlying investments.
 
(4)   The alternatives asset class includes financial structures, absolute return, real estate, private equity, asset allocation, portable alpha and multiple asset strategies.
 
(5)   Ending Money Market AUM includes $68.1 billion in institutional money market AUM and $4.4 billion in retail money market AUM.
 
(6)   Client domicile disclosure groups AUM by the domicile of the underlying clients.

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Results of Operations
Adoption of FASB Statement No. 167
     The company provides investment management services to, and has transactions with, various private equity, real estate, fund-of-funds, collateralized loan obligation products (CLOs), and other investment entities sponsored by the company for the investment of client assets in the normal course of business. The company serves as the investment manager, making day-to-day investment decisions concerning the assets of the products. Certain of these entities are consolidated under variable interest or voting interest entity consolidation guidance. See Part I, Item 1, Financial Statements — Note 12, “Consolidated Investment Products,” for additional details.
     FASB Statement No. 167, which was effective January 1, 2010, had a significant impact on the presentation of the company’s financial statements, as its provisions required the company to consolidate certain CLOs that were not previously consolidated. The cumulative effect adjustment upon adoption of FASB Statement No. 167 at January 1, 2010, resulted in an appropriation of retained earnings and a reclassification of other comprehensive income into retained earnings of $274.3 million and $5.2 million, respectively. The company’s Consolidated Statement of Income for the three months ended June 30, 2010, reflects the elimination of $8.9 million in management fees earned from these CLOs, and the addition of $53.1 million in interest income, $25.6 million in interest expense, and $158.1 million in net other gains. The $175.4 million net income impact during the three months ended June 30, 2010, of consolidation of these CLOs is largely offset by gains/(losses) attributable to investors in noncontrolling interests of $173.0 million. Prior to the adoption of FASB Statement No. 167, the company accounted for its investments in these CLOs as available-for-sale investments, with changes in the value of the company’s interests being recorded through other comprehensive income. After the adoption of FASB Statement No. 167, the change in value of the company’s investments in these CLOs is reflected in the company’s net income. For the three months ended June 30, 2010, the net impact to the company of its investments in these CLOs was $2.4 million. The Condensed Consolidated Balance Sheet at June 30, 2010, reflects the consolidation of $6.5 billion in assets held and $5.4 billion in debt issued by these CLOs, despite the fact that the assets cannot be used by the company, nor is the company obligated for the debt. Retained earnings appropriated for investors of consolidated investment products of $719.5 million is presented as part of the company’s total equity, reflecting the excess of the consolidated CLOs’ assets over their liabilities, attributable to noncontrolling third-party investors in their consolidated CLOs at June 30, 2010, and includes $130.7 million related to consolidated CLOs acquired as part of the June 1, 2010, acquisition. In accordance with the standard, prior periods have not been restated to reflect the consolidation of these CLOs.
     The majority of the company’s consolidated investment products balances were CLO-related as of June 30, 2010. The collateral assets of the CLOs are held solely to satisfy the obligations of the CLOs. The company has no right to the benefits from, nor does it bear the risks associated with, the collateral assets held by the CLOs, beyond the company’s minimal direct investments in, and management fees generated from, the CLOs. If the company were to liquidate, the collateral assets would not be available to the general creditors of the company, and as a result, the company does not consider them to be company assets. Additionally, the investors in the CLOs have no recourse to the general credit of the company for the notes issued by the CLOs. The company therefore does not consider this debt to be a company liability. The discussion that follows will separate consolidated investment product results of operations from the company’s investment management operations through the use of non-GAAP financial measures. See the Schedule of Non-GAAP Information for additional details and reconciliations of the most directly comparable U.S. GAAP measures to the non-GAAP measures.

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Condensed Consolidating Statements of Income
                                 
            Consolidated        
    Before   Investment        
$ in millions   Consolidation*   Products**   Eliminations   Total
Three months ended June 30, 2010
                               
Total operating revenues
    799.3             (12.3 )     787.0  
Total operating expenses
    712.9       15.0       (12.3 )     715.6  
 
                               
Operating income
    86.4       (15.0 )           71.4  
Equity in earnings of unconsolidated affiliates
    10.6             (0.2 )     10.4  
Interest income
    1.8       54.3       (1.2 )     54.9  
Other investment income/(losses)
    (9.3 )     187.2             177.9  
Interest expense
    (14.1 )     (26.8 )     1.2       (39.7 )
 
                               
Income before income taxes, including gains and losses attributable to noncontrolling interests
    75.4       199.7       (0.2 )     274.9  
Income tax provision
    (36.7 )                 (36.7 )
 
                               
Net income, including gains and losses attributable to noncontrolling interests
    38.7       199.7       (0.2 )     238.2  
(Gains)/losses attributable to noncontrolling interests in consolidated entities, net
    (0.1 )     (197.3 )           (197.4 )
 
                               
Net income attributable to common shareholders
    38.6       2.4       (0.2 )     40.8  
 
                               
 
            Consolidated        
    Before   Investment        
$ in millions   Consolidation*   Products   Eliminations   Total
Three months ended June 30, 2009
                               
Total operating revenues
    625.3       0.8       (1.0 )     625.1  
Total operating expenses
    514.6       1.1       (1.0 )     514.7  
 
