Document
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 September 30, 2017
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
invescologoa02a03a04a01a03.gif
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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth 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
 
 
 
 
 
 
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 September 30, 2017, the most recent practicable date, the number of Common Shares outstanding was 407,078,530.

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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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Invesco Ltd.
Condensed Consolidated Balance Sheets
(Unaudited)

 
As of
$ in millions, except per share data
September 30, 2017
 
December 31, 2016
ASSETS
 
 
 
Cash and cash equivalents
1,716.3

 
1,328.0

Unsettled fund receivables
830.4

 
672.9

Accounts receivable
548.5

 
544.2

Investments
690.9

 
795.3

Assets of consolidated investment products (CIP):
 
 
 
Cash and cash equivalents of CIP
485.9

 
742.2

Accounts receivable and other assets of CIP
69.1

 
106.2

Investments of CIP
5,124.3

 
5,116.1

Assets held for policyholders
12,102.6

 
8,224.2

Prepaid assets
122.8

 
116.9

Other assets
64.1

 
95.0

Property, equipment and software, net
483.0

 
464.7

Intangible assets, net
1,561.2

 
1,399.4

Goodwill
6,573.4

 
6,129.2

Total assets
30,372.5

 
25,734.3

LIABILITIES
 
 
 
Accrued compensation and benefits
608.5

 
654.3

Accounts payable and accrued expenses
901.9

 
812.4

Liabilities of CIP:
 
 
 
Debt of CIP
4,323.6

 
4,403.1

Other liabilities of CIP
339.9

 
673.4

Policyholder payables
12,102.6

 
8,224.2

Unsettled fund payables
810.8

 
659.3

Long-term debt
2,075.3

 
2,102.4

Deferred tax liabilities, net
351.5

 
309.7

Total liabilities
21,514.1

 
17,838.8

Commitments and contingencies (See Note 11)


 


TEMPORARY EQUITY
 
 
 
Redeemable noncontrolling interests in consolidated entities
309.6

 
283.7

PERMANENT EQUITY
 
 
 
Equity attributable to Invesco Ltd.:
 
 
 
Common shares ($0.20 par value; 1,050.0 million authorized; 490.4 million shares issued as of September 30, 2017 and December 31, 2016)
98.1

 
98.1

Additional paid-in-capital
6,248.1

 
6,227.4

Treasury shares
(2,783.5
)
 
(2,845.8
)
Retained earnings
5,199.8

 
4,833.4

Accumulated other comprehensive income/(loss), net of tax
(448.5
)
 
(809.3
)
Total equity attributable to Invesco Ltd.
8,314.0

 
7,503.8

Equity attributable to nonredeemable noncontrolling interests in consolidated entities
234.8

 
108.0

Total permanent equity
8,548.8

 
7,611.8

Total liabilities, temporary and permanent equity
30,372.5

 
25,734.3

See accompanying notes.

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Invesco Ltd.
Condensed Consolidated Statements of Income
(Unaudited)

 
Three months ended September 30,
 
Nine months ended September 30,
$ in millions, except per share data
2017
 
2016
 
2017
 
2016
Operating revenues:
 
 
 
 
 
 
 
Investment management fees
1,062.3

 
965.9

 
3,027.9

 
2,826.2

Service and distribution fees
217.6

 
213.4

 
635.3

 
614.5

Performance fees
42.3

 
3.4

 
70.3

 
26.8

Other
15.5

 
18.9

 
51.2

 
72.2

Total operating revenues
1,337.7

 
1,201.6

 
3,784.7

 
3,539.7

Operating expenses:
 
 
 
 
 
 
 
Third-party distribution, service and advisory
380.4

 
362.1

 
1,095.6

 
1,057.7

Employee compensation
393.1

 
345.1

 
1,155.5

 
1,039.8

Marketing
29.5

 
26.4

 
83.0

 
79.6

Property, office and technology
92.8

 
78.2

 
267.3

 
240.4

General and administrative
86.6

 
83.5

 
250.5

 
240.0

Total operating expenses
982.4

 
895.3

 
2,851.9

 
2,657.5

Operating income
355.3

 
306.3

 
932.8

 
882.2

Other income/(expense):
 
 
 
 
 
 
 
Equity in earnings of unconsolidated affiliates
12.9

 
5.5

 
41.1

 
(2.1
)
Interest and dividend income
2.5

 
2.6

 
7.0

 
8.7

Interest expense
(23.6
)
 
(23.9
)
 
(71.2
)
 
(69.9
)
Other gains and losses, net
18.9

 
16.2

 
27.6

 
7.3

Other income/(expense) of CIP, net
31.7

 
39.0

 
92.5

 
69.4

Income before income taxes
397.7

 
345.7

 
1,029.8

 
895.6

Income tax provision
(123.1
)
 
(89.8
)
 
(291.4
)
 
(245.4
)
Net income
274.6

 
255.9

 
738.4

 
650.2

Net (income)/loss attributable to noncontrolling interests in consolidated entities
(7.1
)
 
(14.7
)
 
(19.3
)
 
(22.5
)
Net income attributable to Invesco Ltd.
267.5

 
241.2

 
719.1

 
627.7

Earnings per share:
 
 
 
 
 
 
 
-basic

$0.65

 

$0.58

 

$1.76

 

$1.51

-diluted

$0.65

 

$0.58

 

$1.76

 

$1.51

Dividends declared per share

$0.29

 

$0.28

 

$0.86

 

$0.83


See accompanying notes.


