UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

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

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

Commission file number 1-13908

Bermuda		98-0557567
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)
1555 Peachtree Street, NE, Suite 1800, Atlanta, GA		30309
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (404) 892-0896
Securities registered pursuant to Section 12(b) of the Act:

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

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

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

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

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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

     At June 30, 2009, the aggregate market value of the voting stock held by non-affiliates was $7.3 billion, based on the closing price of the registrant’s Common Shares, par value U.S. $0.20 per share, on the New York Stock Exchange. At January 31, 2010, the number of Common Shares outstanding was 431,677,226.

     The registrant will incorporate by reference information required in response to Part III, Items 10-14 in its definitive Proxy Statement for its annual meeting of shareholders, to be filed with the Securities and Exchange Commission within 120 days after December 31, 2009.

 

 

TABLE OF CONTENTS

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

		Page
Special Cautionary Note Regarding Forward-Looking Statements			3
PART I
Item 1. Business			4
Item 1A. Risk Factors			11
Item 1B. Unresolved Staff Comments			20
Item 2. Properties			20
Item 3. Legal Proceedings			20
Item 4. Submission of Matters to a Vote of Security Holders			20
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			21
Item 6. Selected Financial Data			24
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			56
Item 8. Financial Statements and Supplementary Data			60
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure			115
Item 9A. Controls and Procedures			115
Item 9B. Other Information			116
PART III
Item 10. Directors, Executive Officers and Corporate Governance			117
Item 11. Executive Compensation			118
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			118
Item 13. Certain Relationships and Related Transactions, and Director Independence			119
Item 14. Principal Accountant Fees and Services			119
PART IV
Item 15. Exhibits and Financial Statement Schedules			120
EX-4.8
EX-4.8
EX-4.10
EX-10.1
EX-21
EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

SPECIAL CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This Report, the documents incorporated by reference herein, other public filings and oral and written statements by us and our management, may include statements that constitute “forward-looking statements” within the meaning of the United States securities laws. These statements are based on the beliefs and assumptions of our management and on information available to us at the time such statements are made. Forward-looking statements include information concerning possible or assumed future results of our operations, expenses, earnings, liquidity, cash flows and capital expenditures, industry or market conditions, assets under management, acquisition activities and the effect of completed acquisitions, debt levels and our ability to obtain additional financing or make payments on our debt, legal and regulatory developments, demand for and pricing of our products and other aspects of our business or general economic conditions. In addition, when used in this Report, the documents incorporated by reference herein or such other documents or statements, words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “projects,” “forecasts,” and future or conditional verbs such as “will,” “may,” “could,” “should,” and “would,” and any other statement that necessarily depends on future events, are intended to identify forward-looking statements.

     Forward-looking statements are not guarantees of performance or other outcomes. They involve risks, uncertainties and assumptions. Although we make such statements based on assumptions that we believe to be reasonable, there can be no assurance that actual results will not differ materially from our expectations. We caution investors not to rely unduly on any forward-looking statements.

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

•

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

•

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

•

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

•

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

•

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

•

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

•

our ability to compete in the investment management business;

•

the effect of consolidation in the investment management business;

•

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

•

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

•

the investment performance of our investment products;

•

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

•

changes in regulatory capital requirements;

•

our debt and the limitations imposed by our credit facility;

•

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

•

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

•

the execution risk inherent in our ongoing company-wide transformational initiatives;

•

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

•

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

•

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

•

adverse results in litigation, including private civil litigation related to mutual fund fees and any similar potential regulatory or other proceedings.

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

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

PART I

     In this Annual Report on Form 10-K, unless otherwise specified, the terms “we,” “our,” “us,” “company,” “Invesco,” and “Invesco Ltd.” refer to Invesco Ltd., a company incorporated in Bermuda, and its subsidiaries.

Item 1. Business

Introduction

     Invesco is a leading independent global investment management company, dedicated to helping people worldwide build their financial security. By delivering the combined power of our distinctive worldwide investment management capabilities, Invesco provides a comprehensive array of enduring investment products for retail, institutional and high-net-worth clients around the world. Operating in 20 countries, Invesco had $423.1 billion in assets under management (AUM) as of December 31, 2009.

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

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

Strategy

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

•

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

•

Deliver the combined power of our distinctive investment management capabilities anywhere in the world to meet our clients’ needs;

•

Unlock the power of our global operating platform by simplifying our processes and procedures and further integrating the support structures of our business globally; and

•

Continue to build a high-performance organization by fostering greater transparency, accountability and execution at all levels.

     Over the past four years, Invesco has taken a number of steps to leverage the individual strengths of our distinct investment centers and present the organization as a single firm to our clients around the world. We believe these changes have strengthened Invesco’s ability to operate more efficiently and effectively as an integrated, global organization.

     Since we take a unified approach to our business, we are presenting our financial statements and other disclosures under the single operating segment “asset management.”

Recent Developments

     The global economic recession, the general weakening of government, agency and corporate credit, the dissolution and strategic redirection of certain large financial institutions, and the market volatility over the past two years has had a significant impact on our industry. These factors, among others, created a unique competitive opportunity for few investment management firms that were able to deliver superior relative investment performance, maintain their corporate financial strength, and remain intensely focused on their clients. We believe Invesco was one of these few firms that was able to emerge from this challenging economic and market environment in an improved competitive position.

     Several investment, credit, and liquidity issues affected many key competitors within the asset management industry, including significant economic and reputational exposure to asset-backed securities, illiquid credit derivatives, structured investment vehicles (SIVs), auction rate preferred shares, hedge funds that were effectively operating as Ponzi schemes, and securities lending programs that lost value. Invesco had little to no exposure to such factors. Furthermore, while some competitors were withdrawing from the marketplace, we were meeting regularly with clients, helping them navigate the difficult markets and sharing solutions to meet their long-term investment needs. That enhanced visibility allowed us to deepen our existing relationships and foster new ones, putting us in a strong position as clients began returning to the markets.

     Invesco’s commitment to our multi-year strategy set a firm foundation for the company’s many achievements during 2009, including:

•

Relative investment performance remained strong across the enterprise in 2009, with 69% of assets performing ahead of peers on a 3-year basis at year end;

•

Maintaining the number one position for Invesco Perpetual in the U.K. for retail assets under management, with record net inflows, particularly in fixed income, and strong investment performance;

•

Positive fund flows for the year and record fixed income assets under management for Invesco Aim;

•

Selection by the U.S. Treasury, among only eight asset managers, to participate in the Public-Private Investment Program (PPIP);

•

Launch of our mortgage REIT, Invesco Mortgage Capital, Inc. (IVR), an IPO which raised $200 million in equity. In January 2010, Invesco Mortgage Capital raised an additional $170 million;

•

75% of Invesco Fixed Income AUM above benchmark on a 3-year basis at year end, further building our reputation as a “safe hands” manager during a volatile time in the markets;

•

Successful launch of a $540 million Chinese equity fund in Japan, which was the third largest onshore China product offering in the local market;

•

Industry recognition of our Asian investment teams, including best equity group award for our China joint venture;

•

Continued strong flows at Invesco PowerShares, and the launch of intelligent exchange-traded funds (ETFs) to Canadian investors through an innovative suite of mutual funds;

•

Extended leadership position of the team at W.L. Ross & Co. with their unique investment discipline and ability to capture distressed market opportunities;

•

Continued growth of Invesco’s Hyderabad, India, facility, which was launched early in 2007 utilizing an outsourcing model commonly referred to as “build/operate/transfer.” The facility provides cost-effective support for our operations, technology and finance groups, and is now firmly established with an outsourced staff of more than 400. At such time that formal transfer of control of the facility moves to Invesco (expected to occur within the next 18 months), the current staff will become Invesco employees and will be added to Invesco’s headcount.

     Together, these efforts resulted in positive net flows for our business in each quarter of 2009. At the same time, reflecting the decline in global markets and resulting decline in the company’s assets under management, operating margin and net operating margin decreased to 18.4% and 25.9% in 2009, respectively, from 22.6% and 31.6% in 2008, respectively. (See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Schedule of Non-GAAP Information” for a reconciliation of operating income to net operating income — and by calculation, a reconciliation of operating margin to net operating margin — and important additional disclosures.

     We continued to execute on our long-term strategy, making disciplined capital and resource allocation decisions in a challenging environment, which we believe further improved our ability to serve our clients, reinforced our reputation as one of the premiere global asset managers, and helped to deliver competitive levels of operating income and margins as we progressed through the year. In addition, we took steps to further strengthen our financial position and augment our capital flexibility through a successful capital raise and a new credit facility. We retain a positive outlook by S&P and stable outlook with Moody’s.

     Perhaps the most visible of our accomplishments in 2009 was our announcement in October that we are acquiring Morgan Stanley’s retail asset management business, including Van Kampen. The combination of our organizations has tremendous implications for Invesco’s business when the transaction closes in mid-2010. Through this transaction, we expect to expand the depth and breadth of our investment strategies, strengthen our overall distribution capabilities and greatly enhance our ability to serve clients, both in the U.S. and globally. The planned acquisition provided Invesco the opportunity to review its overall branding approach in the U.S. Under the new approach, beginning April 30, 2010, Invesco Aim will be rebranded as Invesco and AIM funds will be rebranded with the Invesco name (e.g., AIM Charter Fund will become Invesco Charter Fund). In addition, after the close of the transaction, Invesco will be added to the Van Kampen open-end fund names (e.g., Van Kampen Comstock Fund will become Invesco Van Kampen Comstock Fund), and Invesco will rebrand the Morgan Stanley products that are included in the transaction (e.g., Morgan Stanley Special Value Fund will become Invesco Special Value Fund).

Certain Demographic and Industry Trends

     Demographic and economic trends around the world continue to transform the investment management industry and our business:

•

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

•

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

•

We have seen increasing demand from clients for alpha and beta to be separated as investment strategies in the investment management industry. (“Alpha” is defined as excess return attributable to a manager, and “beta” refers to the return of an underlying benchmark.) This trend reflects how clients are differentiating between low-cost beta solutions such as passive, index and ETF products and higher-priced alpha strategies such as those offered by many alternative products.

•

Investors are increasingly seeking to invest outside their domestic markets. They seek firms that operate globally and have investment expertise in markets around the world. Invesco, with a comprehensive range of investment capabilities managed by distinct investment teams worldwide, is well-positioned to benefit from this trend.

     Our four strategic priorities and our plans for taking the business forward acknowledge these demographic and economic trends, as we work to further strengthen our competitive position. Our multi-year strategy is designed to leverage our global presence, our distinctive worldwide investment management capabilities and our talented people to further grow our business and ensure our long-term success.

Investment Management Capabilities

     Invesco is a leading independent global investment manager with operations in 20 countries. As of December 31, 2009, Invesco managed $423.1 billion in assets for retail, institutional and high-net-worth investors around the world. By delivering the combined power of our distinctive worldwide investment management capabilities, Invesco provides a comprehensive array of enduring solutions for our clients.

