IVZ.10Q.2Q.2013
Table of Contents                                  

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2013
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number 1-13908
Invesco 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)
 (404) 892-0896
(Registrant’s telephone number, including area code)
 
 
 
 
 
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ
 
Accelerated filer o
 
Non-accelerated filer o(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
As of June 30, 2013, the most recent practicable date, 442,815,051 of the company’s common shares par value $0.20 per share, were outstanding.

Table of Contents                                  

TABLE OF CONTENTS
We include cross references to captions elsewhere in this Quarterly Report on Form 10-Q, which we refer to as this “Report,” where you can find related additional information. The following table of contents tells you where to find these captions.
 
 
 
Page
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 EX-10.1
 EX-31.1
 EX-31.2
 EX-32.1
 EX-32.2
 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT

2
Table of Contents                                  

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Invesco Ltd.
Condensed Consolidated Balance Sheets
(Unaudited)
 
As of
$ in millions, except share data
June 30, 2013
 
December 31, 2012
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
916.2

 
835.5

Cash and cash equivalents of consolidated investment products
360.6

 
287.8

Unsettled fund receivables
1,058.7

 
550.1

Accounts receivable
457.6

 
449.4

Accounts receivable of consolidated investment products
140.4

 
84.1

Investments
350.1

 
363.9

Investments of consolidated investment products
217.1

 
—

Prepaid assets
49.6

 
50.3

Assets held for sale
101.2

 
—

Other current assets
100.5

 
94.5

Deferred tax asset, net
37.3

 
38.4

Assets held for policyholders
1,229.4

 
1,153.6

Total current assets
5,018.7

 
3,907.6

Non-current assets:
 
 
 
Investments
373.3

 
246.8

Investments of consolidated investment products
4,314.2

 
4,550.6

Security deposit assets and receivables
14.7

 
27.4

Other non-current assets
28.9

 
26.8

Deferred sales commissions
49.8

 
47.7

Property and equipment, net
328.8

 
349.6

Intangible assets, net
1,270.4

 
1,287.7

Goodwill
6,739.8

 
7,048.2

Total non-current assets
13,119.9

 
13,584.8

Total assets
18,138.6

 
17,492.4

LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Current debt of consolidated investment products
206.0

 
—

Unsettled fund payables
1,060.1

 
552.5

Income taxes payable
34.6

 
77.9

Other current liabilities
691.4

 
824.7

Other current liabilities of consolidated investment products
208.2

 
104.3

Policyholder payables
1,229.4

 
1,153.6

Total current liabilities
3,429.7

 
2,713.0

Non-current liabilities:
 
 
 
Long-term debt
1,445.6

 
1,186.0

Long-term debt of consolidated investment products
3,838.3

 
3,899.4

Deferred tax liabilities, net
360.3

 
311.4

Security deposits payable
14.7

 
27.4

Other non-current liabilities
296.0

 
306.2

Total non-current liabilities
5,954.9

 
5,730.4

Total liabilities
9,384.6

 
8,443.4

Commitments and Contingencies (See Note11)


 


Equity:
 
 
 
Equity attributable to common shareholders:
 
 
 
Common shares ($0.20 par value; 1,050.0 million authorized; 490.4 million shares issued as of June 30, 2013 and December 31, 2012)
98.1

 
98.1

Additional paid-in-capital
6,046.2

 
6,141.0

Treasury shares
(1,369.4
)
 
(1,382.9
)
Retained earnings
3,047.7

 
2,801.3

Retained earnings appropriated for investors in consolidated investment products
98.0

 
128.8

Accumulated other comprehensive income, net of tax
243.9

 
530.5

Total equity attributable to common shareholders
8,164.5

 
8,316.8

Equity attributable to noncontrolling interests in consolidated entities
589.5

 
732.2

Total equity
8,754.0

 
9,049.0

Total liabilities and equity
18,138.6

 
17,492.4

See accompanying notes.

3
Table of Contents                                  

Invesco Ltd.
Condensed Consolidated Statements of Income
(Unaudited)
 
Three months ended June 30,
 
Six months ended June 30,
$ in millions, except per share data
2013
 
2012
 
2013
 
2012
Operating revenues:
 
 
 
 
 
 
 
Investment management fees
885.5

 
753.2

 
1,730.1

 
1,519.0

Service and distribution fees
215.7

 
187.1

 
422.0

 
376.1

Performance fees
6.0

 
15.6

 
42.1

 
36.0

Other
28.3

 
25.9

 
53.5

 
58.7

Total operating revenues
1,135.5

 
981.8

 
2,247.7

 
1,989.8

Operating expenses:
 
 
 
 
 
 
 
Employee compensation
324.1

 
288.3

 
665.6

 
590.8

Third-party distribution, service and advisory
366.0

 
315.6

 
712.1

 
632.0

Marketing
23.8

 
26.4

 
46.0

 
52.8

Property, office and technology
68.6

 
65.3

 
135.1

 
128.9

General and administrative
77.3

 
85.3

 
144.8

 
156.5

Transaction and integration
1.8

 
1.1

 
3.2

 
2.6

Total operating expenses
861.6

 
782.0

 
1,706.8

 
1,563.6

Operating income
273.9

 
199.8

 
540.9

 
426.2

Other income/(expense):
 
 
 
 
 
 
 
Equity in earnings of unconsolidated affiliates
6.9

 
6.9

 
15.0

 
16.6

Interest and dividend income
2.1

 
2.2

 
4.3

 
4.6

Interest income of consolidated investment products
50.7

 
68.7

 
101.0

 
137.7

Other gains/(losses) of consolidated investment products, net
(1.6
)
 
77.2

 
(22.7
)
 
(44.7
)
Interest expense
(10.0
)
 
(13.4
)
 
(19.7
)
 
(27.0
)
Interest expense of consolidated investment products
(30.6
)
 
(46.9
)
 
(63.3
)
 
(92.5
)
Other gains and losses, net
0.4

 
(7.7
)
 
18.1

 
10.9

Income from continuing operations before income taxes
291.8

 
286.8

 
573.6

 
431.8

Income tax provision
(83.5
)
 
(61.2
)
 
(169.8
)
 
(133.5
)
Income from continuing operations, net of taxes
208.3

 
225.6

 
403.8

 
298.3

Income/(loss) from discontinued operations, net of taxes
(4.6
)
 