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Invesco Ltd.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 
Three months ended September 30,
 
Nine months ended September 30,
$ in millions
2017
 
2016
 
2017
 
2016
Net income
274.6

 
255.9

 
738.4

 
650.2

Other comprehensive income/(loss), net of tax:
 
 
 
 
 
 
 
Currency translation differences on investments in foreign subsidiaries
142.4

 
(63.4
)
 
352.4

 
(132.8
)
Actuarial (loss)/gain related to employee benefit plans
—

 
—

 
(0.4
)
 
(0.4
)
Reclassification of prior service cost/(credit) into employee compensation expense
—

 
(1.8
)
 
—

 
(5.2
)
Reclassification of actuarial (gain)/loss into employee compensation expense
5.3

 
0.4

 
6.4

 
1.2

Share of other comprehensive income/(loss) of equity method investments
(0.1
)
 
2.4

 
1.1

 
3.0

Unrealized gains/(losses) on available-for-sale investments
(0.2
)
 
2.3

 
3.8

 
4.0

Reclassification of net (gains)/losses realized on available-for-sale investments included in other gains and losses, net
(1.7
)
 
(0.2
)
 
(2.5
)
 
(0.5
)
Other comprehensive income/(loss)
145.7

 
(60.3
)
 
360.8

 
(130.7
)
Total comprehensive income/(loss)
420.3

 
195.6

 
1,099.2

 
519.5

Comprehensive loss/(income) attributable to noncontrolling interests in consolidated entities
(7.1
)
 
(14.2
)
 
(19.3
)
 
(19.5
)
Comprehensive income/(loss) attributable to Invesco Ltd.
413.2

 
181.4

 
1,079.9

 
500.0

See accompanying notes.



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Invesco Ltd.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Nine months ended September 30,
$ in millions
2017
 
2016
Operating activities:
 
 
 
Net income
738.4

 
650.2

Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
 
 
 
Amortization and depreciation
82.2

 
75.5

Share-based compensation expense
134.9

 
118.4

Other (gains)/losses, net
(27.6
)
 
(7.3
)
Other (gains)/losses of CIP, net
(53.4
)
 
(18.1
)
Equity in earnings of unconsolidated affiliates
(41.1
)
 
2.1

Dividends from unconsolidated affiliates
2.2

 
16.3

Changes in operating assets and liabilities:
 
 
 
(Increase)/decrease in cash held by CIP
251.7

 
(66.2
)
(Purchase)/sale of investments by CIP, net
(277.7
)
 
(131.9
)
(Purchase)/sale of trading investments, net
146.8

 
(13.4
)
(Increase)/decrease in receivables
(3,134.3
)
 
(2,257.5
)
Increase/(decrease) in payables
3,189.9

 
2,213.7

Net cash provided by/(used in) operating activities
1,012.0

 
581.8

Investing activities:
 
 
 
Purchase of property, equipment and software
(82.7
)
 
(101.3
)
Purchase of available-for-sale investments
(7.8
)
 
(4.3
)
Sale of available-for-sale investments
76.4

 
38.4

Purchase of investments by CIP
(4,432.4
)
 
(2,398.0
)
Sale of investments by CIP
4,219.6

 
1,835.9

Purchase of other investments
(115.7
)
 
(98.3
)
Sale of other investments
77.8

 
67.7

Returns of capital and distributions from unconsolidated partnership investments
74.0

 
30.0

Purchase of business
(299.2
)
 
(121.9
)
Net cash provided by/(used in) investing activities
(490.0
)
 
(751.8
)
Financing activities:
 
 
 
Purchases of treasury shares
(58.6
)
 
(424.7
)
Dividends paid
(352.7
)
 
(346.3
)
Excess tax benefits from share-based compensation
—

 
(2.4
)
Third-party capital invested into CIP
397.7

 
193.9

Third-party capital distributed by CIP
(93.2
)
 
(64.1
)
Borrowings of debt by CIP
1,887.4

 
760.1

Repayments of debt by CIP
(1,962.4
)
 
(130.2
)
Net borrowings/(repayments) under credit facility
(28.7
)
 
—

Payment of contingent consideration
(10.3
)
 
(9.5
)
Net cash provided by/(used in) financing activities
(220.8
)
 
(23.2
)
Increase/(decrease) in cash and cash equivalents
301.2

 
(193.2
)
Foreign exchange movement on cash and cash equivalents
87.1

 
(76.9
)
Cash and cash equivalents, beginning of period
1,328.0

 
1,851.4

Cash and cash equivalents, end of period
1,716.3

 
1,581.3

Supplemental Cash Flow Information:
 
 
 
Interest paid
(64.8
)
 
(60.4
)
Interest received
3.2

 
4.0

Taxes paid
(200.6
)
 
(148.1
)
See accompanying notes.

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Invesco Ltd.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
 
Equity Attributable to Invesco Ltd.
 
 
 
 
 
 
$ in millions
Common Shares
 
Additional Paid-in-Capital
 
Treasury Shares
 
Retained Earnings
 
Accumulated Other Comprehensive Income/(Loss)
 
Total Equity Attributable to Invesco Ltd.
 
Nonredeemable Noncontrolling Interests in Consolidated Entities
 
Total Permanent Equity
 
Redeemable Noncontrolling Interests in Consolidated Entities Temporary Equity
January 1, 2017
98.1

 
6,227.4

 
(2,845.8
)
 
4,833.4

 
(809.3
)
 
7,503.8

 
108.0

 
7,611.8

 
283.7

Net income
—

 
—

 
—

 
719.1

 
—

 
719.1

 
(6.3
)
 
712.8

 
25.6

Other comprehensive income
—

 
—

 
—

 
—

 
360.8

 
360.8

 
—

 
360.8

 
—

Change in noncontrolling interests in consolidated entities, net
—

 
—

 
—

 
—

 
—

 
—

 
133.1

 
133.1

 
0.3

Dividends
—

 
—

 
—

 
(352.7
)
 
—

 
(352.7
)
 
—

 
(352.7
)
 
—

Employee share plans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation
—

 
134.9

 
—

 
—

 
—

 
134.9

 
—

 
134.9

 
—

Vested shares
—

 
(116.4
)
 
116.4

 
—

 
—

 
—

 
—

 
—

 
—

Settlement of ESPP purchases
—

 
2.1

 
3.9

 
—

 
—

 
6.0

 
—

 
6.0

 
—

Other share awards
—

 
0.1

 
0.6

 
—

 
—

 
0.7

 
—

 
0.7

 
—

Purchase of shares
—

 
—

 
(58.6
)
 
—

 
—

 
(58.6
)
 
—

 
(58.6
)
 
—

September 30, 2017
98.1

 
6,248.1

 
(2,783.5
)
 
5,199.8

 
(448.5
)
 
8,314.0

 
234.8

 
8,548.8

 
309.6


See accompanying notes.

