INVESCO LTS.
 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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(INVESCO LOGO)
SUMMARIZED CONSOLIDATED
FINANCIAL STATEMENTS
OF
INVESCO LTD.
In accordance with Bermuda law, attached are summarized consolidated financial statements of Invesco Ltd., which include the consolidated balance sheets of Invesco Ltd. at December 31, 2007 and 2006 and the related consolidated statements of income, shareholders’ equity and cash flows for the three years in the period ended December 31, 2007, and the auditor’s report thereon. The attached summarized consolidated financial statements do not contain sufficient information to allow as full an understanding of the financial position, results of operations or changes in financial position or cash flows of Invesco Ltd. as would be provided by Invesco Ltd.’s complete consolidated financial statements for such period. In the event you would prefer to receive a copy of these complete consolidated financial statements, of which the information contained herein is a summary, and/or those for subsequent periods, you should submit your request to Invesco Ltd.’s Secretary at company.secretary@invesco.com or by writing Invesco Ltd., Attn: Office of the Secretary, 1360 Peachtree Street N.E., Atlanta, Georgia 30309.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON CONDENSED FINANCIAL STATEMENTS
The Board of Directors and Shareholders of Invesco Ltd.
We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Invesco Ltd. at December 31, 2007 and 2006, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2007 (not presented separately herein) and in our report dated February 25, 2008, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated financial statements (presented on pages 2 through 5) is fairly stated in all material respects in relation to the consolidated financial statements from which it has been derived.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Invesco Ltd.’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2008 (not presented separately herein) expressed an unqualified opinion thereon.
Ernst & Young LLP
Atlanta, GA
February 25, 2008


 

Condensed Consolidated Balance Sheets
                 
    As of December 31,  
    2007     2006  
    $ in millions  
 
               
ASSETS
               
Current assets
               
Cash and cash equivalents
  $ 915.8     $ 778.9  
Cash and cash equivalents of consolidated investment products
    36.6       55.4  
Unsettled fund receivables
    605.5       561.6  
Accounts receivable
    292.1       243.3  
Investments
    177.2       187.8  
Prepaid assets
    65.9       68.5  
Other current assets
    203.3       238.6  
Assets held for policyholders
    1,898.0       1,574.9  
 
           
Total current assets
    4,194.4       3,709.0  
Non-current assets
               
Investments
    122.3       79.9  
Investments of consolidated investment products
    1,205.6       1,482.0  
Prepaid assets
    55.6       82.2  
Deferred sales commissions
    31.3       31.6  
Deferred tax asset, net
    133.8       118.5  
Property and equipment, net
    180.0       198.7  
Intangible assets, net
    154.2       165.9  
Goodwill
    6,848.0       6,360.7  
 
    8,730.8       8,519.5  
 
           
Total assets
  $ 12,925.2     $ 12,228.5  
 
           
 
               
LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS’ EQUITY
               
Current liabilities
               
Current maturities of long-term debt
  $     $ 300.0  
Unsettled fund payables
    581.2       533.0  
Income taxes payable
    140.6       99.7  
Other current liabilities
    1,021.1       857.8  
Policyholder payables
    1,898.0       1,574.9  
 
           
Total current liabilities
    3,640.9       3,365.4  
Non-current liabilities
               
Long-term debt
    1,276.4       979.0  
Borrowings of consolidated investment products
    116.6       37.0  
Other non-current liabilities
    179.5       178.5  
 
           
 
    1,572.5       1,194.5  
 
           
Total liabilities
    5,213.4       4,559.9  
 
           
Minority interests in equity of consolidated entities
    1,121.2       1,504.6  
Shareholders’ equity
               
Common shares ($0.20 par value; 1,050.0 million authorized; 424.7 million shares issued and outstanding)
    84.9        
Ordinary shares (1,050.0 million authorized; 831.9 million shares issued and outstanding)
          83.2  
Exchangeable shares (19.8 million shares issued and outstanding)
          377.4  
Additional paid-in-capital
    5,306.3       4,966.1  
Treasury shares
    (954.4 )     (577.9 )
Retained earnings
    1,201.7       700.7  
Accumulated other comprehensive income, net of tax
    952.1       614.5  
 
           
Total shareholders’ equity
    6,590.6       6,164.0  
 
           
Total liabilities, minority interests and shareholders’ equity
  $ 12,925.2     $ 12,228.5  
 
           

Page 2


 

Condensed Consolidated Statements of Income
                         
    Years Ended December 31,  
    2007     2006     2005  
    $ in millions, except per share data  
Operating Revenues
                       
Investment management fees
  $ 3,080.1     $ 2,508.2     $ 2,166.7  
Performance fees
    70.3       82.1       33.5  
Service and distribution fees
    593.1       534.9       538.2  
Other
    135.4       121.5       134.2  
 
                 
Total Operating Revenues
    3,878.9       3,246.7       2,872.6  
 
                 
 
                       
Operating Expenses
                       
Employee compensation
    1,137.6       1,070.5       1,044.7  
Third-party distribution, service and advisory
    1,051.1       826.8       706.0  
Marketing
    157.6       138.8       139.5  
Property, office and technology
    242.5       230.7       270.9  
General and administrative
    295.8       207.6       224.4  
Restructuring charge
          13.1       62.6  
Goodwill impairment
                16.6  
 
                 
Total Operating Expenses
    2,884.6       2,487.5       2,464.7  
 
                 
 
                       
Operating Income
    994.3       759.2       407.9  
 
                 
 
                       
Other income/(expense)
                       
Equity in earnings of unconsolidated affiliates
    48.1       4.3       0.7  
Interest income
    48.5       26.9       16.7  
Realized and unrealized gains of consolidated investment products, net
    214.3       294.3       128.8  
Interest expense
    (71.3 )     (77.2 )     (85.1 )
Other gains and losses, net
    9.9       26.8       13.4  
 
                 
Income before income taxes and minority interest
    1,243.8       1,034.3       482.4  
Income tax provision
    (357.3 )     (254.6 )     (151.1 )
 
                 
Income before minority interest
    886.5       779.7       331.3  
Minority interest income of consolidated entities, net of tax
    (212.9 )     (297.0 )     (111.5 )
 
                 
Net Income
  $ 673.6     $ 482.7     $ 219.8  
 
                 
 
                       
Earnings per share:
                       
— basic
  $ 1.69     $ 1.22     $ 0.55  
— diluted
  $ 1.64     $ 1.19     $ 0.54  
Dividends declared per share
  $ 0.372     $ 0.357     $ 0.330  

Page 3


 

Condensed Consolidated Statements of Cash Flows
                         
    Years Ended December 31,  
    2007     2006     2005  
    $ in millions  
Operating Activities
                       
Net income
  $ 673.6     $ 482.7     $ 219.8  
Adjustments to reconcile net income to net cash provided by operating activities:
                       
Amortization, depreciation, and goodwill impairment
    64.1       67.5       94.5  
Share related compensation expense
    105.2       140.6       40.6  
Loss/(gain) on disposal of property, equipment, software, and business
    (1.1 )     4.0       (28.8 )
Gain on disposal of investments
    (12.6 )     (7.3 )     (0.6 )
Unrealized gain on trading investments, net
    (223.5 )     (300.0 )     (129.2 )
Tax benefit from share-based compensation
    38.2       17.9        
Excess tax benefits from share-based compensation
    (23.1 )     (12.3 )      
Minority interest in earnings of consolidated entities
    212.9       297.0       111.5  
Equity in earnings of unconsolidated affiliates
    (48.1 )     (4.3 )     (0.7 )
Sale/(purchase) of trading investments
    0.4       (50.4 )     25.3  
Changes in operating assets and liabilities:
                       
Change in cash held at consolidated investment products
    (4.8 )     1.3       (43.2 )
(Increase)/decrease in receivables
    (59.6 )     (160.7 )     53.4  
Increase/(decrease) in payables
    192.1       (20.1 )     (35.7 )
 
                 
Net cash provided by operating activities
    913.7       455.9       306.9  
 
                 
 
                       
Investing Activities
                       
Purchase of property and equipment
    (36.7 )     (37.9 )     (38.8 )
Disposal of property and equipment
    0.1       2.5       2.2  
Purchase of available for sale investments
    (80.3 )     (289.4 )     (316.5 )
Proceeds from sale of available for sale investments
    111.8       254.3       427.0  
Purchase of investments by consolidated investment products
    (331.5 )     (372.3 )     (412.3 )
Proceeds from sale of investments by consolidated investment products
    143.6       122.6       210.9  
Returns of capital in investments of consolidated investment products
    196.0       257.5       185.3  
Proceeds from held to maturity investments
    5.0       2.0       0.6  
Acquisitions of businesses, net of cash acquired of $8.9 million in 2006
    (56.0 )     (200.1 )      
Disposal of businesses, including cash of $0.6 million in 2005
    1.6       2.1       53.6  
 
                 
Net cash (used in)/provided by investing activities
    (46.4 )     (258.7 )     112.0  
 
                 
 
                       
Financing Activities
                       
Proceeds from exercises of share options
    137.4       66.8       7.7  
Purchases of treasury shares
    (716.0 )     (155.9 )      
Dividends paid
    (155.0 )     (143.6 )     (134.1 )
Excess tax benefits from stock-based compensation
    23.1       12.3        
Capital invested into consolidated investment products
    211.0       345.3       329.7  
Capital distributed by consolidated investment products
    (318.2 )     (301.2 )     (351.7 )
Borrowings of consolidated investment products
    112.6       46.3       118.1  
Repayments of borrowings of consolidated investment products
    (33.1 )     (82.1 )     (60.2 )
Net (repayments)/borrowings under credit facility
    (2.6 )     59.0       (81.0 )
Issuance of senior notes
    300.0              
Repayments of senior notes
    (300.0 )     (10.0 )     (79.5 )
 
                 
Net cash used in financing activities
    (740.8 )     (163.1 )     (251.0 )
 