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

     We believe that the proven strength of our distinct and globally located investment centers and their well-defined investment disciplines provide us with a competitive advantage in the eyes of many of our clients. There are few independent investment managers with teams as globally diverse as Invesco’s and with the same breadth and depth of investment capabilities and products. We offer multiple investment objectives within the various asset classes and products that we manage. Our asset classes, broadly defined, include money market, fixed income, balanced, equity and alternatives. Approximately 41% of our AUM as of December 31, 2009, was invested in equities (December 31, 2008: 36% in equities), with the balance invested in fixed income and other securities.

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

Money Market		Fixed Income		Balanced		Equity		Alternatives
Prime		Convertibles		Single Country		Small Cap Core		Financial Structures
Government/Treasury		Core/Core Plus		Global		Small Cap Growth		Absolute Return
Tax-Free		Emerging Markets		Asset Allocation		Small Cap Value		U.S. REITS
Cash Plus		Enhanced Cash		Target Date		Mid Cap Core		Global REITS
Taxable		Government Bonds		Target Risk		Mid Cap Growth		U.S. Direct Real Estate
		High-Yield Bonds				Mid Cap Value		European Direct Real Estate
		Bank Loans				Large Cap Core		Asian Direct Real Estate
		Passive/Enhanced				Large Cap Growth		Private Capital Direct Investments
		Intermediate Term				Large Cap Value		Private Capital Fund of Funds
		International/Global				Enhanced Index Quantitative		Private Capital Distressed
		Municipal Bonds				Sector Funds		Portable Alpha
		Short Term				International		Alternative Beta
		Stable Value				Global		GTAA/Global Macro
		Structured Securities				Regional/Single Country
		(ABS, MBS, CMBS)
		Investment Grade Credit

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

Investment Vehicles by Distribution Channel

Retail		Institutional		Private Wealth Management
Mutual Funds		Institutional Separate Accounts		Separate Accounts
Investment Companies with Variable Capital		Collective Trust Funds		Managed Accounts
Investment Trusts		Managed Accounts		Mutual Funds
Individual Savings Accounts		Exchange-Traded Funds		Exchange-Traded Funds
Exchange-Traded Funds		Private Capital Funds		Private Capital Funds
		Variable Insurance Funds

     One of Invesco’s greatest competitive strengths is the diversification in our AUM by client domicile, distribution channel and asset class. Our distribution network has gathered assets of approximately 49% retail, 47% institutional, and 4% Private Wealth Management clients. 39% of client assets under management are outside the U.S., and we service clients in more than 100 countries. The following tables present a breakdown of AUM by client domicile, distribution channel and asset class as of December 31, 2009:

AUM Diversification

See Part II, Item 8, “Financial Statements and Supplementary Data — Note 12, Geographic Information,” for a geographic breakdown of our consolidated operating revenues for the years ended December 31, 2009, 2008 and 2007.

Distribution Channels

Retail

     Invesco is a significant provider of retail investment solutions to clients through our distribution channels: Invesco Aim in the U.S., Invesco Trimark in Canada, Invesco Perpetual in the U.K., Invesco in Europe and Asia, and Invesco PowerShares (for our ETF products). Collectively, the retail investment management teams manage assets of $206.9 billion as of December 31, 2009. We offer retail products within all of the major asset classes (money market, fixed income, balanced, equity and alternatives). Our retail products are primarily distributed through third-party financial intermediaries, including traditional broker-dealers, fund “supermarkets,” retirement platforms, financial advisors, insurance companies and trust companies.

     The U.K., U.S. and Canadian retail operations rank among the largest by AUM in their respective markets. As of December 31, 2009, Invesco Perpetual was the largest retail fund provider in the U.K., Invesco Aim was the 15^th largest non-proprietary mutual fund complex in the U.S., and Invesco Trimark was the 9^th largest retail fund manager in Canada, and in addition, Invesco Great Wall, our joint venture in China was one of the largest Sino-foreign managers of equity products in China, with AUM of approximately $8 billion as of December 31, 2009. Invesco PowerShares adds a leading set of ETF products (with $15 billion in AUM and 120 exchange-traded funds as of December 31, 2009) to the extensive choices we make available to our retail investors. We believe that we provide our retail clients with one of the industry’s most robust and comprehensive product lines.

Institutional

     We provide investment solutions to institutional investors globally, with a major presence in the U.S., U.K., Continental Europe and Asia-Pacific regions through Invesco and Invesco Aim ($201.0 billion in AUM as of December 31, 2009). We offer a broad suite of domestic and global products, including traditional equities, structured equities, fixed income (including money market funds for institutional clients), real estate, private equity, distressed equities, financial structures, and absolute return strategies. Regional sales forces distribute our products and provide services to clients and intermediaries around the world. We have a diversified client base that includes major public entities, corporations, unions, non-profit organizations, endowments, foundations and financial institutions. Clients of Invesco Aim’s institutional money market funds included 20 of the 25 largest commercial banks in the U.S., 11 of the 20 largest global banks, and 10 of the Fortune 20 corporations as of December 31, 2009.

Private Wealth Management

     Through Atlantic Trust, Invesco provides high-net-worth individuals and their families with a broad range of personalized and sophisticated wealth management services, including financial counseling, estate planning, asset allocation, investment management (including use of third-party managed investment products), private equity, trust, custody and family office services. Atlantic Trust also provides asset management services to foundations and endowments. Atlantic Trust obtains new clients through referrals from existing clients, recommendations from other professionals serving the high-net-worth market, such as attorneys and accountants, and from financial intermediaries, such as brokers. Atlantic Trust has offices in 11 U.S. cities and managed $15.2 billion as of December 31, 2009.

Employees

     As of December 31, 2009, we had 4,890 employees across the globe. As of December 31, 2008 and 2007, we had 5,325 and 5,475 employees, respectively. None of our employees is covered under collective bargaining agreements.

Competition

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

Management Contracts

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

Available Information

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

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

Item 1A. Risk Factors

Recent volatility and disruption in world capital and credit markets, as well as adverse changes in the global economy, have negatively affected Invesco’s revenues and may continue to do so.

     The capital and credit markets have been experiencing substantial volatility and disruption for over a year. While these disruptions moderated to some extent following the March 2009 lows in equity markets, historical norms have not returned and the potential for extreme disruptions remains. These market events have materially impacted our results of operations, and may continue to do so, and could materially impact our financial condition and liquidity. In this regard:

•

The volatility of global market conditions around the world has resulted, and may continue to result, in significant volatility in our assets under management and in our revenues, driven by market value fluctuations on our managed portfolios.

•

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

•

Our money market funds have always maintained a $1.00 net asset value (NAV); however, we do not guarantee such level. Market conditions could lead to severe liquidity issues in money market products, which could affect their NAVs. If the NAV of one of our money market funds were to decline below $1.00 per share, such funds could experience significant redemptions in assets under management, loss of shareholder confidence and reputational harm. The SEC has recently adopted new rules governing U.S. registered money market funds. These new rules are designed to significantly strengthen the regulatory requirements governing money market funds, increase the resilience of such funds to economic stresses, and reduce the risk of runs on these funds. Regulators in the U.S. are evaluating whether to propose mandating a variable (“floating”) NAV for money market funds. The company believes such a change would have significant adverse consequences on the money market funds industry and the short-term credit markets.

•

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

•

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

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

     In response to significant reductions in our assets under management related to recent adverse changes in world financial markets, we have undertaken a variety of efforts to achieve cost savings and reduce our overall operating expenses. If we are unable to effect appropriate expense reductions in a timely manner in response to declines in our revenues, or if we are otherwise unable to adapt to rapid changes in the global marketplace, our profitability, financial condition and results of operations would be adversely affected.

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

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

     Declines in the market value of the assets in the funds and accounts managed. These could be caused by price declines in the securities markets generally or by price declines in the market segments in which those assets are concentrated. Approximately 41% of our total assets under management were invested in equity securities and approximately 59% were invested in fixed income and other securities at December 31, 2009. Through the date of the filing of the Annual Report on Form 10-K with the SEC, markets continue to be volatile. Our AUM as of January 31, 2010, was $412.6 billion. We cannot predict whether the continued volatility in the markets will result in substantial or sustained declines in the securities markets generally or result in price declines in market segments in which our assets under management are concentrated. Any of the foregoing could negatively impact our revenues, income and operating margin.

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

     Declines in the value of seed capital and partnership investments. The company has investments in sponsored investment products that invest in a variety of asset classes, including, but not limited to equities, fixed income products, private equity, and real estate. Investments in these products are generally made to establish a track record, meet purchase size requirements for trading blocks, or demonstrate economic alignment with other investors in our funds. Adverse market conditions may result in the need to write down the value of these seed investments. As of December 31, 2009, the company had $151.8 million in seed capital and partnership investments.

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

     Substantially all of our revenues are derived from investment advisory agreements. Investment advisory agreements are generally terminable upon 30 or fewer days’ notice. Agreements with U.S. mutual funds may be terminated with notice, or terminated in the

event of an “assignment” (as defined in the Investment Company Act), and must be renewed annually by the disinterested members of each fund’s board of directors or trustees, as required by law. In addition, the board of trustees or directors of certain other fund accounts of Invesco or our subsidiaries generally may terminate these investment advisory agreements upon written notice for any reason. Mutual fund and unit trust investors may generally withdraw their funds at any time without prior notice. Institutional clients may elect to terminate their relationships with us or reduce the aggregate amount of assets under our management, and individual clients may elect to close their accounts, redeem their shares in our funds, or shift their funds to other types of accounts with different fee structures. Any termination of or failure to renew a significant number of these agreements, or any other loss of a significant number of our clients or assets under management, would adversely affect our revenues and profitability.

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

     In a rising-rate environment, certain institutional investors using money market products and other short-term duration fixed income products for cash management purposes may shift these investments to direct investments in comparable instruments in order to realize higher yields than those available in money market and other fund products holding lower yielding instruments. These redemptions would reduce managed assets, thereby reducing our revenues. In addition, rising interest rates will tend to reduce the market value of bonds held in various investment portfolios and other products. Thus, increases in interest rates could have an adverse effect on our revenues from money market portfolios and from other fixed income products. If securities within a money market portfolio default, or investor redemptions force the portfolio to realize losses, there could be negative pressure on its net asset value. Although money market investments are not guaranteed instruments, the company might decide, under such a scenario, that it is in its best interest to provide support in the form of a support agreement, capital infusion, or other methods to help stabilize a declining net asset value. Some of these methods could have an adverse impact on our profitability. Additionally, we have $17.9 million of equity at risk invested in our collateralized loan obligation products, the valuation of which could change with changes in interest and default rates.

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

     As with all investment management companies, our activities are highly regulated in almost all countries in which we conduct business. Laws and regulations applied at the national, state or provincial and local level generally grant governmental agencies and industry self-regulatory authorities broad administrative discretion over our activities, including the power to limit or restrict business activities. Possible sanctions include the revocation of licenses to operate certain businesses, the suspension or expulsion from a particular jurisdiction or market of any of our business organizations or their key personnel, the imposition of fines and censures on us or our employees and the imposition of additional capital requirements. It is also possible that laws and regulations governing our operations or particular investment products could be amended or interpreted in a manner that is adverse to us.

