AMVESCAP PLC
United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 20-F
(Mark One)
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934 |
OR
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2006
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 |
OR
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 |
Commission File Number 1-13908
AMVESCAP PLC
(Exact name of Registrant as specified in its charter)
England and Wales
(Jurisdiction of incorporation or organization)
1360 Peachtree Street N.E., Atlanta, Georgia 30309
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
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Name of each exchange on |
Title of each class |
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which registered |
American Depositary Shares, each
representing two (2) Ordinary Shares of
U.S.$0.10 par value per share
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New York Stock Exchange |
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Ordinary Shares of U.S.$0.10 par value per share
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New York Stock Exchange1 |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None.
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None.
Indicate the number of outstanding shares of each of the issuers classes of capital or common
stock as of the close of the period covered by the annual report.
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Outstanding at |
Class |
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December 31, 2006 |
Ordinary Shares2 |
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831,889,059 |
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
If this report is an annual or transition report, indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
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 is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ Accelerated filer o Non-accelerated filer o
Indicate by check mark which financial statement item the registrant has elected to follow.
þ Item 17 o Item 18
If this is an annual report, 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
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Listed not for trading but only in connection with the listing of American
Depositary Shares pursuant to requirements of the Securities and Exchange Commission. The
Ordinary Shares primary trading market is the London Stock Exchange. |
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Includes Ordinary Shares represented by outstanding American Depositary
Shares. |
At A Glance
AMVESCAP is a leading independent global investment manager, dedicated to
helping people worldwide build their financial security. Operating under the AIM,
AIM Trimark, Atlantic Trust, INVESCO, Invesco Perpetual, PowerShares and
WL Ross & Co. brands, AMVESCAP strives to deliver outstanding products
and services through a comprehensive array of enduring investment solutions for
our retail, institutional and private wealth management clients around the world.
AIM Investments is dedicated to providing exceptional products and services through multiple
management styles and a broad range of investments including mutual funds, exchange-traded
funds, and cash management products. AIM draws on the strength of AMVESCAPs worldwide
resources to deliver best-in-class capabilities from specialized investment teams. Our products are
offered through financial advisors in the belief that investors can significantly benefit from the
advice and guidance a professional can provide.
AIM Trimark is a premier provider of enduring solutions for Canadian investors and their advisors.
AIM Trimark has become one of Canadas largest and most successful investment management
firms by adhering to proven investment disciplines that build and protect investors wealth and by
putting investors interests first.
Atlantic Trust provides integrated wealth management and investment counseling services for high
net
worth individuals, families and foundations. Atlantic Trusts experienced professionals deliver a
broad
range of offerings, including proprietary investment solutions, open architecture through
traditional
and alternative managers, as well as estate, trust and related advisory services.
INVESCO has earned the trust of investors around the world. With investment capabilities that
span traditional and alternative asset classes, INVESCO is one of the worlds leading names in
investment management for institutions and individuals.
As one of
the largest investment managers in the U.K., Invesco Perpetual manages assets on behalf
of consumers, intermediaries and professional investors through a broad product range. Invesco
Perpetual is one of the most admired and recognized brands in the U.K. investment industry, trusted
to achieve superior, long-term results for investors through truly active investment management.
PowerShares offers over 70 compelling investment opportunities through style, industry,
commodities, currencies, specialty access and broad market exchange-traded funds (ETFs). PowerShares is
Leading the Intelligent ETF Revolution, providing investment advisers with exceptional asset
management tools and market exposure through the replication of enhanced indexes. PowerShares
delivers this sophisticated asset management in one of the more benefit-rich investment vehicles
available today, the ETF.
WL Ross & Co. manages alternative assets for institutional investors in the U.S., Europe and Asia.
It was formed in April 2000 by Wilbur Ross as an independent organization dedicated to private
investments and fund management for institutional investors and family offices across the globe.
The company has sponsored alternative investments including private equity funds, co-investment
vehicles and hedge funds in the steel, textile, coal, automotive and financial services industries
in the U.S., U.K., France, Germany, China, Japan, Korea, Vietnam, India, Brazil and Bermuda.
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LETTER TO SHAREHOLDERS AND COMMUNITY SERVICE |
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Letter to Shareholders |
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Community Service |
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BUSINESS OVERVIEW |
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Financial Highlights |
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Forward-Looking Statements |
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Introduction |
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Recent Developments |
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Industry Trends |
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Description of Our Business |
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Employees |
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Competition |
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Management Contracts |
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Government Regulation |
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FINANCIAL OVERVIEW |
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Summary |
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Assets Under Management |
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Investment Performance |
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Revenues |
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Expenses |
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Liquidity and Capital Resources |
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International Financial Reporting
Standards (IFRS) |
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Summary of Differences Between
IFRS and U.S. GAAP |
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Critical Accounting Policies |
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30 |
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New Accounting Standards |
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Risk Factors |
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35 |
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GOVERNANCE |
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Directors and Senior Management |
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40 |
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Directors Report |
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44 |
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Corporate Governance |
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45 |
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Remuneration Report |
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52 |
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FINANCIALS |
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Statement of Directors Responsibilities |
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69 |
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Report of Management on Internal
Control Over Financial Reporting |
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Report of Independent Registered
Public Accounting Firm |
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70 |
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Independent Auditors Report |
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71 |
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Report of Independent Registered
Public Accounting Firm |
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72 |
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Consolidated Income Statements |
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73 |
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Consolidated Balance Sheets |
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74 |
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Consolidated Statement of Changes
in Equity |
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75 |
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Consolidated Cash Flow Statements |
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76 |
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Notes to the Financial Statements |
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Parent Financial Statements
and Notes |
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124 |
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Five-Year Summary |
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130 |
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Summary Quarterly Information |
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136 |
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SHAREHOLDER INFORMATION |
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Investor Information |
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138 |
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Form 20-F Cross-Reference Guide |
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150 |
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Company Directory |
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151 |
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This constitutes the Annual Report of AMVESCAP PLC in accordance with United Kingdom (U.K.)
requirements. This document also
contains information set forth within the companys Annual Report on Form 20-F in accordance with
the requirements of the U.S.
Securities and Exchange Commission (SEC). A cross reference sheet, indicating the location within
this document of the various items
of the SECs Form 20-F, is set forth on page 150.
Left to right
Rex D. Adams
Chairman and
Non Executive Director |
Martin L. Flanangan
President and CEO |
02
Dear Fellow Shareholder: There is no question our world is evolving.
Economic and demographic trends across the globe are transforming
our business in ways that present both challenges and opportunities.
Expansion of the global economy is resulting in tremendous prosperity, creating a growing
middle class that increasingly seeks
professional
support to reach its financial goals. Global assets under management (AUM) are expected to grow to
more than
$60.0 trillion by 2010 from less than $50.0 trillion today, and markets outside the U.S. will
increasingly gain market share over
the next few years. In addition, the asset management industry is becoming increasingly
competitive. We believe that successful
asset managers of the future must have the scale and global reach to compete effectively.
Positioned for success. These developments favor firms with global expertise and diversified
investment capabilities. Our company
benefits from a broad global footprint and a full range of investment capabilities that few
organizations can match. With this
unique foundation, we believe that our company is well-positioned to succeed in this evolving
world.
Only a small number of asset managers approach our global reach and capabilities. In fact, of more
than 30,000 money managers
around the world, fewer than 10 are independent organizations with our scale and depth of
investment capabilities. This
represents a meaningful competitive advantage for us.
Our global reach spans nine of the worlds 10 largest markets, and we have a strong local presence
in 19 countries. With more
than 500 investment professionals in key markets across the globe, we are able to offer specialized
capabilities backed by a
global infrastructure.
Diversification is another one of our core strengths. We are diversified by client location,
distribution channel and asset class. This diversification enables us to weather different market cycles and is a source of strength for our company
that benefits our clients, our
shareholders and our business.
Investors, institutions and intermediaries increasingly seek investment managers that offer strong,
core traditional products as
well as alternative solutions. Our broad range of investment capabilities extends from traditional
equity and fixed income investments
to sophisticated structured products and private capital.
During 2006, we expanded our broad lineup of established investment solutions with the acquisitions
of PowerShares distinctive line
of exchange-traded funds (ETFs) and the respected financial restructuring expertise of WL Ross &
Co. With these additions we now
offer our clients one of the industrys most robust and comprehensive sets of investment products.
These distinctive worldwide investment
management capabilities, combined with our global distribution, are powerful differentiators in a
competitive marketplace.
Delivering on our powerful strategy. At the beginning of 2006, we announced a set of strategic
initiatives that recognize the
dynamic environment in which we operate and seek to leverage our many strengths to build our
success over the long term. With
a disciplined focus on the successful execution of these initiatives, we have made significant
progress in strengthening our business
and delivering against this multi-year strategy.
Annual Report 2006 03
Letter to Shareholders
AMVESCAP:
Gaining Momentum
Throughout 2006 we aligned our leadership and organizational structure to help us work more
effectively as an integrated, global
investment management business. Early in the year, we organized our management structure to further
sharpen the focus on our
business and our clients. We also took steps to align our worldwide Legal, Compliance, Finance and
Human Resource areas along
functional lines to ensure greater collaboration and increased efficiency.
Early in 2006 we launched a three-year transformation program for our Operations and Technology
group. The program will improve
efficiency by creating an integrated global technology platform, with a unified organizational and
management structure, and common
policies, procedures and practices. As one measure of success, during 2006 we reduced the number of
software applications supported
across the company by 20%.
As we entered 2007, we opened pilot global enterprise support centers in Hyderabad, India and
Prince Edward Island, Canada. As they
are developed, these centers will provide operations and technology support for our businesses
around the world. The new centers
promise to give us greater flexibility across time zones, lower costs for our fund shareholders and
improved efficiency for our clients.
As another important part of our commitment to integrate our operations, we also announced plans to
take a unified approach to our
business across North America. We believe we can strengthen our business considerably by managing
our U.S. and Canadian retail
activities as a single line of business that transcends borders.
As one of our most important internal initiatives in 2006, we completed the first all-inclusive
survey of employees across the
company. The results showed that our employees wanted further information about our strategic
direction and an increased focus
on people development. Their candid input was an important step in our ongoing efforts to
strengthen our business. One outcome
of the survey was a talent management process that will improve our ability to identify high
performers in our organization with
strong leadership potential.
Strong results for 2006. As a result of our focus on executing our strategy, we are pleased to
report strong results for the year. AUM
ended 2006 at a record level of $462.6 billion, an improvement of $76.3 billion over the prior
year. Operating profit rose to $785.4 million,
up 57.0% over the prior year before the 2005 restructuring charge. Improving operating leverage and
our focus on expense discipline
was reflected in an expansion of our margin, which increased to 32.5% for 2006 from 23.0% in 2005
before the restructuring charge.
Diluted earnings per share improved 76.5% from $0.34 in 2005 before the restructuring charge to
$0.60 in 2006. As a result, consistent
with our goal of steadily increasing our rewards to shareholders, our Board of Directors is
recommending a final dividend of $0.104.
Unifying our culture. As we worked to better integrate our business, we launched an intensive
effort to understand the shared
elements of our culture across the company. More than 2,500 of our employees, our corporate Board
members and senior leaders
provided input regarding the culture of our firm and the business principles that should guide our
interactions with clients and our
04
Letter to Shareholders
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2006, 2005 and 2004 are presented under IFRS. 2003 and 2002 are presented under U.K. GAAP
before goodwill amortization and exceptional items.
See Five-Year Summary for reconciliations of operating profit and earnings per share before the
restructuring charge (2005), the U.S. regulatory
settlement (2004) and goodwill amortization and exceptional items (2003 and 2002) to operating
profit and earnings per share and important additional
disclosures.
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colleagues. The result was a set of principles that form the foundation of our efforts to
create a shared culture
across our company:
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We are passionate about our clients success. |
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We earn trust by acting with integrity. |
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People are the foundation of our success. |
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Working together, we achieve more. |
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We believe in the continuous pursuit of performance excellence. |
Throughout 2007 and beyond, we will build on these principles to further unify our culture,
ensuring a positive environment for our
employees and a consistent, superior experience for our clients.
As we operate and compete as a single, global investment management organization, there are
compelling reasons for moving to a
new company name that leverages the strengths of one of our existing business brands. We are
therefore proposing to shareholders
that we replace the AMVESCAP name with INVESCO. We have chosen INVESCO from among our other strong
brands because it is
the only brand used in every market in which we operate and because being an investment management
company is embedded
in the name. This does not mean we will be eliminating our other strong brands. Our long-term plan
is to build on the power of these
brands to enhance awareness of our company.
Focus on the future. We believe that our company has everything it takes to succeed in our evolving
world. Our financial performance
definitely has us heading in the right direction. To ensure our continued success, our strategy
recognizes the dynamic environment in
which we operate and positions us for long-term growth.
Going forward, we will build on our momentum to drive continued improvements in our financial
performance and generate the resources
we need to compete. We will work to further unlock the power of our global organization to provide
enduring investment solutions for
our clients and add real value for our shareholders. And we will continue to make meaningful
progress toward our goal of becoming
a premier global investment management organization.
Sincerely,
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Rex D. Adams
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Martin L. Flanagan |
Chairman
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President and CEO |
Annual Report 2006 05
Community Services
AMVESCAP CARES
AMVESCAP is committed to responsible corporate citizenship
and encourages employees to play active roles in the growth and
development of the communities in which they live and work.
By donating time, energy and other resources, the AMVESCAP
team supports a variety of local and international programs for
the arts, education, sports, the environment and charitable
organizations. Highlights from the past year include:
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AIM Trimark is a national partner for Big Brothers Big Sisters
of Canada and the annual Bowl for Kids Sake event.
Employees participate in these programs and other charitable
activities year round, including Habitat for Humanity builds,
Play Day and Jeans Days. |
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AIM employees have worked hand in hand with Rebuilding
Together Houston since 1992, providing home repair services
for low income, elderly and disabled Houstonians. In 2006
a crew of AIM volunteers, including family members and
friends, came together to revitalize the home of an elderly
Houston woman. |
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The INVESCO Atlanta Community Service Committee selected
eight local charitable organizations to assist during 2006. Atlanta
associates participated in several volunteer opportunities, and
various employee events raised funds for these organizations,
each of which received a monetary donation. Invesco Perpetual
employees took up a fencing duel to raise money for cancer
research. Members of the Invesco Perpetual UK equity team
completed the Octopus Super Challenge Cycle-a-thon to assist
charities such as Cancerbackup, the Shooting Star Childrens
Hospice and charities in the local Notting Hill area. INVESCO
employees in Asia-Pacific supported local charitable initiatives
by taking part in a charity run, bike ride and dress special day,
with all donations going to charitable organizations in support
of local community services. |
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Atlantic Trust supports nonprofit organizations in the firms
local communities across the U.S., both through professionals
who volunteer their time and expertise, as well as through
sponsorships. |
06
Financial Highlights
The growing financial strength of our company during 2006 was demonstrated by record
assets under management of $462.6 billion and a 57.0% increase in operating profits over
the previous year before the restructuring charge. (a)
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Results before the Adjustments(a) |
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Results for the Year Ended December 31, |
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for the Year Ended December 31, |
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2006 |
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2005 |
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2004 |
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2006 |
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2005 |
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2004 |
Net revenues(b) |
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$ |
2,414.6 |
m |
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$ |
2,173.2 |
m |
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$ |
2,124.5 |
m |
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$ |
2,414.6 |
m |
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$ |
2,173.2 |
m |
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$ |
2,124.5 |
m |
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Operating expenses |
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$ |
1,629.2 |
m |
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$ |
1,748.6 |
m |
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$ |
2,037.2 |
m |
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$ |
1,629.2 |
m |
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$ |
1,672.9 |
m |
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$ |
1,624.0 |
m |
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Operating profit |
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$ |
785.4 |
m |
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$ |
424.6 |
m |
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$ |
87.3 |
m |
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$ |
785.4 |
m |
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$ |
500.3 |
m |
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$ |
500.5 |
m |
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Net operating
margin(c) |
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32.5 |
% |
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19.5 |
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4.1 |
% |
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32.5 |
% |
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23.0 |
% |
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23.6 |
% |
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Profit before tax |
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$ |
754.6 |
m |
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$ |
360.1 |
m |
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$ |
39.0 |
m |
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$ |
754.6 |
m |
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$ |
435.8 |
m |
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$ |
452.2 |
m |
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Earnings per share: |
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basic |
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$ |
0.62 |
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$ |
0.27 |
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(0.05 |
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$ |
0.62 |
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$ |
0.34 |
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$ |
0.35 |
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diluted |
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$ |
0.60 |
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$ |
0.26 |
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$ |
(0.05 |
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$ |
0.60 |
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$ |
0.34 |
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$ |
0.35 |
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Assets under management |
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$ |
462.6 |
b |
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$ |
386.3 |
b |
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$ |
382.1 |
b |
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$ |
462.6 |
b |
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$ |
386.3 |
b |
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$ |
382.1 |
b |
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(a) |
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The Adjustments include the 2005 restructuring charge of $75.7 million
($58.3 million after tax, or $0.072 per share) and the
2004 U.S. regulatory settlement charge of $413.2 million ($318.2 million after tax, or $0.40 per share).
See Five Year Summary for reconciliations of operating profit and earnings per share before the
restructuring charge (2005) and the U.S. regulatory settlement (2004) to operating profit and earnings per share
and important additional disclosures. |
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(b) |
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Net revenues represent total revenues less third party distribution, service and advisory fees. |
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Net operating margin is equal to operating profit divided by net revenues. |
In this annual report, we use the terms AMVESCAP, company, we, us and our to refer
to AMVESCAP PLC together with its consolidated subsidiaries when the distinction between
the publicly-traded parent company and its subsidiaries is not important to the discussion.
When this distinction is important to the discussion, we use the term Parent or AMVESCAP PLC
to refer to AMVESCAP PLC, the publicly-traded parent company, standing alone. The term ordinary shares
means ordinary shares of AMVESCAP PLC.
Annual Report 2006 07
Forward-Looking Statements
We believe it is important to communicate our future expectations
to our shareholders and to the public. 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 United States securities laws. These
statements are based on the beliefs and assumptions of our
management and on information available to our management
at the time such statements were made. Forward-looking statements
include information concerning possible or assumed
future results of our operations, earnings, liquidity, cash flow 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, 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, 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.
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 or incorporated by reference in this report or 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 that we may describe in any such forward-
looking
statements: (1) variations in demand for our investment
products or services, including termination or non-renewal of
our investment advisory agreements (2) significant changes
in net cash 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; (3) significant fluctuations
in the performance of debt and equity markets worldwide;
(4) the effect of political or social instability in the countries in
which we invest or do business; (5) the effect of terrorist attacks
in the countries in which we invest or do business and the escalation
of hostilities that could result therefrom; (6) enactment of
adverse state, federal or foreign legislation or changes in
government
policy or regulation (including accounting standards)
affecting our operations or the way in which our profits
are taxed; (7) war and other hostilities in or involving countries
in which we invest or do business; (8) adverse results in litigation,
including private civil litigation related to market timing,
mutual fund fees and mutual fund sales practices, and any similar
potential regulatory or other proceedings; (9) exchange rate
fluctuations, especially as against the U.S. dollar; (10) the effect
of economic conditions and interest rates in the U.K., U.S. or
globally; (11) our ability to compete in the investment management
business; (12) the effect of consolidation in the investment
management business; (13) limitations or restrictions on access
to distribution channels for our products; (14) our ability to
attract and retain key personnel, including investment management
professionals; (15) the investment performance of our
investment products and our ability to retain our accounts;
(16) 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;
(17) changes in regulatory capital requirements; (18) our substantial
debt and the limitations imposed by our credit facility;
(19) the effect of failures or delays in support systems or customer
service functions, and other interruptions of our
operations; (20) the occurrence of breaches and errors in the
conduct of our business, including any failure to properly
safeguard
confidential and sensitive information; and (21) the
execution risk inherent in our current company-wide transformational
initiatives. 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, as well as other factors, may also cause actual
results to differ materially from those projected. For more discussion
of the risks affecting us, please refer to the section
entitled Financial Overview-Risk Factors below.
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. Except for our ongoing
obligations to disclose material information under applicable
securities laws, we undertake no obligation to release publicly
any revisions to forward looking statements, to report events
or to report the occurrence of unanticipated events. For all
forward-
looking statements, we claim the safe harbor provided
by Section 27A of the U.S. Securities Act and Section
21E of the Securities Exchange Act of 1934.
08
Business Overview
Introduction
AMVESCAP provides retail, institutional and high-net-worth
clients with a distinctive array of investment management
capabilities
through a variety of brands across the globe.
AMVESCAPs sole business is asset management. At
December 31, 2006, AMVESCAP managed $462.6 billion in
assets under management (AUM) around the world under
the AIM, AIM Trimark, Atlantic Trust, INVESCO, Invesco
Perpetual, PowerShares and WL Ross & Co. brands.
The key drivers of success for AMVESCAP are long-term
investment performance and client service, delivered across
a diverse spectrum of products, distribution channels, geographic
areas and market exposures. By achieving success
in these areas, we seek to generate positive net flows and
increased AUM. 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
product diversification. We measure relative investment performance
by comparing our products to competing products and
industry benchmarks. Generally, distributors, investment advisors
and consultants heavily weigh longer-term performance
(e.g. three-year and five-year performance) in selecting the
products they recommend to their customers, although shorterterm
performance may be an important consideration. Third-party
ratings can 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 obtaining feedback from investment consultants.
Our registered office is located at 30 Finsbury Square, London,
United Kingdom, and our principal executive offices are in leased
office space at 1360 Peachtree Street N.E., Atlanta, Georgia, U.S.A.
Our telephone number is +1-404-479-1095. We are a public
limited company under the U.K. Companies Act, domiciled in
the U.K., and our shares, American Depositary Shares and
Exchangeable Shares are listed on the London Stock
Exchange, the New York Stock Exchange and the Toronto Stock
Exchange, respectively, under the symbol AVZ. We maintain
a Web site at www.amvescap.com. (Information contained on
our Web site shall not be deemed to be part of, or to be incorporated
into, this document.)
History
AMVESCAP PLC was originally incorporated on December 19,
1935 under the laws of England and Wales. Although our constituent
corporate entities are significantly older, AMVESCAP
in its modern form was created by the 1997 combination of
two asset management businesses: INVESCO and AIM, both
of which had been founded in the 1970s. Envisioning a broad
international market for asset management, our Chairman Emeritus
Charles W. Brady and eight partners in Atlanta, Georgia had
purchased the pension management department from their
employer, a large regional U.S. bank, in 1978, naming the new
business INVESCO. In the same spirit, AIM-founders Charles
T. Bauer, Robert H. Graham, and Gary T. Crum had separately
left the asset management department of a major U.S. insurance
company in 1976 and had formed a mutual fund company
which they called A I M Management Group. In subsequent
years, INVESCO continued to pursue growth through a program
of targeted acquisitions, establishing or strengthening its retail
and institutional businesses in key locations around the world.
The merger of INVESCO and AIM in 1997 resulted in the
name change to AMVESCAP PLC and created one of the first
truly global independent retail and institutional investment managers,
with approximately $200 billion in AUM. AMVESCAP
increased its global scope further with the acquisition of LGT
Asset Management, Trimark Financial Corporation in Canada,
Perpetual PLC in the United Kingdom and additional businesses
in Australia and Taiwan. In 2001 AMVESCAP formed Atlantic
Private Wealth Management, a business focused on serving
the needs of high-net-worth individuals and their families.
Atlantic Trust was built by the successive acquisitions of
Boston-based Pell Rudman, New York-based Whitehall Asset
Management and Chicago-based Stein Roe Investment Counsel.
In 2003 AMVESCAP became the first global asset management
company to enter the market in China, forming a joint
venture with Great Wall Securities. In 2005 we opened an office
in Shenzhen and became the first non-Chinese firm authorized
by the government to increase its joint venture ownership stake
from 33.0% to 49.0%.
Annual Report 2006 09
Business Overview
Recent Developments
On August 1, 2005, AMVESCAP appointed
Martin L. Flanagan as president and chief
executive officer. Under Mr. Flanagans
leadership, the company developed and began to
implement a comprehensive operating plan
designed to strengthen the business, build
renewed momentum and identify the most
promising opportunities for future growth.
During 2006 we also simplified our management
structure to streamline decision-making and
sharpen the focus on our clients and our
business. Our primary senior management team
consists of the chief executive officer and
eight senior managing directors, each of whom
has responsibility for a core element of our
global business.
On September 18, 2006, we acquired PowerShares,
a leading provider of exchange-traded funds
(ETFs). As of year end 2006, PowerShares
managed approximately $8.5 billion in assets
and offered investors 69 distinctive ETF
products.
On October 3, 2006, we acquired WL Ross &
Co., one of the industrys leading financial
restructuring groups, expanding the range of
high-quality alternative investment offerings
for our clients. Led by Wilbur Ross and his
team, WL Ross & Co. assumed responsibility
for the direct private equity business of
AMVESCAP, with $3.4 billion in combined
assets as of year end 2006.
We are continuing to implement our
comprehensive operating plan, which is designed
to leverage AMVESCAPs core strengths our
people, our investment expertise, our
diversification across asset classes, clients
and channels, and our global presence.
During the year, AMVESCAP made significant
improvements in investment and operating
performance. Net operating margins increased
from below 25.0% to above 30.0%, relative
investment performance levels rose to their
highest in five years, year-over-year net flows
improved, and the price of AMVESCAP shares rose
approximately 35.0% during 2006.
Industry Trends
Demographic and economic trends around
the world are transforming the asset
management industry and our business:
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Population and economic growth are creating
a larger basket of investable assets and a
growing number of investors who need
professional support to reach their financial
goals. |
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Global economic prosperity and changes in
retirement needs are creating a larger middle
class of investors, resulting in the growth of
mutual funds around the globe. The greater
reliance on self-funded retirement will result
in not only a higher level of investable
assets, but a greater need to be advised on how
to invest effectively for the future. Recent
changes to U.S. pension laws could potentially
further increase the size of defined
contribution market. AMVESCAP is
well-positioned to absorb these retirement
assets through our products developed to meet
retirement needs, including lifecycle and
target maturity funds. |
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We have seen increasing separation of alpha
and beta as an investment strategy in the asset
management industry. (Alpha is defined as
excess return attributable to a manager, and
beta refers to the return of an underlying
benchmark.) This trend increases the demand for
low cost beta solutions such as passive, index
and ETF products, as well as an increasing
demand for higher alpha strategies such as
alternative products. The acquisitions of
PowerShares and WL Ross & Co. reflect our focus
on addressing this trend. |
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Explosive growth in China and India, combined
with the generational transfer of wealth in
the U.S. and Europe, is creating a favorable
environment for asset managers globally,
although within a more competitive environment.
As the second-largest joint venture in China,
we are well-positioned to participate in the
rapidly growing fund industry. |
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Investors are increasingly seeking to invest
outside their domestic markets. They seek
firms that operate globally and have expertise
in markets around the world. With offices in
19 countries, AMVESCAP has the global presence
to benefit from this trend. |
Our plans for taking the business forward
acknowledge these demographic and economic
trends, as well as our competition. Our
multi-year strategy is designed to leverage
our global presence, our distinctive worldwide
investment management capabilities and our
talented people to strengthen our business and
ensure our long-term success.
10
Business Overview
Description of Our Business
AMVESCAP is a leading independent global
asset manager with offices in 19 countries. As
of December 31, 2006, AMVESCAP managed $462.6
billion in assets for retail, institutional and
private wealth investors around the world. Our
investment products are sold under the brand
names AIM, AIM Trimark, Atlantic Trust,
INVESCO, Invesco Perpetual, PowerShares and WL
Ross & Co. AMVESCAP shares are traded publicly
on the London, New York and Toronto stock
exchanges under the symbol AVZ. As of
December 31, 2006, AMVESCAP had a market
capitalization of approximately $10.0 billion.
Our aspiration is to take advantage of our
world of opportunity to become a premier
global investment management organization.
Supported by a global operating platform,
AMVESCAP delivers a broad array of investment
products and services to
retail, institutional and high-net-worth
investors on a domestic, international and
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 are committed to delivering the combined
power of our distinctive worldwide investment
management capabilities globally. We believe
that our discipline-specific teams provide us
with a competitive advantage. In addition, we
offer multiple investment objectives within the
various asset classes and products that we
manage. Our asset classes include equity,
balanced, fixed income, stable value, money
market and alternatives. Approximately 47.0%
of our AUM as of December 31, 2006 was invested
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:
Objectives by Asset Class
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Money Market |
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Fixed Income |
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Balanced |
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Equity |
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Alternatives |
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Prime
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Convertibles
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Core
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Small Cap Core
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Financial Structures |
Government/Treasury
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Core/Core Plus
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Global
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Small Cap Growth
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Absolute Return |
Tax-Free
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Emerging Markets
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Asset Allocation
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Small Cap Value
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U.S. REITS |
Cash Plus
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Enhanced Cash
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Medium Cap Core
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Global REITS |
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Government Bonds
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Medium Cap Growth
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U.S. Direct Real Estate |
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High-Yield Bonds
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Medium Cap Value
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European Direct Real Estate |
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High-Yield Loans
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Large Cap Core
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Private Capital Direct Investments |
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Index
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Large Cap Growth
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Private Capital Fund of Funds |
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Intermediate
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Large Cap Value
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Multiple Asset Strategies |
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International/Global
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Enhanced Index
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Asset Allocation |
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Money Markets
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Sector Funds |
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Municipal Bonds
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International |
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Short Bonds
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Global |
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Stable Value
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Regional/Single Country |
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Annual Report 2006 11
Business Overview
The following table sets forth the
categories of products sold through our
three principal distribution channels:
Investment Vehicles by Distribution Channel
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Private Wealth |
Retail |
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Institutional |
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Management |
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Mutual Funds |
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Institutional Separate Accounts |
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Separate Accounts |
ICVCs* |
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Collective Trust Funds |
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Managed Accounts |
Investment Trusts |
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Managed Accounts |
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Exchange-Traded Funds |
Individual Savings Accounts |
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Exchange-Traded Funds |
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Exchange-Traded Funds |
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* |
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Investment companies with variable capital |
The following tables present a
breakdown of AUM by client domicile,
distribution channel and asset class as of
December 31, 2006:
AUM Diversification ($ billions)
Prior to 2006 AMVESCAP operated as a
collection of diverse business units. During
2006 AMVESCAP began to better leverage the
individual strengths of these business units by
working more effectively as a unified global
organization. We realigned management of our
various global support functions (Legal,
Compliance, Finance, Human Resources,
Operations and Technology) under single senior
executives. In addition, our institutional
business is now under unified global
management. Since we now take a unified
approach to our business, we are presenting our
financial statements and other disclosures
under the single operating segment asset
management, and will no longer segregate our
presentation along the historical business
division lines.
The company is focusing on four key strategic
drivers that we believe will contribute to
our long-term success:
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Achieve strong investment performance over
the long term by having clearly articulated
investment disciplines and providing truly
enduring solutions to our clients; |
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Deliver the combined power of our
distinctive investment management
capabilities anywhere in the world to meet
our clients needs; |
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Unlock the power of our global operating
platform by simplifying our processes and
procedures and integrating the support
structures of our business globally; and |
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Continuing to build a high-performance
organization by
fostering greater transparency, accountability
and execution at all levels. |
Distribution Channels
Retail
AMVESCAP is a significant provider of retail
investment solutions to clients through our
distribution channels: AIM in the U.S., AIM
Trimark in Canada, Invesco Perpetual in the
U.K., INVESCO in Europe and Asia, and
PowerShares (for our ETF products).
Collectively the retail product management
teams manage $234.0 billion as of December 31,
2006. We offer retail products within all of
the major asset classes (equity, fixed income,
balanced, money market and alternatives) in
the form of mutual funds, separately managed
accounts, variable annuities, collective trusts
and ETFs. 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.
12
Business Overview
The U.S., Canadian and U.K. retail
businesses rank among the largest, by AUM, in
their respective regions: as of year end 2006,
AIM was the 14th largest non-proprietary mutual
fund complex in the U.S., AIM Trimark was the
fourth largest fund manager in Canada and
Invesco Perpetual was the second largest fund
provider in the U.K. In addition, our joint
venture in China, Great Wall, was the second
largest Sino-foreign manager in China, with AUM
of approximately $4.0 billion. Our recent
acquisition of PowerShares adds a leading set
of ETF products (with $8.5 billion in assets
and 69 funds as of December 31, 2006) to the
extensive choices available to our retail
investors. We now provide our retail clients
with one of the industrys most robust and
comprehensive product lines.
AMVESCAPs North American retail distribution
channel offers mutual funds invested in the
U.S., Canada and international markets,
including funds that target particular market
sectors. We offer equity, balanced, fixed
income, real estate and money market funds.
Through our AIM and AIM Trimark brands, we also
provide investment management services to
mutual funds managed by companies unaffiliated
with us. In addition to our sales of fund
products through financial intermediaries,
third-party pension plans and insurance
companies use our funds as investment options
under their own separate accounts. Similarly,
we sub-advise funds sponsored by third parties,
typically for use as investment options under
insurance company separate accounts. AIM has
also developed a managed account business,
which tailors individual, privately managed
portfolios to clients investment needs. AIM
also provides retirement products and
state-sponsored college savings plans.
Through our Invesco Perpetual brand, we are
one of the largest independent investment
managers in the U.K., currently managing
assets on behalf of consumers, intermediaries
and professional investors through a broad
product range that includes ICVCs, investment
trusts, PEPs, ISAs, pension products, offshore
funds and other specialist mandates. Invesco
Perpetual actively manages products that
include U.K., European, U.S., Asian, emerging
market and other international equities, as
well as fixed interest funds.
In Europe and Asia we market our products
under the INVESCO brand, which includes
locally managed investment products as well as
a diversified offshore fund range.
Institutional
AMVESCAP provides investment solutions to
institutional investors globally, with a major
presence in the U.S., Canada, U.K., Continental
Europe and Asia-Pacific regions under the
INVESCO and AIM brands ($211.8 billion in AUM
as of December 31, 2006). We offer a broad
suite of domestic and global products,
including traditional equities, structured equities, fixed income, real estate, private equity
(recently expanded through our acquisition of
WL Ross & Co.), financial structures, and
absolute return strategies. Global and regional
sales forces distribute our products and
provide services to clients and intermediaries
around the world. Our investment teams are
organized by investment specialty and operate
with key hubs in New York, Atlanta, Dallas,
Louisville, Houston, London, Frankfurt, Hong
Kong, Tokyo and Melbourne.
We have a diversified client base that
includes major public entities, corporate,
union, non-profit, endowments and
foundations, as well as investment
consultants and financial institutions.
Customers of AIMs institutional money
market funds included 17 of the 20 largest
U.S. banks, 8 of the Fortune 50 U.S.
corporations, and 6 of the top 20 Fortune
Global Corporations as of December 31, 2006.
We believe that having our investment
professionals working in and investing from
many of the worlds financial markets is one of
our core strengths. AMVESCAP both coordinates
the construction of global portfolios and
markets our global investment management
services.
Private Wealth Management
Under the Atlantic Trust brand, AMVESCAP
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 sale of third
party-managed investment products), private
equity, trust, custody and family office
services. We also provide asset management
services to foundations and endowments in the
U.S. Atlantic Trust obtains new clients
primarily through referrals from existing
clients and recommendations from a network of
attorneys and accountants. Atlantic Trust has
offices in 16 U.S. cities and manages $16.8
billion as of December 31, 2006 for a diverse
set of clients.
Annual Report 2006 13
Business Overview
Employees
As of December 31, 2006, we had 5,574
employees, of whom approximately 62% were
located in North America. As of December 31,
2005 and 2004, we had 5,798 and 6,693
employees, respectively. The decreases in
headcount were due to reductions in force we
made during those years. 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, 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.
Management Contracts
We derive substantially all of our
revenues from investment management contracts
with clients. 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
and stable return accounts. Investment
management contracts are generally terminable
upon thirty or fewer days notice. Typically,
mutual fund and unit trust investors may
withdraw their funds at any time without prior
notice. Institutional clients may elect to
terminate their relationship with us or reduce
the aggregate amount of assets under management
upon very short-notice periods. Individual
clients and fund shareholders may elect to
close their accounts or redeem their shares in
our mutual funds, or shift their funds to other
types of accounts with different rate
structures, for any of a number of reasons,
including changes in investment strategy,
investment performance, changes in prevailing
interest rates and financial market
performance.
Government Regulation
As with all investment management
companies, our operations and investment
products 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
government agencies and industry self-regulatory
authorities broad administrative discretion over
the activities of our business, including the
power to limit or restrict business activities.
Possible sanctions for violations of law 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,
and the imposition of fines and censures on us
or our employees. It is also possible that laws
and regulations governing our operations in
general or particular investment products could
be amended or interpreted in a manner that is
adverse to us.
We conduct substantial business operations in
the U.S. Various of our subsidiaries and/or
products and services offered by such
subsidiaries are regulated by the SEC, the
National Association of Securities Dealers
(NASD), the National Futures Association, the
Commodity Futures Trading Commission and the
Office of the Comptroller of the Currency
(OCC). Federal statutes that regulate the
products and services we offer in the U.S.
include the Securities Act of 1933, the
Securities Exchange Act of 1934 (Exchange Act),
the Investment Company Act of 1940, the
Investment Advisers Act of 1940 and the
Employee Retirement Income Security Act of
1974.
Various of our subsidiaries are regulated in the
United Kingdom by the Financial Services
Authority (FSA). Our operations elsewhere in the
world are regulated by similar regulatory organizations. Other regulators who potentially
exert a significant impact on our businesses
around the world include the Ministry of Finance
and the Financial Services Agency in Japan, the
Federal Financial Supervisory Authority in
Germany, the Canadian securities administrators
(including the Ontario Securities Commission),
the Central Bank of Ireland, the Banque de
France and the Autorité des Marchs Financiers in
France, the
14
Business Overview
Securities and Futures Commission of
Hong Kong, the Belgian Banking and Finance
Commission, the Australian Securities &
Investments Commission, the Securities and
Futures Commission of the Ministry of Finance
and the Investment Commission of the Ministry
of Economic Affairs of the Republic of China,
the Commissione Nazionale per le Società e la
Borsa (CONSOB) in Italy, the Netherlands
Authority for the Financial Markets, the Swiss
Federal Banking Commission, La Comisión
Nacional del Mercado de Valores (CNMV) in
Spain, the Monetary Authority of Singapore,
the Jersey Financial Services Commission and
the Pension Fund
Supervisions Office (UNFE) in Poland.
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. There
have been recent changes to regulatory capital
requirements applying to investment firms
operating within the European Economic Area
(EEA). After consultation with the U.K.
Financial Services Authority (FSA), it has been
determined that, for the purposes of prudential
supervision, AMVESCAP PLC is not subject to
regulatory consolidated capital requirements
under current European Union (EU) Directives. A
sub-group, however, including all of our EU
subsidiaries, is subject to these consolidated
capital requirements, and capital is maintained
within this sub-group to satisfy these
regulations. 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 distributions. We
cannot guarantee that further corporate
restructuring will not be required to comply
with applicable legislation. See Financial
Overview Risk Factors included elsewhere
herein.
As a foreign private issuer (FPI) for SEC
reporting purposes, we are currently exempt from
significant provisions of the U.S. federal
securities laws. To retain our FPI status, U.S.
residents must hold less than 50% of our voting
securities (ordinary and exchangeable shares).
At January 1, 2007, the most recent measurement
date prior to the publication of this annual
report, the proportion of our voting securities
held by U.S. residents was 44%. If the company
were to lose its status as an FPI, our
accounting and public reporting burdens would
increase and would become more complex. It is
also likely that our compliance and corporate
governance costs would increase.
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.
Annual Report 2006 15
Financial Overview
Summary
AMVESCAP ended 2006 with record AUM of $462.6 billion, a 19.8% increase over 2005 resulting
from a combination of market gains and acquisitions, partially offset by net outflows of $1.4
billion. Larger AUM and higher performance fees increased net revenues to $2,414.6 million, an
11.1% increase over the previous year. Operating expenses fell 2.6% year over year compared to
operating expenses before the restructuring charge in 2005. This combination of growing revenues
and falling expenses produced operating profits of $785.4 million in 2006, an increase of 57.0%
over operating profit before the restructuring charge in 2005, and a significant expansion of net
operating margin to 32.5%. Diluted earnings per share improved 76.5%, from $0.34 in 2005 before the
restructuring charge to $0.60 in 2006. See page 22 for a reconciliation of total operating expenses
before the restructuring charge to total operating expenses. See Five-Year Summary for a
reconciliation of operating profit before the restructuring charge to operating profit and
important additional disclosures.
During 2006, AMVESCAP made two important acquisitions. In September, the acquisition of PowerShares
added $6.3 billion in AUM, and in October, the company completed the acquisition of WL Ross & Co.
with $2.6 billion in AUM. The addition of PowerShares distinctive line of exchange traded funds
(ETFs) and the recognized financial restructuring expertise of WL Ross & Co. to our broad line of
established investment solutions provides our global clients with one of the industrys most robust
and comprehensive ranges of investment capabilities.
Investment performance strengthened during the year in most of our asset categories. Within our
retail products, our U.K., U.S. and Canadian investment teams each improved their relative
performance over 2005. Our U.K. business continued to outpace many of its competitors throughout
2006, and we experienced steady improvement in our U.S. retail business and a significant
turnaround in our Canadian performance in 2006. Our institutional business showed improvement year
over year across asset classes, with our fixed income and money market businesses once again
delivering consistent outstanding performance relative to their benchmarks.
Assets Under Management
AUM at the end of 2006 were $462.6 billion (2005: $386.3 billion). Average AUM for 2006 were
$424.2 billion, compared to $377.6 billion in 2005. Net outflows for the year ended December 31,
2006, were $1.4 billion, with inflows of $85.8 billion and outflows of $87.2 billion. Net inflows
in the first half of the year were slightly positive offset by relatively small net outflows in the
second half, although our investment performance has generally strengthened throughout the year.
Our retail net inflows for 2006 were $0.5 billion, compared to net outflows of $12.1 billion in
2005. Institutional net outflows were $1.2 billion in 2006 versus net outflows of $4.5 billion in
2005. Our Private Wealth Management (PWM) business had net outflows of $0.7 billion in 2006
compared to net inflows of $0.4 billion in 2005. Changes in AUM were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
$ billions |
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
January 1, |
|
$ |
386.3 |
|
|
$ |
382.1 |
|
|
$ |
370.6 |
|
Inflows |
|
|
85.8 |
|
|
|
66.3 |
|
|
|
67.0 |
|
Outflows |
|
|
(87.2 |
) |
|
|
(82.5 |
) |
|
|
(86.5 |
) |
|
|
|
Net flows |
|
|
(1.4 |
) |
|
|
(16.2 |
) |
|
|
(19.5 |
) |
Net flows in money market funds and other |
|
|
12.8 |
|
|
|
0.5 |
|
|
|
(8.3 |
) |
Market gains/reinvestment |
|
|
46.5 |
|
|
|
24.4 |
|
|
|
26.0 |
|
Acquisitions/disposals |
|
|
8.9 |
|
|
|
|
|
|
|
6.1 |
|
Foreign currency translation |
|
|
9.5 |
|
|
|
(4.5 |
) |
|
|
7.2 |
|
|
December 31, |
|
$ |
462.6 |
|
|
$ |
386.3 |
|
|
$ |
382.1 |
|
|
Average long-term AUM |
|
$ |
366.3 |
|
|
$ |
331.7 |
|
|
$ |
326.2 |
|
Average institutional money market AUM |
|
|
57.9 |
|
|
|
45.9 |
|
|
|
45.1 |
|
|
Average AUM |
|
$ |
424.2 |
|
|
$ |
377.6 |
|
|
$ |
371.3 |
|
|
16
Financial Overview
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 may materially affect our revenues from period
to period. Global capital markets improved over 2006. In 2006, the total returns (in local currency
terms) of the FTSE 100, the S&P 500, NASDAQ and the Dow Jones Industrial Average were 14.8%, 15.8%,
10.4% and 19.0%, respectively. Our AUM by channel, by asset class, and by client domicile were as
follows:
AUM by Channel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ billions |
|
Total |
|
|
Retail |
|
|
Institutional |
|
|
PWM |
|
|
January 1, 2004 |
|
$ |
370.6 |
|
|
$ |
176.6 |
|
|
$ |
184.9 |
|
|
$ |
9.1 |
|
Inflows |
|
|
67.0 |
|
|
|
40.1 |
|
|
|
22.6 |
|
|
|
4.3 |
|
Outflows |
|
|
(86.5 |
) |
|
|
(53.3 |
) |
|
|
(28.6 |
) |
|
|
(4.6 |
) |
|
|
|
Net flows |
|
|
(19.5 |
) |
|
|
(13.2 |
) |
|
|
(6.0 |
) |
|
|
(0.3 |
) |
Net flows in money market funds and other |
|
|
(8.3 |
) |
|
|
1.3 |
|
|
|
(9.6 |
) |
|
|
|
|
Market gains/reinvestment |
|
|
26.0 |
|
|
|
16.0 |
|
|
|
9.7 |
|
|
|
0.3 |
|
Acquisitions/disposals |
|
|
6.1 |
|
|
|
|
|
|
|
|
|
|
|
6.1 |
|
Foreign currency translation |
|
|
7.2 |
|
|
|
5.3 |
|
|
|
1.9 |
|
|
|
|
|
|
December 31, 2004 |
|
$ |
382.1 |
|
|
$ |
186.0 |
|
|
$ |
180.9 |
|
|
$ |
15.2 |
|
|
Inflows |
|
|
66.3 |
|
|
|
41.2 |
|
|
|
21.3 |
|
|
|
3.8 |
|
Outflows |
|
|
(82.5 |
) |
|
|
(53.3 |
) |
|
|
(25.8 |
) |
|
|
(3.4 |
) |
|
|
|
Net flows |
|
|
(16.2 |
) |
|
|
(12.1 |
) |
|
|
(4.5 |
) |
|
|
0.4 |
|
Net flows in money market funds and other |
|
|
0.5 |
|
|
|
1.9 |
|
|
|
(1.6 |
) |
|
|
0.2 |
|
Market gains/reinvestment |
|
|
24.4 |
|
|
|
16.0 |
|
|
|
7.9 |
|
|
|
0.5 |
|
Foreign currency translation |
|
|
(4.5 |
) |
|
|
(1.6 |
) |
|
|
(2.9 |
) |
|
|
|
|
|
December 31, 2005 |
|
$ |
386.3 |
|
|
$ |
190.2 |
|
|
$ |
179.8 |
|
|
$ |
16.3 |
|
|
Inflows |
|
|
85.8 |
|
|
|
58.4 |
|
|
|
23.2 |
|
|
|
4.2 |
|
Outflows |
|
|
(87.2 |
) |
|
|
(57.9 |
) |
|
|
(24.4 |
) |
|
|
(4.9 |
) |
|
|
|
Net flows |
|
|
(1.4 |
) |
|
|
0.5 |
|
|
|
(1.2 |
) |
|
|
(0.7 |
) |
Net flows in money market funds and other |
|
|
12.8 |
|
|
|
(0.3 |
) |
|
|
13.1 |
|
|
|
|
|
Market gains/reinvestment |
|
|
46.5 |
|
|
|
31.4 |
|
|
|
13.9 |
|
|
|
1.2 |
|
Acquisitions |
|
|
8.9 |
|
|
|
6.3 |
|
|
|
2.6 |
|
|
|
|
|
Foreign currency translation |
|
|
9.5 |
|
|
|
5.9 |
|
|
|
3.6 |
|
|
|
|
|
|
December 31, 2006 |
|
$ |
462.6 |
|
|
$ |
234.0 |
|
|
$ |
211.8 |
|
|
$ |
16.8 |
|
|
Annual Report 2006 17
Financial Overview
AUM by Asset Class
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed |
|
|
|
|
|
|
Money |
|
|
Stable |
|
|
|
|
$ billions |
|
Total |
|
|
Equity |
|
|
Income |
|
|
Balanced |
|
|
Market |
|
|
Value |
|
|
Alternatives |
|
|
January 1, 2005 |
|
$ |
382.1 |
|
|
$ |
178.6 |
|
|
$ |
44.2 |
|
|
$ |
43.3 |
|
|
$ |
51.8 |
|
|
$ |
42.1 |
|
|
$ |
22.1 |
|
Inflows |
|
|
66.3 |
|
|
|
30.0 |
|
|
|
14.5 |
|
|
|
7.8 |
|
|
|
3.3 |
|
|
|
4.2 |
|
|
|
6.5 |
|
Outflows |
|
|
(82.5 |
) |
|
|
(45.6 |
) |
|
|
(10.4 |
) |
|
|
(12.5 |
) |
|
|
(3.5 |
) |
|
|
(3.0 |
) |
|
|
(7.5 |
) |
|
|
|
Net flows |
|
|
(16.2 |
) |
|
|
(15.6 |
) |
|
|
4.1 |
|
|
|
(4.7 |
) |
|
|
(0.2 |
) |
|
|
1.2 |
|
|
|
(1.0 |
) |
Net flows in money market funds |
|
|
0.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.5 |
|
|
|
|
|
|
|
|
|
Market gains/reinvestment |
|
|
24.4 |
|
|
|
17.9 |
|
|
|
1.2 |
|
|
|
1.7 |
|
|
|
|
|
|
|
2.4 |
|
|
|
1.2 |
|
Foreign currency translation |
|
|
(4.5 |
) |
|
|
(3.3 |
) |
|
|
(0.8 |
) |
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
(0.5 |
) |
|
December 31, 2005 |
|
$ |
386.3 |
|
|
$ |
177.6 |
|
|
$ |
48.7 |
|
|
$ |
40.4 |
|
|
$ |
52.1 |
|
|
$ |
45.7 |
|
|
$ |
21.8 |
|
|
Inflows |
|
|
85.8 |
|
|
|
42.5 |
|
|
|
24.3 |
|
|
|
7.4 |
|
|
|
1.9 |
|
|
|
4.3 |
|
|
|
5.4 |
|
Outflows |
|
|
(87.2 |
) |
|
|
(46.6 |
) |
|
|
(17.9 |
) |
|
|
(9.6 |
) |
|
|
(3.1 |
) |
|
|
(5.6 |
) |
|
|
(4.4 |
) |
|
|
|
Net flows |
|
|
(1.4 |
) |
|
|
(4.1 |
) |
|
|
6.4 |
|
|
|
(2.2 |
) |
|
|
(1.2 |
) |
|
|
(1.3 |
) |
|
|
1.0 |
|
Net flows in money market funds |
|
|
12.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.8 |
|
|
|
|
|
|
|
|
|
Market gains/reinvestment |
|
|
46.5 |
|
|
|
32.6 |
|
|
|
2.8 |
|
|
|
5.7 |
|
|
|
0.5 |
|
|
|
2.5 |
|
|
|
2.4 |
|
Acquisitions |
|
|
8.9 |
|
|
|
6.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.6 |
|
Foreign currency translation |
|
|
9.5 |
|
|
|
6.7 |
|
|
|
1.6 |
|
|
|
0.4 |
|
|
|
0.1 |
|
|
|
|
|
|
|
0.7 |
|
|
December 31, 2006 |
|
$ |
462.6 |
|
|
$ |
219.1 |
|
|
$ |
59.5 |
|
|
$ |
44.3 |
|
|
$ |
64.3 |
|
|
$ |
46.9 |
|
|
$ |
28.5 |
|
|
AUM by Client Domicile
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ billions |
|
Total |
|
|
U.S. |
|
|
Canada |
|
|
U.K. |
|
|
Europe |
|
|
Asia |
|
|
January 1, 2006 |
|
$ |
386.3 |
|
|
$ |
235.9 |
|
|
$ |
42.6 |
|
|
$ |
52.9 |
|
|
$ |
32.5 |
|
|
$ |
22.4 |
|
Inflows |
|
|
85.8 |
|
|
|
30.0 |
|
|
|
4.5 |
|
|
|
14.5 |
|
|
|
23.6 |
|
|
|
13.2 |
|
Outflows |
|
|
(87.2 |
) |
|
|
(42.2 |
) |
|
|
(7.7 |
) |
|
|
(10.2 |
) |
|
|
(18.0 |
) |
|
|
(9.1 |
) |
|
|
|
Net flows |
|
|
(1.4 |
) |
|
|
(12.2 |
) |
|
|
(3.2 |
) |
|
|
4.3 |
|
|
|
5.6 |
|
|
|
4.1 |
|
Net flows in money market funds |
|
|
12.8 |
|
|
|
11.5 |
|
|
|
0.4 |
|
|
|
0.2 |
|
|
|
0.7 |
|
|
|
|
|
Market gains/reinvestment |
|
|
46.5 |
|
|
|
21.9 |
|
|
|
6.9 |
|
|
|
9.9 |
|
|
|
4.1 |
|
|
|
3.7 |
|
Acquisitions |
|
|
8.9 |
|
|
|
8.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
|
9.5 |
|
|
|
(0.3 |
) |
|
|
0.4 |
|
|
|
6.5 |
|
|
|
2.7 |
|
|
|
0.2 |
|
|
December 31, 2006 |
|
$ |
462.6 |
|
|
$ |
265.7 |
|
|
$ |
47.1 |
|
|
$ |
73.8 |
|
|
$ |
45.6 |
|
|
$ |
30.4 |
|
|
The company began documenting and presenting AUM by client domicile in 2006. Prior to 2006, the
company was organized into seven operating divisions, and AUM data was tracked and presented by
these divisions. The company operates under one business segment, asset management. See Note 4 to
the Consolidated Financial Statements for geographical segmental disclosures.
18
Financial Overview
Investment Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of AUM in Top Half of Peer Group |
|
|
Retail (1) |
|
As of December 31, 2006 |
|
|
As of December 31, 2005 |
|
|
|
|
One-Year |
|
|
Three-Year |
|
|
Five-Year |
|
|
One-Year |
|
|
Three-Year |
|
|
Five-year |
|
|
|
2006 |
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
2005 |
|
|
2005 |
|
|
U.S. (Lipper) |
|
|
63 |
% |
|
|
74 |
% |
|
|
67 |
% |
|
|
62 |
% |
|
|
34 |
% |
|
|
22 |
% |
U.S. (Morningstar) |
|
|
60 |
% |
|
|
51 |
% |
|
|
77 |
% |
|
|
45 |
% |
|
|
58 |
% |
|
|
45 |
% |
Canada |
|
|
80 |
% |
|
|
54 |
% |
|
|
81 |
% |
|
|
5 |
% |
|
|
21 |
% |
|
|
93 |
% |
U.K. |
|
|
89 |
% |
|
|
98 |
% |
|
|
87 |
% |
|
|
72 |
% |
|
|
87 |
% |
|
|
83 |
% |
Continental Europe and Asia |
|
|
51 |
% |
|
|
90 |
% |
|
|
57 |
% |
|
|
66 |
% |
|
|
83 |
% |
|
|
60 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of AUM Above Benchmark |
|
|
Institutional (2) |
|
As of December 31, 2006 |
|
|
As of December 31, 2005 |
|
|
|
|
One-Year |
|
|
Three-Year |
|
|
Five-Year |
|
|
One-Year |
|
|
Three-Year |
|
|
Five-Year |
|
|
|
2006 |
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
2005 |
|
|
2005 |
|
|
Equity |
|
|
58 |
% |
|
|
64 |
% |
|
|
100 |
% |
|
|
53 |
% |
|
|
53 |
% |
|
|
97 |
% |
Fixed Income |
|
|
96 |
% |
|
|
98 |
% |
|
|
99 |
% |
|
|
94 |
% |
|
|
93 |
% |
|
|
92 |
% |
Money Market (3) |
|
|
97 |
% |
|
|
97 |
% |
|
|
97 |
% |
|
|
93 |
% |
|
|
93 |
% |
|
|
93 |
% |
|
|
|
|
(1) |
|
Retail performance is based on peer rankings. Sources include: Morningstar, Lipper and S&P Micropal. |
|
(2) |
|
Institutional includes representative products managed in Atlanta, New York, Frankfurt, Louisville and London. |
|
(3) |
|
Money market figures apply to percent of AUM in top half of peer group (versus benchmark for equity and fixed income). |
In our U.S. retail channel, we have seen an improvement on a one-, three- and five-year basis
relative to both Lipper and Morningstar peer groups. Within U.S. retail, 7 of 12 of our global and
international funds had 4- or 5-star Morningstar ratings, with 9 of these funds in the top quartile
on a Lipper one-year basis. We have seen inflows in these and other products. During 2006 we
evaluated, rationalized and merged 15 funds in the U.S. retail product line to ensure we are
delivering the best possible investment solutions to our clients.
Our Canadian retail business has seen a turnaround in its investment performance at the end of
2006. Certain of its portfolios have been underweight in the energy sector, which contributed to
performance lagging its peers during much of 2006 as that sectors valuation increased. Performance
has improved as energy sector valuations lessened in the second half of 2006.
81% of the Canadian retail AUM remains in the top half of peers on a five-year basis. The U.K.
retail business has produced particularly strong results across all measured time frames. In
Continental Europe and Asia more than 51% of AUM are performing in the top of peer groups on a
one-year basis.
In our institutional business, over 96% of our fixed income and money market assets beat their
benchmarks over the one-, three- and five-year periods. Although measuring our investment
performance against benchmarks is an important criterion, our institutional business is also
evaluated against peer groups and consultant perception. Equity performance improved year over
year on a one-, three- and five-year basis.
Annual Report 2006 19
Financial Overview
Revenues
Net revenues (total revenues less third-party distribution, service and advisory fees)
increased by 11.1% in 2006 to $2,414.6 million (2005: $2,173.2 million). The main categories of
revenues, and the percentage change between the periods, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
$ millions |
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2004 |
|
|
Change |
|
|
Management |
|
|
2,609.7 |
|
|
|
2,213.7 |
|
|
|
17.9 |
% |
|
|
2,052.7 |
|
|
|
7.8 |
% |
Service and distribution |
|
|
534.9 |
|
|
|
538.2 |
|
|
|
(0.6) |
% |
|
|
593.3 |
|
|
|
(9.3) |
% |
Other |
|
|
96.8 |
|
|
|
127.3 |
|
|
|
(24.0) |
% |
|
|
111.5 |
|
|
|
14.2 |
% |
|
|
|
Total revenues |
|
|
3,241.4 |
|
|
|
2,879.2 |
|
|
|
12.6 |
% |
|
|
2,757.5 |
|
|
|
4.4 |
% |
Third-party distribution, service and advisory fees |
|
|
(826.8 |
) |
|
|
(706.0 |
) |
|
|
17.1 |
% |
|
|
(633.0 |
) |
|
|
11.5 |
% |
|
Net revenues |
|
|
2,414.6 |
|
|
|
2,173.2 |
|
|
|
11.1 |
% |
|
|
2,124.5 |
|
|
|
2.3 |
% |
|
Management Revenues
Management fee revenues are derived from providing professional services to manage client
accounts and include fees received from retail mutual funds, unit trusts, investment companies with
variable capital (ICVCs), investment trusts and institutional advisory contracts. 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. Management fees for products offered in the institutional
distribution channel are calculated in accordance with the underlying investment management
contracts and also vary in relation to the level of client assets managed, and in certain cases are
also based upon investment performance.
Management revenues increased 17.9% from 2005, due to market appreciation on fund assets,
investment performance and increased sales in
Europe of the Dublin-based offshore fund range and the U.K. onshore fund range. Performance fees,
which are included in management revenues, increased 145.4% in 2006 over 2005, from $33.5 million
to $82.2 million, as several institutional products, primarily in our structured products group,
exceeded performance hurdles. In the U.K., the addition of the Real Estate Opportunity fund and
strong investment performance contributed to the increase in performance fees.
Management fee revenues in 2005 increased 7.8% over 2004. Performance fees increased from $9.4
million in 2004 to $33.5 million in 2005 due to improved comparative performance against
benchmarks.
Service and Distribution Revenues
In 2006, service and distribution revenues decreased 0.6% over 2005. Service revenue is
generated through fees charged to cover several types of expenses, including fund accounting fees,
SEC filings and other maintenance costs for mutual funds and unit trusts, and administrative fees
received from closed-ended funds. Service revenues also include transfer agent fees, which are fees
charged to cover the expense of transferring shares of a mutual fund or units of a unit trust into
the investors name. Distribution revenues include
20
Financial Overview
12b-1 fees received 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 revenues typically vary
in relation to the amount of client assets managed. In 2006, increases in service revenues in
the U.K., in line with higher AUM, were offset by decreases in distribution and transfer agent
revenues. Distribution revenues declined due to the full year of 12b-1 rate reductions on
certain U.S. retail products. The decline in transfer agent fee revenues arose primarily in
U.S. Retail from a change in the sub-transfer agent methodology, account fee rate changes, and
fewer open accounts. Distribution and transfer agent revenues in 2005 included revenues from
AMVESCAP Retirement, which was sold in the second half of 2005, thereby further contributing
to the decline in revenues in 2006.
Service and distribution revenues in 2005 declined $55.1 million, or 9.3%, from 2004. The sale
of the AMVESCAP Retirement business accounted for $30.0 million of this decline, as this
business was included for the full 12 months in 2004 but only six and a half months in 2005.
The remainder of the difference is a result of lower distribution and transfer agency fees in
our U.S. Retail channel.
Other Revenues
Other revenues include fees derived primarily from transaction commissions received upon the
closing of new investments into certain of our retail funds and fees received upon the closing
of real estate investment transactions in our real estate group. In 2005, prior to the
outsourcing of our banking operations and the sale of our German banking license in January
2006, other revenues included fees earned from this banking business, such as interest earned
from balances available on demand from clients and credit institutions and commissions earned
from derivative instruments. In 2006, other revenues decreased 24.0% from 2005, primarily due
to lower real estate transaction commissions and reduced transaction commissions following the
sale of the German banking license.
Other revenues increased 14.2% in 2005 over 2004, primarily due to the increase in transaction
commissions in our real estate group. Real estate transaction fees vary from year to year as
properties are bought and sold over the lifecycle of each portfolio.
Third-Party Distribution, Service and Advisory Fees
Third-party distribution, service and advisory fees are passed through to external parties and
are presented separately from total revenues to arrive at net revenues. These fees include
renewal commissions paid to independent financial advisors for as long as the clients assets
are invested and are payments for the servicing of the client accounts. Renewal commissions
are calculated based upon a percentage of the AUM value. Distribution fees 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 contractual AUM-retention period. Also included in third-party distribution, service and
advisory fees are transfer agency fees that are paid to a third party for transferring shares
of a
mutual fund or units of a unit trust into the investors name. Third-party distribution,
service and advisory fees increased 17.1% from 2005 due primarily to increases in renewal
commissions, partially offset by declines in third-party distribution fees.
In 2005, third-party distribution, service and advisory fees increased by $73.0 million, due
to an increase in trail and renewal commissions driven by higher AUM levels.
Annual Report 2006 21
Financial Overview
Expenses
Operating Expenses
During 2006 we continued to make progress toward our aspiration of becoming a premier global
investment management firm. The company finalized its 2007 operating plan to build on the
momentum created by execution against its 2006 strategic objectives. With the exception of
variances caused by market movements, foreign exchange fluctuations, acquisitions, and
expensing of the 2003 share options (discussed below), the company ended 2006 with $125.0
million in expense savings, $5.0 million ahead of the 2006 expense guidance of $120.0 million.