2.0

 
(0.5
)
 
4.1

Net income
203.7

 
227.6

 
403.3

 
302.4

Net (income)/loss attributable to noncontrolling interests in consolidated entities, net 
(1.1
)
 
(73.7
)
 
21.5

 
45.4

Net income attributable to common shareholders
202.6

 
153.9

 
424.8

 
347.8

Earnings per share:
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
Earnings per share from continuing operations

$0.46

 

$0.33

 

$0.95

 

$0.76

Earnings per share from discontinued operations

($0.01
)
 
—

 
—

 

$0.01

Basic earnings per share

$0.45

 

$0.34

 

$0.95

 

$0.77

Diluted
 
 
 
 
 
 
 
Earnings per share from continuing operations

$0.46

 

$0.33

 

$0.95

 

$0.75

Earnings per share from discontinued operations

($0.01
)
 
—

 
—

 

$0.01

Diluted earnings per share

$0.45

 

$0.34

 

$0.94

 

$0.76

Dividends declared per share

$0.2250

 

$0.1725

 

$0.3975

 

$0.2950

See accompanying notes.

4
Table of Contents                                  

Invesco Ltd.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 
Three months ended June 30,
 
Six months ended June 30,
$ in millions
2013
 
2012
 
2013
 
2012
Net income
203.7

 
227.6

 
403.3

 
302.4

Other comprehensive income/(loss), before tax:
 
 
 
 
 
 
 
Currency translation differences on investments in foreign subsidiaries
(87.3
)
 
(115.9
)
 
(296.9
)
 
(16.1
)
Actuarial (loss)/gain related to employee benefit plans
0.3

 
2.1

 
6.8

 
1.1

Reclassification of amortization of prior service costs/(credit) into employee compensation expense
(0.5
)
 
(0.5
)
 
(1.0
)
 
(1.0
)
Reclassification of amortization of actuarial (gains)/losses into employee compensation expense
0.7

 
0.4

 
1.4

 
0.8

Share of other comprehensive income/(loss) of equity method investments
(1.3
)
 
1.0

 
(1.6
)
 
3.0

Unrealized (losses)/gains on available-for-sale investments
(0.3
)
 
(2.7
)
 
4.0

 
3.8

Reclassification of net (gains)/losses realized on available-for-sale investments included in other gains and losses, net
—

 
0.6

 
(1.4
)
 
(0.4
)
Other comprehensive income/(loss), before tax
(88.4
)
 
(115.0
)
 
(288.7
)
 
(8.8
)
Income tax related to items of other comprehensive income/(loss):
 
 
 
 
 
 
 
Tax benefit/(expense) on foreign currency translation adjustments
(0.3
)
 
0.8

 
(1.1
)
 
0.8

Tax on actuarial (loss)/gain related to employee benefit plans
(0.1
)
 
(0.4
)
 
(1.5
)
 
(0.1
)
Reclassification of tax on amortization of prior service costs/(credit) into income tax provision
0.1

 
—

 
0.2

 
0.1

Reclassification of tax on amortization of actuarial (gains)/losses into income tax provision
(0.1
)
 
(0.1
)
 
(0.3
)
 
(0.2
)
Tax on net unrealized (losses)/gains on available-for-sale investments
(0.8
)
 
0.2

 
(0.6
)
 
0.2

Reclassification of tax on net (gains)/losses realized on available-for-sale investments included in income tax provision
—

 
0.1

 
(0.3
)
 
—

Total income tax benefit (expense) related to items of other comprehensive income
(1.2
)
 
0.6

 
(3.6
)
 
0.8

Other comprehensive income/(loss), net of tax
(89.6
)
 
(114.4
)
 
(292.3
)
 
(8.0
)
Total comprehensive income/(loss)
114.1

 
113.2

 
111.0

 
294.4

Comprehensive loss/(income) attributable to noncontrolling interests in consolidated entities
(2.1
)
 
(50.5
)
 
27.2

 
70.0

Comprehensive income attributable to common shareholders
112.0

 
62.7

 
138.2

 
364.4

See accompanying notes.


5
Table of Contents                                  

Invesco Ltd.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Six months ended June 30,
$ in millions
2013
 
2012
Operating activities:
 
 
 
Net income
403.3

 
302.4

Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
 
 
 
Amortization and depreciation
44.2

 
50.9

Share-based compensation expense
69.4

 
67.0

(Gains)/losses on disposal of property, equipment, and software, net
0.5

 
(0.5
)
Purchase of trading investments
(7,246.0
)
 
(5,210.0
)
Sale of trading investments
7,246.6

 
5,200.8

Other gains and losses, net
(18.1
)
 
(10.9
)
Other (gains)/losses of consolidated investment products, net
22.7

 
44.7

Tax benefit from share-based compensation
57.3

 
42.3

Excess tax benefits from share-based compensation
(16.7
)
 
(12.0
)
Equity in earnings of unconsolidated affiliates
(15.0
)
 
(16.6
)
Dividends from unconsolidated affiliates
1.9

 
13.1

Changes in operating assets and liabilities:
 
 
 
(Increase)/decrease in cash held by consolidated investment products
(76.0
)
 
(45.9
)
(Increase)/decrease in receivables
(711.9
)
 
263.1

Increase/(decrease) in payables
493.4

 
(441.2
)
Net cash provided by/(used in) operating activities
255.6

 
247.2

Investing activities:
 
 
 
Purchase of property and equipment
(40.3
)
 
(37.2
)
Disposal of property and equipment
—

 
0.6

Purchase of available-for-sale investments
(25.2
)
 
(67.5
)
Sale of available-for-sale investments
23.0

 
23.8

Purchase of investments by consolidated investment products
(2,504.3
)
 
(1,584.6
)
Sale of investments by consolidated investment products
2,584.6

 
1,492.1

Purchase of other investments
(164.6
)
 
(63.4
)
Sale of other investments
39.7

 
46.2

Returns of capital and distributions from unconsolidated partnership investments
9.9

 
8.7

Acquisition earn-out payments
(1.2
)
 
(5.6
)
Net cash provided by/(used in) investing activities
(78.4
)
 
(186.9
)
Financing activities:
 
 
 
Proceeds from exercises of share options
10.8

 
12.1

Purchases of treasury shares
(120.5
)
 
(150.0
)
Dividends paid
(178.4
)
 