     Certain of our subsidiaries are required to maintain minimum levels of capital. These and other similar provisions of applicable law may have the effect of limiting withdrawals of capital, repayment of intercompany loans and payment of dividends by such entities. After redomicile and after consultation with the U.K. Financial Services Authority (FSA), it has been determined that, for the purposes of prudential supervision, Invesco Ltd. is not subject to regulatory consolidated capital requirements under current European Union (EU) Directives. A sub-group, however, including all of our regulated EU subsidiaries, is subject to these consolidated capital requirements, and capital is maintained within this sub-group to satisfy these regulations. At December 31, 2009, the European sub-group had cash and cash equivalent balances of $333.5 million, much of which is used to satisfy these regulatory requirements. Complying with our regulatory commitments may result in an increase in the capital requirements applicable to the European sub-group. As a result of corporate restructuring and the regulatory undertakings that we have given, certain of these EU subsidiaries may be required to limit their dividends to the parent company, Invesco Ltd. We cannot guarantee that further corporate restructuring will not be required to comply with applicable legislation.

     The regulatory environment in which we operate frequently changes and has seen significant increased regulation in recent years. We may be adversely affected as a result of new or revised legislation or regulations or by changes in the interpretation or enforcement of existing laws and regulations. To the extent that existing regulations are amended or future regulations are adopted that reduce the sale, or increase the redemptions, of our products and services, or that negatively affect the investment performance of our products, our aggregate assets under management and our revenues could be adversely affected. In addition, regulatory changes could impose additional costs, which could negatively impact our profitability.

     Various regulators, legislators, other government officials and other public policy commentators have proposed or are considering proposals for regulatory reform in response to the ongoing crisis in the financial markets. Certain proposals are far reaching and if enacted could have a material impact on Invesco’s business. While many of these proposals are designed to address perceived problems in the banking sector, certain of the proposals could be applied to other financial services companies, including asset managers. Potential developments include:

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Expanded prudential regulation over investment management firms.

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

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Fundamental change to the regulation of money market funds in the U.S. The SEC has recently proposed changes to Rule 2a-7, the primary securities regulation governing U.S. registered money market funds. The SEC has recently adopted new rules governing U.S. registered money market funds. These new rules are designed to significantly strengthen the regulatory requirements governing money market funds, increase the resilience of such funds to economic stresses, and reduce the risk of runs on these funds. Regulators in the U.S. are evaluating whether to propose mandating a variable (“floating”) NAV for money market funds. The company believes such a change would have significant adverse consequences on the money market funds industry and the short-term credit markets.

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

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Enhanced licensing and qualification requirements for key personnel.

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

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

     Certain proposals would require national legislation or international treaties. Invesco cannot at this time predict the impact of potential regulatory changes on its business. It is possible such changes could impose material new compliance costs or capital requirements or impact Invesco in other ways that could have a material adverse impact on Invesco’s results of operations, financial condition or liquidity. Moreover, such changes could require us to modify our strategies, businesses or operations, and we may incur other new constraints or costs in order to satisfy new regulatory requirements or to compete in a changed business environment.

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

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

     Invesco and certain related entities have in recent years been subject to various legal proceedings arising from normal business operations and/or matters that have been the subject of previous regulatory actions. See Part I, Item 3, “Legal Proceedings,” for additional information.

     The U.S. Supreme Court is expected to reach a decision in the case of Jones v. Harris during its current term, which is scheduled to end in June 2010. That case involves the interpretation of Section 36(b) of the Investment Company Act of 1940, as amended. Section 36(b) grants private parties the right to sue to challenge fees paid by mutual funds to their investment advisers. Depending on the nature and scope of the Court’s ruling, the mutual fund industry in the U.S. could face additional litigation defense costs, new compliance costs and additional pressure on mutual fund fees.

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

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

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

     Our business depends on earning and maintaining the trust and confidence of clients, regulators and other market participants, and the resulting good reputation is critical to our business. Our reputation is vulnerable to many threats that can be difficult or impossible to control, and costly or impossible to remediate. Regulatory inquiries, material errors in public reports, employee dishonesty or other misconduct and rumors, among other things, can substantially damage our reputation, even if they are baseless or satisfactorily addressed. Further, our business requires us to continuously manage actual and potential conflicts of interest, including situations where our services to a particular client conflict, or are perceived to conflict, with the interests of another client. We have procedures and controls that are designed to address and manage conflicts of interest, but this task is complex and difficult, and our reputation could be damaged, and the willingness of clients to enter into transactions in which such a conflict might arise may be affected, if we fail — or appear to fail — to deal appropriately with conflicts of interest. In addition, potential or perceived conflicts could give rise to litigation or regulatory enforcement actions. Any damage to our reputation could impede our ability to attract and retain clients and key personnel, and lead to a reduction in the amount of our assets under management, any of which could have a material adverse effect on our revenues and net income.

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

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

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

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

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

     In 2009, we saw several instances of industry consolidation, both in the area of distributors and manufacturers of investment products. Further consolidation may occur in these areas in the future, particularly if the economic environment and the financial markets remain uncertain and volatile. The increasing size and market influence of certain distributors of our products and of certain

direct competitors may have a negative impact on our ability to compete at the same levels of profitability in the future, should we find ourselves unable to maintain relevance in the markets in which we compete.

We may engage in strategic transactions that could create risks.

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

     On October 19, 2009, we announced that the company had entered into a definitive agreement to acquire Morgan Stanley’s retail asset management business, including Van Kampen Investments. The transaction was valued at $1.5 billion (subject to adjustment), consisting of payments by Invesco of $500.0 million in cash, for which we expect to use available cash balances and borrowings under our credit facility, and an aggregate of approximately 44.1 million Invesco common shares and non-voting common equivalent preferred shares, which will result in Morgan Stanley obtaining an approximately 9.3% equity interest in our company. The transaction has been approved by the boards of directors of both companies and is expected to close in mid-2010, subject to customary regulatory, client and fund shareholder approvals. As a result of this transaction, and until the time of the deal closing, contractual limitations are in place with respect to our issuing or repurchasing our common shares (other than those related to employee compensation plans), and we are also unable to declare or pay any extraordinary dividends.

     The aggregate amount of approximately 44.1 million Invesco common shares and non-voting common equivalent preferred shares (with economic rights identical to common stock, other than no right to vote such shares,) that we expect to issue to Morgan Stanley in exchange for their asset management business upon closing the transaction are largely unrestricted. Since no “lock up” exists, Morgan Stanley may sell these shares in the open market or through a secondary offering subject to certain limited restrictions. If Morgan Stanley were to sell their future equity stake in Invesco, or express an intention to sell the stake, after the close, this may have a significant impact on the company’s stock price.

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

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

     Our access to the capital markets, including for purposes of financing potential acquisitions, depends significantly on our credit ratings. We have received credit ratings of A3 and BBB+ from Moody’s and Standard & Poor’s credit rating agencies, respectively, as of the date of this Annual Report on Form 10-K. Standard & Poor’s has a “positive” outlook for the rating, and Moody’s has a “stable” outlook for the rating as of the date of this Annual Report on Form 10-K. We believe that rating agency concerns include but are not limited to: our ability to sustain net positive asset flows across customer channels, product type and geographies, our level of indebtedness, our risk appetite and approach to risk management, our ability to maintain consistent positive investment, the profitability of our business under a sustained downturn scenario, and integration risk related to the pending acquisition of Morgan Stanley’s retail asset management business. Additionally, the rating agencies could decide to downgrade the entire asset management industry, based on their perspective of future growth and solvency. Material deterioration of these factors, and others defined by each rating agency, could result in downgrades to our credit rating or outlook, thereby limiting our ability to generate additional financing or receive mandates. Management believes that solid investment grade ratings are an important factor in winning and maintaining institutional business and strives to manage the company to maintain such ratings.

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

Our indebtedness could adversely affect our financial position.

     As of December 31, 2009, we had outstanding total debt of $745.7 million and shareholders’ equity of $6,912.9 million. The amount of indebtedness we carry could limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or other purposes, increase our vulnerability to adverse economic and industry conditions, limit our flexibility in planning for, or reacting to, changes in our business or industry, and place us at a disadvantage in relation to our competitors. Any or all of the above factors could materially adversely affect our financial position.

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

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

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

     We sell a portion of our investment products through a variety of financial intermediaries, including major wire houses, regional broker-dealers, banks and financial planners in North America, and independent brokers and financial advisors, banks and financial organizations in Europe and Asia. Increasing competition for these distribution channels could cause our distribution costs to rise, which would lower our net revenues. As a result of recent market turmoil, there has been some consolidation of banks and broker-dealers, particularly in the U.S., and a limited amount of migration of brokers and financial advisors away from major banks to independent firms focused largely on providing advice. If these trends continue, our distribution costs could increase as a percentage of our revenues generated. Additionally, particularly outside of the U.S., certain of the intermediaries upon whom we rely to distribute our investment products also sell their own competing proprietary funds and investment products, which could limit the distribution of our products. Increasingly, investors, particularly in the institutional market, rely on external consultants and other unconflicted third parties for advice on the choice of investment manager. These consultants and third parties tend to exert a significant degree of influence and they may favor a competitor of Invesco as better meeting their particular client’s needs. There is no assurance that our investment products will be among their recommended choices in the future. Additionally, if one of our major distributors were to cease operations, it could have a significant adverse effect on our revenues and profitability. Moreover, any failure to maintain strong business relationships with these distribution sources and the consultant community would impair our ability to sell our products, which in turn could have a negative effect on our revenues and profitability.

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

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

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

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

     The ability to consistently and reliably obtain accurate securities pricing information, process client portfolio and fund shareholder transactions and provide reports and other customer service to fund shareholders and investors in other accounts managed by us is essential to our continuing success. In recent periods, illiquid markets for certain types of securities have required increased use of fair

value pricing, which is dependent on certain subjective judgments. Any delays or inaccuracies in obtaining pricing information, processing such transactions or such reports, other breaches and errors, and any inadequacies in other customer service, could result in reimbursement obligations or other liabilities, or alienate customers and potentially give rise to claims against us. Our customer service capability, as well as our ability to obtain prompt and accurate securities pricing information and to process transactions and reports, is highly dependent on communications and information systems and on third-party vendors. These systems could suffer deficiencies, failures or interruptions due to various natural or man-made causes, and our back-up procedures and capabilities may not be adequate to avoid extended interruptions in operations. Certain of these processes involve a degree of manual input, and thus similar problems could occur from time to time due to human error.

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

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

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

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

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

     We have goodwill on our balance sheet that is subject to an annual impairment review. Goodwill totaled $6,467.6 million at December 31, 2009 (2008: $5,966.8 million). We may not realize the value of such goodwill. We perform impairment reviews of the book values of goodwill on an annual basis or more frequently if impairment indicators are present. A variety of factors could cause such book values to become impaired. Should valuations be deemed to be impaired, a write-down of the related assets would occur, adversely affecting our results of operations for the period. See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Goodwill” for additional details of the company’s goodwill impairment analysis process.

