Edgar Filing: Invesco Ltd.

2012 10-K

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)



þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012



¨		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 Ltd.

(Exact Name of Registrant as Specified in Its Charter)



Bermuda (State or Other Jurisdiction of Incorporation or Organization)		98-0557567 (I.R.S. Employer Identification No.)

1555 Peachtree Street, N.E., Suite 1800, Atlanta, GA (Address of Principal Executive Offices)		30309 (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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes o No þ

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(Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes o No þ

At June 30, 2012, the aggregate market value of the voting stock held by non-affiliates was $8.3 billion, based on the closing price of the registrant's Common Shares, par value U.S. $0.20 per share, on the New York Stock Exchange. At January 31, 2013, the most recent practicable date, the number of Common Shares outstanding was 440,933,312.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant will incorporate by reference information required in response to Part III, Items 10-14 in its definitive Proxy Statement for its annual meeting of shareholders, to be filed with the Securities and Exchange Commission within 120 days after December 31, 2012.

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TABLE OF CONTENTS

We include cross references to captions elsewhere in this Annual Report on Form 10-K, 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

Special Cautionary Note Regarding Forward-Looking Statements	3

PART I
Item 1. Business	4
Item 1A. Risk Factors	10
Item 1B. Unresolved Staff Comments	19
Item 2. Properties	19
Item 3. Legal Proceedings	19
Item 4. Mine Safety Disclosures	19
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	19
Item 6. Selected Financial Data	22
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	66
Item 8. Financial Statements and Supplementary Data	70
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	130
Item 9A. Controls and Procedures	130
Item 9B. Other Information	130
PART III
Item 10. Directors, Executive Officers and Corporate Governance	130
Item 11. Executive Compensation	130
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	130
Item 13. Certain Relationships and Related Transactions, and Director Independence	130
Item 14. Principal Accountant Fees and Services	131

PART IV
Item 15. Exhibits and Financial Statement Schedules	131
Item 16. Exhibits	131
Signatures	134

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SPECIAL CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Report, the documents incorporated by reference herein, other public filings and oral and written statements by us and our management, may include statements that constitute “forward-looking statements” within the meaning of the United States securities laws. These statements are based on the beliefs and assumptions of our management and on information available to us at the time such statements are made. 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, legal and 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 or other outcomes. 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.

The following important factors, and other factors described elsewhere in this Report or incorporated by reference into this Report or contained in our other filings with the U.S. Securities and Exchange Commission (SEC), among others, could cause our results to differ materially from any results described in any forward-looking statements:


•	significant fluctuations in the performance of debt and equity markets worldwide;


•	any inability to adjust our expenses quickly enough to match significant deterioration in markets;


•	significant changes in net asset flows into or out of the accounts we manage or declines in market value of the assets in, or redemptions or other withdrawals from, those accounts;


•	the investment performance of our investment products;


•	variations in demand for our investment products or services, including termination or non-renewal of our investment advisory agreements;


•	the effect of economic conditions and fluctuations in interest rates in the U.S. or globally;


•	adverse changes in laws or regulations, or adverse results in litigation, including private civil litigation related to mutual fund fees and any similar potential regulatory or other proceedings, governmental investigations, and enforcement actions;


•	changes in regulatory capital requirements;


•	our ability to attract and retain key personnel, including investment management professionals;


•	harm to our reputation;


•	our ability to comply with client contractual requirements and/or investment guidelines despite preventative compliance procedures and controls;


•	competitive pressures in the investment management business which may force us to reduce fees we earn;


•	the effect of consolidation in the investment management business;


•	our ability to acquire and integrate other companies into our operations successfully and the extent to which we can realize anticipated cost savings and synergies from such acquisitions;


•	our ability to implement our ongoing company-wide transformational initiatives;


•	our ability to access the capital markets in a timely manner;


•	our debt and the limitations imposed by our credit facility;


•	limitations or restrictions on access to distribution channels for our products;


•	the occurrence of breaches and errors in the conduct of our business, including any failure to properly safeguard confidential and sensitive information;


•	the effect of failures or delays in support systems or customer service functions, and other interruptions of our operations;


•	the effect of political or social instability in the countries in which we invest or do business;


•	the effect of terrorist attacks in the countries in which we invest or do business and the escalation of hostilities that could result therefrom;


•	war and other hostilities in or involving countries in which we invest or do business;


•	exchange rate fluctuations, especially as against the U.S. Dollar;


•	impairment of goodwill and other intangible assets; and


•	enactment of adverse state, federal or foreign legislation or changes in government policy or regulation (including accounting standards) affecting our operations, our capital requirements or the way in which our profits are taxed.

Other factors and assumptions not identified above were also involved in the derivation of these forward-looking statements, and the failure of such other assumptions to be realized may also cause actual results to differ materially from those projected. For more discussion of the risks affecting us, please refer to Part I, Item 1A, “Risk Factors.”

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You should consider the areas of risk described above in connection with any forward-looking statements that may be made by us and our businesses generally. We expressly disclaim any obligation to update any of the information in this or any other public report if any forward-looking statement later turns out to be inaccurate, whether as a result of new information, future events or otherwise. For all forward-looking statements, we claim the “safe harbor” provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

PART I

Item 1. Business

Introduction

Invesco is a leading independent global investment manager, dedicated to helping investors worldwide achieve their financial objectives. By delivering the combined power of our distinctive investment management capabilities, Invesco provides a comprehensive range of investment strategies and vehicles to our retail, institutional and high-net-worth clients around the world. Operating in more than 20 countries, Invesco had $687.7 billion in assets under management (AUM) as of December 31, 2012.

The key drivers of success for Invesco are long-term investment performance, effective distribution relationships, and high-quality client service delivered across a diverse spectrum of investment management capabilities, distribution channels, geographic areas and market exposures. By achieving success in these areas, we seek to generate competitive investment results, positive net flows, increased AUM and associated revenues. We are affected significantly by market movements, which are beyond our control; however, we endeavor to mitigate the impact of market movement by maintaining broad diversification across asset classes, investment vehicles, client domiciles and geographies. We measure relative investment performance by comparing our investment capabilities to competitors' products, industry benchmarks and client investment objectives. Generally, distributors, investment advisors and consultants take into consideration longer-term investment performance (e.g., three-year and five-year performance) in their selection of investment products and manager recommendations to their clients, although shorter-term performance may also be an important consideration. Third-party ratings may also influence client investment decisions. Quality of client service is monitored in a variety of ways, including periodic client satisfaction surveys, analysis of response times and redemption rates, competitive benchmarking of services and feedback from investment consultants.

Invesco Ltd. is organized under the laws of Bermuda, and our common shares are listed and traded on the New York Stock Exchange under the symbol “IVZ.” We maintain a Web site at www.invesco.com. (Information contained on our Web site shall not be deemed to be part of, or be incorporated into, this document).

Strategy

The company focuses on four key strategic priorities that are designed to strengthen our business over time and help ensure our long-term success:


•	Achieve strong investment performance over the long term for our clients;


•	Be instrumental to our clients' success by delivering our distinctive investment capabilities anywhere in the world to meet their needs;


•	Harness the power of our global platform by continuously improving our processes and procedures and further unifying the support structures of our business globally; and


•	Perpetuate a high-performance organization by driving greater transparency, accountability and execution at all levels.

Since 2005, when we adopted our strategy to become an integrated asset manager, Invesco has taken a number of steps to unify our business and present the organization as a single firm to our clients around the world. We believe these changes have strengthened Invesco's ability to operate more efficiently and effectively as an integrated, global organization.

Since 2008, we have encountered business challenges as we have executed our long-term strategy. Over the last five years, investors in global markets have focused their demand on less risky asset classes such as fixed income and passive products; this has in turn driven down the net revenue yield on Invesco's net flows as investors have shifted away from higher yielding AUM such as traditional equities. Furthermore, during this time frame, much of our existing product lineup was based on locally or regionally focused investment capabilities, which by their nature, do not experience the same levels of operating leverage as products or capabilities that can generate global demand. Despite this period of challenge, we were able to deliver improving investment performance and we increased our ability to grow organically. We have also enhanced our financial strength, have closely managed costs and shareholder returns, and have delivered new products that will allow us to add global scale.

One of Invesco's great strengths is our separate, distinct investment teams in multiple markets across the globe. A key focus of our business is nurturing a strong investment culture and providing the support that enables our investment teams to develop

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well-performing investment capabilities within our local and global markets. The ability to leverage the capabilities developed by our investment teams to meet client demand across the globe is a significant differentiator for our firm. As an example, real estate securities and REITs managed in Dallas were first introduced to the U.S. institutional and retail markets in 1988. A few years later, we saw demand for this highly marketable capability in Japan and Australia, and made it available to investors through mutual funds in those markets. We introduced our REIT capability to the European offshore market in August 2005, and to the Canadian retail market in 2007. More recently, we leveraged this capability in an actively managed real estate exchange-traded fund (ETF) delivered in the US - the first of its kind. We've also had success expanding our industry-leading balanced risk allocation capability globally. While this capability was initially created for institutional clients in the U.S. market, Invesco quickly expanded to the retail market with mutual funds in the U.S. and offshore. In 2012, Invesco announced that it was further expanding its multi-asset capability with the addition of a dedicated multi-asset team in the U.K.

We take a unified approach to our business and present our financial statements and other disclosures under the single operating segment “investment management.”

Recent Developments

Throughout 2012, we continued to execute our long-term strategy, which further improved our ability to serve clients, reinforced our reputation as a premier global investment manager, and helped to deliver competitive levels of operating income and margins. We also took advantage of opportunities in the market and continued to invest in our products and capabilities, our brand, our global platform and our people in ways that strengthened our business and competitive position for long-term success.

Invesco's continued progress against a multi-year strategy set a firm foundation for the company's many achievements throughout the year:


•	Relative investment performance remained strong across the enterprise, with 78% of ranked assets* performing ahead of peers on a 5-year basis at year-end;


•	We focused on strengthening and deepening relationships with clients in key markets. For example, we maintained a market share ranking in the top three on all major platforms in the U.K. retail market and further strengthened relationships with leading financial institutions in all U.S. retail channels;


•	We expanded our presence and improved our competitive advantage as a global investment manager in fast-growing, high-priority markets (e.g., China) and segments (e.g., multi-asset strategies);


•	We continued our share repurchase program, purchasing $265 million in shares; and


•	We maintained strong inflows at Invesco PowerShares, and leveraged our expertise to build our ETF capabilities and brand in China and Canada.

Together, these efforts resulted in strong, positive net flows for our business in 2012.

____________


*	As of December 31, 2012, 78% of ranked assets were performing ahead of peers on a 5-year basis. Of total Invesco AUM, 59% were ranked at year-end. See Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations - Investment Capabilities Performance Overview,” for more discussion of AUM rankings by investment capability.

Certain Demographic and Industry Trends

Demographic and economic trends around the world continue to transform the investment management industry and underscore the need to be well diversified with broad capabilities globally and across asset classes:


•	There is an increasing number of investors who seek external professional advice and investment managers to help them reach their financial goals.

•

As the “baby boomer” generation continues to mature, there is a large segment of the world population that is reaching retirement age. Economic growth in emerging market countries has created a large and rapidly expanding middle class and high net worth population with accelerating levels of wealth. As a result, there is a high degree of global demand for an array of investment solutions that span the breadth of investment capabilities, with a particular emphasis on savings vehicles for retirement. We believe Invesco, as one of the few truly global, independent investment managers, is very well positioned to attract these retirement assets through its products that are focused on long-term investment performance.