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Invesco Ltd.
Consolidated Statements of Changes in Equity (continued)
(Unaudited)
 
Equity Attributable to Invesco Ltd.
 
 
 
 
 
 
$ in millions
Common Shares
 
Additional Paid-in-Capital
 
Treasury Shares
 
Retained Earnings
 
Accumulated Other Comprehensive Income
 
Total Equity Attributable to Invesco Ltd.
 
Nonredeemable Noncontrolling Interests in Consolidated Entities
 
Total Permanent Equity
 
Redeemable Noncontrolling Interests in Consolidated Entities Temporary Equity
January 1, 2016
98.1

 
6,197.7

 
(2,404.1
)
 
4,439.6

 
(446.0
)
 
7,885.3

 
810.4

 
8,695.7

 
167.3

Adjustment for adoption of ASU 2015-02
—

 
—

 
—

 
—

 
—

 
—

 
(733.5
)
 
(733.5
)
 
226.6

January 1, 2016, as adjusted
98.1

 
6,197.7

 
(2,404.1
)
 
4,439.6

 
(446.0
)
 
7,885.3

 
76.9

 
7,962.2

 
393.9

Net income
—

 
—

 
—

 
627.7

 
—

 
627.7

 
(2.0
)
 
625.7

 
24.5

Other comprehensive income
—

 
—

 
—

 
—

 
(127.7
)
 
(127.7
)
 
—

 
(127.7
)
 
(3.0
)
Change in noncontrolling interests in consolidated entities, net
—

 
—

 
—

 
—

 
—

 
—

 
12.7

 
12.7

 
(68.4
)
Dividends
—

 
—

 
—

 
(346.3
)
 
—

 
(346.3
)
 
—

 
(346.3
)
 
—

Employee share plans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation
—

 
118.4

 
—

 
—

 
—

 
118.4

 
—

 
118.4

 
—

Vested shares
—

 
(96.4
)
 
96.4

 
—

 
—

 
—

 
—

 
—

 
—

Other share awards
—

 
0.6

 
6.0

 
—

 
—

 
6.6

 
—

 
6.6

 
—

Tax impact of share-based payment
—

 
(2.4
)
 
—

 
—

 
—

 
(2.4
)
 
—

 
(2.4
)
 
—

Purchase of shares
—

 
(11.4
)
 
(413.5
)
 
—

 
—

 
(424.9
)
 
—

 
(424.9
)
 
—

September 30, 2016
98.1

 
6,206.5

 
(2,715.2
)
 
4,721.0

 
(573.7
)
 
7,736.7

 
87.6

 
7,824.3

 
347.0


See accompanying notes.


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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 retail and institutional clients with an array of global investment management capabilities. The company operates globally and its sole business is investment management.
Certain disclosures included in the company's annual report on Form 10-K for the year ended December 31, 2016 (annual report or Form 10-K) are not required to be included on an interim basis in the company's quarterly reports on Forms 10-Q (Report). The company has condensed or omitted these disclosures. Therefore, this Report should be read in conjunction with the company's annual report.
Basis of Accounting and Consolidation
The unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with rules and regulations of the Securities and Exchange Commission and consolidate the financial statements of the Parent and all of its controlled subsidiaries. In the opinion of management, the financial statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for the fair statement of the financial condition and results of operations for the periods presented. All significant intercompany transactions, balances, revenues and expenses are eliminated upon consolidation.
Money Market Fee Waivers
The company is currently voluntarily providing yield support waivers of its management fees on certain money market funds to ensure that they maintain a minimum level of daily net investment income. During the three and nine months ended September 30, 2017, yield support waivers resulted in a reduction of investment management and service and distribution fees of approximately $0.9 million and $3.9 million, respectively. During the three and nine months ended September 30, 2017, approximately 72% and 68%, respectively, of yield support waivers are offset by a reduction in third party distribution, service and advisory expenses, resulting in a net waiver of $0.2 million and $1.3 million for the three and nine months ended September 30, 2017, respectively. The company has provided yield support waivers in prior periods and may increase or decrease the level of fee waivers in future periods.
Accounting Pronouncements Recently Adopted and Pending Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers” (ASU 2014-09) which revises revenue recognition criteria and expands disclosure requirements. This new guidance will be effective for interim and annual reporting periods beginning after December 15, 2017. The company will implement this new accounting standard on January 1, 2018. However, a decision on the adoption method has not been made as of the date of this Report. The underlying premise of the new guidance requires the employment of a five step model to determine the amount of revenue that reflects the consideration to which the company expects to be entitled for the transfer of services to customers and the timing of recognition. In addition, ASU 2014-09 also requires certain costs to obtain and fulfill contracts with customers to be capitalized, if they meet certain criteria. Capitalized contract costs are subject to amortization and periodic impairment testing. A key part of management’s implementation efforts is the detailed review of the terms and conditions of a sample of revenue contracts covering a broad range of products across geographic locations. This review is complete. The company does not anticipate a significant change in the timing of revenue recognition for management and service fee revenues. Performance fees (including carried interest) are under evaluation; the timing of recognition will be driven by the terms of each performance fee arrangement. Due to the revised criteria related to whether or not the company is acting as a principal or agent, the company expects a change in presentation related to certain costs incurred to fulfill its performance obligations, which are currently presented on a net basis and may be presented as a gross expense under the new guidance. We continue to assess the impact of the rule changes on required disclosures and the accounting for sales commissions and other costs incurred to obtain a contract with a customer. The above findings are based on our work performed to date. Further impacts may be identified as we continue our assessment.