Implementation of new accounting rules in our Consolidated Financial Statements could result in investor confusion or potential deficiencies in internal controls over financial reporting.

     In June 2009, the Financial Accounting Standards Board issued Statement No. 167, “Amendments to FASB Interpretation No. 46(R)” (FASB Statement No. 167), now encompassed in Accounting Standards Codification Topic 810, “Consolidation.” FASB Statement No. 167 is effective January 1, 2010, and its adoption will be reflected in our first quarter 2010 Form 10-Q. The adoption of FASB Statement No. 167 will have a significant impact on the presentation of our financial statements, as it will require us to consolidate, for the first time, certain collateralized loan and debt obligation products (CLOs) with approximately $6 billion in AUM at December 31, 2009, into our financial statements. As a result, the company’s Consolidated Statement of Income will reflect the elimination of management and performance fees earned from these CLOs. In addition, FASB Statement No. 167 will require that our Consolidated Balance Sheet reflect the collateral assets held and non-recourse debt issued by these CLOs, despite the fact that the

assets cannot be used by the company, nor is the company obligated for the debt. In addition, the new rules will require our Consolidated Cash Flow Statement to reflect the cash flows of the CLOs. The adoption of FASB Statement No. 167 in the company’s financial statements could have an impact on users’ analyses of our underlying results of operations, financial position, or liquidity. As a result, external credit rating agencies or analysts could report information not reflective of the underlying financial condition of the company.

     Deficiencies in internal controls over financial reporting could result, as the financial information of the funds required to be consolidated do not form part of the company’s financial reporting systems and processes.

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

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

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

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

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

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

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

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

     The company and its subsidiaries’ income tax returns periodically are examined by various tax authorities. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations in a multitude of jurisdictions across our global operations. We recognize potential liabilities and record tax liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional income taxes will be due. We adjust these liabilities in light of changing facts and circumstances. Due to the complexity of some of these uncertainties, however, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities.

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

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

Item 1B. Unresolved Staff Comments

     N/A

Item 2. Properties

     Our registered office is located in Hamilton, Bermuda, and our principal executive offices are in leased office space at 1555 Peachtree Street N.E., Suite 1800, Atlanta, Georgia, 30309, U.S.A. We own office facilities at Perpetual Park, Henley-on-Thames, Oxfordshire, RG9 1HH, United Kingdom, and at 301 W. Roosevelt, Wheaton, Illinois, 60187, and we lease our additional principal offices located at 30 Finsbury Square, London, EC2A 1AG, United Kingdom; 11 Greenway Plaza, Houston, Texas 77046; 1166 Avenue of the Americas, New York, New York 10036; and in Canada at 5140 Yonge Street, Toronto, Ontario M2N 6X7. We lease office space in 17 other countries.

Item 3. Legal Proceedings

     Following the industry-wide regulatory investigations in 2003 and 2004, multiple lawsuits based on market timing allegations were filed against various parties affiliated with Invesco. These lawsuits were consolidated in the United States District Court for the District of Maryland, together with market timing lawsuits brought against affiliates of other mutual fund companies, and on September 29, 2004, three amended complaints were filed against company-affiliated parties: (1) a putative shareholder class action complaint brought on behalf of shareholders of AIM funds formerly advised by Invesco Funds Group, Inc.; (2) a derivative complaint purportedly brought on behalf of certain AIM funds and the shareholders of such funds; and (3) an ERISA complaint purportedly brought on behalf of participants in the company’s 401(k) plan. The company and plaintiffs have reached settlements in principle of these lawsuits. The proposed settlements, which are subject to court approval, call for a payment by the company of $9.8 million, recorded in general and administrative expenses in the Consolidated Statement of Income in 2007, in exchange for dismissal with prejudice of all pending claims. In addition, under the terms of the proposed settlements, the company may incur certain costs in connection with providing notice of the proposed settlements to affected shareholders. Based on information currently available, it is not believed that any such incremental notice costs will have any material effect on the consolidated financial position or results of operations of the company.

     The asset management industry also is subject to extensive levels of ongoing regulatory oversight and examination. In the United States and other jurisdictions in which the company operates, governmental authorities regularly make inquiries, hold investigations and administer market conduct examinations with respect to compliance with applicable laws and regulations. Additional lawsuits or regulatory enforcement actions arising out of these inquiries may in the future be filed against the company and related entities and individuals in the U.S. and other jurisdictions in which the company and its affiliates operate. Any material loss of investor and/or client confidence as a result of such inquiries and/or litigation could result in a significant decline in assets under management, which would have an adverse effect on the company’s future financial results and its ability to grow its business.

     In the normal course of its business, the company is subject to various litigation matters. Although there can be no assurances, at this time management believes, based on information currently available to it, that it is not probable that the ultimate outcome of any of these actions will have a material adverse effect on the consolidated financial condition or results of operations of the company.

Item 4. Submission of Matters to a Vote of Security Holders

     None.

PART II

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

     Invesco Ltd. is organized under the laws of Bermuda, and our common shares are listed and traded on the New York Stock Exchange under the symbol “IVZ.” At January 31, 2010, there were approximately 7,227 holders of record of our common shares.

     Prior to December 4, 2007, we had outstanding ordinary shares that were listed on the Official List of The U.K. Listing Authority and were traded on the London Stock Exchange. We also had American Depositary Shares (ADSs) listed for trading on the NYSE, also under the symbol “IVZ.” Each ADS represented the right to receive two ordinary shares. We also had exchangeable shares, which were issued by one of our subsidiaries and were listed for trading on the Toronto Stock Exchange. Each exchangeable share represented the right to receive one ordinary share.

     On December 4, 2007, we redomiciled the company from the United Kingdom to Bermuda in a transaction previously approved by shareholders. To accomplish this, our predecessor company, INVESCO PLC, effected a court-approved U.K. scheme of arrangement under which our shareholders received common shares in Invesco Ltd., the new Bermuda parent company, in exchange for their ordinary shares in INVESCO PLC. Holders of our ADSs and our exchangeable shares also received common shares in the new Bermuda parent company in exchange for their holdings. Following the redomicile, Invesco Ltd. effected a one-for-two reverse stock split, such that all of our shareholders now hold only common shares, par value $0.20 per share, in Invesco Ltd.

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

		Invesco Ltd.
		Common Shares (or equivalent)
		High				Low				Dividends Declared*
2009
Fourth Quarter		$	23.97			$	20.04			$	0.1025
Third Quarter		$	23.00			$	15.72			$	0.1025
Second Quarter		$	18.73			$	13.60			$	0.1025
First Quarter		$	15.00			$	9.51			$	0.10
2008
Fourth Quarter		$	21.07			$	8.84			$	0.10
Third Quarter		$	27.00			$	20.56			$	0.10
Second Quarter		$	28.80			$	22.31			$	0.10
First Quarter		$	30.66			$	21.43			$	0.22

     The following graph illustrates the cumulative total shareholder return of our common shares (ordinary shares prior to December 4, 2007) over the five-year period ending December 31, 2009, and compares it to the cumulative total return on the Standard and Poor’s (S&P) 500 Index and to a group of peer asset management companies. This table is not intended to forecast future performance of our common shares.

     The chart below illustrates the cumulative total shareholder return of our common shares (ordinary shares prior to December 4, 2007) since the company began executing its multi-year strategic plan, which was designed to enhance long-term investment performance, improve and simplify the operating platform, sharpen the focus on clients and strengthen the business for long-term success.

Note:		Asset Manager Index includes Affiliated Managers Group, Alliance Bernstein, BlackRock, Eaton Vance, Federated Investors, Franklin Resources, Gamco Investors, Invesco Ltd., Janus, Legg Mason, Schroders, T. Rowe Price, and Waddell & Reed.

Important Information Regarding Dividend Payments

     Invesco declares and pays dividends on a quarterly basis in arrears. On October 16, 2009, the company declared a third quarter cash dividend of $0.1025 per Invesco Ltd. common share, which was paid on December 2, 2009, to shareholders of record as of November 18, 2009. On January 27, 2010, the company declared a fourth quarter 2009 cash dividend of $0.1025 per Invesco Ltd. common share, which will be paid on March 10, 2010, to shareholders of record as of February 23, 2010.

     The total dividend attributable to the 2009 fiscal year of $0.41 per share represented a 2.5% increase over the total dividend attributable to the 2008 fiscal year of $0.40 per share. The declaration, payment and amount of any future dividends will be determined by our board of directors and will depend upon, among other factors, our earnings, financial condition and capital requirements at the time such declaration and payment are considered. The board has a policy of managing dividends in a prudent fashion, with due consideration given to profit levels, overall debt levels and historical dividend payouts. See also Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Dividends,” for additional details regarding dividends.

Repurchases of Equity Securities

     The following table shows share repurchase activity during the three months ended December 31, 2009:

														Maximum Number at end of
										Total Number of				period (or Approximate
										Shares Purchased as				Dollar Value) of Shares that
										Part of Publicly				May Yet Be Purchased
		Total Number of				Average Price				Announced Plans				Under the Plans
Month		Shares Purchased (1)				Paid Per Share				or Programs (2)				or Programs (2)
October 1-31, 2009			157,695			$	22.97				—			$	1,360,608,682
November 1-30, 2009			8,720			$	21.15				—			$	1,360,608,682
December 1-31, 2009			7,346			$	23.49				—			$	1,360,608,682

Item 6. Selected Financial Data

     The following tables present selected consolidated financial information for the company as of and for each of the five fiscal years in the period ended December 31, 2009. The consolidated financial information has been prepared in accordance with U.S. generally accepted accounting principles.

		As of and For The Years Ended December 31,
$ in millions, except per share and other data		2009				2008				2007				2006				2005
Operating Data:
Operating revenues			2,627.3				3,307.6				3,878.9				3,246.7				2,872.6
Net revenues*			1,978.7				2,489.4				2,888.4				2,428.0				2,166.6
Operating income			484.3				747.8				994.3				759.2				407.9
Net operating income*			512.7				787.5				1,039.8				762.1				407.9
Operating margin			18.4	%			22.6	%			25.6	%			23.4	%			14.2	%
Net operating margin*			25.9	%			31.6	%			36.0	%			31.4	%			18.8	%
Net income/(loss) attributable to common shareholders			322.5				481.7				673.6				482.7				219.8
Per Share Data:
Earnings per share:
-basic			0.77				1.24				1.68				1.22				0.55
-diluted			0.76				1.21				1.64				1.19				0.54
Dividends declared per share			0.4075				0.520				0.372				0.357				0.330
Balance Sheet Data:
Total assets			10,909.6				9,756.9				12,925.2				12,228.5				10,702.7
Total debt			745.7				1,159.2				1,276.4				1,279.0				1,220.0
Total equity attributable to common shareholders			6,912.9				5,689.5				6,590.6				6,164.0				5,529.8
Total equity			7,620.8				6,596.2				7,711.8				7,668.6				6,730.6
Other Data:
Ending AUM (in billions)		$	423.1			$	357.2			$	500.1			$	462.6			$	386.3
Average AUM (in billions)		$	388.7			$	440.6			$	489.1			$	424.2			$	377.6
Headcount			4,890				5,325				5,475				5,574				5,798

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

Executive Overview

     The following executive overview summarizes the significant trends affecting our results of operations and financial condition for the periods presented. This overview and the remainder of this management’s discussion and analysis supplements, and should be read in conjunction with, the Consolidated Financial Statements of Invesco Ltd. and its subsidiaries (collectively, the “company” or “Invesco”) and the notes thereto contained elsewhere in this Annual Report on Form 10-K.