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•

Given the dynamics of the global markets over the past year, we have seen increased demand for investment solutions that provide reasonable returns in volatile markets. Investors increasingly recognize the need for reducing downside risk while maintaining upside participation. Invesco has been growing rapidly in this market space and has a market-leading asset allocation capability that is highly sought by retail and institutional investors.


•	Investors are increasingly seeking to invest outside their domestic markets in order to increase their returns and mitigate risk. They seek firms that operate globally and have investment expertise in markets around the world.


•	Given the recent volatility in the market, the industry has seen an emphasis on risk management and yield-oriented products, many of which are experiencing strong flows. This dynamic shifted demand to lower-risk and passive investments (e.g. ETFs) and away from traditional equities and actively managed investments.

•

Although the U.S. and Europe are currently the two largest markets for financial assets by a wide margin, other markets in the world, such as China and India, are rapidly growing. As these population-heavy markets mature, investment managers that are truly global will be in the best position to capture this growth. Additionally, population age differences between emerging and developed markets will result in differing investment needs and horizons among countries. Asset allocation and pension type also differ substantially among countries. Firms such as Invesco, with diversified investment capabilities and product types, are best positioned to meet clients' needs in these markets. Invesco has a meaningful and expanding market presence in many of the world's fastest growing and wealthiest regions, including the U.S., Canada, Western Europe and the U.K., the Middle East and Asia-Pacific. Our strong and growing presence in established and emerging markets provides significant long-term growth potential for our business.


•	The global trend towards the provision of defined contribution retirement plans continues, although significant opportunity remains for managers to increase defined benefit market share. Invesco has the capability to serve both the defined benefit and defined contribution markets globally.

Invesco is well positioned to capture the opportunities created by global demographic and industry trends. Our comprehensive range of investment capabilities and broad diversification enable us to continue building our business and strengthening our competitive position through a variety of economic and market environments. Our multi-year strategy is designed to leverage our global presence, our distinctive worldwide investment management capabilities and our talented people to further grow our business and ensure our long-term success.

Investment Management Capabilities

Supported by a global platform, Invesco delivers a comprehensive array of investment capabilities and services to retail, institutional and high net worth investors. We have a significant presence in the institutional and retail segments of the investment management industry in North America, Europe and Asia-Pacific, serving clients in more than 100 countries.

We believe that the proven strength of our distinct and globally located investment centers and their well-defined investment disciplines and risk management provide us with a competitive advantage. There are few independent investment managers with teams as globally diverse as Invesco's and with the same breadth and depth of investment capabilities and vehicles. We offer multiple investment objectives within the various asset classes and products that we manage. Our asset classes, broadly defined, include money market, fixed income, balanced, equity and alternatives. Approximately 43% of our AUM as of December 31, 2012, were invested in equity securities (December 31, 2011: 43%) and 57% in fixed income and other investments (December 31, 2011: 57% in fixed income and other investments).

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The following table sets forth the investment objectives, sorted by asset class, which we manage:

Investment Objectives by Asset Class



Money Market	Fixed Income	Balanced	Equity	Alternatives
Cash Plus	Convertibles	Global	Emerging Markets	Absolute Return
Government/Treasury	Core/Core Plus	Single Country	Enhanced Index/Quantitative	Commodities
Prime	Emerging Markets	Target Date	International/Global	Currencies
Taxable	Enhanced Cash	Target Risk	Large Cap Core	Financial Structures
Tax-Free	Government Bonds	Balanced Risk	Large Cap Growth	Managed Futures
	High-Yield Bonds	Traditional Balanced	Large Cap Value	Private Capital - Direct
	Intermediate Term		Mid Cap Core	Private Capital - Fund of Funds
	International/Global		Mid Cap Growth	Private Direct Real Estate – Asia
	Investment Grade Credit		Mid Cap Value	Private Direct Real Estate – Europe
	Multi-Sector		Regional/Single Country	Private Direct Real Estate – U.S.
	Municipal Bonds		Sector Funds	Public Real Estate Securities – U.S.
	Passive/Enhanced		Small Cap Core	Public Real Estate Securities – Global
	Short Term		Small Cap Growth	Senior Secured Loans
	Stable Value		Small Cap Value
	Structured Securities (ABS, MBS, CMBS)

The following table sets forth the categories of investment vehicles sold through our three principal distribution channels:

Investment Vehicles by Distribution Channel



Retail	Institutional	Private Wealth Management
Closed-end Mutual Funds	Collective Trust Funds	Exchange-Traded Funds
Exchange-Traded Funds	Exchange-Traded Funds	Managed Accounts
Individual Savings Accounts	Institutional Separate Accounts	Mutual Funds
Investment Companies with Variable Capital	Open-end Mutual Funds	Private Capital Funds
Investment Trusts	Private Capital Funds	Separate Accounts
Open-end Mutual Funds
Separately Managed Accounts (SMA)
Unit Investment Trusts
Variable Insurance Funds

One of Invesco's greatest competitive strengths is the diversification in its AUM by client domicile, distribution channel and asset class. Our distribution network has attracted assets of 62% retail, 35% institutional, and 3% private wealth management clients as of December 31, 2012. By client domicile, 31% of client AUM are outside the U.S., and we serve clients in more than 100 countries. The following tables present a breakdown of AUM by client domicile, distribution channel and asset class as of December 31, 2012. Additionally, the fourth table below illustrates the split of our AUM as Passive and Active. Passive AUM includes ETFs, UITs, non-fee earning leverage, foreign exchange overlays and other passive mandates. Active AUM is total AUM less Passive AUM.

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AUM Diversification

By Client Domicile



($ billions)		1-Yr Change
U.S.	$472.8	10.0	%
Canada	$25.2	7.7	%
U.K.	$101.9	13.5	%
Continental Europe	$38.8	21.3	%
Asia	$49.0	(2.2	)%
Total	$687.7	10.0	%

By Distribution Channel



($ billions)		1-Yr Change
Retail	$425.8	13.9	%
Institutional	$242.0	3.6	%
PWM	$19.9	11.2	%
Total	$687.7	10.0	%

By Asset Class



($ billions)		1-Yr Change
Equity	$297.4	9.7	%
Balanced	$62.1	39.2	%
Money Market	$73.3	(0.9	)%
Fixed Income	$171.9	15.4	%
Alternative	$83.0	(4.3	)%
Total	$687.7	10.0	%

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Active vs. Passive



($ billions)		1-Yr Change
Active	$573.7	8.4	%
Passive	$114.0	18.4	%
Total	$687.7	10.0	%

See Part II, Item 8, Financial Statements and Supplementary Data - Note 18, "Geographic Information,” for a geographic breakdown of our consolidated operating revenues for the years ended December 31, 2012, 2011 and 2010.

Channel refers to the distribution channel from which the AUM originated. Retail AUM arose from client investments into funds available to the public with shares or units. Institutional AUM originated from individual corporate clients, endowments, foundations, government authorities, universities, or charities. Private Wealth Management AUM arose from high net worth client investments.

Retail

Invesco is a significant provider of retail investment solutions to clients in all major markets: Invesco in the U.S., Canada, Europe and Asia, Invesco Perpetual in the U.K., and Invesco PowerShares (for our ETF products). Collectively, the retail investment management teams managed assets of $425.8 billion as of December 31, 2012. We offer retail products within all of the major asset classes. Our retail products are primarily distributed through third-party financial intermediaries, including traditional broker-dealers, fund “supermarkets,” retirement platforms, financial advisors, banks, insurance companies and trust companies.

The U.K., U.S. and Canadian retail operations rank among the largest by AUM in their respective markets. As of December 31, 2012, Invesco Perpetual was one of the largest retail fund providers in the U.K.; Invesco's U.S. retail business was among the top 10 largest non-proprietary fund complexes in the U.S. by long-term assets, including the Invesco Powershares franchise; and Invesco Canada was among the top 10 largest retail fund managers in Canada by long-term assets. Invesco Great Wall, our joint venture in China, was one of the largest Sino-foreign managers of equity products in China, with AUM of approximately $6.4 billion as of December 31, 2012. We provide our retail clients with one of the industry's most robust and comprehensive product lines.

Institutional

We provide investment solutions to institutional investors globally, with a major presence in the U.S., U.K., Continental Europe and Asia with $242.0 billion in AUM as of December 31, 2012. We offer a broad suite of domestic and global strategies, including traditional equities, structured equities, fixed income (including money market funds for institutional clients), real estate, private equity, distressed equities, financial structures and absolute return strategies. Regional sales forces distribute our products and provide services to clients and intermediaries around the world. We have a diversified client base that includes major public entities, corporations, unions, non-profit organizations, endowments, foundations, pension funds and financial institutions. Invesco's institutional money market funds serve some of the largest financial institutions and corporations in the world.

Private Wealth Management

Through Atlantic Trust, Invesco provides high net worth individuals and their families with a broad range of personalized and sophisticated wealth management services, including financial counseling, estate planning, asset allocation, investment management (including use of third-party managed investment products), private equity, trust, custody and family office services. Atlantic Trust also provides investment management services to foundations and endowments. Atlantic Trust obtains new clients through referrals from existing clients, recommendations from other professionals serving the high net worth market, such as attorneys and accountants, and from financial intermediaries, such as brokers. Atlantic Trust has offices in 12 U.S. cities and managed $19.9 billion as of December 31, 2012.

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Employees

As of December 31, 2012, we had 6,128 employees across the globe. As of December 31, 2011 and 2010, we had 6,162 and 5,617 employees, respectively. None of our employees are covered under collective bargaining agreements. The 2011 increase in headcount, as compared to 2010, was primarily driven by the insourcing of our Hyderabad, India, facility.

Competition

The investment management business is highly competitive, with points of differentiation including investment performance, the range of products offered, brand recognition, business reputation, financial strength, the depth and continuity of relationships, quality of service and the level of fees charged for services. We compete with a large number of investment management firms, commercial banks, investment banks, broker dealers, hedge funds, insurance companies and other financial institutions. We believe that the quality and diversity of our investment styles, product types and channels of distribution enable us to compete effectively in the investment management business. We also believe being an independent investment manager is a competitive advantage, as our business model avoids conflicts that are inherent within institutions that both distribute and/or serve investment products and manage investment products. Lastly, we believe continued execution against our multi-year strategy will further strengthen our long-term competitive position.

Management Contracts

We derive substantially all of our revenues from investment management contracts with funds and other clients. Fees vary with the type of assets being managed, with higher fees earned on actively managed equity and balanced accounts, along with real estate and alternative asset products, and lower fees earned on fixed income, money market and stable value accounts, as well as certain ETFs. Investment management contracts are generally terminable upon thirty or fewer days' notice. Typically, retail investors may withdraw their funds at any time without prior notice. Institutional and private wealth management clients may elect to terminate their relationship with us or reduce the aggregate amount of assets under management with very short notice periods.

Available Information

We file current and periodic reports, proxy statements and other information with the SEC, copies of which can be obtained from the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.

The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC, at www.sec.gov. We make available free of charge on our Web site, www.invesco.com, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

Item 1A. Risk Factors

Volatility and disruption in world capital and credit markets, as well as adverse changes in the global economy, can negatively affect Invesco's revenues, operations, financial condition and liquidity and may continue to do so.

In recent years, capital and credit markets have experienced substantial volatility. In this regard:

•

In the event of extreme circumstances, including economic, political, or business crises, such as a widespread systemic failure in the global financial system or additional failures of firms that have significant obligations as counterparties on financial instruments, we may suffer significant declines in assets under management ("AUM") and severe liquidity or valuation issues in sponsored investment products in which client and company assets are invested, all of which would adversely affect our operating results, financial condition, liquidity, credit ratings, ability to access capital markets, and retention and ability to attract key employees. Additionally, these factors could impact our ability to realize the carrying value of our goodwill and other intangible assets.


