invesco second quarter 2010 resultss21.q4cdn.com/954047929/files/doc_news/2010/... · summary of...

Invesco second quarter 2010 results

Martin L. Flanagan

President and Chief Executive Officer

Loren M. Starr

Chief Financial Officer

July 27, 2010

1

Forward-looking statements

This presentation, and comments made in the associated conference call today, may include “forward-looking statements.” Forward-looking statements include information concerning future results of our operations, expenses, earnings, liquidity, cash flow and capital expenditures, industry or market conditions, AUM, acquisitions, debt and our ability to obtain additional financing or make payments, regulatory developments, demand for and pricing of our products and other aspects of our business or general economic conditions. In addition, words such as “believes,”“expects,” “anticipates,” “intends,” “plans,” “estimates,” “projects,” “forecasts,” and future or conditional verbs such as “will,” “may,” “could,” “should,” and “would” as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements.

Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. 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 and urge you to carefully consider the risks described in our most recent Form 10-K and subsequent Forms 10-Q, filed with the Securities and Exchange Commission.

You may obtain these reports from the SEC’s website at www.sec.gov. We expressly disclaim any obligation to update the information in any public disclosure if any forward-looking statement later turns out to be inaccurate.

2

Discussion topics

Second quarter overview

Update on the combined business

Financial results

Questions

Appendix

3

Demonstrating solid momentum

Long-term investment performance remains strong despite market volatility

Continued positive trend in net flows

Solid momentum in combined business – benefits from acquisition materializing one month after close.


4

Summary of second quarter 2010 results

Assets under management

June 30, 2010, AUM of $557.7bn versus $457.7bn as of March 31, 20102Q10 average AUM was $480.5bn versus $449.6bn for 1Q10

Flows

Overall operating results

Capital management

Net long-term flows were positive $13.9bn for the quarterETF/UIT/Passive net inflows of $14.7bn for the quarterNet outflows from AUM ex-ETF/UIT/Passive of $0.8bn

Adjusted operating income* in 2Q10 was $188.7mn, an increase of 3.1% versus 1Q10Adjusted operating margin* was 32.0% in the quarter versus 33.6% in 1Q10Adjusted EPS for the quarter was $0.27 versus $0.27 in the priorquarter

Corporate cash balance of $555.6mnPaid $770 million in cash and issued 30.9 million common shares, and share equivalents, to Morgan Stanley for acquired business

Second quarter dividend of $0.11 per share, equal to the first quarter 2010

* See the schedule of Non-GAAP information in the appendix of this presentation for a reconciliation of net revenues, adjusted cash operating income, and adjusted cash EPS to the most directly comparable U.S. GAAP financial measure.

5

3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10

Gross sales

Gross redemptions

Net long-term sales

8.6 9.4 9.0 9.812.212.5

26.6

-6.7 -7.6

-12.0-11.9

14.6

-10.1-10.9-7.8 -7.5

4.6

14.7

0.51.7 2.3 2.3

-1.5

3.7

22.6 22.625.5

27.630.4 32.1

45.3

-29.6-28.5-23.9

-28.5-31.4

29.7

-21.1-23.6-20.9

0.1

-6.0

4.04.41.7

3.6

13.9

6.5

15.114.0 13.2

16.517.8 18.2

-18.7-18.4

-14.4-16.3-16.5

18.719.6

-19.5

-16.1

-13.1

-0.8

3.12.11.62.10.0

-3.6-4.4

3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10

Continued positive momentum in long-term flows in the second quarter, largely due to passive AUM

Quarterly flows

Gross sales

Gross redemptions

Net long-term sales

Gross sales

Gross redemptions

Net long-term sales

Total AUM AUM ex-ETF/UIT/Passive ETF/UIT/Passive AUM

Quarterly long-term flows ($ billions)

6

(a) Retail quarterly flows include retail products in the U.S., Canada, U.K., Europe, Asia and our offshore product line.(b) Institutional quarterly flows include our institutional business in the U.S., Continental Europe and Asia and exclude institutional money market.(c) PWM quarterly flows include our high-net-worth business in the U.S.

Gross sales

Gross redemptions

Net long-term sales

1.1 1.21.5 1.5

1.2

0.7 0.81.1

-1.0-1.2

-1.5

-0.5 -0.5 -0.5

-1.1-1.4

0.60.30.2

0.00.00.10.00.1

4.4 4.83.3

4.2 3.84.8

6.7

-5.2-6.6

-4.7-4.1 -4.1

-5.5

21.2

-3.6

-5.6

-1.8-0.8

2.6

0.7

-0.3 -0.5-1.8

15.7

Improvement in gross sales across the institutional channel led to positive net flowsContinued positive trend in private wealth management flows

Distribution channelsQuarterly long-term flows

Gross sales

Gross redemptions

Net long-term sales

Gross sales

Gross redemptions

Net long-term sales

Quarterly long-term flows ($ billions)

Retail(a) Institutional(b) Private Wealth Management(c)

24.2

16.5 17.819.8

22.624.9 24.6

-23.3-20.7

-14.9

-19.3

-23.9-25.4

23.0

-16.9-15.9

-4.2

0.9

-2.4

5.74.91.9

5.60.7

3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q103Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10

7

Investment performance overviewAsset weighted aggregate performance analysis

Strong overall peer group performance with 68%, 75%, and 79% of assets in the top half of peer groups for the 1-, 3-, 5-year time periods as of June 30, 2010