                               
Operating income
    110.7       (0.3 )           110.4  
Equity in earnings of unconsolidated affiliates
    6.5             1.0       7.5  
Interest income
    1.2                   1.2  
Other investment income/(losses)
    10.0       (48.4 )           (38.4 )
Interest expense
    (16.5 )                 (16.5 )
 
                               
Income/(loss) before income taxes, including gains and losses attributable to noncontrolling interests
    111.9       (48.7 )     1.0       64.2  
Income tax provision
    (36.0 )                 (36.0 )
 
                               
Net income/(loss), including gains and losses attributable to noncontrolling interests
    75.9       (48.7 )     1.0       28.2  
(Gains)/losses attributable to noncontrolling interests in consolidated entities, net
    (0.2 )     47.7             47.5  
 
                               
Net income attributable to common shareholders
    75.7       (1.0 )     1.0       75.7  
 
                               
 
*   The Before Consolidation column includes Invesco’s equity interest in the investment products, accounted for as equity method and available-for-sale investments and does not include any other adjustments related to non-GAAP financial measure presentation.
 
**   The company adopted FASB Statement No. 167 on January 1, 2010, resulting in the consolidation of certain CLOs. In accordance with the standard, prior periods have not been restated to reflect the consolidation of these CLOs. Prior to January 1, 2010, the company was not deemed to be the primary beneficiary of these CLOs.

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Operating Revenues and Net Revenues
     Operating revenues increased by $161.9 million (25.9%) in the three months ended June 30, 2010, to $787.0 million (June 30, 2009: $625.1million). Net revenues increased by $118.9 million (25.3%) in the three months ended June 30, 2010, to $589.0 million (June 30, 2009: $470.1 million). Net revenues are operating revenues less third-party distribution, service and advisory expenses, plus our proportional share of net revenues from joint venture arrangements, plus management fees earned from, less other revenue recorded by, consolidated investment products. See “Schedule of Non-GAAP Information” for additional important disclosures regarding the use of net revenues. A significant portion of our business and managed AUM are based outside of the U.S. The income statements of foreign currency subsidiaries are translated into U.S. dollars, the reporting currency of the company, using average foreign exchange rates. Over the three month period, the U.S. dollar strengthened against the Pound Sterling and Euro, but weakened against the Canadian dollar which impacted our reported revenues for the three months ended June 30, 2010, as compared to the three months ended June 30, 2009. The impact of foreign exchange rate movements resulted in a $6.6 million offset to the increase in operating revenues during the three months ended June 30, 2010. Additionally, our revenues are directly influenced by the level and composition of our AUM as more fully discussed below. Movements in global capital market levels, net new business inflows (or outflows) and changes in the mix of investment products between asset classes and geographies may materially affect our revenues from period to period.
     The main categories of revenues, and the dollar and percentage change between the periods, were as follows:
                                 
    Three months ended        
    June 30,        
$ in millions   2010   2009   $ Change   % Change
Investment management fees
    627.9       501.6       126.3       25.2 %
Service and distribution fees
    139.4       100.4       39.0       38.8 %
Performance fees
    3.5       8.0       (4.5 )     (56.3 )%
Other
    16.2       15.1       1.1       7.3 %
 
                               
Total operating revenues
    787.0       625.1       161.9       25.9 %
Third-party distribution, service and advisory expenses
    (220.7 )     (166.3 )     (54.4 )     32.7 %
Proportional share of revenues, net of third-party distribution expenses, from joint venture investments
    10.4       11.1       (0.7 )     (6.3 )%
Management fees earned from consolidated investment products
    12.3       1.0       11.3       1,130.0 %
Other revenues recorded by consolidated investment products
          (0.8 )     0.8       (100.0 )%
 
                               
Net revenues
    589.0       470.1       118.9       25.3 %
 
                               

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     The operating results for the three months ended June 30, 2010, include the operating results of the acquired business from the closing date of June 1, 2010. The following table provides an analysis of the estimated impact of the acquired business on the company’s operating results for the three months ended June 30, 2010.
                                 
            Acquired   Transaction    
    Existing   Business   and    
    Invesco   from June 1,   Integration   Q2 2010
$ in millions   Business   2010*   Expenses   Combined
Operating revenues
                               
Investment management fees
    591.6       36.3             627.9  
Service and distribution fees
    114.2       25.2             139.4  
Performance fees
    3.5                   3.5  
Other
    10.7       5.5             16.2  
 
                               
Total operating revenues
    720.0       67.0             787.0  
 
                               
Operating expenses
                               
Employee compensation
    244.3       16.2             260.5  
Third-party distribution, service and advisory
    201.7       19.0             220.7  
Marketing
    29.3       5.9             35.2  
Property, office and technology
    52.8       3.0             55.8  
General and administrative
    59.8       4.3             64.1  
Transaction and integration
                79.3       79.3  
 
                               
Total operating expenses
    587.9       48.4       79.3       715.6  
 
                               
 
                               
Operating income
    132.1       18.6       (79.3 )     71.4  
 
                               
 
*   The integration of the acquired business into the existing Invesco business is now largely complete and as a result management does not expect to be able to provide similarly segregated information for future periods.
Investment management fees
     Investment management fees are derived from providing professional services to manage client accounts and include fees earned from retail mutual funds, unit trusts, investment companies with variable capital (ICVCs), exchange-traded funds, investment trusts and institutional and private wealth management advisory contracts. Investment management fees for products offered in the retail distri