In January 2016, the FASB issued Accounting Standards Update 2016-01, "Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities" (ASU 2016-01). The standard amends certain aspects of recognition, measurement, presentation, and disclosure of financial assets and liabilities. One such amendment requires that

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substantially all equity investments in unconsolidated entities, except those accounted for under the equity method, be measured at fair value with changes recognized in earnings. At September 30, 2017, the company's available-for-sale portfolio of equity investments (seed money) was $74.5 million. Under this guidance, this seed money will be measured at fair value with associated changes in valuation recognized in net income rather than accumulated other comprehensive income. ASU 2016-01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 and, in general, requires a modified retrospective approach to adoption with accumulated gains/losses being reclassified into retained earnings at adoption date.

In March 2016, the FASB issued Accounting Standards Update 2016-09, “Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting” (ASU 2016-09). The standard is intended to simplify aspects of the accounting for share-based payment transactions, including income tax impacts, classification on the statement of cash flows, and forfeitures. The company adopted ASU 2016-09 on January 1, 2017. One of the impacts of the new rules is that excess tax benefits and tax deficiencies related to vested awards are no longer recorded in additional paid-in-capital but rather as an income tax expense or benefit. This provision requires a prospective approach to adoption. In the three and nine months ended September 30, 2017, the recognition of excess tax benefits reduced our income tax provision by $0.9 million and $3.1 million, respectively.

Another change resulting from the adoption of ASU 2016-09 relates to the presentation of excess tax benefits and tax deficiencies in the Condensed Consolidated Statements of Cash Flows. The standard requires that excess tax benefits and tax deficiencies be shown as operating cash flows within the Condensed Consolidated Statements of Cash Flows; previously, the company reported these cash flow activities as financing cash flows. The company elected to use a prospective approach to adoption related to this provision and in the nine months ended September 30, 2017, $3.1 million cash inflows were included within the increase/(decrease) in payables as an operating cash flow in the Condensed Consolidated Statements of Cash Flows. ASU 2016-09 requires that employee taxes paid when shares are withheld for tax withholding purposes be reported as a financing activity in the Condensed Consolidated Statements of Cash Flows. The company has retrospectively adopted this change and included $58.6 million in financing activities for the nine months ended September 30, 2017 (nine months ended September 30, 2016: $39.7 million). Additionally, the new rules allow companies to elect to continue to account for forfeitures using an estimate or instead to elect to account for forfeitures as they occur. The company elected to continue to account for forfeitures using an estimate. The company anticipates fluctuations in its effective tax rate as a result of the excess tax benefits or tax deficiencies being recorded to the income tax provision, particularly in the first quarter of each year when annual share awards vest.

In August 2016, the FASB issued Accounting Standards Update 2016-15, "Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments" (ASU 2016-15). The standard addresses eight specific cash flow issues to reduce diversity in practice in how certain cash receipts and cash payments are presented on the Statement of Cash Flows. ASU 2016-15 is effective for fiscal years and interim periods within those years beginning after December 15, 2017. The amendments require a retrospective approach to adoption and early adoption is permitted, including in an interim period. The company continues to evaluate the impact of adopting ASU 2016-15.

In October 2016, the FASB issued Accounting Standards Update 2016-17, “Consolidation: Interests Held through Related Parties That Are under Common Control” (ASU 2016-17). The standard addresses how a reporting entity determines if it satisfies the characteristics of a primary beneficiary of a variable interest entity (VIE) and which party within a group is considered the primary beneficiary. The company adopted ASU 2016-17 on January 1, 2017 and determined that this guidance did not materially change the company's consolidation conclusions.

In February 2017, the FASB issued Accounting Standards Update 2017-05, “Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets: Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets” (ASU 2017-05). The standard clarifies the scope of accounting for gains and losses from the derecognition of nonfinancial assets and adds guidance for partial sales of nonfinancial assets. ASU 2017-05 is effective for fiscal years and interim periods within those years beginning after December 15, 2017 and must be adopted at the same time as ASU 2014-09. The amendments allow either a retrospective or modified retrospective approach to adoption, and early adoption is permitted. The company is currently evaluating the impact of this standard.

In March 2017, the FASB issued Accounting Standard Update 2017-07, “Compensation-Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (ASU 2017-07). The amendments require that an employer disaggregate the service cost component from the other components of net benefit cost. The amendments also provide guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allow that only the service cost component of net benefit cost is eligible for capitalization. ASU

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2017-07 is effective for fiscal years and interim periods within those years beginning after December 15, 2017. The amendments require primarily a retrospective approach to adoption. The application of the new rules will result in the reclassification of pension related costs within the Consolidated Statements of Income and no impact to the results of operations.

2. FAIR VALUE OF ASSETS AND LIABILITIES
The carrying value and fair value of financial instruments are presented in the below summary table. The fair value of financial instruments held by CIP is presented in Note 12, "Consolidated Investment Products."
 
 
 
September 30, 2017
 
December 31, 2016
$ in millions
Footnote Reference
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Cash and cash equivalents
 
 
1,716.3

 
1,716.3

 
1,328.0

 
1,328.0

Available-for-sale investments
3
 
90.9

 
90.9

 
154.0

 
154.0

Trading investments
3
 
269.9

 
269.9

 
329.6

 
329.6

Foreign time deposits *
3
 
27.5

 
27.5

 
26.9

 
26.9

Assets held for policyholders
 
 
12,102.6

 
12,102.6

 
8,224.2

 
8,224.2

Policyholder payables *
 
 
(12,102.6
)
 
(12,102.6
)
 
(8,224.2
)
 
(8,224.2
)
Put option contracts

 
1.9

 
1.9

 
21.8

 
21.8

UIT-related financial instruments sold, not yet purchased
 
 
(1.1
)
 
(1.1
)
 
(6.0
)
 
(6.0
)
Contingent consideration liability
 
 
(67.7
)
 
(67.7
)
 
(78.2
)
 
(78.2
)
Long-term debt *
4
 
(2,075.3
)
 
(2,264.5
)
 
(2,102.4
)
 
(2,206.5
)
____________
*
These financial instruments are not measured at fair value on a recurring basis. See the indicated footnotes or most recently filed Form 10-K 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 into 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 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 (NAV) of the underlying funds, and are classified within level 1 of the valuation hierarchy.