(133.7
)
Excess tax benefits from share-based compensation
16.7

 
12.0

Capital invested into consolidated investment products
34.5

 
19.4

Capital distributed by consolidated investment products
(128.1
)
 
(35.5
)
Net borrowings/(repayments) of debt of consolidated investment products
44.7

 
145.7

Net borrowings/(repayments) under credit facility
259.5

 
272.0

Repayments of senior notes
—

 
(215.1
)
Net cash provided by/(used in) financing activities
(60.8
)
 
(73.1
)
(Decrease)/increase in cash and cash equivalents
116.4

 
(12.8
)
Foreign exchange movement on cash and cash equivalents
(35.7
)
 
3.8

Cash and cash equivalents, beginning of period
835.5

 
727.4

Cash and cash equivalents, end of period
916.2

 
718.4

Supplemental Cash Flow Information:
 
 
 
Interest paid
(16.4
)
 
(26.4
)
Interest received
2.0

 
2.5

Taxes paid
(141.9
)
 
(96.2
)
See accompanying notes.

6
Table of Contents                                  



Invesco Ltd.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
 
 
Equity Attributable to Common Shareholders
 
 
 
 
$ in millions
 
Common Shares
 
Additional Paid-in-Capital
 
Treasury Shares
 
Retained Earnings
 
Retained Earnings
Appropriated for
Investors in
Consolidated Investment Products
 
Accumulated Other
Comprehensive Income
 
Total Equity
Attributable to Common Shareholders
 
Noncontrolling
Interests in
Consolidated Entities
 
Total Equity
January 1, 2013
 
98.1

 
6,141.0

 
(1,382.9
)
 
2,801.3

 
128.8

 
530.5

 
8,316.8

 
732.2

 
9,049.0

Net income
 
—

 
—

 
—

 
424.8

 
—

 
—

 
424.8

 
(21.5
)
 
403.3

Other comprehensive income (loss)
 
—

 
—

 
—

 
—

 
—

 
(286.6
)
 
(286.6
)
 
(5.7
)
 
(292.3
)
Total comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
138.2

 
(27.2
)
 
111.0

Net income (loss) reclassified to appropriated retained earnings
 
—

 
—

 
—

 
—

 
(30.8
)
 
—

 
(30.8
)
 
30.8

 
—

Deconsolidation of consolidated investment products
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(27.7
)
 
(27.7
)
Change in noncontrolling interests in consolidated entities, net
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(118.6
)
 
(118.6
)
Dividends
 
—

 
—

 
—

 
(178.4
)
 
—

 
—

 
(178.4
)
 
—

 
(178.4
)
Employee share plans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation
 
—

 
69.4

 
—

 
—

 
—

 
—

 
69.4

 
—

 
69.4

Vested shares
 
—

 
(167.7
)
 
167.7

 
—

 
—

 
—

 
—

 
—

 
—

Exercise of options
 
—

 
(13.2
)
 
24.0

 
—

 
—

 
—

 
10.8

 
—

 
10.8

Tax impact of share-based payment
 
—

 
16.7

 
—

 
—

 
—

 
—

 
16.7

 
—

 
16.7

Purchase of shares
 
—

 
—

 
(178.2
)
 
—

 
—

 
—

 
(178.2
)
 
—

 
(178.2
)
June 30, 2013
 
98.1

 
6,046.2

 
(1,369.4
)
 
3,047.7

 
98.0

 
243.9

 
8,164.5

 
589.5

 
8,754.0

See accompanying notes.









7
Table of Contents                                  

Invesco Ltd.
Condensed Consolidated Statements of Changes in Equity (continued)
(Unaudited)
 
 
Equity Attributable to Common Shareholders
 
 
 
 
$ in millions
 
Common Shares
 
Additional Paid-in-Capital
 
Treasury Shares
 
Retained Earnings
 
Retained Earnings
Appropriated for
Investors in
Consolidated Investment Products
 
Accumulated Other
Comprehensive Income
 
Total Equity
Attributable to Common Shareholders
 
Non-Controlling
Interests in
Consolidated Entities
 
Total Equity
January 1, 2012
 
98.1

 
6,180.6

 
(1,280.4
)
 
2,413.2

 
334.3

 
373.3

 
8,119.1

 
1,018.5

 
9,137.6

Net income
 
—

 
—

 
—

 
347.8

 
—

 
—

 
347.8

 
(45.4
)
 
302.4

Other comprehensive income
 
—

 
—

 
—

 
—

 
—

 
16.6

 
16.6

 
(24.6
)
 
(8.0
)
Total comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
 
364.4

 
(70.0
)
 
294.4

Net income (loss) reclassified to appropriated retained earnings
 
—

 
—

 
—

 
—

 
(26.4
)
 
—

 
(26.4
)
 
26.4

 
—

Currency translation differences on investments in foreign subsidiaries reclassified to appropriated retained earnings
 
—

 
—

 
—

 
—

 
(8.5
)
 
—

 
(8.5
)
 
8.5

 
—

Deconsolidation of consolidated investment products
 
—

 
—

 
—

 
—

 
(47.6
)
 
—

 
(47.6
)
 
—

 
(47.6
)
Change in noncontrolling interests in consolidated entities, net
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(30.4
)
 
(30.4
)
Dividends
 
—

 
—

 
—

 
(133.7
)
 
—

 
—

 
(133.7
)
 
—

 
(133.7
)
Employee share plans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation
 
—

 
67.0

 
—

 
—

 
—

 
—

 
67.0

 
—

 
67.0

Vested shares
 
—

 
(147.7
)
 
147.7

 
—

 
—

 
—

 
—

 
—

 
—

Exercise of options
 
—

 
(11.7
)
 
23.8

 
—

 
—

 
—

 
12.1

 
—

 
12.1

Tax impact of share-based payment
 
—

 
12.0

 
—

 
—

 
—

 
—

 
12.0

 
—

 
12.0

Purchase of shares
 
—

 
—

 
(192.6
)
 
—

 
—

 
—

 
(192.6
)
 
—

 
(192.6
)
June 30, 2012
 
98.1

 
6,100.2

 
(1,301.5
)
 
2,627.3

 
251.8

 
389.9

 
8,165.8

 
953.0

 
9,118.8

See accompanying notes.


