UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2007
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
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Commission file number 1-13908
Invesco Ltd.
(Exact Name of Registrant as Specified in Its Charter)
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Bermuda
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98-0557567
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(State or Other Jurisdiction
of Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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1360 Peachtree Street, NE, Atlanta, GA
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30309
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(Address of Principal Executive Offices)
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(Zip Code)
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Registrants telephone number, including area code:
(404) 892-0896
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class
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Name of Exchange on Which Registered
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Common Shares, $0.20 par value per share
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes
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No
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. Yes
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No
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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
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No
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(The registrants Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 contained
financial statements prepared in accordance with International Financial Reporting Standards.)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act.) Yes
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No
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At June 30, 2007, the aggregate market value of the voting stock held by non-affiliates was $8.4
billion, based on the closing price of (i) the registrants Ordinary Shares, par value U.S. $0.10
per share, on the London Stock Exchange and (ii) the registrants American Depositary Shares (each
representing two (2) Ordinary Shares) on the New York Stock Exchange.
Following the registrants December 4, 2007 redomicile and reverse stock split transactions, as of
January 31, 2008, the most recent practicable date, 424,767,233 million of the companys common
shares, par value U.S. $0.20 per share, were outstanding. The primary market for the common shares
is the New York Stock Exchange.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant will incorporate by reference information required in response to Part III, Items 10
- 14 in its definitive Proxy Statement for its annual meeting of shareholders, to be filed with the
Securities and Exchange Commission within 120 days after December 31, 2007.
TABLE OF CONTENTS
We include cross references to captions elsewhere in this Annual Report on Form 10-K, which we
refer to as this Report, where you can find related additional information. The following table
of contents tells you where to find these captions.
SPECIAL CAUTIONARY NOTE REGARDING 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 the United States securities laws. These
statements are based on the beliefs and assumptions of our management and on information available
to us at the time such statements are made. Forward-looking statements include information
concerning possible or assumed future results of our operations, earnings, liquidity, cash flows
and capital expenditures, industry or market conditions, assets under management, acquisition
activities and the effect of completed acquisitions, debt levels and our ability to obtain
additional financing or make payments on our debt, 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 described in any
forward-looking statements:
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variations in demand for our investment products or services, including termination or
non-renewal of our investment advisory agreements;
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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;
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significant fluctuations in the performance of debt and equity markets worldwide;
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exchange rate fluctuations, especially as against the U.S. dollar;
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the effect of economic conditions and interest rates in the U.S. or globally;
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our ability to compete in the investment management business;
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the effect of consolidation in the investment management business;
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limitations or restrictions on access to distribution channels for our products;
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our ability to attract and retain key personnel, including investment management professionals;
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the investment performance of our investment products;
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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;
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changes in regulatory capital requirements;
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our substantial debt and the limitations imposed by our credit facility;
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the effect of failures or delays in support systems or customer service functions, and
other interruptions of our operations;
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the occurrence of breaches and errors in the conduct of our business, including any
failure to properly safeguard confidential and sensitive information;
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the execution risk inherent in our current company-wide transformational initiatives;
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the effect of political or social instability in the countries in which we invest or do business;
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the effect of terrorist attacks in the countries in which we invest or do business and
the escalation of hostilities that could result therefrom;
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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;
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war and other hostilities in or involving countries in which we invest or do business;
and
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adverse results in litigation, including private civil litigation related to mutual fund
fees and any similar potential regulatory or other proceedings.
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Other factors and assumptions not identified above were also involved in the derivation of these
forward looking statements, and the failure of such other assumptions to be realized may also cause
actual results to differ materially from those projected. For more discussion of the risks
affecting us, please refer to Part 1, Item 1A, Risk Factors.
You should consider the areas of risk described above in connection with any forward-looking
statements that may be made by us and our businesses generally. We expressly disclaim any
obligation to update any of the information in this or any other public report if any
forward-looking statement later turns out to be inaccurate, whether as a result of new information,
future events or otherwise. For all forward-looking statements, we claim the safe harbor provided
by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934.