The main categories of operating expenses are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
$ millions |
|
2006 |
|
|
2005 |
|
|
Change |
|
|
2004 |
|
|
Change |
|
|
Compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and cash bonuses |
|
|
756.3 |
|
|
|
785.8 |
|
|
|
(3.8 |
)% |
|
|
743.6 |
|
|
|
5.7 |
% |
Payroll-related costs |
|
|
54.9 |
|
|
|
53.1 |
|
|
|
3.4 |
% |
|
|
50.4 |
|
|
|
5.4 |
% |
Pension costs |
|
|
43.4 |
|
|
|
73.3 |
|
|
|
(40.8 |
)% |
|
|
66.5 |
|
|
|
10.2 |
% |
Benefits costs |
|
|
37.2 |
|
|
|
41.3 |
|
|
|
(9.9 |
)% |
|
|
42.7 |
|
|
|
(3.3 |
)% |
Share-related compensation |
|
|
148.5 |
|
|
|
64.3 |
|
|
|
130.9 |
% |
|
|
30.0 |
|
|
|
114.3 |
% |
Other compensation costs |
|
|
21.4 |
|
|
|
26.9 |
|
|
|
(20.4 |
)% |
|
|
33.6 |
|
|
|
(19.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation |
|
|
1,061.7 |
|
|
|
1,044.7 |
|
|
|
1.6 |
% |
|
|
966.8 |
|
|
|
8.1 |
% |
Marketing |
|
|
140.6 |
|
|
|
139.5 |
|
|
|
0.8 |
% |
|
|
129.1 |
|
|
|
8.1 |
% |
Property and office |
|
|
109.7 |
|
|
|
130.3 |
|
|
|
(15.8 |
)% |
|
|
169.3 |
|
|
|
(23.0 |
)% |
Technology and telecommunications |
|
|
123.2 |
|
|
|
139.0 |
|
|
|
(11.4 |
)% |
|
|
148.8 |
|
|
|
(6.6 |
)% |
General and administrative |
|
|
194.0 |
|
|
|
219.4 |
|
|
|
(11.6 |
)% |
|
|
210.0 |
|
|
|
4.5 |
% |
|
Total operating expenses before the
restructuring charge (2005) and the
U.S. regulatory settlement (2004) * |
|
|
1,629.2 |
|
|
|
1,672.9 |
|
|
|
(2.6 |
)% |
|
|
1,624.0 |
|
|
|
3.0 |
% |
Restructuring |
|
|
|
|
|
|
75.7 |
|
|
|
N/A |
|
|
|
|
|
|
|
N/A |
|
U.S. regulatory settlement |
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
413.2 |
|
|
|
N/A |
|
|
Total operating expenses |
|
|
1,629.2 |
|
|
|
1,748.6 |
|
|
|
(6.8 |
)% |
|
|
2,037.2 |
|
|
|
(14.2 |
)% |
|
|
|
|
* |
|
See Five-Year Summary for important additional
disclosures. |
These cost categories can be analyzed as a percentage of net revenues and total expenses as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
% of |
|
|
|
|
|
|
% of Total |
|
|
% of |
|
|
|
|
|
|
% of Total |
|
|
% of |
|
|
|
|
|
|
|
Operating |
|
|
Net |
|
|
|
|
|
|
Operating |
|
|
Net |
|
|
|
|
|
|
Operating |
|
|
Net |
|
$ millions |
|
2006 |
|
|
Expenses |
* |
|
Revenues |
|
|
2005 |
|
|
Expenses |
* |
|
Revenues |
|
|
2004 |
|
|
Expenses |
* |
|
Revenues |
|
|
Compensation |
|
|
1,061.7 |
|
|
|
65.2 |
% |
|
|
44.0 |
% |
|
|
1,044.7 |
|
|
|
62.5 |
% |
|
|
48.1 |
% |
|
|
966.8 |
|
|
|
59.5 |
% |
|
|
45.5 |
% |
Marketing |
|
|
140.6 |
|
|
|
8.6 |
% |
|
|
5.8 |
% |
|
|
139.5 |
|
|
|
8.3 |
% |
|
|
6.4 |
% |
|
|
129.1 |
|
|
|
8.0 |
% |
|
|
6.1 |
% |
Property and
office |
|
|
109.7 |
|
|
|
6.7 |
% |
|
|
4.5 |
% |
|
|
130.3 |
|
|
|
7.8 |
% |
|
|
6.0 |
% |
|
|
169.3 |
|
|
|
10.4 |
% |
|
|
8.0 |
% |
Technology and
telecommunications
|
|
|
123.2 |
|
|
|
7.6 |
% |
|
|
5.1 |
% |
|
|
139.0 |
|
|
|
8.3 |
% |
|
|
6.4 |
% |
|
|
148.8 |
|
|
|
9.2 |
% |
|
|
7.0 |
% |
General and
administrative |
|
|
194.0 |
|
|
|
11.9 |
% |
|
|
8.0 |
% |
|
|
219.4 |
|
|
|
13.1 |
% |
|
|
10.1 |
% |
|
|
210.0 |
|
|
|
12.9 |
% |
|
|
10.0 |
% |
|
|
|
|
1,629.2 |
|
|
|
100.0 |
% |
|
|
67.4 |
% |
|
|
1,672.9 |
|
|
|
100.0 |
% |
|
|
77.0 |
% |
|
|
1,624.0 |
|
|
|
100.0 |
% |
|
|
76.6 |
% |
|
|
|
|
* |
|
Before the restructuring charge (2005) and the U.S regulatory settlement (2004). See
Five-Year Summary for important additional disclosures. |
22
Financial Overview
Compensation
Compensation continues to be the largest component of total operating expenses, accounting for
65.2% of costs for 2006 (2005: 62.5% before the restructuring charge, 2004: 59.5% before the
U.S. regulatory settlement). Competitive compensation is critical for the success of the
company in attracting and retaining the highest caliber employees. Compensation expenses
increased $17.0 million from 2005, due primarily to $84.2 million in incremental non-cash
amortization of share-related compensation programs, including a charge of $44.7 million
($0.04 per share, net of tax) taken in the third and fourth quarters relating to the
cumulative previously unrecognized cost to the company of performance-based share options
granted in 2003 that vested in February 2007. No expense for these options was recorded in
2004 or 2005 as it was not expected in these years that the awards would vest. An increase of
$15.5 million in staff bonuses and smaller increases in sales incentive bonuses also
contributed to the overall rise in compensation costs. The increases in share-based payment
and bonus costs were offset by decreases in base salary and pension costs in 2006, reflecting
lower headcount levels.
Compensation expenses in 2005 increased $77.9 million from 2004, with $34.3 million in
incremental amortization of share-related compensation programs, $11.8 million related to
one-time executive recruiting costs, and the remainder due to staff salaries, bonus and
benefit costs.
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.
Public relations costs, such as the costs of securing prospective distributors and the
marketing of the companys products through conference or other sponsorship, are also included
in marketing costs, as well as the cost of marketing-related employee travel. In 2006,
marketing expenses were relatively at versus 2005.
In 2005, marketing expenses increased 8.1% from 2004, largely due to increased advertising in
the U.K. and U.S.
Property and Office
Property and office expenses include rent costs for our various leased facilities around the
company, depreciation of company-owned property, utilities and other consumable costs. In 2006
these costs decreased 15.8% from 2005, reflecting the reduction in office space around the
company.
In 2005 property and office costs decreased $39.0 million from 2004, due to the $37.0 million
provision taken in 2004 for unused office space.
Technology and Telecommunications
Technology and telecommunications costs include expenses related to minor non-capitalized
computer equipment, software purchases and related maintenance payments, depreciation of
capitalized computer equipment costs, costs related to externally provided computer,
record-keeping and portfolio management services, and telephone systems. These costs decreased
11.4% from 2005, driven by decreased levels of software and telephone system purchases and
lower hardware depreciation levels stemming from declines in overall hardware purchases.
In 2005 technology and telecommunications costs decreased 6.6% from 2004, driven by the sale
of the AMVESCAP Retirement business and generally lower headcount.
Annual Report 2006 23
Financial Overview
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. These costs decreased 11.6% over 2005. In 2006
legal costs, which included a $6.0 million settlement, were offset by a $24.0 million
insurance recovery related to market timing litigation in prior years. Professional insurance
costs declined in 2006 due to reduced premiums, and general recruitment costs declined in
2006. These declines were partially offset by increases in external consulting costs related
to various strategic initiatives.
In 2005 general and administrative expenses increased 4.5% from 2004, primarily due to a $16.6
million goodwill impairment charge recognized in the Private Wealth Management part of our
business.
Net Operating Margin
The net
operating margin (operating profit divided by net revenues) was 32.5% in 2006, up from
23.0% in 2005 before the restructuring charge. The increase in operating margin reflects the
impact of increased revenues and cost controls arising from the restructuring initiatives and
other efforts to control costs.
In 2005 the net operating margin decreased to 23.0% from 23.6% in 2004, primarily due to
increases in compensation, marketing and general and administrative expenses, partially offset
by higher net revenues.
Other Non-Operating Income and Expenses
Other non-operating income and expenses include interest income and expense, gains and losses
on disposal of property and equipment assets, gains and losses from the disposal of
investments, profits of associated companies and foreign exchange gains and losses. In 2006,
these net costs decreased 52.2% over 2005 due to realization of gains from our investments in
collateralized debt obligations and fund seed money and foreign exchange gains. The decrease
in net non-operating costs was partially offset by a decrease in gain on sale of business due
to the recognition of a $32.6 million gain on the sale of the AMVESCAP Retirement business in
2005.
In 2005, these net costs increased 33.5% over 2004, due to a capital infusion into our Taiwan
bond funds, foreign exchange revaluations, and a loss on the outsourcing of our defined
contribution platform in the U.K..
Tax Expense
Our subsidiaries operate in several taxing jurisdictions around the world, each with its own
statutory income tax rate. As a result, the blended average statutory income 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 30%, the Canadian statutory tax rate is 36% and the U.S. statutory tax rate can
range from 36%-42% depending upon the applicable state tax rate(s).
Our blended average statutory tax rate for 2006 was 33.01%, down from 35.12% in 2005 due to a
larger percentage of our profits being taxed at the 30% U.K. tax rate in 2006. In 2005, our
blended average statutory tax rate increased to 35.12% from 33.42% in 2004, primarily due to
the U.S. having a loss in 2004 as a result of the U.S. regulatory settlement.
Our effective tax rate for 2006 was 35.0%, down from 37.7% in 2005 before the restructuring
charge primarily due to the increased profits in the U.K. The effective tax rate was higher
than our blended average statutory tax rate due primarily to additional taxes on subsidiary
dividends and the write down of previously recognized deferred tax assets. In 2005, our
effective tax rate was 37.7% before the restructuring charge which
was flat versus 2004 of
37.5% before the U.S. regulatory settlement charge. The effective tax rates were higher than
our blended average statutory tax rates in both 2005 and 2004 due primarily to nondeductible
tax losses and nondeductible investment write-downs.
In 2006, increases in net deferred tax assets of $71.7 million comprise a deferred tax benefit
in the Consolidated Income Statement of $28.3 million less foreign exchange and other
reclasses of $5.2 million plus $48.6 million reflected in the Consolidated Statement of Changes
in Equity. In 2005, decreases in net deferred tax assets of $6.4 million comprise a deferred
tax expense in the Consolidated Income Statement of $17.2 million less foreign exchange and
other reclasses of $5.8 million and $5.0 million reflected in the Consolidated Statement of
Changes in Equity.
24
Financial Overview
Liquidity and Capital Resources
The existing capital structure of the company, together with the cash flow from operations and
borrowings under the credit facility, should provide the company with sufficient resources to
meet present and future cash needs. We believe that our cash flow from operations and credit
facilities, together with our ability to obtain alternative sources of financing, will enable
us to meet debt and other obligations as they come due and anticipated future capital
requirements.
Cash Flows
The ability to consistently generate cash from operations in excess of capital expenditure and
dividend requirements is one of our companys fundamental financial strengths. Operations continue to be financed from retained
profits, share capital and borrowings. Our principal uses of cash flow, other than for operating expenses, include dividend payments,
capital expenditures, acquisitions, purchase of shares in the open market and investments in certain new investment products.
Cash flows for the years ended December 31, 2006, 2005 and 2004 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions |
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Cash flow from: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
|
506.7 |
|
|
|
430.1 |
|
|
|
205.4 |
|
Investing activities |
|
|
(284.3 |
) |
|
|
30.9 |
|
|
|
(107.0 |
) |
Financing activities |
|
|
(183.9 |
) |
|
|
(286.9 |
) |
|
|
(126.7 |
) |
|
Increase/(decrease) in cash and cash equivalents |
|
|
38.5 |
|
|
|
174.1 |
|
|
|
(28.3 |
) |
Cash and cash equivalents, beginning of year |
|
|
715.7 |
|
|
|
546.9 |
|
|
|
563.3 |
|
Foreign exchange |
|
|
35.4 |
|
|
|
(5.3 |
) |
|
|
11.9 |
|
|
Cash and cash equivalents, end of year* |
|
|
789.6 |
|
|
|
715.7 |
|
|
|
546.9 |
|
|
|
|
|
* |
|
Included in cash and cash equivalents are $2.9 million of client cash (2005: $227.1 million;
2004: $290.3 million) and $0.6 million of cash held to
meet certain capital adequacy requirements (2005: $0.5 million, 2004: $0.6 million). The
decrease in client cash was due primarily to one depository
account sponsored by our banking subsidiary being replaced by an unaffiliated investment fund. |
Operating Cash Flows
Operating cash flows are the result of receipts of investment management and other fees
generated from AUM offset by operating
expenses. Cash flows generated from operating activities in 2006 were $506.7 million, an
increase of 17.8% over 2005. The increase
was reduced by the decline in customer and counterparty payables, a component of current
liabilities, resulting from one depository
account sponsored by our banking subsidiary being replaced by an
unaffiliated investment fund.
Operating cash flows in 2005 increased 109.4% over 2004 largely the result of payments
associated with the U.S. regulatory settlement
incurred in 2004.
Investing Cash Flows
In our institutional business, we periodically invest in both our collateralized debt
obligation structures and our private equity funds,
as is customary in the industry. At December 31, 2006, we had $82.5 million (2005: $68.2
million; 2004: $64.7 million) invested in
these products and a further $94.6 million (2005: $90.3 million; 2004: $85.3 million)
committed to fund our obligations under these
programs. We received $13.3 million (2005: $13.4 million; 2004: $0.3 million) in return of
capital from such investments. We also
make seed investments in affiliated funds to assist in the launch of new funds. During 2006,
we invested $88.8 million in new funds
and recaptured $45.1 million from redemptions of prior investments.
Annual Report 2006 25
Financial Overview
During the fiscal years ended December 31, 2006, 2005 and 2004, our capital expenditures were
$37.7 million, $38.2 million and
$51.6 million, respectively. These expenditures related principally in each year to technology
initiatives, including new platforms from
which we maintain our portfolio management systems and fund accounting systems, improvements
in computer hardware and
software
desktop products for employees, new telecommunications products to enhance our internal
information flow, and back-up
disaster recovery systems. Also, in each year, a portion of these costs related to leasehold
improvements made to the various
buildings and workspaces used in our offices. (See Note 4 to our Consolidated Financial
Statements for information on the geographic
distribution of capital expenditure.) These projects have been funded with proceeds from our
operating cash flows. During the fiscal
years ended December 31, 2006, 2005 and 2004, our capital divestitures were not significant
relative to our total fixed assets.
The acquisitions of PowerShares and WL Ross & Co. resulted in net cash outflows of $198.8
million in 2006. In 2005, we received
net cash inflows of $53.6 million from business dispositions, primarily related to the sale of
the retirement business.
Financing Cash Flows
Net cash outflow from financing activities of $183.9 million, decreased $103.0 million from
2005, as the increase in net inflows from
share issuances and borrowings offset the increase in dividends paid and purchase of shares to
meet the requirements of sharebased
compensation awards. A summary of shares purchased by month is presented on page 29.
Dividends
Our practice has been to pay an interim dividend and a final dividend in respect of each
financial year. The interim dividend is generally
payable in October of each year by resolution of our Board of Directors, and the final
dividend is payable after approval of such
dividend
by our shareholders at the Annual General Meeting in the year following the financial year to
which it relates. The declaration,
payment and amount of any future dividends will be recommended 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 and overall debt levels.
Under the U.K. Companies Act, our ability to declare dividends is restricted to the amount of
our distributable profits and reserves,
which is the current and retained earnings of the Parent, on an unconsolidated basis. At
December 31, 2006, distributable profits
and reserves amounted to $537.2 million. See General Shareholders Information included
elsewhere herein, for further discussion of
our dividend policy and taxes applicable to dividends.
Cash dividends on Ordinary Shares are declared in U.S. dollars. The sterling conversion rate
is announced on the declaration date as
a guide only, with the final conversion rate being set on the dividend record date. Interim
dividends are declared upon Board approval
and recorded when paid, while the final dividend is declared at the companys Annual General
Meeting of shareholders and is paid at
a subsequent date. The default payment for the dividend will be in sterling unless
shareholders elect to receive their dividends in U.S.
dollars. Therefore, holders of our Ordinary Shares that receive sterling will be exposed to
currency fluctuations from the date of declaration
of the dividend to the record date. AMVESCAP is exposed to currency risk between the time of
the record date and the payment
date for dividends paid in sterling.
Prior to the interim dividend declaration for 2006, cash dividends on Ordinary Shares were
declared in pounds sterling. Therefore,
holders of our American Depositary Shares were exposed to currency fluctuations from the date
of declaration of the dividend
to the date when the pounds sterling were converted to U.S. dollars by the Depositary for
distribution to holders of American
Depositary Shares.
Our Board of Directors has recommended a 2006 final dividend of $0.104 per share, resulting in
a total dividend of $0.181 per
share for 2006. The 2006 final dividend will be paid, subject to approval by shareholders, on
May 30, 2007. The ex-dividend date
will be April 25, 2007.
26
Financial Overview
The following table sets forth the interim, final and total dividends paid per Ordinary Share
in respect of each year indicated and translated
into U.S. cents per American Depositary Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Cents per American |
Year Ended December 31, |
|
Pence per Ordinary Share |
|
Depositary
Share (1) |
|
|
Interim |
|
|
Final |
|
|
Total |
|
|
Interim |
|
|
Final |
|
|
Total |
|
|
2002 |
|
|
5.00 |
|
|
|
6.50 |
|
|
|
11.50 |
|
|
|
15.69 |
|
|
|
20.83 |
|
|
|
36.52 |
|
2003 |
|
|
5.00 |
|
|
|
6.50 |
|
|
|
11.50 |
|
|
|
16.63 |
|
|
|
23.31 |
|
|
|
39.94 |
|
2004 |
|
|
2.50 |
|
|
|
5.00 |
|
|
|
7.50 |
|
|
|
9.02 |
|
|
|
19.00 |
|
|
|
28.02 |
|
2005 |
|
|
4.00 |
|
|
|
5.50 |
|
|
|
9.50 |
|
|
|
14.02 |
|
|
|
20.33 |
|
|
|
34.35 |
|
|
|
|
|
(1) |
|
Foreign exchange rates are based on Noon Buying Rates in
effect at the respective payment dates. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Cents per American |
Year Ended December 31, |
|
U.S. Cents per Ordinary Share |
|
Depositary Share |
|
|
Interim |
|
Final |
|
Total |
|
Interim |
|
Final |
|
Total |
|
2006 |
|
|
7.70 |
|
|
|
10.40 |
|
|
|
18.10 |
|
|
|
15.40 |
|
|
|
20.80 |
|
|
|
36.20 |
|
|
Debt
Our total indebtedness at December 31, 2006 is $1,272.7 million. See Note 19 to the
Consolidated Financial Statements for a maturity profile of our total indebtedness. Debt
proceeds have been used by the company to form part of the consideration paid for acquisitions
and also for the integration of the acquired businesses over time. In December 2004, we issued
and sold $500.0 million in new
senior notes: $300.0 million of five-year notes with a coupon of 4.5% due in 2009 and $200.0
million of 10-year notes with a coupon
of 5.375% due in 2014. Also in December 2004, we completed a tender offer for $320.5 million
of our original $400.0 million
6.6% senior notes. In May 2005, we repaid the $79.5 million remaining on these notes. At
December 31, 2006, we also had outstanding
$300.0 million of our 5.9% notes due 2007 and $350.0 million of our 5.375% notes due 2013. On
January 16, 2007, $300.0 million
of our 5.9% senior notes matured and was paid using a draw on our credit facility.
On March 31, 2005, we entered into a five-year $900.0 million credit facility with a group of
lenders. The company draws and repays
its credit facility balances and utilizes the credit facility for working capital and other
cash needs. The financial covenants under our
credit agreement include a leverage ratio of not greater than 3.25:1.00 (debt/EBITDA, as
defined in the credit facility) and an interest
coverage ratio of not less than 4.00:1.00 (EBITDA as defined in the credit facility/interest
payable for the four consecutive fiscal
quarters).
The breach of any covenant would result in a default under the credit facility, which could
lead to lenders requiring all balances
under the credit facility, together with accrued interest and other fees, to be immediately
due and payable. 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, transfer assets, merge, make loans and other investments and create
liens. The coverage ratios,
as defined in our credit facility, were as follows during 2006, 2005 and 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
Q1 |
|
|
|
Q2 |
|
|
|
Q3 |
|
|
|
Q4 |
|
|
Leverage Ratio |
|
|
1.62 |
|
|
|
1.60 |
|
|
|
1.46 |
|
|
|
1.24 |
|
Interest Coverage Ratio |
|
|
9.22 |
|
|
|
10.69 |
|
|
|
11.67 |
|
|
|
12.93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
Q1 |
|
|
|
Q2 |
|
|
|
Q3 |
|
|
|
Q4 |
|
|
Leverage Ratio |
|
|
1.95 |
|
|
|
1.80 |
|
|
|
1.73 |
|
|
|
1.82 |
|
Interest Coverage Ratio |
|
|
8.00 |
|
|
|
7.58 |
|
|
|
7.53 |
|
|
|
8.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 |
|
|
Q1 |
|
|
|
Q2 |
|
|
|
Q3 |
|
|
|
Q4 |
|
|
Leverage Ratio |
|
|
1.86 |
|
|
|
1.79 |
|
|
|
1.76 |
|
|
|
2.04 |
|
Interest Coverage Ratio |
|
|
8.91 |
|
|
|
9.66 |
|
|
|
9.51 |
|
|
|
8.42 |
|
Annual Report 2006 27
Financial Overview
Net debt (total debt less cash and cash equivalents balances, excluding client cash) at
December 31, 2006, amounted to $486.5 million,
compared with $733.7 million at December 31, 2005. Changes in our net debt position in 2006
are shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase/ |
|
$ millions |
|
2006 |
|
|
2005 |
|
|
(Decrease) |
|
|
Senior notes |
|
|
1,143.7 |
|
|
|
1,152.2 |
|
|
|
(8.5 |
) |
Credit facility |
|
|
129.0 |
|
|
|
70.0 |
|
|
|
59.0 |
|
|
Total long-term debt |
|
|
1,272.7 |
|
|
|
1,222.2 |
|
|
|
50.5 |
|
Less: Cash and cash equivalents, excluding client cash |
|
|
(786.7 |
) |
|
|
(488.6 |
) |
|
|
(298.1 |
) |
Finance leases |
|
|
0.5 |
|
|
|
0.1 |
|
|
|
0.4 |
|
|
Net debt |
|
|
486.5 |
|
|
|
733.7 |
|
|
|
(247.2 |
) |
|
We have received credit ratings of A3 and BBB+ from Moodys and Standard & Poors credit
rating agencies, respectively. Standard &
Poors has a negative outlook for the rating. Moodys has a stable outlook for the rating.
Rating agency concerns focus on two
primary issues: our ability to earn our share of industry net inflows in light of inconsistent
historical performance and our higher-thanpeer
levels of debt. Material deterioration of these factors (among others defined by each rating
agency) could result in downgrades
to our credit ratings, thereby limiting our ability to generate additional financing or
receive mandates. Because credit facility borrowing
rates are not tied to credit ratings, and interest rates on outstanding senior notes are
fixed, there is no direct correlation between
changes in ratings and interest expense of the company. However, 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.
Financial Commitments
Financial commitments are as follows (payments due by period):
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within |
|
|
1-3 |
|
|
3-5 |
|
|
More Than |
|
$ millions |
|
Total |
|
|
1 Year |
|
|
Years |
|
|
Years |
|
|
5 Years |
|
|
Total debt |
|
|
1,272.7 |
|
|
|
300.0 |
|
|
|
298.1 |
|
|
|
129.0 |
|
|
|
545.6 |
|
Finance leases |
|
|
0.5 |
|
|
|
0.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
leases (1) |
|
|
495.4 |
|
|
|
57.0 |
|
|
|
105.1 |
|
|
|
84.7 |
|
|
|
248.6 |
|
Defined benefit pension and post
retirement medical obligations |
|
|
110.9 |
|
|
|
2.1 |
|
|
|
3.2 |
|
|
|
3.2 |
|
|
|
102.4 |
|
Acquisition
provisions (2) |
|
|
596.6 |
|
|
|
215.0 |
|
|
|
80.1 |
|
|
|
298.5 |
|
|
|
3.0 |
|
|
Total Undiscounted obligations |
|
|
2,476.1 |
|
|
|
574.6 |
|
|
|
486.5 |
|
|
|
515.4 |
|
|
|
899.6 |
|
|
Less: Discounts applied |
|
|
(72.8 |
) |
|
|
|
|
|
|
(9.0 |
) |
|
|
(63.8 |
) |
|
|
|
|
|
Total Discounted Obligations |
|
|
2,403.3 |
|
|
|
574.6 |
|
|
|
477.5 |
|
|
|
451.6 |
|
|
|
899.6 |
|
|
|
|
|
(1) |
|
Operating leases reflect obligations for leased building space and sponsorship and naming
rights agreements. |
|
(2) |
|
Acquisition provisions primarily reflect earn-out arrangements associated with business
acquisitions. Any payments not made are deducted from the
related goodwill balances. |
We generally lease space in the locations where we conduct business, except that we own
property at Perpetual Park, Henley-on-Thames,
Oxfordshire, RG9 1HH, United Kingdom. Our registered office is located in leased office space
at 30 Finsbury Square, London,
EC2A 1AG, United Kingdom. Our principal executive offices are located in leased office space
at 1360 Peachtree Street N.E., Atlanta,
Georgia 30309, U.S.A. We also lease significant office space in the U.S. at 11 Greenway Plaza,
Houston, Texas 77046 and 4350
South Monaco Street, Denver, Colorado 80237, and in Canada at 5140 Yonge Street, Toronto,
Ontario M2N 6X7. We have not
entered into commitments to construct, significantly expand or improve our facilities.
28
Financial Overview
The company maintains approximately $40.0 million in letters of credit from a variety of
banks. The letters of credit are generally
one-year automatically-renewable facilities and are maintained for various reasons.
Approximately $28.7 million of the letters of credit
support office lease obligations.
Capital and Market Risk Management Objectives and Policies
Capital management involves the management of the companys liquidity and cash flows. The
company manages its capital by
reviewing annual and projected cash flow forecasts and by monitoring credit, liquidity and
market risks, such as interest rate and
foreign currency risks, through measurement and analysis. The company is primarily exposed to
credit risk through its cash and
cash equivalent
deposits, which are held by external firms. The company invests its cash balances with high
credit-quality
financial institutions;
however, we have chosen to limit the number of firms with which we invest. These arrangements
create
exposure to concentrations
of credit risk.
The company is exposed to liquidity risk through $1,272.7 million in total long-term debt,
which the company actively manages by
monitoring projected cash flow forecasts, maintaining a committed credit facility, scheduling
significant gaps between major debt
maturities and engaging external finance sources in regular dialog.
Market risks include both interest rate and foreign currency risks and risks associated with
the general securities market. The company
is exposed to interest rate risk primarily through its external debt. On December 31, 2006,
the interest rates on 89.9% of the
companys borrowings were fixed for an average period of four years. The remainder were
floating. As a global investment manager,
we are exposed to movements in foreign exchange rates, which impact the income statement. The
company has not changed its
financial instruments policies in the current year and does not hedge its operational foreign
exchange exposures. As a result, the companys
financial statements may be particularly impacted by movements in foreign exchange rates, such
as sterling, the Canadian
dollar and the Euro compared to the U.S. dollar. The company does not actively manage its
currency exposures except as described
in Note 29 to the Consolidated Financial Statements, which provides quantitative information
about financial instruments and related
credit, liquidity, and market risks (interest rate and foreign currency risks) that the
company faces.
The company has certain deferred compensation liabilities that fluctuate with the general
securities market. These exposures are
effectively hedged by assets held by the company.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
From time to time, the trustees of the AMVESCAP Global Stock Plan (GSP) and the AMVESCAP
Employee Share Option Trust purchase
ordinary shares in the open market. These trusts were established to satisfy our obligations
to issue ordinary shares under the
GSP, and our stock option and other stock-based schemes. During 2006, the company contributed
$155.9 million to these trusts,
which, in turn, purchased ordinary shares in the amounts and at the average prices specified
below. At December 31, 2006, the
company owed the trusts $32.3 million for unsettled share purchase transactions.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d) |
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Number |
|
|
|
|
|
|
|
|
|
|
(c) |
|
(or Approximate |
|
|
(a) |
|
|
|
|
|
|
Total Number of |
|
Dollar Value) of |
|
|
Total Number |
|
|
(b) |
|
|
Shares Purchased |
|
Shares that May |
|
|
of Shares |
|
|
Average Price |
|
|
as Part of Publicly |
|
Yet Be Purchased |
|
|
Purchased |
| |
Paid Per Share |
|
|
Announced Plans |
|
Under the Plans |
Month |
|
(millions) |
|
|
($) |
|
|
or Programs |
|
or Programs |
|
February 2006
|
|
|
3.2 |
|
|
|
9.69 |
|
|
N/A
|
|
N/A |
March 2006
|
|
|
13.2 |
|
|
|
9.42 |
|
|
N/A
|
|
N/A |
December 2006
|
|
|
2.8 |
|
|
|
11.44 |
|
|
N/A
|
|
N/A |
|
Annual Report 2006 29
Financial Overview
International
Financial Reporting Standards (IFRS)
Effective January 1, 2005, the company began recording its results of operations under IFRS.
The date of the transition to IFRS is
January 1, 2004; this being the start of the earliest period of comparative information
required in the U.K., and accordingly the 2004 comparative
period has been restated to apply IFRS on a consistent basis. Prior to this date, the company
prepared its consolidated
financial statements under U.K. Generally Accepted Accounting Practice (U.K. GAAP).
During 2004, the company carried out a review of IFRS to identify the changes to accounting
policies that were necessary to comply
with the new standards. The most significant changes affecting the company due to the IFRS
transition were:
|
|
The cessation of goodwill amortization (IFRS 3) and redenomination of goodwill into the
currency of the underlying acquired
entities (IAS 21) |
|
|
|
The inclusion of a fair value charge in respect of outstanding employee share options
granted after November 7, 2002 (IFRS 2) |
|
|
|
The replacement of existing charges for awards under certain equity-based compensation plans
with fair value charges spread
over revised time periods (IFRS 2) |
|
|
|
The inclusion in the balance sheet of all employee benefit liabilities (IAS 19) |
|
|
|
The reclassification of certain income statement and balance sheet items for disclosure
purposes, including the presentation
of third-party distribution fees, service and advisory fees in the income statement separately
from total revenues |
These changes, along with reconciliations from U.K. GAAP to IFRS, are detailed in the
companys 2005 Annual Report and
Form 20-F.
Summary of Differences Between IFRS and U.S. GAAP
We prepare our financial statements in accordance with IFRS, which differs in certain respects
from U.S. GAAP. The principal differences
between IFRS and U.S. GAAP, as applied to us, relate to acquisition accounting. Prior to 1998,
goodwill was charged directly
to other reserves. Upon transition to IFRS, this pre-1998 goodwill was not required to be
restated as an asset on the balance sheet,
and it will not be included subsequently in determining any profit or loss upon disposal of
the acquired entity. Under U.S. GAAP, this
pre-1998 goodwill is reflected as an asset. Also upon transition to IFRS, the company ceased
amortization of goodwill at the transition
date, January 1, 2004. Under U.S. GAAP, the company ceased amortization of goodwill on January
1, 2002, in accordance with U.S.
accounting rules. Certain other differences between IFRS and U.S. GAAP exist related to the
timing of recording of redundancy
and reorganization accruals, acquisition earn-out provisions, pension costs and obligations
and certain related tax differences.
See Note 32 to our Consolidated Financial Statements for a reconciliation of operating results
from IFRS to U.S. GAAP.
Critical Accounting Policies
Our significant accounting policies are disclosed in Note 1 to our Consolidated Financial
Statements. These policies address such
matters as accounting for goodwill and investments, revenue recognition, taxation, and
share-based payment. Below is a description
of certain critical accounting policies that require management to make its best estimates and
judgments, which should be read in
conjunction with the discussion of risk factors facing the company. (See Risk Factors
below.)
Revenue
Revenue is measured at the fair value of consideration received or receivable and represents
amounts receivable for services provided
in the normal course of business, net of discounts, VAT and other sales-related taxes. Revenue
is recognized when services have been
provided, it is probable that the economic benefits will flow to the company and the revenue
can be reliably measured. Revenue
represents management, distribution, transfer agent and other fees. Revenue is generally
accrued over the period for which the service
is provided, or in the case of performance-based management fees, when the contractual
performance criteria have been met.
Management fee revenues are derived from providing professional expertise to manage client
accounts and include fees received
from institutional advisory contracts and retail mutual funds, unit trusts, investment
companies with variable capital and investment trusts.
30
Financial Overview
Management fees vary in relation to the level of client assets managed, and in certain cases
are also based on investment performance.
Distribution fees include 12b-1 fees received from certain mutual funds to cover allowable
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. Transfer agent
fees are service fees charged to cover the expense of transferring shares of a mutual fund or
units of a unit trust into the investors name. Other fees include trading fees derived from generally non-recurring security or investment
transactions. Distribution fees, service fees
and advisory fees that are passed through to external parties are presented separately from
total revenues to arrive at Net Revenues
on the income statement.
Our revenues would be adversely affected by any reduction in assets under management as a
result of either a decline in market value
of such assets or continued net outflows, which would reduce the investment management fees we
earn. Additionally, our business
is dependent on investment advisory agreements that are subject to termination or non-renewal,
and our mutual funds and other
investors may withdraw their funds at any time. Demand for our mutual fund products may
decline. Competitive pressures may force us
to reduce or waive temporarily the fees we charge to clients, and changes in the distribution
channels on which we depend could
reduce our revenues and hinder our growth.
Share-Based Payment
The company has issued equity-settled share-based awards to certain employees, which are
measured at fair value at the date of
grant. The fair value determined at the grant date is expensed on a straight-line basis over
the vesting period, based on the companys
estimate of shares that will eventually vest. Fair value is measured by use of a stochastic
valuation model. The expected life of sharebased
payment awards used in the model is adjusted, based on managements best estimate, for the
effects of non-transferability,
exercise restrictions, and behavioral considerations. In accordance with the transition
provisions of IFRS, the company has applied
this policy to all grants after November 7, 2002 that were unvested as of January 1, 2005.
Changes in the assumptions used in the stochastic valuation model, as well as changes in the
companys estimates of vesting (including
the companys evaluation of performance conditions associated with certain share-based payment
awards and assumptions used in
determining award lapse rates) could have a material impact on the share-based payment charge
recorded in each year.
Taxation
After compensation and related costs, our provision for income taxes on our earnings is our
largest annual expense. We operate in
several countries and several states through our various subsidiaries, and must allocate our
income, expenses, and earnings under
the various laws and regulations of each of these taxing jurisdictions. Accordingly, our
provision for income taxes represents our total
estimate of the liability that we have incurred for doing business each year in all of our
locations.
Annually we file tax returns which represent our filing positions with each jurisdiction and
settle our return liabilities. Each jurisdiction
has the right to audit those returns and may take different positions with respect to income
and expense allocations and taxable
earnings determinations. From time to time, we may also provide for estimated liabilities
associated with uncertain tax return filing
positions that are subject to, or in the process of, being audited by various tax authorities.
Because the determinations of our annual provisions are subject to judgments and estimates, it
is possible that actual results will vary
from those recognized in our financial statements. As a result, it is likely that additions
to, or reductions of, income tax expense will
occur each year for prior reporting periods as actual tax returns and tax audits are settled.
Deferred tax liabilities are recognized for taxes that would be payable on the unremitted
earnings of the companys non-U.K. subsidiaries,
associates, and joint ventures except where there is no intention to distribute subsidiary
earnings in the foreseeable future or for associates
and joint ventures where profits cannot be distributed without the consent of the parent
company. The temporary difference associated
with our investment in Canada for which deferred tax liabilities have not been recognized is
estimated to be $600.2 million (2005:
$500.0 million). If distributed as a dividend, Canadian withholding tax of 5.0% would be due.
Changes to our policy of distributing subsidiary
earnings may have a significant effect on our financial condition and results of operation.
Annual Report 2006 31
Financial Overview
Net deferred tax assets have been recognized in the U.S., U.K., and Canada based on
managements belief that operating income and
capital gains will, more likely than not, be sufficient to realize the benefits of these
assets over time. In the event that actual results differ
from these estimates, or if our historical trends of positive operating income in any of these
locations changes, we may be required to
record a valuation allowance on deferred tax assets, which may have a significant effect on
our financial condition and results of operation.
Goodwill
Goodwill represents the excess of the cost over the identifiable net assets of businesses
acquired and is recorded in the functional
currency of the acquired entity. Estimates are used upon acquisition of subsidiaries to
initially value goodwill. Goodwill is recognized as
an asset and is reviewed for impairment annually. The recoverable amounts of each cash
generating unit (the lowest group of identifiable
assets that generate independent cash flows) are compared to its carrying amount to determine
if impairment results. The recoverable
amount of a cash generating unit is the higher of the fair value less costs to sell of the
cash generating unit or its value-in-use (VIU).
Transaction data for similar assets within the asset management industry are obtained from an
external valuations consultant and are
used to assess the fair value less costs to sell as part of the annual goodwill impairment
test. Key assumptions made in determining
the fair value less costs to sell include an analysis of the purchase prices paid for similar
acquisitions in the asset management industry
as a multiple of the revenue streams acquired. These key assumptions reflect past acquisition
experiences within the company and
are applied to the cash generating units to arrive at an estimate of the fair value less costs
to sell of the cash generating units. Changes in
these assumptions could result in inadequate fair value less costs to sell amounts, which
could trigger the need to perform a VIU analysis.
VIU is calculated by first determining the estimate of future cash flows to be generated by
the cash generating unit and then applying
a discount rate equivalent to the companys weighted average cost of capital, adjusted for
risks specific to the cash generating unit.
VIU calculations are based on the cash generating units most recent budgets and (up to)
five-year projections. Extrapolations are then
made to the projections assuming declining growth rates on cash flow throughout the estimated
life of the goodwill. Variances in any
of the VIU assumptions could have a significant impact on the amount of goodwill impairment
recorded. Any impairment is recognized
in the income statement and is not subsequently reversed.
On disposal of a business, the attributable amount of goodwill is included in the
determination of profit or loss. Goodwill arising on
acquisitions before the date of transition to IFRS has been retained at the previous U.K. GAAP
amounts. Prior to 1998, goodwill was
charged directly to other reserves. The goodwill has not been restated, and will not be
included in determining any subsequent profit
or loss on disposal.
No goodwill impairment charge was recorded in 2006; however as a result of the 2005 goodwill
impairment review, the company
recognized a non-cash goodwill impairment charge of $16.6 million ($10.4 million after tax, or
$0.01 per share) related to the Private
Wealth Management cash generating unit. The key assumptions used to determine the fair value
of the Private Wealth Management
cash generating unit included (a) cash flow periods of 20 years; and (b) a discount rate of
12.0%, which was based upon the companys
weighted average cost of capital adjusted for the risks associated with the operations. A
variance in the discount rate could
have had a significant impact on the amount of the goodwill impairment charge recorded. For
example, a 1.0% increase in the discount
rate would have caused an increase in the goodwill impairment charge by approximately $31.0
million. A 1.0% decrease in the discount
rate would have resulted in no impairment.
The company cannot predict the occurrence of future events that might adversely affect the
reported value of goodwill that totaled
$5,006.6 million at December 31, 2006. Such events include, but are not limited to, strategic
decisions made in response to economic
and competitive conditions, the impact of the economic environment on the companys assets
under management, or a material
negative change in assets under management and related management fees.
Investments
All regular way purchases and sales of financial assets are recognized on the trade date,
which is the date that the company commits to
buy or sell the asset. The company has not applied IAS 32, Financial Instruments: Disclosure
and Presentation, and IAS 39, Financial
Instruments: Recognition and Measurement, to the 2004 comparative financial statements
included herein.
32
Financial Overview
Policy Applicable through December 31, 2004:
Long-term investments, including partnership investments, are stated at cost less provisions
for any impairment in value. Investments
held as current assets are stated at the lower of cost or net realizable value. Gains and
losses on investments are recorded within other
income and expense in the income statement in the period in which they arise.
Policy Applicable from January 1, 2005:
Investments are initially recognized at fair value, adjusted by transaction costs, and are
then classified as fair value through profit and
loss (FVTPL), available-for-sale, or held-to-maturity. FVTPL and available-for-sale
investments are measured at fair value. FVTPL
investments are designated as FVTPL upon initial recognition. Criteria for designating FVTPL
investments include evaluating the purpose
for holding such investments. Investments held as FVTPL are usually matched with an offsetting
FVTPL related liability. Both
the FVTPL asset and liability are accounted for and evaluated consistently; otherwise a
measurement inconsistency would arise.
Criteria for designating investments as available-for-sale include assessing the purpose of
holding the investment. If investments cannot
be classified as held-to-maturity or FVTPL, then they are included as available-for-sale
investments. Gains or losses arising from
changes in the fair value of FVTPL investments are included in income, and gains or losses
arising from changes in the fair value of
available-for-sale investments are recognized in a separate component of equity until the
investment is sold or otherwise disposed of,
or until the investment is determined to be impaired, at which time the cumulative gain or
loss previously reported in equity is included
in income. Held-to-maturity investments are measured at amortized cost, taking into account
any discounts or premiums. Gains
or losses on held-to-maturity investments are recognized in income when the investments are
amortized or impaired. Management
applies judgment in the process of applying its accounting policy on investments in selecting
the classification of the investment as
fair value through profit and loss, available-for-sale or held-to-maturity.
Fair value is determined by reference to an active trading market, using quoted bid prices as
of each reporting period end. When a
readily as certainable market value does not exist for an investment (such as the companys
collateralized debt obligations) the fair
value is calculated based on the expected cash flows of its underlying net asset base, taking
into account applicable discount rates
and other factors. Since assumptions are made in determining the fair values, the actual value
realized upon the sale of these investments
could differ from the current carrying values.
Impairment of Assets Excluding Goodwill
The carrying amounts of assets excluding goodwill are reviewed for impairment when events or
changes in circumstances indicate
that the carrying values may not be recoverable. At each reporting date, an assessment is made
for any indication of impairment. If
an indication of impairment exists, and if the recoverable amounts (the higher of the fair
value less costs to sell or value-in-use) are
estimated to be less than the carrying amounts, then the carrying amounts are reduced to their
recoverable amounts, and an impairment
charge is recognized immediately. The company uses the fair value less costs to sell in
determining recoverable amounts. Where an
impairment subsequently reverses, the carrying amounts of the assets and equity are increased
to the revised estimate of their
recoverable amounts, limited to the original carrying amounts less subsequent amortization or
depreciation. Different assumptions
related to the net selling price calculation could result in different impairment results.
Foreign Currencies
Transactions in foreign currencies (currencies other than the functional currencies of the
operation) are recorded at the rates of exchange
prevailing on the dates of the transactions. At each balance sheet date, monetary assets and
liabilities that are denominated in foreign
currencies are retranslated at the rates prevailing at the balance sheet date. Gains and
losses arising on retranslation are included in
the income statement, with the exception of differences on foreign currency borrowings that
provide an effective designated hedge
against a net investment in a foreign entity. These differences are taken directly to equity
until the disposal of the net investment, at
which time they are recognized in the income statement. In the Parents 2005 financial
statements, a fair value hedge was utilized
to revalue certain foreign currency investments in subsidiaries, allowing the revaluation of
these assets to offset the revaluation of
external foreign currency debt in the Parents income statement.
Annual Report 2006 33
Financial Overview
The presentation currency and the functional currency of the Parent is U.S. dollars. On
consolidation, the assets and liabilities of
company
subsidiary operations whose functional currencies are currencies other than the U.S. dollar
(foreign operations) are translated
at the rates of exchange ruling at the balance sheet date. Income statement figures are
translated at the weighted average
rates for the year, which approximate actual exchange rates. Exchange differences arising on
the translation of foreign operations
accounts are taken directly to equity. Goodwill and other fair value adjustments arising on
acquisition of a foreign entity are treated
as assets and liabilities of the foreign entity and are translated at rates of exchange ruling
at the balance sheet date.
The presentation currency of the company changed from sterling to U.S. dollars effective
December 8, 2005. The comparative figures
have been presented in U.S. dollars applying the exchange rates outlined in Note 31 to the
Consolidated Financial Statements,
included elsewhere herein. On December 8, 2005, the Parent redenominated its share capital
from sterling to U.S. dollars and
changed its functional currency from sterling to U.S. dollars. The U.S. dollar more accurately
reflects the currency of the underlying
operations and financing of the Parent. Since a large number of the companys subsidiaries are
located outside of the United States
and have functional currencies that are not the U.S. dollar, fluctuations in these exchange
rates to the U.S. dollar may affect our
reported financial results from one period to the next. We do not actively manage our exposure
to such effects.
Provisions
Provisions are recognized when the company has a present obligation (legal or constructive) as
a result of a past event, it is probable
that an outflow of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be
made of the amount of the obligation. If the effect of the time value of money is material,
provisions are determined by discounting the
expected future cash flows at a pre-tax discount rate that reflects current market assessments
of the time value of money and, where
appropriate, the risks specific to the liability. Where discounting is used, the increase in
the provision due to the passage of time is recognized
as interest expense. Changes to situations that impact the probability of settlement of
provisions, or changes in discount rates,
could have an impact on the reported value of a provision and could require adjustment to the
balance through the income statement.
New Accounting Standards
IFRS comprise standards and interpretations approved by the International Accounting Standards
Board and its predecessors. As
of December 31, 2006, all issued IFRS were also adopted by the European Commission, with the
exception of IFRS 8, Operating
Segments, which is effective for periods commencing January 1, 2009, but which is not
expected to result in changes to the companys
single-segment approach. IFRS 7, Financial Instruments: Disclosures, and the related
amendment to IAS 1, Presentation
of Financial Statements, Capital Disclosures, are effective for periods commencing January 1,
2007. The disclosure requirements
of these standards will be reflected in the companys 2007 Annual Report. During 2006, the
International Financial Reporting
Interpretations Committee issued several interpretations which are relevant to the company:
IFRIC 8, Scope of IFRS 2, which has
been approved by the European Commission, and IFRIC 10, Interim Financial Reporting and
Impairment, which has not yet been
approved by the European Commission. The issuance of these interpretations did not have a
material effect on the companys financial
statements. IFRIC 11, Group and Treasury Share Transactions, is effective for periods
commencing March 1, 2007, and has
provided additional guidance for accounting for share-based payment transactions upon award
vesting between the Parent and its
subsidiaries. The application of IFRIC 11 will also not have a material impact on the
companys consolidated financial statements.
The company has reflected the implementation of FAS 123(R), Share-Based Payment in its
reconciliation from IFRS to U.S. GAAP
for the year ended December 31, 2006, which requires the recognition in U.S. GAAP net income
of a charge for share-based payment
plans. Previously, the companys reconciliation to U.S. GAAP reflected accounting for
share-based payment transactions under
U.S. Accounting Principles Board Opinion 25, Accounting for Stock Issued to Employees, which
resulted in expense recognition
under U.S. GAAP related to its share-based payment programs calculated using the intrinsic
value method. The company currently
accounts for share-based payment programs under IFRS 2, Share-based payment. The share-based
payment expense recognized
in 2006 under U.S. GAAP is the same as the expense recognized under IFRS.
34
Financial Overview
The company adopted FASB 158, Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans an
Amendment of FASB Statement No. 87, 88, 106 and 132(R), in 2006. FASB 158 requires that the
net funded status of defined
benefit
plans be recognized on the U.S. GAAP balance sheet and that unrecognized net actuarial gains
and losses and prior service
costs be recorded directly to other comprehensive income. The adoption of FASB 158 resulted in
$7.1 million greater defined
benefit plan expense under U.S. GAAP than under IFRS, and the recognition of $28.7 million in
additional defined benefit obligation
under IFRS than under U.S. GAAP.
In June 2006, the FASB issued interpretation No. 48, Accounting for Uncertainty in Income
Taxes, an interpretation of FASB Statement
No. 109 (FIN 48). The interpretation prescribes a consistent recognition threshold and
measurement attribute, as well as clear criteria
for subsequently recognizing, derecognizing and measuring such tax positions for financial
statement purposes. FIN 48 also requires
expanded disclosure with respect to the uncertainty in income taxes. FIN 48 is effective for
the company as of January 1, 2007. The
Company is currently assessing the potential impact on its reconciliation from IFRS to U.S.
GAAP upon adoption.
FASB 157, Fair Value Measurements (FASB 157) and 159, The Fair Value Option for Financial
Assets and Financial Liabilities including an amendment of FASB Statement No. 115 (FASB 159) are effective for the company
beginning January 1, 2008. FASB
157 establishes a framework for measuring fair value, and FASB 159 permits companies the
choice of measuring certain financial
instruments and certain other items at fair value. The company is currently evaluating the
impact of these new U.S. GAAP accounting
standards but does not expect that their adoption will have a material impact on the companys
reconciliation from IFRS to U.S. GAAP.
Risk Factors
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 continued 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 from time to time of assets
under management. Assets under
management may decline for various reasons. For any period in which revenues decline, our
profits and profit margins 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
47.4% of our total assets under management were invested in equity securities and
approximately 52.6% were invested in fixed
income and other securities at December 31, 2006. The effect of market price declines will be
compounded if the funds and
accounts managed underperform the applicable market or segment.
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 AMVESCAP focuses;
investors taking profits from their
investments; poor investment performance of the funds and accounts managed by AMVESCAP; 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. During 2006, we experienced net outflows of
approximately $1.4 billion. 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 these lower fee
accounts.
Annual Report 2006 35
Financial Overview
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 with mutual
funds and other separate and private
accounts. Investment management contracts are generally terminable upon 30 or fewer days
notice. With respect to agreements with
U.S. mutual funds, these investment advisory agreements may be terminated with notice, or
terminated in the event of an assignment
(as defined in the Investment Company Act of 1940, as amended), and must be renewed annually
by the disinterested members
of each funds board of directors or trustees, as required by law. In addition, the board of
trustees or directors of certain other funds
accounts of AMVESCAP 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 rate 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.
We may experience difficulties, delays or unexpected costs in achieving the anticipated
benefits of our multi-year strategic
initiative to move to an integrated global operating platform.
In late 2005 we embarked upon a multi-year program designed to strategically realign our
resources as an integrated global investment
manager. This initiative, which is a key component of our global business strategy, will
include increasing efficiency through a
disciplined approach to employee staffing and compensation, discretionary spending and
facilities management, transitioning to a
functionalized enterprise support model (whereby our finance, human resources and legal and
compliance functions are managed on
a global departmental basis), and moving to a low cost operational processing and information
technology structure. We are also
taking steps to realign our management structures in order to focus on the core elements of
our global business. We may encounter
difficulties, delays or unexpected costs in connection with these initiatives, which could
result in our not realizing the anticipated benefits
or in our incurring additional unbudgeted costs or experiencing lost opportunities. Further,
we cannot predict whether we will
realize expected benefits and improved operating performance as a result of any strategic
realignment or streamlining of operations.
We also cannot predict whether any such measures will adversely affect our ability to retain
key employees, which in turn could
adversely affect our operating results. In addition, we are subject to the risk of business
disruption in connection with our initiatives,
which could have a material adverse effect on our business, financial condition and operating
results.
We operate in an industry that is highly regulated in the U.S. and numerous foreign 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.
Our subsidiaries are subject to regulatory capital requirements in most jurisdictions where we
operate. There have been recent
changes to regulatory capital requirements applying to investment firms operating within the
EEA. After consultation with the UK
Financial Services Authority (FSA), it has been determined that, for the purposes of
prudential supervision, AMVESCAP PLC is
not subject to regulatory consolidated capital requirements under current European Union
Directives. A sub-group, however, including
all of our EU subsidiaries, is subject to these consolidated capital requirements, and capital
is maintained within this sub-group to
satisfy these regulations. Complying with our regulatory commitments may result in an increase
in the capital requirements applicable
36
Financial Overview
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 distributions. We cannot assure you that
further corporate restructuring will not
be required to comply with applicable legislation.
Regulatory and legislative actions and reforms may significantly increase our costs of doing
business and/or negatively affect
our revenues.
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.
Various ongoing 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.
AMVESCAP and certain related entities are subject to various legal proceedings arising from
normal business operations and/or matters
that have been the subject of previous regulatory actions. We have been named in civil
lawsuits relating to a variety of issues, including
but not limited to the previously-settled market timing investigations. AMVESCAP cannot
predict the outcome of any of these actions
with certainty but is vigorously defending them. Although there can be no assurances, at this
time management believes, based on
information currently available, 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 of the company. Nonetheless, the lawsuits and
investigations described in Note 28 to
the Consolidated Financial Statements may adversely affect investor and/or client confidence,
which could result in a decline in our
assets under management. Any such decline in assets under management would have an adverse
effect on future financial results and
our ability to grow the business.
Additional lawsuits or regulatory enforcement actions may in the future be filed against
AMVESCAP and related entities and individuals
in the U.S. and other jurisdictions in which we operate. Any such future lawsuits or
regulatory enforcement actions could result in a
decline in assets under management, increase costs and negatively affect our profitability and
future financial results.
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 level of the markets has continued to rise and 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. The departure
of a manager could cause the loss of client accounts, which could have a material adverse
effect on the results of operations
and financial condition of AMVESCAP. 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 a significant portion, either in quality or
quantity, of our investment management personnel
could reduce the attractiveness of our products to potential and current clients and could,
therefore, have a material adverse
effect on our revenues and profitability.
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, financing strength, the
strength and continuity of
institutional management and producer relationships, quality of service, the 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.
Annual Report 2006 37
Financial Overview
We compete in every market in which we operate with a large number of investment management
firms, commercial banks, investment
banks, broker-dealers, 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. The recent
trend toward consolidation within the
investment management industry has served to increase the strength of a number of our
competitors. These strengthened competitors
seek to expand their market share in many of the products and services we offer. If these
competitors are successful, our profitability
would 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 lines of business around the world, including major
banks, insurance companies and
other financial institutions, have also resulted in increased competition.
Our substantial indebtedness could adversely affect our financial position.
We have a significant amount of indebtedness. As of December 31, 2006, we had outstanding
total long-term debt of $1,272.2 million,
net debt of $486.5 million and shareholders funds of $4,275.1 million. The significant 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 that have lower debt levels.
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 to be
accelerated, we might not have sufficient assets to repay such amounts in full.
In 2005 we entered into a new five-year revolving credit facility. Our 2005 credit facility
requires us to maintain specified financial ratios,
including maximum debt-to-earnings and minimum interest coverage ratios. 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 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 to be accelerated, 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. Additionally, 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. In addition, some investors
rely on third-party financial planners, registered investment advisers, and other consultants
or financial professionals to advise them
on the choice of investment adviser and investment portfolio. These professionals and
consultants could favor a competing investment
portfolio as better meeting their particular clients needs. We cannot assure you that our
investment products will be among their
recommended choices in the future. Further, their recommendations could change over time and
we could lose their recommendation
and the related client assets under management. Additionally, if one of our major distributors
were to cease operations, it could have
a significant adverse effect on our revenues and earnings. Moreover, any failure to maintain
strong business relationships with these
distribution sources would impair our ability to sell our products, which could have a
negative effect on our level of assets under
management, related revenues and overall business and financial condition.
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
38
Financial Overview
malicious software code, or authorized persons could inadvertently or intentionally release
confidential or proprietary information.
Such disclosure could, among other things:
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Damage our reputation |
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Allow competitors to access our proprietary business information |
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Result in liability for failure to safeguard our clients data |
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Result in the termination of contracts by our existing customers |
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Subject us to regulatory action, or |
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Require material capital and operating expenditures to investigate and remediate the breach |
Our business is vulnerable to failures in support systems and customer service functions that
could lead to loss of customers,
breaches and errors, or claims against us or our subsidiaries.
The ability to consistently and reliably obtain securities pricing information, process client
portfolio and fund shareholder transactions
and provide reports and other customer service to the shareholders of funds and investors in
other accounts managed by us is essential
to our continuing success. 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 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.
Other similar problems could occur from time to time due to human error.
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 may affect our reported
financial results from one
period to the next.
The majority of our net assets, revenues and expenses, as well as our assets under management,
are 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 may affect our
reported financial results from one period
to the next. We do not actively manage our exposure to such effects. Consequently, changes in
exchange rates to the U.S. dollar
could have a material negative impact on our reported financial results.
Holders of our Ordinary Shares are exposed to currency fluctuations that will affect the
amount of cash dividends they receive.
Cash dividends on Ordinary Shares were historically declared in sterling; we now declare
dividends in U.S. dollars. Therefore, although
interim dividends are declared upon Board approval and recorded when paid, holders of our
ordinary shares who continue to receive
final dividend payments in sterling will be exposed to currency fluctuations from the date of
declaration of the dividend to the date when
U.S. dollars are converted to sterling for distribution to such holders.
The carrying value of goodwill 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 $5,006.6 million at December 31,
2006. We may not realize the value of such goodwill. We perform impairment reviews of the book
values of goodwill on an annual
basis. A variety of factors could cause such book values to become impaired. Should valuations
be deemed to be impaired, a writedown
of the related asset would occur, adversely affecting our results of operations for the
period.
Annual Report 2006 39
Directors and Senior Management
The following table identifies our current directors.
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Name |
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Age |
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Position |
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Rex D. Adams (a,b,c)
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66 |
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Chairman and Non-Executive Director |
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Sir John Banham (a,b,c)
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66 |
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Non-Executive Director |
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Joseph R. Canion (b)
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62 |
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Non-Executive Director |
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Martin L. Flanagan (b)
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46 |
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President and Chief Executive Officer; Director |
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Robert H. Graham
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60 |
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Vice Chairman, Board of Directors |
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Denis Kessler (a,b,c)
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54 |
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Non-Executive Director |
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Edward Lawrence (a,b,c)
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65 |
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Non-Executive Director |
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J. Thomas Presby (a,b)
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67 |
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Non-Executive Director |
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James I. Robertson
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49 |
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Senior Managing Director; Director |
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* |
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None of our directors or members of senior management has any family relationship with any
other director or member of senior management. |
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(a) |
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Member of the Audit Committee |
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(b) |
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Member of the Nomination and Corporate Governance Committee |
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(c) |
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Member of the Remuneration Committee |
Note: Country listed denotes citizenship.
Rex D. Adams (66) Chairman and Non-Executive Director (U.S.A.) (a,b,c)
Rex Adams became chairman of the company on April 27, 2006. He has served as a non-executive
director of our company since November 2001 and as chairman of the Nomination and Corporate
Governance Committee since January 2007. Mr. Adams was dean of the Fuqua School of Business at Duke
University from 1996 to 2001 following a 30-year career with Mobil Corporation. He joined Mobil
International in London in 1965 and served as vice president of administration for Mobil
Corporation from 1988 to 1996. Mr. Adams received a B.A. magna
cum laude from Duke University. He
was selected as a Rhodes Scholar in 1962 and studied at Merton College, Oxford University. Mr.
Adams serves on the Board of Directors of Alleghany Corporation and formerly served as chairman of
the Public Broadcasting Service (PBS) and a trustee of Duke University.
Sir
John Banham (66) Non-Executive Director (U.K.) (a,b,c)
Sir John Banham has served as a non-executive director of our company since 1999 and as
chairman of the Remuneration Committee since January 2007. Sir John was director general of the
Confederation of British Industry from 1987 to 1992, a director of National Power and National
Westminster Bank from 1992 to 1998, chairman of Tarmac PLC from 1994 to 2000, chairman of Kingfisher PLC from 1995 to
2001, chairman of Whitbread PLC from 2000 to 2005 and chairman of Geest plc from 2002 to 2005. He
is currently the chairman of Johnson Matthey plc and Spacelabs Healthcare Inc. Sir John is a
graduate of Cambridge University and has been awarded honorary doctorates by four leading U.K.
universities.
Joseph R. Canion (62) Non-Executive Director (U.S.A.) (b)
Joseph Canion has served as a non-executive director of our company since 1997 and was a
director of AIM Investments from 1991 to 1997, when AIM merged with INVESCO. Mr. Canion has been a
leading figure in the technology industry after co-founding Compaq Computer Corporation in 1982 and
serving as its chief executive officer from 1982 to 1991. He also founded Insource Technology Group
in 1992 and continues to serve as its chairman. Mr. Canion received a B.S. and M.S. in electrical
engineering from the University of Houston. He is chairman of Questia Media, Inc. and of Insource
Technology Corp., and is on the board of directors of BlueArc Corporation, ChaCha Search, Inc. and
the Houston Technology Center.
Martin L. Flanagan, CFA, CPA (46) President and Chief Executive Officer of AMVESCAP PLC
(U.S.A.) (b)
Martin L. Flanagan is president and chief executive officer of AMVESCAP, a position he has held
since August 2005. He is also a member of the Board of Directors of AMVESCAP and a trustee of the
AIM Family of Funds. Mr. Flanagan joined AMVESCAP from Franklin Resources, Inc., where he was
president and co-chief executive officer from January 2004 to July 2005. Previously he had been
Franklins co-president from May 2003 to January 2004, chief operating officer and chief financial
officer from November 1999 to May 2003, and senior vice president and chief financial officer from
1993 until November 1999. Mr. Flanagan served as director, executive vice president and chief
operating officer of Templeton, Galbraith & Hansberger, Ltd. before its acquisition by Franklin in
1992. Before joining Templeton in 1983, he worked with Arthur Andersen & Co. Mr. Flanagan received
a B.A. and BBA from Southern Methodist University (SMU). He is a chartered financial analyst and
certified public accountant. He is chairman of the Investment Company Institute. He also serves as
a member of the executive board at the SMU Cox School of Business and a member of the Board of
Councilors of the Carter Center in Atlanta.
40
Directors and Senior Management
Robert H. Graham (60) Vice Chairman (U.S.A.)
Robert Graham has served as vice chairman of the Board of Directors of our company since
February 2001, a director of our company since 1997, and as chief executive officer of the managed
products business from 1997 to 2001. Mr. Graham co-founded AIM Investments in 1976. Mr. Graham
received a B.S., an M.S. and an MBA from the University of Texas at Austin and has been in the
investment business since 1972. He has served as a member of the Board of Governors and the
Executive Committee of the Investment Company Institute and currently serves as chairman of ICI
Mutual Insurance Company.
Denis
Kessler (54) Non-Executive Director (France) (a,b,c)
Denis Kessler has served as a non-executive director of our company since March 2002. A noted
economist, Mr. Kessler is chairman and chief executive officer of SCOR. He is chairman of the
Boards of Directors of SCOR U.S. Corporation, SCOR LIFE U.S. Re Insurance Company and SCOR
Reinsurance Company, and serves as a member of the Boards of Directors of Dexia SA, BNP Paribas SA,
Bollore Investissement SA, Dassault Aviation and Cogedim SAS.
Mr. Kessler received a diplôme from
the Paris Business School (HEC) and Doctorat dÉtat in economics from the University of Paris.
Edward
P. Lawrence (65) Non-Executive Director (U.S.A.) (a,b,c)
Edward Lawrence has served as a non-executive director of our company since October 2004. He is
a partner at Ropes & Gray, a Boston law firm, where he also heads the investment committee of the
firms trust department. Mr. Lawrence is a graduate of Harvard College and earned a J.D. from
Columbia University Law School. He serves on the Board of the Attorneys Liability Assurance
Society, Ltd., is chairman of the Board of the Massachusetts General Hospital and is a trustee of
Partners Healthcare System, Inc. in Boston and McLean Hospital in Belmont, MA.
J.
Thomas Presby (67) Non-Executive Director (U.S.A.) (a,b)
Thomas Presby has served as a non-executive director of our company since November 2005 and as
chairman of the Audit Committee since April 2006. Prior to his retirement in 2002, Mr. Presby was
deputy chairman and chief operating officer with
Deloitte Touche Tohmatsu. He is presently a director of Tiffany & Co., TurboChef Technologies,
Inc., World Fuel Services, American Eagle Outfitters, First Solar, Inc. and The German Marshall
Fund of the USA. He received a B.S. in electrical engineering from Rutgers and an M.S. in
industrial administration from Carnegie Mellon University Graduate School of Business. Mr. Presby
is a certified public accountant.
James I. Robertson (49) Senior Managing Director and Director (U.K.)
James Robertson has served as a member of the Board of Directors of our company since April
2004. He was chief financial officer from April 2004 to October 2005. Mr. Robertson joined our
company as director of finance and corporate development for INVESCOs Global division in 1993 and
repeated this role for the Pacific division in 1995. Mr. Robertson became managing director of
global strategic planning in 1996 and served as chief executive officer of AMVESCAP Group Services,
Inc. from 2001 to 2005. He holds an M.A. from Cambridge University and is a member of the Institute
of Chartered Accountants in England and Wales.
Annual Report 2006 41
Directors and Senior Management
In addition to Messrs. Flanagan, Graham, and Robertson, the following table identifies
our current members of senior management.*
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Name |
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Age |
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Position |
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G. Mark Armour
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53 |
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Senior Managing
Director and Head of
Worldwide
Institutional |
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Kevin M. Carome
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50 |
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Senior Managing
Director and General
Counsel |
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John Jack S. Markwalter,Jr.
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47 |
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Senior Managing
Director and Chief
Executive Officer of
Private Wealth
Management |
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Colin D. Meadows
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36 |
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Senior Managing
Director and Chief
Administrative
Officer |
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Loren M. Starr
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45 |
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Senior Managing
Director and Chief
Financial Officer |
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Philip A. Taylor
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52 |
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Senior Managing
Director and Chief
Executive Officer of AIM
Investments and AIM
Trimark |
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Robert J. Yerbury
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60 |
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Senior Managing
Director; Chief
Executive Officer and
Chief Investment Officer
of Invesco
Perpetual |
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* |
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None of our directors or members of senior management has any family relationship with any
other director or member of senior management. |
Note: Country listed denotes citizenship.