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Available-for-sale investments
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. At September 30, 2017 and December 31, 2016, investments in collateralized loan obligations (CLOs) were valued using pricing information obtained by an independent third-party pricing source. Other debt securities are valued using a cost valuation technique due to the lack of available cash flow and market data and are accordingly classified within level 3 of the valuation hierarchy.
Trading investments
•Investments related to deferred compensation plans
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.
•Seed money
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.
•Other equity securities
Other equity securities consist of investments in publicly-traded equity securities. These securities are valued under the market approach through the 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.
•UIT-related equity and debt securities
The company invests in Unit Investment Trust (UIT)-related equity and debt securities consisting of investments in corporate equities, UITs, and municipal securities. Each is discussed more fully below.
Corporate equities
The company temporarily holds investments in corporate equities for purposes of creating a UIT. Corporate equities 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.
Put option contracts
The company has purchased put option contracts to hedge economically foreign currency risk on the translation of a portion of its
Pound Sterling-denominated earnings and Euro-denominated earnings into U.S. Dollars (purchases of zero and $8.1 million in the three and nine months ended September 30, 2017, respectively; three and nine months ended September 30, 2016 $7.5 million and $14.5 million, respectively). These were the only contracts entered into during the period to hedge economically foreign currency risk on the translation of a portion of the Pound Sterling-denominated earnings and provide coverage through December 31, 2018. The contracts entered into during 2016 to hedge economically foreign currency risk on the translation of a portion of the Euro-denominated earnings provide coverage through December 27, 2017.

The economic hedge is predominantly triggered upon the impact of a significant decline in the respective Pound Sterling/U.S. Dollar foreign exchange rate or Euro/U.S. Dollar foreign exchange rate. Open put option contracts are marked-to-market through earnings, which are recorded in the company's Condensed Consolidated Statements of Income in other gains and losses, net. These derivative contracts are valued using option valuation models and are included in other assets in the company's Condensed

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Consolidated Balance Sheets. 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 net loss of $2.5 million and $19.9 million in the three and nine months ended September 30, 2017, respectively (three and nine months ended September 30, 2016: $0.9 million and $10.0 million net gain, respectively) related to the change in market value of these put option contracts.

Deferred compensation-related total return swap
In addition to holding trading investments, in 2017 the company purchased a total return swap (TRS) to hedge economically certain of these deferred compensation liabilities. The notional value of the total return swap at September 30, 2017 was $106.9 million and its market value was $2.1 million. The market value of the TRS was determined under the market approach using quoted prices of the underlying investments. The TRS is classified as level 2 of the valuation hierarchy. During the three- and nine-months ended September 30, 2017, market valuation gains of $3.6 million and $6.1 million, respectively were recognized in other gains and losses, net.

Assets held for policyholders
Assets held for policyholders 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 and are therefore not included in the tables below.
Contingent Consideration Liability
During 2015, the company acquired certain investment management contracts from Deutsche Bank. Indefinite-lived intangible assets were valued at $119.3 million. This transaction was a non-cash investing activity during that period. The purchase price was comprised solely of contingent consideration payable in future periods, and is linked to future revenues generated from the contracts.  The contingent consideration liability was recorded at fair value as of the date of acquisition using a discounted cash flow model, and is categorized within level 3 of the valuation hierarchy. Anticipated future cash flows were determined using forecasted assets under management (AUM) levels and discounted back to the valuation date. The company reassesses significant unobservable inputs during each reporting period. At September 30, 2017 inputs used in the model included assumed growth rates in AUM ranging from (10.37)% to 29.63% (weighted average growth rate of 8.58%) and a discount rate of 3.69%. Changes in fair value are recorded in other gains and losses, net in the Condensed Consolidated Statements of Income in the period incurred. An increase in AUM levels and/or a decrease in the discount rate would increase the fair value of the contingent consideration liability, while a decrease in forecasted AUM and/or an increase in the discount rate would decrease the liability.

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The following table presents, for each of the hierarchy levels described above, the carrying value of the company's assets and liabilities, including major security type for equity and debt securities, which are measured at fair value on the company's Condensed Consolidated Balance Sheet as of September 30, 2017:
 
As of September 30, 2017
$ 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)
Assets:
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
769.0

 
769.0

 
—

 
—

Investments:*
 
 
 
 
 
 
 
Available-for-sale:
 
 
 
 
 
 
 
Seed money
74.5

 
74.5

 
—

 
—

CLOs
6.7

 
—

 
6.7

 
—

Other debt securities
9.7

 
—

 
—

 
9.7

Trading investments:
 
 
 
 
 
 
 
Investments related to deferred compensation plans
89.6

 
89.6

 
—

 
—

Seed money
160.7

 
160.7

 
—

 
—

Other equity securities
17.9

 
17.9

 
—

 
—

UIT-related equity and debt securities:
 
 
 
 
 
 
 
Corporate equities
1.4

 
1.4

 
—

 
—

UITs
0.3

 
0.3

 
—

 
—

Assets held for policyholders
12,102.6

 
12,102.6

 
—

 
—

Put option contracts
1.9

 
—

 
1.9

 
—

Total
13,234.3

 
13,216.0

 
8.6

 
9.7

Liabilities:
 
 
 
 
 
 
 
UIT-related financial instruments sold, not yet purchased:
 
 
 
 
 
 
 
Exchange traded funds
(1.1
)
 
(1.1
)
 
—

 
—

Contingent consideration liability
(67.7
)
 
—

 
—

 
(67.7
)
Total
(68.8
)
 
(1.1
)
 
—

 
(67.7
)
____________
*
Foreign time deposits of $27.5 million are excluded from this table. Equity method and other investments of $296.5 million and $6.1 million, respectively, are also excluded from this table. These investments are not measured at fair value, in accordance with applicable accounting standards.