(a) Includes AUM of $336.8 billion (60% of total IVZ) for 1-year, $333.7 billion (60% of total IVZ) for 3-year, and $323.5 billion (58% of total IVZ) for 5 year. 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 passive products, closed-end funds, private equity limited partnerships, non-discretionary direct real estate, unit investment trusts and CDOs. 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

21%

79%

25%

75%

32%

68%

% assets top half of peer group

% assets bottom half of peer group % assets bottom half of peer group % assets bottom half of peer group

% assets top half of peer group % assets top half of peer group

Percent of assets in top half of peer group(a)

1-year 3-year 5-year

8

91% and 95% of Invesco Perpetual AUM are in the top half of peer groups for 3 and 5 years. 97% of Invesco Perpetual UK equity AUM are above peer groups and benchmarks on a 3-month basis

86%, 92% and 92% of US value equity AUM are in the top half of peer groups for 1, 3 and 5 years

95%, 80% and 80% of Invesco Global Fixed Income AUM are in the top half of peer groups for 1, 3 and 5 years

92%, 91% and 90% of Global ex-US and Emerging Market equity AUM are in the top half of peer groups for 1, 3 and 5 years

67% of Invesco Trimark AUM are above peer groups on a 2-year basis

63% of US retail AUM are rated 4 and 5 stars by Morningstar*

Investment performance highlights

*Load-waived basis

9

Discussion topics

Second-quarter overview


Financial results

Questions

Appendix

10

New business integrated with minimal transition issues – ready to deliver for clients on Day 1

Intensive outreach effort by US retail sales force to bring the value of the combined business to our clients

Increased relevance as a top 10 US fund manager is enhancing Invesco’s profile in the marketplace and driving new business

Phase II on schedule with product line up planning underway

Deal is accretive to adjusted EPS by an additional $0.01 per share due to an annual net ~$4 million deferred tax benefit.

Update on the combination

11

Delivering the value of the combined organization to clients

Focus on investment excellence

Combined investment team fully resourced at close (e.g., market data, trading, research) to ensure ongoing focus and continued strong performanceCompensation approach to appropriately recognize, reward and retain key investment professionalsComplementary cultures focused on delivering investment excellence to clients

Focus on our clients

Unified organization

Combined operating platform

Broad and deep coverage of key growth channels and top clients with a knowledgeable, combined sales forceJoint client development teams established post-close growth initiatives for key clients, leveraging broader product line and value-added servicesIntensive product training pre-close to ensure client-facing professionals are fully prepared to support clientsSimplified brand with strong, unified market messages

New business integrated with minimal transition issues – ready to deliver for clients on Day 1At close, Van Kampen or MSIM employees joining Invesco were fully aligned with the organization and engaged

Transitioned VK/MS onto Invesco’s global operating platform at close with minimal disruptionSystems and operation integration completed at close, including combined Transfer Agency to support fund shareholders

12

Management to consider and propose product changes

US fund mergers must be evaluated and approved by fund board

Shareholders votes required for proposed merger of US funds; will require proxy solicitations

Steady state operations post fund mergers, including ~$10 million in additional run rate cost savings over Year 1

Key steps remaining to steady state operationPhase II, 9-12 months from date of close

13

Strong combined culture focused on delivering investment excellence

Expanded depth and breadth of investment capabilities and vehicles

Deeper relationships with clients; well-trained and focused sales force

Strengthened profile as a global investment management firm with US market leadership

Key benefits for clients, shareholders and Invesco

14

Discussion topics



Financial results

Questions

Appendix

15

Total assets under management – 2Q10 vs. 1Q10

N/A0.0114.6Acquisitions

48.3bps

48.4bps

$449.6

$75.3

$374.3

$388.7

$457.7

(4.5)

9.7

(10.6)

3.6

(28.5)

32.1

$459.5

1Q-10($ billions) 2Q-10 % Change

Beginning Assets $457.7 (0.4)%

Long-Term Inflows 45.3 41.1%

Long-Term Outflows (31.4) 10.2%

Long-Term Net flows 13.9 N/A

Net flows in Money Market Funds (0.9) (91.5)%

Market Gains and Losses/Reinvestment (24.2) N/A

Foreign Currency Translation (3.4) 24.4%

Ending Assets $557.7 21.8%

Ending Long-Term AUM $489.6 26.0%

Average Long-Term AUM $413.4 10.4%

Average Institutional Money Market AUM $67.1 (10.9)%

Average AUM $480.5 6.9%

Net Revenue Yield (annualized)* 49.0bps 0.6pts

Net Revenue Yield Before Performance Fees

(annualized)*48.7bps 0.4pts

* Refer to appendix for net revenue calculation

16

Non-GAAP operating results – 2Q10 vs. 1Q10

(1.6)pts33.6%32.0%Adjusted Operating Margin

4,902

449.6

$0.27

120

28.7%

169

(5)

(12)

2

1

183

361

45

54

28

234

544

(198)

11

1

113

618

1Q-10

Adjusted Other Income/(Expense)

Adjusted Operating Expenses

Adjusted Revenues

150.0%4Performance Fees

45.1%16Other

7.8%48General and Administrative

10.6%

6.9%

-

4.5%

0.6pts

5.4%

(22.2)%

13.7%

16.7%

760.0%

3.1%

10.8%

4.3%

25.0%

11.1%

8.2%

12.6%

23.9%

5.7%

% Change*

(4)Other Gains and Losses, net

($ millions) 2Q-10

Investment Management Fees 653

Service and Distribution Fees 139

Third-Party Distribution, Service and Advisory Expenses (223)