     Although the global equity markets began to recover after the first quarter of 2009, they began the year under extreme pressure, as illustrated in the table below. It is important to note that the markets remain below their historical highs, with the S&P down 25.73% from October 2007 to January 2010.

     In expectation of volatile financial markets, Invesco senior leadership adopted a disciplined approach to our business beginning in 2008. A key component of this approach was to significantly reduce discretionary spending, freeing resources which enabled the company to reinvest in opportunities that would strengthen our business over the long term and enhance our competitive position. This approach served the company well over the past two years — during which the Dow Jones Industrial Average saw its worst year of performance since 1931 (in 2008), and other markets around the globe suffered significant declines as well.

     After bottoming out in March 2009, global financial markets staged a dramatic recovery with several major global market indices rebounding in record fashion off of record declines in 2008. The response from governments and central banks around the world to the financial crisis in 2008 was an unprecedented amount of monetary and fiscal stimulus. Central banks lowered interest rates to near zero, issued a number of debt guarantees for banks and other non-bank financial institutions, and began to increase the supply of money through open market asset purchases. Additionally, governments around the globe passed legislation that poured billions of dollars into the global economy. These actions alleviated the risk aversion that dominated the latter half of 2008 and as a result financial markets rallied in 2009. The Dow Jones Industrial Average climbed 53.8% off of March lows to finish the year up 22.6%. The NASDAQ Composite Index rebounded 78.9% above its March low to return 45.2% for the full year. The FTSE 100 gained 22.1% in 2009, its largest advance since 1997. The largest returns were found in the emerging markets as the MSCI Emerging Market Index returned 79.0% for the year.

     The dramatic easing of monetary policy also contributed to major improvements in the credit markets. As interest rates remained close to zero investors fled the relative safety of U.S. Treasury securities for riskier asset classes, such as investment grade, high yield, and emerging market bonds, in search of yield. Credit spreads tightened to levels not seen since the bankruptcy of Lehman Brothers in September 2008 providing corporations around the world access to capital markets. Additionally, the U.S. dollar weakened from March until December as investors redeployed from the relative safety of U.S. Treasury securities into non-U.S. investments.

     In spite of the difficult operating environment over the past year, Invesco continued to make progress in a number of areas that further positioned our company for a time when the markets return. Throughout the course of 2009, the company’s financial performance strengthened. In addition, during this period, Invesco continued to strengthen its competitive position with respect to investment performance, maintain its focus on its clients, and enhance its profile in the industry.

     A critical factor in Invesco’s ability to weather the economic storms of the past two years was our integrated approach to risk management. Our risk management framework provides the basis for consistent and meaningful risk dialogue up, down and across the company. Our Global Performance Measurement and Risk group provides senior management and the Board with insight into core investment risks, while our Corporate Risk Management Committee facilitates a focus on strategic, operational and all other business risks. Further, a network of business unit, functional and geographic risk management committees maintains an ongoing risk assessment process that provides a bottom-up perspective on the specific risk areas existing in various domains of our business. Through this regular and consistent risk communication, the Board has reasonable assurance that all material risks of the company are being addressed and that the company is propagating a risk-aware culture in which good risk management is built into the fabric of the business.

     In addition, we benefited from having a diversified asset base. One of Invesco’s core strengths and a key differentiator for the company within the industry is our broad diversification across client domiciles, asset classes and distribution channels. Our geographical diversification recognizes growth opportunities in different parts of the world. Invesco is also diversified by asset class, with 41% of our assets under management in equities and the remaining 59% covering the risk spectrum from alternatives to money market. Invesco’s assets are roughly split between retail and institutional, and the private wealth management channel provides further diversification. This broad diversification enables Invesco to weather different market cycles and take advantage of growth opportunities in various markets and channels.

     A significant portion of our business and assets under management (AUM) is based outside of the U.S. The strengthening or weakening of the U.S. dollar against other currencies, primarily the Pound Sterling and the Canadian dollar, will impact our reported revenues and expenses from period to period. Additionally, our revenues are directly influenced by the level and composition of our AUM. Therefore, movements in global capital market levels, net new business inflows (or outflows) and changes in the mix of investment products between asset classes and geographies may materially affect our revenues from period to period. The returns from most global capital markets increased in the three months and year ended December 31, 2009, which also contributed to net increases in AUM of $6.2 billion and $65.9 billion during the respective periods. AUM at January 31, 2010, was $412.6 billion.

     Summary operating information for 2009 and 2008 is presented in the table below.

		Year ended December 31,
		2009				2008
Operating revenues		$	2,627.3	m		$	3,307.6	m
Net revenues(1)		$	1,978.7	m		$	2,489.4	m
Operating margin			18.4	%			22.6	%
Net operating margin(2)			25.9	%			31.6	%
Net income attributable to common shareholders		$	322.5	m		$	481.7	m
Diluted EPS		$	0.76			$	1.21
Average assets under management (in billions)		$	388.7			$	440.6

     On October 19, 2009, the company announced that it entered into a definitive agreement to acquire Morgan Stanley’s retail asset management business, including Van Kampen Investments. The transaction was valued at $1.5 billion (subject to adjustment), consisting of payments by Invesco of $500.0 million in cash and an aggregate of approximately 44.1 million Invesco common shares and non-voting common equivalent preferred shares, which will result in Morgan Stanley obtaining an approximately 9.3% equity interest in our company. The transaction has been approved by the boards of directors of both companies and is expected to close in mid-2010, subject to customary regulatory, client and fund shareholder approvals.

Investment Capabilities Performance Overview

     Invesco’s first strategic priority is to achieve strong investment performance over the long-term for our clients. Performance in our equities capabilities, as measured by the percentage of AUM ahead of benchmark and ahead of peer median, is generally strong with some pockets of outstanding performance. Within our equity asset class, U.S. Core, U.K., Asian, European, and Global ex-U.S. and Emerging Markets have had strong relative performance versus competitors and versus benchmark over three- and five-year periods. Within our fixed income asset class, products have achieved strong long-term performance with at least 62% of AUM ahead of benchmarks and 70% of AUM ahead of peers on a 3-year and 5-year basis.

				Benchmark Comparison												Peer Group Comparison
				% of AUM Ahead of												% of AUM In Top Half of
				Benchmark												Peer Group
				1yr				3yr				5yr				1yr				3yr				5yr
Equities		U.S. Core			40	%			93	%			96	%			33	%			65	%			89	%
		U.S. Growth			20	%			19	%			69	%			20	%			19	%			32	%
		U.S. Value			96	%			94	%			22	%			83	%			10	%			7	%
		Sector			84	%			76	%			75	%			79	%			66	%			57	%
		U.K.			0	%			91	%			91	%			0	%			90	%			92	%
		Canadian			38	%			29	%			26	%			38	%			2	%			23	%
		Asian			50	%			85	%			85	%			53	%			72	%			81	%
		Continental European			46	%			74	%			91	%			38	%			61	%			63	%
		Global			62	%			48	%			78	%			47	%			33	%			17	%
		Global Ex U.S. and Emerging Markets			96	%			95	%			97	%			96	%			98	%			63	%
Balanced		Balanced			86	%			55	%			60	%			52	%			43	%			52	%
Fixed Income		Money Market			70	%			71	%			69	%			88	%			95	%			95	%
		U.S. Fixed Income			78	%			62	%			72	%			32	%			70	%			70	%
		Global Fixed Income			83	%			64	%			80	%			91	%			77	%			76	%

Note:		AUM measured in the one-, three-, and five-year peer group rankings represents 69%, 68%, and 65% of total Invesco AUM, respectively, and AUM measured versus benchmark on a one-, three-, and five-year basis represents 84%, 82%, and 75% of total Invesco AUM, respectively, as of 12/31/09. Peer group rankings are sourced from a widely-used third party ranking agency in each fund’s market (Lipper, Morningstar, Russell, Mercer, eVestment Alliance, SITCA) and asset-weighted in USD. Rankings are as of prior quarter-end for most institutional products and prior month-end for Australian retail funds due to their late release by third parties. Rankings for the most representative fund in each GIPS composite are applied to all products within each GIPS composite. Excludes Invesco PowerShares, W.L. Ross & Co., Invesco Private Capital, non-discretionary direct real estate products and CLOs. Certain funds and products were excluded from the analysis because of limited benchmark or peer group data. Had these been available, results may have been different. These results are preliminary and subject to revision. Performance assumes the reinvestment of dividends. Past performance is not indicative of future results and may not reflect an investor’s experience.

     Assets Under Management

     AUM at December 31, 2009, were $423.1 billion, compared to $357.2 billion at December 31, 2008. The increase in AUM during the year was due to $46.1 billion in increased market values, $10.9 billion impact of more favorable foreign exchange rates, and total net inflows of $8.9 billion (long-term net flows plus net flows in institutional money market funds). Average AUM for 2009 were $388.7 billion, compared to $440.6 billion in 2008. Our retail total net inflows for 2009 were $11.0 billion, compared to total net outflows of $10.6 billion in 2008. Institutional net outflows were $2.5 billion in 2009, compared to total net outflows of $3.1 billion in 2008. Our Private Wealth Management (PWM) channel had total net inflows of $0.4 billion in 2009 compared to total net inflows of $0.2 billion in 2008.

     Net revenue yield on AUM declined 5.6 basis points to 50.9 basis points in the year ended December 31, 2009, from the year ended December 31, 2008, level of 56.5 basis points, resulting from market driven changes in our asset mix and an 11.8% decline in average AUM from the year ended December 31, 2008. Our equity AUM generally earn a higher net revenue rate than money market AUM. Net revenues declined 20.5% during the year ended December 31, 2009, compared to the year ended December 31, 2008. Gross revenue yield on AUM declined 7.6 basis points to 68.2 basis points in the year ended December 31, 2009, from the year ended December 31, 2008, level of 75.8 basis points. See “Schedule of Non-GAAP Information” for a reconciliation of operating revenues (gross revenues) to net revenues.