•	In addition to the impact of the market volatility on client portfolios, the illiquidity and volatility of both the global fixed income and equity markets could negatively affect our ability to manage client inflows and outflows or to timely meet client redemption requests.


•	Our money market funds have always maintained a $1.00 net asset value (NAV); however, we do not guarantee such level. Market conditions could lead to severe liquidity issues in money market products, which could affect their NAVs.

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If the NAV of one of our money market funds were to decline below $1.00 per share, such funds could experience significant redemptions in AUM, loss of shareholder confidence and reputational harm. Regulators in the U.S. continue to evaluate whether to propose mandating a variable (“floating”) NAV for money market funds. The company believes such a change would have significant adverse consequences on the money market funds industry and the short-term credit markets.


•	Even if legislative or regulatory initiatives or other efforts continue to stabilize and add liquidity to the financial markets, we may need to modify our strategies, businesses or operations, and we may incur increased capital requirements and constraints or additional costs in order to satisfy new regulatory requirements or to compete in a changed business environment.

We may not adjust our expenses quickly enough to match significant deterioration in global financial markets.

If we are unable to effect appropriate expense reductions in a timely manner in response to declines in our revenues, or if we are otherwise unable to adapt to rapid changes in the global marketplace, our profitability, financial condition and results of operations would be adversely affected.

Our revenues and profitability would be adversely affected by any reduction in AUM as a result of either a decline in market value of such assets or net outflows, which would reduce the investment management fees we earn.

We derive substantially all of our revenues from investment management contracts with clients. Under these contracts, the investment management fees paid to us are typically based on the market value of AUM. AUM may decline for various reasons. For any period in which revenues decline, our income and operating margin may decline by a greater proportion because certain expenses remain fixed. Factors that could decrease AUM (and therefore revenues) include the following:

Declines in the market value of the assets in the funds and accounts managed. These could be caused by price declines in the securities markets generally or by price declines in the market segments in which those assets are concentrated. Approximately 43% of our total AUM were invested in equity securities and approximately 57% were invested in fixed income and other investments at December 31, 2012. Our AUM as of January 31, 2013 were $712.6 billion. We cannot predict whether volatility in the markets will result in substantial or sustained declines in the securities markets generally or result in price declines in market segments in which our AUM are concentrated. Any of the foregoing could negatively impact our revenues, income and operating margin.

Redemptions and other withdrawals from, or shifting among, the funds and accounts managed. These could be caused by investors (in response to adverse market conditions or pursuit of other investment opportunities) reducing their investments in funds and accounts in general or in the market segments on which Invesco focuses; investors taking profits from their investments; poor investment performance of the funds and accounts managed by Invesco; and portfolio risk characteristics, which could cause investors to move assets to other investment managers. Poor performance relative to other investment management firms tends to result in decreased sales, increased redemptions of fund shares, and the loss of private institutional or individual accounts, with corresponding decreases in our revenues. Failure of our funds and accounts to perform well could, therefore, have a material adverse effect on us. Furthermore, the fees we earn vary with the types of assets being managed, with higher fees earned on actively managed equity and balanced accounts, along with real estate and alternative asset products, and lower fees earned on fixed income and stable return accounts. We have seen our net revenue yield decline in recent years, reflecting in part a shift by clients to lower fee products. Our revenues may decline if clients continue to shift their investments to lower fee accounts.

Declines in the value of seed capital and partnership investments. The company has investments in sponsored investment products that invest in a variety of asset classes, including, but not limited to equities, fixed income products, private equity, and real estate. Investments in these products are generally made to establish a track record, meet purchase size requirements for trading blocks, or demonstrate economic alignment with other investors in our funds. Adverse market conditions may result in the need to write down the value of these seed capital and partnership investments. As of December 31, 2012, the company had $275.6 million in seed capital and partnership investments.

Our investment advisory agreements are subject to termination or non-renewal, and our fund and other investors may withdraw their assets at any time.

Substantially all of our revenues are derived from investment advisory agreements. Investment advisory agreements are generally terminable upon 30 or fewer days' notice. Agreements with U.S. mutual funds may be terminated with notice, or terminated in the event of an “assignment” (as defined in the Investment Company Act of 1940, as amended), and must be renewed annually by the disinterested members of each fund's board of directors or trustees, as required by law. In addition, the board of trustees or

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directors of certain other fund accounts of Invesco or our subsidiaries generally may terminate these investment advisory agreements upon written notice for any reason. Mutual fund and unit trust investors may generally withdraw their funds at any time without prior notice. Institutional clients may elect to terminate their relationships with us or reduce the aggregate amount of AUM, and individual clients may elect to close their accounts, redeem their shares in our funds, or shift their funds to other types of accounts with different fee structures. Any termination of or failure to renew a significant number of these agreements, or any other loss of a significant number of our clients or AUM, would adversely affect our revenues and profitability.

Our revenues and profitability from money market and other fixed income assets may be harmed by interest rate, liquidity and credit volatility.

Certain institutional investors using money market products and other short-term duration fixed income products for cash management purposes may shift these investments to direct investments in comparable instruments in order to realize higher yields than those available in money market and other fund products holding lower yielding instruments. These redemptions would reduce managed assets, thereby reducing our revenues. In addition, rising interest rates will tend to reduce the market value of bonds held in various investment portfolios and other products. Thus, increases in interest rates could have an adverse effect on our revenues from money market portfolios and from other fixed income products. If securities within a money market portfolio default, or investor redemptions force the portfolio to realize losses, there could be negative pressure on its NAV. Although money market investments are not guaranteed instruments, the company might decide, under such a scenario, that it is in its best interest to provide support in the form of a support agreement, capital infusion, or other methods to help stabilize a declining NAV. Some of these methods could have an adverse impact on our profitability. Additionally, at December 31, 2012, we have $32.5 million invested in Invesco Mortgage Capital Inc., $42.4 million of equity at risk invested in our collateralized loan obligation products, and $44.4 million invested in fixed income seed money , the valuation of which could change with changes in interest and default rates.

We operate in an industry that is highly regulated in many countries, and any enforcement action or adverse changes in the laws or regulations governing our business could decrease our revenues and profitability.

As with all investment management companies, our activities are highly regulated in almost all countries in which we conduct business. Laws and regulations applied at the national, state or provincial and local level generally grant governmental agencies and industry self-regulatory authorities broad administrative discretion over our activities, including the power to limit or restrict our business activities, conduct examinations, risk assessments, investigations and capital adequacy reviews, and impose remedial programs to address perceived deficiencies. Subsidiaries operating in the European Union (“EU”) also are subject to various EU Directives, which are implemented by member state national legislation. As a result of regulatory oversight, we could face requirements which negatively impact the way in which we conduct business, impose additional capital requirements and involve enforcement actions which could lead to sanctions including the revocation of licenses to operate certain businesses, the suspension or expulsion from a particular jurisdiction or market of any of our business organizations or their key personnel, or the imposition of fines and censures on us or our employees. Judgments or findings of wrongdoing by regulatory or governmental authorities, or in private litigation against us could affect our reputation, increase our costs of doing business and/or negatively impact our revenues, any of which could have a material negative impact on our results of operations, financial condition or liquidity.

Certain of our subsidiaries are required to maintain minimum levels of capital and such capital requirements may be increased from time-to-time. These and other similar provisions of applicable law may have the effect of limiting withdrawals of capital, repayment of intercompany loans and payment of dividends by such entities. A sub-group of Invesco subsidiaries, including all of our regulated EU subsidiaries, is subject to consolidated capital requirements under EU Directives, and capital is maintained within this sub-group to satisfy these regulations. At December 31, 2012, the European sub-group had cash and cash equivalent balances of $528.3 million (December 31, 2011: $440.0 million), much of which is used to satisfy these regulatory requirements. Complying with our regulatory commitments may result in an increase in the capital requirements applicable to the European sub-group. As a result of corporate restructuring and regulatory requirements, certain of these EU subsidiaries may be required to limit their dividends to the parent company, Invesco Ltd.

The regulatory environment in which we operate frequently changes and has seen significant increased regulation in recent years. Various changes in law and regulation have been enacted or adopted and are being implemented or otherwise developed in multiple jurisdictions globally in response to the crisis in the financial markets that began in 2007. Various other proposals remain under consideration by legislators, regulators, and other government officials and other public policy commentators. Certain enacted provisions and certain other proposals are potentially far reaching and, depending upon their implementation, could have a material impact on Invesco's business. While many of these provisions appear designed to address perceived problems in the banking sector, certain of the provisions will or may be applied to other financial services companies, including investment managers. We may be adversely affected as a result of new or revised legislation or regulations or by changes in the interpretation or enforcement of existing laws and regulations. To the extent that existing regulations are amended or future regulations are

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adopted that reduce the sale, or increase the redemptions, of our products and services, or that negatively affect the investment performance of our products, our aggregate AUM and our revenues could be adversely affected. In addition, regulatory changes have imposed and may continue to impose additional costs, which could negatively impact our profitability.

In the United States, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law on July 21, 2010. While Invesco does not believe that the Dodd-Frank Act will fundamentally change the investment management industry or cause Invesco to reconsider its basic strategy, certain provisions will, and other provisions may, require us to change or impose new limitations on the manner in which we conduct business; they also will or may increase regulatory burdens and related compliance costs. Furthermore, certain provisions may have unintended adverse consequences on the liquidity or structure of the financial markets. In addition, the scope and impact of many provisions of the Dodd-Frank Act will be determined by implementing regulations, some of which require lengthy proposal and promulgation periods. Moreover, the Dodd-Frank Act mandates many regulatory studies, some of which pertain directly to the investment management industry, which could lead to additional legislation or regulation. As a result of these uncertainties regarding implementation of the Dodd-Frank Act and such other future potential legislative or regulatory changes, the full impact of the Dodd-Frank Act on the investment management industry and Invesco cannot be predicted at this time.

The European Union has promulgated or is considering various new or revised directives pertaining to financial services, including investment managers. Such directives are progressing at various stages, and are being or will or would be implemented by national legislation in member states. As with the Dodd-Frank Act, Invesco does not believe implementation of these directives will fundamentally change our industry or cause us to reconsider our fundamental strategy, but it does appear certain provisions will, and other provisions may, require us to change or impose new limitations on the manner in which we conduct business; they also will or may increase regulatory burdens and compliance costs. Furthermore, certain provisions may have unintended adverse consequences on the liquidity or structure of the financial markets. Similar developments are being implemented or considered in other jurisdictions where we do business; such developments could have similar effects.

Developments under enacted and proposed legal and regulatory changes, and related matters, will or may include, without limitation:


•	Expanded prudential regulation over investment management firms.


•	New or increased capital requirements and related regulation (including new capital requirements pertaining to money market funds).

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Additional change to the regulation of money market funds in the U.S. The SEC in 2010 adopted changes to Rule 2a-7, the primary securities regulation governing U.S. registered money market funds. These new rules were designed to significantly strengthen the regulatory requirements governing money market funds, increase the resilience of such funds to economic stresses, and reduce the risk of runs on these funds. Regulators in the U.S. continue to evaluate whether to propose additional legal and regulatory changes impacting money market funds. Invesco believes certain potential changes that have been considered (including a variable NAV) would have significant adverse consequences on the money market funds industry and the short-term credit markets.