8
Table of Contents                                  

Invesco Ltd.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
1. ACCOUNTING POLICIES
Corporate Information
Invesco Ltd. (Parent) and all of its consolidated entities (collectively, the company or Invesco) provide clients with an array of global investment management capabilities. The company’s sole business is investment management.
Basis of Accounting and Consolidation
In the opinion of management, the unaudited Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for the fair presentation of the financial condition and results of operations for the interim periods presented. All significant intercompany transactions, balances, revenues and expenses are eliminated upon consolidation.
The Condensed Consolidated Financial Statements have been prepared in accordance with U.S. GAAP and consolidate the financial statements of the Parent, all of its controlled subsidiaries, any variable interest entities (VIEs) required to be consolidated, and any non-VIE general partnership investments where the company is deemed to have control. A VIE is an entity that does not have sufficient equity to finance its operations without additional subordinated financial support, or an entity for which the risks and rewards of ownership are not directly linked to voting interests. Control is deemed to be present when the Parent holds a majority voting interest or otherwise has the power to govern the financial and operating policies of the subsidiary or VIE so as to obtain the benefits from its activities. The company provides investment management services to, and has transactions with, various private equity funds, real estate funds, fund-of-funds, collateralized loan obligations (CLOs), and other investment products sponsored by the company for the investment of client assets in the normal course of business. The company serves as the investment manager, making day-to-day investment decisions concerning the assets of these products. Certain of these entities are considered to be VIEs.
Certain disclosures included in the company’s annual report are not required to be included on an interim basis in the company’s quarterly reports on Forms 10-Q. The company has condensed or omitted these disclosures. Therefore, this Form 10-Q (Report) should be read in conjunction with the company’s annual report on Form 10-K for the year ended December 31, 2012.
Use of Estimates
In preparing the financial statements, company management is required to make estimates and assumptions that affect reported revenues, expenses, assets, liabilities and disclosure of contingent liabilities. The primary estimates relate to investment valuation, goodwill and intangible impairment, and taxes. Use of available information and application of judgment are inherent in the formation of estimates. Actual results in the future could differ from such estimates and the differences may be material to the financial statements.
Reclassifications
As discussed in Note 14, "Discontinued Operations," the results of Atlantic Trust Private Wealth Management (Atlantic Trust) have been presented as a discontinued operation in the income statement for all periods presented. As a result of this change, certain previously reported amounts in the consolidated financial statements and notes have been reclassified to conform to the current period presentation.
Accounting Pronouncements Recently Adopted and Pending Accounting Pronouncements
In February 2013, the FASB issued Accounting Standards Update No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (ASU 2013-02). ASU 2013-02 amends Topic 220 to require an entity to present current period reclassifications out of accumulated other comprehensive income and other amounts of current-period other comprehensive income, separately, for each component of other comprehensive income. ASU 2013-02 also requires an entity to provide information about the effects on net income of significant amounts reclassified out of each component of accumulated other comprehensive income, if those amounts are required under other Topics to be reclassified to net income in their entirety in the same reporting period. The amendments to Topic 220 made by ASU 2013-02 are effective for interim and annual periods beginning on or after December 15, 2012 and are reflected in these financial statements.



9
Table of Contents                                  

2. FAIR VALUE OF ASSETS AND LIABILITIES
The carrying value and fair value of financial instruments is presented in the summary table below. The fair value of financial instruments held by consolidated investment products is presented in Note 12, “Consolidated Investment Products.”
 
June 30, 2013
 
December 31, 2012
$ in millions
Footnote Reference
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Cash and cash equivalents
 
 
916.2

 
916.2

 
835.5

 
835.5

Available-for-sale investments
3

 
100.2

 
100.2

 
122.1

 
122.1

Assets held for policyholders
 
 
1,229.4

 
1,229.4

 
1,153.6

 
1,153.6

Trading investments
3

 
227.1

 
227.1

 
218.7

 
218.7

Foreign time deposits*
3

 
31.5

 
31.5

 
31.3

 
31.3

Support agreements*
11

 
(1.0
)
 
(1.0
)
 
(1.0
)
 
(1.0
)
Policyholder payables
 
 
(1,229.4
)
 
(1,229.4
)
 
(1,153.6
)
 
(1,153.6
)
Put option contracts

 
1.1

 
1.1

 
—

 
—

UIT-related financial instruments sold, not yet purchased
 
 
(1.5
)
 
(1.5
)
 
(1.5
)
 
(1.5
)
Note payable
 
 
(1.2
)
 
(1.2
)
 
(3.4
)
 
(3.4
)
Total debt*
4

 
(1,445.6
)
 
(1,412.3
)
 
(1,186.0
)
 
(1,204.8
)

*
These financial instruments are not measured at fair value on a recurring basis. See the indicated footnotes for additional information about the carrying and fair values of these financial instruments. Foreign time deposits are measured at cost plus accrued interest, which approximates fair value, and are accordingly classified as Level 2 securities.

A three-level valuation hierarchy exists for disclosure of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

•
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
•
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
•
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.

An asset or liability's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

There are three types of valuation approaches: a market approach, which uses observable prices and other relevant information that is generated by market transactions involving identical or comparable assets or liabilities; an income approach, which uses valuation techniques to convert future amounts to a single, discounted present value amount; and a cost approach, which is based on the amount that currently would be required to replace the service capacity of an asset.

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.
Cash equivalents
Cash equivalents include cash investments in money market funds and time deposits. Cash investments in money market funds are valued under the market approach through the use of quoted market prices in an active market, which is the net asset value of the underlying funds, and are classified within level 1 of the valuation hierarchy.
Available-for-sale investments
Available-for-sale investments include amounts seeded into affiliated investment products, investments in affiliated CLOs, and investments in other debt securities. Seed money investments are investments held in Invesco managed funds with the purpose of providing capital to the funds during their development periods. Seed money is valued under the market approach through the use of quoted market prices available in an active market and is classified within level 1 of the valuation hierarchy; there is no modeling or additional information needed to arrive at the fair values of these investments. Investments in CLOs are valued using an income approach through the use of certain observable and unobservable inputs and are classified within level