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The following table presents, for each of the hierarchy levels described above, the carrying value of the company's assets and liabilities, including major security type for equity and debt securities, which are measured at fair value on the company's Condensed Consolidated Balance Sheet as of December 31, 2016:
 
As of December 31, 2016
$ 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)
Assets:
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
476.2

 
476.2

 
—

 
—

Investments:*
 
 
 
 
 
 
 
Available-for-sale:
 
 
 
 
 
 
 
Seed money
127.9

 
127.9

 
—

 
—

CLOs
12.9

 
—

 
—

 
12.9

Other debt securities
13.2

 
—

 
—

 
13.2

Trading investments:
 
 
 
 
 
 
 
Investments related to deferred compensation plans
170.5

 
170.5

 
—

 
—

Seed Money
121.9

 
121.9

 
—

 
—

Other equity securities
30.4

 
30.4

 
—

 
—

UIT-related equity and debt securities:
 
 
 
 
 
 
 
Corporate equities
1.2

 
1.2

 
—

 
—

UITs
5.6

 
5.6

 
—

 
—

Assets held for policyholders
8,224.2

 
8,224.2

 
—

 
—

Put option contracts
21.8

 
—

 
21.8

 
—

Total
9,205.8

 
9,157.9

 
21.8

 
26.1

Liabilities:
 
 
 
 
 
 
 
UIT-related financial instruments sold, not yet purchased:
 
 
 
 
 
 
 
Exchange traded funds
(5.2
)
 
(5.2
)
 
—

 
—

US treasury securities
(0.8
)
 
(0.8
)
 
—

 
—

Contingent consideration liability
(78.2
)
 
—

 
—

 
(78.2
)
Total
(84.2
)
 
(6.0
)
 
—

 
(78.2
)
____________
*
Foreign time deposits of $26.9 million are excluded from this table. Equity method and other investments of $279.0 million and $5.8 million, respectively, are also excluded from this table. These investments are not measured at fair value, in accordance with applicable accounting standards.

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The following table shows a reconciliation of the beginning and ending fair value measurements for level 3 assets and liabilities during the three and nine months ended September 30, 2017 and September 30, 2016, which are valued using significant unobservable inputs:
 
Three months ended September 30, 2017
 
Nine months ended September 30, 2017
$ in millions
Contingent Consideration Liability
 
Other Debt Securities
 
Contingent Consideration Liability
 
CLOs
 
Other Debt Securities
Beginning balance
(69.2
)
 
9.8

 
(78.2
)
 
12.9

 
13.2

Purchases/acquisitions
—

 
—

 
—

 
—

 
7.3

Net unrealized gains and losses included in other gains and losses, net*
(1.6
)
 
—

 
0.2

 
—

 
(2.2
)
Disposition/settlements
3.1

 
(0.1
)
 
10.3

 
—

 
(8.6
)
Transfer from level 3 to level 2
—

 
—

 
—

 
(12.9
)
 
—

Ending balance
(67.7
)
 
9.7

 
(67.7
)
 
—

 
9.7


 
Three months ended September, 2016
 
Nine months ended September 30, 2016
$ in millions
Contingent Consideration Liability
 
CLOs
 
Other Debt Securities
 
Contingent Consideration Liability
 
CLOs
 
Other Debt Securities
Beginning balance
(89.3
)
 
11.5

 
3.3

 
(83.9
)
 
1.4

 
5.9

Adjustment for adoption of ASU 2015-02
—

 
—

 
—

 
—

 
11.5

 
—

Beginning balance, as adjusted
(89.3
)
 
11.5

 
3.3

 
(83.9
)
 
12.9

 
5.9

Returns of capital
—

 
(0.9
)
 
—

 
—

 
(2.3
)
 
(2.6
)
Net unrealized gains and losses included in other gains and losses, net*
5.3

 
—

 
—

 
(6.3
)
 
—

 
—

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

 
1.4

 
—

 
—

 
1.4

 
—

Disposition/settlements
3.3

 
—

 
—

 
9.5

 
—

 
—

Ending balance
(80.7
)
 
12.0

 
3.3

 
(80.7
)
 
12.0

 
3.3

_______________
*
These unrealized gains and losses are attributable to balances still held at the respective period ends.
3.  INVESTMENTS
The disclosures below include details of the company's investments. Investments held by CIP are detailed in Note 12, "Consolidated Investment Products."
$ in millions
September 30, 2017
 
December 31, 2016
Available-for-sale investments:
 
 
 
Seed money
74.5

 
127.9

CLOs
6.7

 
12.9

Other debt securities
9.7

 
13.2

Trading investments:
 
 
 
Investments related to deferred compensation plans
89.6

 
170.5

Seed money
160.7

 
121.9

Other equity securities
17.9

 
30.4

     UIT-related equity and debt securities
1.7

 
6.8

Equity method investments
296.5

 
279.0

Foreign time deposits
27.5

 
26.9

Other
6.1

 
5.8

Total investments
690.9

 
795.3


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Available for sale investments
Realized gains and losses recognized in the Condensed Consolidated Statements of Income during the period from investments classified as available-for-sale are as follows:
 
For the three months ended September 30, 2017
 
For the nine months ended September 30, 2017
$ in millions
Proceeds from Sales
 
Gross Realized Gains
 
Gross Realized Losses
 
Proceeds from Sales
 
Gross Realized Gains
 
Gross Realized Losses
Seed money
15.2

 
1.6

 
—

 
61.7

 
2.7

 
(1.5
)
CLOs
3.5

 
0.8

 
—

 
6.1

 
1.2

 
—

Other debt securities
0.1

 
0.2

 
—

 
8.6

 
1.0

 
—

 
18.8

 
2.6

 
—

 
76.4

 
4.9

 
(1.5
)
 
For the three months ended September 30, 2016
 
For the nine months ended September 30, 2016
$ in millions
Proceeds from Sales
 
Gross Realized Gains
 
Gross Realized Losses
 
Proceeds from Sales
 
Gross Realized Gains
 
Gross Realized Losses
Seed money
31.7

 
0.8

 
(0.7
)
 
33.5

 
1.2

 
(0.7
)
CLOs
1.0

 
—

 
—

 
2.3

 
—

 
—

Other debt securities
—

 
—

 
—

 
2.6

 
—

 
—

 
32.7

 
0.8

 
(0.7
)
 