•	Removal or limitation of previously available exemptions from U.S. Commodity Futures Trading Commission (“CFTC”) regulations which impose new registration, disclosure and reporting requirements with respect to certain funds that use or trade in futures, swaps and other derivatives regulated by the CFTC.

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Changes to the distribution of investment funds and other investment products. In the U.S., the SEC previously has proposed and may repropose significant changes to Rule 12b-1. Invesco believes these proposals could increase operational and compliance costs. The U.K. Financial Services Authority has implemented its Retail Distribution Review ("RDR"), which is expected to reshape the manner in which retail investment funds are sold in the U.K. RDR will change how retail clients pay for investment advice given in respect of all retail investment products, including mutual funds. RDR requires restructuring the manner in which fund distributors are compensated for the services they provide. The EU adopted the Alternative Investment Fund Manager Directive ("AIFMD"); implementing legislation in member states could, among other elements, impose restrictions on the marketing and sale within the EU of private equity and other alternative investment funds sponsored by non-EU managers. Various regulators have promulgated or are considering other new disclosure and suitability requirements pertaining to the distribution of investment funds and other investment products, including enhanced standards and requirements pertaining to disclosures made to retail investors at the point of sale.


•	The AIFMD will also regulate managers of alternative investment funds not authorized as retail funds under the EU's Undertakings for Collective Investment in Transferrable Securities Directive (UCITS). The AIFMD may include, among other matters, regulation of compensation policies, capital requirements, leverage, valuation and stakes in EU companies.


•	Guidelines regarding the structure and components of compensation, including under the Dodd-Frank Act and various other EU Directives.

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•	New requirements pertaining to the trading of securities and other financial instruments, such as swaps and other derivatives; these include reporting requirements, mandated central clearing arrangements, restrictions on proprietary trading by certain financial institutions, other conduct requirements and new taxes or similar fees.

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New and potentially complex and burdensome tax reporting and tax withholding obligations and related compliance activities pertaining to sponsored investment products, including obligations under the Foreign Account Tax Compliance Act ("FATCA") and similar requirements which may be imposed by other countries. FATCA is intended to address tax compliance issues related to US tax payers holding non-US accounts. FATCA will require non-US financial institutions to report information about financial accounts held by US persons and impose withholding, documentation and reporting requirements.

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Heightened regulatory examinations and inspections, including enforcement reviews, and a more aggressive posture regarding commencing enforcement proceedings resulting in fines, penalties and additional remedial activities. Without limiting the generality of the foregoing, regulators in the United States and the United Kingdom have taken and can be expected to continue to take a more aggressive posture on bringing enforcement proceedings.


•	Changes impacting certain other products or markets (e.g., retirement savings).


•	Enhanced licensing and qualification requirements for key personnel.

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Other additional rules and regulations and disclosure requirements. Certain provisions impose additional disclosure burdens on public companies, including Invesco. Certain proposals could impose requirements for more widespread disclosures of compensation to highly-paid individuals. Depending upon the scope of any such requirements, Invesco could be disadvantaged in retaining key employees vis-à-vis private companies, including hedge fund sponsors.


•	Strengthening standards regarding various ethical matters, including enhanced focus of U.S. regulators and law enforcement agencies on compliance with the Foreign Corrupt Practices Act and the enactment of the U.K. Bribery Act.


•	Other changes impacting the identity or the organizational structure of regulators with supervisory authority over Invesco.

Invesco cannot at this time predict the full impact of potential legal and regulatory changes or possible enforcement proceedings on its business. It is possible such changes could impose new compliance costs or capital requirements or impact Invesco in other ways that could have a material adverse impact on Invesco's results of operations, financial condition or liquidity. Similarly, regulatory enforcement actions which impose significant penalties or compliance obligations or which result in significant reputational harm could have similar material adverse effects on Invesco. Moreover, certain legal or regulatory changes could require us to modify our strategies, businesses or operations, and we may incur other new constraints or costs in order to satisfy new regulatory requirements or to compete in a changed business environment.

To the extent that existing or future regulations affecting the sale of our products and services or our investment strategies cause or contribute to reduced sales or increased redemptions of our products or impair the investment performance of our products, our aggregate AUM and results of operations might be adversely affected.

Civil litigation and governmental investigations and enforcement actions could adversely affect our AUM and future financial results, and increase our costs of doing business.

Invesco and certain related entities have in recent years been subject to various legal proceedings, including civil litigation and governmental investigations and enforcement actions. These actions can arise from normal business operations and/or matters that have been the subject of previous regulatory actions. See Part II, Item 8, Financial Statements and Supplementary Data, Note 19, "Commitments and Contingencies,” for additional information. Judgments in civil litigation or findings of wrongdoing by regulatory or governmental authorities against us could affect our reputation, increase our costs of doing business and/or negatively impact our revenues, any of which could have a material negative impact on our results of operations, financial condition or liquidity.

Our investment management professionals and other key employees are a vital part of our ability to attract and retain clients, and the loss of key individuals or a significant portion of those professionals could result in a reduction of our revenues and profitability.

Retaining highly skilled technical and management personnel is important to our ability to attract and retain clients and retail shareholder accounts. The market for investment management professionals is competitive and has grown more so in recent periods as the investment management industry has experienced growth. The market for investment managers is also increasingly characterized by the movement of investment managers among different firms. Our policy has been to provide our investment management professionals with a supportive professional working environment and compensation and benefits that we believe are competitive with other leading investment management firms. However, we may not be successful in retaining our key personnel, and the loss of key individuals or significant investment management personnel could reduce the attractiveness of our products

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to potential and current clients and could, therefore, adversely affect our revenues and profitability.

If our reputation is harmed, we could suffer losses in our business, revenues and net income.

Our business depends on earning and maintaining the trust and confidence of clients, regulators and other market participants, and our good reputation is critical to our business. Our reputation is vulnerable to many threats that can be difficult or impossible to control, and costly or impossible to remediate. Regulatory inquiries, investigations or findings of wrongdoing, material errors in public reports, employee dishonesty or other misconduct and rumors, among other things, can substantially damage our reputation, even if they are baseless or eventually satisfactorily addressed. Further, our business requires us to continuously manage actual and potential conflicts of interest, including situations where our services to a particular client conflict, or are perceived to conflict, with the interests of another client or those of Invesco. The willingness of clients to enter into transactions in which such a conflict might arise may be affected, if we fail - or appear to fail - to deal appropriately with conflicts of interest. In addition, potential or perceived conflicts could give rise to litigation or regulatory enforcement actions.

We have procedures and controls that are designed to address and manage these risks, but this task can be complex and difficult, and if our procedures and controls fail, our reputation could be damaged. Any damage to our reputation could impede our ability to attract and retain clients and key personnel, and lead to a reduction in the amount of our AUM, any of which could have a material adverse effect on our results of operations, financial condition or liquidity.

Failure to comply with client contractual requirements and/or investment guidelines could result in damage awards against us and loss of revenues due to client terminations.

Many of the investment management agreements under which we manage assets or provide products or services specify investment guidelines or contractual requirements that Invesco is required to observe in the provision of its services. A failure to comply with these guidelines or contractual requirements could result in damage to our reputation or in our clients seeking to recover losses, withdrawing their assets or terminating their contracts, any of which could cause our revenues and profitability to decline. We maintain various compliance procedures and other controls to prevent, detect and correct such errors. When an error is detected, we typically will make a payment into the applicable client account to correct it. Significant errors could impact our results of operations, financial condition or liquidity.

Competitive pressures may force us to reduce the fees we charge to clients, increase commissions paid to our financial intermediaries or provide more support to those intermediaries, all of which could reduce our profitability.

The investment management business is highly competitive, and we compete based on a variety of factors, including investment performance, the range of products offered, brand recognition, business reputation, financial strength, stability and continuity of client and intermediary relationships, quality of service, level of fees charged for services and the level of compensation paid and distribution support offered to financial intermediaries. We continue to face market pressures regarding fee levels in certain products.

We face strong competition in every market in which we operate. Our competitors include a large number of investment management firms, commercial banks, investment banks, broker-dealers, hedge funds, insurance companies and other financial institutions. Some of these institutions have greater capital and other resources, and offer more comprehensive lines of products and services, than we do. Our competitors seek to expand their market share in many of the products and services we offer. If these competitors are successful, our revenues and profitability could be adversely affected. In addition, there are relatively few barriers to entry by new investment management firms, and the successful efforts of new entrants into our various distribution channels around the world have also resulted in increased competition.

In recent years there have been several instances of industry consolidation, both in the area of distributors and manufacturers of investment products. Further consolidation may occur in these areas in the future. The increasing size and market influence of certain distributors of our products and of certain direct competitors may have a negative impact on our ability to compete at the same levels of profitability in the future, should we find ourselves unable to maintain relevance in the markets in which we compete.

We may engage in strategic transactions that could create risks.

We regularly review, and from time to time have discussions with respect to, potential strategic transactions, including potential acquisitions, dispositions, consolidations, joint ventures or similar transactions, some of which may be material. There can be no assurance that we will find suitable candidates for strategic transactions at acceptable prices, have sufficient capital resources to pursue such transactions, be successful in negotiating the required agreements, or successfully close transactions after signing such agreements.

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Acquisitions also pose the risk that any business we acquire may lose customers or employees or could underperform relative to expectations. We could also experience financial or other setbacks if pending transactions encounter unanticipated problems, including problems related to closing or integration. Following the completion of an acquisition, we may have to rely on the seller to provide administrative and other support, including financial reporting and internal controls, to the acquired business for a period of time. There can be no assurance that such sellers will do so in a manner that is acceptable to us.

Our ability to access the capital markets in a timely manner should we seek to do so depends on a number of factors.

Our access to the capital markets depends significantly on our credit ratings. We have received credit ratings of A3/Stable and A-/Stable from Moody's and Standard & Poor's credit rating agencies, respectively, as of the date hereof. We believe that rating agency concerns include but are not limited to the fact that our revenues are exposed to equity market volatility and the potential impact from regulatory changes to the industry. Additionally, the rating agencies could decide to downgrade the entire investment management industry, based on their perspective of future growth and solvency. Material deterioration of these factors, and others defined by each rating agency, could result in downgrades to our credit ratings, thereby limiting our ability to generate additional financing. Our credit facility borrowing rates are tied to our credit ratings. Management believes that solid investment grade ratings are an important factor in winning and maintaining institutional business and strives to manage the company to maintain such ratings.

A reduction in our long-term credit ratings could increase our borrowing costs, could limit our access to the capital markets, and may result in outflows thereby reducing AUM and revenues. Continued volatility in global finance markets may also affect our ability to access the capital markets should we seek to do so. If we are unable to access capital markets in a timely manner, our business could be adversely affected.

Our indebtedness could adversely affect our financial position or results of operations.

As of December 31, 2012, we had outstanding total debt of $1,186.0 million, excluding long-term debt of consolidated investment products, and total equity attributable to common shareholders of $8,188.0 million, excluding retained earnings appropriated for investors in consolidated investment products. The amount of indebtedness we carry could limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or other purposes, increase our vulnerability to adverse economic and industry conditions, limit our flexibility in planning for, or reacting to, changes in our business or industry, and place us at a disadvantage in relation to our competitors. Any or all of the above factors could materially adversely affect our financial position or results of operations.

Our credit facility imposes restrictions on our ability to conduct business and, if amounts borrowed under it were subject to accelerated repayment, we might not have sufficient assets or liquidity to repay such amounts in full.