10
Table of Contents                                  

3 of the valuation hierarchy. Other debt securities are valued using a cost valuation technique due to the lack of available cash flow and market data and are accordingly also classified within Level 3 of the valuation hierarchy.
Assets held for policyholders and policyholder payables
Assets held for policyholders represent investments held by one of the company’s subsidiaries, which is an insurance entity that was established to facilitate retirement savings plans in the U.K. The assets held for policyholders are accounted for at fair value pursuant to ASC Topic 944, “Financial Services — Insurance,” and are comprised primarily of affiliated unitized funds. The assets are measured at fair value under the market approach based on the quoted prices of the underlying funds in an active market and are classified within level 1 of the valuation hierarchy. The policyholder payables are indexed to the value of the assets held for policyholders.
Put option contracts
The company has purchased several put option contracts to hedge economically foreign currency risk on the translation of a portion of its pound sterling-denominated earnings into U.S. dollars (purchases of zero and $1.8 million in the three and six months ended June 30, 2013, respectively; purchases of $2.5 million in the three and six months ended June 30, 2012). These were the only contracts entered into during the period to hedge economically foreign currency risk. These contracts provide coverage through March 25, 2014. The economic hedge is predominantly triggered upon the impact of a significant decline in the pound sterling/U.S. dollar foreign exchange rate, which could arise as a result of European economic uncertainty.  Open put option contracts are marked-to-market through earnings, which are recorded in the company's consolidated statement of income in other gains and losses. These derivative contracts are valued using option valuation models and are included in other current assets in the company's consolidated balance sheet.  The significant inputs in these models (volatility, forward points and swap curves) are readily available in public markets or can be derived from observable market transactions for substantially the full terms of the contracts and are classified within level 2 of the valuation hierarchy. The company recognized a loss of $0.3 million and $0.7 million in the three and six months ended June 30, 2013 related to the change in market value of these put option contracts (three and six months ended June 30, 2012: $1.2 million and $1.2 million, respectively).
Trading investments
Trading investments include investments held to hedge economically against costs the company incurs in connection with certain deferred compensation plans in which the company participates, as well as trading and investing activities in equity and debt securities entered into in its capacity as sponsor of unit investment trusts (UITs).
•
Investments related to deferred compensation plans
Investments related to deferred compensation plans are primarily invested in affiliated funds that are held to hedge economically current and non-current deferred compensation liabilities. Investments related to deferred compensation plans are valued under the market approach through the use of quoted prices in an active market and are classified within level 1 of the valuation hierarchy.
•
UIT-related equity and debt securities
At June 30, 2013, UIT-related equity and debt securities consisted of investments in corporate stock, UITs, U.S. state and political subdivisions. Each is discussed more fully below.
•
Corporate stock
The company temporarily holds investments in corporate stock for purposes of creating a UIT. Corporate stocks are valued under the market approach through use of quoted prices on an exchange. To the extent these securities are actively traded, valuation adjustments are not applied and they are categorized within level 1 of the valuation hierarchy; otherwise, they are categorized in level 2.
•
UITs
The company may hold units of its sponsored UITs at period-end for sale in the primary market or secondary market. Equity UITs are valued under the market approach through use of quoted prices on an exchange. Fixed income UITs are valued using recently executed transaction prices, market price quotations (where observable), bond spreads, or credit default swap spreads. The spread data used is for the same maturities as the underlying bonds. If the spread data does not reference the issuers, then data that references comparable issuers is used. When observable price quotations are not available, fair value is determined based on cash flow models with yield curves, bond or single name credit default spreads, and recovery rates based on collateral value as key inputs. Depending on the nature of the inputs, these investments are categorized as level 1, 2, or 3.

11
Table of Contents                                  

•
Municipal securities
Municipal securities are valued using recently executed transaction prices, market price quotations (where observable), bond spreads, or credit default swap spreads. The spread data used is for the same maturities as the underlying bonds. If the spread data does not reference the issuers, then data that references comparable issuers is used. When observable price quotations are not available, fair value is determined based on cash flow models with yield curves, bond or single name credit default spreads, and recovery rates based on collateral value as key inputs. Depending on the nature of the inputs, these investments are categorized as level 1, 2, or 3.
UIT-related financial instruments sold, not yet purchased, and derivative instruments
The company uses U.S. Treasury futures, which are types of derivative financial instruments, to hedge economically fixed income UIT inventory and securities in order to mitigate market risk. Open futures contracts are marked-to-market daily through earnings, which are recorded in the company’s consolidated statement of income in other revenue, along with the mark-to-market on the underlying trading securities held. Fair values of derivative contracts in an asset position are included in other current assets in the company’s consolidated balance sheet. Fair values of derivative contracts in a liability position are included in other liabilities in the company’s consolidated balance sheet. These derivative contracts are valued under the market approach through use of quoted prices in an active market and are classified within level 1 of the valuation hierarchy. At June 30, 2013, there were 14 open futures contracts with a notional value of $1.9 million (December 31, 2012: 10 open futures contracts with a notional value of $1.4 million). Additionally, to hedge economically the market risk associated with equity and debt securities and UITs temporarily held as trading investments, the company will hold short corporate stock, exchange-traded fund, or U.S. treasury security positions. These transactions are recorded as financial instruments sold, not yet purchased and are included in other current liabilities in the company’s consolidated balance sheet. To the extent these securities are actively traded, valuation adjustments are not applied and they are categorized within level 1 of the valuation hierarchy; otherwise, they are categorized in level 2.
Note payable
The note payable represents a payable associated with Invesco’s acquired ownership interest in two consolidated real estate funds. As the underlying investments in the funds are carried at fair value, management elected the fair value option for the note payable in order to offset the fair value movements recognized from the funds and has recorded the note payable as a level 3 liability. The fair value of the note payable is measured by reference to the value of the company's ownership interest in the equity of the funds, as this is the contractual amount payable at the reporting date. The value of the funds' equity is driven by the value of the underlying assets of the funds, as these assets make up the majority of the funds' equity.

12
Table of Contents                                  

The following table presents, for each of the hierarchy levels described above, the carrying value of the company’s assets and liabilities, including major security type for equity and debt securities, which are measured at fair value on the face of the statement of financial position as of June 30, 2013.