38.4

 
1.2

 
(0.7
)
Upon the sale of available-for-sale securities, net realized gains of $2.6 million and $3.4 million were transferred from accumulated other comprehensive income/(loss) into the Condensed Consolidated Statements of Income during the three and nine months ended September 30, 2017, respectively (three and nine months ended September 30, 2016: $0.1 million and $0.5 million, 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 other comprehensive income/(loss) from available-for-sale investments are presented in the table below:
 
September 30, 2017
 
December 31, 2016
$ in millions
Cost
 
Gross Unrealized Holding Gains
 
Gross Unrealized Holding Losses
 
Fair Value
 
Cost
 
Gross Unrealized Holding Gains
 
Gross Unrealized Holding Losses
 
Fair Value
Seed money
68.0

 
7.5

 
(1.0
)
 
74.5

 
127.2

 
6.8

 
(6.1
)
 
127.9

CLOs
5.2

 
1.5

 
—

 
6.7

 
9.2

 
3.7

 
—

 
12.9

Other debt securities
9.7

 
—

 
—

 
9.7

 
13.2

 
—

 
—

 
13.2

 
82.9

 
9.0

 
(1.0
)
 
90.9

 
149.6

 
10.5

 
(6.1
)
 
154.0

At September 30, 2017, 48 seed money funds (December 31, 2016: 103 seed money funds) had incurred gross unrealized holding losses. The following table provides a breakdown of the unrealized losses.
 
September 30, 2017
 
December 31, 2016
$ in millions
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
Less than 12 months
0.1

 
—

 
1.9

 
(0.2
)
12 months or greater
38.4

 
(1.0
)
 
56.4

 
(5.9
)
Total
38.5

 
(1.0
)
 
58.3

 
(6.1
)
The company has reviewed investment securities for other-than-temporary impairment (OTTI) in accordance with its accounting policy and has recognized $3.2 million of other-than-temporary impairment charges on available-for-sale investments during the nine months ended September 30, 2017 (nine months ended September 30, 2016: none). In contemplation of OTTI, the company conducts a review of the financial condition and near-term prospects of the underlying securities as well as the severity and duration of any declines in fair value. No OTTI is recorded for seeded funds which are expected to recover their value over time and for which the company has the intent and ability to hold the securities until this

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recovery occurs. For CLO investments, the company reviewed the estimated future cashflows of each CLO. If the present value of the estimated future cashflows is lower than the carrying value of the investment and there is an adverse change in estimated cashflows, the impairment is considered to be other than temporary. During the nine months ended September 30, 2017 and 2016, no other-than-temporary impairment related to credit related factors was recognized.
Available-for-sale debt securities as of September 30, 2017 by maturity, are set out below:
 
Available-for-Sale (Fair Value)
Less than one year
9.7

One to five years
0.2

Five to ten years
6.5

Greater than ten years
—

Total available-for-sale
16.4


Trading investments
The portion of trading gains and losses for the three and nine months ended September 30, 2017, that relates to trading securities still held at September 30, 2017, was a $3.9 million net gain and $14.1 million net gain, respectively (three and nine months ended September 30, 2016: $11.3 million net gain and $12.9 million net gain, respectively).

4.  LONG-TERM DEBT
The disclosures below include details of the company's debt. Debt of CIP is detailed in Note 12, “Consolidated Investment Products.”
 
September 30, 2017
 
December 31, 2016
$ in millions
Carrying Value**
 
Fair Value
 
Carrying Value**
 
Fair Value
  Floating rate credit facility expiring August 11, 2022
—

 
—

 
28.7

 
28.7

Unsecured Senior Notes*:
 
 
 
 
 
 
 
$600 million 3.125% - due November 30, 2022
596.8

 
615.6

 
596.3

 
604.7

$600 million 4.000% - due January 30, 2024
593.8

 
636.4

 
593.2

 
625.3

$500 million 3.750% - due January 15, 2026
494.9

 
524.6

 
494.5

 
506.4

$400 million 5.375% - due November 30, 2043
389.8

 
487.9

 
389.7

 
441.4

Long-term debt
2,075.3

 
2,264.5

 
2,102.4

 
2,206.5

____________
*
The company's senior note indentures contain certain restrictions on mergers or consolidations. Beyond these items, there are no other restrictive covenants in the indentures.
**
The difference between the principal amounts and the carrying values of the senior notes in the table above reflect the unamortized debt issuance costs and discounts.

The issuer of the senior notes is an indirect 100% owned finance subsidiary of the Parent, and the Parent fully and unconditionally guarantees the securities. The requirement of certain subsidiaries of the Parent to maintain minimum levels of capital 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.
The fair market value of the company's senior notes was determined by market quotes provided by Bloomberg, which is considered a level 2 valuation input. In the absence of an active market, the company relies upon the average price quoted by brokers for determining the fair market value of the debt.
At September 30, 2017, the company's outstanding senior notes of $2,075.3 million mature in periods greater than five years from the balance sheet date. The floating rate credit facility will expire in less than five years.

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During the quarter the company amended and restated the credit facility agreement increasing the borrowing limit to $1.5 billion and extending the expiration date to August 11, 2022. At September 30, 2017, the outstanding balance on the $1.5 billion credit facility was zero (December 31, 2016: $28.7 million). The credit facility will bear interest at (i) LIBOR for specified borrowing 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 incremental margin determined with reference to the higher of the available credit ratings of the company or its indirect subsidiary Invesco Finance PLC. Based on credit ratings as of September 30, 2017 of the company, the applicable incremental margin for LIBOR-based loans was 1.00% and for base rate loans was 0.00%. In addition, the company is required to pay the lenders a facility fee on the unused commitments of the lenders at a rate per annum which is based on the higher of the available credit ratings of the company or its indirect subsidiary Invesco Finance PLC. Based on credit ratings as of September 30, 2017, the annual facility fee was equal to 0.125%.
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 merger arrangements; selling, leasing, transferring or otherwise disposing of assets; making a material change in the nature of the business; making a significant accounting policy change in certain situations; entering into transactions with affiliates; and incurring indebtedness through the subsidiaries (other than the borrower, Invesco Finance PLC). 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 leverage ratio, as defined in the credit agreement, of not greater than 3.25:1.00, (ii) a coverage ratio (EBITDA, as defined in the credit agreement/interest payable for the four consecutive fiscal quarters ended before the date of determination) of not less than 4.00:1.00.
The credit agreement governing the credit facility also contains customary provisions regarding events of default which could result in an acceleration or increase in amounts due, including (subject to certain materiality thresholds and grace periods) payment default, failure to comply with covenants, material inaccuracy of representation or warranty, bankruptcy or insolvency proceedings, change of control, certain judgments, ERISA matters, cross-default to other debt agreements, governmental action prohibiting or restricting the company or its subsidiaries in a manner that has a material adverse effect and failure of certain guaranty obligations. The 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 $10.6 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.
5.  SHARE CAPITAL
The number of common shares and common share equivalents issued are represented in the table below:
 