     Changes in AUM were as follows:

$ in billions		2009				2008				2007
January 1,		$	357.2			$	500.1			$	462.6
Long-term inflows			71.2				72.7				119.9
Long-term outflows			(62.2	)			(94.6	)			(123.3	)
Long-term net flows			9.0				(21.9	)			(3.4	)
Net flows in money market funds			(0.1	)			8.4				10.1
Market gains and losses/reinvestment			46.1				(102.8	)			20.0
Foreign currency translation			10.9				(26.6	)			10.8
December 31,		$	423.1			$	357.2			$	500.1
Average long-term AUM		$	301.7			$	360.8			$	424.2
Average institutional money market AUM			87.0				79.8				64.9
Average AUM		$	388.7			$	440.6			$	489.1
Gross revenue yield on AUM(1)		68.2bps				75.8bps				80.0bps
Gross revenue yield on AUM before performance fees(1)		67.5bps				74.1bps				78.5bps
Net revenue yield on AUM (annualized)(2)		50.9bps				56.5bps				59.1bps
Net revenue yield on AUM before performance fees (annualized)(2)		50.1bps				54.8bps				57.7bps

Our AUM by channel, by asset class, and by client domicile were as follows:

AUM by Channel

$ in billions		Total				Retail				Institutional				PWM
January 1, 2007(a) AUM		$	462.6			$	238.9			$	207.1			$	16.6
Long-term inflows			119.9				86.6				28.2				5.1
Long-term outflows			(123.3	)			(80.6	)			(37.4	)			(5.3	)
Long-term net flows			(3.4	)			6.0				(9.2	)			(0.2	)
Net flows in money market funds			10.1				(0.3	)			10.4				—
Market gains and losses/reinvestment			20.0				11.3				7.8				0.9
Foreign currency translation			10.8				8.5				2.3				—
December 31, 2007(a) AUM		$	500.1			$	264.4			$	218.4			$	17.3
Long-term inflows			72.7				48.1				19.7				4.9
Long-term outflows			(94.6	)			(58.7	)			(31.2	)			(4.7	)
Long-term net flows			(21.9	)			(10.6	)			(11.5	)			0.2
Net flows in money market funds			8.4				—				8.4				—
Market gains and losses/reinvestment			(102.8	)			(79.2	)			(19.4	)			(4.2	)
Foreign currency translation			(26.6	)			(25.3	)			(1.3	)			—
December 31, 2008(a) AUM		$	357.2			$	149.3			$	194.6			$	13.3
Long-term inflows			71.2				50.6				15.7				4.9
Long-term outflows			(62.2	)			(39.6	)			(18.1	)			(4.5	)
Long-term net flows			9.0				11.0				(2.4	)			0.4
Net flows in money market funds			(0.1	)			—				(0.1	)			—
Market gains and losses/reinvestment			46.1				37.0				7.6				1.5
Foreign currency translation			10.9				9.6				1.3				—
December 31, 2009 AUM		$	423.1			$	206.9			$	201.0			$	15.2

AUM by Asset Class

										Fixed								Money
$ in billions		Total				Equity				Income				Balanced				Market				Alternatives(b)
January 1, 2007(a) AUM		$	462.6			$	214.3			$	84.0			$	46.6			$	65.3			$	52.4
Long-term inflows			119.9				74.6				14.7				10.1				1.5				19.0
Long-term outflows			(123.3	)			(64.2	)			(35.1	)			(9.6	)			(2.1	)			(12.3	)
Long-term net flows			(3.4	)			10.4				(20.4	)			0.5				(0.6	)			6.7
Net flows in money market funds			10.1				(0.6	)			0.2				(1.3	)			10.6				1.2
Market gains and losses/reinvestment			20.0				14.1				3.7				0.2				—				2.0
Foreign currency translation			10.8				6.5				1.3				2.8				0.1				0.1
December 31, 2007(a) AUM		$	500.1			$	244.7			$	68.8			$	48.8			$	75.4			$	62.4
Long-term inflows			72.7				38.2				13.8				9.0				3.7				8.0
Long-term outflows			(94.6	)			(52.8	)			(17.4	)			(10.3	)			(3.7	)			(10.4	)
Long-term net flows			(21.9	)			(14.6	)			(3.6	)			(1.3	)			—				(2.4	)
Net flows in money market funds			8.4				—				—				—				8.4				—
Market gains and losses/reinvestment			(102.8	)			(84.5	)			(1.3	)			(10.2	)			0.7				(7.5	)
Foreign currency translation			(26.6	)			(18.0	)			(2.4	)			(4.5	)			(0.3	)			(1.4	)
December 31, 2008(a) AUM		$	357.2			$	127.6			$	61.5			$	32.8			$	84.2			$	51.1
Long-term inflows			71.2				35.2				19.1				8.2				2.2				6.5
Long-term outflows			(62.2	)			(31.9	)			(12.5	)			(7.9	)			(3.1	)			(6.8	)
Long-term net flows			9.0				3.3				6.6				0.3				(0.9	)			(0.3	)
Net flows in money market funds			(0.1	)			—				—				—				(0.1	)			—
Market gains and losses/reinvestment			46.1				35.9				5.8				6.0				0.1				(1.7	)
Foreign currency translation			10.9				6.6				1.3				2.4				0.2				0.4
December 31, 2009 AUM		$	423.1			$	173.4			$	75.2			$	41.5			$	83.5	(c)		$	49.5

AUM by Client Domicile

																		Continental
$ in billions		Total				U.S.				Canada				U.K.				Europe				Asia
January 1, 2007(a) AUM		$	462.6			$	280.3			$	43.3			$	73.8			$	38.6			$	26.6
Long-term inflows			119.9				48.2				6.7				22.0				21.4				21.6
Long-term outflows			(123.3	)			(64.7	)			(6.8	)			(10.0	)			(25.6	)			(16.2	)
Long-term net flows			(3.4	)			(16.5	)			(0.1	)			12.0				(4.2	)			5.4
Net flows in money market funds			10.1				11.0				—				0.2				(0.5	)			(0.6	)
Market gains and losses/reinvestment			20.0				14.9				(4.1	)			2.7				1.8				4.7
Foreign currency translation			10.8				—				7.6				0.4				2.0				0.8
December 31, 2007(a) AUM		$	500.1			$	289.7			$	46.7			$	89.1			$	37.7			$	36.9
Long-term inflows			72.7				36.2				2.9				17.2				10.0				6.4
Long-term outflows			(94.6	)			(46.4	)			(9.7	)			(9.9	)			(16.8	)			(11.8	)
Long-term net flows			(21.9	)			(10.2	)			(6.8	)			7.3				(6.8	)			(5.4	)
Net flows in money market funds			8.4				4.5				—				0.2				1.2				2.5
Market gains and losses/reinvestment			(102.8	)			(51.5	)			(8.5	)			(21.5	)			(8.1	)			(13.2	)
Foreign currency translation			(26.6	)			—				(7.3	)			(18.4	)			(1.6	)			0.7
December 31, 2008(a) AUM		$	357.2			$	232.5			$	24.1			$	56.7			$	22.4			$	21.5
Long-term inflows			71.2				33.9				2.0				18.5				9.8				7.0
Long-term outflows			(62.2	)			(31.1	)			(5.3	)			(8.4	)			(9.9	)			(7.5	)
Long-term net flows			9.0				2.8				(3.3	)			10.1				(0.1	)			(0.5	)
Net flows in money market funds			(0.1	)			2.9				—				(0.1	)			(1.4	)			(1.5	)
Market gains and losses/reinvestment			46.1				19.5				4.3				12.1				2.8				7.4
Foreign currency translation			10.9				—				3.9				5.7				0.7				0.6
December 31, 2009 AUM		$	423.1			$	257.7			$	29.0			$	84.5			$	24.4			$	27.5

Results of Operations

Results of Operations for the Year Ended December 31, 2009, Compared with the Year Ended December 31, 2008

Operating Revenues and Net Revenues

     Operating revenues decreased by 20.6% in 2009 to $2,627.3 million (2008: $3,307.6 million). Net revenues are operating revenues less third-party distribution, service and advisory expenses, plus our proportional share of net revenues from joint venture arrangements. Net revenues decreased by 20.5% in 2009 to $1,978.7 million (2008: $2,489.4 million). See “Schedule of Non-GAAP Information” for additional important disclosures regarding the use of net revenues. A significant portion of our business and managed AUM are based outside of the U.S. The income statements of foreign currency subsidiaries are translated into U.S. dollars, the reporting currency of the company, using average foreign exchange rates. Over the course of the year, the average U.S. dollar foreign exchange rate was stronger when compared to other currencies, primarily the Pound Sterling, Canadian dollar and Euro, which impacted our reported revenues for the year ended December 31, 2009, as compared to the year ended December 31, 2008. The impact of foreign exchange rate movements resulted in $152.0 million (22.3%) of the decline in operating revenues during the year ended December 31, 2009. Additionally, our revenues are directly influenced by the level and composition of our AUM as more fully discussed below. Movements in global capital market levels, net new business inflows (or outflows) and changes in the mix of investment products between asset classes and geographies may materially affect our revenues from period to period.

     The main categories of revenues, and the dollar and percentage change between the periods, are as follows:

$ in millions		2009				2008				$ Change				%Change
Investment management fees			2,120.2				2,617.8				(497.6	)			(19.0	)%
Service and distribution fees			412.6				512.5				(99.9	)			(19.5	)%
Performance fees			30.0				75.1				(45.1	)			(60.1	)%
Other			64.5				102.2				(37.7	)			(36.9	)%
Total operating revenues			2,627.3				3,307.6				(680.3	)			(20.6	)%
Third-party distribution, service and advisory expenses			(693.4	)			(875.5	)			182.1				(20.8	)%
Proportional share of revenues, net of third-party distribution expenses, from joint venture investments			44.8				57.3				(12.5	)			(21.8	)%
Net revenues			1,978.7				2,489.4				(510.7	)			(20.5	)%

Investment Management Fees

     Investment management fees are derived from providing professional services to manage client accounts and include fees earned from retail mutual funds, unit trusts, investment companies with variable capital (ICVCs), exchange-traded funds, investment trusts and institutional and private wealth management advisory contracts. Investment management fees for products offered in the retail distribution channel are generally calculated as a percentage of the daily average asset balances and therefore vary as the levels of AUM change resulting from inflows, outflows and market movements. Investment management fees for products offered in the institutional and private wealth management distribution channels are calculated in accordance with the underlying investment management contracts and also vary in relation to the level of client assets managed.

     Investment management fees decreased 19.0% in 2009 to $2,120.2 million (2008: $2,617.8 million) due to decreases in average AUM during the year, changes in the mix of AUM between various asset classes, and foreign exchange rate movements. Average AUM for the year ended December 31, 2009, were $388.7 billion (2008: $440.6 billion), a decrease of 11.8%. Average long-term AUM, which generally earn higher fee rates than institutional money market AUM, for the year ended December 31, 2009, were $301.7 billion, a decrease of 16.4% from $360.8 billion for the year ended December 31, 2008, while average institutional money market AUM increased 9.0% to $87.0 billion at December 31, 2009, from $79.8 billion for the year ended December 31, 2008.