Net Revenues 589

Employee Compensation 260

Marketing 36

Property, Office and Technology 56

Total Adjusted Operating Expenses 400

Adjusted Operating Income 189

Equity in Earnings of Unconsolidated Affiliates 4

Interest Income 2

Interest Expense (14)

Adjusted Income Before Income Taxes, Including Gains and Losses Attributable to Noncontrolling Interests

178

Effective Tax Rate** 29.3%

Adjusted Net Income 125

Adjusted EPS $0.27

Average AUM ($ billions) 480.5

Headcount 5,421

* % change based on unrounded figures** Effective tax rate = Adjusted Tax Expense / (Adjusted income before taxes, including gains and losses attributable to noncontrolling interests +

(gains)/losses attributable to noncontrolling interests in consolidated entities, net)

17

Further disclosure on deal financials

Increased deal accretion on adjusted EPS of $0.01 per share resulting from the deferred tax benefit (net ~$4 million per year)

— Year 1: $0.22— Year 2: $0.24

No change to net cost synergies of $80 - $85 million in Year 1 and $90 - $95 million in Year 2

No change to Year 1 asset attrition estimate of ~$5 billion net outflow

US GAAP annual intangible amortization expense declines over 12 years

$4 millionYear 9 – 12

Year 5 - 8

Year 3 - 4

Year 2

Year 1

$12 million

$17 million

$22 million

$23 million

PeriodPost Close

Annual Intangible Amortization

18

Change in run rate financials since transaction announcement

50.3

39%

$223

$353

$576

$115

1-Month June Actual

(annualized)

46.7

42% - 43%

$232 - $237

$324 - $319

$556

$119

Sept 30, 2009 Run Rate Including

Synergies

($4)--$119AUM

3.6--40.0Net Revenue Yield (bps)

(3%) – (4%)--32%Adj. Operating Margin (%)

($9) – ($14)$80 - $85-$152Adj. Operating Profit

$29 - $34($80 - $85)$80$324Adj. Operating Expenses

$20-$80$476Adj. Net Revenue

VarianceNet Cost Synergies

Accounting Impact*

Sept. 30, 2009 Run

Rate

$millions other than AUM ($billions)

*US GAAP requires certain revenue share and fund accounting expenses be grossed up. These expenses were presented on a netted basis against associated revenues in the 3Q09 earnings call presentation.

One month of results indicates we are on track to achieve expected outcomes as most cost synergies were captured up front

Acquisition will have a positive impact on Invesco’s adjusted operating margin (Q2 proforma impact = +150 basis points based on 3 months’ impact)

19

Demonstrating solid momentum

Long-term investment performance remains strong despite market volatility

Continued positive trend in net flows

Solid momentum in combined business – benefits from acquisition materializing one month after close


20

Discussion topics



Financial results

Questions

Appendix

21

Discussion topics



Financial results

Questions

Appendix

22

Investment performanceBy investment objective*

17%

87% 88%

1-yr 3-yr 5-yr

25%

7%23%

10% 52%

52%

1-yr 3-yr 5-yr

62%

76%

62%

1-yr 3-yr 5-yr

21% 25%

31%37%

16%

31%

1-yr 3-yr 5-yr1% 1%

48%

85% 91%

44%

1-yr 3-yr 5-yr

73% 72% 71%

1-yr 3-yr 5-yr

41% 35%49%

26%

1-yr 3-yr 5-yr

63%

94%93%

1-yr 3-yr 5-yr

100%

% of AUMabovebenchmark

1st quartile

2nd quartile

U.S. Core U.S. Growth U.S. Value Sector

U.K.

100% 100% 100%

Canadian Asian European

Equities

94% 94%

10%

1-yr 3-yr 5-yr

41%

5%4%

90%

50%

1%

1-yr 3-yr 5-yr

100%

3%

68% 64%

1-yr 3-yr 5-yr

33%22%

35%

33%

3%3%

1-yr 3-yr 5-yr

100%

49%

73%

51%

1-yr 3-yr 5-yr

46%34% 28%

13%21% 32%

1-yr 3-yr 5-yr

100% 100%

91%

78%

94%

1-yr 3-yr 5-yr

10% 5%

38%

75%70%

35%

1-yr 3-yr 5-yr

*AUM measured in the one, three, and five year quartile rankings represents 60%, 60%, and 58% of total Invesco AUM, respectively, and AUM measured versus benchmark on a one, three, and five year basis represents 72%, 71, and 65% of total Invesco AUM, respectively, as of 6/30/10. 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 passive Products, closed end funds, private equity limited partnerships, non-discretionary direct real estate unit investment trusts and CDOs. Certain funds and products were excluded from the analysisbecause 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

23

Investment performanceBy investment objective*

100%

% of AUMabovebenchmark

1st quartile

2nd quartile

GlobalGlobal ex-U.S. andEmerging markets Balanced

Money market

100% 100%

U.S. fixed income Global fixed income

Equities

100% 100% 100%

Balanced

Fixed income

59%65%

81%

1-yr 3-yr 5-yr

40%

21% 21%

24%

16% 18%

1-yr 3-yr 5-yr

86%94% 94%

1-yr 3-yr 5-yr

79% 80%

33%

13% 11%

57%

1-yr 3-yr 5-yr

46%

75% 73%

1-yr 3-yr 5-yr

8%

61%52%

63%

6% 22%

1-yr 3-yr 5-yr

40%

74% 71%

1-yr 3-yr 5-yr

15% 13% 13%

82% 81% 80%

1-yr 3-yr 5-yr

84%

35%

59%

1-yr 3-yr 5-yr

48% 48%41%

21% 16%21%

1-yr 3-yr 5-yr

94%

80%87%

1-yr 3-yr 5-yr

64%

9% 10%

31%

71% 70%

1-yr 3-yr 5-yr

*AUM measured in the one, three, and five year quartile rankings represents 60%, 60%, and 58% of total Invesco AUM, respectively, and AUM measured versus benchmark on a one, three, and five year basis represents 72%, 71, and 65% of total Invesco AUM, respectively, as of 6/30/10. 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 passive Products, closed end funds, private equity limited partnerships, non-discretionary direct real estate unit investment trusts and CDOs. Certain funds and products were excluded from the analysisbecause 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