As of
In millions
September 30, 2017
 
December 31, 2016

Common shares issued
490.4

 
490.4

Less: Treasury shares for which dividend and voting rights do not apply
(83.3
)
 
(86.6
)
Common shares outstanding
407.1

 
403.8

Total treasury shares at September 30, 2017 were 92.5 million (December 31, 2016: 95.9 million), including 9.2 million unvested restricted stock awards (December 31, 2016: 9.3 million) for which dividend and voting rights apply. The market price of common shares at September 30, 2017 was $35.04 per share. The total market value of the company's 92.5 million treasury shares was $3.2 billion at September 30, 2017.


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6.  OTHER COMPREHENSIVE INCOME/(LOSS)
The components of accumulated other comprehensive income/(loss) were as follows:
 
For the three months ended September 30, 2017
$ in millions
Foreign currency translation
 
Employee benefit plans
 
Equity method investments
 
Available-for-sale investments
 
Total
Other comprehensive income/(loss) net of tax:
 
 
 
 
 
 
 
 
 
Currency translation differences on investments in foreign subsidiaries
142.4

 
—

 
—

 
—

 
142.4

Reclassification of actuarial (gain)/loss into employee compensation expense
—

 
5.3

 
—

 
—

 
5.3

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

 
—

 
(0.1
)
 
—

 
(0.1
)
Unrealized gains/(losses) on available-for-sale investments, net of tax
—

 
—

 
—

 
(0.2
)
 
(0.2
)
Reclassification of net (gains)/losses realized on available-for-sale investments included in other gains and losses, net
—

 
—

 
—

 
(1.7
)
 
(1.7
)
Other comprehensive income/(loss), net of tax
142.4

 
5.3

 
(0.1
)
 
(1.9
)
 
145.7

 
 
 
 
 
 
 
 
 
 
Beginning balance
(469.9
)
 
(138.5
)
 
6.0

 
8.2

 
(594.2
)
Other comprehensive income/(loss), net of tax
142.4

 
5.3

 
(0.1
)
 
(1.9
)
 
145.7

Ending balance
(327.5
)
 
(133.2
)
 
5.9

 
6.3

 
(448.5
)

 
For the nine months ended September 30, 2017
$ in millions
Foreign currency translation
 
Employee benefit plans
 
Equity method investments
 
Available-for-sale investments
 
Total
Other comprehensive income/(loss) net of tax:
 
 
 
 
 
 
 
 
 
Currency translation differences on investments in foreign subsidiaries
352.4

 
—

 
—

 
—

 
352.4

Actuarial (loss)/gain related to employee benefit plans, net of tax
—

 
(0.4
)
 
—

 
—

 
(0.4
)
Reclassification of actuarial (gain)/loss into employee compensation expense
—

 
6.4

 
—

 
—

 
6.4

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

 
—

 
1.1

 
—

 
1.1

Unrealized gains/(losses) on available-for-sale investments
—

 
—

 
—

 
3.8

 
3.8

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

 
—

 
—

 
(2.5
)
 
(2.5
)
Other comprehensive income/(loss), net of tax
352.4

 
6.0

 
1.1

 
1.3

 
360.8

 
 
 
 
 
 
 
 
 
 
Beginning balance
(679.9
)
 
(139.2
)
 
4.8

 
5.0

 
(809.3
)
Other comprehensive income/(loss), net of tax
352.4

 
6.0

 
1.1

 
1.3

 
360.8

Ending balance
(327.5
)
 
(133.2
)
 
5.9

 
6.3

 
(448.5
)






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For the three months ended September 30, 2016
$ in millions
Foreign currency translation
 
Employee benefit plans
 
Equity method investments
 
Available-for-sale investments
 
Total
Other comprehensive income/(loss) net of tax:
 
 
 
 
 
 
 
 
 
Currency translation differences on investments in foreign subsidiaries
(63.4
)
 
—

 
—

 
—

 
(63.4
)
Reclassification of prior service cost/(credit) into employee compensation expense
—

 
(1.8
)
 
—

 
—

 
(1.8
)
Reclassification of actuarial (gain)/loss into employee compensation expense
—

 
0.4

 
—

 
—

 
0.4

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

 
—

 
2.4

 
—

 
2.4

Unrealized gains/(losses) on available-for-sale investments
—

 
—

 
—

 
2.3

 
2.3

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

 
—

 
—

 
(0.2
)
 
(0.2
)
Other comprehensive income/(loss)
(63.4
)
 
(1.4
)
 
2.4

 
2.1

 
(60.3
)
 
 
 
 
 
 
 
 
 
 
Beginning balance
(432.7
)
 
(88.6
)
 
6.5

 
0.9

 
(513.9
)
Other comprehensive income/(loss)
(63.4
)
 
(1.4
)
 
2.4

 
2.1

 
(60.3
)
Other comprehensive (income)/loss attributable to noncontrolling interests
0.5

 
—

 
—

 
—

 
0.5

Ending balance
(495.6
)
 
(90.0
)
 
8.9

 
3.0

 
(573.7
)

 
For the nine months ended September 30, 2016
$ in millions
Foreign currency translation
 
Employee benefit plans
 
Equity method investments
 
Available-for-sale investments
 
Total
Other comprehensive income/(loss) net of tax: