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

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

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)

Title of Each Class		Name of Exchange on Which Registered
Common Shares, $0.20 par value per share		New York Stock Exchange

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
		(Do not check if a smaller reporting company)

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

     As of June 30, 2009, the most recent practicable date, 416,052,775 of the company’s common shares, par value $0.20 per share, were outstanding.

 

 

TABLE OF CONTENTS

     We include cross references to captions elsewhere in this Quarterly Report on Form 10-Q, which we refer to as this “Report,” where you can find related additional information. The following table of contents tells you where to find these captions.

		Page
PART I – Financial Information
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets			3
Condensed Consolidated Statements of Income			4
Condensed Consolidated Statements of Cash Flows			5
Condensed Consolidated Statements of Changes in Equity			6
Notes to the Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			35
Item 3. Quantitative and Qualitative Disclosures about Market Risk			62
Item 4. Controls and Procedures			63
PART II – Other Information
Item 1. Legal Proceedings			64
Item 1A. Risk Factors			64
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			64
Item 3. Defaults upon Senior Securities			64
Item 4. Submission of Matters to a Vote of Security Holders			64
Item 6. Exhibits			65
Signatures			66
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

Item 1. Financial Statements

Invesco Ltd.
Condensed Consolidated Balance Sheets
(Unaudited)

		As of
		June 30,				December 31,
$ in millions		2009				2008
ASSETS
Current assets:
Cash and cash equivalents			817.7				585.2
Cash and cash equivalents of consolidated investment products			47.4				73.0
Unsettled fund receivables			562.2				303.7
Accounts receivable			238.7				239.3
Investments			147.3				123.6
Prepaid assets			62.5				55.6
Other current assets			72.9				72.2
Deferred tax asset, net			50.0				86.1
Assets held for policyholders			1,057.3				840.2
Total current assets			3,056.0				2,378.9
Non-current assets:
Investments			128.9				121.3
Investments of consolidated investment products			663.6				843.8
Prepaid assets			26.2				36.3
Deferred sales commissions			21.9				24.5
Deferred tax asset, net			44.5				37.2
Property and equipment, net			219.1				205.3
Intangible assets, net			145.0				142.8
Goodwill			6,272.4				5,966.8
Total non-current assets			7,521.6				7,378.0
Total assets			10,577.6				9,756.9
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt			294.2				297.2
Unsettled fund payables			548.2				288.3
Income taxes payable			32.7				37.9
Other current liabilities			475.8				639.8
Policyholder payables			1,057.3				840.2
Total current liabilities			2,408.2				2,103.4
Non-current liabilities:
Long-term debt			745.7				862.0
Other non-current liabilities			220.9				195.3
Total non-current liabilities			966.6				1,057.3
Total liabilities			3,374.8				3,160.7
Commitments and contingencies (See Note 12)
Equity:
Equity attributable to common shareholders:
Common shares ($0.20 par value; 1,050.0 million authorized; 459.5 million and 426.6 million shares issued as of June 30, 2009, and December 31, 2008, respectively)			91.9				85.3
Additional paid-in-capital			5,708.3				5,352.6
Treasury shares			(1,032.6	)			(1,128.9	)
Retained earnings			1,504.0				1,476.3
Accumulated other comprehensive income/(loss), net of tax			223.8				(95.8	)
Total equity attributable to common shareholders			6,495.4				5,689.5
Equity attributable to noncontrolling interests in consolidated entities			707.4				906.7
Total equity			7,202.8				6,596.2
Total liabilities and equity			10,577.6				9,756.9

See accompanying notes.

Invesco Ltd.
Condensed Consolidated Statements of Income
(Unaudited)

		Three months ended								Six Months Ended
		June 30,								June 30,
$ in millions		2009				2008				2009				2008
Operating revenues:
Investment management fees			501.6				736.8				938.1				1,474.4
Service and distribution fees			100.4				143.3				189.4				281.7
Performance fees			8.0				22.2				18.9				33.2
Other			15.1				33.3				27.3				56.7
Total operating revenues			625.1				935.6				1,173.7				1,846.0
Operating expenses:
Employee compensation			229.0				282.9				464.8				555.7
Third-party distribution, service and advisory			166.3				244.9				314.5				492.0
Marketing			23.9				38.2				50.8				82.1
Property, office and technology			48.6				55.7				94.5				105.8
General and administrative			46.9				73.9				76.9				142.3
Total operating expenses			514.7				695.6				1,001.5				1,377.9
Operating income			110.4				240.0				172.2				468.1
Other income/(expense):
Equity in earnings of unconsolidated affiliates			7.5				9.6				10.0				27.5
Interest income			1.2				10.5				6.0				22.0
Gains and losses of consolidated investment products, net			(48.4	)			40.3				(134.9	)			(4.0	)
Interest expense			(16.5	)			(19.3	)			(32.4	)			(40.8	)
Other gains and losses, net			10.0				(1.1	)			5.8				(7.6	)
Income/(loss) before income taxes, including gains and losses attributable to noncontrolling interests			64.2				280.0				26.7				465.2
Income tax provision			(36.0	)			(77.2	)			(56.3	)			(151.0	)
Net income/(loss), including gains and losses attributable to noncontrolling interests			28.2				202.8				(29.6	)			314.2
(Gains)/losses attributable to noncontrolling interests in consolidated entities, net			47.5				(40.0	)			136.0				3.8
Net income attributable to common shareholders			75.7				162.8				106.4				318.0
Earnings per share:
— basic		$	0.18			$	0.42			$	0.26			$	0.82
— diluted		$	0.18			$	0.41			$	0.26			$	0.79
Dividends declared per share		$	0.1025			$	0.1000			$	0.2025			$	0.3200

See accompanying notes.

Invesco Ltd.
Condensed Consolidated Statements of Cash Flows
(Unaudited)

		Six months ended June 30,
$ in millions		2009				2008
Operating activities:
Net (loss)/income, including losses attributable to noncontrolling interests			(29.6	)			314.2
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation			32.7				33.7
Share-based compensation expense			43.9				58.0
(Gain)/Loss on disposal of property, equipment, software, net			—				(1.8	)
Purchase of trading investments			(38.0	)			(17.7	)
Sale of trading investments			8.9				17.6
Other gains and losses, net			(5.8	)			7.6
Gains and losses of consolidated investment products, net			134.9				4.0
Tax benefit from share-based compensation			31.6				40.4
Excess tax benefits from share-based compensation			—				(19.0	)
Equity in earnings of unconsolidated affiliates			(10.0	)			(27.5	)
Changes in operating assets and liabilities:
Change in cash held at consolidated investment products			25.6				(13.3	)
(Increase)/decrease in receivables			(362.5	)			203.0
Increase/(decrease) in payables			139.7				(531.0	)
Net cash (used in)/provided by operating activities			(28.6	)			68.2
Investing activities:
Purchase of property and equipment			(17.1	)			(48.2	)
Disposal of property and equipment			0.3				—
Dividends from unconsolidated affiliates			25.8				28.1
Purchase of available-for-sale investments			(18.3	)			(88.0	)
Proceeds from sale of available-for-sale investments			29.7				50.3
Purchase of investments by consolidated investment products			(17.2	)			(82.2	)
Proceeds from sale of investments by consolidated investment products			9.7				98.3
Returns of capital in investments of consolidated investment products			8.5				58.5
Purchase of other investments			(4.8	)			(11.9	)
Proceeds from sale of other investments			7.1				27.5
Acquisition earn-out payments			—				(130.9	)
Net cash used in investing activities			23.7				(98.5	)
Financing activities:
Issuance of new shares			441.8				—
Proceeds from exercises of share options			9.6				52.1
Purchases of treasury shares			—				(213.0	)
Dividends paid			(80.2	)			(129.6	)
Excess tax benefits from share-based compensation			—				19.0
Capital invested into consolidated investment products			2.8				66.3
Capital distributed by consolidated investment products			(24.5	)			(126.4	)
Borrowings of consolidated investment products			—				28.9
Repayments of consolidated investment products			—				(9.3	)
Net (repayments)/borrowings under credit facility			(12.0	)			60.6
Repayments of senior notes			(103.0	)			—
Acquisition of remaining noncontrolling interest in subsidiary			(10.3	)			—
Net cash provided by/(used in) financing activities			224.2				(251.4	)
Increase/(decrease) in cash and cash equivalents			219.3				(281.7	)
Foreign exchange movement on cash and cash equivalents			13.2				10.7
Cash and cash equivalents, beginning of period			585.2				915.8
Cash and cash equivalents, end of period			817.7				644.8
Supplemental Cash Flow Information:
Interest paid			(31.9	)			(37.5	)
Interest received			6.3				22.2
Taxes paid			31.2				178.2

See accompanying notes.

Invesco Ltd.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)

		Equity Attributable to Common Shareholders
																						Non-
																		Accumulated				controlling
						Additional												Other				interests in
		Common				Paid-in-				Treasury				Retained				Comprehensive				consolidated				Total
$ in millions		Shares				Capital				Shares				Earnings				Loss				entities				Equity
January 1, 2009			85.3				5,352.6				(1,128.9	)			1,476.3				(95.8	)			906.7				6,596.2
Net loss, including gains and losses attributable to noncontrolling interests			—				—				—				106.4				—				(136.0	)			(29.6	)
Other comprehensive income
Currency translation differences on investments in overseas subsidiaries			—				—				—				—				319.5				—				319.5
Change in minimum pension liability			—				—				—				—				(3.5	)			—				(3.5	)
Change in net unrealized gains on available-for-sale investments			—				—				—				—				3.1				—				3.1
Adoption of FSP FAS 115-2			—				—				—				—				(1.5	)			—				(1.5	)
Tax impacts of changes in accumulated OCI balances			—				—				—				—				2.0				—				2.0
Total comprehensive income			—				—				—				—				—				—				290.0
Adoption of FSP FAS 115-2			—				—				—				1.5				—				—				1.5
Change in noncontrolling interests in consolidated entities, net			—				—				—				—				—				(61.9	)			(61.9	)
Issuance of new shares			6.6				435.2				—				—				—				—				441.8
Dividends			—				—				—				(80.2	)			—				—				(80.2	)
Employee share plans:
Share-based compensation			—				43.9				—				—				—				—				43.9
Vested shares			—				(83.2	)			83.2				—				—				—				—
Exercise of options			—				(15.8	)			25.4				—				—				—				9.6
Tax impact of share-based payment			—				(2.5	)			—				—				—				—				(2.5	)
Modification of share-based payment awards			—				(13.0	)			—				—				—				—				(13.0	)
Purchase of shares			—				—				(12.3	)			—				—				—				(12.3	)
Acquisition of remaining noncontrolling interest in subsidiary			—				(8.9	)			—				—				—				(1.4	)			(10.3	)
June 30, 2009			91.9				5,708.3				(1,032.6	)			1,504.0				223.8				707.4				7,202.8
		Equity Attributable to Common Shareholders
																						Non-
																		Accumulated				controlling
						Additional												Other				interests in
		Common				Paid-in-				Treasury				Retained				Comprehensive				consolidated				Total
$ in millions		Shares				Capital				Shares				Earnings				Income				entities				Equity
January 1, 2008			84.9				5,306.3				(954.4	)			1,201.7				952.1				1,121.2				7,711.8
Net income, including gains and losses attributable to noncontrolling interests			—				—				—				318.0				—				(3.8	)			314.2
Other comprehensive income
Currency translation differences on investments in overseas subsidiaries			—				—				—				—				(8.1	)			—				(8.1	)
Change in minimum pension liability			—				—				—				—				0.2				—				0.2
Change in net unrealized gains on available-for-sale investments			—				—				—				—				(4.7	)			—				(4.7	)
Tax impacts of changes in accumulated OCI balances			—				—				—				—				0.6				—				0.6
Total comprehensive income			—				—				—				—				—				—				302.2
Change in noncontrolling interests in consolidated entities, net			—				—				—				—				—				(147.3	)			(147.3	)
Dividends			—				—				—				(129.6	)			—				—				(129.6	)
Employee share plans:
Share-based compensation			—				58.0				—				—				—				—				58.0
Vested shares			—				(17.4	)			17.4				—				—				—				—
Exercise of options			0.4				8.2				43.6				—				—				—				52.2
Tax impact of share-based payment			—				19.0				—				—				—				—				19.0
Purchase of shares			—				—				(213.0	)			—				—				—				(213.0	)
June 30, 2008			85.3				5,374.1				(1,106.4	)			1,390.1				940.1				970.1				7,653.3

See accompanying notes.

Invesco Ltd.
Notes to the Condensed Consolidated Financial Statements

1. ACCOUNTING POLICIES

   Corporate Information

     Invesco Ltd. (Parent) and all of its consolidated entities (collectively, the company or Invesco) provide retail, institutional and high-net-worth clients with an array of global investment management capabilities. The company’s sole business is investment management.

   Basis of Accounting and Consolidation

     The accompanying Condensed Consolidated Balance Sheets, Statements of Income, Statements of Cash Flows, and Statement of Changes in Equity (together, the Condensed Consolidated Financial Statements) have not been audited and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the company’s Annual Report on Form 10-K for the year ended December 31, 2008. In the opinion of management, the Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for the fair presentation of the financial condition and results of operations for the interim periods presented. All significant intercompany transactions, balances, revenues and expenses are eliminated upon consolidation.

     The Condensed Consolidated Financial Statements have been prepared in accordance with U.S. GAAP and consolidate the financial statements of the Parent, all of its controlled subsidiaries, any variable interest entities (VIEs) required to be consolidated under Financial Accounting Standards Board (FASB) Interpretation (FIN) No. 46(R), “Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51,” and any entities required to be consolidated under Emerging Issues Task Force (EITF) Issue No. 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (EITF 04-5). Under FASB Statement No. 94, “Consolidation of All Majority-Owned Subsidiaries” (FASB Statement No. 94), control is deemed to be present when the parent holds a majority voting interest or otherwise has the power to govern the financial and operating policies of the subsidiary so as to obtain the benefits from its activities. FIN 46(R) requires that variable interest entities (VIEs), or entities in which the risks and rewards of ownership are not directly linked to voting interests, for which the company is the primary beneficiary (having the majority of rewards/risks of ownership) be consolidated. Certain of the company’s managed products are structured as partnerships in which the company is the general partner receiving a management and/or performance fee. If the company is deemed to have a variable interest in these entities and is determined to be the primary beneficiary, these entities are consolidated into the company’s financial statements. If the company is not determined to be the primary beneficiary, the equity method of accounting is used to account for the company’s investment in these entities. In accordance with EITF 04-5, non-VIE general partnership investments are deemed to be controlled by the company and would be consolidated, unless the limited partners have the substantive ability to remove the general partner without cause based upon a simple majority vote or can otherwise dissolve the partnership, or unless the limited partners have substantive participating rights over decision-making. Investment products that are consolidated under FIN 46(R), EITF 04-5, or FASB Statement No. 94 are referred to as consolidated investment products in the accompanying Condensed Consolidated Financial Statements.

     A significant portion of consolidated investment products are private equity funds. Private equity investments made by the underlying funds consist of direct investments in, or fund investments in other private equity funds that hold direct investments in, equity or debt securities in operating companies that are generally not initially publicly traded. Private equity funds are considered investment companies and are therefore accounted for under the American Institute of Certified Public Accountants’ Investment Company Audit Guide and are scoped out of FASB Statement No. 115, “Accounting for Debt and Equity Securities” (FASB Statement No. 115). The company has retained the specialized industry accounting principles of these investment products in our Consolidated Financial Statements in accordance with EITF Issue No. 85-12, “Retention of Specialized Accounting for Investments in Consolidation.” All of the investments of consolidated investment products are presented at fair value in the financial statements. See Note 9, “Consolidated Investment Products,” for additional details.

     As required by Accounting Principles Board (APB) No. 18, “The Equity Method of Accounting for Investments in Common Stock,” the equity method of accounting is used to account for investments in joint ventures and noncontrolled subsidiaries in which the company’s ownership is between 20 and 50 percent. Equity investments are carried initially at cost (subsequently adjusted to recognize the company’s share of the profit or loss of the investee after the date of acquisition) and are included in investments on the

Condensed Consolidated Balance Sheets. The proportionate share of income or loss is included in equity in earnings of unconsolidated affiliates in the Condensed Consolidated Statements of Income.

     The financial statements have been prepared primarily on the historical cost basis; however, certain items are presented using other bases such as fair value, where such treatment is required. The financial statements of subsidiaries are prepared for the same reporting year as the Parent and use consistent accounting policies, which, where applicable, have been adjusted to U.S. GAAP from local generally accepted accounting principles or reporting regulations. Noncontrolling interests in consolidated entities represent the interests in certain entities consolidated by the company either because the company has control over the entity or has determined that it is the primary beneficiary under FIN 46(R), but of which the company does not own all of the equity.

     In preparing the financial statements, management is required to make estimates and assumptions that affect reported revenues, expenses, assets, liabilities and disclosure of contingent liabilities. The primary estimates relate to investment valuation, goodwill impairment and taxes. Use of available information and application of judgment are inherent in the formation of estimates. Actual results in the future could differ from such estimates and the differences may be material to the financial statements.

   Dividends to shareholders

     Dividends to shareholders are recognized on the declaration date. Dividends are declared and paid on a quarterly basis.

   Reclassifications

     The presentation of certain prior period reported amounts has been reclassified to be consistent with the current presentation. Such reclassifications had no impact on net income or shareholders’ equity.

   Accounting Pronouncements Recently Adopted and Pending Accounting Pronouncements

     In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (FASB Statement No. 157), which became effective for Invesco on January 1, 2008. FASB Statement No. 157 clarifies how companies should measure fair value when they are required by U.S. GAAP to use a fair value measure for recognition or disclosure. FASB Statement No. 157 establishes a common definition of fair value, establishes a framework for measuring fair value under U.S. GAAP, and expands disclosures about fair value measurements to eliminate differences in current practice in measuring fair value under existing accounting standards. The adoption of FASB Statement No. 157 did not result in any retrospective adjustments to prior period information or in a cumulative effect adjustment to retained earnings. See Note 2, “Fair Value of Assets and Liabilities,” for additional disclosures.

     In December 2007, the FASB issued Statement No. 141 (revised 2007), “Business Combinations (FASB Statement No. 141(R)),” and Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (FASB Statement No. 160).” Under FASB Statement No. 141(R), the acquirer must recognize, with certain exceptions, 100% of the fair values of assets acquired, liabilities assumed, and noncontrolling interests in acquisitions of less than 100% controlling interest when the acquisition constitutes a change in control of the acquired entity. Additionally, when an acquirer obtains partial ownership in an acquiree, an acquirer recognizes and consolidates assets acquired, liabilities assumed and any noncontrolling interests at 100% of their fair values at that date regardless of the percentage ownership in the acquiree. As goodwill is calculated as a residual, all goodwill of the acquired business, not just the acquirer’s share, is recognized under this “full-goodwill” approach. Contingent consideration obligations that are elements of consideration transferred are recognized as of the acquisition date as part of the fair value transferred in exchange for the acquired business. Acquisition-related costs incurred in connection with a business combination shall be expensed. FASB Statement No. 160 establishes new accounting and reporting standards for noncontrolling interests (formerly known as “minority interests”) in a subsidiary and for the deconsolidation of a subsidiary. FASB Statement No. 141(R) and FASB Statement No. 160 became effective for the company on January 1, 2009. FASB Statement No. 141(R) will be applied prospectively, while FASB Statement No. 160 required retroactive adoption of the presentation and disclosure requirements for existing noncontrolling interests but prospective adoption of all of its other requirements. The adoption of FASB Statement No. 141(R) amended the definition of a business, which led to a change in the company’s basis, but not the company’s conclusion, of determining that it has one reporting unit for goodwill impairment purposes. See Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Critical Accounting Policies and Estimates – Goodwill” for additional information.

     In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (FASB Statement No. 159), which also became effective for Invesco on January 1, 2008, at its own discretion. FASB Statement No. 159 permits companies to elect, on an instrument-by-instrument basis, to fair value certain financial assets and financial liabilities with changes in fair value recognized in earnings as they occur (the fair value option). The company chose not to elect the FASB Statement No. 159 fair value option for eligible items existing on its balance sheet as of January 1, 2008, or for any new eligible items recognized subsequent to January 1, 2008.

     In February 2008, the FASB issued Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157 (FSP FAS 157-2).” FSP FAS 157-2 amends FASB Statement No. 157 to delay the effective date for nonfinancial assets and nonfinancial liabilities except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (that is, at least annually). For items within its scope, FSP FAS 157-2 delays the effective date of FASB Statement No. 157 to January 1, 2009. As of January 1, 2008, Invesco applied the fair value measurement and disclosure provisions of FASB Statement No. 157 to its financial assets and financial liabilities that are recognized or disclosed at fair value in the financial statements. As of January 1, 2009, Invesco applied the fair value measurement and disclosure provisions of FASB Statement No. 157 to nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a non-recurring basis. Those items include: (1) nonfinancial assets and nonfinancial liabilities initially measured at fair value in a business combination or other new basis event, but not measured at fair value in subsequent periods; (2) nonfinancial long-lived assets measured at fair value for an impairment assessment under FASB Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets;” (3) nonfinancial liabilities for exit or disposal activities initially measured at fair value under FASB Statement No. 146, “Accounting for Costs Associated with Exit or Disposal Activities;” and (4) nonfinancial assets and nonfinancial liabilities measured at fair value in the second step of a goodwill impairment test. The adoption of FSP FAS 157-2 did not have a material impact on the company’s financial statements.

     In April 2008, the FASB issued Staff Position No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” (FSP FAS 142-3). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life over which to amortize the cost of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets.” FSP FAS 142-3 requires an entity to consider its own assumptions about renewal or extension of the term of the arrangement, consistent with its expected use of the asset. FSP FAS 142-3 is intended to improve the consistency between the useful life of an intangible asset determined under FASB Statement No. 142 and the period of expected cash flows used to measure the fair value of the asset under FASB Statement No. 141(R) and other U.S. GAAP. The guidance provided by FSP FAS 142-3 for determining the useful life of a recognized intangible asset must be applied prospectively to intangible assets acquired after the effective date, which is January 1, 2009. FSP FAS 142-3 is not expected to have a material impact on the company’s financial statements.

     During June 2008, the FASB issued Staff Position No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (FSP EITF 03-6-1). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and need to be included in the earnings allocation in computing earnings per share (EPS) under the two-class method described in FASB Statement No. 128, “Earnings Per Share.” The guidance in the FSP EITF 03-6-1 provides that only those unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are participating securities that should be included in the calculation of basic EPS under the two-class method. The FASB concluded that the holder of a share-based award receives a noncontingent transfer of value each time the entity declares a dividend, and therefore the share-based award meets the definition of a participating security. FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, with all prior period EPS data being adjusted retrospectively. The adoption of FSP EITF 03-6-1 on January 1, 2009, required the company to include unvested restricted stock units (RSUs) that contain nonforfeitable dividend equivalents as outstanding common shares for purposes of calculating basic EPS. The adoption of FSP EITF 03-6-1 did not have a material impact on the company’s calculation of basic EPS. The weighted average number of shares used for the calculation of prior period earnings per share have been restated to reflect the adoption of EITF 03-6-1. The adoption of FSP EITF 03-6-1 resulted in a change to the six months ended June 30, 2008, reported diluted EPS amounts of $0.01.

     In October 2008, the FASB issued Staff Position No. FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” (FSP 157-3), which became effective for Invesco for the period ended September 30, 2008. FSP 157-3 clarifies the application of FASB Statement No. 157 to financial assets in an inactive market. The FSP includes an illustration of the application of judgment when selecting an appropriate discount rate to apply in the valuation of a collateralized debt obligation in a market that has become increasingly inactive. The adoption of FSP 157-3 did not have a material impact on the company’s financial statements.

     In December 2008, the FASB issued FASB Staff Position No. FAS 140-4 and FIN 46(R)-8, “Disclosures about Transfers of Financial Assets and Interests in Variable Interest Entities (FSP FAS 140-4 and FIN 46(R)-8),” which became effective for the company on March 31, 2009. This staff position requires additional disclosures by public entities with a) continuing involvement in transfers of financial assets to a special purpose entity or b) a variable interest in a variable interest entity. The adoption of FSP FAS 140-4 and FIN 46(R)-8 did not have a material impact on the company’s financial statements. See Note 9, “Consolidated Investment Products,” for additional disclosures.

     In January 2009, the FASB issued Staff Position No. EITF 99-20-1, “Amendments to the Impairment Guidance of EITF Issue No. 99-20 (FSP EITF 99-20-1),” which became effective for the company on March 31, 2009. FSP EITF 99-20-1 revises the impairment guidance provided by EITF 99-20 for beneficial interests to make it consistent with the requirements of FASB Statement No. 115 for determining whether an impairment of other debt and equity securities is other-than-temporary. FSP EITF 99-20-1 eliminates the requirement to rely exclusively on market participant assumptions about future cash flows and permits the use of reasonable management judgment of the probability that the holder will be unable to collect all amounts due. Instead, FSP 99-20-1 requires that an other-than-temporary impairment be recognized when it is probable that there has been an adverse change in the holder’s estimated cash flows. FSP EITF 99-20-1 did not have a material impact on the company’s financial statements.

     On April 9, 2009, the FASB issued three Staff Positions (FSPs) intended to provide additional application guidance and enhance disclosures regarding fair value measurements and impairments of securities. FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions that Are Not Orderly (FSP FAS 157-4),” provides guidelines for making fair value measurements more consistent with the principles presented in FASB Statement No. 157. FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments (FSP FAS 107-1),” enhances consistency in financial reporting by increasing the frequency of fair value disclosures. FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2),” provides additional guidance designed to create greater clarity and consistency in accounting for and presenting impairment losses on securities.

     FSP FAS 157-4 addresses the measurement of fair value of financial assets when there is no active market or where the price inputs being used could be indicative of distressed sales. FSP FAS 157-4 reaffirms the definition of fair value already reflected in FASB Statement No. 157, which is the price that would be paid to sell an asset in an orderly transaction (as opposed to a distressed or forced transaction) at the measurement date under current market conditions. FSP FAS 157-4 also reaffirms the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive. FSP FAS 157-4 became effective for the company for the period ended June 30, 2009. The application of FSP FAS 157-4 did not result in a change in valuation techniques or related inputs used to obtain the fair value measurement of its assets that are carried at fair value in the statement of financial position; however, it did result in expanded disclosures of fair valued assets by major security type. See Note 2, “Fair Value of Assets and Liabilities,” and Note 9, “Consolidated Investment Products,” for additional details.

     FSP FAS 107-1 was issued to improve the fair value disclosures for any financial instruments that are not currently reflected on the balance sheet of companies at fair value. Prior to issuing FSP FAS 107-1, fair values of these assets and liabilities were only disclosed on an annual basis. FSP FAS 107-1 now requires these disclosures on a quarterly basis, providing qualitative and quantitative information about fair value estimates for all those financial instruments not measured on the balance sheet at fair value. FSP FAS 107-1 became effective for the company for the period ended June 30, 2009, which required the company to make annual disclosures in its interim financial statements, which are included in Note 2, “Fair Value of Assets and Liabilities,” Note 3, “Investments,” and Note 4, “Long-Term Debt.”

     FSP FAS 115-2 is intended to improve the consistency in the timing of impairment recognition and provide greater clarity to investors about the credit and noncredit components of impaired debt securities that are not expected to be sold. FSP FAS 115-2 requires increased and more timely disclosures sought by investors regarding expected cash flows, credit losses, and an aging of securities with unrealized losses. The company adopted FSP FAS 115-2 on April 1, 2009. Upon adoption, the company recorded a cumulative effect adjustment of $1.5 million to the April 1, 2009, opening balance of retained earnings with a corresponding adjustment to accumulated other comprehensive income.

     In May 2009, the FASB issued Statement No. 165, “Subsequent Events” (SFAS 165). SFAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, SFAS 165 provides clarity around the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosure that an entity should make about events or transactions that occurred after the

balance sheet date. SFAS 165 is effective for interim and annual financial reporting periods ending after June 15, 2009 and shall be applied prospectively. The company has made the required disclosures at Note 14, “Subsequent Events.”

     In June 2009, the FASB issued Statement No. 166, “Accounting for Transfers of Financial Assets – an amendment of FASB Statement No. 140,” (FASB Statement No. 166), which addresses the effects of eliminating the qualifying special-purpose entity concept from FASB Statement No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (FASB Statement No. 140), and will generally subject those entities to the consolidation guidance applied to other VIEs as provided by FASB Statement No. 167, “Amendments to FASB Interpretation No. 46(R)” (FASB Statement No. 167). Specifically, FASB Statement No. 166 introduces the concept of a participating interest, which will limit the circumstances where the transfer of a portion of a financial asset will qualify as a sale, assuming all other derecogntion criteria are met, and clarifies and amends the derecogntion criteria for determining whether a transfer qualifies for sale accounting. FASB Statement No. 166 will be applied prospectively to new transfers of financial assets occurring on or after January 1, 2010. The company is currently assessing the impact of FASB Statement No. 166 on its Condensed Consolidated Financial Statements.

     In June 2009, the FASB issued Statement No. 167, which addresses the effects of eliminating the qualifying special-purpose entity concept from FASB Statement No. 140 and amends certain provisions of FIN 46(R). Specifically, FASB Statement No. 167 amends certain provisions for determining whether an entity is a VIE, it requires a qualitative rather than a quantitative analysis to determine whether the company is the primary beneficiary of a VIE, it amends FIN 46(R)’s consideration of related party relationships in the determination of the primary beneficiary of a VIE by providing an exception regarding de facto agency relationships in certain circumstances, it requires continuous assessments of whether the company is a VIE’s primary beneficiary, and it requires enhanced disclosures about the company’s involvement with VIEs, which are generally consistent with those disclosures required by FSP FAS 140-4 and FIN 46(R)-8 discussed above. The company is currently assessing the impact of FASB Statement No. 167 on its Condensed Consolidated Financial Statements. FASB Statement No. 167, which is effective January 1, 2010, may have a significant impact on the presentation of the company’s financial statements, as its provisions may require the company to consolidate many managed investment products that are not currently consolidated.

2. FAIR VALUE OF ASSETS AND LIABILITIES

     The carrying value and fair value of financial instruments is presented in the below summary table:

						June 30, 2009								December 31, 2008
		Footnote				Carrying								Carrying
$ in millions		Reference				Value				Fair Value				Value				Fair Value
Cash and cash equivalents			2				817.7				817.7				585.2				585.2
Assets held for policyholders							1,057.3				1,057.3				840.2				840.2
Trading investments			2, 3				71.3				71.3				36.2				36.2
Available for sale investments			2, 3				88.9				88.9				103.9				103.9
Support agreements			9, 12				(2.5	)			(2.5	)			(5.5	)			(5.5	)
Policyholder payables							(1,057.3	)			(1,057.3	)			(840.2	)			(840.2	)
Current maturities of long-term debt			4				(294.2	)			(295.8	)			(297.2	)			(277.3	)
Long-term debt			4				(745.7	)			(683.0	)			(862.0	)			(711.2	)
							(64.5	)			(3.4	)			(439.4	)			(268.7	)

     FASB Statement No. 157 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is 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.

     FASB Statement No. 157 allows 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 and cash equivalents invested in affiliated money market funds totaled $523.4 million at June 30, 2009 (December 31, 2008: $209.4 million). 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. Cash investments in time deposits of $98.4 million at June 30, 2009 (December 31, 2008: $156.4 million) are very short-term in nature and are accordingly valued at cost plus accrued interest, which approximates fair value, and are classified within level 2 of the valuation hierarchy.

Available-for-sale investments

     Available-for-sale investments include amounts seeded into affiliated investment products, foreign time deposits and investments in affiliated collateralized loan obligations (CLOs). Seed money is valued under the market approach through the use of quoted market prices available in an active market and is classified within level 1 of the valuation hierarchy. Seed money investments are investments held in Invesco managed funds with the purpose of providing capital to the funds during their development periods. These investments are recorded at fair value using quoted market prices in active markets; there is no modeling or additional information needed to arrive at the fair values of these investments. Foreign time deposits are valued under the income approach based on observable interest rates and are classified within level 2 of the valuation hierarchy. CLOs are valued using an income approach through the use of certain observable and unobservable inputs. Due to current liquidity constraints within the market for CLO products that require the use of unobservable inputs, these investments are classified as level 3 within the valuation hierarchy.

Trading investments

     Trading investments primarily include the investments of the deferred compensation plans that are offered to certain Invesco employees. These investments are primarily invested in affiliated funds that are held to economically hedge current and non-current deferred compensation liabilities. Trading securities 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.

Assets held for policyholders

     Assets held for policyholders represent investments held by one of the company’s subsidiaries, which is an insurance entity that was established to facilitate retirement savings plans in the U.K. The assets held for policyholders are accounted for at fair value pursuant to AICPA Statement of Position No. 03-1, “Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts,” and are comprised primarily of affiliated unitized funds. The assets are measured at fair value under the market approach based on the quoted prices of the underlying funds in an active market and are classified within level 1 of the valuation hierarchy. The policyholder liabilities are indexed to the value of the assets held for policyholders.

     The following table presents, for each of the hierarchy levels described above, the carrying value of the company’s assets, 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, 2009.

		As of June 30, 2009
						Quoted Prices in
						Active Markets for				Significant Other				Significant
		Fair Value				Identical Assets				Observable Inputs				Unobservable Inputs
$ in millions		Measurements				(Level 1)				(Level 2)				(Level 3)
Current assets:
Cash equivalents:
Money market funds			523.4				523.4				—				—
Time deposits			98.4				—				98.4				—
Investments:*
Available-for-sale:
Seed money			55.8				55.8				—				—
Foreign time deposits			19.7				—				19.7				—
Trading investments:
Investments related to deferred compensation plans			70.4				70.4				—				—
Other			0.9				0.9				—				—
Assets held for policyholders			1,057.3				1,057.3				—				—
Total current assets			1,825.9				1,707.8				118.1				—
Non-current assets:
Investments – available-for-sale:
Collateralized loan obligations			13.4				—				—				13.4
Total assets at fair value			1,839.3				1,707.8				118.1				13.4

     The following table presents, for each of the hierarchy levels described above, the carrying value of the company’s assets that are measured at fair value as of December 31, 2008:

		As of December 31, 2008
						Quoted Prices in
						Active Markets for				Significant Other				Significant
		Fair Value				Identical Assets				Observable Inputs				Unobservable Inputs
$ in millions		Measurements				(Level 1)				(Level 2)				(Level 3)
Current assets:
Cash equivalents			365.8				209.4				156.4				—
Investments*:
Available-for-sale			86.4				69.1				17.3				—
Trading investments			36.2				36.2				—				—
Assets held for policyholders			840.2				840.2				—				—
Total current assets			1,328.6				1,154.9				173.7				—
Non-current assets:
Investments – available-for-sale*			17.5				—				—				17.5
Total assets at fair value			1,346.1				1,154.9				173.7				17.5

     The following table shows a reconciliation of the beginning and ending fair value measurements for level 3 assets during the three and six month periods ending June 30, 2009, which are comprised solely of CLOs, and are valued using significant unobservable inputs:

		Three Months				Six Months
		Ended June 30,				Ended June 30,
$ in millions		2009				2009
Beginning balance			13.5				17.5
Net unrealized gains and losses included in accumulated other comprehensive income/(loss)*			0.8				0.9
Purchases and issuances			—				—
Other-than-temporary impairment included in other gains and losses, net			(0.8	)			(4.4	)
Return of capital			(0.1	)			(0.6	)
Ending balance			13.4				13.4

     The following table shows a reconciliation of the beginning and ending fair value measurements for level 3 assets during the three and six month periods ending June 30, 2008, which are comprised solely of CLOs, and are valued using significant unobservable inputs:

		Three Months				Six Months
		Ended June 30,				Ended June 30,
$ in millions		2008				2008
Beginning balance			32.3				39.0
Net unrealized gains and losses included in accumulated other comprehensive income*			4.1				0.3
Purchases and issuances			—				0.9
Other-than-temporary impairment included in other gains and losses, net			(4.0	)			(7.5	)
Return of capital			(1.7	)			(2.0	)
Ending balance			30.7				30.7

3. INVESTMENTS

   Current Investments

		As of
		June 30,				December 31,
$ in millions		2009				2008
Available-for-sale investments:
Seed money			55.8				69.1
Foreign time deposits			19.7				17.3
Trading investments:
Investments related to deferred compensation plans			70.4				35.5
Other			0.9				0.7
Other			0.5				1.0
Total current investments			147.3				123.6

   Non-current Investments

		As of
		June 30,				December 31,
$ in millions		2009				2008
Available-for-sale investments:
Collateralized loan obligations			13.4				17.5
Other			8.9				8.5
Equity method investments			106.6				95.3
Total non-current investments			128.9				121.3

     The portion of trading gains and losses for the period that relates to trading securities still held at June 30, 2009 was $5.3 million. 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

For the Six Months Ended

June 30, 2009

June 30, 2009

Proceeds

Gross

Gross

Proceeds

Gross

Gross

from

Realized

Realized

from

Realized

Realized

$ in millions

Sales

Gains

Losses

Sales

Gains

Losses

Current available-for-sale investments

17.2

1.4

(1.1

)

27.7

3.1

(1.4

)

Non-current available-for-sale investments

0.1

—

—

2.0

—

—

     Upon the sale of available-for-sale securities, net realized gains of $0.3 million and $1.7 million were transferred from accumulated other comprehensive income into the Condensed Consolidated Statements of Income during the three and six months ended June 30, 2009, 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, 2009																December 31, 2008
						Gross				Gross												Gross				Gross
						Unrealized				Unrealized												Unrealized				Unrealized
						Holding				Holding				Fair								Holding				Holding				Fair
$ in millions		Cost				Gains				Losses				Value				Cost				Gains				Losses				Value
Current:
Seed money			63.4				3.0				(10.6	)			55.8				78.9				3.7				(13.5	)			69.1
Foreign time deposits			19.7				—				—				19.7				17.3				—				—				17.3
Current available-for-sale investments			83.1				3.0				(10.6	)			75.5				96.2				3.7				(13.5	)			86.4
Non-current:
CLOs			13.6				0.4				(0.6	)			13.4				17.1				0.4				—				17.5
Other			7.2				1.7				—				8.9				6.8				1.7				—				8.5
Non-current available-for-sale investments			20.8				2.1				(0.6	)			22.3				23.9				2.1				—				26.0
			103.9				5.1				(11.2	)			97.8				120.1				5.8				(13.5	)			112.4

     Available-for-sale debt securities as of June 30, 2009, by maturity, are set out below:

		Available-for-Sale
$ in millions		(Fair Value)
Less than one year			19.2
One to five years			0.6
Five to ten years			4.4
Greater than ten years			8.9
Total available-for-sale			33.1

     The following table provides the breakdown of available-for-sale investments with unrealized losses at June 30, 2009:

		Less Than 12 Months								12 Months or Greater								Total
						Gross								Gross								Gross
						Unrealized								Unrealized								Unrealized
$ in millions		Fair Value				Losses				Fair Value				Losses				Fair Value				Losses
Seed money			17.2				(2.1	)			18.9				(8.5	)			36.1				(10.6	)
CLOs			10.3				(0.6	)			—				—				10.3				(0.6	)

     The following table provides the breakdown of available-for-sale investments with unrealized losses at December 31, 2008:

Less Than 12 Months

12 Months or Greater

Total

Gross

Gross

Gross

Unrealized

Unrealized

Unrealized

$ in millions

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

Seed money

47.1

(12.8

)

8.7

(0.7

)

55.8

(13.5

)

     The company has reviewed investment securities for other-than-temporary impairment in accordance with its accounting policy and has recognized other-than-temporary impairment charges of $4.4 million and $2.7 million on CLOs and seed money, respectively, during the six months ended June 30, 2009, as discussed in Note 2, “Fair Value of Assets and Liabilities.”

     As of June 30, 2009, the company reviewed the cash flow estimates of its CLOs, which are based on the underlying pools of securities and take into account the overall credit quality of the issuers, the forecasted default rates of the securities, and the company’s past experience in managing similar securities. These estimates of future cash flows, taking into account both timing and amounts and discounted for appropriate discount rates, indicated a sustained decline in valuation, resulting in other-than-temporary impairment charges recorded in other gains and losses, net, on the Condensed Consolidated Statements of Income during the three- and six-months ended June 30, 2009, of $0.8 million and $4.4 million, respectively. These securities may recover their value over time; the company does not intend to sell its CLO investments before maturity. As discussed in Note 1, “Accounting Policies,” the company adopted FSP FAS 115-2 on April 1, 2009. Upon adoption, the company recorded a cumulative effect adjustment of $1.5 million to the April 1, 2009, opening balance of retained earnings with a corresponding adjustment to accumulated other comprehensive income. The other-than-temporary impairment recognized during the three months ended June 30, 2009, was entirely credit related.

     The gross unrealized losses from seed money investments during 2009 were primarily caused by declines in the market value of the underlying funds and foreign exchange movements. After conducting a review of the financial condition and near-term prospects of the underlying securities in the seeded funds as well as the severity and duration of the impairment, the company does not consider any material portion of its gross unrealized losses on these securities to be other-than-temporarily impaired. The securities are expected to recover their value over time and the company has the intent and ability to hold the securities until this recovery occurs.

4. LONG-TERM DEBT

		June 30, 2009								December 31, 2008
		Carrying								Carrying
$ in millions		Value				Fair Value				Value				Fair Value
Unsecured Senior Notes*:
4.5% — due December 15, 2009			294.2				295.8				297.2				277.3
5.625% — due April 17, 2012			215.1				208.6				300.0				231.0
5.375% — due February 27, 2013			333.5				306.8				350.0				299.5
5.375% — due December 15, 2014			197.1				167.6				200.0				168.7
Floating rate credit facility expiring March 31, 2010			—				—				12.0				12.0
Floating rate credit facility expiring June 9, 2012			—				—				—				—
Total long-term debt			1,039.9				978.8				1,159.2				988.5
Less: current maturities of long-term debt			294.2				295.8				297.2				277.3
Long-term debt			745.7				683.0				862.0				711.2

     On June 2, 2009, the company commenced a tender offer for the maximum aggregate principal amount of the outstanding 5.625% senior notes due 2012, the 5.375% senior notes due 2013, and the 5.375% senior notes due 2014 (collectively, the “Notes”) that it could purchase for $100.0 million at a purchase price per $1,000 principal amount determined in accordance with the procedures of a modified “Dutch Auction” (tender offer). The tender offer expired at midnight on June 29, 2009, and on June 30, 2009, $104.3 million of the Notes had been retired, generating a gross gain of $4.3 million upon the retirement of debt at a discount ($3.3 million net of related expenses and the write-off of remaining unamortized debt discount costs), which was recorded in other gains and losses, net, on the Condensed Consolidated Statements of Income for the three and six months ended June 30, 2009.

     The fair market value of the company’s long term debt was determined by market quotes as well as the outcome of the tender offer. Previously, due to the absence of an active market, the company relied upon the average price quoted by brokers for determining the fair market value of the debt. For the 4.5% senior notes due December 15, 2009, the company used market quotes to fair value the notes. The level of trading, both in number and amount of notes traded, in the 2009 maturity has increased substantially since the notes became short-term. Therefore, the company believes the market quotes to be a reasonable representation of the fair market value of the notes. The tender offer facilitated the determination of the fair market value of the company’s 2012, 2013, and 2014 maturities. The offering was structured as a modified “Dutch Auction,” which allowed the investors to decide the price at which they believe to be fair market value of the notes. The transaction settled on June 30, 2009, and the prices the company paid to tender the notes were used in the determination of the fair market value of the remaining debt.

Analysis of Borrowings by Maturity:

$ in millions		June 30, 2009
2009			294.2
2010			—
2011			—
2012			215.1
2013			333.5
Thereafter			197.1
Total long-term debt			1,039.9

     On June 9, 2009, the company completed a new three-year $500.0 million revolving bank credit facility. The new credit facility replaced the $900.0 million credit facility that was scheduled to expire on March 31, 2010, but was terminated concurrent with the entry into the new credit facility. No early termination fees were incurred, and at the time of the termination, there were no loans outstanding under the prior credit facility.

     Amounts borrowed under the new credit facility are repayable at maturity on June 9, 2012, provided that such maturity date will automatically be accelerated to March 16, 2012, if 90% or more of the $300.0 million face amount of the company’s 5.625% senior notes due 2012, are not repaid, repurchased or defeased prior to March 16, 2012. Subject to certain conditions, the company has the right to increase the aggregate borrowings under the new credit facility up to $750.0 million.

     At June 30, 2009, there was no outstanding balance on the new credit facility expiring June 9, 2012. Borrowings under the new 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, 2009, of the company and such credit default spreads, the applicable margin for LIBOR-based loans was 1.50% and for base rate loans was 0.50%. 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, 2009, the annual facility fee was equal to 0.50%. The weighted average interest rate on the prior credit facility expiring March 31, 2010, was 2.80% at June 30, 2008.

     The credit agreement governing the new 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; making or holding external loans; entering into certain restrictive merger arrangements; selling, leasing, transferring or otherwise disposing of assets; making certain investments; 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; making or entering into restrictive agreements; becoming a general partner to certain investments; entering into transactions with affiliates; incurring certain indebtedness through the non-guarantor subsidiaries; and making certain restricted payments (with respect to equity and debt holders). Many of these restrictions are subject to certain minimum thresholds and exceptions. Financial covenants under the credit agreement include: (i) the quarterly maintenance of a debt/EBITDA ratio, as defined in the credit agreement, of not greater than 3.25:1.00 through December 31, 2010, and not greater than 3.00:1.00 thereafter, (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, and (iii) maintenance on a monthly basis of consolidated long-term assets under management (as defined in the credit agreement) of not less than $194.8 billion, which amount is subject to a one-time reset by the company under certain conditions.

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

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

5. COMMON SHARES

     Movements in the number of common shares issued are represented in the table below:

In millions		2009				2008
January 1			426.6				424.7
Issue of new shares			32.9				—
Exercise of options			—				1.9
June 30			459.5				426.6