G. Mark Armour (53) Senior Managing Director and Head of Worldwide Institutional (Australia)
Mark Armour has served as senior managing director and head of AMVESCAPs Worldwide
Institutional business since January 2007. Most recently, Mr. Armour served as head of sales &
service for the institutional business. He was appointed chief executive officer of INVESCO
Australia in September 2002. Prior to joining INVESCO, Mr. Armour held significant leadership roles
in the funds management business in both Australia and Hong Kong. He previously served as chief
investment officer for ANZ Investments and spent almost 20 years with the National Mutual/AXA
Australia Group, where he was chief executive, Funds Management, from 1998 to 2000. Mr. Armour
received a bachelor of economics (honors) from La Trobe University in Melbourne, Australia.
Kevin M. Carome (50) Senior Managing Director and General Counsel (U.S.A.)
Kevin Carome has served as general counsel of our company since January 2006. Previously, he
was senior vice president and general counsel of A I M Management Group Inc. from 2003 to 2005.
Prior to joining AIM, Mr. Carome worked with Liberty Financial Companies, Inc. (LFC) in Boston
where he was senior vice president and general counsel from August 2000 through December 2001. He
joined LFC in 1993 as associate general counsel and, from 1998 through 2000, was general counsel of
certain of its investment management subsidiaries. Mr. Carome began his career as an associate at
Ropes & Gray in Boston. He received a B.S. in political science and a J.D. from Boston College.
John Jack S. Markwalter Jr. (47) Senior Managing Director and Chief Executive Officer of
Private Wealth Management (U.S.A.)
Jack Markwalter has served as chief executive officer and president of Atlantic Trust, our
private wealth management business, since January 2004. He joined Atlantic Trust as head of
business development in 2002 and has 20 years of experience in private wealth management, having
previously worked at Morgan Stanley since 1986. Mr. Markwalter received a B.S. with highest honors
from Georgia Institute of Technology and an MBA from Harvard Business School. Among numerous areas
of community involvement, Mr. Markwalter serves on the Board of Trustees for the Georgia Tech
Foundation, the Board of Trustees for Pace Academy and the Board of Directors for St. Josephs
Hospital Mercy Foundation.
42
Directors and Senior Management
Colin D. Meadows (36) Senior Managing Director and Chief Administrative Officer (U.S.A.)
Colin Meadows joined our company as chief administrative officer in May 2006, with
responsibility for business strategy, human resources, communications, facilities and internal
audit. Mr. Meadows came to AMVESCAP from GE Consumer Finance where he was senior vice president of
business development and mergers & acquisitions. Prior to that role, he served as senior vice
president of strategic planning and technology at Wells Fargo Bank. From 1996 to 2003, Mr. Meadows
was an associate principal with McKinsey & Company, focusing on the financial services and venture
capital industries, with an emphasis in the banking and asset management sectors. Mr. Meadows
received a B.A. cum laude in economics and English literature from Andrews University and a J.D.
from Harvard Law School.
Loren M. Starr (45) Senior Managing Director and Chief Financial Officer (U.S.A.)
Loren Starr has served as senior vice president and chief financial officer of our company
since October 2005. Previously, he served from 2001 to 2005 as senior vice president and chief
financial officer of Janus Capital Group Inc., after working as head of corporate finance from 1998
to 2001 at Putnam Investments. Prior to these positions, Mr. Starr held senior corporate finance
roles with Lehman Brothers and Morgan Stanley & Co. He received a B.A. in chemistry and B.S. in
industrial engineering, summa cum laude, from Columbia University, as well as an MBA, also from
Columbia, and M.S. in operations research from Carnegie Mellon University. Mr. Starr is a certified
treasury professional and serves as chairman of the Association for Financial Professionals.
Philip Taylor (52) Senior Managing Director and Chief Executive Officer of AIM Investments
(U.S.A.) and AIM Trimark (Canada)
Philip Taylor has served as chief executive officer of AIM Trimark Investments since January
2002, also becoming chief executive officer of AIM Investments in April 2006, to head AMVESCAPs
North American Retail business. Mr. Taylor also heads the global shareholder servicing (transfer
agency) operations. He joined AIM Trimark in 1999 as senior vice president of operations and client
services and later became executive vice president and chief operating officer. Mr. Taylor was
president of Canadian retail broker Investors Group Securities from 1994 to 1997 and managing
partner of Meridian Securities, an execution and clearing broker, from 1989 to 1994. He held
various management positions with Royal Trust, now part of Royal Bank of Canada, from 1982 to 1989.
Mr. Taylor began his career in consumer brand management in the U.S. and Canada with
Richardson-Vicks, now part of Procter & Gamble. He received an Honors B. Comm. degree from Carleton
University and an MBA from the Schulich School of Business at York University.
Robert J. Yerbury (60) Senior Managing Director; Chief Executive Officer and Chief Investment
Officer of INVESCO Perpetual (U.K.)
Bob Yerbury has served Invesco Perpetual as chief executive officer since September 2004 and as
chief investment officer since October 1997. He began his investment career in 1969, initially as
an analyst and later fund manager for Equity & Law Life Assurance Society, and joined our company
in 1983. Mr. Yerbury has over 36 years of investment experience, holds an M.A. in mathematics from
Cambridge University and is a Fellow of the Institute of Actuaries.
Company Secretary: Michael S. Perman FCIS
Annual Report 43
Directors Report
The directors present their annual report and the audited financial statements for the
year ended December 31, 2006.
Activities of the Company
AMVESCAPs principal activity is asset management. The principal subsidiaries of the Parent
are identified in the Company Directory. The business review is included in the Letter to
Shareholders and the sections entitled Business Overview and Financial Overview. The
financial risk management objectives and policies of the company are included in the Financial
Overview Liquidity and Capital Resources section and in Notes 1 and 29 to the Consolidated
Financial Statements, which include disclosures related to the exposure of the company to credit,
liquidity and market risks. A description of the principal risks and uncertainties facing the
company is provided in the Financial Overview Risk Factors section. References throughout
this report to the companys Web site refer to www.amvescap.com (company Web site).
Results and Dividends
AMVESCAPs results for the year are shown in the Consolidated Income Statement included
elsewhere herein. The business is a going concern. An interim ordinary dividend of $0.077 per
ordinary share was paid on October 11, 2006, and a final ordinary dividend of $0.104 per ordinary
share will be submitted for the approval of shareholders at the Annual General Meeting to be held
on May 23, 2007. If approved, this dividend will be paid on May 30, 2007, to shareholders on the
register as of April 27, 2007, which is the record date.
Payment Policy
The company negotiates payment terms individually with suppliers. The Parent itself has no
trade creditors, and creditor days disclosures are not applicable.
Substantial Interests
See the section entitled Shareholder Information Major Shareholders. The authority
granted by shareholders, approved at the 2006 AGM, to purchase up to a maximum of 82.0 million
ordinary shares remained valid at December 31, 2006.
Charitable and Political Donations
During the year, AMVESCAPs subsidiaries and their employees contributed to numerous
charities. The company made charitable donations of $1.3 million during 2006 (2005: $1.8
million). Among these, U.K. entities within the company made charitable donations of $0.2 million
in 2006 and 2005. In addition, AMVESCAP employees volunteered their time to many charitable
organizations during the year, and several subsidiaries sponsored local charitable events in
support of educational, civic and cultural activities. No political donations were made by the
company during 2006, as it is our policy not to make political donations in any country.
Directors
The biographies for the current directors are included elsewhere herein. Mr. Charles Brady did
not seek re-election to the Board and stepped down on April 27, 2006. Mr. Bevis Longstreth and
Dr. Thomas Fischer retired from the board on April 27, 2006. Mr. John Rogers resigned from the
board on January 12, 2007. A resolution will be proposed to shareholders at the 2007 Annual
General Meeting to re-elect Messrs. Canion, Robertson and Lawrence as members of the Board.
Directors share interests are outlined in the Remuneration Report. Full details of the
directors who are retiring from the Board and those who are subject to election are contained
in the separate Notice of Annual General Meeting that is being distributed to shareholders with
this report. During 2006, the company purchased and maintained directors and officers
liability insurance as permitted by Section 233 of the Companies Act 2006.
Annual General Meeting
A separate circular has been sent to shareholders containing the Notice of Annual General
Meeting for 2007 and the business to be proposed thereat. The Annual General Meeting will be
held on May 23, 2007, at 11:00 a.m., at Perpetual Park, Henley-on-Thames, Oxfordshire, RG9 1HH,
United Kingdom.
Auditors
A resolution to reappoint Ernst & Young LLP as auditors will be proposed for a vote of
the shareholders at the Annual General Meeting.
Directors Statement as to Disclosure of Information to Auditors
The directors who were members of the board at the time of approving the directors
report are listed on page 40.
The directors are aware of various measures the companys management takes in an effort to
ensure that the auditors are made aware of relevant financial information. The directors also
oversee the companys management structure and are aware of the companys overall reporting
structure and related financial and disclosure controls. Furthermore, the Boards audit
committee meets regularly with the auditors and has received a presentation from the auditors
regarding their audit. Based upon the foregoing, and having made enquiries of fellow directors
and of the companys auditors, each of the directors confirms that:
|
|
so far as the director is aware, there is no information relevant to the preparation of
their report of which the companys auditors are unaware; and |
|
|
each director has taken all the steps a director might reason ably be expected to have
taken to be aware of relevant audit information and to establish that the companys
auditors are aware of that information. |
This confirmation is given and should be interpreted in accordance with the provisions of
Schedule 234ZA of the Companies Act 1985.
By Order of the Board
Michael S. Perman, FCIS
Company Secretary
March 23, 2007
44
Corporate Governance
Statement of Corporate Governance Policy
The Board seeks to maintain the highest standards of integrity and accountability in the
stewardship of the companys affairs and recognizes that proper and effective corporate governance
is important to shareholders and other stakeholders. The Board has approved and adopted a set of
Corporate Governance Guidelines (Guidelines), Terms of Reference for our chairman and chief
executive officer, and charters for the Boards Audit Committee, Nomination and Corporate
Governance Committee and Remuneration Committee. Each of these documents is available on our Web
site (www.amvescap.com).
The Combined Code
The Companys ordinary shares are listed in the U.K. on the London Stock Exchange. As a result,
the company is required to make disclosure concerning its application of the principles of, and
compliance with the provisions of, the revised U.K. Combined Code on corporate governance (the
Combined Code). The Board believes that the company complies substantially with the Combined
Code, and the manner in which we comply with the individual principles thereof is set forth in this
section of our Annual Report.
U.S. Listing Requirements
Our ordinary shares are also listed on the NYSE in the form of American Depositary Shares.
Where required by the SEC or NYSE, the company (as a foreign private issuer) has also adopted the
corporate governance requirements of the Sarbanes-Oxley Act of 2002. Although as a foreign private
issuer the Company is permitted to follow U.K. practice in lieu of most of the corporate governance
rules of the NYSE, we are nevertheless required to disclose any significant ways in which our
corporate governance practices differ from those followed by NYSE-listed U.S. companies. These
differences are disclosed on our Web site.
The Board of Directors
Composition. The Board consists of three executive and six non-executive directors at March 23,
2007. (The terms non-executive and independent are used interchangeably throughout this report
to refer to non-executive members of our Board.) The Guidelines require that a majority of
directors be independent, as that term is defined in each of the Combined Code, the Listing Rules
and Disclosure Rules issued by the U.K.
Financial Services Authority and the listing standards of the NYSE (Applicable Standards). In
addition, at least three directors must also satisfy the additional independence requirements for
audit committee members under the Applicable Standards. The Board periodically evaluates the size
of the Board and makes any changes it deems appropriate in accordance with the Memorandum of
Association and Articles of Association of the company (collectively, the Articles).
The Board does not believe that it should establish term limits for its members. The Board
recognizes the value of continuity of directors who have experience with the company that enables
them to make a significant contribution to the deliberations of the Board without, in the case of
non-executive Board members, any ongoing impairment to their independence. The Guidelines
nevertheless provide that director candidates are not eligible to be recommended for a term
commencing on or after their 72nd birthday, and that incumbent directors will stand for re-election
annually once they reach the age of 70.
Responsibilities. The Board is elected by the shareholders to oversee management and to ensure that
the long-term interests of the shareholders are being served. As such, the Board provides general
oversight of management and also performs a number of specific functions, including:
|
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selecting, evaluating and compensating the chief executive officer and overseeing chief
executive officer succession planning |
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providing the chief executive officer with counsel and oversight on the selection,
evaluation, development and compensation of senior management |
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reviewing, monitoring and, where appropriate, approving fundamental financial and
business strategies and major corporate actions |
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assessing major risks facing the company and reviewing options for their mitigation |
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ensuring processes are in place for maintaining the integrity of the companys financial
statements, its compliance with law and ethics, its relationships with clients and other
business partners, and its relationships with other stakeholders |
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ensuring that the company maintains a proper system of internal controls, including
financial, operational, compliance and risk management controls. |
Annual Report 2006 45
Corporate Governance
The Board also periodically reviews with management the companys long-term strategic
plans. The Board oversees succession planning for the management of the company, including policies
for the selection and performance review of the chief executive officer.
The Board and each of its committees has full access to the companys independent advisors and has
the power to retain legal, accounting, financial or other advisors as it deems appropriate at the
expense of the company, without the need to obtain the prior approval of any officer of the
company. The Board is supplied with appropriate information to allow it to perform its duties, and
it receives briefings on its responsibilities.
Meetings. The Board currently meets in person at least five times per year and holds additional
meetings as circumstances require. Where appropriate, the Board and its committees also hold
meetings by telephone conference call. Meetings of the Audit Committee, the Nomination and
Corporate Governance Committee and the Remuneration Committee are held at least four times per
year, usually in conjunction with regularly scheduled Board meetings. The Audit Committee also
holds meetings by
telephone conference call in order to review the companys quarterly earnings announcements in
advance of their publication.
The Company Secretary maintains a record of the number of Board and Board committee meetings and of
director attendance. The 2006 attendance record for all Board meetings and meetings of the Audit,
Remuneration and Nomination and Corporate Governance Committees (including specially-convened
meetings) is set forth in the table below (in each case during such individuals Board or committee
tenure).
Directors are required to seek re-election by shareholders in the third calendar year following the
year in which they were elected or last re-elected. Directors generally stand for election upon the
recommendation of the Board, although our Articles provide that shareholders may nominate
individuals for Board membership in certain circumstances.
The Board regularly reviews financial statements and forecasts to ensure that a going-concern basis
for their preparation is appropriate. The Boards assessment of the companys position as of
December 31, 2006 is set out in the Letter to Shareholders and the sections entitled Business
Overview and Financial Overview.
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Nomination and |
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Corporate |
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Audit |
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Governance |
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Remuneration |
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Name of Director |
|
Board |
(1) |
|
Committee |
(2) |
|
Committee |
(3) |
|
Committee |
(4) |
|
Charles W. Brady * |
|
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100 |
% |
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N/A |
|
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100 |
% |
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N/A |
|
Martin L. Flanagan |
|
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100 |
% |
|
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N/A |
|
|
|
100 |
% |
|
|
N/A |
|
Robert H. Graham |
|
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90 |
% |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
James I. Robertson |
|
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90 |
% |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
John D. Rogers ** |
|
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100 |
% |
|
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N/A |
|
|
|
N/A |
|
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|
N/A |
|
Rex D. Adams |
|
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100 |
% |
|
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85 |
% |
|
|
100 |
% |
|
|
100 |
% |
Sir John Banham |
|
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90 |
% |
|
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100 |
% |
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100 |
% |
|
|
100 |
% |
Joseph R. Canion |
|
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70 |
% |
|
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71 |
% |
|
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80 |
% |
|
|
86 |
% |
Dr. Thomas R. Fischer * |
|
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33 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
Denis Kessler |
|
|
50 |
% |
|
|
43 |
% |
|
|
60 |
% |
|
|
71 |
% |
Edward P. Lawrence |
|
|
90 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
Bevis Longstreth * |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
J. Thomas Presby |
|
|
100 |
% |
|
|
100 |
% |
|
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100 |
% |
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N/A |
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(1) |
|
10 meetings held in year |
|
(2) |
|
8 meetings held in year |
|
(3) |
|
5 meetings held in year |
|
(4) |
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7 meetings held in year |
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* |
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Resigned April 27, 2006 |
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** |
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Resigned January 12, 2007 |
46
Corporate Governance
Board Practices
Non-Executive Directors. The Board is composed of a majority of non-executive directors who
bring strong, independent judgment, knowledge and experience to its deliberations. In the opinion
of the Board and each of the independent directors, this structure, and the policies and practices
described herein, ensure that a sufficient balance of power and authority exists within the
company. The Board has identified Sir John Banham as the senior independent director available for
communications from shareholders directly with our Board.
Non-executive directors serve pursuant to letters of appointment which set out the terms and
conditions of their appointment and their expected time commitment. Appointments of non-executive
directors are terminable by three months notice by either the company or the director. Copies of
these letters of appointment are available for inspection at the Annual General Meeting and, upon
request, during normal business hours. In addition, the form of non-executive directors letter of
appointment is contained in an exhibit to our Form 20-F, as filed with the SEC.
Although the company permits non-executive directors to serve on the Board beyond their 70th
birthday, any director (whether executive or non-executive) over the age of 70 years is required to
stand for re-election on an annual basis. It is the policy of the Board that directors should
retire at the next Annual General Meeting following their having attained the age of 72 years.
It is the Boards policy that non-executive directors have no ongoing direct financial or
contractual interests in the company other than their fees and shareholdings as disclosed in this
report. The Board has determined that each non-executive director is independent of the company
under the definitions contained in the Applicable Standards. The Board made this determination
based upon its consideration of all facts and circumstances known to it, including the responses of
nonexecutive directors to a questionnaire. The Board has also determined that, notwithstanding Mr.
Presbys simultaneous service on the audit committees of more than three public companies, his
service on our Audit Committee is not impaired. In this connection, the Board considered the fact
that board
service constitutes substantially all of Mr. Presbys current professional and business activities.
Mr. Canion has served on the Board for more than nine years, however it is the opinion of the
Nomination and Corporate Governance Committee and of the Board that he continues to be independent
from management and that there are no relationships or circumstances which could affect, or appear
to affect, his judgment.
Executive Directors. Executive directors (other than Mr. Flanagan) are employed under continuing
contracts of employment that can be terminated by either party under notice provisions of up to one
year.
Chairman and Chief Executive
Upon the appointment of Mr. Flanagan as chief executive officer on August 1, 2005, the roles of
chairman and chief executive officer were separated. The Terms of Reference for each of the
chairman and chief executive officer are available on our Web site. Mr. Adams, our Chairman, is a
director of one other public company, but otherwise has no significant commitments beyond those
relating to the business of the company.
Board Committees
The Board delegates specific responsibilities to its Audit Committee, Remuneration Committee
and Nomination and Corporate Governance Committee. All members of the Audit and Remuneration
Committees, and a majority of the members of the Nomination and Corporate Governance Committee, are
independent directors as defined in the Applicable Standards. The charters of each committee were
revised by the Board on March 23, 2007. They are summarized below, and the full texts are available
on our Web site. Each committee meets on a regular basis, but not less frequently than quarterly,
and holds special meetings as circumstances require.
Audit Committee. The Audit Committee is chaired by Mr. Presby and consists additionally of Messrs.
Adams, Banham, Kessler and Lawrence. This committee is responsible for assisting the Board in
fulfilling its responsibility to oversee the companys financial reporting, auditing and internal
control activities, including the integrity of the companys financial statements, compliance with
legal and regulatory requirements, the independent auditors qualifications and independence and
the performance of the companys internal audit function and
Annual Report 2006 47
Corporate Governance
independent auditor. The committee is responsible for making recommendations to the
Board regarding appointment of the independent auditor and pre-approval of its engagement to
provide any audit or permitted non-audit services under agreed policies and procedures. The
committee is also responsible for establishing hiring policies for current or former employees of
its independent auditor. It annually reviews the independent auditors report and evaluates its
qualifications, performance and independence. The committee is also responsible for monitoring and
reviewing the effectiveness of the companys internal audit function. In connection with financial
reporting, the committee is responsible for reviewing and discussing with management and the
independent auditor (i) the companys audited financial statements and related disclosures, (ii)
its earnings press releases, (iii) its critical accounting policies, (iv) the quality and adequacy
of its internal controls over financial reporting, disclosure controls and procedures, and
accounting procedures, (v) any audit problems or difficulties, and (vi) procedures with respect to
enterprise risk assessment and management. Finally, the committee is responsible for assisting the
Board in overseeing the companys legal and regulatory compliance.
The Audit Committee charter describes the authority and responsibilities of the committee, which
are summarized immediately above. The committee is comprised of at least three members of the
Board, each of whom is independent of the company under the Applicable Standards and is also
financially literate. At least one member must have recent and relevant financial experience.
Committee members are appointed and removed by the Board. The committee is required to meet at
least quarterly, and also periodically meets with the Director of Internal Audit and the
independent auditor in separate executive sessions without members of senior management present.
The committee has the authority to retain independent advisors, at the companys expense, wherever
it deems appropriate to fulfill its duties. It reports to the Board regularly and annually reviews
its own performance and the terms of its charter and recommends any proposed changes to the Board.
The Audit Committee approves all non-audit services rendered by the independent auditors only after
concluding that performance of such service by the auditor will not impair the auditors
independence and will serve the companys interests better than performance of such service by
other providers. The Audit Committee ensures that such services are consistent with applicable
national rules on auditor independence.
The Board has determined that Mr. Presby is an audit committee financial expert (as defined under
the SECs rules and regulations), that he has accounting or related financial management
expertise and that he is independent of the company under the Applicable Standards.
Remuneration Committee. The Remuneration Committee is chaired by Sir John Banham and consists
additionally of Messrs. Adams, Kessler and Lawrence. This committee is responsible for annually
evaluating the performance of the chief executive officer and approving the corporate goals
relevant to, and determining the amount of, his or her compensation. The committee also reviews and
makes recommendations to the Board concerning the companys overall remuneration philosophy. It
further annually approves the remuneration structure for, and the remuneration of, senior officers,
and it oversees managements decisions concerning their performance. It further oversees the
companys equity-based and other incentive remuneration plans, assists the Board with executive
succession planning, and determines the remuneration, including deferred remuneration arrangements,
for the companys nonexecutive directors. The committee is also responsible for preparing a
remuneration report containing all required public disclosures regarding director and management
remuneration and share ownership.
The committee is comprised of at least three members of the Board, each of whom is independent of
the company under the Applicable Standards. Committee members are appointed and removed by the
Board. The committee is required to meet at least quarterly. It also has the authority to retain
independent advisors, at the companys expense, wherever it deems appropriate to fulfill its
duties, including any remuneration consulting firm.
48
Corporate Governance
Nomination and Corporate Governance Committee. The Nomination and Corporate Governance Committee is chaired by Mr. Adams and consists additionally of
the chief executive officer, Mr. Flanagan, as well as Messrs. Banham, Canion, Kessler, Lawrence and
Presby. The committee is responsible for establishing a policy setting forth the specific, minimum
qualifications that the committee believes must be met by a nominee recommended for a position on
the Board, and describing any specific qualities or skills that the committee believes are
necessary for one or more of the directors to possess. Such qualifications shall include the
requirements under the Applicable Standards as well as consideration of the individual skills,
experience and perspectives that will help create an effective Board. The committee is responsible
for establishing procedures for identifying and evaluating potential nominees for directors and for
recommending to the Board potential nominees for election. Candidates for election to the Board are
considered in light of their background and experience using the extensive personal knowledge of
current directors or through the recommendations of various advisors to the company. The committee
is also required to periodically review and reassess the adequacy of the Guidelines to determine
whether any changes are appropriate and recommend any such changes to the Board for its approval.
Board Effectiveness
The Guidelines require the Board, with the assistance of its Nomination and Corporate
Governance Committee, to annually review its own performance to determine whether the Board and its
committees are functioning effectively. Such an evaluation was conducted by the senior independent
director, Sir John Banham, who utilized the services of outside legal advisors to the company to
conduct confidential interviews with each director. The resulting report was considered by the
Nomination and Corporate Governance Committee at their meeting in March 2007, and this committee
has made recommendations to the Board. As part of the evaluation process, the committee considered
the performance, including time commitments, of each individual director.
Code of Conduct
We have adopted a code of ethics (Code of Conduct) that applies to our principal executive
officer, principal financial officer, principal accounting officer and persons performing similar
functions, as well as to our other officers and employees. The Code of Conduct is posted on our Web
site and available in print free of charge to any shareholder who requests a copy. Interested
parties may address a written request for a printed copy of the Code of Conduct to: Michael S.
Perman, Company Secretary, AMVESCAP PLC, 30 Finsbury Square, London, EC2A 1AG, United Kingdom. In
addition, we have adopted a separate Directors Code of Conduct that applies to all members of the
Board. We intend to satisfy the disclosure requirement regarding any amendment to, or a waiver of,
a provision of the Code of Conduct for our principal executive officer, principal financial officer
and principal accounting officer by posting such information on our Web site.
Corporate Social Responsibility
AMVESCAP qualifies as a constituent of the FTSE4Good U.K., FTSE4Good Europe and FTSE4Good
Global indices, which are independently defined and researched benchmark and tradable indices
facilitating investment in companies with good records of corporate social responsibility.
Ethics
AMVESCAP and its subsidiaries worldwide operate within a highly regulated industry. The Board
believes that the companys reputation as an ethical and trustworthy provider of investment
services is essential to its core purpose.
To that end, the company maintains policies and procedures that specifically reflect its commitment
to the fair and ethical treatment of clients and employees. These policies and procedures
complement the multiple laws and regulations that govern AMVESCAPs operations worldwide, and they
are monitored with systems that have been designed to ensure compliance with regulatory
requirements.
Annual Report 2006 49
Corporate Governance
Employees
We recognize the importance of our employees and our aim is to be an employer of choice
wherever we operate. This means that we work to ensure employee policies and practices reflect
best practice within each of the countries in which we operate. In 2006 we introduced a global
employee opinion survey. As a result of the feedback we received in 2006, we are continuing a
number of initiatives to:
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improve communication globally and locally to ensure
that employee views are represented in the discussion of
key issues; |
|
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enhance career development and training opportunities across
the company; and |
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make the basis for reward decisions more open and
transparent. |
AMVESCAP provides equal opportunity in its employment and promotion practices.
Clients
Our most important contribution to social responsibility is the achievement of the companys
core purpose of helping people worldwide build their financial security, in particular by helping
them to save for retirement. Embodied within this core purpose is the goal of providing real
benefits to clients as they save for the future. This goal captures the essence of what AMVESCAP
employees set out to accomplish each day.
Environment
The company believes that the protection of our shared environment can only be achieved through
the concerted action of individuals, companies and governments. As an investment management
company, AMVESCAP has a limited direct impact on the environment and there are few, if any,
environmental risks associated with our activities. We nevertheless recognize our corporate
responsibility to adopt policies and programs that promote energy conservation and the sustainable
use of natural resources. AMVESCAPs environmental policy is available on
our Web site. As part of our ongoing commitment to the environment, AMVESCAP obtained certification
from the British Standards Institute at the end of 2006 for the introduction of environmental
management systems compliant with ISO 14001 for its U.K. businesses in London and Henley-on-Thames.
(This certification is subject to regular annual audit.)
Relations with Shareholders
The company announces financial results by means of a press release on a quarterly basis. In
conjunction with such announcements, the chief executive officer and chief financial officer give
presentations on the results to investors, analysts, the media and the public through conference
calls open to all interested parties, details of which are included in the press release and posted
in advance on our Web site.
Senior management meets regularly with shareholders and analysts. It reports formally to
shareholders through the Annual Report and the Form 20-F filed with the SEC. Finally, the companys
senior independent director, Sir John Banham, who is based in London, is available for
communication from shareholders in accordance with the Combined Code. He stands ready to attend
meetings with shareholders from time to time to listen to their views and develop a better
understanding of issues of concern.
The companys Annual General Meeting is used as an opportunity to communicate with shareholders. At
the meeting, a business presentation is made to shareholders, and all directors are available,
formally during the meeting and informally afterwards, for questions. The results of voting from
the Annual General Meeting are announced through a Regulatory News Service and are made available
on our Web site as soon as they become available.
The Board is kept apprised of the views of major shareholders as a result of the dialogue created
by the measures described above and through regular reports from the chief executive officer, chief
financial officer and investor relations representatives.
50
Corporate Governance
Internal Controls and Risk Management
The Board has overall responsibility for the system of internal controls, including financial,
operational, compliance and risk management controls. The maintenance of this control system rests
with senior management. Internal controls include the organizational structure and the delegation
of authority within the company. Senior management confirms compliance with the companys policies
on a quarterly basis. Further, under the U.S. Sarbanes-Oxley Act of 2002, senior management is
required to execute certifications relating to the maintenance and evaluation of the companys
disclosure controls and procedures, that ensure that information required to be disclosed by the
company under the U.S. securities laws is recorded and filed timely and accurately with the SEC.
These certifications accompany our Annual Report on Form 20-F that is filed with the SEC.
We have evaluated, with the participation of our chief executive officer and chief financial
officer, the effectiveness of our disclosure controls and procedures as of December 31, 2006. There
are inherent limitations to the effectiveness of any system of disclosure controls and procedures,
including the possibility of human error and the circumvention or overriding of the controls and
procedures. Accordingly, even effective disclosure controls and procedures can only provide
reasonable assurance of achieving their control objectives. Based upon our evaluation, our chief
executive officer and chief financial officer concluded that our disclosure controls and procedures
were effective to provide reasonable assurance that information required to be disclosed by us in
the reports that we file or submit under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the applicable rules and forms, and that it is
accumulated and communicated to our management, including our chief executive officer and chief
financial officer, as appropriate to allow timely decisions regarding required disclosure.
Since the evaluation date referenced above, there have been no significant changes in our internal
control over financial reporting or in other factors that could significantly affect these
controls.
As described below, the Board has a process for identifying and evaluating risks faced by the
company. The Board has reviewed the effectiveness of the companys internal controls and believes
that the system of internal controls, enhanced as described below, provides reasonable assurance
that the companys assets are safeguarded, transactions are authorized and recorded properly and
that material errors and irregularities are either prevented or would be detected within a
reasonable period. No material weakness in the system of internal controls has been identified for
the year under review and up to the date of this report.
The Board regularly reviews the effectiveness of the process for identifying and managing the key
risks of the business. Executive management reports on changes in the business and the external
environment that may affect key risks. The chief financial officer provides the Board with monthly
financial information and regularly reports to the Board on the companys financial affairs. The
companys general counsel and global compliance director regularly report to the Board or the Audit
Committee on any significant regulatory compliance matters as well as on any significant
examinations by regulatory bodies. The company continues to maintain a comprehensive compliance
function focused on regulations pertaining to its asset management business. The company also from
time to time utilizes outside advisors to evaluate and monitor financial and technology-related
risks and is subject to periodic examinations by regulatory authorities.
The companys management includes a Corporate Risk Management Committee (CRMC) to provide
top-down oversight. The role of the CRMC is to:
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Identify and prioritize enterprise-wide risks |
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Seek to ensure that corporate policies, procedures and governance effectively meet
regulatory standards and industry best practice |
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Establish and administer a review process for risks within operating units and functional
areas |
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Establish thematic reviews along topical and functional lines across AMVESCAP |
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Establish a Risk Mitigation Program to develop risk metrics that assess effectiveness and to
review breaches and errors |
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Communicate and report on emerging risk across the business. |
The CRMC includes a representative cross-section of the companys senior management, including
certain Senior Managing Directors.
The Director of Internal Audit also attends all CRMC meetings.
The Board reviews risk management and control processes for effectiveness and takes action where
areas for improvement are identified. The Board, through its Audit Committee, reviews the scope of
work of the internal audit, compliance functions, and CRMC, as well as reports made by independent
auditors and other specialists. The Board considers the recommendations made by the Audit
Committee. These activities, in our opinion, provide a framework to address the risks associated
with the business and provide objective confirmation concerning the adequacy of internal controls.
The directors confirm that the procedures are in place in accordance with the requirements relating
to internal controls under the Combined Code.
Annual Report 2006 51
Remuneration Report
This report, approved by the Board, has been prepared in accordance with the requirements of
the Companies Act 1985, as amended by the Directors Remuneration Report Regulations 2002 and the
Listing Rules of the Financial Services Authority. Apart from the information relating to
individual remuneration, pensions, share incentives and share interests, the information contained
in this report is not subject to audit.
The purpose of this report is to inform shareholders of the companys policies on remuneration in
operation for the 12 months ending December 31, 2006 and of the intended policies for subsequent
years, as well as to provide details of the remuneration of individual directors and members of
senior management as determined by the Remuneration Committee. Shareholders will be asked to
approve this report at the Annual General Meeting on May 23, 2007.
The Remuneration Committee determines specific remuneration packages for each executive director
and Senior Managing Director. The committee also addresses remuneration issues that affect the
interests of shareholders, including share incentive plans and performance-linked remuneration
arrangements.
As of February 28, 2007, the Remuneration Committee consisted only of the following independent
directors (dates of appointment in parentheses): Sir John Banham (Chairman January 1, 1999), Mr.
Adams (November 15, 2001), Mr. Kessler (March 4, 2002) and Mr. Lawrence (October 12, 2004).
Biographical details of each member of the committee can be found elsewhere herein. The committee
meets at least four times per year and more frequently if it deems necessary.
Johnson Associates, Inc., a firm of independent professional consultants, has been appointed by the
committee to review executive compensation and provide market benchmarking for select senior
executives during the year-end process. The benchmarking work reflected compensation ranges for
positions of similar scope and responsibility, updated through year-end 2006. Due to the large
number of private/subsidiary comparators for which information is closely held, targeting an
explicit peer group of companies was considered to be less practical. Therefore to the extent
reliable data was available, companies used for comparison included both independent and captive
asset management firms managing over $200 billion in assets under management which were of similar
scope and business dynamics.
Johnson Associates, Inc. has confirmed that it has no material, financial or other connection to
the company, thus ensuring that no conflicts of interest arise as a result of its engagement.
Remuneration Objectives
We strive to have remuneration policies and programs that enable us to reinforce our meritocracy
and provide our top performers with a meaningful mixture of cash and equity. Through these
objectives we aim to recruit, retain and motivate the very high caliber of talent needed to compete
in the global marketplace. We believe that our ability to compete for this talent has an important
impact on the long-term success of our company.
Although many of our compensation practices are set by market conditions in the countries where
we operate, the primary benchmark for remuneration in our industry continues to be the U.S. The
compensation for executive directors and senior management is reviewed annually against an
extensive and diverse peer group of other leading asset management companies.
52
Remuneration Report
Remuneration Policy
Our remuneration policy is designed to closely link rewards to economic results at every
level of the company. We believe that our compensation practices should make sense to all
of our key stakeholders (including our shareholders, clients, peers, and current and
prospective employees) and include the following essential elements:
|
|
pay for performance and affordability |
|
|
consistency with a well-defined investment approach, tied to good, long-term performance |
|
|
fairness and alignment with shareholders interests, with no perceived material conflicts of interest, and encouragement of a
constructive collaborative environment. |
Within this framework our remuneration policy is based on the following components:
|
|
Salaries. Fixed compensation is established by reference to levels prevailing in the
employment market generally for executives of comparable status, responsibility and
skills. Particular regard is paid to salary levels within other leading companies in
the asset management sector and the need in many cases to secure the services of senior
executives who have international experience and flexibility in job location. These
comparisons are made with the assistance of our remuneration consultant, Johnson
Associates, Inc. |
|
|
Cash bonus. Cash bonus, or variable compensation, levels reflect both our companys
performance and industry-wide competitive norms, with a heavy emphasis on pay for
performance and at risk compensation. Base salary levels for executive directors and
senior management are comparatively modest relative to our competitors. Consequently,
the salary plus variable compensation elements of total cash compensation have varied
with the companys financial performance. Although the Remuneration Committee does not
consider it appropriate to establish any maximum percentage of salary payable by way of
annual bonus, the level of cash bonus compensation of executive directors will be
determined based on the companys overall operating results, individual performance
and market conditions. |
|
|
Share incentives. The Remuneration Committee believes that senior executives should
have a significant ownership position in the company, and our remuneration policies are
designed to achieve that goal, thereby assuring alignment of interests between
management and shareholders. Consistent with these beliefs, time-vested and
performance-vested grants of deferred or restricted shares feature prominently in our
companys senior management compensation program, as more fully described below. The
Remuneration Committee also places significant emphasis on earnings per share
performance for share-based compensation. A portion of the deferred and restricted
share awards is subject to growth in earnings per share performance targets. The
Remuneration Committee believes that the mixture of time-vested and performance-vested
share awards provides an appropriately balanced share incentive structure. |
|
|
Pension Benefits. With the exception of legacy plans which are closed to new members,
and in keeping with the emphasis on tying rewards to performance, the company does not
provide traditional defined benefit pension plans. Executives rely upon at risk
variable compensation and share incentive awards to finance their future pensions, with
only nominal funding from the company. Pension contributions were $83,700 in the
aggregate for current executive directors in 2006, which represented less than 1 % of
total cash compensation for the year. |
|
|
Non-executive establishment of executive cash bonus and share incentive compensation.
The Remuneration Committee sets the annual cash bonus and share incentive compensation
levels for executive directors, senior managing directors and other members of senior
management as well as a total cash bonus and share incentive compensation pool for the
company. |
Annual Report 2006 53
Remuneration Report
2006 Compensation Decisions
In arriving at its compensation decisions for 2006, the Remuneration Committee took into
account the very significant progress made by the management team under the leadership of chief
executive officer Mr. Flanagan towards the objective of rebuilding and unlocking the power of our
global organization. Our operating profits have shown a 57.0% increase from 2005 before the
restructuring charge, diluted earnings per share has risen 76.5% from 2005 before the restructuring
charge, and net operating margin has improved 9.5 points from 2005 before the restructuring charge
to 32.5%. Total shareholder return in the same 12-month period (as reflected in the chart below)
has significantly outperformed the FTSE 100 and S&P 500. Assets under management have grown to
$462.6 billion at December 31, 2006, an increase of 19.8% from last year, and investment
performance continues to improve. (See Five-Year Summary for reconciliations of operating profit
and earnings per share before the restructuring charge to operating profit and earnings per share
and important additional disclosures.)
The Remuneration Committee decisions this year have therefore been made with a view to building
further on this momentum and continuing the development of a high-performance organization. The
Remuneration Committee believes that the continued success of the company relies on ensuring that a
meaningful mixture of cash and share incentive compensation vehicles exist within the organization
and that long-term wealth creation should be promoted by ensuring that all key employees have
sufficient equity in the company. The compensation elements, which the Remuneration Committee
approved, as a proportion of total compensation in fulfillment of these objectives were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
2005 |
|
Objectives |
|
Cash |
|
|
68.7 |
% |
|
|
68.9 |
% |
|
Tied to current year performance, driven by
certain local plan mechanics and discretionary
factors |
|
|
|
|
|
|
|
|
|
|
|
Time-vested share incentives |
|
|
9.3 |
% |
|
|
9.7 |
% |
|
Tied to current year performance, driven by
plan mechanics, current unvested equity and
employee retention |
|
|
|
|
|
|
|
|
|
|
|
Performance-vested share incentives |
|
|
22.0 |
% |
|
|
15.4 |
% |
|
Designed to recognize and retain the next
generation of high performers and driven by
individual performance, potential and unvested equity |
|
|
|
|
|
|
|
|
|
|
|
Shares options |
|
|
|
|
|
|
6.0 |
% |
|
Share option awards not utilized in 2006 |
|
Total compensation award pool |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
54
Remuneration Report
Time-vested share incentive awards relating to 2006 compensation will vest ratably over three
years with annual vesting on February 28th of each year from 2008 to 2010. A portion of the
performance-vested share incentive awards relating to 2006 compensation will vest upon the
achievement of performance criteria based upon compound three-year earnings per share annual growth
of between 10% and 15% (10% growth = 50% vesting and 15% growth = 100% vesting). If the
performance targets are met, the awards will vest in whole or in part on February 28, 2010. The
remaining portion of performance-vested share incentives awarded in 2006 are subject to vesting in
whole or in part after five years based upon performance measures linked to a specific business
unit.
Chief Executive Officer
Mr. Flanagan entered into an employment agreement commencing on July 12, 2005, for an initial
four-year period that is, thereafter, terminable with a one-year notice in line with the policy of
the company on the duration of contracts with executive directors. The terms of his contract
provide that he will be entitled to receive a cash compensation bonus award of up to a maximum of
$4,750,000 per annum. A detailed summary of the terms of Mr. Flanagans employment agreement,
including the compensation receivable by him in the event of termination, is set forth under
Shareholder Information Material Contracts beginning on page 144.
At the date of his appointment, Mr. Flanagan received long-term share incentive compensation
consisting of the following:
1. |
|
A grant of 2,500,000 time-vested restricted shares, which vest as to one-fourth at each
of the four anniversaries following the grant date, of which 625,000 shares vested on
August 31, 2006. |
2. |
|
A grant of 2,500,000 performance-vested restricted shares, which vest upon the attainment of
cumulative earnings per share (EPS) growth targets reflecting a compound growth rate of
between 10% and 15% per annum during a three-year period. The Baseline EPS for the purpose
of this calculation is the average of 2004 and 2005 EPS adjusted for certain non-recurring
charges. |
For 2006, the Remuneration Committee determined that Mr. Flanagan exhibited outstanding performance
during the year. Importantly, the Remuneration Committee was cognizant of market levels of
compensation and made an additional long-term share incentive award effective February 28, 2007 to
Mr. Flanagan of 211,899 performance-vested restricted shares which are subject to the achievement
of performance criteria based upon compound three-year EPS annual growth of between 10% and 15%. If
the performance targets are met, the awards will vest in whole or in part on February 28, 2010.
Vesting of these awards will be fully accelerated upon the occurrence of a change in control as
defined in the Global Stock Plan.
Executive Directors and Other Members of Senior Management
With the exception of Mr. Flanagan, whose principal contract terms are summarized above,
executive directors and other members of senior management are employed under continuing contracts
of employment which can be terminated by either party under notice provisions of up to one year. In
the event of such termination, the executive directors generally will receive continuation of their
cash compensation and benefits during the notice period. Similarly, outstanding equity awards
generally would continue to vest as scheduled during such period. The dates the contracts were
entered into are set out below:
|
|
|
Name of Executive Director |
|
Date of Contract |
|
Martin L. Flanagan
|
|
July 12, 2005 |
Robert H. Graham
|
|
December 22, 2000 |
James I. Robertson
|
|
January 3, 2001 |
John D. Rogers*
|
|
January 8, 2001 |
|
|
|
|
* |
|
Resigned January 12, 2007 |
Annual
Report 2006 55
Remuneration Report
Except as described above, executive director and senior management service contracts do not
include any fixed provision for termination compensation. The Remuneration Committee is mindful of
the need to consider what compensation commitments, if any, are appropriate in the event of the
termination of executive directors and members of senior managements service contracts, bearing
in mind the companys legal obligations and the individuals ability to mitigate his loss. The
Remuneration Committee must approve in advance any proposed termination payments.
Compensation for this group, including participation in our share-based plans and bonus
arrangements, is determined by the Remuneration Committee and set forth in the table on pages
58 and 59.
The Remuneration Committee believes that its 2006 compensation decisions were in the best long-term
interests of AMVESCAP and its shareholders.
Non-Executive Directors
Non-executive directors are engaged by the company under letters of appointment terminable by
either party upon three months notice. The continuation of appointment depends upon satisfactory
performance and re-election at annual general meetings by the shareholders of the company. It is
our policy that non-executive directors will (a) seek re-election not less frequently than every
three years, and (b) will retire from the Board at the next annual general meeting following their
72nd birthday.
The dates that letters of appointment were entered into for each non-executive director are as
follows:
|
|
|
Name of Non-Executive Director |
|
Date of Letter of Appointment |
|
Rex D. Adams (chairman)
|
|
May 23, 2005 |
Sir John Banham
|
|
May 23, 2005 |
Joseph R. Canion
|
|
May 23, 2005 |
Denis Kessler
|
|
May 23, 2005 |
Edward P. Lawrence
|
|
May 23, 2005 |
J Thomas Presby
|
|
November 17, 2005 |
|
The compensation of non-executive directors is determined by the Board. Non-executive directors
receive a basic fee of $120,000, and Board committee chairmen receive an additional fee of $15,000.
The chairman of the Board receives a fee of $400,000. A further $50,000 is payable in stock at the
end of each financial year to which it relates and is required to be held by the director for the
period that he serves as a director of the company.
The table below sets forth the numbers of shares that were acquired on behalf of non-executive
directors with respect to their compensation for service on the Board during 2006, along with the
share price at the date of the award.
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Share Price |
|
|
|
Ordinary Shares |
|
|
at Date |
|
Name |
|
Acquired |
|
|
of Award |
|
|
Rex D. Adams (chairman) |
|
|
4,200 |
|
|
|
601 p |
|
Sir John Banham |
|
|
4,200 |
|
|
|
601 p |
|
Joseph R. Canion |
|
|
4,200 |
|
|
|
601 p |
|
Denis Kessler |
|
|
4,200 |
|
|
|
601 p |
|
Edward P. Lawrence |
|
|
4,200 |
|
|
|
601 p |
|
J. Thomas Presby |
|
|
4,200 |
|
|
|
601 p |
|
|
56
Remuneration Report
Remuneration Comparisons
Total compensation includes salary (fixed), cash bonuses (variable), nominal
contributions to defined contribution pension plans and share incentive awards, a portion of
which will vest based upon the company achieving pre-determined performance objectives.
These policies comply with the Combined Code.
The following chart compares the average cash compensation of the executive members of the
Board against earnings per share on a relative basis (rebased to 100 in 2002), before the
restructuring charge (2005), the U.S. regulatory settlement (2004) and goodwill amortization
and exceptional items (2003 and 2002), as derived from the accounts for each of the last
five years ended December 31, 2006. Amounts for 2006, 2005 and 2004 are presented under
IFRS. Amounts for 2003 and 2002 are presented under U.K. GAAP before goodwill amortization
and exceptional items. (See Five-Year Summary for reconciliations of earnings per share
before the restructuring charge (2005), the U.S. regulatory settlement (2004) and goodwill
and exceptional items (2003 and 2002) to earnings per share and important additional
disclosures.)
|
|
|
(1) |
|
2005 figures do not include a one-time make whole payment to Mr. Flanagan in
respect of compensation and stock incentives foregone from his previous employment
as a result of his accepting the chief executive officer position with AMVESCAP. |
The Remuneration Committee takes into account the returns provided to the companys
shareholders and the performance of the company generally. In determining an individuals
compensation, the committee considers the individuals performance measured against, among
other factors, the achievement of objectives and targets, including the achievement of both
short-term and long-term performance standards and goals, and other individual goals. In
each case, the individuals position is evaluated against compensation ranges for similar
levels of responsibility in peer group companies provided by the independent consultant.
The following chart compares AMVESCAPs total shareholder return (TSR) for the last five
years against the S&P 500 Composite gross total return index, being the principal index
against which the companys performance is benchmarked. In light of the lack of a comparable
universe of independent asset managers of similar size and operating characteristics to our
own, we believe that this index represents the best benchmark for AMVESCAPs overall
performance.
TSR for the last five years shown in the chart below has been presented in accordance with
the requirements of the Companies Act (1985 and 2006). (Source: Datastream). As AMVESCAP
is a constituent of the FTSE 100 index, relative total shareholder return data is also
shown for the assistance of the reader.
Annual Report 2006 57
Remuneration Report
Remuneration of Directors and Senior Management (Audited)
The table below sets forth the salary, cash bonus and benefits components of total cash
compensation for 2006 and 2005 as well as time-vested and performance-vested share incentive award
values granted related to 2006 and 2005 service periods to our directors and members of our
administrative, supervisory and management bodies. Amounts have been prorated to reflect
compensation during periods of Board or senior management service. Share-based awards for these
individuals are also detailed later in this report. In 2006, this table includes compensation for
Senior Managing Directors. For 2005, this table includes compensation for members of the Executive
Management Committee (EMC).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash |
|
|
|
Salary |
|
|
Cash Bonus |
|
|
Benefits |
|
|
Compensation |
|
|
$000 |
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
Chief Executive Officer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin L. Flanagan (a,i) |
|
|
790 |
|
|
|
329 |
|
|
|
4,750 |
|
|
|
13,750 |
|
|
|
128 |
|
|
|
121 |
|
|
|
5,668 |
|
|
|
14,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Directors: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert H. Graham (a) |
|
|
500 |
|
|
|
500 |
|
|
|
|
|
|
|
|
|
|
|
39 |
|
|
|
47 |
|
|
|
539 |
|
|
|
547 |
|
James I. Robertson (a,h) |
|
|
400 |
|
|
|
400 |
|
|
|
1,250 |
|
|
|
1,000 |
|
|
|
31 |
|
|
|
41 |
|
|
|
1,681 |
|
|
|
1,441 |
|
John D. Rogers (a,c) |
|
|
500 |
|
|
|
417 |
|
|
|
1,250 |
|
|
|
883 |
|
|
|
30 |
|
|
|
33 |
|
|
|
1,780 |
|
|
|
1,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Executive Directors: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles W. Brady (a,g) |
|
|
189 |
|
|
|
566 |
|
|
|
|
|
|
|
9,000 |
|
|
|
18 |
|
|
|
62 |
|
|
|
207 |
|
|
|
9,628 |
|
The Hon. Michael D. Benson
(a,e,k) |
|
|
|
|
|
|
162 |
|
|
|
|
|
|
|
2,212 |
|
|
|
|
|
|
|
67 |
|
|
|
|
|
|
|
2,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,379 |
|
|
|
2,374 |
|
|
|
7,250 |
|
|
|
26,795 |
|
|
|
246 |
|
|
|
371 |
|
|
|
9,875 |
|
|
|
29,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Managing Directors not on the
Board, as a group (7 persons) (2005 includes
members of the Executive Management
Committee not on the Board: 12 persons) |
|
|
2,479 |
|
|
|
4,473 |
|
|
|
8,025 |
|
|
|
12,442 |
|
|
|
384 |
|
|
|
512 |
|
|
|
10,888 |
|
|
|
17,427 |
|
|
|
|
|
4,858 |
|
|
|
6,847 |
|
|
|
15,275 |
|
|
|
39,237 |
|
|
|
630 |
|
|
|
883 |
|
|
|
20,763 |
|
|
|
46,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Executive Directors (j): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rex D. Adams |
|
|
406 |
|
|
|
193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
406 |
|
|
|
193 |
|
Sir John Banham (b) |
|
|
185 |
|
|
|
186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
185 |
|
|
|
186 |
|
Joseph R. Canion |
|
|
170 |
|
|
|
160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170 |
|
|
|
160 |
|
Dr. Thomas R. Fischer(b) |
|
|
41 |
|
|
|
128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41 |
|
|
|
128 |
|
Denis Kessler (b) |
|
|
170 |
|
|
|
178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170 |
|
|
|
178 |
|
Edward P. Lawrence |
|
|
170 |
|
|
|
185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170 |
|
|
|
185 |
|
Bevis Longstreth (g) |
|
|
62 |
|
|
|
193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62 |
|
|
|
193 |
|
J. Thomas Presby (d) |
|
|
180 |
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
180 |
|
|
|
21 |
|
Stephen K. West (f) |
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
1,384 |
|
|
|
1,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,384 |
|
|
|
1,269 |
|
|
|
|
|
|
|
6,242 |
|
|
|
8,116 |
|
|
|
15,275 |
|
|
|
39,237 |
|
|
|
630 |
|
|
|
883 |
|
|
|
22,147 |
|
|
|
48,236 |
|
|
Footnotes related to this table are located on page 59.
Remuneration Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance- |
|
|
Total Share |
|
|
|
Time-Vested |
|
|
Vested Share |
|
|
Incentive |
|
|
|
Share Incentives |
|
|
Incentives |
|
|
Compensation |
|
$000 |
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
Chief Executive Officer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin L. Flanagan |
|
|
|
|
|
|
16,548 |
|
|
|
2,500 |
|
|
|
16,548 |
|
|
|
2,500 |
|
|
|
33,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Directors: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert H. Graham |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James I. Robertson |
|
|
500 |
|
|
|
|
|
|
|
250 |
|
|
|
600 |
|
|
|
750 |
|
|
|
600 |
|
John D. Rogers (c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500 |
|
|
|
|
|
|
|
500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Executive Directors: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles W. Brady (g) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Hon. Michael D. Benson (e) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500 |
|
|
|
16,548 |
|
|
|
2,750 |
|
|
|
17,648 |
|
|
|
3,250 |
|
|
|
34,196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Managing Directors not
on the Board, as a group
(7 persons) (2005 includes
members of the Executive
Management Committee not
on the Board: 12 persons) |
|
|
3,800 |
|
|
|
1,290 |
|
|
|
12,211 |
|
|
|
5,263 |
|
|
|
16,011 |
|
|
|
6,553 |
|
|
|
|
|
4,300 |
|
|
|
17,838 |
|
|
|
14,961 |
|
|
|
22,911 |
|
|
|
19,261 |
|
|
|
40,749 |
|
|
(a) |
|
Includes contributions for executive directors to a defined contribution pension plan as
follows: C.W. Brady (2006: $3,700, 2005: $21,000); M.L. Flanagan (2006: $20,000, 2005: $21,000);
The Hon. M.D. Benson (2006: $nil, 2005: $65,000); R.H. Graham (2006: $20,000, 2005: $29,000); J.I.
Robertson (2006: $20,000, 2005: $29,000); J.D. Rogers (2006: $20,000, 2005: $25,000); other senior
management as a group (2006: 7 persons, $124,774, 2005: 12 persons, $339,000). Our non-executive
directors do not participate in any company-sponsored pension plan. |
|
(b) |
|
2005 compensation includes $18,000 for services on the INVESCO
European Advisory Board. |
|
(c) |
|
Appointed March 8, 2005 and resigned January 12, 2007. |
|
(d) |
|
Appointed November 17, 2005. |
|
(e) |
|
Resigned March 31, 2005. |
|
(f) |
|
Resigned April 28, 2005. |
|
(g) |
|
Resigned April 27, 2006. |
|
(h) |
|
Appointed April 29, 2004. |
|
(i) |
|
Cash compensation for Martin L. Flanagan in 2005 includes a one-time make whole payment in
respect of compensation and stock incentives foregone from his previous employment as a result of
his accepting the chief executive officer position with AMVESCAP. |
|
(j) |
|
Salary figures for non-executive directors include an annual payment of
$50,000 paid in AMVESCAP ordinary shares. |
|
(k) |
|
Payment made in respect of contractual obligations arising from termination of
employment contract. |
Annual Report 2006 59
Remuneration Report
Share-Based Awards
The final component of total compensation consists of share-based awards in the following three
forms: share incentive awards, share options and sharesave plan shares. The table below sets
forth a summary, as of December 31, 2006, of share-based awards outstanding.
|
|
|
|
|
|
|
Total Awards |
|
|
|
Outstanding at |
|
millions of shares |
|
December 31, 2006 |
|
|
Share Incentive Awards: |
|
|
|
|
Time-vested, by Award Year |
|
|
|
|
2002 |
|
|
14.8 |
|
2004 |
|
|
12.4 |
|
2005 |
|
|
4.8 |
|
2006 |
|
|
3.3 |
|
|
Subtotal time-vested |
|
|
35.3 |
|
Performance-vested, by Award Year |
|
|
|
|
2005 |
|
|
4.7 |
|
2006 |
|
|
4.4 |
|
|
Subtotal performance-vested |
|
|
9.1 |
|
|
Share Incentive Awards |
|
|
44.4 |
|
|
|
|
|
|
|
Share Option Awards: |
|
|
|
|
Time-vested: |
|
|
|
|
Exercise Price |
|
|
|
|
25p 200p |
|
|
2.0 |
|
201p 400p |
|
|
0.4 |
|
401p 500p |
|
|
11.3 |
|
501p 600p |
|
|
4.2 |
|
601p 700p |
|
|
9.0 |
|
701p 800p |
|
|
0.1 |
|
801p 1000p |
|
|
11.9 |
|
1001p 1200p |
|
|
10.9 |
|
1201p 1700p |
|
|
1.0 |
|
|
Subtotal time-vested |
|
|
50.8 |
|
|
|
|
|
|
|
Performance-vested: |
|
|
|
|
Exercise price |
|
|
|
|
301p 400p |
|
|
21.7 |
|
401p 500p |
|
|
8.5 |
|
|
Subtotal performance-vested |
|
|
30.2 |
|
|
Total Share Option Awards |
|
|
81.0 |
|
|
|
|
|
|
|
Sharesave Plan Share |
|
|
1.8 |
|
|
See Note 24 to the Consolidated Financial Statements for vesting details of each award.
60
Remuneration Report
Share Incentive Awards
Description of Share Incentive Awards
Share incentive awards, which are used to retain and motivate key executives and the next
generation of management of the company and to ensure future succession in the business, are
broadly classified into two types: time-vested and performance-vested awards. All share incentive
awards are granted under the AMVESCAP Global Stock Plan (GSP). Time-vested awards vest ratably
over, or cliff vest at the end of, a period of continued employee service. Performance-vested
awards cliff vest at the end of a defined vesting period of continued employee service upon the
companys attainment of certain performance criteria, generally the attainment of cumulative EPS
growth targets at the end of the vesting period reflecting a compound annual growth rate of between
10.0% and 15.0% per annum. AMVESCAP considers that growth in earnings per share targets for
performance conditions are the most appropriate and consistent measure of its success. Note 24 to
the Consolidated Financial Statements contains a table detailing vesting of all share-based awards
by year.
Awards under these plans take the form of deferred or restricted shares. Share incentive awards are
funded with shares purchased from time to time in the open market. Shares allocated are distributed
to the key executives at the end of the respective vesting periods, unless the individual elects to
defer distribution until retirement or termination of employment.
The GSP trust held 38.4 million ordinary shares on December 31, 2006, and 40.1 million ordinary
shares on February 28, 2007.
Director and Senior Management Interests in Share Incentive Awards
The following table sets forth interests of our directors and members of senior management in share
incentive awards under the GSP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 Share |
|
|
|
|
|
|
Shares |
|
|
Money value of |
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards |
|
|
|
|
|
|
vested |
|
|
vested and |
|
|
|
|
|
|
|
|
|
Outstanding |
|
|
(including |
|
|
Share price |
|
|
and |
|
|
distributed shares |
|
|
|
|
|
|
|
|
|
Shares at |
|
|
awards made |
|
|
on date(s) of |
|
|
distributed |
|
|
(based upon |
|
|
Outstanding |
|
|
Outstanding |
|
|
|
January 1, |
|
|
on February |
|
|
award(s) |
|
|
during |
|
|
share price on |
|
|
at December |
|
|
at February |
|
Participant |
|
2006 |
|
|
28, 2007) (1) |
|
|
(pence) |
|
|
2006 |
|
|
distribution date) |
|
|
31, 2006 |
|
|
28, 2007 |
|
|
Time Vested |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin L. Flanagan |
|
|
2,500,000 |
|
|
|
|
|
|
|
|
|
|
|
625,000 |
(2) |
|
$ |
6,449,631 |
|
|
|
1,875,000 |
|
|
|
1,875,000 |
|
James I. Robertson |
|
|
1,500,000 |
|
|
|
42,379 |
|
|
|
601p |
|
|
|
500,000 |
(3) |
|
$ |
4,770,000 |
|
|
|
1,000,000 |
|
|
|
542,379 |
|
John D. Rogers |
|
|
1,500,000 |
|
|
|
|
|
|
|
|
|
|
|
500,000 |
(3) |
|
$ |
4,770,000 |
|
|
|
1,000,000 |
|
|
|
500,000 |
|
Other senior
management |
|
|
|
|
|
|
|
|
|
|
517p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(as a group): |
|
|
200,000 |
|
|
|
327,548 |
|
|
and 601p |
|
|
66,666 |
|
|
$ |
778,340 |
|
|
|
223,560 |
|
|
|
460,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Vested |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin L. Flanagan |
|
|
2,500,000 |
|
|
|
211,899 |
|
|
|
601p |
|
|
|
|
|
|
|
|
|
|
|
2,500,000 |
|
|
|
2,711,899 |
|
James I. Robertson |
|
|
77,589 |
|
|
|
21,189 |
|
|
|
601p |
|
|
|
|
|
|
|
|
|
|
|
77,589 |
|
|
|
98,778 |
|
John D. Rogers |
|
|
77,589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77,589 |
|
|
|
|
|
Other senior
management |
|
|
|
|
|
|
|
|
|
517p and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(as a group): |
|
|
586,222 |
|
|
|
1,184,627 |
|
|
|
601p |
|
|
|
|
|
|
|
|
|
|
|
1,184,627 |
|
|
|
1,770,849 |
|
|
|
|
|
(1) |
|
Time vested awards made on February 28th , 2007 will vest rateably over three years on
February 28th in each year. |
|
|
|
Performance-vested awards made on February 28th, 2007 will vest on February 28th, 2010 subject
to the satisfactory achievement of performance criteria based upon growth in earnings per share of
between 10% and 15%. |
|
(2) |
|
Time-vested award made on August 1, 2005 and vesting in equal increments over 4 years from date
of grant. |
|
(3) |
|
Time-vested award made on December 31, 2002 and vesting in three equal installments in December
2005, 2006 and 2007. |
Annual Report 2006 61
Remuneration Report
Share Option Awards and Sharesave Plan Shares
Description of Share Option Plans
The Remuneration Committee considers it necessary to retain a share option plan as part of the
companys executive compensation arrangements. AMVESCAP maintains two option plans: the AMVESCAP
2000 Share Option Plan (2000 Plan) and the AMVESCAP No. 3 Executive Share Option Scheme (No. 3
Plan). AMVESCAP has not made any awards under the latter plan since April 2003. Options to acquire
shares under the share option plans are granted at the closing market price on the day preceding
the date of grant, and such options generally become and remain exercisable between the third and
tenth anniversaries of the date of grant. A total of 81.0 million shares were under option in these
plans at December 31, 2006, to 660 participants at exercise prices between 25p and 1680p per share.
(See page 60).
Time Vested Share Options No. 3 Plan
The No. 3 Plan has been in existence since 1987 and contains no performance conditions attaching to
either the grant or exercise of options. The No. 3 Plan operates under a trust arrangement with an
independent trustee (the share option trust). Shares utilized by the No. 3 Plan are held in the
share option trust, which acquires shares in the market utilizing loans provided by the company.
The trustee also has the right to acquire shares by subscription from the company to the extent
that insufficient shares are held in the trust to cover grants of options. On December 31, 2006,
and February 28, 2007, the trustee held a total of 19.3 million ordinary shares and held rights
from the company to subscribe for a further 36.9 million and 35.3 million ordinary shares,
respectively.
Performance Vested Share Options 2000 Plan
The 2000 Plan was approved by shareholders in April 2000. All options under this plan are subject
to the satisfaction of performance conditions. Since November 2002, the exercise of share options
awarded under this plan has been subject to the satisfaction of the performance conditions
described further below. The 2000 Plan permits the company to make up to 10.5% of its issued share
capital available for grant of options over a seven-year period, subject to satisfying certain
performance conditions. The Remuneration Committee has determined that the best criteria of
performance are ones that measure growth in EPS in line with our policy for performance conditions
attaching to all share incentive awards. The performance targets for the plan for options granted
after November 2002 provide that an option granted to an eligible employee may be exercised only if
EPS since the date of the award has grown by a percentage in excess of a weighted average of the
U.K. Retail Price Index and the U.S. Consumer Price Index (the Composite Index) over the preceding
three years as follows:
|
|
|
|
|
|
|
|
Percent of Options |
Percentage Growth |
|
|
Exercisable |
|
Below 12% |
|
|
0 |
% |
12%13% |
|
|
80 |
% |
13%14% |
|
|
85 |
% |
14%15% |
|
|
90 |
% |
Over 15% |
|
|
100 |
% |
|
62
Remuneration Report
The Remuneration Committee considers that growth in EPS targets for performance conditions
attaching to all share incentive plans are the most appropriate and consistent measure of its
success, as this is the methodology most commonly used by analysts to value the company. The
determination as to whether relevant performance conditions have been met will be made by the
Remuneration Committee on the basis of the companys results for the periods in question and taking
into account any adjustments which may be considered by them to be fair and reasonable.
During 2003, the company made option awards which were subject to the performance conditions
described above under the 2000 Plan of approximately 16.1 million ordinary shares to 941 employees.
The Remuneration Committee verified that the performance conditions applicable to these options had
been met and approximately 12.4 million options remaining have accordingly become exercisable.
Description Of Sharesave Plans
The company operates a number of sharesave plans under which eligible employees may save up to £250
per month for periods up to three years. Options awarded under these plans may be exercised at the
end of the contract periods, or alternatively the employee may have his or her savings returned. At
December 31, 2006, there were 1,211 participants in these plans whose aggregate savings relating to
the duration of their contract periods would result in the issuance of 1.8 million ordinary shares.
The company has operated an Inland Revenue-approved All Employee Share Incentive Plan from 2002
onwards. At December 31, 2006, there were 134 participants saving £10 £125 per month which is
used to purchase company shares. The shares are held in trust for three years before employees
receive them. Employees receive tax relief on the amount saved.