 
As of June 30, 2013
$ in millions
Fair Value Measurements
 
Quoted Prices in
Active Markets for
Identical Assets (Level 1)
 
Significant Other
Observable Inputs (Level 2)
 
Significant
Unobservable Inputs (Level 3)
Current assets:
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
330.1

 
330.1

 
—

 
—

Investments:*

 

 

 
 
Available-for-sale:

 

 

 
 
Seed money
91.5

 
91.5

 
—

 
—

Trading investments:

 

 

 
 
Investments related to deferred compensation plans
222.5

 
222.5

 
—

 
—

UIT-related equity and debt securities:

 

 

 
 
Corporate stock
1.5

 
1.5

 
—

 
—

UITs
0.8

 
0.8

 
—

 
—

Municipal securities
2.3

 
—

 
2.3

 
—

Assets held for policyholders
1,229.4

 
1,229.4

 
—

 
—

Put option contracts
1.1

 
—

 
1.1

 
—

Total current assets
1,879.2

 
1,875.8

 
3.4

 
—

Non-current assets:
 
 
 
 
 
 
 
Investments — available-for-sale*:
—

 
—

 
—

 
—

CLOs
2.4

 
—

 
—

 
2.4

Other debt securities
6.3

 
—

 
—

 
6.3

Total assets at fair value
1,887.9

 
1,875.8

 
3.4

 
8.7

Current liabilities:
 
 
 
 
 
 
 
Policyholder payables
(1,229.4
)
 
(1,229.4
)
 
—

 
—

UIT-related financial instruments sold, not yet purchased:

 

 

 

Corporate equities
(1.5
)
 
(1.5
)
 
—

 
—

Note payable
(1.2
)
 
—

 
—

 
(1.2
)
Total liabilities at fair value
(1,232.1
)
 
(1,230.9
)
 
—

 
(1.2
)

*
Current foreign time deposits of $31.5 million are excluded from this table. Non-current equity method and other investments of $358.6 million and $6.0 million, respectively, are also excluded from this table. These investments are not measured at fair value, in accordance with applicable accounting standards.

13
Table of Contents                                  

The following table presents, for each of the hierarchy levels described above, the carrying value of the company’s assets and liabilities that are measured at fair value as of December 31, 2012:
 
As of December 31, 2012
$ in millions
Fair Value Measurements
 
Quoted Prices in
Active Markets for
Identical Assets (Level 1)
 
Significant Other
Observable Inputs (Level 2)
 
Significant
Unobservable Inputs (Level 3)
Current assets:
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
292.2

 
292.2

 
—

 
—

Investments:*
 
 
 
 
 
 
 
Available-for-sale:
 
 
 
 
 
 
 
Seed money
113.4

 
113.4

 
—

 
—

Trading investments:

 

 

 
 
Investments related to deferred compensation plans
213.5

 
213.5

 
—

 
—

Other equity securities
0.3

 
0.3

 
—

 
—

UIT-related equity and debt securities:
 
 
 
 
 
 
 
Corporate stock
1.5

 
1.5

 
—

 
—

UITs
1.6

 
1.6

 
—

 
—

Municipal securities
1.8

 
—

 
1.8

 
—

Assets held for policyholders
1,153.6

 
1,153.6

 
—

 
—

Total current assets
1,777.9

 
1,776.1

 
1.8

 
—

Non-current assets:
 
 
 
 
 
 
 
Investments — available-for-sale*:
 
 
 
 
 
 
 
CLOs
2.4

 
—

 
—

 
2.4

Other debt securities
6.3

 
—

 
—

 
6.3

Total assets at fair value
1,786.6

 
1,776.1

 
1.8

 
8.7

Current liabilities:
 
 
 
 
 
 
 
Policyholder payables
(1,153.6
)
 
(1,153.6
)
 
—

 
—

UIT-related financial instruments sold, not yet purchased:
 
 
 
 
 
 
 
Corporate equities
(1.5
)
 
(1.5
)
 
—

 
—

Non-current liabilities:
 
 
 
 
 
 
 
Note payable
(3.4
)
 
—

 
—

 
(3.4
)
Total liabilities at fair value
(1,158.5
)
 
(1,155.1
)
 
—

 
(3.4
)

*
Current foreign time deposits of $31.3 million and other current investments of $0.5 million are excluded from this table. Non-current equity method and other investments of $228.2 million and $9.9 million, respectively, are also excluded from this table. These investments are not measured at fair value, in accordance with applicable accounting standards.

14
Table of Contents                                  

The following table shows a reconciliation of the beginning and ending fair value measurements for level 3 assets and liabilities during the three and six months ended June 30, 2013 and June 30, 2012, which are valued using significant unobservable inputs:
 
Three months ended June 30, 2013
 
Six months ended June 30, 2013
$ in millions
CLOs
 
Other Debt Securities
 
Note Payable
 
CLOs
 
Other Debt Securities
 
Note Payable
Beginning balance
2.4

 
6.3

 
(2.4
)
 
2.4

 
6.3

 
(3.4
)
Settlements
(0.1
)
 
—

 
1.0

 
(0.1
)
 
—

 
1.7

Net unrealized gains and losses included in accumulated other comprehensive income/(loss)*
0.1

 
—

 
—

 
0.1

 
—

 
—

Net unrealized gains and losses included in earnings*
—

 
—

 
—

 
—

 
—

 
0.1

Foreign exchange gains/(losses)
—

 
—

 
0.2

 
—

 
—

 
0.4

Ending balance
2.4

 
6.3

 
(1.2
)
 
2.4

 
6.3

 
(1.2
)

 
Three months ended June 30, 2012
 
Six months ended June 30, 2012
$ in millions
CLOs
 
Other Debt Securities
 
Note Payable
 
CLOs
 
Other Debt Securities
 
Note Payable
Beginning balance
2.8

 
6.3

 
(12.3
)
 
—

 
—

 
(16.8
)
Purchases
—

 
—

 
—

 
—

 
1.7

 
—

Settlements
(0.1
)
 
—

 
—

 
(0.1
)
 
—

 
—

Deconsolidation of consolidated investment products
—

 
—

 
—

 
2.5

 
—

 
—

Net unrealized gains and losses included in accumulated other comprehensive income/(loss)*
(0.2
)
 
—

 
—

 
0.1

 
—

 
—

Net unrealized gains and losses included in earnings*
—

 
—

 
—

 
—

 
—

 
3.5

Reclassification
—

 
—

 
—

 
—

 
4.6

 
—

Foreign exchange gains/(losses)
—

 
—

 
(0.3
)
 
—

 
—

 
0.7

Ending balance
2.5

 
6.3

 
(12.6
)
 
2.5

 
6.3

 
(12.6
)

*
Included in other gains and losses, net in the Condensed Consolidated Statement of Income are $0.1 million in net unrealized gains for the six months ended June 30, 2013, however there were no net unrealized gains or losses for the three months ended June 30, 2013 (three and six months ended June 30, 2012: none and $3.5 million net unrealized gains, respectively) attributable to the note payable still held at June 30, 2013. There were $0.1 million net unrealized gains included in accumulated other comprehensive income/(loss) for both the three and six months ended June 30, 2013 (three and six months ended June 30, 2012: $0.2 million net unrealized losses and $0.1 million net unrealized gains, respectively) attributed to the change in unrealized gains and losses related to assets still held at June 30, 2013.