Our credit facility requires us to maintain specified financial ratios, including maximum debt-to-earnings and minimum interest coverage ratios. This credit facility also contains customary affirmative operating covenants and negative covenants that, among other things, restrict certain of our subsidiaries' ability to incur debt and restrict our ability to transfer assets, merge, make loans and other investments and create liens. The breach of any covenant (either due to our actions or due to a significant and prolonged market-driven decline in our operating results) would result in a default under the credit facility. In the event of any such default, lenders that are party to the credit facility could refuse to make further extensions of credit to us and require all amounts borrowed under the credit facility, together with accrued interest and other fees, to be immediately due and payable. If any indebtedness under the credit facility were subject to accelerated repayment, we might not have sufficient liquid assets to repay such indebtedness in full.

Changes in the distribution channels on which we depend could reduce our net revenues and hinder our growth.

We sell a significant portion of our investment products through a variety of financial intermediaries, including major wire houses, regional broker-dealers, banks and financial planners in North America, and independent brokers and financial advisors, banks and financial organizations in Europe and Asia. Increasing competition for these distribution channels could cause our distribution costs to rise, which would lower our net revenues. Following the financial crisis, there has been consolidation of banks and broker-dealers, particularly in the U.S., and a limited amount of migration of brokers and financial advisors away from major banks to independent firms focused largely on providing advice. If these trends continue, our distribution costs could increase as a percentage of our revenues generated. Additionally, particularly outside of the U.S., certain of the intermediaries upon whom we rely to distribute our investment products also sell their own competing proprietary funds and investment products, which could limit the distribution of our products. Increasingly, investors, particularly in the institutional market, rely on external consultants and other unconflicted third parties for advice on the choice of investment manager. These consultants and third parties tend to exert a significant degree of influence and they may favor a competitor of Invesco as better meeting their particular client's

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needs. There is no assurance that our investment products will be among their recommended choices in the future. If one of our major distributors were to cease operations, it could have a significant adverse effect on our revenues and profitability. Any failure to maintain strong business relationships with these distribution sources and the consultant community would impair our ability to sell our products, which in turn could have a negative effect on our revenues and profitability.

We could be subject to losses if we fail to properly safeguard confidential and sensitive information.

We maintain and transmit confidential information about our clients as well as proprietary information relating to our business operations as part of our regular operations. Our systems could be attacked by unauthorized users or corrupted by computer viruses or other malicious software code, or authorized persons could inadvertently or intentionally release confidential or proprietary information.

Such disclosure could, among other things, damage our reputation, allow competitors to access our proprietary business information, result in liability for failure to safeguard our clients' data, result in the termination of contracts by our existing customers, subject us to regulatory action, or require material capital and operating expenditures to investigate and remediate the breach.

Our business is vulnerable to deficiencies and failures in support systems and customer service functions that could lead to breaches and errors, resulting in loss of customers or claims against us or our subsidiaries.

The ability to consistently and reliably obtain accurate securities pricing information, process client portfolio and fund shareholder transactions and provide reports and other customer service to fund shareholders and clients in other accounts managed by us is essential to our continuing success. In recent periods, illiquid markets for certain types of securities have required increased use of fair value pricing, which is dependent on certain subjective judgments that have the potential to be challenged. Any delays or inaccuracies in obtaining pricing information, processing such transactions or such reports, other breaches and errors, and any inadequacies in other customer service, could result in reimbursement obligations or other liabilities, or alienate customers and potentially give rise to claims against us. Our customer service capability, as well as our ability to obtain prompt and accurate securities pricing information and to process transactions and reports, is highly dependent on communications and information systems and on third-party service providers. These systems or service providers could suffer deficiencies, failures or interruptions due to various natural or man-made causes, and our back-up procedures and capabilities may not be adequate to avoid extended interruptions in operations. Certain of these processes involve a degree of manual input, and thus similar problems could occur from time to time due to human error.

If we are unable to successfully recover from a disaster or other business continuity problem, we could suffer material financial loss, loss of human capital, regulatory actions, reputational harm or legal liability.

If we were to experience a local or regional disaster or other business continuity problem, such as a pandemic or other natural or man-made disaster, our continued success will depend, in part, on the availability of our personnel, our office facilities and the proper functioning of our computer, telecommunication and other related systems and operations. In such an event, our operational size, the multiple locations from which we operate, and our existing back-up systems would provide us with an important advantage. Nevertheless, we could still experience near-term operational challenges with regard to particular areas of our operations, such as key executive officers or technology personnel. Further, as we strive to achieve cost savings by shifting certain business processes to lower-cost geographic locations such as India, the potential for particular types of natural or man-made disasters, political, economic or infrastructure instabilities, or other country- or region-specific business continuity risks increases. Although we seek to regularly assess and improve our existing business continuity plans, a major disaster, or one that affected certain important operating areas, or our inability to recover successfully should we experience a disaster or other business continuity problem, could materially interrupt our business operations and cause material financial loss, loss of human capital, regulatory actions, reputational harm or legal liability.

Since many of our subsidiary operations are located outside of the United States and have functional currencies other than the U.S. dollar, changes in the exchange rates to the U.S. dollar affect our reported financial results from one period to the next.

The largest component of our net assets, revenues and expenses, as well as our AUM, is presently denominated in U.S. Dollars. However, we have a large number of subsidiaries outside of the United States whose functional currencies are not the U.S. dollar. As a result, fluctuations in the exchange rates to the U.S. dollar affect our reported financial results from one period to the next. We generally do not actively manage our exposure to such effects. Consequently, significant strengthening of the U.S. dollar relative to the U.K. Pound Sterling, Euro, or Canadian dollar, among other currencies, could have a material negative impact on our reported financial results.

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The carrying value of goodwill and other intangible assets on our balance sheet could become impaired, which would adversely affect our results of operations.

We have goodwill and indefinite-lived intangible assets on our balance sheet that are subject to annual impairment reviews. We also have definite-lived intangible assets on our balance sheet that are subject to impairment testing if indicators of impairment are identified. Goodwill and intangible assets totaled $7,048.2 million and $1,287.7 million, respectively, at December 31, 2012 (December 31, 2011: $6,907.9 million and $1,322.8 million, respectively). We may not realize the value of such assets. We perform impairment reviews of the book values of these assets on an annual basis or more frequently if impairment indicators are present. A variety of factors could cause such book values to become impaired. Should valuations be deemed to be impaired, a write-down of the related assets would occur, adversely affecting our results of operations for the period. See Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies - Goodwill” and “- Intangibles,” for additional details of our goodwill impairment analysis process.

Bermuda law differs from the laws in effect in the United States and may afford less protection to shareholders.

Our shareholders may have more difficulty protecting their interests than shareholders of a corporation incorporated in a jurisdiction of the United States. As a Bermuda company, we are governed by the Companies Act 1981 of Bermuda (Companies Act). The Companies Act differs in some material respects from laws generally applicable to United States corporations and shareholders, including provisions relating to interested directors, mergers, amalgamations and acquisitions, takeovers, shareholder lawsuits and indemnification of directors.

Under Bermuda law, the duties of directors and officers of a company are generally owed to the company only. Shareholders of Bermuda companies do not generally have rights to take action against directors or officers of the company, and may only do so in limited circumstances. Directors and officers may owe duties to a company's creditors in cases of impending insolvency. Directors and officers of a Bermuda company must, in exercising their powers and performing their duties, act honestly and in good faith with a view to the best interests of the company and must exercise the care and skill that a reasonably prudent person would exercise in comparable circumstances. Directors have a duty not to put themselves in a position in which their duties to the company and their personal interests may conflict and also are under a duty to disclose any personal interest in any material contract or proposed material contract with the company or any of its subsidiaries. If a director or officer of a Bermuda company is found to have breached his duties to that company, he may be held personally liable to the company in respect of that breach of duty.

Our Bye-Laws provide for indemnification of our directors and officers in respect of any loss arising or liability attaching to them in respect of any negligence, default, breach of duty or breach of trust of which a director or officer may be guilty in relation to us other than in respect of his own fraud or dishonesty, which is the maximum extent of indemnification permitted under the Companies Act. Under our Bye-Laws, each of our shareholders agrees to waive any claim or right of action, both individually and on our behalf, other than those involving fraud or dishonesty, against us or any of our officers, directors or employees. The waiver applies to any action taken by a director, officer or employee, or the failure of such person to take any action, in the performance of his duties, except with respect to any matter involving any fraud or dishonesty on the part of the director, officer or employee. This waiver limits the right of shareholders to assert claims against our directors, officers and employees unless the act or failure to act involves fraud or dishonesty.

We have anti-takeover provisions in our Bye-Laws that may discourage a change of control.

Our Bye-Laws contain provisions that could make it more difficult for a third-party to acquire us or to obtain majority representation on our board of directors without the consent of our board. As a result, shareholders may be limited in their ability to obtain a premium for their shares under such circumstances.

Legislative and other measures that may be taken by U.S. and/or other governmental authorities could materially increase our tax burden or otherwise adversely affect our financial conditions, results of operations or cash flows.

Under current laws, as the company is domiciled and tax resident in Bermuda, taxation in other jurisdictions is dependent upon the types and the extent of the activities of the company undertaken in those jurisdictions. There is a risk that changes in either the types of activities undertaken by the company or changes in tax rules relating to tax residency could subject the company and its shareholders to additional taxation.

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We continue to assess the impact of various U.S. federal and state legislative proposals, and modifications to existing tax treaties between the United States and foreign countries, that could result in a material increase in our U.S. federal and state taxes. Proposals have been introduced in the U.S. Congress that, if ultimately enacted, could either limit treaty benefits on certain payments made by our U.S. subsidiaries to non-U.S. affiliates, treat the company as a U.S. corporation and thereby subject the earnings from non-U.S. subsidiaries of the company to U.S. taxation, or both. We cannot predict the outcome of any specific legislative proposals. However, if such proposals were to be enacted, or if modifications were to be made to certain existing tax treaties, the consequences could have a materially adverse impact on the company, including increasing our tax burden, increasing costs of our tax compliance or otherwise adversely affecting our financial condition, results of operations or cash flows.

Examinations and audits by tax authorities could result in additional tax payments for prior periods.

The company and its subsidiaries are subject to income taxes as well as non-income based taxes, in both the United States and various foreign jurisdictions and are subject to ongoing tax audits in various jurisdictions. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations in a multitude of jurisdictions across our global operations. Tax authorities may disagree with certain positions we have taken and assess additional taxes. We recognize potential liabilities and record tax liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional income taxes will be due. We adjust these liabilities in light of changing facts and circumstances. Due to the complexity of some of these uncertainties, however, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities.

Item 1B. Unresolved Staff Comments

N/A

Item 2. Properties

Our registered office is located in Hamilton, Bermuda, and our corporate headquarters are in leased office space at 1555 Peachtree Street N.E., Suite 1800, Atlanta, Georgia, 30309, U.S.A. Our principal regional centers are maintained in leased facilities, except as noted below, in the following locations:

- North America: 11 Greenway Plaza, Houston, Texas 77046

- U.K./Europe: Perpetual Park, Henley-on-Thames, Oxfordshire, RG9 1HH, United Kingdom (owned facilities)

- Asia: Citibank Plaza, No. 3 Garden Road, Hong Kong

We maintain a global enterprise center in Hyderabad, India, in leased facilities at DivyaSree Orion in the Ranga Reddy District of Hyderabad, India. We lease office space in 20 other countries.

Item 3. Legal Proceedings

See Part II, Item 8, Financial Statements and Supplementary Data, -- Note 19, "Commitments and Contingencies," for information regarding legal proceedings.