Annual Report 2006 63
Remuneration Report
Director and Senior
Management Interests in Share Options and Sharesave Plans
The following are details of
directors share options and sharesave plan shares (audited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise |
|
|
Market |
|
|
Gains |
|
|
|
|
|
|
|
|
|
|
|
Lapsed |
|
|
Exercised |
|
|
December |
|
|
February |
|
|
|
|
|
|
Price |
|
|
Price at |
|
|
Resulting |
|
|
|
Date of |
|
|
January 1, |
|
|
During |
|
|
During |
|
|
31, |
|
|
28, |
|
|
Expiry |
|
|
per |
|
|
Date of |
|
|
from |
|
Directors Name |
|
Grant |
|
|
2006(1) |
|
|
Year |
|
|
Year |
|
|
2006 |
|
|
2007 |
|
|
Date |
|
|
Share |
|
|
Exercise |
|
|
Exercise |
|
|
Time-Vested No. 3 Plan: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert H. Graham |
|
Nov 25 1997 |
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
100,000 |
|
|
Nov 24 2007 |
|
|
|
422.5p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Dec 8 1998 |
|
|
|
200,000 |
|
|
|
|
|
|
|
|
|
|
|
200,000 |
|
|
|
200,000 |
|
|
Dec 7 2008 |
|
|
|
432p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Dec 9 1999 |
|
|
|
250,000 |
|
|
|
|
|
|
|
|
|
|
|
250,000 |
|
|
|
250,000 |
|
|
Dec 8 2009 |
|
|
|
660p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Dec 4 2001 |
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
50,000 |
|
|
Dec 3 2011 |
|
|
|
950p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James I. Robertson |
|
Nov 12 1996 |
|
|
|
200,000 |
|
|
|
|
|
|
|
200,000 |
|
|
|
|
|
|
|
|
|
|
Nov 11 2006 |
|
|
|
244p |
|
|
|
520.25p |
|
|
£ |
552,000 |
|
|
|
Nov 25 1997 |
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
50,000 |
|
|
Nov 24 2007 |
|
|
|
422.5p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Oct 30 1998 |
|
|
|
75,000 |
|
|
|
|
|
|
|
|
|
|
|
75,000 |
|
|
|
75,000 |
|
|
Oct 29 2008 |
|
|
|
416p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Dec 9 1999 |
|
|
|
150,000 |
|
|
|
|
|
|
|
|
|
|
|
150,000 |
|
|
|
150,000 |
|
|
Dec 8 2009 |
|
|
|
660p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Dec 4 2001 |
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
50,000 |
|
|
Dec 3 2011 |
|
|
|
950p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John D. Rogers |
|
Nov 12 1996 |
|
|
|
200,000 |
|
|
|
|
|
|
|
200,000 |
|
|
|
|
|
|
|
|
|
|
Nov 11 2006 |
|
|
|
244p |
|
|
|
522.5p |
|
|
£ |
557,000 |
|
|
|
Nov 25 1997 |
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
50,000 |
|
|
Nov 24 2007 |
|
|
|
422.5p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Oct 30 1998 |
|
|
|
25,000 |
|
|
|
|
|
|
|
|
|
|
|
25,000 |
|
|
|
25,000 |
|
|
Oct 29 2008 |
|
|
|
416p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Dec 9 1999 |
|
|
|
25,000 |
|
|
|
|
|
|
|
|
|
|
|
25,000 |
|
|
|
25,000 |
|
|
Dec 8 2009 |
|
|
|
660p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Dec 4 2001 |
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
50,000 |
|
|
Dec 3 2011 |
|
|
|
950p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other senior management
(as a group): |
|
Aug 6 1999 |
|
|
|
48,100 |
|
|
|
|
|
|
|
|
|
|
|
48,100 |
|
|
|
48,100 |
|
|
Aug 8 2009 |
|
|
|
512.5p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Aug 26 1999 |
|
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
5,000 |
|
|
|
5,000 |
|
|
Aug 25 2009 |
|
|
|
543.5p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Dec 9 1999 |
|
|
|
25,000 |
|
|
|
|
|
|
|
|
|
|
|
25,000 |
|
|
|
25,000 |
|
|
Dec 8 2009 |
|
|
|
660p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Aug 7 2000 |
|
|
|
34,425 |
|
|
|
|
|
|
|
|
|
|
|
34,425 |
|
|
|
34,425 |
|
|
Aug 6 2010 |
|
|
|
1158p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Dec 4 2001 |
|
|
|
114,400 |
|
|
|
|
|
|
|
|
|
|
|
114,400 |
|
|
|
114,400 |
|
|
Dec 3 2011 |
|
|
|
950p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Feb 15 2002 |
|
|
|
127,916 |
|
|
|
|
|
|
|
|
|
|
|
127,916 |
|
|
|
127,916 |
|
|
Feb 14 2012 |
|
|
|
897p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Sept 3 2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,960 |
(1) |
|
Sept 2 2012 |
|
|
|
416.5p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Apr 30 2003 |
|
|
|
77,907 |
|
|
|
|
|
|
|
|
|
|
|
77,907 |
|
|
|
77,907 |
|
|
Apr 29 2013 |
|
|
|
322p |
|
|
|
N/A |
|
|
|
N/A |
|
Continued on page 65
64
Remuneration Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
|
Gains |
|
|
|
|
|
|
|
|
|
|
|
Lapsed |
|
|
Exercised |
|
|
December |
|
|
February |
|
|
|
|
|
|
Exercise |
|
|
Price at |
|
|
Resulting |
|
|
|
Date of |
|
|
January 1, |
|
|
During |
|
|
During |
|
|
31, |
|
|
28, |
|
|
Expiry |
|
|
Price per |
|
|
Date of |
|
|
from |
|
Directors Name |
|
Grant |
|
|
2006 |
(1) |
|
Year |
|
|
Year |
|
|
2006 |
|
|
2007 |
|
|
Date |
|
|
Share |
|
|
Exercise |
|
|
Exercise |
|
|
Time-Vested 2000
Plan: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert H. Graham |
|
Dec 1 2000 | |
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
100,000 |
|
|
Nov 30 2010 |
|
|
|
1100p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Dec 4 2001 |
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
100,000 |
|
|
Dec 3 2011 |
|
|
|
950p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James I. Robertson |
|
Dec 1 2000 | |
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
100,000 |
|
|
Nov 30 2010 |
|
|
|
1100p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Dec 4 2001 |
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
100,000 |
|
|
Dec 3 2011 |
|
|
|
950p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John D. Rogers |
|
Dec 1 2000 | |
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
100,000 |
|
|
Nov 30 2010 |
|
|
|
1100p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Dec 4 2000 |
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
100,000 |
|
|
Nov 30 2010 |
|
|
|
950p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other senior
management (as a group): |
|
Dec 1 2000 | |
|
|
25,000 |
|
|
|
|
|
|
|
|
|
|
|
25,000 |
|
|
|
25,000 |
|
|
Nov 30 2010 |
|
|
|
1100p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Feb 7 2001 |
|
|
|
47,561 |
|
|
|
|
|
|
|
|
|
|
|
47,561 |
|
|
|
47,561 |
|
|
Feb 6 2011 |
|
|
|
1440p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time-Vested
Perpetual Plan: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other senior
management (as a group): |
|
Mar 12 1999 |
|
|
|
68,798 |
|
|
|
|
|
|
|
|
|
|
|
68,798 |
|
|
|
68,798 |
|
|
Mar 11 2009 |
|
|
|
1366p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time-Vested
Canadian
2000 Plan: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other senior
management (as a group): |
|
Dec 31 2002 |
|
|
|
1,000,000 |
|
|
|
|
|
|
|
|
|
|
|
1,000,000 |
|
|
|
1,000,000 |
|
|
Dec 31 2009 |
|
|
|
25p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-
Vested
2000 Plan: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert H. Graham |
|
Nov 21 2002 |
|
|
|
350,000 |
|
|
|
350,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nov 20 2012 |
(2) |
|
|
419.25 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Dec 16 2003 |
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
100,000 |
|
|
Dec 15 2013 |
|
|
|
374p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Dec 31 2004 |
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
100,000 |
|
|
Dec 30 2014 |
|
|
|
319.25 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James I. Robertson |
|
Nov 21 2002 |
|
|
|
300,000 |
|
|
|
300,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nov 20 2012 |
(2) |
|
|
419.25 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Dec 16 2003 |
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
50,000 |
|
|
Dec 15 2013 |
|
|
|
374p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Dec 31 2004 |
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
100,000 |
|
|
Dec 30 2014 |
|
|
|
319.25 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John D. Rogers |
|
Nov 21 2002 |
|
|
|
300,000 |
|
|
|
300,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nov 20 2012 |
(2) |
|
|
419.25 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Dec 16 2003 |
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
50,000 |
|
|
Dec 15 2013 |
|
|
|
374p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Dec 31 2004 |
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
100,000 |
|
|
Dec 30 2014 |
|
|
|
319.25 |
|
|
|
N/A |
|
|
|
N/A |
|
|
Continued on page 66
Annual Report 2006 65
Remuneration Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
|
Gains |
|
|
|
|
|
|
|
|
|
|
|
Lapsed |
|
|
Exercised |
|
|
December |
|
|
February |
|
|
|
|
|
|
Exercise |
|
|
Price at |
|
|
Resulting |
|
|
|
Date of |
|
|
January |
|
|
During |
|
|
During |
|
|
31, |
|
|
28, |
|
|
|
Expiry |
|
Price per |
|
|
Date of |
|
|
from |
|
Directors Name |
|
Grant |
|
|
1,2006 |
(1) |
|
Year |
|
|
Year |
|
|
2006 |
|
|
2007 |
|
|
|
Date |
|
Share |
|
|
Exercise |
|
|
Exercise |
|
|
Other senior
management (as a group): |
|
Nov 21 2002 |
|
|
|
489,302 |
|
|
|
489,302 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nov 20 2012 |
(2) |
|
419.25p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Dec 16 2003 |
|
|
|
190,000 |
|
|
|
|
|
|
|
|
|
|
|
190,000 |
|
|
|
200,000 |
|
|
Dec 15 2013 |
|
|
374p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Feb 13 2004 |
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
100,000 |
|
|
Feb 12 2014 |
|
|
400.5p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Dec 31 2004 |
|
|
|
297,644 |
|
|
|
|
|
|
|
|
|
|
|
297,644 |
|
|
|
317,644 |
|
|
Dec 30 2014 |
|
|
319.25p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sharesave Plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 25 2004 |
|
|
|
320 |
|
|
|
|
|
|
|
320 |
|
|
|
|
|
|
|
|
|
|
Aug 9 2006 |
|
|
311p |
|
|
|
507.25p |
|
|
£ |
1,623.20 |
|
|
|
Sept 1 2005 |
|
|
|
1,822 |
|
|
|
|
|
|
|
|
|
|
|
1,822 |
|
|
|
1,822 |
|
|
Nov 7 2007 |
|
|
319p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
Sept 1 2005 |
|
|
|
2,133 |
|
|
|
|
|
|
|
|
|
|
|
2,122 |
|
|
|
2,133 |
|
|
Jun 30 2008 |
|
|
319p |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
(1) |
|
Or date of appointment, if appointed |
|
(2) |
|
Lapsed February 7, 2006 |
No new share option awards were made in 2006 to any executive director of the company or any
Senior Managing Director, nor were the terms of any outstanding option awards varied during the
period.
At December 31, 2006, the market price of an AMVESCAP ordinary share was 596p.
Historical Cash Awards Satisfied with Shares
Prior to 2005, a percentage of variable compensation of certain employees, including executive
directors and senior management, was satisfied with shares (GSP shares). These GSP shares
constituted profit-linked variable compensation and were paid annually into a discretionary
employee benefit trust, which purchased ordinary shares of the company in the open market in
order to fund awards of deferred or restricted shares to participants.
Employee Share Ownership Plan (ESOP)
The company sponsors the AMVESCAP Employee Share Ownership Plan (ESOP) for certain of its
U.S.-based employees. The ESOP is a leveraged employee stock ownership retirement plan designed to
invest primarily in AMVESCAP ordinary shares. The plan was closed to further participants effective
January 1, 2000. Mr. Robertson and Mr. Rogers have participated in the ESOP and are accordingly
deemed to be interested in the ordinary shares held by the trustees of the ESOP. On December 31,
2006 and February 28, 2007, the trustees of the ESOP held 5.3 million shares.
Director and Senior Management Interests in Cash Awards Satisfied with Shares and ESOP Shares
Direct interests of members of our Board and senior management in GSP and ESOP shares are shown
in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 28, 2007 |
|
|
December 31, 2006 |
|
|
January 1, 2006 |
|
|
|
ESOP |
|
|
GSP |
|
|
ESOP |
|
|
GSP |
|
|
ESOP |
|
|
GSP |
|
|
Robert H. Graham |
|
|
|
|
|
|
20,511 |
|
|
|
|
|
|
|
20,511 |
|
|
|
|
|
|
|
28,750 |
|
James I. Robertson |
|
|
13,980 |
|
|
|
1,801 |
|
|
|
13,980 |
|
|
|
18,801 |
|
|
|
13,763 |
|
|
|
26,822 |
|
John D. Rogers* |
|
|
N/A |
|
|
|
N/A |
|
|
|
32,918 |
|
|
|
121,253 |
|
|
|
32,407 |
|
|
|
127,660 |
|
Other senior management
(as a group) |
|
|
|
|
|
|
173,537 |
|
|
|
|
|
|
|
164,413 |
|
|
|
|
|
|
|
190,564 |
|
|
|
|
|
* |
|
Resigned January 12, 2007 |
66
Remuneration Report
Director and Senior Management Interests in Shares
The directors and Senior Managing Directors have notified us that they held the ordinary shares
set forth in the table below as of the dates indicated. This table sets forth share ownership as
measured under applicable definitions of the U.S. Securities and Exchange Commission (SEC) and U.K.
authorities, respectively. The columns entitled Beneficial Ownership under SEC Rules and
Percentage Ownership under SEC Rules were compiled solely as of February 28, 2007. The
designations in the remaining columns Beneficial and Non-Beneficial refer to pecuniary and
non-pecuniary interests as measured under U.K. rules, respectively, and should not be confused with
definitions of beneficial ownership under SEC rules.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 28, 2007 |
|
|
February 28, 2007 |
|
|
December 31, 2006 |
|
|
January 1, 2006 |
|
|
|
Under SEC Rules |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial |
|
|
Percentage |
|
|
Non- |
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
Ownership |
(1) |
|
Ownership |
(2) |
|
Beneficial |
|
|
Beneficial |
|
|
Beneficial |
|
|
Beneficial |
|
|
Beneficial |
|
|
Beneficial |
|
|
Executive Directors: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin L. Flanagan |
|
|
1,131,850 |
|
|
|
* |
|
|
|
|
|
|
|
5,718,749 |
|
|
|
|
|
|
|
5,506,850 |
|
|
|
|
|
|
|
5,506,850 |
|
Robert H. Graham (2) |
|
|
25,299,925 |
|
|
|
3.02 |
|
|
|
141,090 |
|
|
|
24,258,834 |
|
|
|
241,090 |
|
|
|
24,458,834 |
|
|
|
145,545 |
|
|
|
25,574,680 |
|
James I. Robertson |
|
|
1,721,882 |
|
|
|
* |
|
|
|
|
|
|
|
1,774,059 |
|
|
|
|
|
|
|
1,710,491 |
|
|
|
|
|
|
|
1,702,041 |
|
John D. Rogers (4) |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
1,624,933 |
|
|
|
|
|
|
|
1,616,483 |
|
Non-Executive
Directors: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rex D. Adams |
|
|
47,399 |
|
|
|
* |
|
|
|
|
|
|
|
47,399 |
|
|
|
|
|
|
|
47,399 |
|
|
|
|
|
|
|
32,098 |
|
Sir John Banham |
|
|
18,271 |
|
|
|
* |
|
|
|
|
|
|
|
18,271 |
|
|
|
|
|
|
|
18,271 |
|
|
|
|
|
|
|
7,500 |
|
Joseph R. Canion |
|
|
24,518 |
|
|
|
* |
|
|
|
|
|
|
|
24,518 |
|
|
|
|
|
|
|
24,518 |
|
|
|
|
|
|
|
13,564 |
|
Denis Kessler |
|
|
12,971 |
|
|
|
* |
|
|
|
|
|
|
|
12,971 |
|
|
|
|
|
|
|
12,971 |
|
|
|
|
|
|
|
2,200 |
|
Edward P. Lawrence |
|
|
15,771 |
|
|
|
* |
|
|
|
|
|
|
|
15,771 |
|
|
|
|
|
|
|
15,771 |
|
|
|
|
|
|
|
|
|
J. Thomas Presby |
|
|
4,974 |
|
|
|
* |
|
|
|
|
|
|
|
4,974 |
|
|
|
|
|
|
|
4,974 |
|
|
|
|
|
|
|
|
|
Senior Managing
Directors: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
G. Mark Armour (5) |
|
|
73,010 |
|
|
|
* |
|
|
|
|
|
|
|
111,236 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
Kevin M. Carome |
|
|
130,814 |
|
|
|
* |
|
|
|
|
|
|
|
221,218 |
|
|
|
|
|
|
|
132,222 |
|
|
|
|
|
|
|
129,316 |
|
John S. Markwalter |
|
|
316,641 |
|
|
|
* |
|
|
|
|
|
|
|
1,176,951 |
|
|
|
|
|
|
|
1,113,383 |
|
|
|
|
|
|
|
1,110,391 |
|
Colin Meadows |
|
|
|
|
|
|
* |
|
|
|
|
|
|
|
268,081 |
|
|
|
|
|
|
|
157,895 |
|
|
|
N/A |
|
|
|
N/A |
|
Loren M. Starr |
|
|
45,034 |
|
|
|
* |
|
|
|
|
|
|
|
555,505 |
|
|
|
|
|
|
|
428,367 |
|
|
|
|
|
|
|
450,000 |
|
Philip A. Taylor |
|
|
359,827 |
|
|
|
* |
|
|
|
|
|
|
|
241,960 |
|
|
|
|
|
|
|
21,586 |
|
|
|
|
|
|
|
9,768 |
|
Robert J. Yerbury |
|
|
479,125 |
|
|
|
* |
|
|
|
|
|
|
|
1,533,217 |
|
|
|
|
|
|
|
1,418,793 |
|
|
|
|
|
|
|
1,438,230 |
|
|
|
|
|
(1) |
|
Ordinary shares include (i) shares held as American Depositary Shares, and (ii) options and
other rights to purchase ordinary shares held by such individuals that are exercisable within 60
days, as further described in Note 4 to this table. For information regarding ownership of stock
options, see Director and Senior Management Interests in Share Options and Sharesave Plans
included elsewhere herein. The shares identified in this table do not have different voting rights
from any other ordinary shares. |
|
(2) |
|
Includes 141,090 ordinary shares owned by a limited partnership of which Mr. Graham is the
managing general partner. |
|
(3) |
|
In computing percentage ownership (i) as required by General Instruction F to Form 20-F, each
person is also considered to be the beneficial owner of securities that such person has the right
to acquire within 60 days by option or other agreement, including by exchange of Exchangeable
Shares, and (ii) all shares described in (i) immediately above are, as to such beneficial owner,
deemed outstanding; these shares, however, are not deemed outstanding for purposes of computing the
percentage ownership of any other person. Percentages of less than 1%
are indicated by *. |
|
(4) |
|
Resigned from the Board January 12, 2007. |
|
(5) |
|
Appointed January 12, 2007. |
Annual Report 2006 67
Remuneration Report
Under U.K. law, the executive directors are deemed discretionary beneficiaries of the 2000 Plan
and the No. 3 Plan (collectively, the Option Plans) as well as the AMVESCAP Global Stock Plan
(GSP), and are thus deemed to be interested in the ordinary shares held by the trustees of these
plans.
Mr. Canion had an interest in 11,747 ordinary shares at December 31, 2006 and at February 28, 2007
as a result of his participation in a deferred director fee arrangement.
For and on behalf of the Board
Sir John Banham
Chairman Remuneration Committee
March 23, 2007
68
Financials
This report contains our consolidated balance sheets as of December 31, 2006 and 2005 and
consolidated income statements, consolidated statements of changes in equity, and consolidated cash
flow statements for the years ended December 31, 2006, 2005 and 2004. These statutory accounts for
the financial years ended December 31, 2006, 2005 and 2004 will be delivered to the Registrar of
Companies for England and Wales. No significant change in our financial information has occurred
since the date of our annual financial statements included in this Annual Report.
Statement of Directors Responsibilities
The directors are responsible for preparing the annual report and the financial statements in
accordance with applicable United Kingdom law and those International Financial Reporting Standards
(IFRS) as adopted by the European Union.
The directors are required to prepare financial statements for each financial year which present
fairly the financial position of the company and of the group and the financial performance and
cash flows of the company and of the Parent for that period. The directors have the power to amend
the financial statements after issue. In preparing those financial statements, the directors are
required to:
|
|
select suitable accounting policies and apply them consistently |
|
|
|
present information, including accounting policies, in a manner that provides relevant, reliable,
comparable and understandable information |
|
|
|
provide additional disclosures when compliance with the specific requirements in IFRS is
insufficient to enable users to understand the impact of particular transactions, other events and
conditions on the entitys financial position and financial performance |
|
|
|
state that the company has complied with IFRS, subject to any material departures disclosed and
explained in the financial statements. |
The directors are responsible for keeping proper accounting records which disclose with reasonable
accuracy at any time the financial position of the company and of the Parent and enable them to
ensure that the financial statements comply with the Companies Act 1985 and Article 4 of the IAS
Regulation. They are also responsible for safeguarding the assets of the company and hence for
taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors discharge these responsibilities by their oversight of management through the
corporate governance structure described elsewhere herein.
Report of Management on Internal
Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under
the supervision and with the participation of our management, including our Chief Executive Officer
and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal
control over financial reporting as of December 31, 2006, based on the framework in Internal
Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on that evaluation, our management concluded that our internal control
over financial reporting was effective as of December 31, 2006.
Managements assessment of the effectiveness of our internal control over financial reporting as of
December 31, 2006, has been audited by Ernst & Young LLP, an independent registered public
accounting firm, as stated in their report, included elsewhere herein, which expresses unqualified
opinions on managements assessment and on the effectiveness of the companys internal control over
financial reporting as of December 31, 2006.
Annual Report 2006 69
Report of Independent Registered Public Accounting Firm
To the Directors and Shareholders
of AMVESCAP PLC:
We have audited managements assessment, included in the accompanying Report of Management on
Internal Control over Financial Reporting, that AMVESCAP PLC and subsidiaries (the Company)
maintained effective internal control over financial reporting as of December 31, 2006, based on
criteria established in Internal Control Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Companys management
is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting. Our responsibility is
to express an opinion on managements assessment and an opinion on the effectiveness of the
companys internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating managements assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, managements assessment that the Company maintained effective internal control over
financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on
the COSO criteria. Also, in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2006, based on the COSO
criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the Consolidated Balance Sheets of the Company as of December 31, 2006 and
2005, and the related Consolidated Statements of Income, Changes in Equity, and Cash Flows for each
of the three years in the period ended December 31, 2006, and our report dated March 22, 2007
expressed an unqualified opinion thereon.
Ernst & Young LLP
London, England
March 23, 2007
70
Independent Auditors Report
To the Members of AMVESCAP PLC
We have audited the financial statements of AMVESCAP PLC and its consolidated subsidiaries and
AMVESCAP PLC (the Parent) for the year ended December 31, 2006 which comprise the Consolidated
Income Statement, the Consolidated and Parent Company Balance Sheets, the Consolidated and Parent
Company Cash Flow Statements, the Consolidated and Parent Company Statement of Changes in Equity
and the related notes 1 to 31 and A to E. These financial statements have been prepared under the
accounting policies set out therein. We have also audited the information in the Directors
Remuneration Report that is described as having been audited.
This report is made solely to the companys members, as a body, in accordance with Section 235 of
the Companies Act 1985. Our audit work has been undertaken so that we might state to AMVESCAP PLCs
members those matters we are required to state to them in an auditors report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than AMVESCAP PLC and its members as a body, for our audit work, for this report, or
for the opinions we have formed.
Respective Responsibilities
of Directors and Auditors
The directors responsibilities for preparing the Annual Report, the Directors Remuneration
Report and the financial statements in accordance with applicable United Kingdom law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union are set out in
the Statement of Directors Responsibilities.
Our responsibility is to audit the financial statements and the part of the Directors Remuneration
Report to be audited in accordance with relevant legal and regulatory requirements and
International Standards on Auditing (U.K. and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view and
whether the financial statements and the part of the Directors Remuneration Report to be audited
have been properly prepared in accordance with the Companies Act 1985 and, as regards the group
financial information, Article 4 of the IAS Regulation. We also report to you whether in our
opinion the information given in the directors report is consistent with the financial statements.
In addition we report to you if, in our opinion, AMVESCAP PLC has not kept proper accounting
records, if we have not received all the information and explanations we require for our audit, or
if information specified by law regarding directors remuneration and other transactions are not
disclosed.
We review whether the Corporate Governance Statement reflects AMVESCAP PLCs compliance with the
nine provisions of the 2003 Combined Code specified for our review by the Listing Rules of the
Financial Services Authority, and we report if it does not. We are not required to consider whether
the boards statements on internal control cover all risks and controls, or form an opinion on the
effectiveness of the corporate governance procedures or the risk and control procedures of AMVESCAP
PLC and its consolidated subsidiaries.
We read other information contained in the Annual Report and
consider whether it is consistent with the audited financial statements. The other information
comprises only the Letter from the Chairman and CEO, Community Service, Business Overview section,
Financial Overview section, the Directors Report and unaudited part of the Remuneration Report
within the Governance section, the Statement of Directors Responsibilities and Report of
Management on Internal Control over Financial Reporting and Notes 32, 33 and Five-Year Summary and
Summary Quarterly Information within the Financials section and the Shareholder Information
section. We consider the implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the financial statements. Our responsibilities do
not extend to any other information.
Basis of Audit Opinion
We conducted our audit in accordance with International Standards on Auditing (U.K. and
Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements and the part of the
Directors Remuneration Report to be audited. It also includes an assessment of the significant
estimates and judgements made by the directors in the preparation of the financial statements, and
of whether the accounting policies are appropriate to the circumstances of AMVESCAP PLC and its
consolidated subsidiaries and AMVESCAP PLC, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance
that the financial statements and the part of the Directors Remuneration Report to be audited are
free from material misstatement, whether caused by fraud or other irregularity or error. In forming
our opinion we also evaluated the overall adequacy of the presentation of information in the
financial statements and the part of the Directors Remuneration Report to be audited.
Annual Report 2006 71
Independent Auditors Report
(continued)
Opinion
In our opinion:
|
|
the financial statements of AMVESCAP PLC and its consolidated subsidiaries give a true and fair
view, in accordance with IFRSs as adopted by the European Union, of the state of the affairs of
AMVESCAP PLC and its consolidated subsidiaries as at December 31, 2006 and of its profit for the
year then ended; |
|
|
|
the AMVESCAP PLC financial statements give a true and fair view, in accordance with IFRSs as
adopted by the European Union as applied in accordance with the provisions of the Companies Act
1985, of the state of the parent companys affairs as at December 31, 2006; |
|
|
|
the financial statements and the part of the Directors Remuneration Report to be audited have
been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS
Regulation; and |
|
|
|
the information given in the directors report is consistent with the financial statements. |
Ernst & Young LLP
Registered Auditor
London, England
March 23, 2007
Report of Independent Registered Public Accounting Firm
To the Directors and Shareholders
of AMVESCAP PLC:
We have audited the accompanying Consolidated Balance Sheets of AMVESCAP PLC and subsidiaries
(the Company) as of December 31, 2006 and 2005, and the related Consolidated Statements of Income,
Changes in Equity and Cash Flows for each of the three years in the period ended December 31, 2006.
These financial statements are the responsibility of the Companys management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of the Company at December 31, 2006 and 2005, and the consolidated
results of its operations and its cash flows for each of the three years in the period ended
December 31, 2006, in conformity with International Financial Reporting Standards as adopted by the
European Union which differ in certain respects from U. S. generally accepted accounting principles
(see Note 32 of Notes to the Financial Statements).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the effectiveness of the Companys internal control over financial reporting
as of December 31, 2006, based on criteria established in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
March 23, 2007 expressed an unqualified opinion thereon.
Ernst & Young LLP
London, England
March 23, 2007
72
Consolidated Income Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions, except per share data |
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
Notes |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management |
|
|
|
|
|
$ |
2,609.7 |
|
|
$ |
2,213.7 |
|
|
$ |
2,052.7 |
|
Service and distribution |
|
|
|
|
|
|
534.9 |
|
|
|
538.2 |
|
|
|
593.3 |
|
Other |
|
|
|
|
|
|
96.8 |
|
|
|
127.3 |
|
|
|
111.5 |
|
|
|
|
|
|
|
|
Total Revenues |
|
|
|
|
|
|
3,241.4 |
|
|
|
2,879.2 |
|
|
|
2,757.5 |
|
Third-party distribution, service and advisory fees |
|
|
|
|
|
|
(826.8 |
) |
|
|
(706.0 |
) |
|
|
(633.0 |
) |
|
|
|
|
|
|
|
Net Revenues |
|
|
4 |
|
|
|
2,414.6 |
|
|
|
2,173.2 |
|
|
|
2,124.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation |
|
|
3 |
|
|
|
1,061.7 |
|
|
|
1,044.7 |
|
|
|
966.8 |
|
Marketing |
|
|
|
|
|
|
140.6 |
|
|
|
139.5 |
|
|
|
129.1 |
|
Property and office |
|
|
|
|
|
|
109.7 |
|
|
|
130.3 |
|
|
|
169.3 |
|
Technology and telecommunications |
|
|
|
|
|
|
123.2 |
|
|
|
139.0 |
|
|
|
148.8 |
|
General and administrative |
|
|
|
|
|
|
194.0 |
|
|
|
219.4 |
|
|
|
210.0 |
|
Restructuring charge |
|
|
3 |
|
|
|
|
|
|
|
75.7 |
|
|
|
|
|
U.S. regulatory settlement |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
413.2 |
|
|
|
|
|
|
|
|
Total Operating Expenses |
|
|
|
|
|
|
1,629.2 |
|
|
|
1,748.6 |
|
|
|
2,037.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
|
|
|
|
|
785.4 |
|
|
|
424.6 |
|
|
|
87.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of business |
|
|
2 |
|
|
|
1.9 |
|
|
|
32.6 |
|
|
|
11.8 |
|
Interest income |
|
|
|
|
|
|
27.0 |
|
|
|
16.7 |
|
|
|
10.4 |
|
Other realized gains |
|
|
5 |
|
|
|
27.9 |
|
|
|
6.6 |
|
|
|
19.5 |
|
Other realized losses |
|
|
5 |
|
|
|
(6.3 |
) |
|
|
(35.3 |
) |
|
|
(8.8 |
) |
Interest expense |
|
|
6 |
|
|
|
(81.3 |
) |
|
|
(85.1 |
) |
|
|
(81.2 |
) |
|
|
|
|
|
|
|
Profit before taxation |
|
|
|
|
|
|
754.6 |
|
|
|
360.1 |
|
|
|
39.0 |
|
Taxation U.K. |
|
|
7 |
|
|
|
(73.0 |
) |
|
|
(18.0 |
) |
|
|
(2.4 |
) |
Taxation Overseas |
|
|
7 |
|
|
|
(190.8 |
) |
|
|
(128.7 |
) |
|
|
(72.3 |
) |
|
|
|
|
|
|
|
Profit/(Loss) after taxation |
|
|
|
|
|
|
490.8 |
|
|
|
213.4 |
|
|
|
(35.7 |
) |
Profit attributable to minority interests |
|
|
13 |
|
|
|
(0.7 |
) |
|
|
(1.2 |
) |
|
|
(0.5 |
) |
|
Profit/(Loss) attributable to equity holders of the Parent |
|
|
|
|
|
$ |
490.1 |
|
|
$ |
212.2 |
|
|
$ |
(36.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic |
|
|
9 |
|
|
$ |
0.62 |
|
|
$ |
0.27 |
|
|
$ |
(0.05 |
) |
diluted |
|
|
9 |
|
|
$ |
0.60 |
|
|
$ |
0.26 |
|
|
$ |
(0.05 |
) |
Earnings per share before restructuring charge (2005)
and U.S. regulatory settlement (2004): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic |
|
|
9 |
|
|
$ |
0.62 |
|
|
$ |
0.34 |
|
|
$ |
0.35 |
|
diluted |
|
|
9 |
|
|
$ |
0.60 |
|
|
$ |
0.34 |
|
|
$ |
0.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid |
|
|
8 |
|
|
$ |
143.6 |
|
|
$ |
134.1 |
|
|
$ |
135.7 |
|
Final dividends proposed per share |
|
|
8 |
|
|
$ |
0.104 |
|
|
$ |
0.098 |
|
|
$ |
0.096 |
|
Final dividends proposed (2006 estimated) |
|
|
8 |
|
|
$ |
85.9 |
|
|
$ |
80.3 |
|
|
$ |
75.0 |
|
|
The accompanying notes form part of these financial statements.
Annual Report 2006 73
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions |
|
|
|
|
|
|
|
|
|
As of December 31, |
|
Notes |
|
|
2006 |
|
|
2005 |
|
|
Non-current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
10 |
|
|
$ |
5,006.6 |
|
|
$ |
4,213.6 |
|
Intangible assets |
|
|
11 |
|
|
|
196.7 |
|
|
|
99.0 |
|
Property and equipment |
|
|
15 |
|
|
|
165.8 |
|
|
|
180.0 |
|
Deferred sales commissions |
|
|
|
|
|
|
55.9 |
|
|
|
78.9 |
|
Deferred tax assets |
|
|
7 |
|
|
|
212.1 |
|
|
|
140.4 |
|
Investments |
|
|
14,29 |
|
|
|
158.1 |
|
|
|
149.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,795.2 |
|
|
|
4,861.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
16 |
|
|
|
997.4 |
|
|
|
805.3 |
|
Investments |
|
|
14,29 |
|
|
|
134.9 |
|
|
|
31.3 |
|
Cash and cash equivalents |
|
|
21,29 |
|
|
|
789.6 |
|
|
|
715.7 |
|
Assets held for policyholders |
|
|
17 |
|
|
|
1,574.9 |
|
|
|
1,170.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,496.8 |
|
|
|
2,723.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
9,292.0 |
|
|
|
7,584.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
19,21,29 |
|
|
|
(972.7 |
) |
|
|
(1,212.2 |
) |
Provisions |
|
|
20 |
|
|
|
(461.8 |
) |
|
|
(182.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,434.5 |
) |
|
|
(1,394.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt |
|
|
19,21,29 |
|
|
|
(300.0 |
) |
|
|
(10.0 |
) |
Trade and other payables |
|
|
18 |
|
|
|
(1,384.3 |
) |
|
|
(1,300.5 |
) |
Taxation |
|
|
|
|
|
|
(95.4 |
) |
|
|
(40.0 |
) |
Provisions |
|
|
20 |
|
|
|
(227.8 |
) |
|
|
(52.1 |
) |
Policyholder liabilities |
|
|
17 |
|
|
|
(1,574.9 |
) |
|
|
(1,170.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,582.4 |
) |
|
|
(2,573.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
(5,016.9 |
) |
|
|
(3,968.1 |
) |
|
Net assets |
|
|
|
|
|
$ |
4,275.1 |
|
|
$ |
3,616.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
22 |
|
|
$ |
83.2 |
|
|
$ |
81.8 |
|
Share premium |
|
|
|
|
|
|
205.1 |
|
|
|
85.0 |
|
Shares held by employee trusts |
|
|
22 |
|
|
|
(601.7 |
) |
|
|
(413.5 |
) |
Exchangeable shares |
|
|
22 |
|
|
|
377.4 |
|
|
|
431.8 |
|
Retained earnings |
|
|
|
|
|
|
1,054.9 |
|
|
|
638.7 |
|
Other reserves |
|
|
23 |
|
|
|
3,151.2 |
|
|
|
2,789.2 |
|
|
|
|
|
|
|
|
Equity attributable to equity holders of the Parent |
|
|
|
|
|
|
4,270.1 |
|
|
|
3,613.0 |
|
Minority interests |
|
|
13 |
|
|
|
5.0 |
|
|
|
3.3 |
|
|
Total equity |
|
|
|
|
|
$ |
4,275.1 |
|
|
$ |
3,616.3 |
|
|
The accompanying notes form part of these financial statements. These financial statements
were approved by the Board of Directors on March 23, 2007, and were signed on its behalf by:
Martin L. Flanagan
Loren M. Starr
74
Consolidated Statement of Changes in Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share |
|
|
|
|
|
|
Held by |
|
|
Exchange- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
|
|
|
|
|
Employee |
|
|
able |
|
|
|
|
|
|
Other |
|
|
Minority |
|
|
|
|
|
|
Shares |
|
|
Share |
|
|
Trusts |
|
|
Share |
|
|
Retained |
|
|
Reserves |
|
|
Interests |
|
|
|
|
$ millions |
|
(Note 22) |
|
|
Premium |
|
|
(Note 22) |
|
|
(Note 22) |
|
|
Earnings |
|
|
(Note 23) |
|
|
(Note 13) |
|
|
Total |
|
|
January 1, 2004 |
|
$ |
354.0 |
|
|
$ |
1,194.4 |
|
|
$ |
(328.4 |
) |
|
$ |
584.4 |
|
|
$ |
671.5 |
|
|
$ |
965.6 |
|
|
$ |
0.7 |
|
|
$ |
3,442.2 |
|
Loss attributable to equity holders of the Parent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36.2 |
) |
|
|
|
|
|
|
|
|
|
|
(36.2 |
) |
Currency translation differences resulting from
change in presentation currency |
|
|
30.5 |
|
|
|
104.7 |
|
|
|
(32.8 |
) |
|
|
48.2 |
|
|
|
48.0 |
|
|
|
246.9 |
|
|
|
1.3 |
|
|
|
446.8 |
|
Currency translation differences on investments in
overseas subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(158.6 |
) |
|
|
|
|
|
|
(158.6 |
) |
|
Total recognized income and expense attributable
to equity holders of the Parent |
|
|
30.5 |
|
|
|
104.7 |
|
|
|
(32.8 |
) |
|
|
48.2 |
|
|
|
11.8 |
|
|
|
88.3 |
|
|
|
1.3 |
|
|
|
252.0 |
|
|
Total equity before transactions with owners |
|
|
384.5 |
|
|
|
1,299.1 |
|
|
|
(361.2 |
) |
|
|
632.6 |
|
|
|
683.3 |
|
|
|
1,053.9 |
|
|
|
2.0 |
|
|
|
3,694.2 |
|
Share-based compensation credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24.0 |
|
|
|
|
|
|
|
|
|
|
|
24.0 |
|
Exercise of options |
|
|
0.7 |
|
|
|
7.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.9 |
|
Increase in shares held by employee share
ownership trusts |
|
|
|
|
|
|
|
|
|
|
(95.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(95.5 |
) |
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(135.7 |
) |
|
|
|
|
|
|
|
|
|
|
(135.7 |
) |
Acquisition of subsidiary |
|
|
2.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44.6 |
|
|
|
|
|
|
|
47.4 |
|
Acquisition earn-out |
|
|
|
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1 |
|
Conversion of exchangeable shares into ordinary shares |
|
|
0.9 |
|
|
|
38.7 |
|
|
|
|
|
|
|
(39.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amounts attributable to minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.5 |
|
|
|
0.5 |
|
|
December 31, 2004 |
|
$ |
388.9 |
|
|
$ |
1,345.1 |
|
|
$ |
(456.7 |
) |
|
$ |
593.0 |
|
|
$ |
571.6 |
|
|
$ |
1,098.5 |
|
|
$ |
2.5 |
|
|
$ |
3,542.9 |
|
|
Adoption of IAS 32/39 on January 1, 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29.1 |
|
|
|
|
|
|
|
29.1 |
|
Profit attributable to equity holders of the Parent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
212.2 |
|
|
|
|
|
|
|
|
|
|
|
212.2 |
|
Currency translation differences resulting from
change in presentation currency |
|
|
(37.5 |
) |
|
|
(129.7 |
) |
|
|
43.2 |
|
|
|
(69.1 |
) |
|
|
(63.6 |
) |
|
|
(304.4 |
) |
|
|
(0.4 |
) |
|
|
(561.5 |
) |
Currency translation differences on investments
in overseas subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450.5 |
|
|
|
|
|
|
|
450.5 |
|
Net movement on available-for-sale reserves |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.4 |
|
|
|
|
|
|
|
5.4 |
|
|
Total recognized income and expense attributable
to equity holders of the Parent |
|
|
(37.5 |
) |
|
|
(129.7 |
) |
|
|
43.2 |
|
|
|
(69.1 |
) |
|
|
148.6 |
|
|
|
180.6 |
|
|
|
(0.4 |
) |
|
|
135.7 |
|
|
Total equity before transactions with owners |
|
|
351.4 |
|
|
|
1,215.4 |
|
|
|
(413.5 |
) |
|
|
523.9 |
|
|
|
720.2 |
|
|
|
1,279.1 |
|
|
|
2.1 |
|
|
|
3,678.6 |
|
Share-based compensation credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52.6 |
|
|
|
|
|
|
|
|
|
|
|
52.6 |
|
Exercise of options |
|
|
0.5 |
|
|
|
7.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.1 |
) |
|
|
|
|
|
|
7.7 |
|
Tax taken to/recycled from equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.1 |
|
|
|
|
|
|
|
8.1 |
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(134.1 |
) |
|
|
|
|
|
|
|
|
|
|
(134.1 |
) |
Acquisition earn-out |
|
|
0.2 |
|
|
|
2.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.2 |
|
Conversion of exchangeable shares into ordinary shares |
|
|
0.7 |
|
|
|
91.4 |
|
|
|
|
|
|
|
(92.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redenomination of share capital (Note 22) |
|
|
(271.0 |
) |
|
|
(1,231.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,502.1 |
|
|
|
|
|
|
|
|
|
Total amounts attributable to minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.2 |
|
|
|
1.2 |
|
|
December 31, 2005 |
|
$ |
81.8 |
|
|
$ |
85.0 |
|
|
$ |
(413.5 |
) |
|
$ |
431.8 |
|
|
$ |
638.7 |
|
|
$ |
2,789.2 |
|
|
$ |
3.3 |
|
|
$ |
3,616.3 |
|
|
Profit attributable to equity holders of the Parent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
490.1 |
|
|
|
|
|
|
|
|
|
|
|
490.1 |
|
Currency translation differences on investments
in overseas subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.6 |
) |
|
|
(70.9 |
) |
|
|
311.6 |
|
|
|
1.2 |
|
|
|
241.3 |
|
Net movement on available-for-sale reserves |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8.1 |
) |
|
|
|
|
|
|
(8.1 |
) |
|
Total recognized income and expense attributable
to equity holders of the Parent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.6 |
) |
|
|
419.2 |
|
|
|
303.5 |
|
|
|
1.2 |
|
|
|
723.3 |
|
|
Total equity before transactions with owners |
|
|
81.8 |
|
|
|
85.0 |
|
|
|
(413.5 |
) |
|
|
431.2 |
|
|
|
1,057.9 |
|
|
|
3,092.7 |
|
|
|
4.5 |
|
|
|
4,339.6 |
|
Share-based compensation credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
140.6 |
|
|
|
|
|
|
|
|
|
|
|
140.6 |
|
Exercise of options |
|
|
1.1 |
|
|
|
65.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66.9 |
|
Increase in shares held by employee share
ownership trusts |
|
|
|
|
|
|
|
|
|
|
(188.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(188.2 |
) |
Tax taken to/recycled from equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58.5 |
|
|
|
|
|
|
|
58.5 |
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(143.6 |
) |
|
|
|
|
|
|
|
|
|
|
(143.6 |
) |
Acquisition earn-out |
|
|
|
|
|
|
0.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.8 |
|
Conversion of exchangeable shares into ordinary shares |
|
|
0.3 |
|
|
|
53.5 |
|
|
|
|
|
|
|
(53.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amounts attributable to minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.5 |
|
|
|
0.5 |
|
|
December 31, 2006 |
|
$ |
83.2 |
|
|
$ |
205.1 |
|
|
$ |
(601.7 |
) |
|
$ |
377.4 |
|
|
$ |
1,054.9 |
|
|
$ |
3,151.2 |
|
|
$ |
5.0 |
|
|
$ |
4,275.1 |
|
|
The accompanying notes form part of these financial statements.
Annual Report 2006 75
Consolidated Cash Flow Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions |
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
Notes |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period attributable to
equity holders of the Parent |
|
|
|
|
|
$ |
490.1 |
|
|
$ |
212.2 |
|
|
$ |
(36.2 |
) |
Adjustments to reconcile profit for the
period to net
cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization, depreciation, and goodwill
impairment |
|
|
3 |
|
|
|
67.6 |
|
|
|
94.4 |
|
|
|
92.5 |
|
Amortization of share related compensation |
|
|
|
|
|
|
148.5 |
|
|
|
64.3 |
|
|
|
30.0 |
|
(Increase)/Decrease in receivables |
|
|
|
|
|
|
(129.5 |
) |
|
|
41.9 |
|
|
|
16.2 |
|
(Decrease)/Increase in payables |
|
|
|
|
|
|
(32.8 |
) |
|
|
(75.8 |
) |
|
|
132.5 |
|
Loss/(Gain) on disposal of property,
equipment, software and business |
|
|
|
|
|
|
4.0 |
|
|
|
(28.8 |
) |
|
|
1.0 |
|
Gain on disposal of long-term investments |
|
|
|
|
|
|
(8.4 |
) |
|
|
(0.5 |
) |
|
|
(12.0 |
) |
(Increase)/Decrease in current investments |
|
|
|
|
|
|
(32.8 |
) |
|
|
122.4 |
|
|
|
(18.6 |
) |
|
|
|
|
|
|
|
Net cash inflow from operating activities |
|
|
|
|
|
|
506.7 |
|
|
|
430.1 |
|
|
|
205.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
|
|
|
|
(37.7 |
) |
|
|
(38.2 |
) |
|
|
(51.6 |
) |
Disposal of property and equipment |
|
|
|
|
|
|
2.5 |
|
|
|
2.2 |
|
|
|
1.0 |
|
Purchase of long-term investments |
|
|
|
|
|
|
(69.8 |
) |
|
|
(25.4 |
) |
|
|
(45.2 |
) |
Disposal of long-term investments |
|
|
|
|
|
|
18.8 |
|
|
|
38.7 |
|
|
|
42.7 |
|
Acquisitions of businesses, net of cash
acquired of
$8.9 million in 2006 (2004: $4.8 million) |
|
|
2 |
|
|
|
(200.2 |
) |
|
|
|
|
|
|
(72.3 |
) |
Disposal of business, including cash of
$0.6 million in 2005 |
|
|
2 |
|
|
|
2.1 |
|
|
|
53.6 |
|
|
|
18.4 |
|
|
|
|
|
|
|
|
Net cash (outflow)/inflow from investing
activities |
|
|
|
|
|
|
(284.3 |
) |
|
|
30.9 |
|
|
|
(107.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issues of ordinary share capital |
|
|
|
|
|
|
66.6 |
|
|
|
7.7 |
|
|
|
7.9 |
|
Purchases of shares held by employee share
ownership trusts |
|
|
|
|
|
|
(155.9 |
) |
|
|
|
|
|
|
(95.5 |
) |
Dividends paid
|
|
|
8 |
|
|
|
(143.6 |
) |
|
|
(134.1 |
) |
|
|
(135.7 |
) |
Credit facility, net |
|
|
19,21 |
|
|
|
59.0 |
|
|
|
(81.0 |
) |
|
|
(79.0 |
) |
Issuance of senior notes |
|
|
19,21 |
|
|
|
|
|
|
|
|
|
|
|
496.1 |
|
Repayment of senior notes |
|
|
19,21 |
|
|
|
(10.0 |
) |
|
|
(79.5 |
) |
|
|
(320.5 |
) |
|
|
|
|
|
|
|
Net cash outflow from financing activities |
|
|
|
|
|
|
(183.9 |
) |
|
|
(286.9 |
) |
|
|
(126.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase/(Decrease) in cash and cash
equivalents |
|
|
21 |
|
|
$ |
38.5 |
|
|
$ |
174.1 |
|
|
$ |
(28.3 |
) |
Foreign exchange movement on cash and
cash equivalents |
|
|
|
|
|
|
35.4 |
|
|
|
(5.3 |
) |
|
|
11.9 |
|
Cash and cash equivalents, beginning of year |
|
|
|
|
|
|
715.7 |
|
|
|
546.9 |
|
|
|
563.3 |
|
|
Cash and cash equivalents, end of year |
|
|
|
|
|
$ |
789.6 |
|
|
$ |
715.7 |
|
|
$ |
546.9 |
|
|
Supplemental Cash Flow Information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
|
|
|
|
|
$ |
(83.9 |
) |
|
$ |
(88.2 |
) |
|
$ |
(85.3 |
) |
Interest received |
|
|
|
|
|
$ |
28.4 |
|
|
$ |
17.4 |
|
|
$ |
11.9 |
|
Taxes paid |
|
|
|
|
|
$ |
(213.1 |
) |
|
$ |
(118.8 |
) |
|
$ |
(133.1 |
) |
|
The accompanying notes form part of these financial statements.
76
Notes to the Financial Statements
Note 1
ACCOUNTING POLICIES
Corporate Information
The separate financial statements of AMVESCAP PLC (Parent) and the consolidated financial
statements of the Parent and all of its controlled subsidiaries (company) for the year-ended
December 31, 2006, were authorized for issue in accordance with a resolution of the directors on
March 23, 2007. The Parent is incorporated and domiciled in the United Kingdom. Its shares are
publicly traded. The principal activities of the company are described in Note 13. The principal
accounting policies that are presented below are applicable to both the company and the Parent.
Basis of Accounting and Consolidation
The financial statements consolidate the financial statements of the Parent and all of its
controlled subsidiaries. Control is achieved where the Parent has the power to govern the financial
and operating policies of the subsidiary so as to obtain the benefits from its activities. No
statement of income is presented for the Parent as permitted by S230 of the Companies Act 1985. The
financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union and applied in accordance with the Companies Act
1985.
IFRS comprise standards and interpretations approved by the International Accounting Standards
Board and its predecessors. As of December 31, 2006, all issued IFRS were also adopted by the
European Commission, with the exception of IFRS 8, Operating Segments, which is effective for
periods commencing January 1, 2009, but which is not expected to result in changes to the companys
single-segment approach. IFRS 7, Financial Instruments: Disclosures, and the related amendment to
IAS 1, Presentation of Financial Statements, Capital Disclosures, are effective for periods
commencing January 1, 2007. The disclosure requirements of these standards will be reflected in the
companys 2007 Annual Report. During 2006, the International Financial Reporting Interpretations
Committee issued several interpretations which are relevant to the company: IFRIC 8, Scope of IFRS
2, which has been approved by the European Commission, and IFRIC 10, Interim Financial Reporting
and Impairment, which has not yet been approved by the European Commission. The issuance of these
interpretations did not have a material effect on the companys financial statements. IFRIC 11,
Group and Treasury Share Transactions, is effective for periods commencing March 1, 2007, and has
provided additional guidance for accounting for share-based payment transactions upon awards
vesting between the Parent and its subsidiaries. The application of IFRIC 11 will also not have a
material impact on the Parent and the companys consolidated financial statements.
The presentation currency of the company changed from sterling to U.S. dollars with effect from
December 31, 2005. The comparative figures have been presented in U.S. dollars applying the
exchange rates outlined in Note 31. On December 8, 2005, the Parent redenominated its share capital
from sterling to U.S. dollars and changed its functional currency from sterling to U.S. dollars.
The U.S. dollar more accurately reflects the currency of the underlying operations and financing of
the Parent. See Note D to the Parent financial statements for additional information.
The financial statements have been prepared primarily on the historical cost basis; however,
certain items are presented using other bases such as fair value and recoverable amounts, where
such treatment is appropriate. The financial statements of subsidiaries are prepared for the same
reporting year as the Parent and use consistent accounting policies, which, where applicable, have
been adjusted to IFRS from local generally accepted accounting principles or reporting regulations.
All intra-group transactions, balances, income and expenses are eliminated upon consolidation.
Minority interests represent the interests in certain entities within the company over which the
company has control, but of which the company does not own all of the share capital.
In preparing the financial statements, management is required to make estimates and assumptions
that affect reported income, expenses, assets, liabilities and disclosure of contingent
liabilities. Use of available information and application of judgment are inherent in the formation
of estimates. Actual results in the future could differ from such estimates and the differences may
be material to the financial statements.
Annual Report 2006 77
Notes to the Financial Statements
Certain prior year amounts have been reclassified to conform to the current year presentation
of those amounts. Specifically, amounts relating to client money accounts in the offshore business,
previously classified as client cash on the consolidated balance sheet and cash flow statements
have been reclassified into receivables and current liabilities from and to client accounts.
Additionally, tax reserves previously classified as non-current deferred tax liabilities have been
reclassified into current liabilities. The reclassification amounts are not considered to be
material.
Acquisition Accounting
On acquisition, the assets, liabilities and contingent liabilities, if reliably measurable, of
a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost
of the acquisition over the fair values of the identifiable net assets acquired attributable to the
company is recognized as goodwill. The interest of minority shareholders is stated at the
minoritys proportion of the fair values of the assets and liabilities recognized. The results of
entities acquired or sold during the year are included from or to the date control changes.
Deferred contingent consideration payable in respect of a business acquisition is recorded as a
provision when there is a legal or constructive obligation resulting from the acquisition, it is
probable that an outflow of resources will be required to settle the obligation, and when a
reliable estimate can be made of the amount of the obligation. If the time value of money is
material, applicable discount rates are applied to the provision as outlined in the provisions
accounting policy.
Goodwill
Goodwill represents the excess of the cost over the identifiable net assets of businesses
acquired and is recorded in the functional currency of the acquired entity. Goodwill is recognized
as an asset and is reviewed for impairment annually. The recoverable amounts of each cash
generating unit (the lowest group of identifiable assets that generate independent cash flows) are
compared to its carrying amount to determine if impairment results. The recoverable amount of a
cash generating unit is the higher of the fair value less costs to sell of the cash generating unit
or its value-in-use (VIU).
Transaction data for similar assets within the asset management industry are obtained from an
external valuations consultant and are used to assess the fair value less costs to sell as part of
the annual goodwill impairment test. Key assumptions made in determining the fair value less costs
to sell include an analysis of the purchase prices paid for similar acquisitions in the asset
management industry as a multiple of the revenue streams acquired. These key assumptions reflect
past acquisition experiences within the company and are applied to the cash generating units to
arrive at an estimate of the fair value less costs to sell of the cash generating units.
VIU is calculated by first determining the estimate of future cash flows to be generated by the
cash generating unit and then applying a discount rate equivalent to the companys weighted average
cost of capital, adjusted for risks specific to the cash generating unit. VIU calculations are
based on the cash generating units most recent budgets and (up to) five-year projections.
Extrapolations are then made to the projections assuming declining growth rates on cash flow
throughout the estimated life of the goodwill. Any impairment is recognized in the income statement
and is not subsequently reversed.
On disposal of a business, the attributable amount of goodwill is included in the determination of
profit or loss. Goodwill arising on acquisitions before the date of transition to IFRS, January 1,
2004, has been retained at the previous U.K. GAAP amounts. Prior to 1998, goodwill was charged
directly to other reserves. This goodwill has not been restated, and will not be included in
determining any subsequent profit or loss on disposal.
Intangible Assets
Management contract intangible assets identified on the acquisition of a business are
capitalized separately from goodwill if the fair value can be measured reliably on initial
recognition (transaction date) and are amortized and recorded as operating expenses on a
straight-line basis over their useful lives, usually seven to ten years. Where evidence exists that
the underlying management contracts are renewed annually at little or no cost to the company, the
management contract intangible asset is assigned an indefinite life and reviewed for impairment on
an annual basis. Purchased software is capitalized where the related costs can be measured
reliably, and it is probable that the asset will generate future economic benefits, and amortized
into operating expenses on a straight-line basis over its useful life, usually three years.
78
Notes to the Financial Statements
Revenue
Revenue is measured at the fair value of consideration received or receivable and represents
amounts receivable for services provided in the normal course of business, net of discounts, VAT
and other sales-related taxes. Revenue is recognized when services have been provided, it is
probable that the economic benefits will flow to the company and the revenue can be reliably
measured. Revenue represents management, distribution, transfer agent and other fees. Revenue is
generally accrued over the period for which the service is provided, or in the case of
performance-based management fees, when the contractual performance criteria have been met.
Management fee revenues are derived from providing professional expertise to manage client accounts
and include fees received from institutional advisory contracts and retail mutual funds, unit
trusts, investment companies with variable capital and investment trusts. Management fees vary in
relation to the level of client assets managed, and in certain cases are also based on investment
performance. Distribution fees include 12b-1 fees received from certain mutual funds to cover
allowable 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. Transfer agent fees are
service fees charged to cover the expense of transferring shares of a mutual fund or units of a
unit trust into the investors name. Other fees include trading fees derived from generally
non-recurring security or investment transactions and fees earned from the companys banking
subsidiaries, such as interest earned from balances available on demand from clients and credit
institutions and commissions earned from derivative instruments. Distribution fees, service fees
and advisory fees that are passed through to external parties are presented separately from total
revenues to arrive at Net Revenues on the income statement.
Interest income is accrued on cash and other interest-generating financial assets using the
effective interest method.
Dividend income from investments is recognized when the shareholders rights to receive payment
have been established.
Deferred Sales Commissions
Mutual fund shares sold without a sales commission at the time of purchase are commonly
referred to as B shares. B shares typically have an asset-based fee (12b-1 fee) that is charged
to the fund over a period of years and a contingent deferred sales charge (CDSC). The CDSC is an
asset-based fee that is charged to investors that redeem B shares during a stated period.
Commissions paid at the date of sale to brokers and dealers for sales of mutual funds that have a
CDSC are capitalized and amortized over a period not to exceed the redemption period of the related
fund (generally up to six years).
The companys Canadian business participates in a funding arrangement with a bank whereby certain
future revenue streams from asset-based and deferred redemption fees for each class B equivalent
security are sold to the bank by a fund distribution entity unaffiliated with the company. The
purchase price paid by the fund distribution entity for the revenue stream associated with any
particular security under this arrangement is equal to a percentage of the price at which that
security is sold. In return, the bank pays the B-share commissions to the Canadian financial
advisors and brokers. There is no recourse to the company with respect to the proceeds from these
programs. Under this arrangement, no commissions are capitalized or amortized as the transactions
are financed through parties external to the company.
Property, Equipment and Depreciation
Property and equipment includes owned property, computer hardware and other equipment and is
stated at cost less accumulated depreciation and any impairment in value. Depreciation is provided
on property and equipment at rates calculated to write off the cost, less estimated residual value,
of each asset evenly over its expected useful life: owned buildings over 50 years, leasehold
improvements over the shorter of the lease term or useful life of the improvement; computers and
other various equipment between three and seven years.
Impairment of Assets Excluding Goodwill and Indefinite-Lived Intangible Assets
The carrying amounts of assets excluding goodwill and indefinite-lived intangible assets are
reviewed for impairment when events or changes in circumstances indicate that the carrying values
may not be recoverable. At each reporting date, an assessment is made for any indication of
impairment. If an indication of impairment exists, and if the recoverable amounts (the higher of
the fair value less costs to sell or value-in-use) are estimated to be less than the carrying
amounts, then the carrying amounts are reduced to their
Annual Report 2006 79
Notes to the Financial Statements
recoverable amounts, and an impairment charge is recognized immediately. The company uses the
fair value less costs to sell in determining recoverable amounts. Where an impairment subsequently
reverses, the carrying amounts of the assets are increased to the revised estimate of their
recoverable amounts, limited to the original carrying amounts less subsequent amortization or
depreciation.
Investments
All regular way purchases and sales of financial assets are recognized on the trade date, which
is the date that the company commits to buy or sell the asset. Financial assets are removed from
the balance sheet upon sale or maturity, when the contractual rights to the cash flows from the
financial asset expire or the financial asset is transferred so that the risks and rewards of the
asset are no longer retained. The company adopted IAS 32, Financial Instruments: Disclosure and
Presentation and IAS 39, Financial Instruments: Recognition and Measurement, from January 1,
2005. These standards require that financial assets and liabilities be recognized on the balance
sheet and accounted for according to their underlying classification.
Policy Applicable through December 31, 2004:
Long-term investments, including partnership investments, are stated at cost less provisions for
any impairment in value. Investments held as current assets are stated at the lower of cost or net
realizable value. Gains and losses on investments are recorded within other income and expense in
the income statement in the period in which they arise.
Policy Applicable from January 1, 2005:
Investments are initially recognized at fair value, adjusted by transaction costs, and are then
classified as fair value through profit and loss (FVTPL), available-for-sale, or held-to-maturity.
FVTPL and available-for-sale investments are measured at fair value. Criteria for designating
investments as FVTPL, available-for-sale or held-to-maturity include evaluating the purpose for
holding such investments. If investments cannot be classified as held-to-maturity or FVTPL, then
they are included as available-for-sale investments. Investments held as FVTPL are usually matched
with an offsetting FVTPL related liability. Both the FVTPL asset and liability are accounted for
and evaluated consistently; otherwise a measurement inconsistency would arise. Gains or losses
arising from changes in the fair value of FVTPL investments are included in income, and gains or
losses arising from changes in the fair value of available-for-sale investments are recognized in a
separate component of equity until the investment is sold or otherwise disposed of, or until the
investment is determined to be impaired, at which time the cumulative gain or loss previously
reported in equity is included in income. Held-to-maturity investments are measured at amortized
cost, taking into account any discounts or premiums. Gains or losses on held-to-maturity
investments are recognized in income when the investments are amortized or impaired.
Fair value for assets and liabilities is determined by reference to an active trading market, using
quoted bid prices as of each reporting period end. When a readily ascertainable market value does
not exist for an investment (such as the companys collateralized debt obligations) the fair value
is calculated based on the expected cash flows of its underlying net asset base, taking into
account applicable discount rates and other factors.
Investments in Associates and Joint Ventures
Investments in associates are investments over which the company has significant influence but
not control and are accounted for using the equity method, where the investment in associate is
initially recorded at cost and the carrying amount is increased or decreased to recognize the
companys share of the profit or loss of the investee after the date of acquisition. Investments in
joint ventures are investments jointly controlled by the company and external parties. Investments
in joint ventures are accounted for using the proportionate consolidation method to reflect the
substance and economic reality of the companys interest in jointly controlled entities.
Derivative Financial Instruments
The company does not utilize derivative financial instruments to provide a hedge against
interest rate or foreign exchange exposures except in its offshore business, where forward foreign
exchange contracts are purchased daily to hedge against foreign exchange rate movements during the
four-day client money settlement period and swap foreign exchange contracts periodically are
entered into for client money settlement purposes.
80
Notes to the Financial Statements
Leases
Rentals under operating leases, where the lessor retains substantially all the risks and
benefits of ownership of the asset, are charged evenly to the income statement over the lease term.
Benefits received and receivable as an incentive to enter an operating lease are also spread evenly
over the lease term. When an operating lease obligation becomes onerous, a provision is recorded
based on the best estimate of the present value of expenditure required to settle the obligation at
the balance sheet date net of estimated sublease income.
Taxation
Tax expense represents the sum of current tax and deferred tax. Current tax is provided on
taxable profits based on tax rates (and tax laws) that have been enacted or substantively enacted
at the balance sheet date. Deferred income tax is generally provided, using the liability method,
on all temporary differences at the balance sheet date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are generally recognized for all taxable temporary differences.
Deferred income tax assets are recognized for all deductible temporary differences, carry-forward
of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit
will be available against which the deductible temporary differences, carry-forward of unused tax
assets and unused tax losses can be utilized.
Deferred tax assets and liabilities are not recognized where the temporary difference arises from
the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor taxable
profit or loss.
In respect of temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, deferred tax assets are only recognized to the extent that it is
probable that the temporary differences will reverse in the foreseeable future and taxable profit
will be available against which the temporary differences can be utilized. Deferred tax liabilities
are recognized where either the timing of the reversal of the temporary difference cannot be
controlled or it is probable that the temporary differences will reverse in the foreseeable future.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred income tax asset to be utilized. Unrecognized
deferred income tax assets are reassessed at each balance sheet date and are recognized to the
extent that it has become probable that future taxable profit will allow the deferred tax asset to
be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply
to the year when the asset is realized or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the balance sheet date.
Income tax relating to items recognized directly in equity is recognized in equity and not in the
income statement.
Deferred tax assets and liabilities in the Consolidated Balance Sheet have been offset on a
jurisdiction by jurisdiction basis where they relate to income taxes levied by the same taxation
authority and there is a legally enforceable right to offset current tax assets against current tax
liabilities.
Foreign Currencies
Transactions in foreign currencies (currencies other than the functional currencies of the
operation) are recorded at the rates of exchange prevailing on the dates of the transactions. At
each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies
are retranslated at the rates prevailing at the balance sheet date. Gains and losses arising on
retranslation are included in the income statement, with the exception of differences on foreign
currency borrowings that provide an effective designated hedge against a net investment in a
foreign entity. These differences are taken directly to equity until the disposal of the net
investment, at which time they are recognized in the income statement. In the Parents financial
statements, a fair value hedge was utilized in 2005 to revalue certain foreign currency investments
in subsidiaries, allowing the revaluation of these assets to offset the revaluation of external
foreign currency debt in the Parents income statement.