                 
 
                       
Increase in cash and cash equivalents
    126.5       34.1       167.9  
Foreign exchange movement on cash and cash equivalents
    10.4       35.3       (5.3 )
Cash and cash equivalents, beginning of year
    778.9       709.5       546.9  
 
                 
Cash and cash equivalents, end of year
  $ 915.8     $ 778.9     $ 709.5  
 
                 
 
                       
Supplemental Cash Flow Information:
                       
Interest paid
  $ (72.0 )   $ (73.4 )   $ (84.4 )
Taxes paid
  $ (328.2 )   $ (213.1 )   $ (118.8 )

Page 4


 

Condensed Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income
                                                                 
                                                    Accumulated        
                            Additional                     Other     Total  
    Common     Ordinary     Exchangeable     Paid-in-     Treasury     Retained     Comprehensive     Shareholders’  
    Shares     Shares     Shares     Capital     Shares     Earnings     Income     Equity  
    $ in millions  
January 1, 2005
  $     $ 388.9     $ 593.0     $ 4,738.3     $ (456.7 )   $ 339.5     $ (7.8 )   $ 5,595.2  
Net income
                                  219.8             219.8  
Other comprehensive income
                                                               
Currency translation differences on investments in overseas subsidiaries
                                        360.4       360.4  
Change in minimum pension liability
                                        6.8       6.8  
Change in net unrealized gains on available-for-sale investments
                                        (4.1 )     (4.1 )
Tax impacts of changes in accumulated OCI balances
                                        (3.6 )     (3.6 )
 
                                                             
Total comprehensive income
                                                            579.3  
 
                                                             
Employee share plans:
                                                               
Share-based compensation
                      40.6                         40.6  
Vested stock
                      (6.4 )     6.4                    
Exercise of options
          0.5             7.2                         7.7  
Dividends
                                  (134.1 )           (134.1 )
Business combinations
          0.2             2.0                         2.2  
Currency translation differences from change in presentation currency
          (37.5 )     (69.1 )     (434.1 )     43.2       (63.6 )           (561.1 )
Conversion of exchangeable shares into ordinary shares
          0.7       (92.1 )     91.4                          
Redenomination of share capital
          (271.0 )           271.0                          
 
                                               
December 31, 2005
            81.8       431.8       4,710.0       (407.1 )     361.6       351.7       5,529.8  
 
                                               
Net income
                                  482.7             482.7  
Other comprehensive income
                                                               
Currency translation differences on investments in overseas subsidiaries
                                        268.3       268.3  
Change in minimum pension liability
                                        25.3       25.3  
Change in net unrealized gains on available-for-sale investments
                                        (6.6 )     (6.6 )
Tax impacts of changes in accumulated OCI balances
                                        (0.7 )     (0.7 )
 
                                                             
Total comprehensive income
                                                            769.0  
 
                                                             
Initial impact of adopting FASB 158, net of tax
                                        (23.5 )     (23.5 )
Dividends
                                  (143.6 )           (143.6 )
Employee share plans:
                                                               
Share-based compensation
                      140.6                         140.6  
Vested stock
                      (17.4 )     17.4                    
Exercise of options
          1.1             65.7                         66.8  
Tax impact of share-based payment
                      12.3                         12.3  
Purchase of shares
                            (188.2 )                 (188.2 )
Business combinations
                      0.8                         0.8  
Conversion of exchangeable shares into ordinary shares
          0.3       (54.4 )     54.1                          
 
                                               
December 31, 2006
          83.2       377.4       4,966.1       (577.9 )     700.7       614.5       6,164.0  
 
                                               
Net income
                                  673.6             673.6  
Other comprehensive income
                                                               
Currency translation differences on investments in overseas subsidiaries
                                        351.1       351.1  
Change in accumulated OCI related to employee benefit plans
                                        7.7       7.7  
Change in net unrealized gains on available-for-sale investments
                                        (16.8 )     (16.8 )
Tax impacts of changes in accumulated OCI balances
                                        (4.4 )     (4.4 )
 
                                                             
Total comprehensive income
                                              1,011.2  
 
                                                             
Adoption of FIN 48
                                  (17.6 )           (17.6 )
Dividends
                                  (155.0 )           (155.0 )
Employee share plans:
                                                               
Share-based compensation
                      105.2                         105.2  
Vested stock
                      (53.9 )     53.9                    
Exercise of options
          1.6             135.8                         137.4  
Tax impact of share-based payment
                      23.1                         23.1  
Purchase of shares
                            (683.7 )                 (683.7 )
Cancellation of treasury shares
          (1.9 )           (251.4 )     253.3                    
Business combinations
                      6.0                           6.0  
Conversion of exchangeable shares into ordinary shares
          2.0       (377.4 )     375.4                          
Cancellation of ordinary shares and issuance of common shares
    84.9       (84.9 )                                    
 
                                               
December 31, 2007
  $ 84.9     $     $     $ 5,306.3     $ (954.4 )   $ 1,201.7     $ 952.1     $ 6,590.6  
 
                                               

Page 5