Item 4. Mine Safety Disclosures

Not applicable

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Invesco Ltd. is organized under the laws of Bermuda, and our common shares are listed and traded on the New York Stock Exchange under the symbol “IVZ.” At January 31, 2013, there were approximately 6,274 holders of record of our common shares.

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The following table sets forth, for the periods indicated, the high and low reported share prices on the New York Stock Exchange, based on data reported by Bloomberg.



	Invesco Ltd. Common Shares
	High		Low	Dividends Declared*
2012
Fourth Quarter	$	26.34	$23.21	$0.1725
Third Quarter	$	25.85	$20.49	$0.1725
Second Quarter	$	26.77	$20.79	$0.1725
First Quarter	$	26.84	$20.90	$0.1225
2011
Fourth Quarter	$	20.96	$14.85	$0.1225
Third Quarter	$	23.90	$15.51	$0.1225
Second Quarter	$	26.00	$21.92	$0.1225
First Quarter	$	27.42	$23.77	$0.1100

____________



*	Dividends declared represent amounts declared in the current quarter but are attributable to the prior fiscal quarter.

The following graph illustrates the cumulative total shareholder return of our common shares over the five-year period ending December 31, 2012, and compares it to the cumulative total return of the Standard and Poor's (S&P) 500 Index and to a group of peer investment management companies. A representative peer group of the company consists of companies in the S&P 500 and the S&P 400 that are also in the Asset Management and Custody Bank sub-index, plus Alliance Bernstein, a competitor not in this sub-index but which is another global asset manager followed by industry analysts. These tables are not intended to forecast future performance of our common shares.

Peer Index

Note:

The above chart is the average annual total return for the period from December 31, 2007 through December 31, 2012. Peer Index includes Affiliated Managers Group, Alliance Bernstein, Ameriprise Financial, Bank of New York Mellon, BlackRock, Eaton Vance, Federated Investors, Franklin Resources, Invesco Ltd., Janus, Legg Mason, Northern Trust, SEI Investments, State Street, T. Rowe Price, and Waddell & Reed.

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Important Information Regarding Dividend Payments

Invesco declares and pays dividends on a quarterly basis in arrears. On January 31, 2013, the company declared a fourth quarter 2012 cash dividend of $0.1725 per share, which will be paid on March 8, 2013, to shareholders of record as of February 21, 2013.

The total dividend attributable to the 2012 fiscal year of $0.69 per share represented an 40.8% increase over the total dividend attributable to the 2011 fiscal year of $0.49 per share. The declaration, payment and amount of any future dividends will be determined by our board of directors and will depend upon, among other factors, our earnings, financial condition and capital requirements at the time such declaration and payment are considered. The board has a policy of managing dividends in a prudent fashion, with due consideration given to profit levels, overall debt levels and historical dividend payouts. See also Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Dividends,” for additional details regarding dividends.

Securities Authorized for Issuance under Equity Compensation Plans

The equity compensation plan information required in Item 201(d) of Regulation S-K is set forth in the definitive Proxy Statement for the company's annual meeting of shareholders, which will be filed with the SEC no later than 120 days after the close of the fiscal year ended December 31, 2012, and is incorporated by reference in this Report.

Repurchases of Equity Securities

The following table shows share repurchase activity during the three months ended December 31, 2012:



Month	Total Number of Shares Purchased⁽¹⁾	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽²⁾	Maximum Number at end of period (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs⁽²⁾ (millions)
October 1 - 31, 2012	2,110		$25.23	—		$542.0
November 1 - 30, 2012	1,815,849		$23.84	1,807,614		$498.9
December 1 - 31, 2012	1,364,676		$25.76	1,236,148		$467.0
	3,182,635			3,043,762

____________


(1)	An aggregate of 138,873 shares were surrendered to us by Invesco employees to satisfy tax withholding obligations or loan repayments in connection with the vesting of equity awards.


(2)	On April 23, 2008, our board of directors authorized a share repurchase authorization of up to $1.5 billion of our common shares with no stated expiration date.

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Item 6. Selected Financial Data

The following tables present selected consolidated financial information for the company as of and for each of the five fiscal years in the period ended December 31, 2012. Except as otherwise noted below, the consolidated financial information has been prepared in accordance with U.S. generally accepted accounting principles.



	As of and For The Years Ended December 31,
$ in millions, except per share and other data	2012		2011		2010		2009		2008
Operating Data:
Operating revenues	4,177.0		4,092.2		3,487.7		2,627.3		3,307.6
Net revenues⁽¹⁾	2,959.0		2,898.4		2,521.1		1,941.0		2,437.9
Operating income	871.5		898.1		589.9		484.3		747.8
Adjusted operating income⁽²⁾	1,045.1		1,068.9		897.7		565.6		826.1
Operating margin	20.9	%	21.9	%	16.9	%	18.4	%	22.6	%
Adjusted operating margin⁽²⁾	35.3	%	36.9	%	35.6	%	29.1	%	33.9	%
Net income attributable to common shareholders	677.1		729.7		465.7		322.5		481.7
Adjusted net income⁽³⁾	776.7		781.6		639.7		378.1		527.1
Per Share Data:
Earnings per share:
-basic	1.50		1.58		1.01		0.77		1.24
-diluted	1.49		1.57		1.01		0.76		1.21
Adjusted diluted EPS⁽³⁾	1.71		1.68		1.38		0.89		1.32
Dividends declared per share	0.6400		0.4775		0.4325		0.4075		0.5200
Balance Sheet Data:
Total assets	17,492.4		19,347		20,444.1		10,909.6		9,756.9
Current maturities of total debt	—		215.1		—		—		297.2
Long-term debt	1,186.0		1,069.6		1,315.7		745.7		862.0
Long-term debt of consolidated investment products	3,899.4		5,512.9		5,865.4		—		—
Total equity attributable to common shareholders	8,316.8		8,119.1		8,264.6		6,912.9		5,689.5
Total equity	9,049.0		9,137.6		9,360.9		7,620.8		6,596.2
Other Data:
Ending AUM (in billions)	687.7		625.3		616.5		459.5		377.1
Average AUM (in billions)	664.4		634.3		532.3		415.8		468.9
Headcount	6,128		6,162		5,617		4,890		5,325

_________

(1)

Net revenues are operating revenues less third-party distribution, service and advisory expenses (distribution expense related to the European infrastructure initiative), plus our proportional share of the net revenues of our joint venture investments, plus management and performance fees earned from, less other revenue recorded by, consolidated investment products. See Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations - 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, compensation expense related to market valuation changes in deferred compensation plans, the operating income impact of the consolidation of investment products, and other reconciling items. See Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations - 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, third-party distribution expense related to the European infrastructure initiative, 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 and other reconciling items. Adjusted net income also includes the company's proportional share of net revenues and operating income from joint venture investments. By calculation, adjusted diluted EPS is adjusted net income divided by the weighted average number of shares outstanding (for diluted EPS). See Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations - Schedule of Non-GAAP Information,” for the reconciliation of net income to adjusted net income.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

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 Consolidated Financial Statements of Invesco Ltd. and its subsidiaries (collectively, the “company” or “Invesco”) and the notes thereto contained elsewhere in this Annual Report on Form 10-K.

During 2012 global equity markets produced strong positive returns as evidenced by the returns of the S&P 500 index, which was up over 13%, the Nikkei 225 index, which increased almost 23% in the year and the MSCI Emerging Market index which gained over 15% in 2012. The markets recovered from the significant volatility and negative sentiment experienced during 2011 as fears over the solvency of peripheral European sovereigns and the fiscal situation in the U.S. subsided.

The table below summarizes the year ended December 31 returns based on price appreciation of several major market indices for 2012, 2011, and 2010:



	Year ended December 31,
Index	2012	2011	2010
S&P 500	13.4%	0.0%	12.8%
FTSE 100	5.8%	(5.6)%	9.0%
Nikkei 225	22.9%	(17.3)%	(3.0%)
MSCI Emerging Markets	15.2%	(20.4)%	16.4%

Throughout 2012, Invesco continued to deliver strong, long-term investment performance, maintained its focus on its clients, and enhanced its profile in the industry.

As a global investment management firm dedicated to delivering investment excellence to our clients, Invesco is committed to further strengthening and enhancing our best-in-class risk management approach. A key factor in Invesco's ability to weather the economic storms of the past three years was our integrated approach to risk management.

Invesco's enterprise risk management (ERM) approach is embedded in its management processes across the organization. Broadly, our approach includes two governance structures - one for investments and another for business risk.


•	Investment risk oversight is supported by the Global Performance Measurement and Risk group and the investment teams.


•	Business risk oversight is supported by the Corporate Risk Management Committee and related committees.

Our Global Performance Measurement and Risk group provides senior management and the Board with insight into core investment risks, while our Corporate Risk Management Committee facilitates a focus on strategic, operational and other key business risks. Further, business component, functional, and geographic risk management committees maintain an ongoing risk assessment process that provides a bottom-up perspective on the specific risk areas existing in various domains of our business. A key value of a robust enterprise risk management process is facilitating the flow of information and insight across the organization and applying that information to more effectively managing risk. Through this regular and consistent risk communication, the Board has reasonable assurance that all material risks of the company are being addressed and that the company is propagating a risk-aware culture in which effective risk management is sewn into the fabric of the business. As a result of our efforts in this area, S&P has designated our enterprise risk management rating as "strong."

In addition, we benefited from our long-term efforts to ensure a diversified base of assets under management. One of Invesco's core strengths, and a key differentiator for the company within the industry, is our broad diversification across client domiciles, asset classes and distribution channels. Our geographical diversification recognizes growth opportunities in different parts of the world. This broad diversification enables Invesco to withstand different market cycles and take advantage of growth opportunities in various markets and channels.

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Presentation of Management's Discussion and Analysis of Financial Condition and Results of Operations

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 II, Item 8, Financial Statements and Supplementary Data - Note 1, “Accounting Policies” and Note 20, “Consolidated Investment Products,” for additional details.

The majority of the company's consolidated investment product balances are CLO-related. 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 and performance 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 impact of consolidation of investment products is so significant to the presentation of the company’s financial statements (but not to the underlying financial condition or results of operations of the company) that the company has elected to deconsolidate these products in its non-GAAP disclosures. The following discussion therefore combines the results presented under U.S. generally accepted accounting principles (GAAP) with the company’s non-GAAP presentation. There are four distinct sections within this Management’s Discussion and Analysis of Financial Condition and Results of Operations after the Assets Under Management discussion:


•	Results of Operations (years ended December 31, 2012 compared to December 31, 2011 compared to December 31, 2010);


•	Schedule of Non-GAAP Information;


•	Balance Sheet Discussion; and


•	Liquidity and Capital Resources.

Each of the financial statement summary sections (Results of Operations, Balance Sheet Discussion, and Liquidity and Capital Resources) begins with a table illustrating the impact of the consolidation of investment products relative to the company's consolidated totals. The impact is illustrated by a column which shows the dollar-value change in the consolidated figures, as caused by the consolidation of investment products. For example, the impact of consolidated investment products on operating revenues for the year ended December 31, 2012 was $(41.0) million. This indicates that the consolidation of investment products reduced consolidated revenues by this amount, reflecting the elimination upon their consolidation of the operating revenues earned by Invesco for managing these investment products.

The narrative that follows each of these sections separately provides discussion of the underlying financial statement activity for the company, before consolidation of investment products, as well as of the financial statement activity of consolidated investment products. Additionally, wherever a non-GAAP measure is referenced, a disclosure will follow in the narrative or in the note referring the reader to the Schedule of Non-GAAP Information, where additional details regarding the use of the non-GAAP measure by the company are disclosed, along with reconciliations of the most directly comparable U.S. GAAP measures to the non-GAAP measures. To further enhance the readability of the Results of Operations section, separate tables for each of the revenue, expense, and non-operating income/expense sections of the income statement introduce the narrative that follows, providing a section-by-section review of the company’s income statements for the periods presented.

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Summary Operating Information

Summary operating information for 2012, 2011 and 2010 is presented in the table below.



$ in millions, other than per share amounts, percentages and AUM	Year ended December 31,
U.S. GAAP Financial Measures Summary	2012			2011			2010
Operating revenues		$4,177.0			$4,092.2			$3,487.7
Operating income		$871.5			$898.1			$589.9
Operating margin	20.9		%	21.9		%	16.9		%
Net income attributable to common shareholders		$677.1			$729.7			$465.7
Diluted EPS		$1.49			$1.57			$1.01
Debt/equity ratio including consolidated investment products (%)	56.2		%	74.4		%	76.7		%

Non-GAAP Financial Measures Summary
Net revenues⁽¹⁾		$2,959.0			$2,898.4			$2,521.1
Adjusted operating income⁽²⁾		$1,045.1			$1,068.9			$897.7
Adjusted operating margin⁽²⁾	35.3		%	36.9		%	35.6		%
Adjusted net income attributable to common shareholders⁽³⁾		$776.7			$781.6			$639.7
Adjusted diluted EPS⁽³⁾		$1.71			$1.68			$1.38
Debt/equity ratio excluding consolidated investment products(%)⁽⁴⁾	14.5		%	16.5		%	16.9		%

Assets Under Management
Ending AUM (billions)		$687.7			$625.3			$616.5
Average AUM (billions)		$664.4			$634.3			$532.3

_________


(1)	Net revenues is a non-GAAP financial measure. See Item 6. "Selected Financial Data," footnote 1, for the definition of this measure. See “Schedule of Non-GAAP Information” for the reconciliation of operating revenues to net revenues.


(2)	Adjusted operating income and adjusted operating margin are non-GAAP financial measures. See Item 6. "Selected Financial Data," footnote 2, for the definition of these measures. See “Schedule of Non-GAAP Information” for the reconciliation of operating income to adjusted operating income.


(3)	Adjusted net income attributable to common shareholders and adjusted diluted EPS are non-GAAP financial measures. See Item 6. "Selected Financial Data," footnote 3, for the definition of these measures. See “Schedule of Non-GAAP Information” for the reconciliation of net income to adjusted net income.


(4)	The debt-to-equity ratio excluding consolidated investment products is a non-GAAP financial measure. See the "Liquidity and Capital Resources" section for a recalculation of this ratio and other important disclosures.

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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. Long-term performance in our equities capabilities, as measured by the percentage of AUM ahead of benchmark and ahead of peer median, is generally strong with some pockets of outstanding performance. Within our equity asset class, U.K. and Global Ex U.S. and Emerging Markets have had strong relative performance, with 87% or more of assets beating their peer group and benchmark over three- and five-year periods. U.S. Value funds reflect strong performance with 99% and 94%, respectively, of assets beating benchmarks and peers on a five-year basis. Within our fixed income asset class, Stable Value products have achieved excellent long-term performance with 100% of AUM ahead of benchmarks and peers on a one-, three-, and five-year basis.



		Benchmark Comparison						Peer Group Comparison
		% of AUM Ahead of Benchmark						% of AUM In Top Half of Peer Group
		1yr		3yr		5yr		1yr		3yr		5yr
Equities	U.S. Core	22	%	29	%	82	%	37	%	40	%	60	%
	U.S. Growth	35	%	29	%	24	%	30	%	25	%	62	%
	U.S. Value	53	%	55	%	99	%	74	%	73	%	94	%
	Sector	63	%	65	%	58	%	43	%	29	%	39	%
	U.K.	11	%	99	%	98	%	9	%	98	%	94	%
	Canadian	100	%	56	%	81	%	100	%	52	%	56	%
	Asian	49	%	45	%	46	%	37	%	44	%	44	%
	Continental European	70	%	70	%	94	%	45	%	58	%	58	%
	Global	59	%	80	%	88	%	62	%	73	%	60	%
	Global Ex U.S. and Emerging Markets	25	%	88	%	99	%	15	%	87	%	90	%

Other	Alternatives	51	%	60	%	68	%	73	%	54	%	6	%
	Balanced	47	%	45	%	77	%	97	%	83	%	95	%

Fixed Income	Money Market	60	%	33	%	72	%	97	%	96	%	93	%
	U.S. Fixed Income	64	%	90	%	58	%	81	%	81	%	77	%
	Global Fixed Income	86	%	62	%	89	%	91	%	41	%	86	%
	Stable Value	100	%	100	%	100	%	100	%	100	%	100	%

Note:

AUM measured in the one-, three-, and five-year peer group rankings represents 59%, 59%, and 56% of total Invesco AUM, respectively, and AUM measured versus benchmark on a one-, three-, and five-year basis represents 72%, 71%, and 67% of total Invesco AUM, respectively, as of December 31, 2012. Peer group rankings are sourced from a widely-used third party ranking agency in each fund's market (Lipper, Morningstar, IMA, Russell, Mercer, eVestment Alliance, SITCA) and asset-weighted in USD. Rankings are as of prior quarter-end for most institutional products and preceding 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 passive products, closed-end funds, private equity limited partnerships, non-discretionary direct real estate, unit investment trusts fund-of-funds with component funds managed by Invesco, stable value building block funds 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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Assets Under Management

The company's rolling presentation of AUM from period to period (on the following pages) 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 use them as short-term funding vehicles and because their flows are particularly sensitive to short-term interest rate movements.

The discussion below includes presentation of AUM as Passive and Active. Passive AUM includes ETFs, UITs, non-fee earning leverage, foreign exchange overlays and other passive mandates. Active AUM is total AUM less Passive AUM.

There are numerous drivers of AUM inflows and outflows, including individual investor decisions to change investment preferences, fiduciaries making broad asset allocation decisions on behalf of advised clients and reallocation of 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 liquidity needs. Therefore, the company is not in a position to provide meaningful information regarding the drivers of inflows and outflows.

AUM at December 31, 2012 were $687.7 billion (December 31, 2011: $625.3 billion; December 31, 2010: $616.5 billion). During the year ended December 31, 2012, net long-term inflows increased AUM by $12.4 billion, while positive market movements increased AUM by $48.8 billion. We experienced net inflows in institutional money market funds of $0.1 billion, increases in AUM of $2.8 billion due to changes in foreign exchange rates, and net outflows from dispositions of $1.7 billion during the year ended December 31, 2012. During the year ended December 31, 2011, net inflows increased AUM by $19.2 billion and negative market movements decreased AUM by $15.3 billion. We experienced net inflows in institutional money market funds of $5.3 billion, offset by decreases in AUM of $0.4 billion due to changes in foreign exchange rates during the year ended December 31, 2011. During the year ended December 31, 2010, net inflows increased AUM by $5.5 billion and positive market movements increased AUM by $43.9 billion. We experienced net outflows in institutional money market funds of $15.5 billion and increases in AUM of $1.6 billion due to changes in foreign exchange rates during the year ended December 31, 2010. Acquisitions added $121.5 billion of AUM in 2010, including $114.6 billion of AUM added at June 1, 2010 with the acquisition of Morgan Stanley's retail asset management business, including Van Kampen Investments (the “acquired business” or the “acquisition”). Average AUM during the year ended December 31, 2012 were $664.4 billion, compared to $634.3 billion for the year ended December 31, 2011 and $532.3 billion for the year ended December 31, 2010.

Net inflows during the year ended December 31, 2012 included net long-term inflows of passive AUM of $11.1 billion and active net long-term inflows of $1.3 billion. Net flows were driven by net inflows into both our retail and institutional distribution channels of $10.4 billion and $0.3 billion, respectively, primarily in the fixed income and balanced asset classes, while our equity asset class experienced net outflows of $9.3 billion. Net inflows during the year ended December 31, 2011 included net long-term inflows of passive AUM of $17.5 billion and active net long-term AUM inflows of $1.7 billion. Net flows in 2011 were driven by positive net inflows of $9.1 billion into our retail and $8.9 billion into institutional distribution channels, primarily in the fixed asset class, while our equity asset class experienced net outflows of $7.9 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. As discussed in the “Executive Overview” section of this Management’s Discussion and Analysis, global equity markets produced strong returns during the year ended December 31, 2012, contrasting with overall declines experienced in the year ending December 31, 2011. Of the $48.8 billion increase in AUM resulting from market gains during the year ended December 31, 2012, $33.3 billion of this increase was due to the change in value of our equity asset class. Our fixed income, balanced, and alternatives asset classes were also positively impacted by the change in market valuations during the period. Of the total decrease in AUM resulting from market losses during the year ended December 31, 2011, $14.8 billion was due to the change in value of our equity asset class, decreasing in line with equity markets globally. Of the $43.9 billion increase in AUM resulting from market increases during the year ended December 31, 2010, $33.4 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 12.8% and 9.0%, 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. The impact of the change in foreign exchange rates in the year ended December 31, 2012 was driven primarily by the strengthening of the Pound Sterling relative to the U.S. Dollar, which was reflected in the translation of our Pound Sterling-based AUM into U.S. Dollars, the strengthening 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 the strengthening of the Euro relative to the U.S. Dollar, which was reflected in the translation

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of our Euro-based AUM into U.S. Dollars. This was partly offset by the weakening of the Japanese Yen relative to the U.S. Dollar, which was reflected in the translation of our Yen-based AUM into U.S. Dollars. The impact of the change in foreign exchange rates in the year ended December 31, 2011 was driven primarily by the strengthening of the Japanese Yen relative to the U.S. Dollar, partially offset by the weakening of the Pound Sterling, Canadian Dollar and Euro relative to the U.S. Dollar. The impact of the change in foreign exchange rates at December 31, 2010 was driven by the strengthening of the Canadian Dollar and Japanese Yen relative to the U.S. Dollar, offset by the weakening of the Pound Sterling and the Euro.

The table below illustrates the spot foreign exchange rates for translation into the U.S. Dollar, the reporting currency of the company, at December 31, 2012, 2011, and 2010:



	December 31, 2012	December 31, 2011	December 31, 2010
Pound Sterling ($ per £)	1.625	1.555	1.565
Canadian Dollar (CAD per $)	0.996	1.018	0.994
Japan (¥ per $)	86.520	76.950	81.080
Euro ($ per Euro)	1.319	1.299	1.342

Net revenue yield on AUM decreased 1.2 basis points to 44.5 basis points in the year ended December 31, 2012 from the year ended December 31, 2011 level of 45.7 basis points. Excluding performance fees, the net revenue yield decreased 1.5 basis points to 43.6 basis points in the year ended December 31, 2012 from the year ended December 31, 2011 level of 45.1 basis points. Changes in our AUM mix significantly impact our net revenue yield. For example, on an asset class basis, our equity AUM generally earn a higher net revenue rate than money market AUM. The tables that follow also analyze AUM into active and passive style. Passive AUM generally earn a lower effective fee rate than active asset classes. At December 31, 2012, passive AUM were $114.0 billion, representing 16.6% of total AUM at that date; whereas at December 31, 2011, passive AUM were $96.3 billion, representing 15.4% of our total AUM at that date. In the year ended December 31, 2012, the net revenue yield on passive AUM was 9.3 basis points compared to 10.8 basis points in the year ended December 31, 2011, a reduction of 1.5 basis points. The net revenue yield (before performance fees) on active AUM has been more stable, reducing from 50.8 basis points in the year ended December 31, 2011 to 50.4 basis points in the year ended December 31, 2012. The higher proportion of passive AUM combined with the lower yield earned by passive AUM resulted in the majority of the overall yield reduction experienced in 2012 when compared to 2011. The increase in passive AUM includes the movements in the Powershares QQQ Nasdaq-100 index tracking fund. The Powershares QQQ fund AUM increased to $30.4 billion at December 31, 2012 compared to $25.6 billion at December 31, 2011, an increase in passive AUM of $4.8 billion. The revenue yield for Invesco on this product is less than 1 basis point, reimbursing Invesco for the portfolio trading services provided to the fund, and flows into and out of this product therefore have a significant impact on the overall net revenue yield and are a significant factor in the year-on-year yield reduction.