Annual Report 2006 81
Notes to the Financial Statements
The companys presentation currency and the functional currency of the Parent is U.S. dollars.
On consolidation, the assets and liabilities of company subsidiary operations whose functional
currencies are currencies other than the U.S. dollar (foreign operations) are translated at the
rates of exchange ruling at the balance sheet date. Income statement figures are translated at the
weighted average rates for the year, which approximate actual exchange rates. Exchange differences
arising on the translation of foreign operations accounts are taken directly to equity. Goodwill
and other fair value adjustments arising on acquisition of a foreign entity are treated as assets
and liabilities of the foreign entity and are translated at rates of exchange ruling at the balance
sheet date.
Pensions
For defined contribution schemes, contributions payable in respect of the accounting period are
charged to the income statement. For defined benefit schemes, the cost of providing benefits is
separately determined for each plan using the projected unit credit method, with actuarial
valuations being carried out at each balance sheet date. A portion of actuarial gains and losses is
recognized through the income statement if the net cumulative unrecognized actuarial gain or loss
at the end of the prior period exceeds the greater of 10.0% of the present value of the defined
benefit obligation (before deducting plan assets) at that date and 10.0% of the fair value of any
plan assets. The retirement benefit obligation recognized in the balance sheet represents the
present value of the defined benefit obligation as adjusted for unrecognized actuarial gains and
losses, unrecognized past service cost, and as reduced by the fair value of plan assets. Any asset
resulting from this calculation is limited to past service cost plus the present value of available
refunds and reductions in future contributions to the plan.
Debt and Financing Costs
Upon initial recognition, debt balances are recorded at the net of the maturity amounts and any
debt issue costs. After initial recognition, debt is measured at amortized cost. Finance charges
and debt issue costs are accounted for using the effective interest method. Interest charges are
recognized in the income statement in the period in which they are incurred.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with a
maturity upon acquisition of three months or less. Certain cash and cash equivalents balances that
are held to satisfy regulatory liquidity requirements are disclosed as restricted cash. Also
included in cash and cash equivalents is cash to facilitate our trust operations and customer
transactions in the companys affiliated funds. In addition, cash balances may not be readily
accessible to the Parent due to certain capital adequacy requirements. For the purposes of the
Consolidated Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as
defined above, net of outstanding bank overdrafts.
Trade and Other Receivables and Payables
Trade and other receivables and payables are recorded at their original invoice amounts, less
any provision.
Provisions
Provisions are recognized when the company has a present obligation (legal or constructive) as
a result of a past event, it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation and a reliable estimate can be made of the amount of the
obligation. If the effect of the time value of money is material, provisions are determined by
discounting the expected future cash flows at a pre-tax discount rate that reflects current market
assessments of the time value of money and, where appropriate, the risks specific to the liability.
Where discounting is used, the increase in the provision due to the passage of time is recognized
as interest expense.
Linked Assets and Liabilities
One of the companys subsidiaries is an insurance entity, established to facilitate retirement
savings plans. Fair value through profit and loss investments and policyholder liabilities held by
this business meet the definition of financial instruments and are carried in the balance sheet at
fair value. Changes in fair value are recorded in the income statement. The liability to the
policyholders is linked to the value of the investments. Management fees earned from policyholder
investments are accounted for as described in the companys revenue accounting policy. Policyholder
liabilities are measured in accordance with actuarial principles and guidance.
82
Notes to the Financial Statements
Share-Based Payment
The company issues equity-settled share-based awards to certain employees, which are measured
at fair value at the date of grant. The fair value determined at the grant date is expensed on a
straight-line basis over the vesting period, based on the companys estimate of shares that will
eventually vest. Fair value is measured by use of a stochastic valuation model. The expected life
of share-based payment awards used in the model is adjusted, based on managements best estimate,
for the effects of non-transferability, exercise restrictions and behavioral considerations. In
accordance with the transition provisions of IFRS, the company has applied this policy to all
grants after November 7, 2002, that were unvested as of January 1, 2005.
Shares Held by Employee Share Ownership Trusts
Shares held by employee share ownership trusts associated with equity-settled share-based
awards that have not vested unconditionally to the companys employees are valued at cost and are
included as deductions from equity.
Dividends
Final dividends are recognized on the declaration date, which is the date when the dividend is
formally approved by shareholders. Interim dividends are recognized when paid.
Note 2
ACQUISITIONS AND DISPOSITIONS
Acquisition of PowerShares Capital Management LLC
On September 18, 2006, the company acquired 100% of the limited liability company interests of
PowerShares Capital Management LLC (PowerShares). Consideration for the transaction was $399.1
million, which includes earn-out provisions of $291.6 million, payable in the future depending on
the achievement of various management fee growth targets, and transaction costs of $6.3 million. At
the date of the acquisition, PowerShares managed assets of approximately $6.3 billion offering 37
exchange-traded funds to investors. PowerShares assets under management had grown to $8.5 billion
at the end of December 31, 2006. Goodwill and management contract intangible assets of $398.7
million have been initially recorded on this acquisition.
The initial book and fair values of net assets acquired were determined as follows:
|
|
|
|
|
$ millions |
|
|
|
|
|
Property and equipment |
|
|
2.6 |
|
Receivables |
|
|
3.4 |
|
Cash and cash equivalents |
|
|
2.1 |
|
Payables |
|
|
(7.7 |
) |
|
|
|
|
|
Net assets |
|
|
0.4 |
|
Goodwill |
|
|
299.0 |
|
Management contract intangibles |
|
|
99.7 |
|
|
|
|
|
399.1 |
|
|
|
|
|
|
Satisfied by: |
|
|
|
|
Cash paid to seller at closing |
|
|
101.2 |
|
Provisions established |
|
|
291.6 |
|
Transaction costs |
|
|
6.3 |
|
|
Total fair value of net assets |
|
|
399.1 |
|
|
The initial book value of net assets acquired is approximately equal to the fair value of these
assets and liabilities. No accounting policy alignment adjustments have been made, because the
PowerShares financial results maintained under U.S. Generally Accepted Accounting Principles are
materially the same as they would be under International Financial Reporting Standards followed by
the company. From the date of acquisition through the end of 2006, PowerShares profit after
taxation was $0.9 million.
Annual Report 2006 83
Notes to the Financial Statements
Acquisition of WL Ross & Co. LLC
On October 3, 2006, the company acquired 100% of the limited liability company interests of WL
Ross & Co. LLC (WL Ross), one of the industrys
leading financial restructuring groups. WL Ross
manages assets for institutional investors in the U.S., Europe and Asia. Consideration for the
transaction was $294.7 million, which includes earn-out provisions of $190.6 million, payable in
the future depending on the achievement of annual fund launch targets
over the five years following
the completion of the transaction and transaction costs of $4.1 million. At the time of the
acquisition, WL Ross managed assets of approximately $2.6 billion. At December 31, 2006, WL Rosss
assets under management were $2.8 billion. Goodwill, management contracts and other intangible
assets of $288.0 million have been initially recorded on this acquisition.
The initial book and fair values of net assets acquired were determined as follows:
|
|
|
|
|
$ millions |
|
|
|
|
|
Property and equipment |
|
|
3.0 |
|
Receivables |
|
|
4.8 |
|
Cash and cash equivalents |
|
|
6.8 |
|
Other |
|
|
0.9 |
|
Payables |
|
|
(8.8 |
) |
|
|
|
|
Net assets |
|
|
6.7 |
|
Goodwill |
|
|
277.1 |
|
Management contract intangibles |
|
|
10.9 |
|
|
|
|
|
294.7 |
|
|
|
|
|
|
Satisfied by: |
|
|
|
|
Cash paid to seller at closing |
|
|
100.0 |
|
Provisions established |
|
|
190.6 |
|
Transaction costs |
|
|
4.1 |
|
|
Total fair value of net assets |
|
|
294.7 |
|
|
The initial book value of net assets acquired is approximately equal to the fair value of these
assets and liabilities. No accounting policy alignment adjustments have been made because the WL
Ross financial results maintained under U.S. Generally Accepted Accounting Principles are
materially the same as they would be under International Financial Reporting Standards followed by
the company. From the date of acquisition through the end of 2006, WL Rosss profit after taxation
was $1.3 million.
If these acquisitions had taken place on January 1, 2006, net revenues and profit after
taxation for the consolidated company for the year would have been approximately $2,462.3
million and $499.9 million, respectively.
Disposition of AMVESCAP Retirement Business
On July 15, 2005, the company completed the sale of the AMVESCAP Retirement business. This
business provided administrative, recordkeeping, brokerage, trust and custodial services for
retirement plans, individual retirement accounts, and education savings programs and accounts. The
company disposed of all rights, title and interests in this business, including all of the issued
and out-standing capital of one of its subsidiaries, AMVESCAP Services Inc. The results of this
business are included through the closing date of the transaction. The disposal is analyzed as
follows:
|
|
|
|
|
$ millions |
|
|
|
|
|
Non-current assets |
|
|
6.2 |
|
Current assets, including cash of $0.6 million |
|
|
9.6 |
|
Current liabilities assumed |
|
|
7.7 |
|
|
|
|
|
23.5 |
|
Gain on sale recognized in 2005 |
|
|
32.6 |
|
Gain on sale recognized in 2006 |
|
|
1.7 |
|
|
Cash consideration received (2006: $1.7 million, 2005: $56.1 million) |
|
|
57.8 |
|
|
84
Notes to the Financial Statements
In December 2005, the company outsourced its banking operations in Germany and on January 31, 2006,
completed the sale of its German banking license. Included in gain on sale of business in the 2006
Consolidated Income Statement is a gain of $0.2 million related to this transaction.
Note 3
ADDITIONAL OPERATING EXPENSE INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions |
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Salaries and cash bonuses |
|
|
756.3 |
|
|
|
785.8 |
|
|
|
743.6 |
|
Payroll-related costs |
|
|
54.9 |
|
|
|
53.1 |
|
|
|
50.4 |
|
Pension costs |
|
|
43.4 |
|
|
|
73.3 |
|
|
|
66.5 |
|
Benefits costs |
|
|
37.2 |
|
|
|
41.3 |
|
|
|
42.7 |
|
Share-related compensation |
|
|
148.5 |
|
|
|
64.3 |
|
|
|
30.0 |
|
Other compensation costs |
|
|
21.4 |
|
|
|
26.9 |
|
|
|
33.6 |
|
|
Total compensation costs |
|
|
1,061.7 |
|
|
|
1,044.7 |
|
|
|
966.8 |
|
|
The average number of employees of the company during the year was 5,546 (2005: 6,261). Of
these totals 3,868 (2005: 4,593) were employed in North America and the remainder were employed
in the U.K., Europe and Asia.
Included in operating expenses are the following non-cash charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions |
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Foreign exchange |
|
|
1.1 |
|
|
|
1.0 |
|
|
|
2.4 |
|
Depreciation |
|
|
37.0 |
|
|
|
43.5 |
|
|
|
51.3 |
|
Amortization |
|
|
30.6 |
|
|
|
34.3 |
|
|
|
41.2 |
|
Goodwill impairment charge |
|
|
|
|
|
|
16.6 |
|
|
|
|
|
|
|
|
|
68.7 |
|
|
|
95.4 |
|
|
|
94.9 |
|
|
Included in operating expenses in 2005 is a restructuring charge of $75.7 million, related to
operational and structural changes made as a result of a review of the business. The charge
includes the following:
|
|
|
|
|
$ millions, except per share data |
|
2005 |
|
|
Staff termination costs |
|
|
45.1 |
|
Property costs |
|
|
20.4 |
|
Fund rationalization costs |
|
|
6.9 |
|
Other |
|
|
3.3 |
|
|
|
|
|
Total restructuring charge |
|
|
75.7 |
|
Taxation |
|
|
(17.4 |
) |
|
|
|
|
Net income charge |
|
|
58.3 |
|
|
Per share impact |
|
$ |
0.072 |
|
|
The consolidated income statement for 2004 includes a charge of $413.2 million relating to the
mutual fund market timing investigations by regulators in the United States. The charge comprised
settlement payments and civil penalties of $376.7 million, along with related costs of $36.5
million, primarily additional legal costs associated with the investigations. Included in general
and administrative expenses are $24.0 million in 2006 (2005: $20.8 million) of amounts recovered
from insurers relating primarily to legal and other related costs associated with the mutual fund
market timing investigations and private litigation involving the AIM Funds.
Cash paid in 2006 related to the restructuring charge was $36.7 million (2005: $14.5 million)
and relating to the U.S. regulatory settlement was $nil (2005: $173.6 million; 2004: $237.7
million).
Annual Report 2006 85
Notes to the Financial Statements
Note 4
SEGMENTAL INFORMATION
For management reporting purposes prior to the end of 2005, the company was organized into
seven operating segments, including a Corporate segment. Each operating segment performed
asset management activities. The company generally recorded inter-segment services and
transfers as if the services or transfers were provided to third parties at current market
prices. Beginning January 1, 2006, management realigned the business to achieve increased
efficiencies and does not manage the business under the divisional business structure used in
the past. The company operates under one business segment, asset management. The secondary
geographical segmentation of the company is presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions |
|
U.S. |
|
|
U.K. |
|
|
Canada |
|
|
Europe/Asia |
|
|
Total |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Profit Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues |
|
|
1,442.8 |
|
|
|
1,033.8 |
|
|
|
624.1 |
|
|
|
140.7 |
|
|
|
3,241.4 |
|
Net Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External |
|
|
1,195.2 |
|
|
|
716.1 |
|
|
|
416.2 |
|
|
|
87.1 |
|
|
|
2,414.6 |
|
Inter-segment |
|
|
51.5 |
|
|
|
(130.4 |
) |
|
|
(14.0 |
) |
|
|
92.9 |
|
|
|
|
|
|
|
|
|
|
|
1,246.7 |
|
|
|
585.7 |
|
|
|
402.2 |
|
|
|
180.0 |
|
|
|
2,414.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
|
2,322.7 |
|
|
|
4,088.8 |
|
|
|
1,643.3 |
|
|
|
714.6 |
|
|
|
8,769.4 |
|
Unallocated corporate assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
522.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,292.0 |
|
Capital additions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment |
|
|
16.2 |
|
|
|
2.2 |
|
|
|
1.8 |
|
|
|
3.8 |
|
|
|
24.0 |
|
Intangible assets |
|
|
14.5 |
|
|
|
0.7 |
|
|
|
0.9 |
|
|
|
|
|
|
|
16.1 |
|
|
|
|
Total capital additions |
|
|
30.7 |
|
|
|
2.9 |
|
|
|
2.7 |
|
|
|
3.8 |
|
|
|
40.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Profit Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues |
|
|
1,470.0 |
|
|
|
704.2 |
|
|
|
592.1 |
|
|
|
112.9 |
|
|
|
2,879.2 |
|
Net Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External |
|
|
1,219.8 |
|
|
|
485.5 |
|
|
|
384.1 |
|
|
|
83.8 |
|
|
|
2,173.2 |
|
Inter-segment |
|
|
30.8 |
|
|
|
(62.8 |
) |
|
|
(10.6 |
) |
|
|
42.6 |
|
|
|
|
|
|
|
|
|
|
|
1,250.6 |
|
|
|
422.7 |
|
|
|
373.5 |
|
|
|
126.4 |
|
|
|
2,173.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
|
1,713.2 |
|
|
|
3,168.1 |
|
|
|
1,637.3 |
|
|
|
735.9 |
|
|
|
7,254.5 |
|
Unallocated corporate assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
329.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,584.4 |
|
Capital additions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment |
|
|
17.2 |
|
|
|
2.0 |
|
|
|
3.4 |
|
|
|
2.1 |
|
|
|
24.7 |
|
Intangible assets |
|
|
9.2 |
|
|
|
2.9 |
|
|
|
1.3 |
|
|
|
|
|
|
|
13.4 |
|
|
|
|
Total capital additions |
|
|
26.4 |
|
|
|
4.9 |
|
|
|
4.7 |
|
|
|
2.1 |
|
|
|
38.1 |
|
|
Continued
on page 87
86
Notes to the Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions |
|
U.S. |
|
|
U.K. |
|
|
Canada |
|
|
Europe/Asia |
|
|
Total |
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Profit Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues |
|
|
1,541.1 |
|
|
|
558.0 |
|
|
|
526.0 |
|
|
|
132.4 |
|
|
|
2,757.5 |
|
Net Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External |
|
|
1,292.1 |
|
|
|
398.7 |
|
|
|
332.4 |
|
|
|
101.3 |
|
|
|
2,124.5 |
|
Inter-segment |
|
|
22.0 |
|
|
|
(50.9 |
) |
|
|
(12.5 |
) |
|
|
41.4 |
|
|
|
|
|
|
|
|
|
|
|
1,314.1 |
|
|
|
347.8 |
|
|
|
319.9 |
|
|
|
142.7 |
|
|
|
2,124.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
|
1,575.6 |
|
|
|
2,628.5 |
|
|
|
1,615.4 |
|
|
|
766.2 |
|
|
|
6,585.7 |
|
Unallocated corporate assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
833.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,419.6 |
|
Capital additions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment |
|
|
23.3 |
|
|
|
6.8 |
|
|
|
1.4 |
|
|
|
1.1 |
|
|
|
32.6 |
|
Intangible assets |
|
|
17.7 |
|
|
|
|
|
|
|
0.9 |
|
|
|
0.4 |
|
|
|
19.0 |
|
|
|
|
Total capital additions |
|
|
41.0 |
|
|
|
6.8 |
|
|
|
2.3 |
|
|
|
1.5 |
|
|
|
51.6 |
|
|
Net
revenues reflect the geographical segments from which services are provided.
Note 5
OTHER REALIZED GAINS AND LOSSES
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions |
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Other realized gains: |
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of listed investments |
|
|
|
|
|
|
1.2 |
|
|
|
5.0 |
|
Gain on sale of unlisted investments |
|
|
18.1 |
|
|
|
4.4 |
|
|
|
12.9 |
|
Share of profits of associated undertakings |
|
|
1.3 |
|
|
|
0.7 |
|
|
|
1.5 |
|
Gains on disposal of other assets |
|
|
|
|
|
|
0.3 |
|
|
|
0.1 |
|
Foreign exchange |
|
|
8.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
27.9 |
|
|
|
6.6 |
|
|
|
19.5 |
|
|
Other realized losses: |
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale of unlisted investments |
|
|
(1.7 |
) |
|
|
(2.0 |
) |
|
|
(8.5 |
) |
Loss on disposal of other assets |
|
|
(4.6 |
) |
|
|
(10.5 |
) |
|
|
(0.3 |
) |
Taiwan Bonds |
|
|
|
|
|
|
(11.3 |
) |
|
|
|
|
Foreign exchange |
|
|
|
|
|
|
(11.5 |
) |
|
|
|
|
|
|
|
|
(6.3 |
) |
|
|
(35.3 |
) |
|
|
(8.8 |
) |
|
Note 6
INTEREST EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions |
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Senior notes |
|
|
60.8 |
|
|
|
62.5 |
|
|
|
63.4 |
|
Credit facility |
|
|
7.9 |
|
|
|
4.5 |
|
|
|
5.7 |
|
Discounting charge |
|
|
8.0 |
|
|
|
5.6 |
|
|
|
|
|
Debt retirement costs |
|
|
|
|
|
|
|
|
|
|
5.1 |
|
Interest costs associated with the U.S. regulatory settlement |
|
|
|
|
|
|
7.2 |
|
|
|
2.4 |
|
Other |
|
|
4.6 |
|
|
|
5.3 |
|
|
|
4.6 |
|
|
|
|
|
81.3 |
|
|
|
85.1 |
|
|
|
81.2 |
|
|
Annual Report 2006 87
Notes to the Financial Statements
Note 7
TAXATION
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions |
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Consolidated income statement |
|
|
|
|
|
|
|
|
|
|
|
|
Current Income Tax |
|
|
|
|
|
|
|
|
|
|
|
|
Corporation tax for the period |
|
|
(294.9 |
) |
|
|
(126.5 |
) |
|
|
(104.0 |
) |
Adjustments in respect of prior periods |
|
|
2.8 |
|
|
|
(2.9 |
) |
|
|
(3.4 |
) |
Deferred Income Tax |
|
|
|
|
|
|
|
|
|
|
|
|
Relating to origination and reversal of temporary differences |
|
|
35.1 |
|
|
|
(17.9 |
) |
|
|
35.4 |
|
Adjustments in respect of prior periods |
|
|
|
|
|
|
0.6 |
|
|
|
(2.7 |
) |
Write down of previously recognized deferred tax assets |
|
|
(6.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
Income tax expense reported in the consolidated income statement |
|
|
(263.8 |
) |
|
|
(146.7 |
) |
|
|
(74.7 |
) |
|
|
|
Total U.K. corporation tax |
|
|
(73.0 |
) |
|
|
(18.0 |
) |
|
|
(2.4 |
) |
Total foreign income tax |
|
|
(190.8 |
) |
|
|
(128.7 |
) |
|
|
(72.3 |
) |
|
|
|
Income tax expense reported in the consolidated income statement |
|
|
(263.8 |
) |
|
|
(146.7 |
) |
|
|
(74.7 |
) |
|
Consolidated statement of changes in equity |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax related to additional tax deduction for share-based payment |
|
|
37.6 |
|
|
|
12.5 |
|
|
|
|
|
Deferred tax related to mark-to-market adjustments on available-for-sale investments |
|
|
3.1 |
|
|
|
(7.5 |
) |
|
|
|
|
Deferred tax related to foreign exchange (gain)/loss |
|
|
7.9 |
|
|
|
|
|
|
|
|
|
Current tax related to foreign exchange (gain)/loss |
|
|
(3.0 |
) |
|
|
3.1 |
|
|
|
|
|
Current tax related to additional tax deduction for share-based payment |
|
|
12.9 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income tax benefit reported in equity |
|
|
58.5 |
|
|
|
8.1 |
|
|
|
|
|
|
A reconciliation between tax expense and the product of accounting profit multiplied by the
blended average statutory income tax rate of the company for the years ended December 31,
2006, 2005 and 2004 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions |
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Accounting profit before tax from continuing operations |
|
|
754.6 |
|
|
|
360.1 |
|
|
|
39.0 |
|
At blended average statutory income tax rate of 33.01%
(2005: 35.12%, 2004: 33.42%) |
|
|
249.0 |
|
|
|
126.5 |
|
|
|
13.0 |
|
Effects of: |
|
|
|
|
|
|
|
|
|
|
|
|
Non-deductible investment write-offs/non-taxable income |
|
|
(4.0 |
) |
|
|
5.6 |
|
|
|
3.2 |
|
Prior year provision to return differences |
|
|
(2.8 |
) |
|
|
2.3 |
|
|
|
6.1 |
|
Other permanent items |
|
|
6.5 |
|
|
|
3.9 |
|
|
|
(5.6 |
) |
Europe and Asia restructuring provisions |
|
|
|
|
|
|
9.8 |
|
|
|
|
|
Europe and Asia operating losses |
|
|
3.1 |
|
|
|
10.7 |
|
|
|
3.5 |
|
Net previously unrecognized losses |
|
|
(2.9 |
) |
|
|
(6.3 |
) |
|
|
|
|
Additional tax loss on retirement division sale |
|
|
|
|
|
|
(4.0 |
) |
|
|
|
|
Net movement in tax reserves |
|
|
1.8 |
|
|
|
(1.8 |
) |
|
|
1.1 |
|
Non-deductible U.S. regulatory settlement penalties |
|
|
|
|
|
|
|
|
|
|
53.4 |
|
Write down of previously recognized deferred tax assets |
|
|
6.8 |
|
|
|
|
|
|
|
|
|
Additional tax on subsidiary dividends |
|
|
6.3 |
|
|
|
|
|
|
|
|
|
|
Income tax expense as reported in the consolidated income statement |
|
|
263.8 |
|
|
|
146.7 |
|
|
|
74.7 |
|
|
88
Notes to the Financial Statements
Our subsidiaries operate in several taxing jurisdictions around the world, each with its own
statutory income tax rate. As a result, the blended average statutory income 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 30.0%, the Canadian statutory tax rate is 36.0% and the U.S. statutory tax rate can
range from 36.0%42.0% depending upon the applicable state tax rate(s).
Deferred income tax at December 31 related to the following:
Deferred Tax Assets
|
|
|
|
|
|
|
|
|
$ millions |
|
2006 |
|
|
2005 |
|
|
Deferred compensation arrangements |
|
|
160.0 |
|
|
|
82.4 |
|
Restructuring accruals |
|
|
19.9 |
|
|
|
24.5 |
|
Tax losses carried forward |
|
|
3.9 |
|
|
|
17.8 |
|
Post-retirement medical, pension and other benefits |
|
|
41.4 |
|
|
|
45.9 |
|
Fixed asset depreciation |
|
|
7.5 |
|
|
|
7.2 |
|
Investment basis differences |
|
|
5.2 |
|
|
|
6.3 |
|
Unrealized foreign exchange |
|
|
13.3 |
|
|
|
|
|
Other |
|
|
12.9 |
|
|
|
13.8 |
|
|
|
|
Ending balance prior to offset |
|
|
264.1 |
|
|
|
197.9 |
|
Offset within same tax jurisdiction |
|
|
(52.0 |
) |
|
|
(57.5 |
) |
|
Net deferred tax assets |
|
|
212.1 |
|
|
|
140.4 |
|
|
Deferred Tax Liabilities
|
|
|
|
|
|
|
|
|
$ millions |
|
2006 |
|
|
2005 |
|
|
Deferred sales commissions |
|
|
(20.2 |
) |
|
|
(28.5 |
) |
Intangible asset amortization |
|
|
(9.5 |
) |
|
|
(10.4 |
) |
Undistributed earnings of subsidiaries |
|
|
(7.0 |
) |
|
|
(3.8 |
) |
Basis differences on available-for-sale assets |
|
|
(3.1 |
) |
|
|
(7.1 |
) |
Revaluation reserve |
|
|
(6.4 |
) |
|
|
(6.4 |
) |
Other |
|
|
(5.8 |
) |
|
|
(1.3 |
) |
|
|
|
Ending balance prior to offset |
|
|
(52.0 |
) |
|
|
(57.5 |
) |
Offset within same tax jurisdiction |
|
|
52.0 |
|
|
|
57.5 |
|
|
Net deferred tax liabilities |
|
|
|
|
|
|
|
|
|
Deferred tax assets net of liabilities |
|
|
212.1 |
|
|
|
140.4 |
|
|
In 2006, movements on net deferred tax of $71.7 million comprise a deferred tax benefit in the
consolidated income statement of $28.3 million less foreign exchange and other reclasses of $5.2
million plus $48.6 million reflected in the statement of changes in equity:
|
|
|
|
|
|
|
|
|
$ millions |
|
2006 |
|
|
2005 |
|
|
Deferred tax related to additional tax deduction for share-based payment |
|
|
37.6 |
|
|
|
12.5 |
|
Deferred tax related to mark-to-market adjustments on available-for-sale investments |
|
|
3.1 |
|
|
|
(7.5 |
) |
Deferred tax related to foreign exchange (gain)/loss |
|
|
7.9 |
|
|
|
|
|
|
|
|
|
48.6 |
|
|
|
5.0 |
|
|
Deferred tax assets and liabilities in the Consolidated Balance Sheet have been offset on a jurisdiction by jurisdiction basis where they relate to income taxes levied by the same taxation authority and there is a legally enforceable right to set off current tax assets against current tax liabilities.
Annual Report 2006 89
Notes to the Financial Statements
At December 31, 2006, the company had tax loss carryforwards accumulating in certain
subsidiaries in the aggregate of $107.1 million (2005: $127.5 million) for which deferred tax has
not been recognized as the losses may not be utilized to offset taxable profits else-where in the
company, and they have arisen in subsidiaries that have not shown a history of taxable profits
and/or the amount of the losses is greater than the expected profit in the near future. The tax
loss carryforwards at December 31, 2006 will expire as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions |
|
20072009 |
|
|
20102012 |
|
|
After 2012 |
|
|
Unlimited |
|
|
|
|
|
4.8 |
|
|
|
4.1 |
|
|
|
|
|
|
|
98.2 |
|
|
Deferred tax assets of $3.9 million (2005: $17.8 million) have been recognized on tax losses
in certain subsidiaries as it is more likely than not that each subsidiary will have taxable
profits in the foreseeable future to enable utilization of the amounts recognized.
Deferred tax liabilities are recognized for taxes that would be payable on the unremitted
earnings of the companys non-U.K. subsidiaries, associates, and joint ventures except where
there is no intention to distribute subsidiary earnings in the foreseeable future or for
associates and joint ventures where profits cannot be distributed without the consent of the
parent company. The temporary difference associated with our investment in Canada for which
deferred tax liabilities have not been recognized is estimated to be $600.2 million (2005:
$500.0 million). If distributed as a dividend, Canadian withholding tax of 5.0% would apply.
For associates and joint ventures, no consent to distribute profits was given as of the
balance sheet date.
Deferred tax liabilities in the amount of $7.0 million (2005: $3.8 million) for additional
U.K. tax have been recognized for unremitted earnings of certain subsidiaries that have
regularly remitted earnings to the Parent and are expected to continue to remit earnings in
the foreseeable future. Dividends from our investment in the U.S. should not give rise to
additional tax as there is no withholding tax between the U.S. and U.K., the underlying U.S.
tax rate is greater than the U.K. tax rate, and we have U.K. tax credits available.
There are no adverse income tax consequences to the company related to the payment of dividends
by the company to its shareholders.
Note 8
DIVIDENDS
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions |
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Declared and paid during the year: |
|
|
|
|
|
|
|
|
|
|
|
|
Final dividend in respect of 2005, 5.5p per share (2004: 5.0p) |
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares |
|
|
78.1 |
|
|
|
72.4 |
|
|
|
96.3 |
|
Exchangeable shares |
|
|
2.2 |
|
|
|
2.6 |
|
|
|
3.5 |
|
|
Final dividend paid |
|
|
80.3 |
|
|
|
75.0 |
|
|
|
99.8 |
|
|
Interim dividend paid in respect of 2006, $0.077 per share (2005: 4.0p) |
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares |
|
|
61.7 |
|
|
|
57.1 |
|
|
|
34.6 |
|
Exchangeable shares |
|
|
1.6 |
|
|
|
2.0 |
|
|
|
1.3 |
|
|
Interim dividend paid |
|
|
63.3 |
|
|
|
59.1 |
|
|
|
35.9 |
|
|
A final dividend in respect of 2006 of $0.104 per share ($85.9 million: $83.8 million for
ordinary shares and $2.1 million for exchangeable shares) has been proposed by the Board and
will be paid, subject to shareholder approval, on May 30, 2007. This dividend is not
recognized as a liability at December 31, 2006.
Up to and including the 2005 final dividend, dividends were declared in sterling. The final
dividend proposed will not equal the final dividend paid due to foreign exchange rate
movement and changes in the number of shares over which the dividend is ultimately paid.
The trustees of the Employee Share Option Trust waived dividends amounting to $3.2 million in
2006 (2005: $3.1 million). The trustees of the Global Stock Plan waived dividends amounting
to $1.0 million in 2006 (2005: $nil); however the company paid an equivalent amount of cash
in lieu of a dividend to certain deferred share-based award recipients per the terms of the
awards.
90
Notes to the Financial Statements
Note 9
EARNINGS PER SHARE
Basic earnings per share is based on the weighted average number of ordinary and
exchangeable shares outstanding during the respective periods, excluding shares purchased by
employee share ownership trusts. Diluted earnings per share takes into account the effect of
the potential issuance of ordinary shares.
The calculation of earnings per share is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(Loss) |
|
|
|
|
|
|
|
|
|
Attributable to |
|
|
|
|
|
|
|
|
|
Equity Holders |
|
|
Number of |
|
|
Per Share |
|
millions, except per share data |
|
of the Parent |
|
|
Shares |
|
|
Amount |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
490.1 |
|
|
|
792.2 |
|
|
$ |
0.62 |
|
Dilutive effect of share-based awards |
|
|
|
|
|
|
20.0 |
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
490.1 |
|
|
|
812.2 |
|
|
$ |
0.60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
212.2 |
|
|
|
794.0 |
|
|
$ |
0.27 |
|
Dilutive effect of share-based awards |
|
|
|
|
|
|
11.1 |
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
212.2 |
|
|
|
805.1 |
|
|
$ |
0.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share |
|
$ |
(36.2 |
) |
|
|
802.2 |
|
|
$ |
(0.05 |
) |
|
Profit before the restructuring charge in 2005 and the U.S. regulatory settlement in 2004 is
a more appropriate basis for the calculation of earnings per share because this represents
a more consistent measure of the year-by-year performance of the business; therefore, the
calculation below is presented on that basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit Before the |
|
|
|
|
|
|
|
|
|
Restructuring |
|
|
Number of |
|
|
Per Share |
|
millions, except per share data |
|
Charge |
|
|
Shares |
|
|
Amount |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
270.5 |
|
|
|
794.0 |
|
|
$ |
0.34 |
|
Dilutive effect of share-based awards |
|
|
|
|
|
|
11.1 |
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
270.5 |
|
|
|
805.1 |
|
|
$ |
0.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit Before the |
|
|
|
|
|
|
|
|
|
U.S. Regulatory |
|
|
Number of |
|
|
Per Share |
|
millions, except per share data |
|
Settlement |
|
|
Shares |
|
|
Amount |
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
282.0 |
|
|
|
802.2 |
|
|
$ |
0.35 |
|
Dilutive effect of share-based awards |
|
|
|
|
|
|
4.5 |
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
282.0 |
|
|
|
806.7 |
|
|
$ |
0.35 |
|
|
Annual Report 2006 91
Notes to the Financial Statements
Profit/(loss) attributable to equity holders of the Parent and diluted earnings per share are
reconciled to profit and earnings per share before the restructuring charge in 2005 and the U.S.
regulatory settlement in 2004 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
Earnings |
|
$ millions, except per share data |
|
Profit/(Loss) |
|
|
per Share |
|
|
2005 |
|
|
|
|
|
|
|
|
Profit attributable to equity holders of the Parent |
|
$ |
212.2 |
|
|
$ |
0.26 |
|
Restructuring charge |
|
|
75.7 |
|
|
|
0.09 |
|
Tax benefit resulting from restructuring charge |
|
|
(17.4 |
) |
|
|
(0.02 |
) |
Other adjustments |
|
|
|
|
|
|
0.01 |
|
|
|
|
Profit before the restructuring charge |
|
$ |
270.5 |
|
|
$ |
0.34 |
|
|
|
|
|
|
|
|
|
|
|
2004 |
|
|
|
|
|
|
|
|
Loss attributable to equity holders of the Parent |
|
$ |
(36.2 |
) |
|
$ |
(0.05 |
) |
U.S. regulatory settlement |
|
|
413.2 |
|
|
|
0.51 |
|
Tax benefit resulting from U.S. regulatory settlement charge |
|
|
(95.0 |
) |
|
|
(0.11 |
) |
|
|
|
Profit before the U.S. regulatory settlement charge |
|
$ |
282.0 |
|
|
$ |
0.35 |
|
|
See the table in Note 24 for a summary of share awards outstanding under the companys share-based
payment programs. These programs could generate potential ordinary shares that would affect the
measurement of basic and diluted earnings per share.
Note 10
GOODWILL
|
|
|
|
|
$ millions |
|
|
|
|
|
January 1, 2006 |
|
|
4,213.6 |
|
Business acquisitions |
|
|
576.1 |
|
Reduction in earn-out provisions |
|
|
(5.6 |
) |
Other adjustments |
|
|
(0.7 |
) |
Foreign exchange |
|
|
223.2 |
|
|
December 31, 2006 |
|
|
5,006.6 |
|
|
|
|
|
|
|
January 1, 2005 |
|
|
4,317.4 |
|
Impairment charge recognized during the year* |
|
|
(16.6 |
) |
Reduction in earn-out provisions |
|
|
(1.1 |
) |
Other adjustments |
|
|
7.4 |
|
Foreign exchange |
|
|
(93.5 |
) |
|
December 31, 2005 |
|
|
4,213.6 |
|
|
|
|
|
|
|
Accumulated impairment charges: |
|
|
|
|
January 1, 2006 and December 31, 2006 |
|
|
(16.6 |
) |
|
|
|
|
* |
|
Included in general and administrative expenses in the 2005 income statement. See Note 12. |
92
Notes to the Financial Statements
Note 11
INTANGIBLE ASSETS
Intangible assets are comprised of purchased software and management contracts acquired
through acquisitions. Amortization of software intangible assets is included within technology
and telecommunications expense in the income statement. Amortization of management contracts
is included within general and administrative costs in the income statement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management |
|
|
|
|
$ millions |
|
Software |
|
|
Contracts |
|
|
Total |
|
|
Cost: |
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2006 |
|
|
208.1 |
|
|
|
91.4 |
|
|
|
299.5 |
|
Foreign exchange |
|
|
6.9 |
|
|
|
0.5 |
|
|
|
7.4 |
|
Business acquisitions |
|
|
|
|
|
|
110.6 |
|
|
|
110.6 |
|
Additions |
|
|
16.1 |
|
|
|
|
|
|
|
16.1 |
|
Disposals |
|
|
(2.3 |
) |
|
|
|
|
|
|
(2.3 |
) |
|
December 31, 2006 |
|
|
228.8 |
|
|
|
202.5 |
|
|
|
431.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2006 |
|
|
(171.2 |
) |
|
|
(29.3 |
) |
|
|
(200.5 |
) |
Foreign exchange |
|
|
(5.3 |
) |
|
|
(0.2 |
) |
|
|
(5.5 |
) |
Provided during the year |
|
|
(20.6 |
) |
|
|
(10.0 |
) |
|
|
(30.6 |
) |
Disposals |
|
|
2.0 |
|
|
|
|
|
|
|
2.0 |
|
|
December 31, 2006 |
|
|
(195.1 |
) |
|
|
(39.5 |
) |
|
|
(234.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006 |
|
|
33.7 |
|
|
|
163.0 |
|
|
|
196.7 |
|
|
Management contracts include $99.7 million of amounts acquired in 2006 related to the PowerShares
acquisition that have indefinite lives and therefore are not subject to amortization.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management |
|
|
|
|
$ millions |
|
Software |
|
|
Contracts |
|
|
Total |
|
|
Cost: |
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2005 |
|
|
224.0 |
|
|
|
92.1 |
|
|
|
316.1 |
|
Foreign exchange |
|
|
(4.7 |
) |
|
|
(0.7 |
) |
|
|
(5.4 |
) |
Additions |
|
|
13.4 |
|
|
|
|
|
|
|
13.4 |
|
Business disposition |
|
|
(16.9 |
) |
|
|
|
|
|
|
(16.9 |
) |
Disposals |
|
|
(7.7 |
) |
|
|
|
|
|
|
(7.7 |
) |
|
December 31, 2005 |
|
|
208.1 |
|
|
|
91.4 |
|
|
|
299.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2005 |
|
|
(166.1 |
) |
|
|
(20.1 |
) |
|
|
(186.2 |
) |
Foreign exchange |
|
|
2.5 |
|
|
|
0.2 |
|
|
|
2.7 |
|
Provided during the year |
|
|
(24.9 |
) |
|
|
(9.4 |
) |
|
|
(34.3 |
) |
Business disposition |
|
|
13.0 |
|
|
|
|
|
|
|
13.0 |
|
Disposals |
|
|
4.3 |
|
|
|
|
|
|
|
4.3 |
|
|
December 31, 2005 |
|
|
(171.2 |
) |
|
|
(29.3 |
) |
|
|
(200.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005 |
|
|
36.9 |
|
|
|
62.1 |
|
|
|
99.0 |
|
|
Annual Report 2006 93
Notes to the Financial Statements
Note 12
IMPAIRMENT TESTING OF GOODWILL AND INDEFINITE-LIVED INTANGIBLE ASSETS
Goodwill and indefinite-lived intangible assets acquired through business combinations are
allocated to the following cash generating units for impairment testing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
Indefinite- |
|
|
|
|
|
|
Indefinite- |
|
|
|
|
|
|
|
Lived |
|
|
|
|
|
|
Lived |
|
|
|
|
|
|
|
Intangible |
|
|
|
|
|
|
Intangible |
|
$ millions |
|
Goodwill |
|
|
Assets |
|
|
Goodwill |
|
|
Assets |
|
|
Cash generating unit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AIM U.S. |
|
|
527.6 |
|
|
|
99.7 |
|
|
|
228.6 |
|
|
|
|
|
AIM Canada |
|
|
1,535.0 |
|
|
|
|
|
|
|
1,519.4 |
|
|
|
|
|
INVESCO U.S. |
|
|
735.5 |
|
|
|
|
|
|
|
454.5 |
|
|
|
|
|
INVESCO U.K. |
|
|
1,573.3 |
|
|
|
|
|
|
|
1,395.2 |
|
|
|
|
|
INVESCO Europe |
|
|
142.5 |
|
|
|
|
|
|
|
128.3 |
|
|
|
|
|
INVESCO Asia |
|
|
279.4 |
|
|
|
|
|
|
|
268.8 |
|
|
|
|
|
Private Wealth Management |
|
|
213.3 |
|
|
|
|
|
|
|
218.8 |
|
|
|
|
|
|
|
|
|
5,006.6 |
|
|
|
99.7 |
|
|
|
4,213.6 |
|
|
|
|
|
|
Acquisitions completed by the company are generally unique to one cash generating unit and have
resulting goodwill or management contract intangibles allocated directly to the cash generating
unit. In certain cases acquisitions have occurred that have involved more than one cash generating
unit. In these cases, goodwill is allocated to the cash generating units by the percentage of
revenue that the unit will obtain compared to the total revenue acquired. By using a percentage of
revenue, goodwill is then matched to the cash generating units that receive the economic benefits
from the acquisition.
The 2006 goodwill and indefinite-lived intangible asset impairment review was based upon fair
value less costs to sell for all cash generating units. In all cases, the fair value less costs to
sell exceeded the net assets of the cash generating units. Our primary method of evaluating fair
value is to compare revenue multiples with other similar businesses based on public company values
or business transactions. A reduction in the revenue would have a significant impact on the
calculated fair values. A 4.0% reduction in the revenue of the AIM Canada cash generating unit
would be sufficient to reduce the fair value to below the net asset value, suggesting a potential
impairment. As a result, a value-in-use calculation was performed for this cash generating unit.
This calculation provided a value-in-use that exceeded the net asset value by approximately $800.0
million, indicating that no impairment existed.
The 2005 goodwill impairment review was based on fair value less costs to sell for all cash
generating units except Private Wealth Management, which was based on value-in-use. The impairment
review methodology employed is presented in Note 1. As a result of the 2005 goodwill impairment
review, the company recognized a non-cash goodwill impairment charge of $16.6 million ($10.4
million after tax, or $0.01 per share) included in general and administrative costs on the income
statement related to the Private Wealth Management cash generating unit. The key assumptions used
to determine the fair value of the Private Wealth Management cash generating unit included: a) cash
flow periods of 20 years; and b) a discount rate of 12.0%, which was based upon the companys
weighted average cost of capital, adjusted for the risks associated with the operations. A variance
in the discount rate could have a significant impact on the amount of the goodwill impairment
charge recorded. For example, a 1.0% increase in the discount rate would have caused an increase in
the goodwill impairment charge of approximately $31.0 million. A 1.0% decrease in the discount rate
would have resulted in no impairment.
94
Notes to the Financial Statements
Note 13
PRINCIPAL SUBSIDIARIES, ASSOCIATED UNDERTAKINGS AND JOINT VENTURES
AMVESCAP PLC is the ultimate parent company of the companys asset management business, the
principal activities of which are asset management and the provision of related financial services.
The Company Directory included elsewhere herein contains a listing of the principal operating
companies. The companys significant subsidiaries, as defined by the Regulation S-X of the U.S.
Securities and Exchange Act of 1934, all of which are wholly-owned subsidiaries, are set forth
below:
|
|
|
|
|
Country of |
Name of Company |
|
Incorporation |
|
A I M Management Group Inc.
|
|
U.S. |
AIM Advisors, Inc.
|
|
U.S. |
INVESCO Institutional (N.A.), Inc.
|
|
U.S. |
AVZ Inc.
|
|
U.S. |
AMVESCAP Group Services, Inc.
|
|
U.S. |
INVESCO North American Holdings, Inc.
|
|
U.S. |
INVESCO U.K. Limited
|
|
England |
INVESCO Fund Managers Limited
|
|
England |
INVESCO Pensions Limited
|
|
England |
AIM Canada Holdings Inc.
|
|
Canada |
AMVESCAP Inc.
|
|
Canada |
AIM Funds Management, Inc.
|
|
Canada |
AVZ Callco Inc.
|
|
Canada |
|
AMVESCAP PLC owns 100% of the voting power of its subsidiary entities, directly or indirectly
through its subsidiaries, with the exception of the following entities, which are consolidated
with resulting minority interests:
|
|
|
|
|
|
|
|
|
|
|
% Voting |
|
|
Country of |
|
Interest |
Name of Company |
|
Incorporation |
|
Owned |
|
INVESCO Real Estate GmbH |
|
Germany |
|
|
75.1 |
% |
INDIA Asset Recovery Management Limited |
|
India |
|
|
80.1 |
% |
|
The company participates in the following joint venture and associated undertaking arrangements :
|
|
|
|
|
|
|
|
|
|
|
% Voting |
|
|
Country of |
|
Interest |
Name of Company |
|
Incorporation |
|
Owned |
|
INVESCO Great Wall Fund Management Company Limited |
|
China |
|
|
49.0 |
% |
TAIYO Fund Management Co. LLC |
|
U.S. |
|
|
40.0 |
% |
Pocztylion ARKA |
|
Poland |
|
|
29.3 |
% |
|
Annual Report 2006 95
Notes to the Financial Statements
Note 14
INVESTMENTS
Non-Current Investments
|
|
|
|
|
|
|
|
|
$ millions |
|
2006 |
|
|
2005 |
|
|
Available-for-sale investments: |
|
|
|
|
|
|
|
|
Partnerships |
|
|
27.1 |
|
|
|
31.3 |
|
Collateralized debt obligations |
|
|
48.9 |
|
|
|
48.5 |
|
Seed money in affiliated funds |
|
|
|
|
|
|
37.5 |
|
Associated entities |
|
|
4.7 |
|
|
|
4.0 |
|
Other |
|
|
4.5 |
|
|
|
4.3 |
|
Fair value through profit and loss investments (FVTPL): |
|
|
|
|
|
|
|
|
Equity investments related to deferred compensation plans * |
|
|
64.8 |
|
|
|
8.8 |
|
Held-to-maturity investments: |
|
|
|
|
|
|
|
|
Treasury and governmental agency securities |
|
|
8.1 |
|
|
|
15.0 |
|
|
|
|
Total non-current investments |
|
|
158.1 |
|
|
|
149.4 |
|
|
|
|
Listed |
|
|
8.1 |
|
|
|
24.3 |
|
Unlisted |
|
|
150.0 |
|
|
|
125.1 |
|
|
|
|
|
158.1 |
|
|
|
149.4 |
|
|
|
|
|
* |
|
Designated as FVTPL investments upon initial recognition. |
As discussed in Note 1, the fair values of collateralized debt obligations are determined
using discounted cash flow analyses. An increase or decrease in the discount rate of 1.0% would
change the valuation of the collateralized debt obligations by $1.2 million (2005: $1.3 million).
Current Investments
|
|
|
|
|
|
|
|
|
$ millions |
|
2006 |
|
|
2005 |
|
|
Available-for-sale investments: |
|
|
|
|
|
|
|
|
Seed money in affiliated funds |
|
|
97.1 |
|
|
|
25.1 |
|
Treasury and governmental agency securities |
|
|
|
|
|
|
1.3 |
|
Time Deposits |
|
|
11.1 |
|
|
|
0.5 |
|
Property held for sale |
|
|
11.9 |
|
|
|
|
|
Other |
|
|
7.8 |
|
|
|
2.4 |
|
Held-to-maturity investments: |
|
|
|
|
|
|
|
|
Treasury and governmental agency securities |
|
|
7.0 |
|
|
|
2.0 |
|
|
|
|
Total current investments |
|
|
134.9 |
|
|
|
31.3 |
|
|
|
|
Listed |
|
|
7.0 |
|
|
|
2.0 |
|
Unlisted |
|
|
127.9 |
|
|
|
29.3 |
|
|
|
|
|
134.9 |
|
|
|
31.3 |
|
|
During 2006 property held for sale of $15.8 million was transferred from land and buildings and
was written down to the recoverable amount, resulting in a loss of $4.6 million.
96
Notes to the Financial Statements
Net gains and losses, including interest income, recognized in the income statement during
the year from investments are as follows:
|
|
|
|
|
|
|
|
|
$ millions |
|
2006 |
|
|
2005 |
|
|
Long-term investments: |
|
|
|
|
|
|
|
|
Available-for-sale investments |
|
|
7.1 |
|
|
|
2.5 |
|
Fair value through profit and loss investments |
|
|
4.4 |
|
|
|
|
|
Held-to-maturity investments |
|
|
0.2 |
|
|
|
0.4 |
|
|
Total long-term investments |
|
|
11.7 |
|
|
|
2.9 |
|
|
Current investments: |
|
|
|
|
|
|
|
|
Available-for-sale investments |
|
|
9.3 |
|
|
|
1.1 |
|
Fair value through profit and loss investments |
|
|
|
|
|
|
|
|
Held-to-maturity investments |
|
|
0.3 |
|
|
|
0.1 |
|
|
Total current investments |
|
|
9.6 |
|
|
|
1.2 |
|
|
Investments classified as available-for-sale and FVTPL are recorded at fair value.
Investments classified as held-to-maturity are recorded at amortized cost. At
December 31, 2006 and 2005, the fair values of investments classified as
held-to-maturity were $15.0 million and $17.0 million, respectively. See the
accounting policy on investments included in Note 1 for discussion of the companys
approach to determining the fair values of its investments. Fair values were
determined using observable market prices on the majority of investments. During
2006, $10.1 million was transferred from the available-for-sale reserve into the
income statement on realization of investment gains.
Note 15
PROPERTY AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology |
|
|
Freehold |
|
|
|
|
|
|
and Other |
|
|
Land and |
|
|
|
|
$ millions |
|
Equipment |
|
|
Buildings |
|
|
Total |
|
|
Cost: |
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2006 |
|
|
494.0 |
|
|
|
88.7 |
|
|
|
582.7 |
|
Foreign exchange |
|
|
31.9 |
|
|
|
9.9 |
|
|
|
41.8 |
|
Acquisitions |
|
|
3.4 |
|
|
|
2.2 |
|
|
|
5.6 |
|
Additions |
|
|
21.3 |
|
|
|
2.7 |
|
|
|
24.0 |
|
Transfer to investments |
|
|
|
|
|
|
(19.8 |
) |
|
|
(19.8 |
) |
Transfer from investments |
|
|
|
|
|
|
2.0 |
|
|
|
2.0 |
|
Disposals |
|
|
(65.3 |
) |
|
|
|
|
|
|
(65.3 |
) |
|
December 31, 2006 |
|
|
485.3 |
|
|
|
85.7 |
|
|
|
571.0 |
|
|
Accumulated depreciation: |
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2006 |
|
|
(395.3 |
) |
|
|
(7.4 |
) |
|
|
(402.7 |
) |
Foreign exchange |
|
|
(31.1 |
) |
|
|
(0.7 |
) |
|
|
(31.8 |
) |
Provided during the year |
|
|
(35.9 |
) |
|
|
(1.1 |
) |
|
|
(37.0 |
) |
Transfer to investments |
|
|
|
|
|
|
4.0 |
|
|
|
4.0 |
|
Disposals |
|
|
62.3 |
|
|
|
|
|
|
|
62.3 |
|
|
December 31, 2006 |
|
|
(400.0 |
) |
|
|
(5.2 |
) |
|
|
(405.2 |
) |
|
Net book value: |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006 |
|
|
85.3 |
|
|
|
80.5 |
|
|
|
165.8 |
|
|
Annual Report 2006 97
Notes to the Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology |
|
|
Freehold |
|
|
|
|
|
|
and Other |
|
|
Land and |
|
|
|
|
$ millions |
|
Equipment |
|
|
Buildings |
|
|
Total |
|
|
Cost: |
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2005 |
|
|
515.7 |
|
|
|
105.4 |
|
|
|
621.1 |
|
Foreign exchange |
|
|
(10.6 |
) |
|
|
(9.3 |
) |
|
|
(19.9 |
) |
Additions |
|
|
24.7 |
|
|
|
|
|
|
|
24.7 |
|
Business disposition |
|
|
(18.8 |
) |
|
|
|
|
|
|
(18.8 |
) |
Disposals |
|
|
(17.0 |
) |
|
|
(7.4 |
) |
|
|
(24.4 |
) |
|
December 31, 2005 |
|
|
494.0 |
|
|
|
88.7 |
|
|
|
582.7 |
|
|
Accumulated depreciation: |
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2005 |
|
|
(387.6 |
) |
|
|
(6.5 |
) |
|
|
(394.1 |
) |
Foreign exchange |
|
|
9.8 |
|
|
|
0.7 |
|
|
|
10.5 |
|
Provided during the year |
|
|
(41.9 |
) |
|
|
(1.6 |
) |
|
|
(43.5 |
) |
Business disposition |
|
|
16.8 |
|
|
|
|
|
|
|
16.8 |
|
Disposals |
|
|
7.6 |
|
|
|
|
|
|
|
7.6 |
|
|
December 31, 2005 |
|
|
(395.3 |
) |
|
|
(7.4 |
) |
|
|
(402.7 |
) |
|
Net book value: |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005 |
|
|
98.7 |
|
|
|
81.3 |
|
|
|
180.0 |
|
|
Note 16
TRADE AND OTHER RECEIVABLES
|
|
|
|
|
|
|
|
|
$ millions |
|
2006 |
|
|
2005 |
|
|
Unsettled fund receivables |
|
|
561.6 |
|
|
|
468.1 |
|
Trade receivables |
|
|
245.4 |
|
|
|
196.7 |
|
Prepayments |
|
|
51.1 |
|
|
|
57.5 |
|
Accrued income |
|
|
73.1 |
|
|
|
38.7 |
|
Customer and counterparty receivables |
|
|
1.1 |
|
|
|
1.4 |
|
Other receivables |
|
|
65.1 |
|
|
|
42.9 |
|
|
|
|
|
997.4 |
|
|
|
805.3 |
|
|
Note 17
ASSETS HELD FOR POLICYHOLDERS AND POLICYHOLDER LIABILITIES
One of the companys subsidiaries, INVESCO Pensions Limited, is an insurance company which was
established to facilitate retirement savings plans in the U.K. The entity holds assets which are
managed for its clients on its balance sheet with an offsetting liability. Both the asset and the
liability are designated as Fair Value through Profit and Loss financial instruments. At December
31, 2006, the assets held for policyholders and the linked policyholder payables were $1,574.9
million (2005: $1,170.8 million). Changes in the fair values of these assets and liabilities are
recorded in the income statement, where they offset, because the value of the policy-holder
payables is linked to the value of the assets held for policyholders.
98
Notes to the Financial Statements
Note
18
TRADE AND OTHER PAYABLES
|
|
|
|
|
|
|
|
|
$ millions |
|
2006 |
|
|
2005 |
|
|
Unsettled fund payables |
|
|
533.0 |
|
|
|
440.9 |
|
Accruals and other liabilities |
|
|
312.7 |
|
|
|
289.0 |
|
Customer and counterparty payables |
|
|
0.4 |
|
|
|
234.5 |
|
Compensation and benefits |
|
|
457.6 |
|
|
|
260.7 |
|
Trade
Payables |
|
|
80.6 |
|
|
|
75.4 |
|
|
|
|
|
1,384.3 |
|
|
|
1,300.5 |
|
|
Included in compensation and benefits are $67.2 million (2005: $56.5 million) in
financial liabilities designated as FVTPL.
Note
19
LONG-TERM DEBT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
$ millions |
|
Book Value |
|
|
Fair Value |
|
|
Book Value |
|
|
Fair Value |
|
|
Senior notes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US$10 million due December 15, 2006 at 6.875% |
|
|
|
|
|
|
|
|
|
|
10.0 |
|
|
|
10.2 |
|
US$300 million due January 15, 2007 at 5.9% |
|
|
300.0 |
|
|
|
299.9 |
|
|
|
299.4 |
|
|
|
302.0 |
|
US$300 million due December 15, 2009 at 4.5% |
|
|
298.1 |
|
|
|
292.2 |
|
|
|
297.9 |
|
|
|
291.9 |
|
US$350 million due February 27, 2013 at 5.375% |
|
|
347.0 |
|
|
|
346.0 |
|
|
|
346.7 |
|
|
|
345.6 |
|
US$200 million due December 15, 2014 at 5.375% |
|
|
198.6 |
|
|
|
196.4 |
|
|
|
198.2 |
|
|
|
196.2 |
|
US$900 million credit facility expiring March 31, 2010 |
|
|
129.0 |
|
|
|
129.0 |
|
|
|
70.0 |
|
|
|
70.0 |
|
| | |
|
Total long-term debt |
|
|
1,272.7 |
|
|
|
1,263.5 |
|
|
|
1,222.2 |
|
|
|
1,215.9 |
|
Less: current maturities of long-term debt |
|
|
(300.0 |
) |
|
|
(299.9 |
) |
|
|
(10.0 |
) |
|
|
(10.2 |
) |
|
Non-current maturities of long-term debt |
|
|
972.7 |
|
|
|
963.6 |
|
|
|
1,212.2 |
|
|
|
1,205.7 |
|
|
On January 15, 2007, $300.0 million 5.9% senior notes matured and were repaid.
The credit facility provides for borrowings of various maturities and contains certain conditions.
Financial covenants under the credit agreement include the quarterly maintenance of a debt/EBITDA
ratio, as defined in the credit facility, of not greater than 3.25:1.00 and a coverage ratio of not
less than 4.00:1.00 (EBITDA, as defined in the credit facility/interest payable for the four
consecutive fiscal quarters ended before the date of determination). Interest is payable on the
credit facility based upon LIBOR, Prime, Federal Funds or other bank-provided rates in existence at
the time of each borrowing.
Because an active market does not exist for the companys debt in which to obtain current market
price information, fair value amounts disclosed in the table above were derived from estimates and
analysis performed by the companys external financing providers. Such analysis included
comparison of the terms of the companys debt with other actively traded debt of other companies.
Analysis of Borrowings:
|
|
|
|
|
|
|
|
|
$ millions |
|
2006 |
|
|
2005 |
|
|
Less than one year |
|
|
300.0 |
|
|
|
10.0 |
|
Between one and three years |
|
|
298.1 |
|
|
|
299.4 |
|
Between three and five years |
|
|
129.0 |
|
|
|
367.9 |
|
Thereafter |
|
|
545.6 |
|
|
|
544.9 |
|
|
Total long-term debt |
|
|
1,272.7 |
|
|
|
1,222.2 |
|
|
Annual Report 2006 99
Notes to the Financial Statements
Note 20
PROVISIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined |
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit |
|
|
Lease and |
|
|
|
|
$ millions |
|
Acquisition |
|
|
Obligation |
|
|
Other |
|
|
Total |
|
|
January 1, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
17.4 |
|
|
|
23.4 |
|
|
|
11.2 |
|
|
|
52.0 |
|
Non-current |
|
|
31.8 |
|
|
|
105.2 |
|
|
|
45.5 |
|
|
|
182.5 |
|
|
|
|
Total |
|
|
49.2 |
|
|
|
128.6 |
|
|
|
56.7 |
|
|
|
234.5 |
|
Cash paid |
|
|
(5.0 |
) |
|
|
(27.7 |
) |
|
|
(12.8 |
) |
|
|
(45.5 |
) |
Shares issued |
|
|
(0.8 |
) |
|
|
|
|
|
|
|
|
|
|
(0.8 |
) |
Reduction in earn-out provisions |
|
|
(5.6 |
) |
|
|
|
|
|
|
|
|
|
|
(5.6 |
) |
Discounting charge |
|
|
4.0 |
|
|
|
|
|
|
|
4.0 |
|
|
|
8.0 |
|
Provisions released |
|
|
(1.0 |
) |
|
|
(0.2 |
) |
|
|
(2.8 |
) |
|
|
(4.0 |
) |
Provisions established |
|
|
482.7 |
|
|
|
3.4 |
|
|
|
6.6 |
|
|
|
492.7 |
|
Other adjustments |
|
|
(0.4 |
) |
|
|
|
|
|
|
|
|
|
|
(0.4 |
) |
Foreign
exchange |
|
|
0.7 |
|
|
|
6.8 |
|
|
|
3.2 |
|
|
|
10.7 |
|
|
December 31, 2006 |
|
|
523.8 |
|
|
|
110.9 |
|
|
|
54.9 |
|
|
|
689.6 |
|
|
Current |
|
|
215.0 |
|
|
|
2.1 |
|
|
|
10.7 |
|
|
|
227.8 |
|
Non-Current |
|
|
308.8 |
|
|
|
108.8 |
|
|
|
44.2 |
|
|
|
461.8 |
|
|
|
|
Total |
|
|
523.8 |
|
|
|
110.9 |
|
|
|
54.9 |
|
|
|
689.6 |
|
|
Expected timing of payments for provisions is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than |
|
|
|
|
|
|
|
|
|
|
$ millions |
|
Total |
|
|
1 Year |
|
|
1-3 Years |
|
|
3-5 Years |
|
|
Thereafter |
|
|
Acquisition provisions |
|
|
523.8 |
|
|
|
215.0 |
|
|
|
71.1 |
|
|
|
234.7 |
|
|
|
3.0 |
|
Defined benefit obligation |
|
|
110.9 |
|
|
|
2.1 |
|
|
|
3.2 |
|
|
|
3.2 |
|
|
|
102.4 |
|
Lease and other |
|
|
54.9 |
|
|
|
10.7 |
|
|
|
11.6 |
|
|
|
7.2 |
|
|
|
25.4 |
|
|
Total |
|
|
689.6 |
|
|
|
227.8 |
|
|
|
85.9 |
|
|
|
245.1 |
|
|
|
130.8 |
|
|
Acquisition provisions include the following:
|
|
$293.8 million earn-out provision relating to the PowerShares acquisition. A contingent
payment of $129.6 million is included in current provisions that will fall due when aggregate management fees total $50.0 million or more in
any consecutive 12 month period
following the date of acquisition. Additional contingent payments up to a maximum of $500.0
million fall due 5 years after the date
of acquisition. The maximum payment would require a compound annual growth rate in management fees
of 100%. A non-current
provision of $164.2 million is recorded at December 31, 2006, based on the assumption of net new
assets under management of
$10.0 billion per year and a discount rate of 5.37%. At the companys option, up to 35% of these
contingent payments are payable
in equity. |
|
|
|
$192.5 million earn-out provision relating to the WL Ross acquisition. Contingent payments of up to $55.0 million fall due each
year for the five years following the date of acquisition based on the size and number of future
fund launches. The maximum contingent payments of $275.0 million would require annual fund launches to total $4.0 billion.
Current provisions include $50.9 million
at December 31, 2006. Non-current provisions include $141.6 million at December 31, 2006, based on
future-year fund launch
projections and a discount rate of 5.37%. |
100
Notes to the Financial Statements
|
|
$27.9 million earn-out provision established for the acquisition of Stein Roe Asset
Management LLC. The third anniversary earn-out
consideration will fall due during 2007 and will be satisfied by the issuance of shares and the
payment of cash. The full amount is
included in current provisions. |
|
|
|
$6.6 million deferred acquisition provision, to be paid in 2007, relates to the acquisition of the real estate asset management business of Hypo und Vereinsbank in 2003. |
The company operates defined benefit schemes for qualifying employees of its subsidiaries in the
U.K., Ireland, Germany, Taiwan and the U.S. The company also operates a post-retirement medical
plan in the U.S. See Note 26 for additional details.