Service and Distribution Fees

     Service fees are generated through fees charged to cover several types of expenses, including fund accounting fees and other maintenance costs for mutual funds, unit trusts and ICVCs, and administrative fees earned from closed-ended funds. Service fees also include transfer agent fees, which are fees charged to cover the expense of processing client share purchases and redemptions, call center support and client reporting. U.S. distribution fees can include 12b-1 fees earned from certain mutual funds to cover allowable sales and marketing expenses for those funds and also include asset-based sales charges paid by certain mutual funds for a period of time after the sale of those funds. Distribution fees typically vary in relation to the amount of client assets managed. Generally, retail products offered outside of the U.S. do not generate a separate distribution fee, as the quoted management fee rate is inclusive of these services.

     In 2009, service and distribution fees decreased 19.5% to $412.6 million (2008: $512.5 million) primarily due to decreases in average AUM during the year. Included in the decline in service and distribution fees in the three months ended December 31, 2009, was a reduction of $5.4 million reflecting the full-year impact of a reduction in transfer agency and administrative revenues in Canada, as certain fund expense recovery limits were reached.

Performance Fees

     Performance fee revenues are generated on certain management contracts when performance hurdles are achieved. Such fee revenues are recorded in operating revenues as of the performance measurement date, when the contractual performance criteria have been met and when the outcome of the transaction can be measured reliably in accordance with Method 1 of ASC Topic 605-20-S99, “Revenue Recognition — Services — SEC Materials.” Cash receipt of earned performance fees occurs after the measurement date. The performance measurement date is defined in each contract in which incentive and performance fee revenue agreements are in effect, and therefore we have performance fee arrangements that include monthly, quarterly and annual measurement dates. Given the uniqueness of each transaction, performance fee contracts are evaluated on an individual basis to determine if revenues can and should be recognized. Performance fees are not recorded if there are any future performance contingencies. If performance

arrangements require repayment of the performance fee for failure to perform during the contractual period, then performance fee revenues are recognized no earlier than the expiration date of these terms. Performance fees will fluctuate from period to period and may not correlate with general market changes, since most of the fees are driven by relative performance to the respective benchmark rather than by absolute performance. Additionally, of our $423.1 billion in AUM at December 31, 2009, only approximately $30.0 billion, or 7.1%, could potentially earn performance fees.

     In 2009, performance fees decreased 60.1% to $30.0 million (2008: $75.1 million). The performance fees generated in 2009 arose primarily due to products managed by the Invesco Global Strategies group ($2.4 million), Invesco Perpetual ($13.4 million), and Atlantic Trust ($5.7 million). The performance fees generated in 2008 arose primarily due to products managed by the Invesco Global Strategies ($22.3 million) and Real Estate ($14.5 million) groups, as well as by Invesco Perpetual ($21.1 million).

Other Revenues

     Other revenues include fees derived primarily from transaction commissions earned upon the sale of new investments into certain of our funds and fees earned upon the completion of transactions in our direct real estate and private equity asset groups. Real estate transaction fees are derived from commissions earned through the buying and selling of properties. Private equity transaction fees include commissions associated with the restructuring of, and fees from providing advice to, portfolio companies held by the funds. These transaction fees are recorded in our financial statements on the date when the transactions are legally closed. Other revenues also include the revenues of consolidated investment products.

     In 2009, other revenues decreased 36.9% to $64.5 million (2008: $102.2 million), driven by decreases in transaction commissions, due to the tightening of the credit markets and fewer real estate transactions, and foreign exchange rate movements.

Third-Party Distribution, Service and Advisory Expenses

     Third-party distribution, service and advisory expenses include periodic “renewal” commissions paid to brokers and independent financial advisors for their continuing oversight of their clients’ assets, over the time they are invested, and are payments for the servicing of client accounts. Renewal commissions are calculated based upon a percentage of the AUM value. Third-party distribution expenses also include the amortization of upfront commissions paid to broker-dealers for sales of fund shares with a contingent deferred sales charge (a charge levied to the investor for client redemption of AUM within a certain contracted period of time). The distribution commissions are amortized over the redemption period. Also included in third-party distribution, service and advisory expenses are sub-transfer agency fees that are paid to third parties for processing client share purchases and redemptions, call center support and client reporting. Third-party distribution, service and advisory expenses may increase or decrease at a rate different from the rate of change in service and distribution fee revenues due to the inclusion of distribution, service and advisory expenses for the U.K. and Canada, where the related revenues are recorded as investment management fee revenues, as noted above.

     Third-party distribution, service and advisory expenses decreased 20.8% in 2009 to $693.4 million (2008: $875.5 million), consistent with the declines in investment management and service and distribution fee revenues.

Proportional share of revenues, net of third-party distribution expenses, from joint venture investments

     Management believes that the addition of our proportional share of revenues, net of third-party distribution expenses, from joint venture arrangements should be added to operating revenues to arrive at net revenues, as it is important to evaluate the contribution to the business that our joint venture arrangements are making. See “Schedule of Non-GAAP Information” for additional disclosures regarding the use of net revenues. The company’s most significant joint venture arrangement is our 49.0% investment in Invesco Great Wall Fund Management Company Limited (the “Invesco Great Wall” joint venture).

     The 21.8% decrease in our proportional share of revenues, net of third-party distribution expenses, to $44.8 million in 2009 (2008: $57.3 million), is driven by the declines in average AUM of the Invesco Great Wall joint venture. Our share of the Invesco Great Wall joint venture’s average AUM at December 31, 2009, was $3.7 billion, a 17.8% decline in average AUM from $4.5 billion at December 31, 2008.

Operating Expenses

     During 2009, operating expenses decreased 16.3% to $2,143.0 million (2008: $2,559.8 million), reflecting declines in all cost categories from 2008 expense levels. As discussed above, a significant portion of our business and managed AUM are based outside of the U.S. The income statements of foreign currency subsidiaries are translated into U.S. dollars, the reporting currency of the company, using average foreign exchange rates. Over the course of the year, the average U.S. dollar foreign exchange rate was stronger when compared to other currencies, primarily the Pound Sterling, Canadian dollar and Euro, which impacted our reported expenses for the year ended December 31, 2009, as compared to the year ended December 31, 2008. The impact of foreign exchange rate movements resulted in $108.0 million (25.9%) of the decline in operating expenses during the year ended December 31, 2009. Additionally, operating expenses were lower in 2009 as compared to 2008 reflecting the impact of general cost containment measures and costs that move in line with revenues.

     The main categories of operating expenses are as follows:

$ in millions		2009				2008				$ Change				% Change
Employee compensation			950.8				1,055.8				(105.0	)			(9.9	)%
Third-party distribution, service and advisory			693.4				875.5				(182.1	)			(20.8	)%
Marketing			108.9				148.2				(39.3	)			(26.5	)%
Property, office and technology			212.3				214.3				(2.0	)			(0.9	)%
General and administrative			166.8				266.0				(99.2	)			(37.3	)%
Transaction and integration			10.8				—				10.8				N/A
Total operating expenses			2,143.0				2,559.8				(416.8	)			(16.3	)%

     The table below sets forth these expense categories as a percentage of total operating expenses and operating revenues, which we believe provides useful information as to the relative significance of each type of expense.

						% of Total				% of								% of Total				% of
						Operating				Operating								Operating				Operating
$ in millions		2009				Expenses				Revenues				2008				Expenses				Revenues
Employee compensation			950.8				44.4	%			36.2	%			1,055.8				41.2	%			31.9	%
Third-party distribution, service and advisory			693.4				32.3	%			26.4	%			875.5				34.2	%			26.5	%
Marketing			108.9				5.1	%			4.1	%			148.2				5.8	%			4.5	%
Property, office and technology			212.3				9.9	%			8.1	%			214.3				8.4	%			6.5	%
General and administrative			166.8				7.8	%			6.3	%			266.0				10.4	%			8.0	%
Transaction and integration			10.8				0.5	%			0.4	%			—				—				—
Total operating expenses			2,143.0				100.0	%			81.5	%			2,559.8				100.0	%			77.4	%

Employee Compensation

     Employee compensation includes salary, cash bonuses and share-based payment plans designed to attract and retain the highest caliber employees. Employee staff benefit plan costs and payroll taxes are also included in employee compensation.

     Employee compensation decreased $105.0 million, or 9.9%, in 2009 from 2008 due predominantly to overall decreases in variable compensation, including decreases in discretionary and investment performance-based staff bonuses, decreases in base salary costs resulting from decreases in headcount, and foreign exchange rate movements. Headcount declined 8.2% to 4,890 at December 31, 2009 from 5,325 at December 31, 2008. Included in compensation expenses during the year ended December 31, 2009, are share-based payment costs of $90.8 million, compared to $97.7 million during the year ended December 31, 2008. Additionally, employee compensation costs for the years ended December 31, 2009 and 2008, included $20.0 million of prepaid compensation amortization expenses related to the 2006 acquisition of W.L. Ross & Co. This expense amortization will continue through 2010, and the acquisition-related asset will be fully amortized by the third quarter of 2011.

     Compensation expenses in the three months ended December 31, 2009, included a $4.1 million increase in pension costs related to the plans’ actuarial annual valuation updates and a $4.3 million increase in payroll taxes associated with the vesting of share-based payment awards.

Third-Party Distribution, Service and Advisory Expenses

     Third-party distribution, service and advisory expenses are discussed above in the operating and net revenues section.

Marketing

     Marketing expenses include marketing support payments, which are payments made to distributors of certain of our retail products over and above the 12b-1 distribution payments. These fees are contracted separately with each distributor. Marketing expenses also include the cost of direct advertising of our products through trade publications, television and other media, and public relations costs, such as the marketing of the company’s products through conferences or other sponsorships, and the cost of marketing-related employee travel.

     Marketing expenses decreased 26.5% in 2009 to $108.9 million (2008: $148.2 million) due to decreased marketing support payments related to the decline in average AUM in the U.S., a lower level of advertising, and a reduction in marketing-related travel costs.

Property, Office and Technology

     Property, office and technology expenses include rent and utilities for our various leased facilities, depreciation of company-owned property and capitalized computer equipment costs, minor non-capitalized computer equipment and software purchases and related maintenance payments, and costs related to externally provided operations, technology, and other back office management services.

     Property, office and technology costs decreased 0.9% to $212.3 million in 2009 from $214.3 million in 2008. Decreases in technology costs resulting from general disciplined expense management measures and foreign exchange rate movement were offset by increases in property and office costs during the year. Property and office expenses for the year ended December 31, 2009, included $12.0 million in charges relating to vacating leased property, including our Denver, Colorado, operations facility. Property and office expenses during 2008 included a $5.1 million rent charge related to vacating leased property, offset by downward adjustments in rent costs for sublet office property of $8.2 million. Property, office and technology costs increased in the three months ended December 31, 2009, primarily due to the outsourcing of facilities management in North America and the significant growth of the Hyderabad, India, facility.

General and Administrative

     General and administrative expenses include professional services costs, such as information service subscriptions, consulting fees, professional insurance costs, audit, tax and legal fees, non-marketing related employee travel expenditures, recruitment and training costs, and the amortization of certain intangible assets.