Although net revenue yield reduced on a year-on-year basis, this trend reversed during the second half of 2012 due to improving equity markets as well as net inflows in the balanced asset class, including strong net AUM flows in our Continental European business. The balanced asset class includes the Invesco Balanced Risk Allocation strategy range of products. AUM for this strategy reached $18.7 billion as at December 31, 2012 compared to $5.2 billion at December 31, 2011, an increase of $13.5 billion during the year. These active AUM inflows assisted in stabilizing the active and passive AUM mix and contributed to a net revenue yield before performance fees of 44.4 basis points in the final quarter of 2012 compared to the 43.6 basis points recorded for the year ended December 31, 2012.

Gross revenue yield on AUM decreased 1.7 basis points to 63.2 basis points in the year ended December 31, 2012 from the year ended December 31, 2011 level of 64.9 basis points. Management does not consider gross revenue yield, the most comparable U.S. GAAP-based measure to net revenue yield, 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. See “Schedule of Non-GAAP Information” for a reconciliation of operating revenues (gross revenues) to net revenues.

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Changes in AUM were as follows:



$ in billions	Total AUM		Active		Passive		Total AUM		Active		Passive		Total AUM		Active		Passive
	2012		2012		2012		2011		2011		2011		2010		2010		2010
January 1	625.3		529.0		96.3		616.5		535.7		80.8		459.5		406.5		53.0
Long-term inflows	164.0		106.6		57.4		177.6		106.3		71.3		154.7		84.6		70.1
Long-term outflows	(151.6	)	(105.3	)	(46.3	)	(158.4	)	(104.6	)	(53.8	)	(149.2	)	(83.4	)	(65.8	)
Long-term net flows	12.4		1.3		11.1		19.2		1.7		17.5		5.5		1.2		4.3
Net flows in institutional money market funds	0.1		0.1		—		5.3		5.3		—		(15.5	)	(15.5	)	—
Market gains and losses/reinvestment	48.8		41.8		7.0		(15.3	)	(13.2	)	(2.1	)	43.9		36.3		7.6
Acquisitions/dispositions, net	(1.7	)	(1.7	)	—		—		—		—		121.5		107.1		14.4
Foreign currency translation	2.8		3.2		(0.4	)	(0.4	)	(0.5	)	0.1		1.6		0.1		1.5
December 31	687.7		573.7		114.0		625.3		529.0		96.3		616.5		535.7		80.8
Average long-term AUM	595.4		485.2		110.2		566.0		474.7		91.3		463.5		393.8		69.7
Average institutional money market AUM	69.0		69.0		—		68.3		68.3		—		68.8		68.8		—
Average AUM	664.4		554.2		110.2		634.3		543.0		91.3		532.3		462.6		69.7
Gross revenue yield on AUM⁽¹⁾	63.2bps		73.9bps		9.3bps		64.9bps		74.0bps		10.8bps		66.0bps		74.3bps		10.8bps
Gross revenue yield on AUM before performance fees⁽¹⁾	62.3bps		72.9bps		9.3bps		64.3bps		73.3bps		10.8bps		65.5bps		73.8bps		10.8bps
Net revenue yield on AUM⁽²⁾	44.5bps		51.6bps		9.3bps		45.7bps		51.6bps		10.8bps		47.4bps		52.9bps		10.8bps
Net revenue yield on AUM before performance fees⁽²⁾	43.6bps		50.4bps		9.3bps		45.1bps		50.8bps		10.8bps		46.9bps		52.3bps		10.8bps

____________

(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 2012 for our JVs in China was $3.0 billion (2011: $3.3 billion, 2010: $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 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⁾



$ in billions	Total		Retail		Institutional		Private Wealth Management
January 1, 2012 AUM	625.3		373.9		233.5		17.9
Long-term inflows	164.0		131.7		28.0		4.3
Long-term outflows	(151.6	)	(121.3	)	(27.7	)	(2.6	)
Long-term net flows	12.4		10.4		0.3		1.7
Net flows in institutional money market funds	0.1		—		0.1		—
Market gains and losses/reinvestment	48.8		37.3		11.2		0.3
Acquisitions/dispositions, net	(1.7	)	—		(1.7	)	—
Foreign currency translation	2.8		4.2		(1.4	)	—
December 31, 2012 AUM	687.7		425.8		242.0		19.9

January 1, 2011 AUM	616.5		378.1		221.4		17.0
Long-term inflows	177.6		135.4		38.7		3.5
Long-term outflows	(158.4	)	(126.3	)	(29.8	)	(2.3	)
Long-term net flows	19.2		9.1		8.9		1.2
Net flows in institutional money market funds	5.3		—		5.3		—
Market gains and losses/reinvestment	(15.3	)	(12.3	)	(2.7	)	(0.3	)
Foreign currency translation	(0.4	)	(1.0	)	0.6		—
December 31, 2011 AUM	625.3		373.9		233.5		17.9

January 1, 2010 AUM	459.5		239.1		205.2		15.2
Long-term inflows	154.7		106.2		45.2		3.3
Long-term outflows	(149.2	)	(107.4	)	(39.6	)	(2.2	)
Long-term net flows	5.5		(1.2	)	5.6		1.1
Net flows in institutional money market funds	(15.5	)	—		(15.5	)	—
Market gains and losses/reinvestment	43.9		36.8		6.4		0.7
Acquisitions/dispositions, net	121.5		104.0		17.5		—
Foreign currency translation	1.6		(0.6	)	2.2		—
December 31, 2010 AUM	616.5		378.1		221.4		17.0

____________



	See accompanying notes immediately following these AUM tables.

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Passive AUM by Channel⁽¹⁾



$ in billions	Total		Retail		Institutional		Private Wealth Management
January 1, 2012 AUM	96.3		76.9		19.4		—
Long-term inflows	57.4		52.4		5.0		—
Long-term outflows	(46.3	)	(44.9	)	(1.4	)	—
Long-term net flows	11.1		7.5		3.6		—
Net flows in institutional money market funds	—		—		—		—
Market gains and losses/reinvestment	7.0		6.8		0.2		—
Foreign currency translation	(0.4	)	—		(0.4	)	—
December 31, 2012 AUM	114.0		91.2		22.8		—

January 1, 2011 AUM	80.8		70.6		10.2		—
Long-term inflows	71.3		59.9		11.4		—
Long-term outflows	(53.8	)	(52.0	)	(1.8	)	—
Long-term net flows	17.5		7.9		9.6		—
Net flows in institutional money market funds	—		—		—		—
Market gains and losses/reinvestment	(2.1	)	(1.6	)	(0.5	)	—
Foreign currency translation	0.1		—		0.1		—
December 31, 2011 AUM	96.3		76.9		19.4		—

January 1, 2010 AUM	53.0		48.1		4.9		—
Long-term inflows	70.1		51.2		18.9		—
Long-term outflows	(65.8	)	(47.2	)	(18.6	)	—
Long-term net flows	4.3		4.0		0.3		—
Net flows in institutional money market funds	—		—		—		—
Market gains and losses/reinvestment	7.6		4.8		2.8		—
Acquisitions/dispositions, net	14.4		13.7		0.7		—
Foreign currency translation	1.5		—		1.5		—
December 31, 2010 AUM	80.8		70.6		10.2		—

____________



	See accompanying notes immediately following these AUM tables.

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Total AUM by Asset Class⁽²⁾



$ in billions	Total		Equity		Fixed Income		Balanced		Money Market			Alternatives⁽³⁾
January 1, 2012 AUM	625.3		271.0		149.0		44.6		74.0			86.7
Long-term inflows	164.0		81.4		38.9		21.5		2.7			19.5
Long-term outflows	(151.6	)	(90.7	)	(25.8	)	(8.5	)	(3.4	)		(23.2	)
Long-term net flows	12.4		(9.3	)	13.1		13.0		(0.7	)		(3.7	)
Net flows in institutional money market funds	0.1		—		—		—		0.1			—
Market gains and losses/reinvestment	48.8		33.3		9.4		3.8		(0.1	)		2.4
Acquisitions/dispositions, net	(1.7	)	—		—		—		—			(1.7	)
Foreign currency translation	2.8		2.4		0.4		0.7		—			(0.7	)
December 31, 2012 AUM	687.7		297.4		171.9		62.1		73.3		⁽⁴⁾	83.0

January 1, 2011 AUM	616.5		294.0		132.0		43.5		68.3			78.7
Long-term inflows	177.6		94.2		38.8		10.9		2.2			31.5
Long-term outflows	(158.4	)	(102.1	)	(25.1	)	(7.9	)	(2.0	)		(21.3	)
Long-term net flows	19.2		(7.9	)	13.7		3.0		0.2			10.2
Net flows in institutional money market funds	5.3		—		—		—		5.3			—
Market gains and losses/reinvestment	(15.3	)	(14.8	)	3.2		(1.6	)	0.2			(2.3	)
Foreign currency translation	(0.4	)	(0.3	)	0.1		(0.3	)	—			0.1
December 31, 2011 AUM	625.3		271.0		149.0		44.6		74.0			86.7

January 1, 2010 AUM	459.5		192.6		76.2		39.9		83.5			67.3
Long-term inflows	154.7		95.8		32.7		8.2		1.5			16.5
Long-term outflows	(149.2	)	(104.4	)	(19.1	)	(7.4	)	(1.9	)		(16.4	)
Long-term net flows	5.5		(8.6	)	13.6		0.8		(0.4	)		0.1
Net flows in institutional money market funds	(15.5	)	—		—		—		(15.5	)		—
Market gains and losses/reinvestment	43.9		33.4		4.2		2.5		0.1			3.7
Acquisitions/dispositions, net	121.5		75.1		37.9		0.3		0.6			7.6
Foreign currency translation	1.6		1.5		0.1		—		—			—
December 31, 2010 AUM	616.5		294.0		132.0		43.5		68.3			78.7

____________



	See accompanying notes immediately following these AUM tables.

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Passive AUM by Asset Class⁽²⁾



$ in billions	Total		Equity		Fixed Income		Balanced	Money Market	Alternatives⁽³⁾
January 1, 2012 AUM	96.3		45.6		30.0		—	—	20.7
Long-term inflows	57.4		41.7		11.2		—	—	4.5
Long-term outflows	(46.3	)	(37.7	)	(2.7	)	—	—	(5.9	)
Long-term net flows	11.1		4.0		8.5		—	—	(1.4	)
Net flows in institutional money market funds	—		—		—		—	—	—
Market gains and losses/reinvestment	7.0		5.9		0.5		—	—	0.6
Foreign currency translation	(0.4	)	—		—		—	—	(0.4	)
December 31, 2012 AUM	114.0		55.5		39.0		—	—	19.5

January 1, 2011 AUM	80.8		42.8		19.8		—	—	18.2
Long-term inflows	71.3