Lease provisions of $51.7 million at December 31, 2006 consist of an estimate of the costs
associated with onerous leases resulting from excess office space in the U.S. and the U.K. The
provisions reflect calculations of the lease payments in excess of the expected sublease proceeds
over the remaining lives of the leases. Other provisions of $3.2 million include amounts
established to meet various client claims.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined |
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit |
|
|
Lease and |
|
|
|
|
$ millions |
|
Acquisition |
|
|
Obligation |
|
|
Other |
|
|
Total |
|
|
January 1 , 2005 |
|
|
61.4 |
|
|
|
117.2 |
|
|
|
60.9 |
|
|
|
239.5 |
|
Cash paid |
|
|
(7.6 |
) |
|
|
(0.3 |
) |
|
|
(11.4 |
) |
|
|
(19.3 |
) |
Reduction in earn-out provisions |
|
|
(3.1 |
) |
|
|
|
|
|
|
|
|
|
|
(3.1 |
) |
German bank provision |
|
|
|
|
|
|
11.1 |
|
|
|
|
|
|
|
11.1 |
|
Discounting charge |
|
|
|
|
|
|
|
|
|
|
1.7 |
|
|
|
1.7 |
|
Provisions released |
|
|
|
|
|
|
|
|
|
|
(2.1 |
) |
|
|
(2.1 |
) |
Provisions established |
|
|
|
|
|
|
8.5 |
|
|
|
10.6 |
|
|
|
19.1 |
|
Other adjustments |
|
|
|
|
|
|
(0.9 |
) |
|
|
(1.2 |
) |
|
|
(2.1 |
) |
Foreign exchange |
|
|
(1.5 |
) |
|
|
(7.0 |
) |
|
|
(1.8 |
) |
|
|
(10.3 |
) |
|
December 31, 2005 |
|
|
49.2 |
|
|
|
128.6 |
|
|
|
56.7 |
|
|
|
234.5 |
|
|
Note
21
ANALYSIS OF CASH, CASH EQUIVALENTS AND NET DEBT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes and |
|
|
|
|
$ millions |
|
January 1 |
|
|
Cash Flow |
|
|
Translation |
|
|
December 31 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash |
|
|
715.7 |
|
|
|
38.5 |
|
|
|
35.4 |
|
|
|
789.6 |
|
Less: cash equivalents |
|
|
(264.9 |
) |
|
|
(175.5 |
) |
|
|
(21.3 |
) |
|
|
(461.7 |
) |
|
|
|
|
|
|
450.8 |
|
|
|
(137.0 |
) |
|
|
14.1 |
|
|
|
327.9 |
|
Client cash * |
|
|
(227.1 |
) |
|
|
224.5 |
|
|
|
(0.3 |
) |
|
|
(2.9 |
) |
|
|
|
|
|
|
223.7 |
|
|
|
87.5 |
|
|
|
13.8 |
|
|
|
325.0 |
|
Cash equivalents |
|
|
264.9 |
|
|
|
175.5 |
|
|
|
21.3 |
|
|
|
461.7 |
|
Debt due within one year |
|
|
(10.0 |
) |
|
|
10.0 |
|
|
|
(300.0 |
) |
|
|
(300.0 |
) |
Debt due after more than one year |
|
|
(1,212.2 |
) |
|
|
(59.0 |
) |
|
|
298.5 |
|
|
|
(972.7 |
) |
Finance leases |
|
|
(0.1 |
) |
|
|
|
|
|
|
(0.4 |
) |
|
|
(0.5 |
) |
|
Net Debt |
|
|
(733.7 |
) |
|
|
214.0 |
|
|
|
33.2 |
|
|
|
(486.5 |
) |
|
Continued on page 102
Annual Report 2006 101
Notes to the Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes and |
|
|
|
|
$ millions |
|
January 1 |
|
|
Cash Flow |
|
|
Translation |
|
|
December 31 |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash |
|
|
546.9 |
|
|
|
174.1 |
|
|
|
(5.3 |
) |
|
|
715.7 |
|
Less: cash equivalents |
|
|
(151.6 |
) |
|
|
(114.0 |
) |
|
|
0.7 |
|
|
|
(264.9 |
) |
|
|
|
|
|
|
395.3 |
|
|
|
60.1 |
|
|
|
(4.6 |
) |
|
|
450.8 |
|
Client cash* |
|
|
(290.3 |
) |
|
|
62.7 |
|
|
|
0.5 |
|
|
|
(227.1 |
) |
|
|
|
|
|
|
105.0 |
|
|
|
122.8 |
|
|
|
(4.1 |
) |
|
|
223.7 |
|
Cash equivalents |
|
|
151.6 |
|
|
|
114.0 |
|
|
|
(0.7 |
) |
|
|
264.9 |
|
Debt due within one year |
|
|
(79.5 |
) |
|
|
79.5 |
|
|
|
(10.0 |
) |
|
|
(10.0 |
) |
Debt due after more than one year |
|
|
(1,302.1 |
) |
|
|
81.0 |
|
|
|
8.9 |
|
|
|
(1,212.2 |
) |
Finance leases |
|
|
(0.2 |
) |
|
|
|
|
|
|
0.1 |
|
|
|
(0.1 |
) |
|
Net Debt |
|
|
(1,125.2 |
) |
|
|
397.3 |
|
|
|
(5.8 |
) |
|
|
(733.7 |
) |
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash |
|
|
563.3 |
|
|
|
(28.3 |
) |
|
|
11.9 |
|
|
|
546.9 |
|
Less: cash equivalents |
|
|
(153.5 |
) |
|
|
10.7 |
|
|
|
(8.8 |
) |
|
|
(151.6 |
) |
Bank overdraft |
|
|
(0.4 |
) |
|
|
0.5 |
|
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
409.4 |
|
|
|
(17.1 |
) |
|
|
3.0 |
|
|
|
395.3 |
|
Client cash* |
|
|
(291.7 |
) |
|
|
2.1 |
|
|
|
(0.7 |
) |
|
|
(290.3 |
) |
|
|
|
|
|
|
117.7 |
|
|
|
(15.0 |
) |
|
|
2.3 |
|
|
|
105.0 |
|
Cash equivalents |
|
|
153.5 |
|
|
|
(10.7 |
) |
|
|
8.8 |
|
|
|
151.6 |
|
Debt due within one year |
|
|
|
|
|
|
320.5 |
|
|
|
(400.0 |
) |
|
|
(79.5 |
) |
Debt due after more than one year |
|
|
(1,283.6 |
) |
|
|
(417.1 |
) |
|
|
398.6 |
|
|
|
(1,302.1 |
) |
Finance leases |
|
|
|
|
|
|
|
|
|
|
(0.2 |
) |
|
|
(0.2 |
) |
|
Net Debt |
|
|
(1,012.4 |
) |
|
|
(122.3 |
) |
|
|
9.5 |
|
|
|
(1,125.2 |
) |
|
|
|
|
* |
|
Client cash includes deposits in subsidiary trust institutions as well as cash held by
certain distributor subsidiaries to facilitate customer transactions in the companys
affiliated funds. In addition, certain cash balances may not be readily accessible to the
Parent due to certain capital adequacy requirements. |
Included in cash and cash equivalents at December 31, 2006 is $0.6 million (2005: $0.5
million) that is not available for general use by the company due to regulatory net capital
restrictions required in certain subsidiary locations.
102
Notes to the Financial Statements
Note 22
CALLED UP SHARE CAPITAL AND EXCHANGEABLE SHARES
Ordinary Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
|
|
|
|
Book |
|
|
|
|
|
|
Book |
|
|
|
|
|
|
Book |
|
millions |
|
Number |
|
|
Value |
|
|
Number |
|
|
Value |
|
|
Number |
|
|
Value |
|
|
Authorized ordinary shares of 10 cents each (2005: 10 cents
each) |
|
|
1,050.0 |
|
|
$ |
105.0 |
|
|
|
1,050.0 |
|
|
$ |
105.0 |
|
|
|
1,050.0 |
|
|
$ |
503.8 |
|
Allotted, called up and fully paid ordinary shares of 10
cents each (2005: 10 cents each) |
|
|
831.9 |
|
|
$ |
83.2 |
|
|
|
818.1 |
|
|
$ |
81.8 |
|
|
|
810.7 |
|
|
$ |
389.0 |
|
Authorized and issued deferred sterling shares of £1
each |
|
|
0.1 |
|
|
$ |
0.1 |
|
|
|
0.1 |
|
|
$ |
0.1 |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Effective December 8, 2005, the ordinary share capital of the Parent was redenominated from 25
pence per share to 10 cents per share implemented by way of a reduction of capital pursuant to
Section 135 of the Companies Act 1985. Following Court approval, the sterling share capital was
reduced to £nil and the related share premium account was cancelled. The credits arising on the
Parents books were then transferred to a special reserve, converted to U.S. dollars using the
foreign exchange rate on the effective date, and applied by the creation of new 10 cent shares. The
10 cent shares were then immediately issued to shareholders in the proportion of one new 10 cent
share for every one 25 pence share previously held.
Immediately prior to the reduction of share capital becoming effective, the Parent increased its
share capital by £50,000 by the creation of 50,000 deferred sterling shares to ensure that the
share capital of the Parent will continue to satisfy the requirements of Section 118 of the
Companies Act 1985 that any public company maintain a minimum share capital of £50,000. The
deferred sterling shares have no rights to participate in the profits of the Parent, no rights to
attend or to vote at any general meetings and will have no rights to any assets of the Parent upon
a winding up.
As of December 31, 2006 and 2005, unissued ordinary shares were reserved for the following
purposes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
millions |
|
Shares |
|
|
Shares |
|
|
Prices |
|
|
Last Expiry Date |
|
|
Options arising from acquisitions |
|
|
0.9 |
|
|
|
1.0 |
|
|
|
66p-1366p |
|
|
Feb 2010 |
Conversion of exchangeable shares |
|
|
19.8 |
|
|
|
22.6 |
|
|
|
|
|
|
Dec 2009 |
Subscription agreement (options) with the
Employee Share Option Trust |
|
|
33.6 |
|
|
|
46.4 |
|
|
|
25p-1680p |
|
|
Apr 2013 |
Options
granted under the AMVESCAP 2000
Share Option Plan |
|
|
45.4 |
|
|
|
81.7 |
|
|
|
319.25p-1440p |
|
|
Dec 2015 |
Options granted under Sharesave plans |
|
|
1.8 |
|
|
|
3.6 |
|
|
|
268p-805p |
|
|
May 2010 |
|
Exchangeable Shares
The exchangeable shares issued by a subsidiary of the Parent are exchangeable into ordinary
shares of the Parent on a one-for-one basis at any time at the request of the holder. They have, as
nearly as practicable, the economic equivalence of the Parents ordinary shares, including the same
voting and dividend rights as the ordinary shares. The Parent can redeem all outstanding
exchangeable shares for ordinary shares after December 31, 2009, or earlier if the total number of
exchangeable shares falls below 5.0 million.
Annual Report 2006 103
Notes to the Financial Statements
The exchangeable shares are included as part of share capital in the consolidated balance sheet
to present a complete view of the companys capital structure, as they are economically equivalent
to, and will become, ordinary shares.
Movements in ordinary and exchangeable shares comprise:
|
|
|
|
|
|
|
|
|
|
|
Ordinary |
|
|
Exchangeable |
|
millions |
|
Shares |
|
|
Shares |
|
|
January 1, 2005 |
|
|
810.7 |
|
|
|
28.1 |
|
Exercises of share options |
|
|
1.4 |
|
|
|
|
|
Acquisitions and acquisition earn-outs |
|
|
0.5 |
|
|
|
|
|
Converted from exchangeable shares into ordinary shares |
|
|
5.5 |
|
|
|
(5.5 |
) |
|
December 31, 2005 |
|
|
818.1 |
|
|
|
22.6 |
|
|
Exercises of share options |
|
|
10.5 |
|
|
|
|
|
Acquisitions and acquisition earn-outs |
|
|
0.5 |
|
|
|
|
|
Converted from exchangeable shares into ordinary shares |
|
|
2.8 |
|
|
|
(2.8 |
) |
|
December 31, 2006 |
|
|
831.9 |
|
|
|
19.8 |
|
|
Shares Held by Employee Trusts
Shares held by employee trusts represent the holdings of the ordinary shares of AMVESCAP PLC by
its employee share ownership trusts.
Movements in shares held by employee trusts comprise:
|
|
|
|
|
millions |
|
Number |
|
|
January 1, 2005 |
|
|
50.7 |
|
|
Purchases of ordinary shares |
|
|
|
|
Distribution of ordinary shares |
|
|
(1.1 |
) |
|
December 31, 2005 |
|
|
49.6 |
|
|
Purchases of ordinary shares |
|
|
19.2 |
|
Distribution of ordinary shares |
|
|
(2.8 |
) |
|
December 31, 2006 |
|
|
66.0 |
|
|
The market price of ordinary shares at the end of 2006 was 596 pence. The total market value of
shares held by employee trusts was $771.4 million on December 31, 2006 (2005: $381.1 million).
104
Notes to the Financial Statements
Note 23
OTHER RESERVES
Movements in other reserves of the company comprise:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemp- |
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
Available- |
|
|
|
|
|
|
Tax |
|
|
Warrant |
|
|
tion |
|
|
Currency |
|
|
Merger |
|
|
and Other |
|
|
Special |
|
|
for-Sale |
|
|
Total Other |
|
$ millions |
|
Reserve |
|
|
Reserve |
|
|
Reserve |
|
|
Reserve |
|
|
Reserve |
|
|
Reserves |
|
|
Reserve |
|
|
Reserve |
|
|
Reserves |
|
|
January 1, 2004 |
|
|
|
|
|
|
6.0 |
|
|
|
7.0 |
|
|
|
|
|
|
|
2,849.8 |
|
|
|
(1,897.2 |
) |
|
|
|
|
|
|
|
|
|
|
965.6 |
|
Currency translation
differences resulting
from change in
presentation currency |
|
|
|
|
|
|
0.5 |
|
|
|
0.6 |
|
|
|
|
|
|
|
245.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
246.9 |
|
Currency translation
differences on
investments in overseas
subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(205.4 |
) |
|
|
|
|
|
|
46.8 |
|
|
|
|
|
|
|
|
|
|
|
(158.6 |
) |
Exercise of options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of subsidiary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44.6 |
|
|
December 31, 2004 |
|
|
|
|
|
|
6.5 |
|
|
|
7.6 |
|
|
|
(205.4 |
) |
|
|
3,140.2 |
|
|
|
(1,850.4 |
) |
|
|
|
|
|
|
|
|
|
|
1,098.5 |
|
|
Adoption of IAS 32/39 on
January 1, 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29.1 |
|
|
|
29.1 |
|
Currency translation
differences resulting
from change in
presentation currency |
|
|
|
|
|
|
(0.6 |
) |
|
|
(0.7 |
) |
|
|
|
|
|
|
(303.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(304.4 |
) |
Currency translation
differences on
investments in overseas
subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
494.6 |
|
|
|
|
|
|
|
(42.6 |
) |
|
|
|
|
|
|
(1.5 |
) |
|
|
450.5 |
|
Exercise of options |
|
|
|
|
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.1 |
) |
Net movement on
available-for-sale
reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.4 |
|
|
|
5.4 |
|
Tax taken to/recycled
from equity |
|
|
8.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.1 |
|
Redenomination of share
capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,502.1 |
|
|
|
|
|
|
|
1,502.1 |
|
|
December 31, 2005 |
|
|
8.1 |
|
|
|
5.8 |
|
|
|
6.9 |
|
|
|
289.2 |
|
|
|
2,837.1 |
|
|
|
(1,893.0 |
) |
|
|
1,502.1 |
|
|
|
33.0 |
|
|
|
2,789.2 |
|
|
Currency translation
differences on
investments in overseas
subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
267.9 |
|
|
|
|
|
|
|
43.7 |
|
|
|
|
|
|
|
|
|
|
|
311.6 |
|
Net movement on
available-for-sale
reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8.1 |
) |
|
|
(8.1 |
) |
Tax taken to/recycled
from equity |
|
|
58.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58.5 |
|
|
December 31, 2006 |
|
|
66.6 |
|
|
|
5.8 |
|
|
|
6.9 |
|
|
|
557.1 |
|
|
|
2,837.1 |
|
|
|
(1,849.3 |
) |
|
|
1,502.1 |
|
|
|
24.9 |
|
|
|
3,151.2 |
|
|
Annual Report 2006 105
Notes to the Financial Statements
Nature and Purpose of Reserves
Tax
Reserve. The tax reserve relates to the future tax benefits associated with share-based
payments, net of future tax liabilities
related to available-for-sale investment revaluation and current tax
benefits for realized foreign
exchange losses.
Warrant Reserve. The warrant reserve was created in 1997 in connection with the merger with A I M
Management Group Inc.
Capital Redemption Reserve. The capital redemption reserve was created upon the purchase and
cancellation of ordinary and special deferred shares prior to 2003.
Currency Reserve. The foreign currency translation reserve is used to record exchange
differences arising from the translation of foreign currency subsidiaries upon consolidation
into the company.
Merger Reserve. The merger reserve was created pursuant to Section 133 of the Companies Act
1985 for the excess value over par value of shares issued as consideration for acquisitions of
subsidiaries.
Goodwill and Other Reserves. The goodwill reserve contains goodwill that was created in
acquisitions prior to 1998.
Special Reserve. The special reserve was created in December 2005 pursuant to the reduction in
share capital of the Parent prior to the redenomination of share capital into U.S. dollars.
Revaluation Reserve. The revaluation reserve records the fair value changes on available-for-sale
investments.
Note 24
SHARE-BASED PAYMENT
The company recognized total expenses of $140.6 million, $52.6 million and $24.0 million
related to equity-settled share-based payment transactions in 2006, 2005 and 2004 respectively.
The table below is a summary, as of December 31, 2006, of equity-settled share-based payment
awards outstanding under the companys non-retirement share-based payment programs. Details
relating to each program are included in the Remuneration Report within the Governance section
of this annual report. The companys ordinary shares are listed on the London Stock Exchange
and trade in sterling; therefore all references to share prices, exercise prices or weighted
average prices of awards are in pence per share.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully Vested at |
|
|
|
|
|
|
|
|
|
|
December 31 , |
|
|
Vesting During the Years Ended December 31, |
|
millions of shares |
|
Total |
|
|
2006 |
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
Share Incentive Awards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time-vested, by Award Year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002 |
|
|
14.8 |
|
|
|
3.0 |
|
|
|
4.6 |
|
|
|
3.6 |
|
|
|
3.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 |
|
|
12.4 |
|
|
|
0.2 |
|
|
|
3.0 |
|
|
|
3.1 |
|
|
|
3.6 |
|
|
|
1.3 |
|
|
|
0.9 |
|
|
|
0.3 |
|
2005 |
|
|
4.8 |
|
|
|
0.7 |
|
|
|
0.7 |
|
|
|
2.7 |
|
|
|
0.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
3.3 |
|
|
|
|
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
1.7 |
|
|
|
0.7 |
|
|
|
0.7 |
|
|
|
|
|
|
Subtotal time-vested |
|
|
35.3 |
|
|
|
3.9 |
|
|
|
8.4 |
|
|
|
9.5 |
|
|
|
9.6 |
|
|
|
2.0 |
|
|
|
1.6 |
|
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-vested, by Award Year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
4.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
4.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.2 |
|
|
|
2.1 |
|
|
|
2.1 |
|
|
|
|
|
|
Subtotal performance-vested |
|
|
9.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.9 |
|
|
|
2.1 |
|
|
|
2.1 |
|
|
|
|
|
|
Share Incentive Awards |
|
|
44.4 |
|
|
|
3.9 |
|
|
|
8.4 |
|
|
|
9.5 |
|
|
|
14.5 |
|
|
|
4.1 |
|
|
|
3.7 |
|
|
|
0.3 |
|
|
Continued on page 107
106
Notes to the Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully Vested at |
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
Vesting During the Years Ended December 31, |
|
millions of shares |
|
Total |
|
|
2006 |
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
Share Option Awards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time vested: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25p 200p |
|
|
2.0 |
|
|
|
|
|
|
|
0.6 |
|
|
|
0.7 |
|
|
|
0.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
201p 400p |
|
|
0.4 |
|
|
|
0.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401p 500p |
|
|
11.3 |
|
|
|
11.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
501p 600p |
|
|
4.2 |
|
|
|
4.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
601p 700p |
|
|
9.0 |
|
|
|
9.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
701p 800p |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
801p 1000p |
|
|
11.9 |
|
|
|
11.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1001p 1200p |
|
|
10.9 |
|
|
|
10.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1201p 1700p |
|
|
1.0 |
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal time-vested |
|
|
50.8 |
|
|
|
48.8 |
|
|
|
0.6 |
|
|
|
0.7 |
|
|
|
0.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-vested: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
301p 400p |
|
|
21.7 |
|
|
|
|
|
|
|
9.7 |
|
|
|
11.8 |
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
401p 500p |
|
|
8.5 |
|
|
|
|
|
|
|
2.7 |
|
|
|
0.2 |
|
|
|
5.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal performance-vested |
|
|
30.2 |
|
|
|
|
|
|
|
12.4 |
|
|
|
12.0 |
|
|
|
5.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Share Option Awards |
|
|
81.0 |
|
|
|
48.8 |
|
|
|
13.0 |
|
|
|
12.7 |
|
|
|
6.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sharesave Plan Shares |
|
|
1.8 |
|
|
|
|
|
|
|
1.0 |
|
|
|
0.7 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Incentive Awards
Share
incentive awards are broadly classified into two categories: time-vested and
performance-vested share awards. All equity awards are granted under the companys Global
Stock Plan. Time-vested awards vest ratably over or cliff-vest at the end of a period of
continued employee service. Performance-vested awards cliff-vest at
the end of a defined
vesting period of continued employee service upon the companys attainment of certain
performance criteria, generally the attainment of cumulative EPS growth targets at the end of
the vesting period reflecting a compound annual growth rate of between 10.0% and 15.0% per
annum during a three-year period. Time-vested and performance-vested share incentive awards
are granted in the form of restricted shares or deferred share awards. Dividends accrued
directly to the employee holder of restricted shares, and cash payments in lieu of dividends
are made to employee holders of certain deferred share awards. There is therefore no discount
to the fair value of these share incentive awards at their grant date. Pursuant to these
plans, the company granted 7.7 million awards in 2006, at a weighted average share price of
535p.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
Time- |
|
|
Performance- |
|
|
Time- |
|
|
Performance- |
|
|
Time- |
|
|
Performance- |
|
millions of shares |
|
Vested |
|
|
Vested |
|
|
Vested |
|
|
Vested |
|
|
Vested |
|
|
Vested |
|
|
Outstanding at the beginning of period |
|
|
33.3 |
|
|
|
5.0 |
|
|
|
31.7 |
|
|
|
|
|
|
|
22.0 |
|
|
|
|
|
Granted during the period |
|
|
3.3 |
|
|
|
4.4 |
|
|
|
5.0 |
|
|
|
5.0 |
|
|
|
13.2 |
|
|
|
|
|
Forfeited during the period |
|
|
(1.3 |
) |
|
|
(0.3 |
) |
|
|
(3.4 |
) |
|
|
|
|
|
|
(3.5 |
) |
|
|
|
|
Vested and distributed during the period |
|
|
(3.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at the end of the period |
|
|
31.4 |
|
|
|
9.1 |
|
|
|
33.3 |
|
|
|
5.0 |
|
|
|
31.7 |
|
|
|
|
|
|
Share incentive awards are valued using the Black-Scholes model. The weighted average fair
value at the date of grant of these share awards was 508.5p in 2006 (2005: 405p; 2004: 302p).
Annual Report 2006 107
Notes to the Financial Statements
Share Options
The companys share option plans provide for a grant price equal to the quoted market price of
the companys shares on the date of grant. The vesting period is three years. If the options remain
unexercised after a period of 10 years from the date of grant, the options expire. Furthermore,
options are forfeited if the employee leaves the company before the options vest.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
Exercise |
|
|
|
|
|
|
Exercise |
|
|
|
|
|
|
Exercise |
|
millions, except prices |
|
Options |
|
|
Price (pence) |
|
|
Options |
|
|
Price (pence) |
|
|
Options |
|
|
Price (pence) |
|
|
Outstanding at the
beginning of period |
|
|
128.8 |
|
|
|
543.09 |
|
|
|
135.1 |
|
|
|
557.20 |
|
|
|
135.3 |
|
|
|
578.57 |
|
Granted during the period |
|
|
|
|
|
|
|
|
|
|
6.2 |
|
|
|
332.50 |
|
|
|
13.7 |
|
|
|
321.17 |
|
Forfeited during the period |
|
|
(38.2 |
) |
|
|
468.19 |
|
|
|
(11.5 |
) |
|
|
621.72 |
|
|
|
(12.6 |
) |
|
|
567.79 |
|
Exercised during the period |
|
|
(9.5 |
) |
|
|
336.72 |
|
|
|
(1.0 |
) |
|
|
258.88 |
|
|
|
(1.3 |
) |
|
|
269.54 |
|
|
|
|
Outstanding at the end of
the period |
|
|
81.1 |
|
|
|
610.27 |
|
|
|
128.8 |
|
|
|
543.09 |
|
|
|
135.1 |
|
|
|
556.60 |
|
|
|
|
Exercisable at the end of
the period |
|
|
48.8 |
|
|
|
780.22 |
|
|
|
63.4 |
|
|
|
704.75 |
|
|
|
69.5 |
|
|
|
710.22 |
|
|
No grants were issued in 2006. The options outstanding at December 31, 2006 had a range of exercise
prices from 25p to 1680p, and a weighted average remaining contractual life of 5.05 years. The
market price at the end of 2006 was 596p (2005: 442p; 2004: 321p). On February 12, 2007, 12.4
million performance-based share options granted in 2003 vested. No expense for these options was
recorded in 2004, 2005 or during the first six months of 2006 based upon the expectation that the
required performance targets for the vesting of these options would not be attained. As a result of
the improved performance in 2006, the company recorded a charge of $44.7 million in the second half
of 2006 ($0.04 per share, net of tax), representing the current year and cumulative previously
unrecognized cost to the company of these awards.
The share option programs were valued using a stochastic model. The inputs into the model in
previous years are as follows:
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
2004 |
|
|
|
Options |
|
|
Options |
|
|
Weighted average share price |
|
|
438p |
|
|
|
321p |
|
Weighted average exercise price |
|
|
439p |
|
|
|
321p |
|
Expected volatility |
|
|
52.0 |
% |
|
|
54.6 |
% |
Expected life |
|
7.8 years |
|
|
7.8 years |
|
Risk free rate |
|
|
4.2 |
% |
|
|
4.7 |
% |
Expected dividends |
|
|
2.2 |
% |
|
|
2.9 |
% |
|
Expected volatility was determined by calculating the historical volatility of the companys share
price over the previous five years. The expected life used in the model has been adjusted, based on
managements best estimate, for the effects of non-transferability, exercise restrictions, and
behavioral considerations.
Sharesave Plans
The employee share purchase plans are open to almost all employees and provide for a purchase
price equal to the market price on the date of grant, less 15.0% to 20.0%. The shares can be
purchased at the end of the 27- to 42-month savings contract. As of December 31, 2006, there are
1.8 million options to purchase shares outstanding under these programs. The fair value of these
options was determined using the stochastic valuation model, and the weighted average contractual
life of these awards is 1.08 years at December 31, 2006.
108
Notes to the Financial Statements
Note 25
OPERATING LEASE
The company leases office space in the majority of its locations of business.
Sponsorship and naming rights commitments relate to INVESCO Field at Mile High, a sports
stadium in Denver, Colorado. The companys total future commitments under non-cancelable
operating leases are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sponsorship and |
|
|
|
|
|
|
Total |
|
|
Land and Buildings |
|
|
|
Naming Rights |
|
Other |
|
|
$ millions |
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Within one year |
|
|
57.0 |
|
|
|
57.8 |
|
|
|
70.1 |
|
|
|
50.0 |
|
|
|
50.9 |
|
|
|
51.6 |
|
|
|
6.0 |
|
|
|
6.0 |
|
|
|
6.0 |
|
|
|
1.0 |
|
|
|
0.9 |
|
|
|
12.5 |
|
Within one to three years inclusive |
|
|
105.1 |
|
|
|
109.8 |
|
|
|
115.5 |
|
|
|
93.0 |
|
|
|
97.3 |
|
|
|
95.0 |
|
|
|
12.0 |
|
|
|
12.0 |
|
|
|
12.0 |
|
|
|
0.1 |
|
|
|
0.5 |
|
|
|
8.5 |
|
Within three to five years inclusive |
|
|
84.7 |
|
|
|
86.0 |
|
|
|
97.7 |
|
|
|
72.7 |
|
|
|
74.0 |
|
|
|
79.3 |
|
|
|
12.0 |
|
|
|
12.0 |
|
|
|
12.0 |
|
|
|
|
|
|
|
|
|
|
|
6.4 |
|
In more than
five years |
|
|
248.6 |
|
|
|
247.2 |
|
|
|
304.9 |
|
|
|
191.1 |
|
|
|
183.7 |
|
|
|
226.7 |
|
|
|
57.5 |
|
|
|
63.5 |
|
|
|
69.5 |
|
|
|
|
|
|
|
|
|
|
|
8.7 |
|
|
|
|
|
495.4 |
|
|
|
500.8 |
|
|
|
588.2 |
|
|
|
406.8 |
|
|
|
405.9 |
|
|
|
452.6 |
|
|
|
87.5 |
|
|
|
93.5 |
|
|
|
99.5 |
|
|
|
1.1 |
|
|
|
1.4 |
|
|
|
36.1 |
|
|
Future minimum
sublease pay-
ments expected
to be received |
|
|
110.7 |
|
|
|
104.4 |
|
|
|
29.6 |
|
|
|
110.7 |
|
|
|
104.4 |
|
|
|
29.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2006, the company recognized $48.4 million in operating lease costs in the
income statement (2005: $53.9 million; 2004: $58.7 million), and $4.3 million of
sublease income (2005: $1.6 million; 2004: $1.4 million).
The company maintains approximately $40.0 million in letters of credit from a variety of
banks. The letters of credit are generally one-year automatically-renewable facilities and
are maintained for various reasons. Approximately $28.7 million of the letters of credit
support office lease obligations.
Note 26
RETIREMENT BENEFIT PLANS
Defined Contribution Plans
The company operates defined contribution retirement benefit plans for all qualifying
employees. The assets of the plans are held separately from those of the company in funds
under the control of trustees. When employees leave the plans prior to vesting fully in
the contributions, the contributions payable by the company are reduced by the amount of
forfeited contributions.
The total cost charged to the income statement of $38.1 million (2005: $60.5 million;
2004: $57.5 million) represents contributions payable to these plans by the company at
rates specified in the rules of the plans. As of December 31, 2006, contributions of
$19.5 million (2005: $30.0 million) due in respect of the current reporting period had
not been paid to the plans.
Defined Benefit Plans
The company maintains legacy defined benefit pension plans for qualifying employees of
its subsidiaries in the U.K., Ireland, Germany, Taiwan and the U.S. All defined benefit
plans are closed to new participants, and the U.S. plan benefits have been frozen. The
company also maintains a post-retirement medical plan in the U.S., which was closed to new
participants in 2005. In 2006, the plan was amended to eliminate benefits for all
participants who will not meet retirement eligibility by 2008. The assets of all defined
benefit schemes are held in separate trustee-administered funds. Under the U.K. schemes, the
employees are entitled to retirement benefits based on final salary at retirement.
The most recent actuarial valuations of plan assets and the present value of the defined
benefit obligation were valued as of December 31, 2006. The present value of the defined
benefit obligation, the related current service cost and past service cost were measured
using the projected unit credit method.
Annual Report 2006 109
Notes to the Financial Statements
Key assumptions including those used in plan valuations are detailed below. Appropriate local
mortality tables are also used.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans |
|
|
Medical Plan |
|
|
|
2006 |
|
2005 |
|
2004 |
|
2006 |
|
2005 |
|
|
2004 |
|
Discount rate |
|
|
2.15%5.75 |
% |
|
|
2.50%5.50 |
% |
|
|
3.50%5.75 |
% |
|
|
5.75 |
% |
|
|
5.50 |
% |
|
|
5.75 |
% |
Expected return
on plan assets |
|
|
2.75%7.50 |
% |
|
|
3.00%7.50 |
% |
|
|
3.50%7.50 |
% |
|
|
7.00 |
% |
|
|
8.00 |
% |
|
|
8.00 |
% |
Expected rate of
salary increases |
|
|
3.00%5.50 |
% |
|
|
3.00%5.40 |
% |
|
|
3.00%5.40 |
% |
|
|
N/A |
|
|
|
4.50 |
% |
|
|
4.50 |
% |
Future pension/
medical cost trend
rate increases |
|
|
2.25%3.00 |
% |
|
|
1.75%2.90 |
% |
|
|
1.75%3.00 |
% |
|
|
5.50%9.00 |
% |
|
|
5.50%9.00 |
% |
|
|
5.50%10.00 |
% |
|
In developing the expected rate of return, the company considers long-term compound annualized
returns based on historical and current market data. Using this reference information, the
company develops forward-looking return expectations for each asset category and an expected
long-term rate of return for a targeted portfolio. The actual return on plan assets was $32.2
million (2005: $39.9 million; 2004: $17.5 million).
Amounts recognized in the income statement in respect of these defined benefit plans are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans |
|
|
Medical Plan |
|
$ millions |
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Current service cost |
|
|
(7.9 |
) |
|
|
(19.2 |
) |
|
|
(8.8 |
) |
|
|
(0.7 |
) |
|
|
(4.2 |
) |
|
|
(3.2 |
) |
Interest cost |
|
|
(16.2 |
) |
|
|
(15.3 |
) |
|
|
(14.3 |
) |
|
|
(2.5 |
) |
|
|
(3.8 |
) |
|
|
(2.9 |
) |
Expected return on plan assets |
|
|
18.9 |
|
|
|
15.5 |
|
|
|
14.4 |
|
|
|
0.5 |
|
|
|
0.5 |
|
|
|
0.4 |
|
Past service cost/(credit) |
|
|
|
|
|
|
|
|
|
|
(0.4 |
) |
|
|
1.8 |
|
|
|
(0.4 |
) |
|
|
(0.4 |
) |
Actuarial gains/(losses) |
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
(0.7 |
) |
|
|
(0.4 |
) |
|
|
|
|
|
Total amounts recognized in the income statement |
|
|
(5.3 |
) |
|
|
(19.0 |
) |
|
|
(9.1 |
) |
|
|
(1.6 |
) |
|
|
(8.3 |
) |
|
|
(6.1 |
) |
|
Actuarial gains and losses that are in excess of the greater of 10.0% of the benefit obligation or
10.0% of the fair value of plan assets are amortized over the expected average remaining working
lives of the participants.
The amount included in the balance sheet arising from the companys obligations in respect of its
defined benefit retirement plans is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans |
|
|
Medical Plan |
|
$ millions |
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
Present value of unfunded defined benefit obligations |
|
|
3.3 |
|
|
|
22.3 |
|
|
|
N/A |
|
|
|
N/A |
|
Present value of funded or partially funded defined benefit obligations |
|
|
375.5 |
|
|
|
312.1 |
|
|
|
44.6 |
|
|
|
72.4 |
|
Fair value of plan assets |
|
|
(329.5 |
) |
|
|
(254.1 |
) |
|
|
(7.3 |
) |
|
|
(6.9 |
) |
|
|
|
Deficit in plans |
|
|
49.3 |
|
|
|
80.3 |
|
|
|
37.3 |
|
|
|
65.5 |
|
Net actuarial gains/(losses) not yet recognized in balance sheet |
|
|
10.2 |
|
|
|
(2.5 |
) |
|
|
(7.2 |
) |
|
|
(12.3 |
) |
Unrecognized net transition obligation |
|
|
(0.1 |
) |
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
Past service (cost)/credit not yet recognized in balance sheet |
|
|
|
|
|
|
|
|
|
|
21.4 |
|
|
|
(2.1 |
) |
|
|
|
Liability recognized in the balance sheet |
|
|
59.4 |
|
|
|
77.6 |
|
|
|
51.5 |
|
|
|
51.1 |
|
|
|
|
This amount is presented in the balance sheet as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
0.5 |
|
|
|
22.5 |
|
|
|
1.6 |
|
|
|
1.0 |
|
Non-current liabilities |
|
|
58.9 |
|
|
|
55.1 |
|
|
|
49.9 |
|
|
|
50.1 |
|
|
|
|
|
59.4 |
|
|
|
77.6 |
|
|
|
51.5 |
|
|
|
51.1 |
|
|
Amount not recognized as an asset due to recognition caps |
|
|
0.2 |
|
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
110
Notes to the Financial Statements
Movements in the present value of defined benefit obligations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans |
|
|
Medical Plan |
|
$ millions |
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
January 1 |
|
|
334.4 |
|
|
|
318.1 |
|
|
|
72.4 |
|
|
|
59.4 |
|
Service cost |
|
|
7.9 |
|
|
|
19.2 |
|
|
|
0.7 |
|
|
|
4.2 |
|
Interest cost |
|
|
16.2 |
|
|
|
15.3 |
|
|
|
2.5 |
|
|
|
3.8 |
|
Contributions from plan participants |
|
|
|
|
|
|
|
|
|
|
0.8 |
|
|
|
1.9 |
|
Actuarial (gains)/losses |
|
|
(0.2 |
) |
|
|
17.5 |
|
|
|
(3.7 |
) |
|
|
5.6 |
|
Exchange difference |
|
|
38.9 |
|
|
|
(29.4 |
) |
|
|
|
|
|
|
|
|
Benefits paid |
|
|
(7.6 |
) |
|
|
(4.6 |
) |
|
|
(2.2 |
) |
|
|
(2.5 |
) |
Past service cost credit |
|
|
|
|
|
|
|
|
|
|
(25.9 |
) |
|
|
|
|
Settlement |
|
|
(10.8 |
) |
|
|
(1.7 |
) |
|
|
|
|
|
|
|
|
|
December 31 |
|
|
378.8 |
|
|
|
334.4 |
|
|
|
44.6 |
|
|
|
72.4 |
|
|
Past service cost in 2006 for the medical plan reflects the adjustment to eliminate
benefits for all participants who will not meet retirement eligibility by 2008.
Movements in the fair value of plan assets in the current period were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans |
|
|
Medical Plan |
|
$ millions |
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
January 1 |
|
|
254.1 |
|
|
|
235.0 |
|
|
|
7.0 |
|
|
|
6.1 |
|
Expected return on plan assets |
|
|
18.9 |
|
|
|
15.5 |
|
|
|
0.5 |
|
|
|
0.5 |
|
Actuarial gains/(losses) |
|
|
12.7 |
|
|
|
24.4 |
|
|
|
0.1 |
|
|
|
(0.2 |
) |
Exchange difference |
|
|
32.9 |
|
|
|
(21.5 |
) |
|
|
|
|
|
|
|
|
Contributions from the company |
|
|
27.7 |
|
|
|
5.9 |
|
|
|
|
|
|
|
|
|
Contributions from plan participants |
|
|
|
|
|
|
1.4 |
|
|
|
0.5 |
|
|
|
1.6 |
|
Benefits paid |
|
|
(7.6 |
) |
|
|
(4.5 |
) |
|
|
(0.8 |
) |
|
|
(1.0 |
) |
Settlement |
|
|
(9.2 |
) |
|
|
(2.1 |
) |
|
|
|
|
|
|
|
|
|
December 31 |
|
|
329.5 |
|
|
|
254.1 |
|
|
|
7.3 |
|
|
|
7.0 |
|
|
The analysis of the plan assets at the balance sheet date was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans |
|
|
Medical Plan |
|
$ millions |
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
Equity instruments |
|
|
230.0 |
|
|
|
178.9 |
|
|
|
2.9 |
|
|
|
2.4 |
|
Debt instruments |
|
|
76.8 |
|
|
|
54.8 |
|
|
|
4.1 |
|
|
|
3.1 |
|
Other assets |
|
|
22.7 |
|
|
|
20.4 |
|
|
|
0.3 |
|
|
|
1.5 |
|
|
|
|
|
329.5 |
|
|
|
254.1 |
|
|
|
7.3 |
|
|
|
7.0 |
|
|
Amounts for the current and prior two periods are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans |
|
|
Medical Plan |
|
$ millions |
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Present value of defined benefit obligations |
|
|
(378.8 |
) |
|
|
(334.4 |
) |
|
|
(318.1 |
) |
|
|
(44.6 |
) |
|
|
(72.4 |
) |
|
|
(59.4 |
) |
Fair value of plan assets |
|
|
329.5 |
|
|
|
254.1 |
|
|
|
235.0 |
|
|
|
7.3 |
|
|
|
7.0 |
|
|
|
6.0 |
|
|
Deficit in the plan |
|
|
(49.3 |
) |
|
|
(80.3 |
) |
|
|
(83.1 |
) |
|
|
(37.3 |
) |
|
|
(65.4 |
) |
|
|
(53.4 |
) |
|
Experience adjustments on plan liabilities |
|
|
0.2 |
|
|
|
22.4 |
|
|
|
(2.0 |
) |
|
|
3.7 |
|
|
|
(2.1 |
) |
|
|
|
|
Experience adjustments on plan assets |
|
|
12.7 |
|
|
|
24.4 |
|
|
|
3.1 |
|
|
|
0.1 |
|
|
|
(0.3 |
) |
|
|
(0.1 |
) |
|
Annual Report 2006 111
Notes to the Financial Statements
The estimated amounts of contributions expected to be paid to the plans during 2007 is
$8.2 million for retirement plans and $1.8 million for the medical plan.
A one percent change in the assumed rate of increase in healthcare costs would have the following
effects:
|
|
|
|
|
|
|
|
|
$ millions |
|
Increase |
|
|
Decrease |
|
|
Effect on aggregate service and interest costs |
|
|
0.5 |
|
|
|
(0.4 |
) |
Effect on defined benefit obligation |
|
|
5.5 |
|
|
|
(4.6 |
) |
|
Note 27
RELATED PARTY TRANSACTION
Remuneration of Key Management Personnel
The remuneration of the Senior Managing Directors, who are the key management personnel of the
company from 2006, is set out below. Prior to 2006, the companys key management personnel were
members of the Executive Management Committee. Further information about the remuneration of
individual directors is provided in the audited section of the Remuneration Report in the
Governance section of this annual report.
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions |
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Short-term employee benefits |
|
|
21.9 |
|
|
|
43.0 |
|
|
|
19.2 |
|
Post-employment benefits |
|
|
0.2 |
|
|
|
0.6 |
|
|
|
0.5 |
|
Termination benefits |
|
|
|
|
|
|
4.6 |
|
|
|
0.5 |
|
Share-based payment |
|
|
19.3 |
|
|
|
40.7 |
|
|
|
17.0 |
|
|
|
|
|
41.4 |
|
|
|
88.9 |
|
|
|
37.2 |
|
|
Other Related Party Transactions
The company manages the defined benefit and defined contribution plan assets for certain
employee-related schemes. Generally, management fees are not charged, or are charged at an arms
length rate.
Note 28
OTHER COMMITMENTS AND CONTINGENCIES
Guarantees and commitments may arise in the ordinary course of business.
Following the industry-wide investigation by the SEC,
the New York Attorney Generals Office and
other regulators, into potential market timing activity in mutual funds, multiple lawsuits based on
market timing allegations were filed against various parties affiliated with AMVESCAP. 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
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 the AIM funds and
such fund registrants; and (3) an ERISA complaint purportedly brought on behalf of participants in
the companys 401(k) plan.
On March 1, 2006, the court entered orders dismissing certain claims asserted against
company-related defendants in the shareholder class action and derivative lawsuits but preserving
claims under Section 10(b) of the Securities Exchange Act of 1934, as amended and Section 36(b) of
the Investment Company Act of 1940, as amended. On September 15, 2006, the court dismissed the
ERISA lawsuit with prejudice. Plaintiff has appealed that dismissal to the United States Court of
Appeals for the Fourth Circuit.
112
Notes to the Financial Statements
Additionally, the company and/or company-affiliated parties have been named as
defendants in certain other lawsuits alleging that one or more of AMVESCAPs funds charged
excessive fees, engaged in unlawful distribution practices or inadequately employed fair
value pricing. The lawsuits have been filed in both federal and state courts and seek
declaratory, injunctive and/or unspecified monetary relief.
The Attorney Generals Office for the State of West Virginia has filed a voluntary dismissal
of the previously disclosed civil action brought under the West Virginia Consumer Credit
and Protection Act. The Auditor of the State of West Virginia, in his capacity as
securities commissioner, has initiated administrative proceedings against many mutual fund
companies, including AIM, seeking disgorgement and other monetary relief based on
allegations similar to those underlying the market timing lawsuits. AIMs time to respond
to the Auditors proceeding has not yet elapsed.
Although it is expected that the payments required under the terms of the regulatory
settlement will mitigate any damages payable as a result of the market timing actions, the
company cannot predict with certainty the outcome of these actions or any of the other
actions mentioned above. The company intends to defend the above-mentioned lawsuits
vigorously.
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 companys 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 of the
company.
Note 29
FINANCIAL INSTRUMENTS
Financial Assets and Liabilities
The companys principal financial instruments, the main purpose of which is to
finance the companys operations, comprise the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footnote |
|
|
|
|
|
|
|
$ millions |
|
Reference |
|
|
2006 |
|
|
2005 |
|
|
Cash and cash equivalents * |
|
|
21 |
|
|
|
789.6 |
|
|
|
715.7 |
|
Investments |
|
|
14 |
|
|
|
293.0 |
|
|
|
180.7 |
|
Trade and Other Receivables |
|
|
16 |
|
|
|
997.4 |
|
|
|
805.3 |
|
Assets Held for Policyholders |
|
|
17 |
|
|
|
1,574.9 |
|
|
|
1,170.8 |
|
Policyholder Liabilities |
|
|
17 |
|
|
|
(1,574.9 |
) |
|
|
(1,170.8 |
) |
Trade and Other Payables |
|
|
18 |
|
|
|
(1,384.3 |
) |
|
|
(1,300.5 |
) |
Total Long-Term Debt |
|
|
19 |
|
|
|
(1,272.7 |
) |
|
|
(1,222.2 |
) |
|
|
|
|
* |
|
Book value approximates fair value for cash deposits, which comprise deposits placed
primarily in money market accounts and seven-day deposits. Interest income recognized
during the year was $27.0 million (2005: $16.7 million; 2004; $10.4 million). The
majority of trade receivables and payables mature within three months, and there is no
material interest rate gap on these amounts. |
Annual Report 2006 113
Notes to the Financial Statements
The company does not hold collateral as security for its financial assets, nor have any other
credit enhancements been offered to the other party to the loans or receivables. No financial
assets are individually determined to be impaired at December 31, 2006.
Financial Statement Risks
The nature and extent of risks arising from financial instruments to which the company is
exposed during the period and at December 31, 2006, and discussion of how the company manages
those risks, is presented below.
Credit Risk
Credit risk is the risk that one party to a financial instrument will cause a financial
loss for the other party by failing to discharge an obligation. The company is subject to
credit risk in the following areas of its business:
|
|
All cash and cash equivalent balances are subject to credit risk, as
they represent deposits made by the company with external banks and
other institutions. Our maximum exposure to credit risk related to our
cash and cash equivalent balances is $789.6 million at December 31,
2006. The company utilizes a master netting arrangement, which
significantly reduces the credit risk associated with financial assets
not offset against financial liabilities with the same counterparty.
The credit risk associated with financial assets subject to this
master netting arrangement is eliminated only to the extent that
financial liabilities due to the same counterparty will be settled
after the assets are realized. |
|
|
|
Certain trust subsidiaries of the company accept deposits and place
deposits with other institutions on behalf of our customers. Our
maximum exposure to credit risk related to these transactions is $2.9
million at December 31, 2006. |
Concentrations of credit risk with respect to trade receivables are limited due to the companys
client base being large and unrelated. The company does not utilize credit derivatives or similar
instruments to mitigate the maximum exposure to credit risk. The company does not expect any
counterparties to its financial instruments to fail to meet their obligations.
Liquidity Risk
Liquidity risk is the risk that the company will encounter difficulty in meeting obligations
associated with its financial liabilities. The company is exposed to liquidity risk through its
$1,272.7 million in total long-term debt. The company actively manages liquidity risk by preparing
cash flow forecasts for future periods, reviewing them regularly with senior management,
maintaining a committed credit facility, scheduling significant gaps between major debt maturities
and engaging external financing sources in regular dialog. See Note 19 for a contractual maturity
schedule of the companys debt. See also the discussion on financial commitments in Financial
Overview Liquidity and Capital Resources which projects future expected cash flows relating to
financial liabilities over future periods.
Market Risk Foreign Currency Risk
The company has transactional currency exposures which occur when any of the companys
subsidiaries receives or pays cash in a currency different from its functional currency. Such
exposure arises from sales or purchases by an operating unit in currencies other than the units
functional currency. These exposures are not actively managed except in the companys Irish
subsidiaries where transactions related to the distribution of offshore funds are recorded; forward
foreign exchange contracts and foreign currency swaps are entered into with external parties.
Forward foreign exchange contracts are purchased daily to hedge the movement in foreign exchange
rates between the date of sale or redemption of a client investment and the date that cash is
actually received or paid (generally within four days). Swap foreign exchange contracts are entered
into periodically for client money settlement purposes. The value of these contracts at December
31, 2006, was $18.5 million (2005: $15.4 million).
The company also has certain investments in foreign operations, whose net assets and related
goodwill are exposed to foreign currency translation risk. The company does not hedge these
exposures. Prior to the redenomination of the share capital of the Parent and the change in its
functional currency from sterling to U.S. dollars, the company designated its U.S. dollar senior
notes balances as hedges against its net investments in its U.S. subsidiaries. Note 19 details the
fair values of the U.S. dollar senior notes (the hedging instruments) at December 31, 2005. Gains
or losses on the retranslation of these borrowings were transferred to equity to offset any gains
and losses on the net investments in subsidiaries. During 2005, the company recorded a charge of
$6.8 million within other realized losses on the income statement related to the unhedged portion
of debt.
114
Notes to the Financial Statements
The underlying currency of the companys cash and cash equivalents and investment financial
assets as of December 31 is as follows:
|
|
|
|
|
|
|
|
|
$ millions |
|
2006 |
|
|
2005 |
|
|
Cash deposits: |
|
|
|
|
|
|
|
|
U.S. dollar |
|
|
159.6 |
|
|
|
410.2 |
|
Sterling |
|
|
464.2 |
|
|
|
107.5 |
|
Canadian dollar |
|
|
49.5 |
|
|
|
48.4 |
|
Euro |
|
|
65.9 |
|
|
|
102.0 |
|
Other |
|
|
50.4 |
|
|
|
47.6 |
|
|
|
|
|
789.6 |
|
|
|
715.7 |
|
|
|
|
|
|
|
|
|
|
|
Investments: |
|
|
|
|
|
|
|
|
U.S. dollar |
|
|
174.5 |
|
|
|
129.0 |
|
Sterling |
|
|
83.9 |
|
|
|
36.8 |
|
Canadian dollar |
|
|
9.3 |
|
|
|
|
|
U.S. dollar treasury bills |
|
|
11.0 |
|
|
|
12.9 |
|
Other |
|
|
14.3 |
|
|
|
2.0 |
|
|
|
|
|
293.0 |
|
|
|
180.7 |
|
|
Total |
|
|
1,082.6 |
|
|
|
896.4 |
|
|
Market Risk Interest Rate Risk
Interest rate risk relates to the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market interest rates. The
interest rate profile of the financial liabilities of the company on December 31 was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
for Which |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
Rate is |
|
$ millions |
|
Total |
|
|
Floating Rate |
|
|
Fixed Rate |
* |
|
Rate (%) |
|
|
Fixed (Years) |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. dollar |
|
|
1,272.7 |
|
|
|
129.0 |
|
|
|
1,143.7 |
|
|
|
5.3 |
|
|
|
4.0 |
|
Japanese yen |
|
|
0.5 |
|
|
|
|
|
|
|
0.5 |
|
|
|
9.4 |
|
|
|
4.0 |
|
|
|
|
|
1,273.2 |
|
|
|
129.0 |
|
|
|
1,144.2 |
|
|
|
5.3 |
|
|
|
4.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. dollar |
|
|
1,222.2 |
|
|
|
70.0 |
|
|
|
1,152.2 |
|
|
|
5.3 |
|
|
|
5.0 |
|
Japanese yen |
|
|
0.1 |
|
|
|
|
|
|
|
0.1 |
|
|
|
12.0 |
|
|
|
3.7 |
|
|
|
|
|
1,222.3 |
|
|
|
70.0 |
|
|
|
1,152.3 |
|
|
|
5.3 |
|
|
|
5.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. dollar |
|
|
1,381.6 |
|
|
|
151.0 |
|
|
|
1,230.6 |
|
|
|
5.4 |
|
|
|
5.6 |
|
Japanese yen |
|
|
0.2 |
|
|
|
|
|
|
|
0.2 |
|
|
|
12.4 |
|
|
|
4.7 |
|
|
|
|
|
1,381.8 |
|
|
|
151.0 |
|
|
|
1,230.8 |
|
|
|
5.4 |
|
|
|
5.6 |
|
|
|
|
|
* |
|
Measured at amortized cost. |
Annual Report 2006 115
Notes to the Financial Statements
See Notes 19 and 21 for additional disclosures relating to the U.S. dollar floating and fixed
rate obligations. A 1.0% increase in interest rates would have increased the recorded interest
expense on the floating rate debt by $1.0 million.
The companys only fixed interest financial assets are $15.1 million in investments in
treasury/governmental agency securities. The average interest rate on the treasury bills is 3.6%
(2005: 3.2%), and the average time for which the rate is fixed is 1.0 years (2005: 1.5 years).
Note 30
AUDIT FEES
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions |
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Audit services: |
|
|
|
|
|
|
|
|
|
|
|
|
Audit of company consolidation |
|
|
3.5 |
|
|
|
2.6 |
|
|
|
2.0 |
|
Statutory audits of subsidiary entities |
|
|
1.6 |
|
|
|
1.9 |
|
|
|
2.0 |
|
|
|
|
Total Audit services |
|
|
5.1 |
|
|
|
4.5 |
|
|
|
4.0 |
|
Non-audit services: |
|
|
|
|
|
|
|
|
|
|
|
|
Further assurance services * |
|
|
1.2 |
|
|
|
1.8 |
|
|
|
1.4 |
|
Tax services: |
|
|
|
|
|
|
|
|
|
|
|
|
Compliance services |
|
|
0.1 |
|
|
|
0.2 |
|
|
|
0.5 |
|
Advisory services |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.4 |
|
Other services |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
1.0 |
|
|
|
|
|
6.6 |
|
|
|
6.7 |
|
|
|
7.3 |
|
|
|
|
|
* |
|
Excludes $0.2 million in 2006 (2005: $0.2 million; 2004: $0.1 million) paid to the corporate
auditors for audits of benefit plans around the company. |
Included in further assurance services are $0.9 million for internal control and investment
performance compliance reports (2005: $0.9 million; 2004: $1.0 million). Also included in
further assurance services in 2005 are $0.6 million related to the audit of the transition from
U.K. GAAP to International Financial Reporting Standards (2004: $nil).
The Audit Committee pre-approves the audit and non-audit services performed by the independent
auditor in order to ensure that the auditors independence is not impaired. The Audit Committee
approves all non-audit services rendered by the independent auditors only after concluding that
performance of such service by the auditor will not impair the auditors independence and will
serve the companys interests better than performance of such service by other providers. The Audit
Committee ensures that such services are consistent with applicable national rules on auditor
independence.
116
Notes to the Financial Statements
Note 31
EXCHANGE RATES
The following primary U.S. dollar exchange rates have been used in preparing these financial
statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending |
|
|
Average |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Canadian dollar |
|
|
1.16 |
|
|
|
1.17 |
|
|
|
1.24 |
|
|
|
1.14 |
|
|
|
1.21 |
|
|
|
1.30 |
|
Euro |
|
|
0.76 |
|
|
|
0.84 |
|
|
|
0.74 |
|
|
|
0.80 |
|
|
|
0.80 |
|
|
|
0.75 |
|
Sterling |
|
|
0.51 |
|
|
|
0.58 |
|
|
|
0.52 |
|
|
|
0.54 |
|
|
|
0.55 |
|
|
|
0.54 |
|
|
Note 32
RECONCILIATION TO U.S. ACCOUNTING PRINCIPLES
The company prepares its consolidated financial statements in accordance with
International Financial Reporting Standards (IFRS), which differ in certain material
respects from U.S. generally accepted accounting principles (U.S. GAAP).
The following is a summary of material adjustments to profit and shareholders funds, which
would be required if U.S. GAAP had been applied instead of IFRS.
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions, except per share data |
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Profit/(loss) after minority interests (IFRS) |
|
$ |
490.1 |
|
|
$ |
212.2 |
|
|
$ |
(36.2 |
) |
Redundancy and reorganizations (A) |
|
|
(14.9 |
) |
|
|
7.5 |
|
|
|
(69.4 |
) |
Taxation (B) |
|
|
8.9 |
|
|
|
(3.2 |
) |
|
|
25.9 |
|
Share-based payment (C) |
|
|
|
|
|
|
12.0 |
|
|
|
1.5 |
|
Retirement benefit plans (D) |
|
|
(7.1 |
) |
|
|
|
|
|
|
|
|
Other (E) |
|
|
(2.5 |
) |
|
|
(5.0 |
) |
|
|
(7.7 |
) |
|
Net income (U.S. GAAP) |
|
$ |
474.5 |
|
|
$ |
223.5 |
|
|
$ |
(85.9 |
) |
|
Earnings per share (U.S. GAAP) *: |
|
|
|
|
|
|
|
|
|
|
|
|
basic |
|
$ |
0.60 |
|
|
$ |
0.28 |
|
|
$ |
(0.11 |
) |
diluted |
|
$ |
0.58 |
|
|
$ |
0.28 |
|
|
$ |
(0.11 |
) |
|
Shareholders funds, equity interests (IFRS) |
|
$ |
4,275.1 |
|
|
$ |
3,616.3 |
|
|
$ |
3,542.9 |
|
Non-current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill (F) |
|
|
1,480.8 |
|
|
|
1,891.7 |
|
|
|
1,948.5 |
|
Deferred taxation (B) |
|
|
(68.2 |
) |
|
|
(9.1 |
) |
|
|
9.3 |
|
Non-current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Provisions Retirement benefit plans (D) |
|
|
28.7 |
|
|
|
|
|
|
|
|
|
Provisions acquisition (F) |
|
|
305.8 |
|
|
|
|
|
|
|
|
|
Investments other (E) |
|
|
|
|
|
|
|
|
|
|
5.5 |
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accruals and other redundancy and reorganizations (A) |
|
|
1.2 |
|
|
|
16.1 |
|
|
|
8.5 |
|
Provisions acquisition and other (F) |
|
|
150.5 |
|
|
|
2.4 |
|
|
|
7.5 |
|
|
Shareholders equity (U.S. GAAP) |
|
$ |
6,173.9 |
|
|
$ |
5,517.4 |
|
|
$ |
5,522.2 |
|
|
|
|
|
* |
|
Earnings per share before the restructuring charge (2005) and the U.S. regulatory
settlement (2004) are non-GAAP measures that are not permissible under U.S. GAAP and
accordingly are not presented in the table above. |
Note A: Redundancy and Reorganizations
Certain amounts provided relating to redundancy and reorganization initiatives under
IFRS must be expensed over the period of the related initiative under U.S. GAAP.
Annual Report 2006 117
Notes to the Financial Statements
Note B: Taxation
Tax expense under U.S. GAAP has been adjusted to reflect the redundancy and reorganization
differences (Note A) and in 2006 the additional retirement benefit plan cost (Note D).
Additionally, in 2005 and 2004, adjustments were made to account for the difference between IFRS
2 and APB 25 (Note C). No adjustment was required in 2006 due to the adoption of FAS 123(R).
Deferred tax assets have been reduced to reflect the remaining redundancy and reorganization
differences (Note A) and for 2006 the cumulative decrease in the retirement benefit plan cost
(Note D).
The IFRS deferred tax asset for share-based payments has been adjusted to eliminate the amount
recorded to equity for the difference between the share price at each measurement date and the fair
value award price used to calculate the financial statement expense.
The IFRS deferred tax liability for tax intangible amortization has been increased to reflect the
higher book intangible basis under U.S. GAAP for the two-year period 2002 and 2003 (Note F).
Note C: Share-Based Payment
Equity-settled share-based awards are measured at fair value and are amortized under IFRS and
under U.S. GAAP pursuant to the companys adoption of FAS 123(R) on January 1, 2006. Prior to
January 1, 2006, this expense was removed from the U.S. GAAP income statement under APB 25.
Note D: Retirement benefit plans
Under IFRS, amounts recognized as a net liability for defined benefit pension and
post-retirement medical obligations include the actuarially-determined defined benefit obligation,
less the fair value of plan assets, less the unrecognized net actuarial losses, plus the credit to
prior service costs recognized during the year (see Note 26). Under U.S. GAAP, pursuant to the
companys adoption of FAS 158 in 2006, amounts recognized as a net liability on the balance sheet
include only the actuarially-determined defined benefit obligation less the fair value of plan
assets (the funded status of the plans). Under U.S. GAAP, the unrecognized net actuarial losses and
the credit to prior service costs are recorded directly to other comprehensive income.
Additionally, upon transition to IFRS at January 1, 2004, the companys cumulative unrecognized net
actuarial losses were reset to zero and accordingly are building up again only from the IFRS
transition date. The impact of the companys prior service cost credit, combined with the lower
cumulative unrecognized net actuarial loss amounts under IFRS, result in a greater IFRS balance
sheet provision for defined benefit pension and post retirement medical plans than under U.S. GAAP.
Since the cumulative unrecognized net actuarial losses for the company are greater under U.S. GAAP
than under IFRS, this results in greater amortization costs than under U.S. GAAP.
Note E: Other
Other adjustments include accounting differences relating to staff retention provisions.
Note F: Goodwill
The company transitioned from U.K. GAAP to IFRS at January 1, 2004. Prior to this date, the
U.K. GAAP treatment of goodwill arising on acquisitions prior to 1998 was to eliminate it directly
against reserves. These amounts remain in reserves under IFRS. Goodwill arising in 1998 and after
was capitalized and amortized through the transition date to IFRS.
Under U.S. GAAP, the amortization of goodwill and indefinite-lived intangible assets ceased at
January 1, 2002, and the balances are carried forward at cost less provision for impairment in
value. There is therefore a two-year period (2002 and 2003) under which the goodwill balances were
amortized, while the U.S. GAAP balances were not. Definite-lived intangible assets are amortized
over their estimated useful lives. Contingent consideration payable related to acquisitions is not
recorded under U.S. GAAP until the applicable conditions have been satisfied.
118
Notes to the Financial Statements
Note 33
GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
The 5.9% $300.0 million senior notes due 2007, the 4.5% $300.0 million senior notes due
2009, the 5.375% $350.0 million senior notes due 2013 and the 5.375% $200.0 million senior
notes due 2014 are fully and unconditionally guaranteed as to payment of principal,
interest and any other amounts due thereon by the following wholly owned subsidiaries: A I
M Management Group, Inc., AIM Advisors, Inc., INVESCO North American Holdings, Inc., and
INVESCO Institutional (N.A.), Inc. (the Guarantors). The guarantees of each of the
guarantor subsidiaries are joint and several. Presented below are condensed consolidating
balance sheets as of December 31, 2006 and 2005 and condensed consolidating income and cash
flow statements of the company for the three years ended December 31, 2006.
Condensed Consolidating Balance Sheet and
Reconciliation of Shareholders Funds from IFRS to U.S. GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
AMVESCAP |
|
|
Consolidated |
|
|
|
|
|
|
Guarantor |
|
|
Guarantor |
|
|
PLC Parent |
|
|
Elimination |
|
|
Consolidated |
|
$ millions |
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Company |
|
|
Entries |
|
|
Total |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
1,759.0 |
|
|
|
6,332.1 |
|
|
|
5,293.3 |
|
|
|
(7,589.2 |
) |
|
|
5,795.2 |
|
Current assets |
|
|
130.4 |
|
|
|
3,331.1 |
|
|
|
35.3 |
|
|
|
|
|
|
|
3,496.8 |
|
Current liabilities |
|
|
(414.7 |
) |
|
|
(2,788.3 |
) |
|
|
(379.4 |
) |
|
|
|
|
|
|
(3,582.4 |
) |
Intercompany balances |
|
|
(151.1 |
) |
|
|
(376.6 |
) |
|
|
527.7 |
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
(164.9 |
) |
|
|
(287.0 |
) |
|
|
(982.6 |
) |
|
|
|
|
|
|
(1,434.5 |
) |
|
Net assets |
|
|
1,158.7 |
|
|
|
6,211.3 |
|
|
|
4,494.3 |
|
|
|
(7,589.2 |
) |
|
|
4,275.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Called up share capital |
|
|
|
|
|
|
1,555.1 |
|
|
|
83.2 |
|
|
|
(1,555.1 |
) |
|
|
83.2 |
|
Share premium account |
|
|
1,028.9 |
|
|
|
3,600.0 |
|
|
|
205.1 |
|
|
|
(4,628.9 |
) |
|
|
205.1 |
|
Shares held by employee trusts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(601.7 |
) |
|
|
(601.7 |
) |
Exchangeable shares |
|
|
|
|
|
|
377.4 |
|
|
|
|
|
|
|
|
|
|
|
377.4 |
|
Profit and loss account |
|
|
397.4 |
|
|
|
(70.3 |
) |
|
|
1,054.9 |
|
|
|
(327.1 |
) |
|
|
1,054.9 |
|
Other reserves |
|
|
(267.6 |
) |
|
|
744.1 |
|
|
|
3,151.1 |
|
|
|
(476.4 |
) |
|
|
3,151.2 |
|
|
Shareholders funds, equity interests
under IFRS |
|
|
1,158.7 |
|
|
|
6,206.3 |
|
|
|
4,494.3 |
|
|
|
(7,589.2 |
) |
|
|
4,270.1 |
|
Minority interests |
|
|
|
|
|
|
5.0 |
|
|
|
|
|
|
|
|
|
|
|
5.0 |
|
|
Shareholders funds, equity interests
under IFRS |
|
|
1,158.7 |
|
|
|
6,211.3 |
|
|
|
4,494.3 |
|
|
|
(7,589.2 |
) |
|
|
4,275.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile U.S. GAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
1,461.9 |
|
|
|
18.9 |
|
|
|
1,480.8 |
|
|
|
(1,480.8 |
) |
|
|
1,480.8 |
|
Investments |
|
|
(293.8 |
) |
|
|
293.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred taxation |
|
|
(25.5 |
) |
|
|
(42.7 |
) |
|
|
(68.2 |
) |
|
|
68.2 |
|
|
|
(68.2 |
) |
Non-current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions Defined benefit obligation |
|
|
|
|
|
|
28.7 |
|
|
|
28.7 |
|
|
|
(28.7 |
) |
|
|
28.7 |
|
Provisions acquisition |
|
|
164.2 |
|
|
|
141.6 |
|
|
|
305.8 |
|
|
|
(305.8 |
) |
|
|
305.8 |
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruals and other |
|
|
0.4 |
|
|
|
0.8 |
|
|
|
1.1 |
|
|
|
(1.1 |
) |
|
|
1.2 |
|
Provisions acquisition |
|
|
129.6 |
|
|
|
20.9 |
|
|
|
150.5 |
|
|
|
(150.5 |
) |
|
|
150.5 |
|
|
Shareholders equity under U.S. GAAP |
|
|
2,595.5 |
|
|
|
6,673.3 |
|
|
|
6,393.0 |
|
|
|
(9,487.9 |
) |
|
|
6,173.9 |
|
|
Annual Report 2006 119
Notes to the Financial Statements
Condensed Consolidating Balance Sheet and
Reconciliation of Shareholders Funds from IFRS to U.S. GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
AMVESCAP |
|
|
Consolidated |
|
|
|
|
|
|
Guarantor |
|
|
Guarantor |
|
|
PLC Parent |
|
|
Elimination |
|
|
Consolidated |
|
$ millions |
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Company |
|
|
Entries |
|
|
Total |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
1,385.2 |
|
|
|
5,219.5 |
|
|
|
4,237.5 |
|
|
|
(5,980.9 |
) |
|
|
4,861.3 |
|
Current assets |
|
|
98.5 |
|
|
|
2,618.3 |
|
|
|
6.3 |
|
|
|
|
|
|
|
2,723.1 |
|
Non-current liabilities |
|
|
(6.0 |
) |
|
|
(144.7 |
) |
|
|
(1,244.0 |
) |
|
|
|
|
|
|
(1,394.7 |
) |
Current liabilities |
|
|
(230.5 |
) |
|
|
(2,310.9 |
) |
|
|
(32.0 |
) |
|
|
|
|
|
|
(2,573.4 |
) |
Intercompany balances |
|
|
(355.4 |
) |
|
|
(271.5 |
) |
|
|
626.9 |
|
|
|
|
|
|
|
|
|
|
Net assets |
|
|
891.8 |
|
|
|
5,110.7 |
|
|
|
3,594.7 |
|
|
|
(5,980.9 |
) |
|
|
3,616.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Called up share capital |
|
|
|
|
|
|
1,604.4 |
|
|
|
81.8 |
|
|
|
(1,604.4 |
) |
|
|
81.8 |
|
Share premium account |
|
|
1,028.9 |
|
|
|
3,048.1 |
|
|
|
85.0 |
|
|
|
(4,077.0 |
) |
|
|
85.0 |
|
Shares held by employee trusts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(413.5 |
) |
|
|
(413.5 |
) |
Exchangeable shares |
|
|
|
|
|
|
431.8 |
|
|
|
|
|
|
|
|
|
|
|
431.8 |
|
Profit and loss account |
|
|
135.8 |
|
|
|
(431.9 |
) |
|
|
638.7 |
|
|
|
296.1 |
|
|
|
638.7 |
|
Other reserves |
|
|
(272.9 |
) |
|
|
455.0 |
|
|
|
2,789.2 |
|
|
|
(182.1 |
) |
|
|
2,789.2 |
|
|
Shareholders funds, equity interests
under IFRS |
|
|
891.8 |
|
|
|
5,107.4 |
|
|
|
3,594.7 |
|
|
|
(5,980.9 |
) |
|
|
3,613.0 |
|
Minority interests |
|
|
|
|
|
|
3.3 |
|
|
|
|
|
|
|
|
|
|
|
3.3 |
|
|
Shareholders funds, equity interests
under IFRS |
|
|
891.8 |
|
|
|
5,110.7 |
|
|
|
3,594.7 |
|
|
|
(5,980.9 |
) |
|
|
3,616.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile to U.S. GAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
1,351.6 |
|
|
|
540.1 |
|
|
|
1,891.7 |
|
|
|
(1,891.7 |
) |
|
|
1,891.7 |
|
Deferred taxation |
|
|
(2.5 |
) |
|
|
(6.6 |
) |
|
|
(9.1 |
) |
|
|
9.1 |
|
|
|
(9.1 |
) |
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual and other |
|
|
3.6 |
|
|
|
12.5 |
|
|
|
16.1 |
|
|
|
(16.1 |
) |
|
|
16.1 |
|
Provisions other |
|
|
2.4 |
|
|
|
|
|
|
|
2.5 |
|
|
|
(2.5 |
) |
|
|
2.4 |
|
|
Shareholders equity under U.S. GAAP |
|
|
2,246.9 |
|
|
|
5,656.7 |
|
|
|
5,495.9 |
|
|
|
(7,882.1 |
) |
|
|
5,517.4 |
|
|
120
Notes to the Financial Statements
Condensed Consolidating Statements of Income
andReconciliations of Net Income from IFRS to U.S.GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
AMVESCAP |
|
|
Consolidated |
|
|
|
|
|
|
Guarantor |
|
|
Guarantor |
|
|
PLC Parent |
|
|
Elimination |
|
|
Consolidated |
|
$ millions |
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Company |
|
|
Entries |
|
|
Total |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
793.4 |
|
|
|
1,621.2 |
|
|
|
|
|
|
|
|
|
|
|
2,414.6 |
|
Operating expenses |
|
|
(568.1 |
) |
|
|
(1,042.7 |
) |
|
|
(18.4 |
) |
|
|
|
|
|
|
(1,629.2 |
) |
|
Operating profit |
|
|
225.3 |
|
|
|
578.5 |
|
|
|
(18.4 |
) |
|
|
|
|
|
|
785.4 |
|
Other net expense |
|
|
2.1 |
|
|
|
(46.5 |
) |
|
|
13.6 |
|
|
|
|
|
|
|
(30.8 |
) |
|
Profit before taxation |
|
|
227.4 |
|
|
|
532.0 |
|
|
|
(4.8 |
) |
|
|
|
|
|
|
754.6 |
|
Taxation |
|
|
(81.2 |
) |
|
|
(190.1 |
) |
|
|
7.5 |
|
|
|
|
|
|
|
(263.8 |
) |
|
Profit after taxation |
|
|
146.2 |
|
|
|
341.9 |
|
|
|
2.7 |
|
|
|
|
|
|
|
490.8 |
|
Minority interests |
|
|
|
|
|
|
(0.7 |
) |
|
|
|
|
|
|
|
|
|
|
(0.7 |
) |
|
Profit before share of profits
of subsidiaries |
|
|
146.2 |
|
|
|
341.2 |
|
|
|
2.7 |
|
|
|
|
|
|
|
490.1 |
|
Share of profits of subsidiaries |
|
|
60.9 |
|
|
|
146.2 |
|
|
|
487.4 |
|
|
|
(694.5 |
) |
|
|
|
|
|
Net profit under IFRS (equity method) |
|
|
207.1 |
|
|
|
487.4 |
|
|
|
490.1 |
|
|
|
(694.5 |
) |
|
|
490.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redundancy and reorganizations |
|
|
(3.1 |
) |
|
|
(11.8 |
) |
|
|
|
|
|
|
|
|
|
|
(14.9 |
) |
Taxation |
|
|
2.1 |
|
|
|
6.8 |
|
|
|
|
|
|
|
|
|
|
|
8.9 |
|
Retirement benefit plans |
|
|
|
|
|
|
(7.1 |
) |
|
|
|
|
|
|
|
|
|
|
(7.1 |
) |
Other |
|
|
(2.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.5 |
) |
Share of adjustment relating
to subsidiaries |
|
|
|
|
|
|
(3.5 |
) |
|
|
(15.6 |
) |
|
|
19.1 |
|
|
|
|
|
|
Net profit under U.S. GAAP |
|
|
203.6 |
|
|
|
471.8 |
|
|
|
474.5 |
|
|
|
(675.4 |
) |
|
|
474.5 |
|
|
Condensed Consolidating Statement of Cash Flows
andU.S. GAAP Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
AMVESCAP |
|
|
Consolidated |
|
|
|
|
|
|
Guarantor |
|
|
Guarantor |
|
|
PLC Parent |
|
|
Elimination |
|
|
Consolidated |
|
$ millions |
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Company |
|
|
Entries |
|
|
Total |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash inflow from operating activities |
|
|
123.5 |
|
|
|
413.9 |
|
|
|
34.5 |
|
|
|
(65.2 |
) |
|
|
506.7 |
|
Net cash outflow from investing activities |
|
|
(123.3 |
) |
|
|
(169.5 |
) |
|
|
8.5 |
|
|
|
|
|
|
|
(284.3 |
) |
Net cash outflow from financing activities |
|
|
(10.0 |
) |
|
|
(225.0 |
) |
|
|
(14.1 |
) |
|
|
65.2 |
|
|
|
(183.9 |
) |
|
Increase in cash and cash equivalents |
|
|
(9.8 |
) |
|
|
19.4 |
|
|
|
28.9 |
|
|
|
|
|
|
|
38.5 |
|
|
Annual Report 2006 121
Notes to the Financial Statements
Condensed Consolidating Statements of Income and
Reconciliations of Net Income from IFRS to U.S. GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
AMVESCAP |
|
|
Consolidated |
|
|
|
|
|
|
Guarantor |
|
|
Guarantor |
|
|
PLC Parent |
|
|
Elimination |
|
|
Consolidated |
|
$ millions |
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Company |
|
|
Entries |
|
|
Total |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
736.3 |
|
|
|
1,436.9 |
|
|
|
|
|
|
|
|
|
|
|
2,173.2 |
|
Operating expenses |
|
|
(572.0 |
) |
|
|
(1,177.9 |
) |
|
|
1.3 |
|
|
|
|
|
|
|
(1,748.6 |
) |
|
Operating profit |
|
|
164.3 |
|
|
|
259.0 |
|
|
|
1.3 |
|
|
|
|
|
|
|
424.6 |
|
Other net expense |
|
|
(31.3 |
) |
|
|
(1.4 |
) |
|
|
(31.8 |
) |
|
|
|
|
|
|
(64.5 |
) |
|
Profit before taxation |
|
|
133.0 |
|
|
|
257.6 |
|
|
|
(30.5 |
) |
|
|
|
|
|
|
360.1 |
|
Taxation |
|
|
(42.6 |
) |
|
|
(103.1 |
) |
|
|
(1.0 |
) |
|
|
|
|
|
|
(146.7 |
) |
|
Profit after taxation |
|
|
90.4 |
|
|
|
154.5 |
|
|
|
(31.5 |
) |
|
|
|
|
|
|
213.4 |
|
Minority interests |
|
|
|
|
|
|
(1.2 |
) |
|
|
|
|
|
|
|
|
|
|
(1.2 |
) |
|
Profit before share of profits of
subsidiaries |
|
|
90.4 |
|
|
|
153.3 |
|
|
|
(31.5 |
) |
|
|
|
|
|
|
212.2 |
|
Share of profits of subsidiaries |
|
|
67.6 |
|
|
|
90.4 |
|
|
|
243.7 |
|
|
|
(401.7 |
) |
|
|
|
|
|
Net profit under IFRS (equity method) |
|
|
158.0 |
|
|
|
243.7 |
|
|
|
212.2 |
|
|
|
(401.7 |
) |
|
|
212.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redundancy and reorganizations |
|
|
0.3 |
|
|
|
7.2 |
|
|
|
7.5 |
|
|
|
(7.5 |
) |
|
|
7.5 |
|
Taxation |
|
|
1.3 |
|
|
|
(4.5 |
) |
|
|
(3.2 |
) |
|
|
3.2 |
|
|
|
(3.2 |
) |
Share-based payment |
|
|
2.6 |
|
|
|
9.4 |
|
|
|
12.0 |
|
|
|
(12.0 |
) |
|
|
12.0 |
|
Other |
|
|
(5.0 |
) |
|
|
|
|
|
|
(5.0 |
) |
|
|
5.0 |
|
|
|
(5.0 |
) |
|
Net profit under U.S. GAAP |
|
|
157.2 |
|
|
|
255.8 |
|
|
|
223.5 |
|
|
|
(413.0 |
) |
|
|
223.5 |
|
|
Condensed Consolidating Statement of Cash Flows
and
U.S. GAAP Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
AMVESCAP |
|
|
Consolidated |
|
|
|
|
|
|
Guarantor |
|
|
Guarantor |
|
|
PLC Parent |
|
|
Elimination |
|
|
Consolidated |
|
$ millions |
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Company |
|
|
Entries |
|
|
Total |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash inflow from operating activities |
|
|
22.2 |
|
|
|
468.5 |
|
|
|
143.1 |
|
|
|
(203.7 |
) |
|
|
430.1 |
|
Net cash inflow from investing activities |
|
|
(22.0 |
) |
|
|
(85.8 |
) |
|
|
138.7 |
|
|
|
|
|
|
|
30.9 |
|
Net cash outflow from financing activities |
|
|
|
|
|
|
(208.8 |
) |
|
|
(281.8 |
) |
|
|
203.7 |
|
|
|
(286.9 |
) |
|
Increase in cash and cash equivalents |
|
|
0.2 |
|
|
|
173.9 |
|
|
|
|
|
|
|
|
|
|
|
174.1 |
|
|
122
Notes to the Financial Statements
Condensed Consolidating Statements of Income
and Reconciliations of Net Income from IFRS to U.S.GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
AMVESCAP |
|
|
Consolidated |
|
|
|
|
|
|
Guarantor |
|
|
Guarantor |
|
|
PLC Parent |
|
|
Elimination |
|
|
Consolidated |
|
$ millions |
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Company |
|
|
Entries |
|
|
Total |
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
787.7 |
|
|
|
1,336.8 |
|
|
|
|
|
|
|
|
|
|
|
2,124.5 |
|
Operating expenses |
|
|
(962.9 |
) |
|
|
(1,076.4 |
) |
|
|
2.1 |
|
|
|
|
|
|
|
(2,037.2 |
) |
|
Operating profit |
|
|
(175.2 |
) |
|
|
260.4 |
|
|
|
2.1 |
|
|
|
|
|
|
|
87.3 |
|
Other net expense |
|
|
(34.2 |
) |
|
|
(8.6 |
) |
|
|
(5.5 |
) |
|
|
|
|
|
|
(48.3 |
) |
|
Profit before taxation |
|
|
(209.4 |
) |
|
|
251.8 |
|
|
|
(3.4 |
) |
|
|
|
|
|
|
39.0 |
|
Taxation |
|
|
31.0 |
|
|
|
(118.8 |
) |
|
|
13.1 |
|
|
|
|
|
|
|
(74.7 |
) |
|
Loss after taxation |
|
|
(178.4 |
) |
|
|
133.0 |
|
|
|
9.7 |
|
|
|
|
|
|
|
(35.7 |
) |
Minority interests |
|
|
|
|
|
|
(0.5 |
) |
|
|
|
|
|
|
|
|
|
|
(0.5 |
) |
|
Profit before share of profits
of subsidiaries |
|
|
(178.4 |
) |
|
|
132.5 |
|
|
|
9.7 |
|
|
|
|
|
|
|
(36.2 |
) |
Share of profits of subsidiaries |
|
|
69.6 |
|
|
|
(178.4 |
) |
|
|
(45.9 |
) |
|
|
154.7 |
|
|
|
|
|
|
Net loss under IFRS (equity method) |
|
|
(108.8 |
) |
|
|
(45.9 |
) |
|
|
(36.2 |
) |
|
|
154.7 |
|
|
|
(36.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redundancy and reorganizations |
|
|
(60.3 |
) |
|
|
(9.1 |
) |
|
|
(69.3 |
) |
|
|
69.3 |
|
|
|
(69.4 |
) |
Taxation |
|
|
22.2 |
|
|
|
3.7 |
|
|
|
25.9 |
|
|
|
(25.9 |
) |
|
|
25.9 |
|
Share-based payment |
|
|
0.1 |
|
|
|
1.4 |
|
|
|
1.5 |
|
|
|
(1.5 |
) |
|
|
1.5 |
|
Other |
|
|
(4.2 |
) |
|
|
(3.5 |
) |
|
|
(7.8 |
) |
|
|
7.8 |
|
|
|
(7.7 |
) |
|
Net profit under U.S. GAAP |
|
|
(151.0 |
) |
|
|
(53.4 |
) |
|
|
(85.9 |
) |
|
|
204.4 |
|
|
|
(85.9 |
) |
|
Condensed Consolidating Statement of Cash Flows
and U.S. GAAP Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
AMVESCAP |
|
|
Consolidated |
|
|
|
|
|
|
Guarantor |
|
|
Guarantor |
|
|
PLC Parent |
|
|
Elimination |
|
|
Consolidated |
|
$ millions |
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Company |
|
|
Entries |
|
|
Total |
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash inflow from operating activities |
|
|
110.6 |
|
|
|
398.2 |
|
|
|
155.6 |
|
|
|
(459.0 |
) |
|
|
205.4 |
|
Net cash outflow from investing activities |
|
|
(33.5 |
) |
|
|
(39.8 |
) |
|
|
(129.2 |
) |
|
|
95.5 |
|
|
|
(107.0 |
) |
Net cash outflow from financing activities |
|
|
(75.0 |
) |
|
|
(388.8 |
) |
|
|
(26.4 |
) |
|
|
363.5 |
|
|
|
(126.7 |
) |
|
Decrease in cash and cash equivalents |
|
|
2.1 |
|
|
|
(30.4 |
) |
|
|
|
|
|
|
|
|
|
|
(28.3 |
) |
|
Annual Report 2006 123
Parent Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions |
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
Note |
|
|
2006 |
|
|
2005 |
|
|
Non-current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Investments in subsidiaries |
|
|
A |
|
|
$ |
5,540.6 |
|
|
$ |
5,300.5 |
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany receivables |
|
|
|
|
|
|
864.1 |
|
|
|
645.6 |
|
Other |
|
|
|
|
|
|
6.5 |
|
|
|
6.7 |
|
Cash and cash equivalents |
|
|
|
|
|
|
28.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
899.4 |
|
|
|
652.3 |
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
6,440.0 |
|
|
|
5,952.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Senior notes |
|
|
19 |
|
|
|
(843.7 |
) |
|
|
(1,142.2 |
) |
Credit facility |
|
|
19 |
|
|
|
(129.0 |
) |
|
|
(70.0 |
) |
Provisions |
|
|
C |
|
|
|
(3.0 |
) |
|
|
(31.8 |
) |
Other |
|
|
|
|
|
|
(6.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(982.5 |
) |
|
|
(1,244.0 |
) |
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany liabilities |
|
|
|
|
|
|
(688.8 |
) |
|
|
(345.3 |
) |
Senior notes |
|
|
19 |
|
|
|
(300.0 |
) |
|
|
|
|
Accruals and other creditors |
|
|
|
|
|
|
(44.8 |
) |
|
|
(19.1 |
) |
Provisions |
|
|
|
|
|
|
(34.5 |
) |
|
|
(12.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,068.1 |
) |
|
|
(377.2 |
) |
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
(2,050.6 |
) |
|
|
(1,621.2 |
) |
|
Net assets |
|
|
|
|
|
$ |
4,389.4 |
|
|
$ |
4,331.6 |
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
22 |
|
|
$ |
83.2 |
|
|
$ |
81.8 |
|
Share premium |
|
|
|
|
|
|
205.1 |
|
|
|
85.0 |
|
Other reserves |
|
|
E |
|
|
|
3,563.9 |
|
|
|
3,596.8 |
|
Retained earnings |
|
|
|
|
|
|
537.2 |
|
|
|
568.0 |
|
|
Total equity |
|
|
|
|
|
$ |
4,389.4 |
|
|
$ |
4,331.6 |
|
|
The accompanying notes form part of these financial statements.
These financial statements were approved by the Board of Directors on March 23, 2007, and were
signed on its behalf by:
Martin L. Flanagan
Loren M. Starr
124
Parent Statement of Changes in Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Capital |
|
|
Share |
|
|
Reserves |
|
|
Retained |
|
|
|
|
$ millions |
|
(Note 22) |
|
|
Premium |
|
|
(Note E) |
|
|
Earnings |
|
|
Total |
|
|
January 1, 2004 |
|
$ |
354.0 |
|
|
$ |
1,194.4 |
|
|
$ |
2,060.5 |
|
|
$ |
294.6 |
|
|
$ |
3,903.5 |
|
Profit after taxation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
356.4 |
|
|
|
356.4 |
|
Currency translation differences
resulting
from change in presentation currency |
|
|
30.5 |
|
|
|
104.7 |
|
|
|
177.7 |
|
|
|
23.0 |
|
|
|
335.9 |
|
Currency translation differences on
investments in overseas subsidiaries |
|
|
|
|
|
|
|
|
|
|
8.4 |
|
|
|
|
|
|
|
8.4 |
|
|
Total equity before transactions
with owners |
|
|
384.5 |
|
|
|
1,299.1 |
|
|
|
2,246.6 |
|
|
|
674.0 |
|
|
|
4,604.2 |
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(130.9 |
) |
|
|
(130.9 |
) |
Acquisition of subsidiary |
|
|
2.8 |
|
|
|
|
|
|
|
44.6 |
|
|
|
|
|
|
|
47.4 |
|
Exercise of options |
|
|
0.7 |
|
|
|
7.2 |
|
|
|
|
|
|
|
|
|
|
|
7.9 |
|
Acquisition earn-out |
|
|
|
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
0.1 |
|
Conversion of exchangeable shares
into ordinary shares |
|
|
0.9 |
|
|
|
38.7 |
|
|
|
|
|
|
|
|
|
|
|
39.6 |
|
|
December 31, 2004 |
|
$ |
388.9 |
|
|
$ |
1,345.1 |
|
|
$ |
2,291.2 |
|
|
$ |
543.1 |
|
|
$ |
4,568.3 |
|
|
Profit after taxation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
169.7 |
|
|
|
169.7 |
|
Currency translation differences
resulting
from change in presentation currency |
|
|
(37.5 |
) |
|
|
(129.7 |
) |
|
|
(220.3 |
) |
|
|
(15.8 |
) |
|
|
(403.3 |
) |
Currency translation differences on
investments in overseas subsidiaries |
|
|
|
|
|
|
|
|
|
|
23.9 |
|
|
|
|
|
|
|
23.9 |
|
|
Total equity before transactions
with owners |
|
|
351.4 |
|
|
|
1,215.4 |
|
|
|
2,094.8 |
|
|
|
697.0 |
|
|
|
4,358.6 |
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(129.0 |
) |
|
|
(129.0 |
) |
Exercise of options |
|
|
0.5 |
|
|
|
7.3 |
|
|
|
(0.1 |
) |
|
|
|
|
|
|
7.7 |
|
Acquisition earn-out |
|
|
0.2 |
|
|
|
2.0 |
|
|
|
|
|
|
|
|
|
|
|
2.2 |
|
Conversion of exchangeable shares
into ordinary shares |
|
|
0.7 |
|
|
|
91.4 |
|
|
|
|
|
|
|
|
|
|
|
92.1 |
|
Redenomination of share capital
(Note 22) |
|
|
(271.0 |
) |
|
|
(1,231.1 |
) |
|
|
1,502.1 |
|
|
|
|
|
|
|
|
|
|
December 31, 2005 |
|
$ |
81.8 |
|
|
$ |
85.0 |
|
|
$ |
3,596.8 |
|
|
$ |
568.0 |
|
|
$ |
4,331.6 |
|
|
Profit after taxation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64.9 |
|
|
|
64.9 |
|
Tax taken to/recycled from equity |
|
|
|
|
|
|
|
|
|
|
(0.7 |
) |
|
|
|
|
|
|
(0.7 |
) |
Currency translation differences on
investments in overseas subsidiaries |
|
|
|
|
|
|
|
|
|
|
(32.2 |
) |
|
|
44.1 |
|
|
|
11.9 |
|
|
Total equity before transactions
with owners |
|
|
81.8 |
|
|
|
85.0 |
|
|
|
3,563.9 |
|
|
|
677.0 |
|
|
|
4,407.7 |
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(139.8 |
) |
|
|
(139.8 |
) |
Exercise of options |
|
|
1.1 |
|
|
|
65.8 |
|
|
|
|
|
|
|
|
|
|
|
66.9 |
|
Acquisition earn-out |
|
|
|
|
|
|
0.8 |
|
|
|
|
|
|
|
|
|
|
|
0.8 |
|
Conversion of exchangeable shares
into ordinary shares |
|
|
0.3 |
|
|
|
53.5 |
|
|
|
|
|
|
|
|
|
|
|
53.8 |
|
|
December 31, 2006 |
|
|
83.2 |
|
|
$ |
205.1 |
|
|
$ |
3,563.9 |
|
|
$ |
537.2 |
|
|
$ |
4,389.4 |
|
|
The accompanying notes form part of these financial statements.
Annual Report 2006 125
Parent Cash Flow Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions |
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
Notes |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(Loss) for the period attributed
to equityholders |
|
|
|
|
|
$ |
64.9 |
|
|
$ |
169.7 |
|
|
$ |
356.4 |
|
Adjustments to reconcile profit to net cash
provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease/(Increase) in receivables |
|
|
|
|
|
|
1.7 |
|
|
|
2.2 |
|
|
|
(201.4 |
) |
(Decrease)/Increase in payables |
|
|
|
|
|
|
(29.3 |
) |
|
|
(28.1 |
) |
|
|
|
|
Gain on disposal of capital investments |
|
|
|
|
|
|
(1.3 |
) |
|
|
(0.7 |
) |
|
|
(0.6 |
) |
Decrease/(Increase) in current investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.2 |
|
|
|
|
|
|
|
|
Net cash inflow from operating activities |
|
|
|
|
|
|
36.0 |
|
|
|
143.1 |
|
|
|
155.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposal of long-term investments |
|
|
|
|
|
|
8.4 |
|
|
|
138.7 |
|
|
|
39.6 |
|
Purchases of shares held by employee
share ownership trusts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(95.5 |
) |
Acquisitions of businesses (2004: net
of cash acquired of $4.8 million) |
|
|
|
|
|
|
(1.4 |
) |
|
|
|
|
|
|
(73.3 |
) |
|
|
|
|
|
|
|
Net cash inflow from investing activities |
|
|
|
|
|
|
7.0 |
|
|
|
138.7 |
|
|
|
(129.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issues of ordinary share capital |
|
|
|
|
|
|
66.6 |
|
|
|
7.7 |
|
|
|
7.9 |
|
Dividends paid |
|
|
|
|
|
|
(139.8 |
) |
|
|
(129.0 |
) |
|
|
(130.9 |
) |
Credit facility, net |
|
|
19, 21 |
|
|
|
59.0 |
|
|
|
(81.0 |
) |
|
|
(79.0 |
) |
Issuance of senior notes |
|
|
19, 21 |
|
|
|
|
|
|
|
|
|
|
|
496.1 |
|
Repayment of loans |
|
|
19, 21 |
|
|
|
|
|
|
|
(79.5 |
) |
|
|
(320.5 |
) |
|
|
|
|
|
|
|
Net cash outflow from financing activities |
|
|
|
|
|
|
(14.2 |
) |
|
|
(281.8 |
) |
|
|
(26.4 |
) |
|
|
|
|
|
|
|
Increase in cash and cash equivalents |
|
|
|
|
|
$ |
28.8 |
|
|
$ |
|
|
|
$ |
|
|
Cash and cash equivalents, beginning of year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year |
|
|
|
|
|
$ |
28.8 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
|
|
|
|
|
$ |
(84.9 |
) |
|
$ |
(72.9 |
) |
|
$ |
(77.4 |
) |
Interest received |
|
|
|
|
|
$ |
68.1 |
|
|
$ |
45.6 |
|
|
$ |
69.3 |
|
Dividends received |
|
|
|
|
|
$ |
62.2 |
|
|
$ |
201.0 |
|
|
$ |
346.5 |
|
Taxes received |
|
|
|
|
|
$ |
|
|
|
$ |
0.3 |
|
|
$ |
13.0 |
|
|
The accompanying notes form part of these financial statements.
126
Notes to the Parent Financial Statements
Note A
NON-CURRENT INVESTMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in Employee |
|
|
|
|
|
|
|
|
|
|
|
|
Share |
|
|
|
|
|
|
Shares in |
|
|
Loans to |
|
|
Ownership |
|
|
|
|
|
|
|
Subsidiary |
|
|
Subsidiary |
|
|
Trusts |
|
|
|
|
$ millions |
|
Undertakings |
|
|
Undertakings |
|
|
(Note 22) |
|
|
Total |
|
|
Cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2006 |
|
|
4,621.3 |
|
|
|
326.2 |
|
|
|
413.5 |
|
|
|
5,361.0 |
|
Foreign exchange |
|
|
|
|
|
|
26.2 |
|
|
|
|
|
|
|
26.2 |
|
Additions |
|
|
247.3 |
|
|
|
|
|
|
|
189.1 |
|
|
|
436.4 |
|
Disposals |
|
|
(221.7 |
) |
|
|
|
|
|
|
(0.8 |
) |
|
|
(222.5 |
) |
Transfers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006 |
|
|
4,646.9 |
|
|
|
352.4 |
|
|
|
601.8 |
|
|
|
5,601.1 |
|
|
Provisions against investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2006 |
|
|
(60.5 |
) |
|
|
|
|
|
|
|
|
|
|
(60.5 |
) |
Foreign exchange |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006 |
|
|
(60.5 |
) |
|
|
|
|
|
|
|
|
|
|
(60.5 |
) |
|
Net book value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2006 |
|
|
4,560.8 |
|
|
|
326.2 |
|
|
|
413.5 |
|
|
|
5,300.5 |
|
|
December 31, 2006 |
|
|
4,586.4 |
|
|
|
352.4 |
|
|
|
601.8 |
|
|
|
5,540.6 |
|
|
The principal operating companies, which are all held through intermediate holding
companies, are set out in the Company Directory. The holdings in all U.K. subsidiaries
(which are all registered in England and Wales) consist of ordinary and/or preference
shares. In the case of U.S. subsidiaries, the holdings are of common stock. All material
holdings are of 100% of the equity capital, and the country of incorporation and the country
in which the subsidiary operates is the same as shown in its address.
Note B
RELATED PARTY TRANSACTIONS
The Parent engages in intercompany transactions with its subsidiaries which are all
related to the companys tax and treasury management processes. As of December 31, 2006, the
Parent had $864.1 million in receivables from subsidiaries (2005: $645.6 million). As of
December 31, 2006, the Parent had payables to its subsidiaries of $688.8 million (2005:
$345.3 million).
Annual Report 2006 127
Notes to the Parent Financial Statements
Note
C
PROVISIONS
|
|
|
|
|
$ millions |
|
|
|
|
|
January 1, 2006 |
|
|
|
|
Current |
|
|
12.8 |
|
Non-current |
|
|
31.8 |
|
|
|
|
|
Total |
|
|
44.6 |
|
Cash paid |
|
|
(1.4 |
) |
Shares issued |
|
|
(0.8 |
) |
Reduction in earn-out provision |
|
|
(5.6 |
) |
Foreign
exchange |
|
|
0.7 |
|
|
December 31, 2006 |
|
|
37.5 |
|
|
Current |
|
|
34.5 |
|
Non-Current |
|
|
3.0 |
|
|
Total |
|
|
37.5 |
|
|
Acquisition provisions include the following:
|
|
$27.9 million earn-out provision established for the acquisition of Stein Roe Asset
Management LLC. The third anniversary earn-out consideration will fall due during 2007 and will be
satisfied by the issuance of shares and the payment of cash. The full amount is included in current provisions. |
|
|
|
$6.6 million deferred acquisition provision to be paid in 2007 relates to the acquisition
of the real estate asset management business of Hypo und Vereinsbank in 2003. |
|
|
|
|
|
$ millions |
|
|
|
|
|
January 1, 2005 |
|
|
52.7 |
|
Reduction in earn-out provision |
|
|
(6.6 |
) |
Foreign
exchange |
|
|
(1.5 |
) |
|
December 31, 2005 |
|
|
44.6 |
|
|
Note
D
REDENOMINATION OF SHARE CAPITAL AND CHANGE IN FUNCTIONAL CURRENCY
As discussed in Note 22, effective December 8, 2005, the ordinary share capital of the Parent
was redenominated from 25 pence per share to 10 cents per share implemented by way of a reduction
of capital pursuant to Section 135 of the Companies Act 1985. This event marked the culmination of
a series of changes in the Parent, which began with the acquisition
of A I M Management Group Inc.
that supported the change in the functional currency from sterling to the U.S. dollar. The primary
currency in which the Parent funds its transactions and obtains its financing is the U.S. dollar.
128
Notes to the Parent Financial Statements
Note E
RESERVES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Share |
|
|
|
|
|
|
Total |
|
|
|
Tax |
|
|
Warrant |
|
|
Redemption |
|
|
Currency |
|
|
Merger |
|
|
Goodwill |
|
|
Premium |
|
|
Special |
|
|
Other |
|
$ millions |
|
Reserve |
|
|
Reserve |
|
|
Reserve |
|
|
Reserve |
|
|
Reserve |
|
|
Reserve |
|
|
Account |
|
|
Reserve |
|
|
Reserves |
|
|
January 1, 2004 |
|
|
|
|
|
|
6.0 |
|
|
|
7.0 |
|
|
|
|
|
|
|
1,964.4 |
|
|
|
4.5 |
|
|
|
78.6 |
|
|
|
|
|
|
|
2,060.5 |
|
Currency translation differences
resulting from
change in pre-
sentation currency |
|
|
|
|
|
|
0.5 |
|
|
|
0.6 |
|
|
|
|
|
|
|
169.8 |
|
|
|
|
|
|
|
6.8 |
|
|
|
|
|
|
|
177.7 |
|
|
Currency
translation
differences on
investments in
overseas
subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.3 |
|
|
|
|
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
8.4 |
|
|
Acquisition of
subsidiary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44.6 |
|
|
December 31, 2004 |
|
|
|
|
|
|
6.5 |
|
|
|
7.6 |
|
|
|
8.3 |
|
|
|
2,178.8 |
|
|
|
4.6 |
|
|
|
85.4 |
|
|
|
|
|
|
|
2,291.2 |
|
|
|
Currency
translation
differences
resulting from
change in
presentation
currency |
|
|
|
|
|
|
(0.6 |
) |
|
|
(0.7 |
) |
|
|
|
|
|
|
(210.3 |
) |
|
|
(0.5 |
) |
|
|
(8.2 |
) |
|
|
|
|
|
|
(220.3 |
) |
|
Currency
translation
differences on
investments in
overseas
subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.9 |
|
Exercise of options |
|
|
|
|
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.1 |
) |
Redenomination
of share capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,502.1 |
|
|
|
1,502.1 |
|
|
December 31, 2005 |
|
|
|
|
|
|
5.8 |
|
|
|
6.9 |
|
|
|
32.2 |
|
|
|
1,968.5 |
|
|
|
4.1 |
|
|
|
77.2 |
|
|
|
1,502.1 |
|
|
|
3,596.8 |
|
|
Currency
translation
differences on
investments in
overseas
subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32.2 |
) |
Tax taken
to/recycled from
equity |
|
|
(0.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.7 |
) |
|
December 31, 2006 |
|
|
(0.7 |
) |
|
|
5.8 |
|
|
|
6.9 |
|
|
|
|
|
|
|
1,968.5 |
|
|
|
4.1 |
|
|
|
77.2 |
|
|
|
1,502.1 |
|
|
|
3,563.9 |
|
|
Annual Report 2006 129
Five-Year Summary
The following tables present selected consolidated financial information of AMVESCAP as of
and for each of the five fiscal years in the period ended December 31, 2006. The financial
statement information as of and for each of the years in the five-year period ended December 31,
2006 has been derived from our audited Consolidated Financial Statements in the Financials
section of this annual report. The Consolidated Financial Statements for the years ended December
31, 2006, 2005 and 2004 are prepared in accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union and the Companies Act 1985, as amended (the Companies
Act), which differ in certain respects from U.S. generally accepted accounting principles (U.S.
GAAP). Previously the company followed generally accepted accounting practice in the United Kingdom
(U.K. GAAP), which also differs in certain respects from U.S. GAAP, and accordingly the selected
financial data for the years ended December 31, 2003 and 2002 presented below has been derived from
U.K. GAAP Consolidated Financial Statements, which are not comparable to the information prepared
in accordance with IFRS. For a discussion of the principal differences and reconciliations between
IFRS and U.S. GAAP, see Financial Overview and Note 32 to the Consolidated Financial Statements,
included elsewhere herein. The selected consolidated financial information should be read together
with the Consolidated Financial Statements and related notes beginning on page 69 of this annual
report and the Financial Overview, included elsewhere herein.
The presentation currency of the company changed from pounds sterling to U.S. dollars effective
December 8, 2005. The comparative figures have been presented in U.S. dollars applying the exchange
rates outlined in Note 31 to the Consolidated Financial Statements, included elsewhere herein. For
the foreign exchange rates used in the presentation of the years 2003 and 2002, see footnote 4 on
page 133. We publish our Consolidated Financial Statements in U.S. dollars. References in this
annual report to U.S. dollars, $ or cents are to United States currency and references to
pounds sterling, £, pence or p are to United Kingdom currency. A discussion of the effects
of currency translations and fluctuations on our results is contained in Financial Overview,
included elsewhere herein.
130
Five-Year Summary
Amounts in accordance with IFRS:
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions, except per share data |
|
|
|
|
|
|
|
|
|
Year Ended December 31, (1) |
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Profit and loss data: |
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues |
|
|
3,241.4 |
|
|
|
2,879.2 |
|
|
|
2,757.5 |
|
Third-party distribution, service and advisory fees |
|
|
(826.8 |
) |
|
|
(706.0 |
) |
|
|
(633.0 |
) |
|
|
|
Net Revenues |
|
|
2,414.6 |
|
|
|
2,173.2 |
|
|
|
2,124.5 |
|
Operating profit |
|
|
785.4 |
|
|
|
424.6 |
|
|
|
87.3 |
|
Profit before taxation |
|
|
754.6 |
|
|
|
360.1 |
|
|
|
39.0 |
|
Profit/(loss) after taxation |
|
|
490.8 |
|
|
|
213.4 |
|
|
|
(35.7 |
) |
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
basic |
|
|
0.62 |
|
|
|
0.27 |
|
|
|
(0.05 |
) |
diluted |
|
|
0.60 |
|
|
|
0.26 |
|
|
|
(0.05 |
) |
Earnings per share before restructuring charge (2005)
and U.S. regulatory settlement (2004) (2): |
|
|
|
|
|
|
|
|
|
|
|
|
basic |
|
|
0.62 |
|
|
|
0.34 |
|
|
|
0.35 |
|
diluted |
|
|
0.60 |
|
|
|
0.34 |
|
|
|
0.35 |
|
Balance sheet data: |
|
|
|
|
|
|
|
|
|
|
|
|
Net current assets |
|
|
(85.6 |
) |
|
|
149.7 |
|
|
|
13.6 |
|
Goodwill |
|
|
5,006.6 |
|
|
|
4,213.6 |
|
|
|
4,317.4 |
|
Total assets |
|
|
9,292.0 |
|
|
|
7,584.4 |
|
|
|
7,419.6 |
|
Current maturities of debt |
|
|
300.0 |
|
|
|
10.0 |
|
|
|
79.5 |
|
Long-term debt recourse |
|
|
972.7 |
|
|
|
1,212.2 |
|
|
|
1,302.2 |
|
Capital and reserves |
|
|
4,275.1 |
|
|
|
3,616.3 |
|
|
|
3,542.9 |
|
Other data: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operations |
|
|
506.7 |
|
|
|
430.1 |
|
|
|
205.4 |
|
Total dividends |
|
|
143.6 |
|
|
|
134.1 |
|
|
|
135.7 |
|
Dividends
per share(5) |
|
|
0.181 |
|
|
|
0.173 |
|
|
|
0.139 |
|
|
Footnotes related to this table are located on page 133.
Annual Report 2006 131
Five-Year Summary
Amounts in Accordance with U.K. GAAP:
|
|
|
|
|
|
|
|
|
$ millions, except per share data |
|
|
|
|
|
|
Year ended December 31, (1,4) |
|
2003 |
|
|
2002 |
|
|
Profit and loss data: |
|
|
|
|
|
|
|
|
Total Revenues |
|
|
2,342.0 |
|
|
|
2,408.5 |
|
Third-party distribution, service and advisory fees |
|
|
(440.9 |
) |
|
|
(394.5 |
) |
|
|
|
Net Revenues |
|
|
1,901.1 |
|
|
|
2,014.0 |
|
Operating profit |
|
|
124.0 |
|
|
|
215.2 |
|
Profit before taxation |
|
|
57.7 |
|
|
|
145.5 |
|
Profit/(Loss) after taxation |
|
|
(29.7 |
) |
|
|
18.8 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
basic |
|
|
(0.04 |
) |
|
|
0.02 |
|
diluted |
|
|
(0.04 |
) |
|
|
0.02 |
|
Earnings per share before goodwill amortization and exceptional items (3): |
|
|
|
|
|
|
|
|
basic |
|
|
0.39 |
|
|
|
0.41 |
|
diluted |
|
|
0.38 |
|
|
|
0.41 |
|
Balance sheet data: |
|
|
|
|
|
|
|
|
Net current assets |
|
|
404.5 |
|
|
|
26.4 |
|
Goodwill |
|
|
4,262.9 |
|
|
|
4,070.0 |
|
Total assets |
|
|
6,986.8 |
|
|
|
6,399.3 |
|
Current maturities of debt |
|
|
|
|
|
|
355.5 |
|
Long-term debt recourse |
|
|
1,290.3 |
|
|
|
953.5 |
|
Capital and reserves |
|
|
3,650.2 |
|
|
|
3,399.6 |
|
Other data: |
|
|
|
|
|
|
|
|
Cash provided by operations |
|
|
558.8 |
|
|
|
669.3 |
|
Total dividends |
|
|
161.4 |
|
|
|
145.4 |
|
Dividends
per share(5) |
|
|
0.189 |
|
|
|
0.172 |
|
|
Footnotes related to this table are located on page 133.
Amounts in Accordance with U.S. GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions, except per share data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, (1,4) |
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
2003 |
|
|
2002 |
|
|
Profit and loss data *: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) |
|
|
474.5 |
|
|
|
223.6 |
|
|
|
(85.9 |
) |
|
|
229.6 |
|
|
|
242.8 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic |
|
|
0.60 |
|
|
|
0.28 |
|
|
|
(0.11 |
) |
|
|
0.29 |
|
|
|
0.30 |
|
diluted |
|
|
0.58 |
|
|
|
0.28 |
|
|
|
(0.11 |
) |
|
|
0.28 |
|
|
|
0.30 |
|
Balance sheet data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
6,487.4 |
|
|
|
6,105.3 |
|
|
|
6,265.9 |
|
|
|
6,156.8 |
|
|
|
5,680.8 |
|
Total assets |
|
|
10,704.6 |
|
|
|
9,467.0 |
|
|
|
9,382.9 |
|
|
|
9,188.5 |
|
|
|
8,394.0 |
|
Total long-term debt recourse |
|
|
1,272.7 |
|
|
|
1,222.2 |
|
|
|
1,381.6 |
|
|
|
1,290.3 |
|
|
|
1,309.0 |
|
Total long-term debt non-recourse |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
180.3 |
|
|
|
308.6 |
|
Capital and reserves |
|
|
6,168.9 |
|
|
|
5,514.1 |
|
|
|
5,519.7 |
|
|
|
5,717.3 |
|
|
|
5,139.5 |
|
|
* |
|
Earnings per share before restructuring charge (2005) and U.S. regulatory settlement (2004)
are non-GAAP measures that are not permissible under
U.S. GAAP and accordingly are not presented in the table above. See Note 32 to the Consolidated
Financial Statements for a reconciliation of Profit
(Loss) after minority interests under IFRS to Net income under U.S. GAAP and a reconciliation of
Shareholders funds, equity interests, under IFRS to Shareholders equity under U.S. GAAP. |
132
Five-year Summary
Other Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
2003 |
|
|
2002 |
|
|
Assets under management ($
billions) |
|
|
462.6 |
|
|
|
386.3 |
|
|
|
382.1 |
|
|
|
370.6 |
|
|
|
332.6 |
|
Headcount at December 31 (units) |
|
|
5,574 |
|
|
|
5,798 |
|
|
|
6,693 |
|
|
|
6,747 |
|
|
|
7,581 |
|
Total ordinary shares outstanding
(millions) |
|
|
831.9 |
|
|
|
818.1 |
|
|
|
810.7 |
|
|
|
801.1 |
|
|
|
794.5 |
|
|
(1) |
|
Includes financial data attributable to acquired businesses from the respective
dates of purchase and gives effect to businesses disposed of from the
respective dates of disposition. See Financial Overview, included elsewhere herein. |
|
(2) |
|
We believe profit after taxation before the restructuring charge (2005) and the
U.S. regulatory settlement (2004) is a more appropriate income amount
for the calculation of earnings per share, since they both represent a more consistent
measure of our year-by-year performance. This measure should
be evaluated in the context of our IFRS results. See Note 3 to our Consolidated Financial
Statements for a discussion of the restructuring charge
and the U.S. regulatory settlement charge that have been eliminated from our operating
profit for the years ended December 31, 2005 and 2004.
Reconciliations of earnings per share to earnings per share before the restructuring
charge (2005) and the U.S. regulatory settlement (2004) are
presented below. |
|
(3) |
|
We believe that when presenting U.K. GAAP results, operating profit before
goodwill amortization and exceptional items is a more appropriate income
amount for presentation, and profit after taxation before goodwill amortization and
exceptional items is a more appropriate income amount for the
calculation of earnings per share, since they both represent a more consistent measure of
our year-by-year performance. These measures should be
evaluated in the context of our U.K. GAAP results. The U.K. GAAP income statements for
the years ended December 31, 2003 and 2002 included
the following exceptional items: |
|
|
|
|
|
|
|
|
|
$ millions |
|
|
|
|
|
|
Year Ended December 31, |
|
2003 |
|
|
2002 |
|
|
Redundancy and reorganization |
|
|
81.3 |
|
|
|
69.8 |
|
U.S. regulatory investigation |
|
|
30.7 |
|
|
|
|
|
Acquisition retention costs |
|
|
3.9 |
|
|
|
|
|
Onerous lease costs |
|
|
16.0 |
|
|
|
8.0 |
|
Other* |
|
|
12.0 |
|
|
|
30.9 |
|
|
|
|
|
143.9 |
|
|
|
108.7 |
|
|
* |
|
Includes information technology-related costs and costs related to
certain terminated initiatives. Reconciliations of operating profit to
operating profit before goodwill amortization and exceptional items
(2003 and 2002) are presented below. Reconciliations of earnings per
share to earnings per share before goodwill amortization and exceptional
items (2003 and 2002) are presented below. |
|
(4) |
|
In presenting the financial information for the years 2003 and 2002, the
period-end prevailing U.S. dollar exchange rates were used to translate the
balance sheet selected financial data from sterling to U.S. dollars, and the average
prevailing U.S. dollar exchange rates for the applicable periods
were used to translate the profit and loss selected financial data from sterling to
U.S. dollars, as presented below: |
|
|
2003 - period-end: .57,
average: .61 |
|
|
2002 - period-end: .62,
average: .67 |
|
(5) |
|
Prior to the interim dividend declaration for 2006, cash dividends were
declared in sterling. Prior periods presented in these tables reflect
translations from sterling to U.S. dollars using the foreign exchange rates
outlined in Note 31 to the Consolidated Financial Statements and
in footnote 4 to these tables. |
Annual Report 2006 133
Five-Year Summary
Reconciliation Between Earnings per Share Before the Restructuring
Charge (2005) and the U.S. Regulatory Settlement (2004) and Earnings per
Share:
|
|
|
|
|
|
|
|
|
$ millions, except per share data |
|
|
|
|
|
|
Year Ended December 31, (1) |
|
2005 |
(2) |
|
2004 |
|
|
Basic earnings per share |
|
$ |
0.27 |
|
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
0.26 |
|
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
Profit/(Loss) after taxation |
|
$ |
213.4 |
|
|
$ |
(35.7 |
) |
Minority interests |
|
|
(1.2 |
) |
|
|
(0.5 |
) |
Restructuring charge (2) |
|
|
75.7 |
|
|
|
|
|
U.S. regulatory settlement (2) |
|
|
|
|
|
|
413.2 |
|
Restructuring charge (2005) and U.S. regulatory settlement (2004)
(2) tax benefit |
|
|
(17.4 |
) |
|
|
(95.0 |
) |
|
|
|
|
|
|
|
|
|
|
Profit after taxation before the restructuring charge (2005) and
U.S. regulatory settlement (2004) (2) |
|
$ |
270.5 |
|
|
$ |
282.0 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares |
|
|
|
|
|
|
|
|
Basic |
|
|
794.0 |
|
|
|
802.2 |
|
Diluted |
|
|
805.1 |
|
|
|
806.7 |
|
|
|
|
|
|
|
|
|
|
Earnings per share before restructuring
charge (2005) and U.S. regulatory settlement (2004) (2): |
|
|
|
|
|
|
|
|
basic |
|
$ |
0.34 |
|
|
$ |
0.35 |
|
diluted |
|
$ |
0.34 |
|
|
$ |
0.35 |
|
|
|
Footnotes related to this table are located on page 133. |
Reconciliation Between Earnings per Share Before
Goodwill Amortization and Exceptional Items and Earnings per
Share:
|
|
|
|
|
|
|
|
|
$ millions, except per share data |
|
|
|
|
|
|
Year Ended December 31, (1) |
|
2003 |
|
|
2002 |
|
|
Basic earnings per share |
|
$ |
(0.04 |
) |
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
(0.04 |
) |
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
|
(Loss)/Profit after taxation |
|
$ |
(29.7 |
) |
|
$ |
18.8 |
|
Goodwill amortization (3) |
|
|
244.3 |
|
|
|
225.0 |
|
Exceptional items (3) |
|
|
143.9 |
|
|
|
108.7 |
|
Exceptional items (3) tax benefit |
|
|
(49.2 |
) |
|
|
(20.2 |
) |
|
|
|
Profit after taxation before goodwill amortization and exceptional items (3) |
|
$ |
309.3 |
|
|
$ |
332.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares |
|
|
|
|
|
|
|
|
Basic |
|
|
802.9 |
|
|
|
810.0 |
|
Diluted |
|
|
810.4 |
|
|
|
819.5 |
|
|
|
|
|
|
|
|
|
|
Earnings per share before goodwill amortization and exceptional items (3) |
|
|
|
|
|
|
|
|
basic |
|
$ |
0.39 |
|
|
$ |
0.41 |
|
diluted |
|
$ |
0.38 |
|
|
$ |
0.41 |
|
|
|
Footnotes related to this table are located on page 133. |
134
Five-Year Summary
Reconciliation Between Operating Profit Before the Restructuring
Charge (2005) and the U.S. Regulatory Settlement (2004) and Operating
Profit:
|
|
|
|
|
|
|
|
|
$ millions |
|
|
|
|
|
|
Year Ended December 31, (1) |
|
2005 |
|
|
2004 |
|
|
Operating profit |
|
$ |
424.6 |
|
|
$ |
87.3 |
|
Restructuring charge (2) |
|
|
75.7 |
|
|
|
|
|
U.S. regulatory settlement (2) |
|
|
|
|
|
|
413.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before the restructuring charge (2005) and
the U.S. regulatory settlement (2004) |
|
$ |
500.3 |
|
|
$ |
500.5 |
|
|
|
Footnotes related to this table are located on page 133. |
Management excludes from its evaluation of the business the effects of any one-time,
non-recurring items that are unusual due to their size or incidence so that the underlying
results and performance of the company can be compared against both budgeted/forecasted
results and historical results. The company had no such unusual, non-recurring items in
2006; however, the 2005 restructuring charge and the 2004 U.S. regulatory settlement charge
are examples of such items that were accordingly excluded from the calculation of total
operating expenses and operating profit. Including these costs within the companys total
operating expenses or operating profit would inflate the companys expense base thereby
impairing the companys ability to forecast future cost levels. Excluding these items allows
management to analyze these measures, including all relevant recurring items, using
equivalent operating metrics from year to year. The significant limitation associated with
excluding such items from these measures is that it results in measures that differ from
total operating expenses and operating profit, respectively, as presented in the financial
statements for those years. The company compensates for this limitation by preparing
reconciliations to the more established measures and also detailed cash flow statements
inclusive of items related to the restructuring and the U.S. regulatory settlement.
Management uses total operating expenses and operating profit exclusive of one-time,
non-recurring items as performance and cash flow metrics for internal monitoring and
planning purposes, including the preparation of annual operating budget and monthly
operating reviews, as well as to facilitate analysis of future investment decisions. In
addition, these metrics are important to allow management to evaluate profitability and make
performance trend comparisons between the company and its competitors. Further, the company
believes these metrics are frequently used by securities analysts, investors and other
interested parties in the evaluation of companies in its industry.
Reconciliation Between Operating Profit Before Goodwill
Amortization and Exceptional Items and Operating Profit:
|
|
|
|
|
|
|
|
|
$ millions |
|
|
|
|
|
|
Year Ended December 31, (1) |
|
2003 |
|
|
2002 |
|
|
Operating profit |
|
$ |
124.0 |
|
|
$ |
215.2 |
|
Goodwill amortization (3) |
|
|
244.3 |
|
|
|
225.0 |
|
Exceptional items (3) |
|
|
143.9 |
|
|
|
108.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before goodwill amortization and exceptional items (3) |
|
$ |
512.2 |
|
|
$ |
548.9 |
|
|
|
Footnotes related to this table are located on page 133. |
Annual Report 2006 135
Summary Quarterly Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions, except per share data |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
March 31 |
|
|
June 30 |
|
|
September 30 |
|
|
December 31 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management |
|
$ |
620.1 |
|
|
$ |
625.9 |
|
|
$ |
641.7 |
|
|
$ |
722.0 |
|
Service and distribution |
|
|
135.6 |
|
|
|
133.0 |
|
|
|
130.8 |
|
|
|
135.5 |
|
Other |
|
|
27.3 |
|
|
|
29.4 |
|
|
|
18.8 |
|
|
|
21.3 |
|
|
|
|
Total Revenues |
|
|
783.0 |
|
|
|
788.3 |
|
|
|
791.3 |
|
|
|
878.8 |
|
Third-party distribution,
service and advisory fees |
|
|
(198.9 |
) |
|
|
(200.2 |
) |
|
|
(204.2 |
) |
|
|
(223.5 |
) |
|
|
|
Net Revenues |
|
|
584.1 |
|
|
|
588.1 |
|
|
|
587.1 |
|
|
|
655.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation |
|
|
253.4 |
|
|
|
251.4 |
|
|
|
288.3 |
|
|
|
268.6 |
|
Marketing |
|
|
36.2 |
|
|
|
35.6 |
|
|
|
31.6 |
|
|
|
37.2 |
|
Property and office |
|
|
27.0 |
|
|
|
27.0 |
|
|
|
27.1 |
|
|
|
28.6 |
|
Technology and telecommunications |
|
|
32.1 |
|
|
|
30.1 |
|
|
|
30.5 |
|
|
|
30.5 |
|
General and administrative |
|
|
48.8 |
|
|
|
52.3 |
|
|
|
52.8 |
|
|
|
40.1 |
|
|
|
|
Total Operating Expenses |
|
|
397.5 |
|
|
|
396.4 |
|
|
|
430.3 |
|
|
|
405.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
|
186.6 |
|
|
|
191.7 |
|
|
|
156.8 |
|
|
|
250.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other net income/(expense) |
|
|
(14.9 |
) |
|
|
(7.5 |
) |
|
|
(6.3 |
) |
|
|
(2.1 |
) |
|
|
|
Profit before taxation |
|
|
171.7 |
|
|
|
184.2 |
|
|
|
150.5 |
|
|
|
248.2 |
|
Taxation |
|
|
(63.4 |
) |
|
|
(66.8 |
) |
|
|
(48.3 |
) |
|
|
(85.3 |
) |
|
Profit after taxation |
|
$ |
108.3 |
|
|
$ |
117.4 |
|
|
$ |
102.2 |
|
|
$ |
162.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic |
|
$ |
0.14 |
|
|
$ |
0.15 |
|
|
$ |
0.13 |
|
|
$ |
0.21 |
|
diluted |
|
$ |
0.13 |
|
|
$ |
0.15 |
|
|
$ |
0.13 |
|
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating margin |
|
|
31.9 |
% |
|
|
32.6 |
% |
|
|
26.7 |
% |
|
|
38.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets under management at period end
($ billions) |
|
|
410.9 |
|
|
|
413.8 |
|
|
|
440.6 |
|
|
|
462.6 |
|
Headcount (units) |
|
|
5,586 |
|
|
|
5,485 |
|
|
|
5,499 |
|
|
|
5,574 |
|
|
|
|
|
|
|
Net operating margin is equal to operating profit divided by net revenues. |
136
Summary Quarterly Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions, except per share data |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
March 31 |
|
|
June 30 |
|
|
September 30 |
|
|
December 31 |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management |
|
$ |
541.8 |
|
|
$ |
542.5 |
|
|
$ |
555.7 |
|
|
$ |
573.6 |
|
Service and distribution |
|
|
142.4 |
|
|
|
140.5 |
|
|
|
125.9 |
|
|
|
129.3 |
|
Other |
|
|
25.9 |
|
|
|
34.8 |
|
|
|
35.0 |
|
|
|
31.7 |
|
|
|
|
Total Revenues |
|
|
710.1 |
|
|
|
717.8 |
|
|
|
716.6 |
|
|
|
734.6 |
|
Third-party distribution,
service and advisory fees |
|
|
(172.3 |
) |
|
|
(170.0 |
) |
|
|
(180.4 |
) |
|
|
(183.2 |
) |
|
|
|
Net Revenues |
|
|
537.8 |
|
|
|
547.8 |
|
|
|
536.2 |
|
|
|
551.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation |
|
|
254.9 |
|
|
|
259.1 |
|
|
|
267.3 |
|
|
|
263.4 |
|
Marketing |
|
|
39.6 |
|
|
|
38.2 |
|
|
|
28.2 |
|
|
|
33.6 |
|
Property and office |
|
|
31.3 |
|
|
|
31.1 |
|
|
|
40.9 |
|
|
|
26.9 |
|
Technology and telecommunications |
|
|
37.0 |
|
|
|
36.9 |
|
|
|
33.4 |
|
|
|
31.6 |
|
General and administrative |
|
|
45.8 |
|
|
|
48.6 |
|
|
|
53.3 |
|
|
|
71.8 |
|
Restructuring charge |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75.7 |
|
|
|
|
Total Operating Expenses |
|
|
408.6 |
|
|
|
413.9 |
|
|
|
423.1 |
|
|
|
503.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
|
129.2 |
|
|
|
133.9 |
|
|
|
113.1 |
|
|
|
48.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other net income/(expense) |
|
|
(18.4 |
) |
|
|
(22.3 |
) |
|
|
6.0 |
|
|
|
(29.8 |
) |
|
|
|
Profit before taxation |
|
|
110.8 |
|
|
|
111.6 |
|
|
|
119.1 |
|
|
|
18.6 |
|
Taxation |
|
|
(39.6 |
) |
|
|
(39.9 |
) |
|
|
(43.8 |
) |
|
|
(23.4 |
) |
|
Profit/(Loss) after taxation |
|
$ |
71.2 |
|
|
$ |
71.7 |
|
|
$ |
75.3 |
|
|
$ |
(4.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic and diluted |
|
$ |
0.09 |
|
|
$ |
0.09 |
|
|
$ |
0.09 |
|
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share before
restructuring charge : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic and diluted |
|
$ |
0.09 |
|
|
$ |
0.09 |
|
|
$ |
0.09 |
|
|
$ |
0.07 |
|
Net operating margin |
|
|
24.0 |
% |
|
|
24.4 |
% |
|
|
21.1 |
% |
|
|
22.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets under management at period end
($ billions) |
|
|
375.4 |
|
|
|
373.2 |
|
|
|
380.5 |
|
|
|
386.3 |
|
Headcount (units) |
|
|
6,586 |
|
|
|
6,519 |
|
|
|
5,983 |
|
|
|
5,798 |
|
|
|
|
|
|
|
Net operating margin is equal to operating profit before the restructuring
charge divided by net revenues. See Five-Year Summary for reconciliations of
operating profit and earnings per share before the restructuring charge to
operating profit and earnings per share and important additional disclosures. |
Annual Report 2006 137
Shareholder Information
Investor Information
Documents on Display
We are subject to the informational requirements of the U.S. Securities and Exchange Commission
applicable to foreign private issuers and fulfill the obligation by fling with or furnishing
reports to the SEC. You may read and copy any document we file with or furnish to the SEC without
charge at the SECs public reference room at 100 F Street, N.E., Washington, D.C. 20549. Copies of
these materials may also be obtained via the SECs Web site at www.sec.gov and by mail from
the Public Reference Branch of the SEC at the above address, at prescribed rates. Please call the
SEC at l-800-SEC-0330 for further information on the public reference room.
Share Price Information
The latest information on the AMVESCAP PLC share price is available on various financial
information Web sites. The share price is also reported in a number of major news publications in
London, New York and Toronto, and in other newspapers throughout the world.
Nature of Trading Market and Price History
Our Ordinary Shares are listed on the Official List of The U.K. Listing Authority and are
traded on the London Stock Exchange under the symbol AVZ.
Our American Depositary Shares are listed for trading on the NYSE also under the symbol AVZ. Each
of our American Depositary Shares represents the right to receive two Ordinary Shares deposited
with The Bank of New York (the Depositary). The Depositary issues American Depositary Receipts,
which may represent any number of American Depositary Shares.
We furnish the Depositary with annual reports containing a review of operations, audited
consolidated financial statements prepared in accordance with IFRS and an opinion on the
Consolidated Financial Statements by our independent auditors. We also furnish the Depositary with
semi-annual reports containing unaudited interim consolidated financial information prepared in
accordance with IFRS. The Depositary arranges for the mailing of our reports to all record holders
of American Depositary Shares. In addition, we furnish the Depositary with copies of all notices of
shareholders meetings and other reports and communications that are distributed generally to our
shareholders, and the Depositary arranges for the mailing of such notices, reports and
communications to all record holders of American Depositary Shares.
We also have Exchangeable Shares which were issued by one of our subsidiaries and are listed for
trading on The Toronto Stock Exchange under the symbol AVZ. Voting rights of holders of
Exchangeable Shares and a description of the Exchangeable Shares are set forth in Memorandum and
Articles of Association Rights attaching to our shares below.
Our 4.500% Senior Notes due 2009, our 5.375% Senior Notes due 2013 and our 5.375% Senior Notes due
2014 are listed on the Luxembourg Stock Exchange.
The following table sets forth, for the periods indicated, the high and low reported sale prices
for the Ordinary Shares on the London Stock Exchange, based on its Daily Price Official List, and
the high and low reported sale prices for the American Depositary Shares on the NYSE.
138
Shareholder Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
American Depositary |
|
|
|
|
|
|
|
Ordinary Shares |
|
|
Shares (1) |
|
|
|
|
|
|
|
High |
|
|
Low |
|
|
High |
|
|
Low |
|
|
February |
|
|
2007 |
|
|
|
662.00p |
|
|
|
585.50p |
|
|
$ |
25.97 |
|
|
$ |
23.74 |
|
January |
|
|
2007 |
|
|
|
633.00p |
|
|
|
581.50p |
|
|
$ |
24.96 |
|
|
$ |
22.77 |
|
December |
|
|
2006 |
|
|
|
606.00p |
|
|
|
534.50p |
|
|
$ |
24.65 |
|
|
$ |
21.49 |
|
November |
|
|
2006 |
|
|
|
615.00p |
|
|
|
533.00p |
|
|
$ |
23.26 |
|
|
$ |
21.16 |
|
October |
|
|
2006 |
|
|
|
643.50p |
|
|
|
569.50p |
|
|
$ |
23.90 |
|
|
$ |
22.00 |
|
September |
|
|
2006 |
|
|
|
585.00p |
|
|
|
517.75p |
|
|
$ |
22.06 |
|
|
$ |
19.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
American Depositary |
|
|
|
|
|
|
|
Ordinary Shares |
|
|
Shares (1) |
|
|
|
|
|
|
|
High |
|
|
Low |
|
|
High |
|
|
Low |
|
|
Fourth Quarter |
|
|
2006 |
|
|
|
643.50p |
|
|
|
533.00p |
|
|
$ |
24.65 |
|
|
$ |
21.16 |
|
Third Quarter |
|
|
2006 |
|
|
|
585.00p |
|
|
|
453.00p |
|
|
$ |
22.06 |
|
|
$ |
16.84 |
|
Second Quarter |
|
|
2006 |
|
|
|
633.00p |
|
|
|
441.50p |
|
|
$ |
23.01 |
|
|
$ |
16.63 |
|
First Quarter |
|
|
2006 |
|
|
|
581.00p |
|
|
|
438.50p |
|
|
$ |
20.33 |
|
|
$ |
15.87 |
|
Fourth Quarter |
|
|
2005 |
|
|
|
449.75p |
|
|
|
325.00p |
|
|
$ |
15.87 |
|
|
$ |
11.58 |
|
Third Quarter |
|
|
2005 |
|
|
|
434.00p |
|
|
|
330.50p |
|
|
$ |
15.47 |
|
|
$ |
12.14 |
|
Second Quarter |
|
|
2005 |
|
|
|
347.75p |
|
|
|
293.00p |
|
|
$ |
12.86 |
|
|
$ |
11.21 |
|
First Quarter |
|
|
2005 |
|
|
|
372.75p |
|
|
|
305.75p |
|
|
$ |
14.06 |
|
|
$ |
11.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
American Depositary |
|
|
|
Ordinary Shares |
|
|
Shares (1) |
|
|
|
High |
|
|
Low |
|
|
High |
|
|
Low |
|
|
2006 |
|
|
643.50p |
|
|
|
438.50p |
|
|
$ |
24.65 |
|
|
$ |
15.87 |
|
2005 |
|
|
449.75p |
|
|
|
293.00p |
|
|
$ |
15.87 |
|
|
$ |
11.21 |
|
2004 |
|
|
464.00p |
|
|
|
257.50p |
|
|
$ |
17.28 |
|
|
$ |
9.81 |
|
2003 |
|
|
570.00p |
|
|
|
231.00p |
|
|
$ |
18.04 |
|
|
$ |
7.92 |
|
2002 |
|
|
1,120.00p |
|
|
|
239.00p |
|
|
$ |
31.10 |
|
|
$ |
7.98 |
|
|
|
|
|
(1) |
|
One American Depositary Share represents two Ordinary Shares. |
Important Information Regarding Dividend Payments
Commencing from the announcement of the 2006 interim results, AMVESCAP declares dividends in
U.S. dollars. The sterling conversion rate will be announced at that time (as a guide only), with
the final conversion rate being set on the
dividend record date. The payment of the dividend will be in sterling, unless shareholders elect to
receive their dividends in U.S. dollars. Elections to receive the dividend payment in U.S. dollars
must be received no later than the record date for payment. Copies of the forms of election can be
obtained from Capita Registrars or from our Web site at www.amvescap.com.
Annual Report 2006 139
Shareholder Information
Major Shareholders
The following table discloses, as of February 28, 2007, the number of Ordinary Shares
beneficially owned by each person whom we know to be a beneficial owner of 3% or more of our
outstanding Ordinary Shares:
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially Owned and Percentage of Class (1,2) |
|
|
|
|
|
|
|
Percent of Outstanding |
|
|
|
Ordinary Shares |
|
|
Ordinary Shares |
|
|
Franklin Resources Inc., and its affiliates |
|
|
60,110,981 |
|
|
|
7.18 |
|
Robert H. Graham (3) |
|
|
25,299,925 |
|
|
|
3.02 |
|
Legal and General Investment Management |
|
|
27,905,563 |
|
|
|
3.33 |
|
|
|
|
|
(1) |
|
Ordinary Shares include shares held as American Depositary Shares. In computing the number
of shares beneficially owned by a person, as required by General Instruction F to Form 20-F,
each person is also considered to be the beneficial owner of securities that such person has
the right to acquire within 60 days by option or other agreement, including by exchange of
Exchangeable Shares. In computing percentage ownership, the securities that such person has
the right to acquire within 60 days are, as to such beneficial owner, deemed outstanding;
these shares, however, are not deemed outstanding for purposes of computing the percentage
ownership of any other person. |
|
(2) |
|
Major shareholders do not have different voting rights from owners of less than 3% of our
Ordinary Shares. |
|
(3) |
|
Assumes exercise and retention of 900,000 share options having the right to be acquired within
60 days of February 28, 2007. |
A total of 837,290,748 Ordinary Shares were issued and outstanding on February 28,
2007, of which 5,534,595 Ordinary Shares were held of record by holders in the U.S. (excluding
shares held in American Depositary Receipt form) and 97,636,028 Ordinary Shares were represented by
American Depositary Shares evidenced by American Depositary Receipts issued by the Depositary. On
February 28, 2007, the number of holders of record of the Ordinary Shares was 11,369, the number of
holders of record of Ordinary Shares in the U.S. was 122 and the number of registered holders of
the American Depositary Shares was 39. Because certain of these Ordinary Shares and American
Depositary Shares were held by brokers or other nominees, the number of holders of record or
registered holders in the U.S. is not representative of the number of beneficial holders in the
U.S. or of the residence of the beneficial holders.
We are not directly or indirectly owned or controlled by any other corporations, foreign
governments or other persons. We are not aware of any arrangement the operation of which might
result in a change in control of the company.
Memorandum and Articles of Association
AMVESCAP PLC is registered in England and Wales under the number 308372. Our Memorandum of
Association provides that our principal objects are, among other things, to carry on the
business of an investment holding company and to subscribe for, purchase or otherwise acquire and
hold shares, debentures or other securities of any other company or body corporate and to acquire
and undertake the whole or any part of the business, property and liabilities of any company or
body corporate carrying on any business and to sell or deal in or otherwise dispose of any shares,
debentures or other securities or property including any business or undertaking of any other
company or any other assets or liabilities. Our objects are set out in full in clause 4 of our
Memorandum of Association.
The following discussion summarizes certain provisions of our Articles of Association and the U.K.
Companies Acts 1985 and 2006, and should be read in conjunction with the Memorandum of Association
and the Articles of Association, which are attached as exhibits to our Form 20-F fled with the SEC.
The Companies Act 2006 will largely repeal prior legislation, including the Companies Act 1985.
Although the new statute formally became law in November 2006, most of its provisions have not yet
come into effect, and full implementation may not occur until October of 2008. Consequently, the
discussion below addresses provisions of both the Companies Act 1985 and the Companies Act 2006,
and it refers to them together as the Companies Acts. Our Articles of Association contain,
among other things, provisions to the following effect:
140
Shareholder Information
Directors
Each director is required to retire at the annual general meeting held in the third calendar year
following the year in which he was elected or last re-elected. We calculate the directors
retirement schedules prior to each annual general meeting based on director retirements during the
past 12 months and the date each director was last elected.
Under the Companies Acts, directors who are interested in any contract or proposed contract with
the company must declare the nature of such interest to the other directors. Other than as
described below, a director cannot vote in respect of any contract or arrangement in which he has
any interest that, when aggregated with the interests of persons connected to him (as defined in
the Companies Acts), is to his knowledge material, other than by virtue of his interest in our
securities. A director will not be counted in the quorum at the meeting in relation to the
resolution on which he is not permitted to vote. A director can vote on resolutions concerning (i)
debt obligations incurred by him for us, (ii) securities offerings in which he is interested as an
underwriting participant, (iii) proposals relating to any company in which he or any person
connected to him is interested, provided he or any persons connected to him beneficially own less
than 1% of such company, (iv) proposals relating to certain retirement benefit plans and certain
employee share participation plans and (v) proposals concerning the purchase and maintenance of
insurance for the benefit of directors, indemnities in favor of directors, funding of expenses of
directors to defend themselves in litigation, and any action taken to enable a director to avoid
such expenditures. A director cannot vote or be counted in the quorum on any resolution regarding
his appointment as an office-holder, including fixing or varying the terms of his appointment or
termination. Remuneration of nonexecutive directors is determined by the Board as a whole.
Remuneration of executive directors is determined by the Remuneration Committee, which is composed
solely of independent non-executive directors.
Generally, the Board may exercise the power to borrow or raise money as it deems necessary for our
purposes, subject to an aggregate limit of the greater of £150 million or a sum equal to three
times the adjusted share capital of AMVESCAP PLC as it appears on our latest audited consolidated
balance sheets. Borrowings in excess of such limits may be sanctioned in advance by shareholders in
general meeting.
Under the Companies Act 1985, although directors may serve on the Board beyond their 70th birthday,
any director over the age of 70 years who is seeking re-election will be required to do so on an
annual basis. Directors are not required to hold shares of our stock as a qualification for office.
Rights Attaching to Our Ordinary Shares
The Companies Acts provide that an annual general meeting must be held each year with no more than
15 months elapsing since the date of the preceding annual general meeting. Subject to this
requirement, the Board may determine when to hold the annual general meeting, and may call
extraordinary meetings when it thinks appropriate. Extraordinary meetings may also be requisitioned
by shareholders in accordance with the provisions of our Articles of Association and the Companies
Acts. Each holder of ordinary shares who is entered on the register as of the time fixed by the
company with respect to the meeting has the right to attend and vote at general meetings of
shareholders.
Notwithstanding the foregoing, and unless the Board otherwise determines, a shareholder may not be
present or vote at a meeting in respect of his shares, and will not be counted in the quorum for
such meeting, if he owes any amount to us for the purchase of his shares. In addition, if a
shareholder does not comply within the specified time period with a section 793 request (as defined
below under Disclosure of Interests in Shares) made by us, the directors may suspend the
shareholders right to attend meetings or vote his shares.
Subject to any special voting rights, and if all shares owned have been fully paid for, every
shareholder who is present in person at a vote conducted on a show of hands shall have one vote on
the matter voted upon, without regard to the number of Ordinary Shares owned by such shareholder.
Where a vote is conducted on a poll, every shareholder who is present in person or by proxy has one
vote for every four Ordinary Shares held by such shareholder. Where a vote is conducted on a poll,
every shareholder who is present in person or by proxy but whose Ordinary Shares are not fully paid
up has one vote for every US$0.40 in the aggregate paid up in respect of the nominal amount of
Ordinary Shares held. All Ordinary Shares are currently fully paid up.
Annual Report 2006 141
Shareholder Information
Rights Attaching to Our Exchangeable Shares and Our Special Voting Share
The special voting share, par value 25 pence, that we issued in connection with the issuance of
Exchangeable Shares by one of our subsidiaries (the Special Voting Share), has one vote in
addition to any votes that may be cast by holders of Exchangeable Shares (other than the company).
On a poll, the holder of the Special Voting Share has one vote for every four Exchangeable Shares
that have been voted by holders of such Exchangeable Shares (other than the company). A holder of
Exchangeable Shares (other than the company) can instruct the holder of the Special Voting Share to
appoint the relevant holder of the Exchangeable Shares as proxy to attend meetings on behalf of his
own interests in the Exchangeable Shares. We may not issue any special voting shares in addition to
the Special Voting Share without the approval of the holder of such share. When no Exchangeable
Shares are outstanding (other than those held by the company), the Special Voting Share will
automatically be redeemed and cancelled. Otherwise, the Special Voting Share is not subject to
redemption by us or by the holder of such share.
Rights Attaching to Our Deferred Sterling Shares
In connection with the redenomination of our ordinary share capital from sterling into U.S. dollars
in December 2005, we issued 50,000 Preference Shares of £1 each (the Preference Shares) to our
financial advisor in order to maintain our status as a public limited company under applicable U.K.
law. The Preference Shares entitled the holder to receive a monthly dividend at an annual rate of
7% per annum on the nominal value of the shares (the Preference Dividend). Pursuant to Article 7
of our Articles of Association, upon the payment of a special dividend of £50,000 in aggregate to
the holder of the Preference Shares (the Special Dividend) together with any Preference Dividend
due, which payment we made on December 15, 2005, the Preference Shares were redesignated Deferred
Sterling Shares and the rights of the holder(s) of the Deferred Sterling Shares were altered such
that (i) they are no longer entitled to receive any dividends or distributions, (ii) they do not
have any entitlement to participate in the assets of the company (including on a winding-up), (iii)
they are no longer entitled to receive any notice of general meetings or to attend or vote at
general meetings, and (iv) the company is deemed to have an irrevocable
authority at any time: (x) to appoint any person to transfer the Deferred Sterling Shares for no
consideration to any persons the company may determine; and/or (y) to redeem the Deferred Sterling
Shares for no consideration by giving seven days notice to the holders of the Deferred Sterling
Shares.
General Provisions Relating to Shareholder Meetings
Save in limited circumstances, under our Articles of Association three shareholders present in
person or by proxy and entitled to vote are required to constitute a quorum at general meetings of
shareholders. Shareholders are permitted to pass resolutions by written consent, but only on a
unanimous basis and only where the Companies Acts do not require a meeting to be held.
An annual general meeting and an extraordinary general meeting called for the passing of a special
resolution need to be called by not less than 21 days notice in writing and all other
extraordinary general meetings by not less than 14 days notice in writing.
Disclosure of Interests in Shares
There are no provisions in our Articles of Association whereby persons acquiring, holding or
disposing of a certain percentage of our shares are required to make disclosure of their ownership
percentage, although such requirements exist under the rules of the U.K. Financial Services
Authority relating to disclosure, transparency and corporate governance made in accordance with
section 73A of the Financial Services and Markets Act 2000 (the Disclosure and Transparency
Rules).
The basic disclosure requirement under the Disclosure and Transparency Rules requires a person to
notify the company of the percentage that he holds of the companys voting rights if the percentage
that he holds as a shareholder or through direct or indirect holding of financial instruments
reaches, exceeds or falls below 3% and each 1% threshold thereafter up to 100%.
Section 793 of the Companies Act 2006 entitles the company to send a notice in writing to a person
that it believes holds shares in the company requesting that such person confirm whether he holds
shares in the company and, if he does, provide certain information in relation to such shareholding
(a section 793 request).
142
Shareholder Information
Pre-Emption Rights
Under section 80 of the Companies Act 1985, directors are, with certain exceptions, unable to allot
relevant securities without the authority of the shareholders in a general meeting. Relevant
securities as defined in the Companies Act 1985 include Ordinary Shares or securities convertible
into Ordinary Shares. In addition, section 89 of the Companies Act 1985 imposes further
restrictions on the issuance of equity securities (as defined in the Companies Act 1985, which
include the Ordinary Shares and securities convertible into Ordinary Shares) which are, or are to
be, paid up wholly in cash and not first offered to existing shareholders. However, shareholders
may authorize directors to allot relevant securities and equity securities for cash up to a
specified amount and free of the restriction in section 89. In accordance with institutional
investor guidelines, the amount of relevant securities to be fixed by shareholders is normally
restricted to approximately one-third of the existing issued ordinary share capital, and the amount
of equity securities to be issued for cash other than in connection with a rights issue is
restricted to 5% of the existing issued ordinary share capital.
Modification of Class Rights
Subject to the provisions of the Companies Acts, all or any of the rights and privileges attaching
to any class of share may be altered with the consent in writing of the holders of not less than
75% in nominal value of the issued shares of that class or with the sanction of an extraordinary
resolution passed at a separate meeting of the holders of such class of shares. At every such
meeting, all of the provisions of our Articles of Association relating to proceedings at a general
meeting apply, except that the quorum is two persons holding at least one-third in nominal value of
the issued shares of that class and that each person shall be entitled on a poll to one vote for
every share of the class held by him.
Dividends and Entitlement to Any Surplus in the Event of Liquidation
The company may declare such dividends out of the profits available for distribution as may be
determined pursuant to the relevant accounting standards and the Companies Acts, provided that no
dividend may exceed the amount recommended by the Board. The Board may also pay shareholders such
interim dividends as appear to be justified by the profits of the company. Before recommending
dividends, the Board can
set aside sums as a reserve for special purposes. The Board can deduct from any dividend payable to
any shareholder sums payable by him to us. The dividend payable by us will not bear interest. If
dividends remain unclaimed for one year after being declared, we can utilize the dividend money
until claimed. All dividends unclaimed for a period of twelve years after having been declared will
be forfeited and revert to us. Every dividend shall be paid to shareholders of record on the record
date. The Special Voting Share does not carry any right to receive dividends or distributions.
Where a shareholder holds greater than 0.25% of a class of issued shares and where that shareholder
has not complied with a section 793 request within the specified period, the Board may in its
absolute discretion direct that such shareholder shall not be entitled to receive any dividends on
shares held by him until the requested information is provided.
On a winding up of our company, the liquidator may, with the approval of the contributories, divide
our assets among the contributories, setting such value as he deems fair on any property to be
divided, provided that the holder of the Special Voting Share must receive 25 pence before any
distribution is made on the Ordinary Shares. After payment of such amount, the holder of the
Special Voting Share is not entitled to participate in any further distribution of our assets.
Restrictions on our ability to declare and pay dividends are described in Financial Overview
Liquidity and Capital Resources, included elsewhere herein.
Non-Resident or Foreign Shareholders
There are currently no restrictions under our Memorandum of Association, Articles of Association or
English law that limit the rights of non-resident or foreign shareholders to freely own, hold, vote
and transfer Ordinary Shares in the same manner as U.K. residents or nationals. However,
shareholders must provide us with an address in the U.K. in order to be entitled to receive
notifications of shareholders meetings and other notices and documents.
Redemption
Subject to the provisions of the Companies Acts, any shares may be issued on terms that they may be
redeemed on such terms and in such manner as may be provided by the Articles of Association.
Annual Report 2006 143
Shareholder Information
Calls on Shares
The Board may from time to time make calls upon the shareholders in respect of any moneys unpaid on
their shares subject to the terms of their allotment. A call may be revoked or postponed in whole
or part as the Board may determine. All shares are currently fully paid up.
Material Contracts
The contract described below (not being a contract entered into in the ordinary course of
business) has been entered into by us and/or our subsidiaries within two years prior to the fling
of our Form 20-F with the SEC and, as of the date of this document, contains provisions under which
we or one or more of our subsidiaries have an obligation or entitlement which is or may be material
to us. This discussion should be read in conjunction with the agreement described below, which was
fled as an exhibit to the Form 20-F for 2005.
Agreement Relating to the Employment of Our Chief Executive Officer:
Master Employment Agreement, dated July 28, 2005,
between AMVESCAP PLC and Mr. Martin L. Flanagan (the
Master Employment Agreement).
Under the Master Employment Agreement, which was effective as of July 12, 2005, Mr. Flanagan was
employed as the President and Chief Executive Officer of the company for an initial four-year term
commencing on August 1, 2005 (the Employment Date). Following such initial term, the Master
Employment Agreement automatically renews for successive one-year periods subject to termination by
either party on not less than 90 days prior written notice. (The initial term and all successive
one-year terms are collectively referred to as the Employment Period.) Under the Master
Employment Agreement, Mr. Flanagans base salary is $790,000 per year. In addition, the company
made a make whole payment of $11,750,000 with respect to all compensation forfeited or foregone
by Mr. Flanagan in connection with his prior employment. (This payment must be repaid to the
company in the event that Mr. Flanagan terminates his employment voluntarily under certain
circumstances prior to the first anniversary of the Employment Date.) The Master Employment
Agreement also stipulates that the Board of Directors will designate Mr. Flanagan as a Global
Partner, the term used to refer to the most senior group of officers and employees of the
company, and incorporates by reference
(to the extent not inconsistent with the Master Employment Agreement) the provisions of a separate,
attached Global Partner Agreement entered into by the parties. The Master Employment Agreement
further provides that Mr. Flanagan will have the opportunity to receive short-term compensation
awards of up to $4,750,000 per year (pro-rated for any periods of less than a full year) based on
the achievement of certain performance criteria to be mutually determined by the Remuneration
Committee and Mr. Flanagan. The Master Employment Agreement further entitles Mr. Flanagan to
receive long-term compensation awards under the companys Global Stock Plan consisting of the
following:
1. |
|
a grant of 2,500,000 restricted ordinary shares which will vest as to one-fourth (625,000
shares) at each of the four anniversaries following the grant date, providing he remains an
employee of the company on each vesting date; and |
2. |
|
a grant of a further 2,500,000 restricted ordinary shares which will vest ratably upon the
attainment of cumulative earnings-per-share (EPS) growth targets reflecting a compound growth
rate of between 10% and 15% per annum over a base EPS figure during a three-year period. The
base EPS for the purpose of this calculation is the average of 2004 and 2005 EPS adjusted for
certain non-recurring charges. |
Vesting of the awards will be fully accelerated upon the occurrence of a change of control as
defined in the Global Stock Plan.
The Master Employment Agreement further provides that Mr. Flanagan will be eligible to participate
in all incentive, savings and retirement plans, all aspects of the deferred compensation program,
all welfare benefit plans, practices, policies and programs, fringe benefits and perquisites, and
paid vacation and reimbursement of business expenses, all as provided generally to other U.S.-based
Global Partners of the company. In addition, the company is obligated to pay all of Mr. Flanagans
reasonable expenses in connection with his relocation to Atlanta, Georgia. The Master Employment
Agreement (i) terminates automatically in certain circumstances upon the death or Disability (as
defined) of Mr. Flanagan, (ii) is terminable by the company with or without Cause (as defined), and
(iii) is terminable by Mr. Flanagan for Good Reason or for no reason. Good Reason is defined to
include certain diminutions of position, authority, duties or responsibilities, certain reductions
in compensation as the same may have been increased from time to time during the Employment Period,
certain involuntary
144
Shareholder Information
geographic relocations without Mr. Flanagans consent, any failure to require a
successor entity to expressly assume the obligations of the company under the agreement, and any
failure to appoint Mr. Flanagan to the Board of Directors within 60 days of the Employment Date. In
the event that, during the Employment Period, the company terminates Mr. Flanagans employment
other than for Cause or Disability, or Mr. Flanagan terminates for Good Reason (and provided that
Mr. Flanagan has not breached certain restrictive covenants in the Global Partner Agreement), the
company is obligated to pay to Mr. Flanagan (i) his then-effective base salary through the date of
termination, (ii) any accrued vacation, (iii) any compensation previously deferred (unless a later
payout date is stipulated), (iv) cash in the amount of three times the sum of base salary and the
Reference Bonus (as defined), (v) immediate vesting and exercisability of all outstanding
share-based awards (options, restricted shares, etc.), (vi) continuation of medical benefits for
Mr. Flanagan and his covered dependents for a period of 36 months following termination, (vii) a
prorated portion of the Reference Bonus, and (viii) any other vested amounts or benefits under any
other plan or program. In the event that the excise tax imposed by Section 4999 of the United
States Internal Revenue Code becomes applicable to any payment to Mr. Flanagan, the company is
obligated to provide to Mr. Flanagan a gross-up payment such as will fully reimburse him for the
amount of any associated tax liability.
Exchange Controls
There are currently no U.K. or U.S. foreign exchange control restrictions on the import or
export of capital, on the payment of dividends or other payments to holders of Ordinary Shares or
on the conduct of our operations.
Taxation
Introduction
This section summarizes the principal U.S. federal income and U.K. tax consequences to U.S. Holders
(defined below) that own our Ordinary Shares or American Depositary Shares (collectively, the
Shares) as capital assets for U.S. federal income tax purposes. Except where noted otherwise in
this section, tax consequences apply equally to U.S. Holders that own Ordinary Shares and U.S.
Holders that own American Depositary Shares. U.S. Holders generally is used in this section to
refer to beneficial owners of our Shares that are (i) U.S. citizens, (ii) U.S. residents, or (iii)
U.S. corporations. However, U.S. Holders
does not include (i) U.S. citizens that are or have been resident or ordinarily resident in the
U.K., (ii) U.S. citizens or residents that have a permanent establishment or fixed base of business
in the U.K. or (iii) persons that hold (actually or constructively) 10% or more of our voting stock
or capital. The Convention Between the Government of the United States of America and the
Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double
Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains, as
in effect on the date hereof, is referred to in this Form 20-F as the U.S./U.K. Income Tax
Treaty. The Convention Between the Government of the United States of America and the Government
of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation
and Prevention of Fiscal Evasion with respect to Taxes on Estates of Deceased Persons and on Gifts,
as in effect on the date hereof, is referred to in this Form 20-F as the U.S./ U.K. Estate Tax
Treaty.
Taxation of Dividends
A U.S. Holder will be required to include in gross income the gross amount of any distribution with
respect to the Shares it owns that is paid out of our current or accumulated earnings and profits
(as determined for U.S. federal income tax purposes). Distributions in excess of our current and
accumulated earnings and profits will be treated as a non-taxable return of capital to the extent
of the U.S. Holders adjusted tax basis in such Shares and thereafter will be treated as a gain
from the sale of such Shares. We have not maintained and do not plan to maintain calculations of
our earnings and profits for U.S. federal income tax purposes and, as a result, we intend to treat
any distribution that we make with respect to the Shares as a dividend for U.S. federal income tax
reporting purposes.
Dividends paid on the Shares generally will constitute income from sources outside the United
States and be categorized as passive category income or, in the case of some U.S. Holders, as
general category income for U.S. foreign tax credit purposes (or, for tax years beginning before
January 1, 2007, as passive income or, in the case of some U.S. Holders, as financial services
income for U.S. foreign tax credit purposes). Dividends paid on the Shares generally will not be
eligible for the dividends received deduction generally allowed to corporate shareholders with
respect to dividends received from U.S. corporations.
Annual Report 2006 145
Shareholder Information
The U.S. dollar value of any U.K. pound sterling (or other non-U.S. currency)
distribution with respect to our shares will be the U.S. dollar value of the payment, calculated by
reference to the exchange rate in effect on the day the payment is received by the Depositary in
the case of the American Depositary Shares, or by the U.S. Holder in the case of Ordinary Shares
held directly by such U.S. Holders, regardless of whether the pounds sterling (or other non-U.S.
currency) are in fact converted into U.S. dollars. If the pounds sterling (or other non-U.S.
currency) so received are converted into U.S. dollars on the day they are received, the U.S. Holder
generally will not be required to recognize foreign currency gain or loss upon such conversion. If
the pounds sterling (or other non-U.S. currency) so received are not converted into U.S. dollars on
the date of receipt, such U.S. Holder will have a basis in the pounds sterling (or other non-U.S.
currency) equal to the U.S. dollar value on the date of receipt. Any gain or loss on a subsequent
conversion or other disposition of the pounds sterling (or other non-U.S. currency) generally will
be treated as ordinary income or loss to such U.S. Holder and generally will be income or loss from
sources within the United States for U.S. foreign tax credit purposes.
Distributions treated as dividends that are received by a noncorporate U.S. Holder (including an
individual) through taxable years beginning on or before
December 31, 2010 from qualified foreign
corporations generally qualify for a 15% reduced maximum tax rate so long as certain holding
period and other requirements are met. A non-U.S. corporation (other than a corporation that is in,
or was in the year prior to, the year the dividend is paid, a passive foreign investment company
(PFIC) for U.S. federal income tax purposes) generally will be considered to be a qualified foreign
corporation with respect to dividends paid on its shares (or American depositary receipts in
respect of such shares) if the shares (or American depositary receipts in respect of such shares)
are readily tradable on an established securities market in the United States. Ordinary shares, or
American depositary receipts in respect of such shares, will be considered to be readily tradable
on an established securities market in the United States if they are listed on a nationally
registered stock exchange (such as the NYSE). Accordingly, unless we are treated as a PFIC, the
dividends we pay in respect of our American Depositary Shares generally
should be eligible for the reduced rate. A non-U.S. corporation (other than a corporation that is
in, or was in the year prior to, the year the dividend is paid, a PFIC for U.S. federal income tax
purposes) generally will also be considered to be a qualified foreign corporation if it is eligible
for the benefits of a comprehensive income tax treaty with the United States which the U.S.
Treasury Department determines is satisfactory for purposes of this provision and which includes an
exchange of information program (a Qualifying Treaty). The U.S./U.K. Income Tax Treaty as
currently in effect is considered a Qualifying Treaty and we believe that we are currently eligible
for the benefits of such treaty. However, because the U.S. Treasury Department has not yet issued
guidance concerning when a non-U.S. corporation is eligible for the benefits of a Qualifying Treaty
and this conclusion is a factual determination and thus may be subject to change, no assurance can
be given that the reduced rate will apply to dividends paid by us on this basis. Based on the
foregoing, we intend to take the position that we are a qualified foreign corporation with respect
to the dividends on our Shares for U.S. federal income tax reporting purposes.
Special rules apply for purposes of determining the recipients investment income (which limits
deductions for investment interest) and foreign income (which may affect the amount of foreign tax
credit) and to certain extraordinary dividends.
PFIC
We believe that we were not in 2006, and we do not expect to become in 2007, a PFIC for U.S.
federal tax purposes. However, because this determination is made annually at the end of each
taxable year and is dependent upon a number of factors, some of which are beyond our control,
including the value of our assets and the amount and type of our income, there can be no assurance
that we will not become a PFIC or that the U.S. Internal Revenue Service will agree with our
conclusion regarding our PFIC status. If we are a PFIC in any year, U.S. Holders could suffer
adverse consequences, including the possible characterization of gain from sale, exchange or other
disposition of the Shares as ordinary income and an interest charge on such gain at the time of
such sale, exchange or disposition. We urge each U.S. Holder to consult its tax advisor regarding
the potential application of the PFIC rules.
146
Shareholder Information
Taxation on Sale, Exchange or Other Disposition of Shares
A U.S. Holder generally will recognize capital gain or loss upon the sale, exchange or other
disposition of Shares that it owns in an amount equal to the difference, if any, between the amount
realized on the sale, exchange or other disposition and the U.S. Holders adjusted tax basis in
such Shares. This capital gain or loss will be long-term capital gain or loss if the U.S. Holders
holding period in such Shares exceeds one year. Net long-term capital gains of a non-corporate U.S.
Holder recognized in a tax year beginning before January 1, 2011 are generally taxed at a
maximum U.S. federal income tax rate of 15%. The gain or loss will generally be income or loss from
sources within the United States for U.S. foreign tax credit purposes. The deductibility of capital
losses is subject to limitations.
Summary of Tax Treatment
U.S. Holders who own our Ordinary Shares or American Depositary Shares generally receive the same
U.S. tax treatment as if they owned shares of a U.S. company. The following chart summarizes the
major differences between the tax treatment for a U.S. Holder that owns shares of a U.S. company
and a U.S. Holder that owns shares of a U.K. company:
|
|
|
|
|
Transaction |
|
U.S. Company |
|
U.K. Company |
Purchase of shares
|
|
No U.S. tax ramifications.
|
|
No U.S. or U.K. tax
ramifications; U.K.
stamp duty or stamp
duty reserve tax
may be applicable
(1). |
|
|
|
|
|
Ownership of shares
(dividends)
|
|
Entire dividend taxable in U.S.;
no withholding tax on dividends
received
(2);
non-corporate shareholders may
be eligible for reduced tax
rates. (3)
|
|
Entire dividend
taxable in U.S.; no
withholding tax on
dividends received
(2);
non-corporate
shareholders may be
eligible for
reduced tax rates
(3);
U.S./U.K. Income
Tax Treaty does not
allow for tax
credit. |
|
|
|
|
|
Disposition of
shares
|
|
Gain on sale of shares is
taxable in U.S. (4);
U.S. rules would treat gain as
capital in nature; capital gain
is either short- or long-term
depending on holding period.
|
|
Gain on sale of
shares is taxable
in U.S.
(4);
U.S. rules would
treat gain as
capital in nature;
capital gain is
either short- or
long-term depending
on holding period;
no U.K. tax to a
U.S. Holder
(4);
U.K. stamp duty or
stamp duty reserve
tax may be
applicable
(1). |
|
|
|
|
|
Other transfers
(estate or gift)
|
|
U.S. estate and gift rules apply.
|
|
U.K. inheritance
tax would not apply
to individuals that
are domiciled in
the U.S., or if
also domiciled in
the U.K., are
treated as
domiciled in the
U.S. under the
tie-breaker
provisions set out
in the U.S./U.K.
Estate Tax Treaty
(5);
U.S. estate and
gift rules apply;
treaty provisions
provide for a tax
credit if U.S.
Holder is subject
to tax in U.S. and
U.K.
(5);
U.K. stamp duty or
stamp duty reserve
tax may be
applicable
(1). |
|
|
|
(1) |
|
If an owner of Ordinary Shares transfers his or her shares to another person through
the use of a transfer document (i.e., a stock transfer form)
executed in or brought to the U.K., the purchaser usually pays the stamp duty at a rate of
0.5%. |
|
|
|
When Ordinary Shares are transferred without the use of a transfer document, stamp duty does not
apply. Instead, the purchaser normally pays Stamp Duty Reserve Tax (SDRT) at a rate of 0.5% of
the purchase price. If stamp duty is paid on the transfer, SDRT may be refunded. |
|
|
|
If Ordinary
Shares are transferred to the Depositary under the Amended and Restated Deposit Agreement, dated
as of November 8, 2000, among us, the Depositary, and the holders of American Depositary Receipts
issued pursuant to such agreement (the Depositary Agreement), the Depositary will charge the
U.S. Holder who purchases the American Depositary Receipts representing those shares for the
stamp duty or SDRT owed at a rate of 1.5%. No SDRT will be payable on an agreement to transfer
American Depositary Receipts, nor will U.K. stamp duty be payable on transfer of the American
Depositary Receipts, provided that the instrument of transfer is executed outside the U.K. and
subsequently remains at all times outside the U.K. If the Depositary transfers the underlying
Ordinary Shares to a U.S. Holder who owned American Depositary Shares representing such Ordinary
Shares, such U.S. Holder will pay duty at a rate of £5 per transfer. If the Depositary transfers
the underlying Ordinary Shares to a purchaser from a U.S. Holder who owned American Depositary
Shares representing such Ordinary Shares, such purchaser will pay duty at a rate of 0.5% of the
purchase price. |
|
(2) |
|
See previous discussion on the taxation of dividends. These rules would apply to a U.S.
Holder that receives a distribution from either a U.S. company or a U.K. company. The U.K.
does not have a withholding tax in respect of dividends. |
|
(3) |
|
See previous discussion of the requirements for eligibility for reduced tax rates on dividends. |
|
(4) |
|
The effect of the U.S./U.K. Income Tax Treaty is that capital gains derived by a U.S. Holder
from the disposition of shares are generally taxable only in the United States. In any event,
a U.S. Holder would not generally be subject to U.K. tax on such gains under U.K. domestic
law. |
|
(5) |
|
The U.S./U.K. Estate Tax Treaty generally provides for the tax paid in the U.K. to be
credited against tax paid in the U.S. or for tax paid in the U.S. to be credited against tax
payable in the U.K. based on priority rules set out in that Treaty. |
Annual Report 2006 147
Shareholder Information
Information Reporting and Backup Withholding
Dividends on Shares and proceeds from the sale of Shares may be subject to U.S. information
reporting and/or backup withholding, unless the U.S. Holder is a corporation or otherwise
establishes a basis for exemption. A credit can be claimed against the U.S. Holders U.S. federal
income tax liability for the amounts withheld under the backup withholding rules and any excess
amount is refundable if the required information is provided to the U.S. Internal Revenue Service.
Reportable Transactions
U.S. Holders that participate in reportable transactions (as defined in the regulations) must
attach to their tax returns a disclosure statement on Form 8886. We urge U.S. Holders to consult
their own tax advisors as to the possible obligation to file Form 8886 with respect to the
purchase, ownership or disposition of any pounds sterling (or other foreign currency) received as a
dividend or as proceeds from the sale of Shares.
The above discussion is based on current U.S. and U.K. laws and current interpretations of these
laws in effect as of the date of filing of this Annual Report on Form 20-F. The laws and/or the
interpretation of these laws are subject to change and any changes may be made retroactively to
include transactions that occurred in an earlier year. In addition, the above discussion relies on
representations of the Depositary and assumes that the terms and conditions of the Deposit
Agreement will be followed.
THIS SUMMARY DOES NOT ADDRESS THE LAWS OF ANY STATE OR LOCALITY OR ANY GOVERNMENT OTHER THAN THE
U.K. AND U.S. FURTHERMORE, THIS SUMMARY DOES NOT ADDRESS THE TAX CONSEQUENCES TO ANY TAXPAYERS THAT
ARE NOT U.S. HOLDERS (AS DEFINED ABOVE). THE INFORMATION PROVIDED ABOVE IS INTENDED TO BE A GENERAL
DISCUSSION AND SHOULD NOT BE CONSIDERED TO BE DIRECTED TO ANY PARTICULAR SHAREHOLDER. In
particular, this discussion does not address all of the tax consequences that may be relevant to
certain types of investors subject to special treatment under the U.S. federal income tax laws
(such as banks, insurance companies, investors liable for the alternative minimum tax, individual
retirement accounts and other tax-deferred accounts, tax-exempt organizations, dealers, traders in
securities that elect to mark-to-market their securities, partnerships and other pass-through
entities, regulated investment companies, real estate investment
trusts, U.S. expatriates, investors that hold our Ordinary Shares or American Depositary Shares as
part of a straddle, hedging transaction or conversion transaction for U.S. federal income tax
purposes or investors whose functional currency is not the U.S. dollar).
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE U.K. AND U.S. FEDERAL, STATE
AND LOCAL AND ANY OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF
ORDINARY SHARES OR AMERICAN DEPOSITARY SHARES WITH PARTICULAR REFERENCE TO THEIR SPECIFIC
CIRCUMSTANCES.
Holders of Ordinary Shares
Administrative inquiries relating to ordinary shareholdings should be addressed to Capita
Registrars (Capita) at the address shown below and must clearly state the registered shareholders
name and address. Shareholders may also use the Capita Web site
(www.capitaregistrars.com/shareholders and follow the instructions to The Share Portal) to access
their personal shareholding details. A link to this site can also be accessed in the Investor
Relations section of the company Web site.
Capita Registrars
The Registry,
34 Beckenham Road
Beckenham
Kent BR3 4TU United Kingdom
We now offer shareholders the opportunity to receive notices of shareholder meetings and
shareholder reports, such as the Annual Report, in electronic form via the Internet. You would
receive an e-mail notification each time we publish a new shareholder report or notice of meeting
on the company Web site. If you would like to receive shareholder communications via the Internet,
please register your e-mail address through the Capita Web site. You will need your investor code,
which is printed on your personalized form of proxy and on your share certificate. We encourage you
to use these facilities, as we believe they will provide a more convenient and prompt method of
communication and reduce demand on natural resources. Should you experience any difficulties in
using the facilities described above, please contact our registrars, Capita, at 0870 162 3100
(U.K.) or +44 20 8639 2157 (outside of the U.K.).
148
Shareholder Information
Capita Share Dealing Services
(Available to U.K. Shareholders Only)
Capita offers a quick and easy share dealing service to individual shareholders to either sell or
buy AMVESCAP shares. An online and telephone dealing facility is available to provide AMVESCAP
shareholders with an easy to access and simple to use service.
The table below provides you with details of the associated charges:
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Type of Trade |
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Online |
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Telephone |
Share certificates
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1 % of the value of the
deal (Minimum £17.50,
Maximum £50)
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1.50% of the value of
the deal (Minimum
£22.50, Maximum £100) |
All transactions incur a compliance charge of £2.50.
There is no need to pre-register and there are no forms to complete. The online and telephone
dealing service allows you to trade real time at a known price which will be given to you at the
time you give your instruction. To deal online or by telephone, all you need is your surname,
shareholder reference number, full postcode and your date of birth. Your shareholder reference
number can be found on your latest statement or Certificate, where it will appear as either a
folio number or investor code. Please have the appropriate documents on hand when you log on or
call, as this information will be needed before you can buy or sell shares.
For further information on this service, or to buy and sell shares, please contact:
www.capitadeal.com (online dealing) 24 hours
0870 458 4577 (telephone dealing)
8:00 a.m. 4.30 p.m. (GMT) Monday Friday
Holders of American Depositary Shares
The companys American Depositary Shares (ADSs), each representing two ordinary shares, are listed
on the New York Stock Exchange. The company files reports and other documents with the Securities
and Exchange Commission (SEC) that are available on the SECs Web site at www.sec.gov, as well as
for inspection and copying at the SECs public reference facilities or by writing to the company
secretary. The Bank of New York Company, Inc. of New York is the depositary for AMVESCAP PLC. All
inquiries concerning American Depositary Receipts records, certificates or transfer of ordinary
shares into ADSs should be addressed to:
The Bank of New York
101 Barclay Street, 22W
New York, New York 10286 USA
Holders of Exchangeable Shares
The exchangeable shares of AMVESCAP Inc., a subsidiary of the company, are listed on the Toronto
Stock Exchange. Exchangeable shares are generally retractable into the companys ordinary shares on
a one-for-one basis at any time. They can be compulsorily converted into ordinary shares on or
after December 31, 2009, or earlier in certain circumstances. CIBC Mellon Trust Company of Toronto
is the registrar and transfer agent of the exchangeable shares of AMVESCAP, Inc. All inquiries
concerning exchangeable shares, certificates, or the retraction of exchangeable shares into
ordinary shares, should be addressed to CIBC Mellon Trust Company at the address noted below.
CIBC Mellon Trust Company
P.O. Box 7010
Adelaide Street Postal Station
Toronto, Canada
M5C 2W9
Financial Calendar 2007
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April |
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25 |
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Ex-dividend date for final dividend |
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26 |
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Announce 2007 Q1 results |
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27 |
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Record date for final dividend |
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May |
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23 |
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Annual General Meeting |
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30 |
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2006 final dividend payment |
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August |
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2 |
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Announce 2007 interim results |
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September |
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19 |
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Ex-dividend date |
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21 |
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Record date for interim dividend |
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October |
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25 |
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2007 interim dividend payment |
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November |
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8 |
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Announce 2007 Q3 results |
AMVESCAP
30 Finsbury Square
London EC2A 1 AG
www.amvescap.com
Annual
Report 2006 149
Form 20-F Cross-Reference Guide
The information in this document that is referenced on this page is included in AMVESCAPs
Form 20-F for 2006 and is filed with the U.S. Securities and Exchange Commission (SEC). The Form
20-F is the only document intended to be incorporated by reference
into any filings by AMVESCAP
PLC under the Securities Act of 1933, as amended. References to major headings include all
information under such major headings, including subheadings. References to subheadings include
only the information contained under such subheadings. Graphs are not included unless
specifically identified. The Form 20-F has not been approved or disapproved by the SEC, nor has
the SEC passed upon the accuracy or adequacy of the Form
20-F. The Form 20-F filed with the SEC
may contain modified information and may be amended from time to time.
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Item |
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Form 20-F Caption |
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Location in This Document |
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Page |
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Part I |
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1 |
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Identity of Directors, Senior Management and Advisers |
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N/A |
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2 |
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Offer Statistics and Expected Timetable |
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N/A |
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3 |
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Key Information |
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3.A |
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Selected Financial Data |
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Financials Five-Year Summary |
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130 |
3.B |
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Capitalization and Indebtedness |
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N/A |
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3.C |
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Reasons for the Offer and Use of Proceeds |
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N/A |
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3.D |
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Risk Factors |
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Financial Overview Risk Factors |
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35 |
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4 |
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Information on the Company |
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4.A |
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History and Development |
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Business Overview History and Development |
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9 |
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Financial Overview Liquidity and Capital Resources |
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25 |
4.B |
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Business Overview |
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Business Overview |
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9 |
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Financials Note 4 |
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86 |
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Financial Overview Risk Factors |
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35 |
4.C |
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Organizational Structure |
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Financials Note 13 |
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95 |
4.D |
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Property, Plant and Equipment |
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Financial Overview Liquidity and Capital Resources |
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25 |
4 A |
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Unresolved Staff Comments |
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None |
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5 |
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Operating and Financial Review and Prospects |
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5.A |
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Operating Results |
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Financial Overview Revenues |
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20 |
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Financial Overview Expenses |
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22 |
5.B |
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Liquidity and Capital Resources |
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Financial Overview Liquidity and Capital Resources |
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25 |
5.C |
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Research and Development, Patents and Licenses, etc. |
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N/A |
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5.D |
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Trend Information |
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Business Overview Industry Trends |
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10 |
5.E |
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Off-Balance-Sheet Arrangements |
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N/A |
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5.F |
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Tabular Disclosure of Contractual Obligations |
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Financial Overview Liquidity and Capital Resources |
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25 |
5.G |
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Safe Harbor |
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Business Overview Forward-Looking Statements |
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8 |
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6 |
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Directors, Senior Management and Employees |
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6.A |
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Directors and Senior Management |
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Governance Directors and Senior Management |
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40 |
6.B |
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Compensation |
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Governance Remuneration Report |
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52 |
6.C |
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Board Practices |
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Governance Corporate Governance Board Practices |
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47 |
6.D |
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Employees |
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Business Overview Employees |
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14 |
6.E |
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Share Ownership |
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Governance Remuneration Report |
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52 |
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7 |
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Major Shareholders and Related Party Transactions |
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7.A |
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Major Shareholders |
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Shareholder Information Investor Information |
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138 |
7.B |
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Related Party Transactions |
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None |
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7.C |
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Interests of Experts and Counsel |
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N/A |
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8 |
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Financial Information |
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8.A |
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Consolidated Statements and Other Financial Information |
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Financials |
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69 |
8.B |
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Significant Changes |
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None |
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9 |
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The Offer and Listing |
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Shareholder Information Investor Information |
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138 |
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10 |
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Additional Information |
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10.A |
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Share Capital |
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N/A |
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10.B |
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Memorandum and Articles of Association |
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Shareholder Information Investor Information |
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138 |
10.C |
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Material Contracts |
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Shareholder Information Investor Information |
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138 |
10.D |
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Exchange Controls |
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Shareholder Information Investor Information |
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138 |
10.E |
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Taxation |
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Shareholder Information Investor Information |
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138 |
10.F |
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Dividends and Paying Agents |
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N/A |
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10.G |
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Statement by Experts |
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N/A |
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10.H |
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Documents on Display |
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Shareholder Information Investor Information |
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138 |
10.I |
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Subsidiary Information |
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N/A |
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11 |
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Quantitative and Qualitative Disclosures About Market Risk |
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Financial Overview Liquidity and Capital Resources |
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25 |
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Financials Note 29 |
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12 |
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Description of Securities Other than Equity Securities |
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N/A |
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Part II |
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13 |
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Defaults, Dividend Arrearages and Delinquencies |
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N/A |
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14 |
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Material Modifications to the Rights of Security Holders and Use of Proceeds |
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N/A |
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15 |
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Controls and Procedures |
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Governance Corporate Governance |
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45 |
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Financials
Report of Management on Internal Control Over Financial
Reporting |
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69 |
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Financials
Report of Independent Registered Public Accounting Firm |
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70 |
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16 |
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[Reserved] |
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16A |
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Audit Committee Financial Expert |
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Governance Corporate Governance |
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45 |
16B |
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Code of Ethics |
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Governance Corporate Governance |
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45 |
16C |
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Principal Accountant Fees and Services |
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Financials Note 30 |
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116 |
16D |
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Exemptions from the Listing Standards for Audit Committees |
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N/A |
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16E |
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Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
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Financial Overview Liquidity and Capital Resources |
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25 |
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17 |
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Financial Statements |
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Financials |
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69 |
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18 |
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Financial Statements |
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N/A |
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19 |
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Exhibits |
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Filed with the SEC |
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150
Company Directory
Parent Registered Office
AMVESCAP PLC
30 Finsbury Square
London
EC2A 1AG
United Kingdom
Tel: (44) 0 20 7638 0731
Fax: (44) 0 20 7065 3962
Company Number: 308372
Operating Subsidiaries
USA
A I M Management Group Inc.
11 Greenway Plaza
Suite 100
Houston
Texas 77046-1173
USA
Tel: (1) 713 626 1919
Fax: (1) 713 993 9890
INVESCO Institutional (N.A.), Inc.
INVESCO Global Asset Management (N.A.), Inc.
One Midtown Plaza
1360 Peachtree Street N.E.
Suite 100
Atlanta
Georgia 30309
USA
Tel: (1) 404 892 0896
(1) 404 439 4910
Fax: (1) 404-436-4911
INVESCO Institutional (N.A.), Inc.
101 Federal Street
8th Floor
Boston
Massachusetts 02110
USA
Tel: (1) 617 345 8200
Fax: (1) 617 261 4560
The Aegon Building
400 West Market Street
Suite 3300
Louisville
Kentucky 40202
USA
Tel: (1) 502 589 2011
Fax: (1) 502 589 2157
INVESCO Real Estate
Three Galleria Tower
Suite 500
13155 Noel Road
Dallas
Texas 75240
USA
Tel: (1) 972 715 7400
Fax: (1) 972 715 7474
INVESCO Senior Secured Management, Inc.
INVESCO Private Capital, Inc.
1166 Avenue of the Americas
27th Floor
New York
New York 10036
USA
Tel: (1) 212 278 9000
Fax: (1) 212 278 9619
(Senior Secured)/9822
(General)
Atlantic Trust Private Wealth Management
1170 Peachtree Street N.E.
Suite 2300
Atlanta
Georgia 30309-7649
USA
Tel: (1) 404 881 3400
Fax: (1) 404 881 3401
100 Federal Street
Floor 37
Boston
Massachusetts 02110-1802
USA
Tel: (1) 617 357 9600
Fax: (1) 617 357 9602
One South Wacker Drive
Suite 3500
Chicago
Illinois 60606-4614
USA
Tel: (1) 312 368 7700
Fax: (1) 312 368 8136
50 Rockefeller Plaza
15th Floor
New York
New York 10020-1605
USA
Tel: (1) 212 259 3800
Fax: (1) 212 259 3888
1330 Avenue of the Americas
30th floor
New York
New York 10019-5402
USA
Tel: (1) 212 489 0131
Fax: (1) 212 307 0270
Three Embarcadero Center
Suite 1600
San Francisco
California 94111-4019
USA
Tel: (1) 415 433 5844
Fax: (1) 415 397 6639
AMVESCAP National Trust Company
One Midtown Plaza
1360 Peachtree Street, N.E.
Atlanta
Georgia 30309
USA
Tel: (1) 800 774 1205
Fax: (1) 404 439 4580
PowerShares Capital Management LLC
301 W. Roosevelt
Wheaton
Illinois 60187
USA
Tel: (1) 630 933 9600
Fax: (1) 630 933 9699
WL Ross & Co. LLC
600 Lexington Avenue
New York
New York 10022
USA
Tel: (1) 212 826 1100
Fax: (1) 212 317 4893
Canada
AIM Funds Management Inc.
5140 Yonge Street
Suite 900
Toronto
Ontario M2N 6X7
Canada
Tel: (1) 800 874-6275
(1) 416 590 9855
Fax: (1) 416 590 9868
(1) 800 631 7008
United Kingdom
INVESCO Asset Management Limited
INVESCO Fund Managers Limited
INVESCO Pensions Limited
30 Finsbury Square
London
EC2A 1AG
United Kingdom
Tel: (44) 0 20 7065 4000
Fax: (44) 0 20 7638 0752
Perpetual Park
Perpetual Park Drive
Henley-on-Thames
Oxfordshire RG9 1HH
United Kingdom
Phone (44) 0 1491 417 000
Fax (44) 0 1491 416 000
INVESCO Real Estate
10 Mount Row
London
W1K 3SD
United Kingdom
Tel: (44) 0 20 7543 3500
Fax: (44) 0 20 7543 3588
Continental Europe
INVESCO Asset Management S.A. (Branch Office)
The Blue Tower
Avenue Louise 326
1050 Brussels
Belgium
Tel: (32) 2 641 0151
Fax: (32) 2 641 0190
INVESCO Asset Management Oesterreich GmbH
Rotenturmstrasse 16-18
A-1010 Vienna
Austria
Tel: (43) 1 316 200
Fax: (43) 1 316 2020
Annual Report 2006 151
Company Directory
INVESCO Asset Management S.A.
16-18 rue de Londres
75009 Paris
France
Tel: (33) 1 56 62 43 00
Fax: (33) 1 52 62 44 74
INVESCO Asset Management Deutschland GmbH
INVESCO
Kapitalanlagegesellschaft mbH
Bleichstrasse 60-62
60313 Frankfurt
Germany
Tel: (49) 69 29 80 70
Fax: (49) 69 29 80 71 59
INVESCO Real Estate GmbH
Maffeistrasse 3
80333 Munich
Germany
Tel: (49) 89 2060 6000
Fax: (49) 89 2060 6010
INVESCO Asset Management Ireland Limited
1st Floor
Georges Quay House
Townsend Street
Dublin 2
Ireland
Tel: (353) 1 439 8000
Fax: (353) 1 439 8400
INVESCO Asset Management S.A. (Branch Office)
Via Cordusio, 2
20123 Milan
Italy
Tel: (39) 02 880741
Fax: (39) 02 88074 391
INVESCO International Limited
P.O. Box 1588
40 Esplanade
St. Helier
Jersey JE4 2PH
Channel Islands
Tel: (44) 0 1534 607 600
Fax: (44) 0 1534 510 510
INVESCO Asset Management S.A. (Representative Office)
J.C. Geesinkweg 999
1096 AZ Amsterdam
The Netherlands
Tel: (31) 205 61 62 61
Fax: (31) 205 61 68 68
INVESCO Asset Management S.A., (Branch Office)
Calle Recoletos 15, Piso 1
28001 Madrid
Spain
Tel: (34) 902 510 907
Fax: (34) 902 510 876
INVESCO Asset Management (Switzerland) Ltd
Genferstrasse 21
8002 Zurich
Switzerland
Tel: (41) 1 287 9000
Fax: (41) 1 287 9010
INVESCO Real Estate sro
Praha City Centre
Klimentska 46
11002 Prague 1
Czech Republic
Tel: (42) 0227 202 420
Fax: (42) 0227 202 430
Asia Pacific
INVESCO Hong Kong Limited
INVESCO Asset Management Asia Limited
32nd Floor, Three Pacific
Place
1 Queens Road East
Hong Kong
Tel: (852) 3128 6000
Fax: (852) 3128 6001
INVESCO Australia Limited
Level 26
333 Collins Street
Melbourne
Victoria 3000
Australia
Tel: (613) 9611 3600
Fax: (613) 9611 3800
INVESCO Asset Management (Japan) Limited
25F Shiroyama Trust Tower
3-1 Toranomon 4-chome
Minato-Ku
Tokyo 105-6025
Japan
Tel: (81) 3 6402 2600
Fax: (81) 3 6402 2810
INVESCO Asset Management Singapore Ltd
6 Battery Road #15-02
Singapore 049909
Tel: (65) 6538 8166
Fax: (65) 6538 8266
INVESCO Taiwan Limited
10F, No. 122 Tun Hua North
Road
Taipei 105
Taiwan, Republic of China
Tel: (886) 2 2719 7890
Fax: (886) 2 2719 7900
INVESCO Great Wall Fund Management Company Limited (Joint Venture)
16th Floor, CITIC Tower,
CITIC City Plaza
1093 Shennan Road Central
Shenzhen City, 518031
Peoples Republic of China
Tel: (86) 755 8237 0388
Fax: (86) 755 2598 7352
Middle East
INVESCO Asset Management Limited (Branch Office)
PO Box 31303
Level 42
Jumeirah Emirates Towers
Dubai
United Arab Emirates
Tel: (971) 4 3197481
Fax: (971) 4 3197474
Notes
1. |
|
All of the companies listed herein have been consolidated within the AMVESCAP PLC financial
statements for the year. |
2. |
|
When dialing into the United Kingdom from overseas, the 0 in front of the area code should
be excluded. |
3. |
|
A complete list of all offices can be found at www.amvescap.com. |
152
AMVESCAP PLC
Form 20-F Exhibit Index
Item 19. Exhibits
The exhibits filed with or incorporated by reference into this annual report are listed below.
|
1.1 |
|
Memorandum of Association of AMVESCAP, incorporating amendments
up to and including April 27, 2006, incorporated by reference to
exhibit 1.1 to AMVESCAPs Annual Report on Form 20-F for the year
ended December 31, 2005, filed with the Securities and Exchange
Commission on June 23, 2006. |
|
|
1.2 |
|
Articles of Association of AMVESCAP, adopted on July 20, 2000,
incorporating amendments up to and including April 27, 2006,
incorporated by reference to exhibit 1.2 to AMVESCAPs Annual
Report on Form 20-F for the year ended December 31, 2005, filed
with the Securities and Exchange Commission on June 23, 2006. |
|
|
2.1 |
|
Form of Certificate for Ordinary Shares of AMVESCAP, incorporated
by reference to exhibit 2.1 to AMVESCAPs Annual Report on Form
20-F for the year ended December 31, 2005, filed with the
Securities and Exchange Commission on June 23, 2006. |
|
|
2.2 |
|
Form of Certificate for American Depositary Shares, each
representing two Ordinary Shares, incorporated by reference to
exhibit 2.2 to AMVESCAPs Annual Report on Form 20-F for the year
ended December 31, 2005, filed with the Securities and Exchange
Commission on June 23, 2006. |
|
|
2.3 |
|
Amended and Restated Deposit Agreement, dated as of November 8,
2000, among AMVESCAP, The Bank of New York and the holders of
American Depositary Receipts issued thereunder, incorporated by
reference to exhibit 2.3 to AMVESCAPs Annual Report on Form 20-F
for the year ended December 31, 2000, filed with the Securities
and Exchange Commission on May 17, 2001. |
|
|
2.4 |
|
Five Year Credit Agreement, dated as of March 31, 2005, by and
between AMVESCAP PLC, the banks, financial institutions and other
institutional lenders from time to time a party thereto and Bank
of America, N.A., as administrative agent, incorporated by
reference to exhibit 2.7 to AMVESCAPs Annual Report on Form 20-F
for the year ended December 31, 2004, filed with the Securities
and Exchange Commission on June 29, 2005. |
|
|
2.5 |
|
Indenture, dated as of February 27, 2003, for AMVESCAPs 5.375%
Senior Notes Due 2013, among AMVESCAP PLC, A I M Advisors, Inc.,
A I M Management Group Inc., INVESCO Institutional (N.A.), Inc.,
INVESCO North American Holdings, Inc. and SunTrust Bank,
incorporated by reference to exhibit 2.12 to AMVESCAPs Annual
Report on Form 20-F for the year ended December 31, 2002, filed
with the Securities and Exchange Commission on March 27, 2003. |
|
|
2.6 |
|
Indenture, dated as of December 14, 2004, for AMVESCAPs 4.500%
Senior Notes due 2009 among AMVESCAP PLC, A I M Advisors, Inc., A
I M Management Group Inc., INVESCO Institutional (N.A.), Inc.,
INVESCO North American Holdings, Inc. and SunTrust Bank,
incorporated by reference to exhibit 2.10 to AMVESCAPs Annual
Report on Form 20-F for the year ended December 31, 2004, filed
with the Securities and Exchange Commission on June 29, 2005. |
|
|
2.7 |
|
Indenture, dated as of December 14, 2004, for AMVESCAPs 5.375%
Senior Notes due 2014, among AMVESCAP PLC, A I M Advisors, Inc.,
A I M Management Group Inc., INVESCO Institutional (N.A.), Inc.,
INVESCO North American Holdings, Inc. and SunTrust Bank,
incorporated by reference to exhibit 2.11 to AMVESCAPs Annual
Report on Form 20-F for the year ended December 31, 2004, filed
with the Securities and Exchange Commission on June 29, 2005. |
|
3.1 |
|
Voting and Exchange Trust Agreement, dated as of August 1, 2000,
between AMVESCAP, AMVESCAP Inc. and CIBC Mellon Trust Company,
incorporated by reference to exhibit 4.25 to AMVESCAPs Annual
Report on Form 20-F for the year ended December 31, 2000, filed
with the Securities and Exchange Commission on May 17, 2001. |
|
|
4.1 |
|
Second Amended and Restated Purchase and Sale Agreement, dated as
of December 14, 2000, among A I M Management Group Inc.,
Citibank, N.A. and Citicorp North America, Inc., incorporated by
reference to exhibit 4.17 to AMVESCAPs Annual Report on Form
20-F for the year ended December 31, 2000, filed with the
Securities and Exchange Commission on May 17, 2001. |
|
|
4.2 |
|
Amendment No. 4 to Facility Documents, dated as of August 24,
2001 among A I M Management Group Inc., A I M Advisors, Inc., A I
M Distributors, Inc., Citibank, N.A., Bankers Trust Company and
Citicorp North America, Inc., incorporated by reference to
exhibit 4.4 to AMVESCAPs Annual Report on Form 20-F for the year
ended December 31, 2001, filed with the Securities and Exchange
Commission on April 4, 2002. |
|
|
4.3 |
|
AMVESCAP Deferred Fees Share Plan, incorporated by reference to
exhibit 4.22 to AMVESCAPs Annual Report on Form 20-F for the
year ended December 31, 2000, filed with the Securities and
Exchange Commission on May 17, 2001. |
|
|
4.4 |
|
Amended and Restated Merger Agreement, dated as of May 9, 2000,
between AMVESCAP and Trimark, incorporated by reference to
exhibit 4.23 to AMVESCAPs Annual Report on Form 20-F for the
year ended December 31, 2000, filed with the Securities and
Exchange Commission on May 17, 2001. |
|
|
4.5 |
|
Support Agreement, dated as of August 1, 2000, with respect to
AMVESCAPs Exchangeable Shares (as defined in such Support
Agreement), among AMVESCAP, AVZ Callco Inc. and AMVESCAP Inc.,
incorporated by reference to exhibit 4.24 to AMVESCAPs Annual
Report on Form 20-F for the year ended December 31, 2000, filed
with the Securities and Exchange Commission on May 17, 2001. |
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4.6 |
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Merger Agreement, dated as of February 28, 2001, among National
Asset Management Corporation, the Sellers listed therein, the
Option Holder listed therein, AMVESCAP and AVZ, Inc.,
incorporated by reference to exhibit 4.28 to AMVESCAPs Annual
Report on Form 20-F for the year ended December 31, 2000, filed
with the Securities and Exchange Commission on May 17, 2001. |
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4.7 |
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Stock Purchase Agreement, dated as of April 26, 2001, by and
among Old Mutual, PLC, Old Mutual Holdings (U.S.), Inc., United
Asset Management Holdings, Inc., AMVESCAP and INVESCO North
American Holdings, Inc., incorporated by reference to exhibit
4.11 to AMVESCAPs Annual Report on Form 20-F for the year ended
December 31, 2001, filed with the Securities and Exchange
Commission on April 4, 2002. |
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4.8 |
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Amendment No. 1 to Stock Purchase Agreement, dated as of August
2, 2001, by and among Old Mutual, PLC, Old Mutual Holdings
(U.S.), Inc., United Asset Management Holdings, Inc., AMVESCAP
and INVESCO North American Holdings, Inc., incorporated by
reference to exhibit 4.12 to AMVESCAPs Annual Report on Form
20-F for the year ended December 31, 2001, filed with the
Securities and Exchange Commission on April 4, 2002. |
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4.9 |
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AMVESCAP Global Stock Plan, Amended and Restated Effective as of
August 31, 2005. |
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4.10 |
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Guarantee, dated February 27, 2003, with respect to AMVESCAPs
5.375% Senior Notes Due 2013, made by A I M Management Group
Inc., A I M Advisors, Inc., INVESCO Institutional (N.A.), Inc.
and INVESCO North American Holdings, Inc., incorporated by
reference to exhibit 4.20 to AMVESCAPs Annual Report on Form
20-F for the year ended |
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December 31, 2002, filed with the
Securities and Exchange Commission on March 27, 2003. |
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4.11 |
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Global Partner Agreement, dated January 3, 2001, between James I.
Robertson and AMVESCAP Group Services, Inc., incorporated by
reference to exhibit 4.16 to AMVESCAPs Annual Report on Form
20-F for the year ended December 31, 2004, filed with the
Securities and Exchange Commission on June 29, 2005. |
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4.12 |
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Form of Non-Executive Directors Letter of Appointment, between
AMVESCAP PLC and each non-executive director of the company,
incorporated by reference to exhibit 4.19 to AMVESCAPs Annual
Report on Form 20-F for the year ended December 31, 2004, filed
with the Securities and Exchange Commission on June 29, 2005. |
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4.13 |
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Master Employment Agreement, dated July 28, 2005, between Martin
L. Flanagan and AMVESCAP PLC, incorporated by reference to
exhibit 4.18 to AMVESCAPs Annual Report on Form 20-F for the
year ended December 31, 2005, filed with the Securities and
Exchange Commission on June 23, 2006. |
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8.1 |
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List of Subsidiaries. Information on Significant Subsidiaries is
incorporated by reference from the list set forth in Note 13 to
our annual financial statements contained in this Annual Report
on Form 20-F. |
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12.1 |
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Certification of Martin L. Flanagan pursuant to Rule 13a-14(a),
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
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12.2 |
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Certification of Loren M. Starr pursuant to Rule 13a-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
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13.1 |
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Certification of Martin L. Flanagan pursuant to Rule 13a-14(b)
and 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. |
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13.2 |
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Certification of Loren M. Starr pursuant to Rule 13a-14(b) and
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. |
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14.1 |
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Consent of Ernst & Young LLP. |
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F
and that it has duly caused and authorized the undersigned to sign this annual report on its
behalf.
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AMVESCAP PLC |
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By: |
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/s/ Loren M. Starr |
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Loren M. Starr
Chief Financial Officer |
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Date: April 10, 2007 |
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