     General and administrative expenses decreased by $99.2 million (37.3%) to $166.8 million in 2009 from $266.0 million in 2008, due to several factors including an insurance recovery of $9.5 million related to legal costs associated with the market-timing regulatory settlement, foreign exchange rate movement, and general disciplined expense management measures, including reduced travel and entertainment and professional services expenses recorded during the year ended December 31, 2009.

Transaction and integration

     Transaction and integration expenses include acquisition-related charges incurred during the period to effect a business combination, including legal, regulatory, advisory, valuation, and other professional or consulting fees, general and administrative costs, including travel costs related to the transaction and the costs of temporary staff involved in executing the transaction, and post-closing costs of integrating the acquired business into the company’s existing operations.

     Transaction and integration charges were $10.8 million in 2009 ($9.8 million of these costs were recorded in the three months ended December 31, 2009) and relate to the pending acquisition of Morgan Stanley’s retail asset management business, including Van Kampen Investments. The acquisition was announced in October 2009 and is expected to close in mid-2010. These costs are currently estimated to be less than $175 million, including those costs incurred in 2009, and are expected to continue to be incurred during 2010-2011. At the time of the announcement of the transaction, the transaction and integration costs were estimated to be approximately $125 million. One of the largest anticipated post-closing expenses of integrating the acquired business into the company’s existing operations relates to the costs of proxy solicitation of fund shareholders. Our estimates of these charges could continue to increase as additional resources are devoted to obtaining the required votes as early as practicable before the end of the second quarter of 2010, as desired.

Operating Income, Net Operating Income, Operating Margin and Net Operating Margin

     Operating income decreased 35.2% to $484.3 million in 2009 from $747.8 million in 2008, driven by the declines in operating revenues from reduced AUM. As a result of the decline in our operating revenues, the following measures have also declined in 2009: operating margin, net operating income, and net operating margin. Operating margin (operating income divided by operating revenues) was 18.4% in 2009, down from 22.6% in 2008. Net operating income (operating income plus our proportional share of the operating income from joint venture arrangements) decreased 34.9% to $512.7 million in 2009 from $787.5 million in 2008. Net operating margin was 25.9% in 2009, down from 31.6% in 2008. Net operating margin is equal to net operating income divided by net revenues. Net revenues are equal to operating revenues less third-party distribution, service and advisory expenses, plus our proportional share of the net revenues from our joint venture arrangements. See “Schedule of Non-GAAP Information” for a reconciliation of operating revenues to net revenues, a reconciliation of operating income to net operating income and additional important disclosures regarding net revenues, net operating income and net operating margins.

Other Income and Expenses

     Equity in earnings of unconsolidated affiliates decreased by $19.8 million (42.3%) to $27.0 million in the year ended December 31, 2009 (December 31, 2008: $46.8 million), resulting primarily from declines in our share of the pre-tax earnings of our joint venture investments in China as well as net losses in certain of our partnership investments.

     Interest income decreased 73.7% to $9.8 million in 2009 from $37.2 million in 2008 due to the combination of lower interest rates and lower average cash and cash equivalents balances in 2009. The decrease in yields was consistent with the market movement from 2008 to 2009. Interest expense decreased 16.1% to $64.5 million in 2009 from $76.9 million in 2008 due to decreases in the average debt balance in 2009.

     Other gains and losses, net were a net gain of $7.8 million in 2009, compared to a net loss of $39.9 million in 2008. Included in the net gain is a gross gain generated upon the debt tender offer of $4.3 million ($3.3 million net of related expenses) and net gain of $4.3 million realized upon the disposal of other investments (2008: $7.4 million gain on maturity of a CLO investment, offset by a loss of $4.1 million realized upon the disposal of a private equity investment). The 2009 net gain also included $5.2 million in other-than-temporary impairment charges related to the valuations of investments in certain of our CLO products (2008: $22.7 million) and $3.0 million in other-than-temporary impairment charges related to other seed money in affiliated funds (2008: $8.5 million). The CLO impairments arose principally from adverse changes in the timing of estimated cash flows used in the valuation models. In the year ended December 31, 2009, we also benefited from $8.4 million in net foreign exchange gains whereas in 2008, we incurred $13.0 million in net foreign exchange losses. See Item 8, “Financial Statements and Supplementary Data — Note 13, Other Gains and Losses, Net,” for additional details related to other gains and losses.

     Included in other income and expenses are net realized and unrealized gains of consolidated investment products. In 2009, the net losses of consolidated investment products were $106.9 million, compared to net losses of $58.0 million in 2008, reflecting the changes in market values of the investments held by consolidated investment products. Invesco invests in only a small equity portion of these products, and as a result these losses are offset by noncontrolling interests of $113.9 million, resulting in a net impact to the company of $7.0 million.

Income Tax Expense

     Our subsidiaries operate in several taxing jurisdictions around the world, each with its own statutory income tax rate. As a result, our effective tax rate will vary from year to year depending on the mix of the profits and losses of our subsidiaries. The majority of our profits are earned in the U.S., Canada and the U.K. The current U.K. statutory tax rate is 28%, the Canadian statutory tax rate is 33% and the U.S. Federal statutory tax rate is 35%.

     Our effective tax rate, excluding noncontrolling interests in consolidated entities, for 2009 was 31.5%, down from 32.9% for 2008. The rate decrease was primarily due to the mix of pre-tax income and a larger benefit from the release of provisions for uncertain tax positions in 2009 versus 2008. The rate decrease was partially offset by an increase in the net valuation allowance for subsidiary operating losses and additional state taxes.

     The inclusion of income from noncontrolling interests in consolidated entities increased our effective tax rate to 41.5% in 2009 and to 35.9% in 2008.

Results of Operations for the Year Ended December 31, 2008, Compared with the Year Ended December 31, 2007

Operating Revenues and Net Revenues

     Operating revenues decreased by 14.7% in 2008 to $3,307.6 million (2007: $3,878.9 million). Net revenues are operating revenues less third-party distribution, service and advisory expenses, plus our proportional share of net revenues from joint venture arrangements. Net revenues decreased by 13.8% in 2008 to $2,489.4 million (2007: $2,888.4 million). See “Schedule of Non-GAAP Information” for additional important disclosures regarding the use of net revenues.

     The main categories of revenues, and the dollar and percentage change between the periods, are as follows:

$ in millions		2008				2007				$ Change				% Change
Investment management fees			2,617.8				3,080.1				(462.3	)			(15.0	)%
Service and distribution fees			512.5				593.1				(80.6	)			(13.6	)%
Performance fees			75.1				70.3				4.8				6.8	%
Other			102.2				135.4				(33.2	)			(24.5	)%
Total operating revenues			3,307.6				3,878.9				(571.3	)			(14.7	)%
Third-party distribution, service and advisory expenses			(875.5	)			(1,051.1	)			175.6				(16.7	)%
Proportional share of revenues, net of third-party distribution expenses, from joint venture investments			57.3				60.6				(3.3	)			(5.4	)%
Net revenues			2,489.4				2,888.4				(399.0	)			(13.8	)%

Investment Management Fees

     Investment management fees decreased 15.0% in 2008 to $2,617.8 million (2007: $3,080.1 million) due to decreases in average AUM during the year and the mix of AUM between various asset classes. Average AUM for the year ended December 31, 2008, were $440.6 billion (2007: $489.1 billion), a decrease of 9.9%. Average long-term AUM, which generally earn higher fee rates than institutional money market AUM, for the year ended December 31, 2008, were $360.8 billion, a decrease of 14.9% from $424.2 billion for the year ended December 31, 2007, while average institutional money market AUM increased 23.0% to $79.8 billion at December 31, 2008, from $64.9 billion for the year ended December 31, 2007. In addition, our equity AUM as a percentage of total AUM fell from 49% at December 31, 2007, to 36% at December 31, 2008. This decline in equities within our asset mix was consistent with the decline in global equity markets.

Performance Fees

     In 2008, these fees increased 6.8% to $75.1 million (2007: $70.3 million). The performance fees generated in 2008 arose primarily in the Invesco Quantitative Strategies and Real Estate groups, as well as in the U.K.; whereas the performance fees generated in 2007 included amounts generated primarily in the U.K. and Asia.

Service and Distribution Fees

     In 2008, service and distribution fees decreased 13.6% to $512.5 million (2007: $593.1 million) primarily due to decreased retail AUM, offset by increases in institutional money market revenues resulting from the 23.0% increase in average institutional money market AUM during the year.

Other Revenues

     In 2008, other revenues decreased 24.5% to $102.2 million (2007: $135.4 million) driven by decreases in sales volumes of funds subject to front-end commissions, offset by higher transaction fees within our private equity business.

Third-Party Distribution, Service and Advisory Expenses

     Third-party distribution, service and advisory expenses decreased 16.7% in 2008 to $875.5 million (2007: $1,051.1 million), consistent with the declines in investment management and service and distribution fee revenues.

Proportional share of revenues, net of third-party distribution expenses, from joint venture investments

     The 5.4% decrease in our proportional share of revenues, net of third-party distribution expenses, to $57.3 million in 2008 (2007: $60.6 million), is driven by the declines in average AUM in the Invesco Great Wall joint venture. Our share of the Invesco Great Wall joint venture’s AUM at December 31, 2008, was $3.0 billion, a 58% decline in AUM from $7.1 billion at December 31, 2007, reflecting the increased volatility of equity markets in this region during the year.

Operating Expenses

     During 2008, operating expenses decreased 11.3% to $2,559.8 million (2007: $2,884.6 million), reflecting declines in all cost categories from 2007 expense levels.

     The main categories of operating expenses are as follows:

$ in millions		2008				2007				$ Change				% Change
Employee compensation			1,055.8				1,137.6				(81.8	)			(7.2	)%
Third-party distribution, service and advisory			875.5				1,051.1				(175.6	)			(16.7	)%
Marketing			148.2				157.6				(9.4	)			(6.0	)%
Property, office and technology			214.3				242.5				(28.2	)			(11.6	)%
General and administrative			266.0				295.8				(29.8	)			(10.1	)%
Total operating expenses			2,559.8				2,884.6				(324.8	)			(11.3	)%

     The table below sets forth these expense categories as a percentage of total operating expenses and operating revenues, which we believe provides useful information as to the relative significance of each type of expense.

						% of Total				% of								% of Total				% of
						Operating				Operating								Operating				Operating
$ in millions		2008				Expenses				Revenues				2007				Expenses				Revenues
Employee compensation			1,055.8				41.2	%			31.9	%			1,137.6				39.4	%			29.3	%
Third-party distribution, service and advisory			875.5				34.2	%			26.5	%			1,051.1				36.4	%			27.1	%
Marketing			148.2				5.8	%			4.5	%			157.6				5.5	%			4.1	%
Property, office and technology			214.3				8.4	%			6.5	%			242.5				8.4	%			6.3	%
General and administrative			266.0				10.4	%			8.0	%			295.8				10.3	%			7.6	%
Total operating expenses			2,559.8				100.0	%			77.4	%			2,884.6				100.0	%			74.4	%