24

Sources: Invesco. All data as of June 30, 2010. The listed centers do not all provide products or services that are available in the U.S. nor are their and services available on all platforms. All entities listed are wholly owned, indirect subsidiaries of Invesco Ltd. Please consult your Invesco representative for more information.

Commitment to investment excellence

25

Retail58.5%

Institutional38.8%

PWM2.7%

Alternative11.6%

Fixed Income21.4%

Money Market13.0%

Balanced6.8%

Equity47.2%

Asia8.1%

Europe5.3%

U.K.14.3%

Canada4.7%

U.S.67.6%

As of June 30, 2010

$377.1$26.0$79.6$29.6$45.4

$557.7Total

U.S.CanadaU.K.Europe Asia

40.0%3.2%

15.9%11.3%85.3%

34.6%

1-Yr Change($ billions)

$326.0$216.3$15.4

$557.7Total

RetailInstitutionalPWM

69.7%3.7%

11.6%

34.6%


$263.2$38.2$72.5

$119.3$64.5

Total

Equity BalancedMoney MarketFixed IncomeAlternative

69.2% 9.1%

(23.1)%74.2%5.7%

34.6%


$557.7

We are diversified as a firmDelivering a diverse set of solutions to meet client needs

By client domicile By channel By asset class

26

US GAAP operating results – quarterly

$0.25

111

(23)

30.3%

182

(0)

-

(15)

26

-

2

9

161

587

10

50

55

30

195

247

748

18

7

111

612

4Q-09

$0.24

105

1

29.3%

148

2

-

(17)

2

-

2

8

152

554

1

40

63

28

184

239

706

19

4

112

570

3Q-09

$0.18

76

48

32.2%

64

10

-

(17)

(48)

-

1

8

110

515

-

47

49

24

166

229

625

15

8

100

502

2Q-09

$0.08

31

89

39.8%

(38)

(4)

-

(16)

(87)

-

5

3

62

487

-

30

46

27

148

236

549

12

11

89

437

1Q-09

$0.08

32

61

52.9%

7

(22)

-

(18)

(57)

-

7

11

85

550

-

62

58

31

163

236

634

31

24

101

479

4Q-08

$0.33

132

(4)

27.2%

185

(10)

-

(18)

3

-

8

8

195

632

-

62

51

35

221

264

827

15

18

129

665

3Q-08

23.1%(21)(26)Interest Expense of Consolidated Investment Products

1.1%5353Interest Income of Consolidated Investment Products

$0.21

95

(119)

34.5%

265

(2)

(12)

103

2

6

137

582

17

50

54

28

196

238

719

12

1

113

594

1Q-10

28.2%64General and Administrative

342.9%(9)Other Gains and Losses, net

($ millions) 2Q-10 % Change*

Investment Management Fees 628 5.8%

Service and Distribution Fees 139 23.9%

Performance Fees 4 150.0%

Other 16 38.5%

Total Operating Revenues 787 9.4%

Employee Compensation 261 9.6%

Third-Party Distribution, Service and Advisory 221 12.8%

Marketing 35 24.4%

Property, Office and Technology 56 4.3%

Transaction & Integration 79 361.0%

Total Operating Expenses 716 22.9%

Operating Income 71 (47.8)%

Equity in Earnings of Unconsolidated Affiliates 10 79.3%

Interest Income 2 12.5%

Gains and (Losses) of Consolidated Investment Products, net

187 81.6%

Interest Expense (14) 13.7%

Income Before Income Taxes, Including Gains and Losses Attributable to Noncontrolling Interests

275 3.9%

Effective Tax Rate** 47.4%

(Gains)/Losses Attributable to Noncontrolling Interests in Consolidated Entities, net

(197) 65.2%

Net Income Attributable to Common Shareholders 41 (57.1)%

EPS Diluted $0.09 (57.1)%

* % change based on unrounded figures** Effective tax rate = Tax Expense / (Income before income taxes, including gains and losses attributable to noncontrolling interests + (gains)/losses

attributable to noncontrolling interests in consolidated entities, net + (gains)/losses attributable to investors of consolidated CLOs)

27

Reconciliation of US GAAP results to non-GAAP results – three months ended June 30, 2010

3

-

(1)

4

6

-

-

-

-

-

-

(2)

2

-

-

-

-

-

2

-

-

-

-

-

-

Market appreciation / depreciation of

deferred compensation

awards

Adjusted EPS

Diluted Shares Outstanding

Adjusted Operating Margin

(2)

197

-

(200)

-

26

-

(187)

(53)

-

0

15

(3)

-

(3)

-

-

-

-

12

-

-

-

-

12

Consolidated Investment

Products

6

-

(3)

9

-

-

-

-

-

-

-

9

(9)

-

(9)

-

-

-

-

-

-

-

-

-

-

Other Reconciling

Items

--(221)-221Third-Party Distribution, Service and Advisory

16--016Other

----(26)Interest Expense of Consolidated Investment Products

----53Interest Income of Consolidated Investment Products

-

-

-

-

-

-

-

0

(6)

6

4

-

1

1

0

3

10

(3)

-

-

13

Proportional Consolidation

of Joint Ventures

-

-

-

-

-

-

-

-

-

-

(221)

-

-

-

-

-

(221)

(221)

-

-

-

3rd party distribution, service and

advisory expenses

79

-

(11)

90

-

-

-

-

-

90

(90)

(79)

(5)

-

-

(5)

-

-

-

-

-

Acquisition related

$0.27

457.8

32.0%

125

(0)

(52)

178

(4)

(14)

-

2

4

189

400

-

48

56

36

260

589

(223)

4

139

653

Non-GAAP basis

64General and Administrative


($ millions)

Operating Revenues

US GAAP

Basis



Performance Fees 4

Third-Party Distribution, Service and Advisory -

Total Operating Revenues reconciled to net revenues

Operating Expenses

787


Marketing 35


Transaction & Integration 79

Total Operating Expenses 716

Operating Income reconciled to adjusted cash operating income

71


Interest Income 2


187



275

Income Tax Provision (37)


(197)

Net Income Attributable to Common Shareholders reconciled to adjusted cash net income

41

EPS Diluted


Adjusted Operating margin

$0.09

457.8

9.1%

28

Reconciliation of US GAAP results to non-GAAP results – three months ended March 31, 2010

----(196)-196Third-Party Distribution, Service and Advisory

11(0)---(0)12Other

-21----(21)Interest Expense of Consolidated Investment Products

-(53)----53Interest Income of Consolidated Investment Products

-

-

-

-

-

-

-

0

(6)

5

5

-

1

1

0

3

11

(3)

-

-

14

Proportional share of JV

-

-

-

-

-

-

-

-

-

-

(196)

-

-

-

-

-

(196)

(196)

-

-

-

3rd party distribution, service and

advisory expenses

27

-

2

25

-

-

-

-

-

25

(25)

(17)

(3)

-

-

(5)

-

-

-

-

-

Acquisition

related

Adjusted EPS

Diluted shares outstanding

Adjusted operating margin

(0)

-

0

(1)

(2)

-

-

-

-

2

(2)

-

-

-

-

(2)

-

-

-

-

-

Market appreciation / depreciation of

deferred compensation awards

(2)

119

-

(121)

-

-

(103)

-

0

14

(3)

-

(3)

-

-

-

10

-

-

-

11

Consolidated Investment

Products

$0.27

442.4

33.6%

120

(0)

(48)

168

(5)

(12)

-

2

1

183

361

-

45

54

28

234

544

(198)

1

113

618

Non-GAAP basis

50General and Administrative


($ millions)

Operating Revenues

US GAAP

Basis



Performance Fees 1

Third-Party Distribution, Service and Advisory -

Total Operating Revenues reconciled to net revenues

Operating Expenses

719


Marketing 28


Transaction & Integration 17

Total Operating Expenses 582

Operating Income reconciled to adjusted cash operating income

137


Interest Income 2


103



265

Income Tax Provision (50)


(119)

Net Income Attributable to Common Shareholders reconciled to adjusted cash net income

95

EPS Diluted


Operating margin

$0.21

442.4

19.0%

29

Total assets under management - quarterly

28.230.312.7N/A9.7(24.2)Market Gains and Losses/Reinvestment

48.3bps

48.4bps

64.4bps

64.5bps

$449.6

75.3

374.3

388.7

$457.7

(4.5)

-

(10.6)

3.6

(28.5)

32.1

$459.5

1Q-10

49.3bps

49.9bps

66.0bps

66.6bps

453.4

89.8

363.6

380.0

$459.5

1.2

-

(7.8)

6.5

(23.9)

30.4

$446.9

4Q-09

48.8bps

49.2bps

64.8bps

65.2bps

437.1

90.6

346.5

359.7

$446.9

0.8

-

(2.6)

4.0

(23.6)

27.6

$414.4

3Q-09

46.0bps

46.8bps

62.0bps

62.8bps

$401.5

90.6

310.9

324.7

$414.4

11.1

-

1.7

4.4

(21.1)

25.5

$369.0

2Q-09($ billions) 2Q-10 % Change

Beginning Assets $457.7 (0.4)%

Long-Term Inflows 45.3 41.1%

Long-Term Outflows (31.4) (10.2)%

Long-Term Net flows 13.9 286.1%

Net flows in Money Market Funds (0.9) (91.5)%

Acquisitions 114.6 N/A

Foreign Currency Translation (3.4) 24.4%

Ending Assets $557.7 21.8%

Ending Long-Term AUM 489.6 26.0%

Average Long-Term AUM 413.4 10.4%

Average Institutional Money Market AUM 67.1 (10.9)%

Average AUM $480.5 6.9%

Gross Revenue Yield (annualized)* 66.0bps 1.5pts

Gross Revenue Yield Less Performance Fees (annualized)* 65.7bps 1.3pts

Net Revenue Yield (annualized)** 49.0bps 0.6pts

Net Revenue Yield Less Performance Fees

(annualized)**

48.7bps 0.4pts

* Gross revenue yield on AUM is equal to total operating revenues divided by average AUM, excluding JV AUM. Average AUM for 2Q10, for our joint ventures in China were $3.1bn (1Q10: $3.8bn ; 4Q09: $3.9bn ; 3Q09: $3.9bn; 2Q09: $3.6bn).

**Net Revenue Yield on AUM is equal to net revenues divided by average AUM including JV AUM. Average AUM for 2Q10, for our JV in China were $3.1bn (1Q10: $3.8bn 4Q09: $3.9bn; 3Q09: $3.9bn; 2Q09: $3.6bn;)

The beginning balances were adjusted to reflect certain asset reclassifications

3030

Total assets under management – by asset class

($ billions) Total Equity

Fixed

Income Balanced

Money

Market Alternative

December 31, 2009 $459.5 $192.6 $76.2 $39.9 $83.5 $67.3

Long-Term Inflows 32.1 19.4 6.9 1.8 0.3 3.7

Long-Term Outflows (28.5) (17.2) (4.5) (1.7) (0.6) (4.5)

Long-Term Net flows 3.6 2.2 2.4 0.1 (0.3) (0.8)

Net flows in Money Market Funds

(10.6) - - - (10.6) -

Market Gains and Losses/Reinvestment

9.7 6.7 1.7 1.0 0.0 0.3

Foreign Currency Translation (4.5) (3.0) (0.8) (0.4) 0.0 (0.3)

2.20.60.337.873.7114.6Acquisitions

March 31, 2010 $457.7 $198.5 $79.5 $40.6 $72.6 $66.5



Long-Term Net flows 13.9 14.5 0.7 (0.1) 0.2 (1.4)

Net flows in Money Market Fund

(0.9) - - - (0.9) -


(24.2) (21.5) 1.6 (1.9) - (2.4)

Foreign Currency Translation (3.4) (2.0) (0.3) (0.7) - (0.4)

June 30, 2010 $557.7 $263.2 $119.3 $38.2 $72.5 $64.5

* The beginning balances were adjusted to reflect certain asset reclassifications

3131



Fixed

Income Balanced

Money

Market Alternative

June 30, 2009 $414.4 $155.6 $68.5 $35.0 $94.3 $61.0



Long-Term Net flows 4.0 2.9 2.2 0.2 (0.3) (1.0)


(2.6) - - - (2.6) -


30.3 22.6 3.4 3.0 0.0 1.3

Foreign Currency Translation 0.8 0.1 - 0.5 0.1 0.1

September 30, 2009 $446.9 $181.2 $74.1 $38.7 $91.5 $61.4



Long-Term Net flows 6.5 0.8 1.2 0.0 (0.3) 4.8


(7.8) - - - (7.8) -


12.7 9.8 0.8 0.9 0.1 1.1

Foreign Currency Translation 1.2 0.8 0.1 0.3 0.0 0.0

December 31, 2009 $459.5 $192.6 $76.2 $39.9 $83.5 $67.3


3232



Fixed

Income Balanced

Money

Market Alternative

December 31, 2008 $377.1 $140.6 $61.5 $31.7 $84.2 $59.1



Long-Term Net flows 1.7 (1.2) 1.8 (0.1) (0.1) 1.3


8.6 - - - 8.6 -


(16.5) (11.3) 0.2 (1.3) (0.1) (4.0)

Foreign Currency Translation (1.9) (1.0) (0.3) (0.4) 0.0 (0.2)

March 31, 2009 $369.0 $127.1 $63.2 $29.9 $92.6 $56.2



Long-Term Net flows 4.4 0.7 1.6 0.1 (0.2) 2.2


1.7 - - - 1.7 -


28.2 21.0 2.1 3.4 0.0 1.7

Foreign Currency Translation 11.1 6.8 1.6 1.6 0.2 0.9

June 30, 2009 $414.4 $155.6 $68.5 $35.0 $94.3 $61.0


3333

Total assets under management – by channel

$15.2$204.5$239.8$459.5December 31, 2009

($ billions) Total Retail Institutional PWM

Long-Term Inflows 32.1 24.6 6.7 0.8

Long-Term Outflows (28.5) (23.9) (4.1) (0.5)

Long-Term Net flows 3.6 0.7 2.6 0.3

Net flows in Money Market Funds (10.6) 0.0 (10.6) 0.0

Market Gains and Losses/Reinvestment 9.7 7.5 2.1 0.1

Foreign Currency Translation (4.5) (3.7) (0.8) 0.0

March 31, 2010 $457.7 $244.3 $197.8 $15.6

0.09.5105.1114.6Acquisitions



Long-Term Net flows 13.9 (2.4) 15.7 0.6


Market Gains and Losses/Reinvestment (24.2) (18.6) (4.8) (0.8)


June 30, 2010 $557.7 $326.0 $216.3 $15.4


3434


$13.8$208.5$192.1$414.4June 30, 2009




Long-Term Net flows 4.0 5.7 (1.8) 0.1

Net flows in Money Market Funds (2.6) 0.0 (2.6) -


Foreign Currency Translation 0.8 0.1 0.7 0.0

September 30, 2009 $446.9 $224.1 $207.8 $15.0



Long-Term Net flows 6.5 5.6 0.7 0.2



Foreign Currency Translation 1.2 1.4 (0.2) 0.0

December 31, 2009 $459.5 $239.8 $204.5 $15.2


3535


$13.4$197.3$166.4$377.1December 31, 2008





Net flows in Money Market Funds 8.6 0.0 8.6 0.0

Market Gains and Losses/Reinvestment (16.5) (11.7) (4.3) (0.5)


March 31, 2009 $369.0 $155.4 $200.6 $13.0




Net flows in Money Market Funds 1.7 0.0 1.7 0.0


Foreign Currency Translation 11.1 9.4 1.7 0.0

June 30, 2009 $414.4 $192.1 $208.5 $13.8


3636

Total assets under management – by client domicile

($ billions) Total U.S. Canada U.K.Continental

Europe Asia

December 31, 2009 $459.5 $294.1 $29.0 $84.9 $24.4 $27.1

Inflows 32.1 21.0 0.6 4.5 3.8 2.2

Outflows (28.5) (18.7) (1.7) (4.3) (2.1) (1.7)

Long-Term Net flows 3.6 2.3 (1.1) 0.2 1.7 0.5

Net flows in Money Market Funds (10.6) (11.6) - (0.6) 1.7 (0.1)

Market Gains and Losses/Reinvestment 9.7 5.6 0.5 3.9 0.0 (0.3)

Foreign Currency Translation (4.5) - 0.8 (4.5) (0.8) -

March 31, 2010 $457.7 $290.4 $29.2 $83.9 $27.0 $27.2


5.62.91.80.6103.7114.6Acquisition

Inflows 45.3 18.9 0.6 4.7 3.3 17.8

Outflows (31.4) (21.3) (1.8) (3.7) (3.2) (1.4)

Long-Term Net flows 13.9 (2.4) (1.2) 1.0 0.1 16.4

Net flows in Money Market Funds (0.9) (1.7) 0.0 (0.3) 2.0 (0.9)

Market Gains and Losses/Reinvestment (24.2) (12.9) (1.4) (5.6) (1.4) (2.9)

Foreign Currency Translation (3.4) 0.0 (1.2) (1.2) (1.0) 0.0

June 30, 2010 557.7 377.1 26.0 79.6 29.6 45.4

3737


Europe Asia

June 30, 2009 $414.4 $269.4 $25.2 $68.7 $26.6 $24.5

Inflows 27.6 17.0 0.3 5.6 2.6 2.1

Outflows (23.6) (15.0) (1.2) (2.4) (3.1) (1.9)

Long-Term Net flows 4.0 2.0 (0.9) 3.2 (0.5) 0.2

Net flows in Money Market Funds (2.6) (1.1) (0.1) (0.2) (0.1) (1.1)

Market Gains and Losses/Reinvestment 30.3 14.0 2.3 9.3 2.4 2.3

Foreign Currency Translation 0.8 - 2.0 (2.1) 0.3 0.6

September 30, 2009 $446.9 $284.3 $28.5 $78.9 $28.7 $26.5


Inflows 30.4 19.8 0.4 4.9 3.4 1.9

Outflows (23.9) (14.4) (1.6) (2.0) (3.7) (2.2)

Long-Term Net flows 6.5 5.4 (1.2) 2.9 (0.3) (0.3)

Net flows in Money Market Funds (7.8) (2.4) - - (4.6) (0.8)


Foreign Currency Translation 1.2 - 0.8 0.7 (0.2) (0.1)

December 31, 2009 $459.5 $294.1 $29.0 $84.9 $24.4 $27.1


3838


Europe Asia

December 31, 2008 $377.1 $252.7 $23.8 $57.1 $22.3 $21.2

Inflows 22.6 15.5 0.7 3.8 1.6 1.0

Outflows (20.9) (15.2) (1.2) (1.4) (1.9) (1.2)

Long-Term Net flows 1.7 0.3 (0.5) 2.4 (0.3) (0.2)

Net flows in Money Market Funds 8.6 6.4 - 0.1 2.0 0.1

Market Gains and Losses/Reinvestment (16.5) (8.8) (1.5) (5.3) (1.1) 0.2

Foreign Currency Translation (1.9) - (0.4) (0.5) (0.5) (0.5)

March 31, 2009 $369.0 $250.6 $21.4 $53.8 $22.4 $20.8


Inflows 25.5 16.4 0.5 4.1 2.3 2.2

Outflows (21.1) (13.7) (1.3) (1.7) (2.1) (2.3)

Long-Term Net flows 4.4 2.7 (0.8) 2.4 0.2 (0.1)

Net flows in Money Market Funds 1.7 (0.1) - 0.1 1.3 0.4


Foreign Currency Translation 11.1 - 1.9 7.6 1.0 0.6

June 30, 2009 $414.4 $269.4 $25.2 $68.7 $26.6 $24.5


3939

Assets under management – ETF, UIT and passive – by asset class

($ billions)Total Equity

Fixed

Income Balanced

Money

Market Alternative

December 31, 2009 $53.0 $31.1 $4.0 $0.0 $0.0 $17.9

Long-Term Inflows 12.5 10.1 0.5 - - 1.9

Long-Term Outflows (12.0) (8.4) (0.3) - - (3.3)

Long-Term Net flows 0.5 1.7 0.2 - - (1.4)


- - - - - -


2.2 1.5 0.4 - - 0.3

Foreign Currency Translation - - - - - -

---9.24.513.7Acquisitions

March 31, 2010 $55.7 $34.3 $4.6 $0.0 $0.0 $16.8


Long-Term Outflows (11.9) (9.7) (0.2) - - (2.0)

Long-Term Net flows 14.7 14.7 0.6 - - (0.6)


- - - - - -


(4.8) (4.6) 0.9 - - (1.1)

Foreign Currency Translation (0.1) - - - - (0.1)

June 30, 2010 $79.2 $48.9 $15.3 $0.0 $0.0 $15.0


4040

$29.4September 30, 2009 $45.9 $3.5 $0.0 $0.0 $13.0


Long-Term Outflows(7.6) (7.0) - - - (0.6)

Long-Term Net flows 4.6 0.3 0.5 - - 3.8


- - - - - -


2.5 1.4 - - - 1.1


December 31, 2009 $53.0 $31.1 $4.0 $0.0 $0.0 $17.9


Fixed

Income Balanced

Money

Market Alternative

June 30, 2009 $39.0 $24.6 $1.9 $0.0 $0.0 $12.5


Long-Term Outflows (7.5) (6.1) 0.0 - - (1.4)

Long-Term Net flows 2.3 1.0 1.0 - - 0.3


- - - - - -


4.5 3.8 0.6 - - 0.1

Foreign Currency Translation 0.1 - - - - 0.1



4141


Fixed

Income Balanced

Money

Market Alternative

December 31, 2008 $30.5 $21.6 $0.9 $0.0 $0.0 $8.0


Long-Term Outflows (7.8) (6.8) - - - (1.0)

Long-Term Net flows 1.6 (0.3) 0.4 - - 1.5


- - - - - -


(1.1) (0.6) (0.1) - - (0.4)


March 31, 2009 $31.0 $20.7 $1.2 $0.0 $0.0 $9.1


Long-Term Outflows (6.7) (5.8) - - - (0.9)

Long-Term Net flows 2.3 (0.3) 0.6 - - 2.0


- - - - - -


5.5 4.2 0.1 - - 1.2


June 30, 2009 $39.0 $24.6 $1.9 $0.0 $0.0 $12.5



4242

$0.0$5.0$48.0$53.0December 31, 2009


Long-Term Inflows 12.5 12.5 - -

Long-Term Outflows (12.0) (12.0) - -

Long-Term Net flows 0.5 0.5 - -

Net flows in Money Market Funds - - - -

Market Gains and Losses/Reinvestment 2.2 1.2 1.0 -

Foreign Currency Translation - - - -

March 31, 2010 $55.7 $49.7 $6.0 $0.0

--13.713.7Acquisitions

Long-Term Inflows 26.6 10.6 16.0 -


Long-Term Net flows 14.7 (1.3) 16.0 -


Market Gains and Losses/Reinvestment (4.8) (4.6) (0.2) -

Foreign Currency Translation (0.1) - (0.1) -

June 30, 2010 $79.2 $57.5 $21.7 $0.0


Assets under management – ETF, UIT and passive – by channel

4343

$0.0$3.7$35.3$39.0June 30, 2009




Long-Term Net flows 2.3 2.1 0.2 -



Foreign Currency Translation 0.1 0.1 - -

September 30, 2009 $45.9 $41.5 $4.4 $0.0



Long-Term Net flows 4.6 4.5 0.1 -




December 31, 2009 $53.0 $48.0 $5.0 $0.0



4444

$0.0$3.4$27.1$30.5December 31, 2008






Market Gains and Losses/Reinvestment (1.1) (0.7) (0.4) -


March 31, 2009 $31.0 $28.0 $3.0 $0.0






Foreign Currency Translation 0.2 - 0.2 -

June 30, 2009 $39.0 $35.3 $3.7 $0.0



4545


Europe Asia

December 31, 2009 $53.0 $50.4 $0.0 $0.0 $1.0 $1.6

Inflows 12.5 12.5 - - - -

Outflows (12.0) (12.0) - - - -

Long-Term Net flows 0.5 0.5 - - - -

Net flows in Money Market Funds - - - - - -

Market Gains and Losses/Reinvestment 2.2 2.2 - - - -


March 31, 2010 $55.7 $53.1 $0.0 $0.0 $1.0 $1.6


----13.713.7Acquisition

Inflows 26.6 10.7 - - 0.1 15.8

Outflows (11.9) (11.8) - - (0.1) -

Long-Term Net flows 14.7 (1.1) - - - 15.8


Market Gains and Losses/Reinvestment (4.8) (4.0) - - (0.1) (0.7)

Foreign Currency Translation (0.1) - - - - (0.1)

June 30, 2010 $79.2 $61.7 $0.0 $0.0 $0.9 $16.6

Assets under management – ETF, UIT and passive – by client domicile

4646


Europe Asia

June 30, 2009 $39.0 $36.8 $0.0 $0.0 $0.8 $1.4

Inflows 9.8 9.7 - - 0.1 -

Outflows (7.5) (7.4) - - (0.1) -

Long-Term Net flows 2.3 2.3 - - - -


Market Gains and Losses/Reinvestment 4.5 4.3 - - 0.1 0.1


September 30, 2009 $45.9 $43.4 $0.0 $0.0 $0.9 $1.6


Inflows 12.2 12.1 - - 0.1 -

Outflows (7.6) (7.6) - - - -

Long-Term Net flows 4.6 4.5 - - 0.1 -


Market Gains and Losses/Reinvestment 2.5 2.5 - - - -


December 31, 2009 $53.0 $50.4 $0.0 $0.0 $1.0 $1.6


4747


Europe Asia

December 31, 2008 $30.5 $29.0 $0.0 $0.0 $0.5 $1.0

Inflows 9.4 9.3 - - 0.1 -

Outflows (7.8) (7.8) - - - -



Market Gains and Losses/Reinvestment (1.1) (1.1) - - - -


March 31, 2009 $31.0 $29.4 $0.0 $0.0 $0.6 $1.0


Inflows 9.0 8.9 - - 0.1 -

Outflows (6.7) (6.7) - - - -



Market Gains and Losses/Reinvestment 5.5 5.2 - - 0.1 0.2


June 30, 2009 $39.0 $36.8 $0.0 $0.0 $0.8 $1.4


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