Quantitative Information about Level 3 Fair Value Measurements
The following table shows significant unobservable inputs used in the fair value measurement of level 3 assets and liabilities:
Assets and Liabilities *
 
Fair Value at June 30, 2013 ($ in millions)
 
Valuation Technique
 
Unobservable Inputs
 
Range
CLOs
 
2.4
 
Discounted Cash Flow- Euro
 
Probability of Default
 
2% - 5%
 
 
 
 
 
 
Spread over Euribor
 
3000 - 3600 bps
 
 
 
 
Discounted Cash Flow- USD
 
Probability of Default
 
1% - 3%
 
 
 
 
 
 
Spread over Libor
 
1200 - 1500 bps

15
Table of Contents                                  

Assets and Liabilities *
 
Fair Value at December 31, 2012 ($ in millions)
 
Valuation Technique
 
Unobservable Inputs
 
Range
CLOs
 
2.4
 
Discounted Cash Flow- Euro
 
Probability of Default
 
3% - 5%
 
 
 
 
 
 
Spread over Euribor
 
2975 - 3050 bps
 
 
 
 
Discounted Cash Flow- USD
 
Probability of Default
 
1% - 3%
 
 
 
 
 
 
Spread over Libor
 
1350 - 1400 bps

*
Other debt securities of $6.3 million (at December 31, 2012: $6.3 million) are not included in the table above as they are valued using a cost valuation technique. The note payable of $1.2 million (at December 31, 2012: $3.4 million) is also not included in the table above as its value is linked to the underlying value of consolidated funds. Both items are more fully discussed in the "Available-for-sale investments" and "Note payable" disclosures above.

For CLO Notes, a change in the assumption used for spreads is generally accompanied by a directionally similar change in default rate. Significant increases in any of these inputs in isolation would result in significant decreases in fair value measurements. A directionally-opposite impact would apply for significant decreases in these inputs.

3. INVESTMENTS
The disclosures below include details of the company’s investments. Investments held by consolidated investment products are detailed in Note 12, “Consolidated Investment Products.”
Current Investments
 
As of
 
June 30,
 
December 31,
$ in millions
2013
 
2012
Available-for-sale investments:
 
 
 
Seed money
91.5

 
113.4

Trading investments:

 
 
Investments related to deferred compensation plans
222.5

 
213.5

UIT-related equity and debt securities
4.6

 
4.9

Other equity securities
—

 
0.3

Foreign time deposits
31.5

 
31.3

Other
—

 
0.5

Total current investments
350.1

 
363.9

Non-current Investments
 
As of
 
June 30,
 
December 31,
$ in millions
2013
 
2012
Available-for-sale investments:
 
 
 
CLOs
2.4

 
2.4

Other debt securities
6.3

 
6.3

Equity method investments
358.6

 
228.2

Other
6.0

 
9.9

Total non-current investments
373.3

 
246.8

In March 2013, the company completed the purchase of a 49% equity interest in Religare Asset Management Limited, a company incorporated in India. The company has applied the equity method of accounting for its investment. The equity method investment balance above includes the difference between the carrying amount of the investment and its book value.

16
Table of Contents                                  

The portion of trading gains and losses for the three and six months ended June 30, 2013 that relates to trading securities still held at June 30, 2013 was a $2.5 million net loss and $14.0 million net gain, respectively (three and six months ended June 30, 2012: $5.2 million net loss and $6.3 million net gain, respectively).
Realized gains and losses recognized in the income statement during the year from investments classified as available-for-sale are as follows:
 
For the three months ended June 30, 2013:
 
For the six months ended June 30, 2013:
$ in millions
Proceeds from Sales
 
Gross Realized Gains
 
Gross Realized Losses
 
Proceeds from Sales
 
Gross Realized Gains
 
Gross Realized Losses
Current available-for-sale investments
—

 
—

 
—

 
22.9

 
1.7

 
(0.3
)
Non-current available-for-sale investments
—

 
—

 
—

 
0.1

 
—

 
—

 
For the three months ended June 30, 2012:
 
For the six months ended June 30, 2012:
$ in millions
Proceeds from Sales
 
Gross Realized Gains
 
Gross Realized Losses
 
Proceeds from Sales
 
Gross Realized Gains
 
Gross Realized Losses
Current available-for-sale investments
3.3

 
0.3

 
—

 
23.6

 
1.8

 
(0.5
)
Non-current available-for-sale investments
0.2

 
—

 
—

 
0.2

 
—

 
—

Upon the sale of available-for-sale securities, net realized gains of $1.4 million and $1.3 million were transferred from accumulated other comprehensive income into the Condensed Consolidated Statements of Income during the six months ended June 30, 2013 and 2012, respectively. The specific identification method is used to determine the realized gain or loss on securities sold or otherwise disposed.
Gross unrealized holding gains and losses recognized in other accumulated comprehensive income from available-for-sale investments are presented in the table below:
 
June 30, 2013
 
December 31, 2012
$ in millions
Cost
 
Gross Unrealized Holding Gains
 
Gross Unrealized Holding Losses
 
Fair Value
 
Cost
 
Gross Unrealized Holding Gains
 
Gross Unrealized Holding Losses
 
Fair Value
Current:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Seed money
81.1

 
10.7

 
(0.3
)
 
91.5

 
105.5

 
8.4

 
(0.5
)
 
113.4

Current available-for-sale investments
81.1

 
10.7

 
(0.3
)
 
91.5

 
105.5

 
8.4

 
(0.5
)
 
113.4

Non-current:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CLOs
2.3

 
0.1

 
—

 
2.4

 
2.4

 
—

 
—

 
2.4

Other debt securities
6.3

 
—

 
—

 
6.3

 
6.3

 
—

 
—

 
6.3

Non-current available-for-sale investments:
8.6

 
0.1

 
—

 
8.7

 
8.7

 
—

 
—

 
8.7

 
89.7

 
10.8

 
(0.3
)
 
100.2

 
114.2

 
8.4

 
(0.5
)
 
122.1

Available-for-sale debt securities as of June 30, 2013 by maturity, are set out below:
 
Available-for-Sale
$ in millions
(Fair Value)
One to five years
1.7

Five to ten years
7.0

Total available-for-sale
8.7




17
Table of Contents                                  


The following table provides the breakdown of available-for-sale investments with unrealized losses at June 30, 2013:
 
 
Less Than 12 Months
 
12 Months or Greater
 
Total
$ in millions
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
Seed money (40 funds)
 
7.4

 
(0.2
)
 
0.2

 
(0.1
)
 
7.6

 
(0.3
)
The following table provides the breakdown of available-for-sale investments with unrealized losses at December 31, 2012:
 
 
Less Than 12 Months
 
12 Months or Greater
 
Total
$ in millions
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
Seed money (52 funds)
 
0.2

 
—

 
11.5

 
(0.5
)
 
11.7

 
(0.5
)
The company has reviewed investment securities for other-than-temporary impairment (OTTI) in accordance with its accounting policy and has recognized no other-than-temporary impairment charges on available-for-sale investments during the six months ended June 30, 2013 (six months ended June 30, 2012: $0.9 million).
The gross unrealized losses of seed money investments at June 30, 2013 were immaterial and were primarily caused by foreign exchange movements. After conducting a review of the financial condition and near-term prospects of the underlying securities in the seeded funds as well as the severity and duration of the impairment, the company does not consider any material portion of its gross unrealized losses on these securities to be other-than-temporarily impaired. The securities are expected to recover their value over time and the company has the intent and ability to hold the securities until this recovery occurs.

4. DEBT
The disclosures below include details of the company’s total debt. Debt of consolidated investment products is detailed in Note 12, “Consolidated Investment Products.”
 
June 30, 2013
 
December 31, 2012
$ in millions
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Unsecured Senior Notes*:
 
 
 
 
 
 
 
   3.125% - due November 30, 2022
599.6

 
566.4

 
599.5

 
618.3

Floating rate credit facility expiring June 3, 2016
846.0

 
846.0

 
586.5

 
586.5

Total debt
1,445.6

 
1,412.4

 
1,186.0

 
1,204.8


*
The company’s Senior Note indentures contain certain restrictions on mergers or consolidations. Beyond these items, there are no other restrictive covenants in the indentures.
The fair value of the company’s Senior Notes was determined by market quotes provided by Bloomberg, which is considered a Level 2 valuation input.
Analysis of Borrowings by Maturity:
$ in millions
June 30, 2013
2016
846.0

2022
599.6

Total debt
1,445.6



18
Table of Contents                                  

In November 2012, the company issued an initial aggregate principal amount of $600.0 million 3.125% Senior Notes which will mature in November 2022. The issuer is a 100%-owned finance subsidiary of the Parent, and the Parent has fully and unconditionally guaranteed the securities. Certain of our subsidiaries are required to maintain minimum levels of capital. 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.

At June 30, 2013, the outstanding balance on the credit facility was $846.0 million and the weighted average interest rate on the credit facility was 1.37%. Borrowings under the credit facility will bear interest at (i) LIBOR for specified interest periods or (ii) a floating base rate (based upon the highest of (a) the Bank of America prime rate, (b) the Federal Funds rate plus 0.50% and (c) LIBOR for an interest period of one month plus 1.00%), plus, in either case, an applicable margin determined with reference to the company’s credit ratings and specified credit default spreads. Based on credit ratings as of June 30, 2013 of the company and such credit default spreads, the applicable margin for LIBOR-based loans was 1.10% and for base rate loans was 0.10%. In addition, the company is required to pay the lenders a facility fee on the aggregate commitments of the lenders (whether or not used) at a rate per annum which is based on the company’s credit ratings. Based on credit ratings as of June 30, 2013, the annual facility fee was equal to 0.15%.

The credit agreement governing the credit facility contains customary restrictive covenants on the company and its subsidiaries. Restrictive covenants in the credit agreement include, but are not limited to: prohibitions on creating, incurring or assuming any liens; entering into certain restrictive merger arrangements; selling, leasing, transferring or otherwise disposing of assets; making a material change in the nature of the business; making material amendments to organic documents; making a significant accounting policy change in certain situations; entering into transactions with affiliates. Many of these restrictions are subject to certain minimum thresholds and exceptions. Financial covenants under the credit agreement include: (i) the quarterly maintenance of a debt/EBITDA ratio, as defined in the credit agreement, of not greater than 3.25:1.00 through June 30, 2014, and not greater than 3.00:1.00 thereafter, (ii) a coverage ratio (EBITDA, as defined in the credit agreement, divided by interest payable for the four consecutive fiscal quarters ended before the date of determination) of not less than 4.00:1.00.

The credit agreement governing the credit facility also contains customary provisions regarding events of default which could result in an acceleration or increase in amounts due, including (subject to certain materiality thresholds and grace periods) payment default, failure to comply with covenants, material inaccuracy of representation or warranty, bankruptcy or insolvency proceedings, change of control, certain judgments, ERISA matters, cross-default to other debt agreements, governmental action prohibiting or restricting the company or its subsidiaries in a manner that has a material adverse effect and failure of certain guaranty obligations. The company is in compliance with all regulatory minimum net capital requirements.

The lenders (and their respective affiliates) may have provided, and may in the future provide, investment banking, cash management, underwriting, lending, commercial banking, leasing, foreign exchange, trust or other advisory services to the company and its subsidiaries and affiliates. These parties may have received, and may in the future receive, customary compensation for these services.

The company maintains approximately $31.2 million in letters of credit from a variety of banks. The letters of credit are generally one-year automatically-renewable facilities and are maintained for various commercial reasons. Approximately $11.2 million of the letters of credit support office lease obligations.
 
5. SHARE CAPITAL
Movements in the number of common shares issued are represented in the table below:
In millions
June 30, 2013
 
June 30, 2012
Common shares issued
490.4