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PART I
In this Annual Report on Form 10-K, unless otherwise specified, the terms we, our, us,
company, Invesco, and Invesco Ltd. refer to Invesco Ltd., a company incorporated in Bermuda,
and its subsidiaries.
Item 1.
Business
Introduction
Invesco is a leading independent global investment management company, dedicated to helping people
worldwide build their financial security. By delivering the combined power of our distinctive
worldwide investment management capabilities, including AIM, Atlantic Trust, Invesco, Perpetual,
PowerShares, Trimark and WL Ross, Invesco provides a comprehensive array of enduring solutions for
retail, institutional and high-net-worth clients around the world. Operating in 20 countries,
Invesco had $500.1 billion in assets under management (AUM) as of December 31, 2007.
The key drivers of success for Invesco are long-term investment performance and client service
delivered across a diverse spectrum of capabilities, distribution channels, geographic areas and
market exposures. By achieving success in these areas, we seek to generate positive net flows,
increased AUM and associated revenues. We are affected significantly by market movements, which are
beyond our control; however, we endeavor to mitigate the impact of market movement by offering
broad capability, client and geographical diversification. We measure relative investment
performance by comparing our investment capabilities to competing products, industry benchmarks and
client investment objectives. Generally, distributors, investment advisors and consultants heavily
weigh longer-term performance (e.g., three-year and five-year performance) in selecting the
investment capabilities they recommend to their customers, although shorter-term performance may
also 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 feedback from investment consultants.
Invesco Ltd. is organized under the laws of Bermuda, and our common shares are listed and traded on
the New York Stock Exchange under the symbol IVZ. We maintain a Web site at www.Invesco.com.
(Information contained on our Web site shall not be deemed to be part of, or to be incorporated
into, this document).
Strategy
The company 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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Continue to build a high-performance organization by fostering greater transparency,
accountability and execution at all levels.
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Prior to 2006, Invesco operated as a collection of diverse business units. During 2006 and 2007,
Invesco increasingly leveraged the individual strengths of these business units by working more
effectively as a unified global organization. Under the leadership of chief executive officer (CEO)
Mr. Martin L. Flanagan, the company developed and is implementing a comprehensive operating plan
designed to achieve our strategic objectives. We believe these changes have strengthened the
business. Invescos primary senior management team consists of the CEO and eight direct reports,
each of whom has responsibility for a core aspect of our global business. Since we take a unified
approach to our business, we are presenting our financial statements and other disclosures under
the single operating segment asset management.
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Recent Developments
In September 2006, we acquired PowerShares, a leading provider of exchange-traded funds (ETFs). As
of December 31, 2007, PowerShares managed approximately $14.5 billion in assets and offered
investors more than 100 domestic and international ETFs. In October 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 operations of Invesco, with $6.8
billion in combined assets under management as of year end 2007. Our 2007 operating results
include a full year of operations of both PowerShares and WL Ross & Co.
On May 24, 2007, with approval from our shareholders, we changed our name from AMVESCAP PLC to
Invesco PLC to better reflect our position as an integrated global company. We chose Invesco from
among our many powerful brands since Invesco is recognized in every market in which we operate and
because being an investment management company is embedded in the name. On November 5, 2007, we
introduced a new brand identity for Invesco. This move was part of our long-range brand strategy
that will further unify our company and build on the strength of our existing brands to help us
promote our global investment management expertise.
Throughout the year, we remained committed to executing on our comprehensive operating plan. At
the same time, we were intensely focused on investing for growth. Our focus on continuous
improvement gave us the flexibility to invest in our core markets and in the long-term success of
our business. During 2007, we undertook a number of initiatives that provided the resources for
reinvesting in our business, including:
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Transformation of our Operations and Technology group and our North American retail
operations; and
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Rationalization of our enterprise support, institutional sales and service and
transfer agent operations.
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These initiatives provided resources that were reinvested in the business to support our expansion
in key markets, launch new products, enhance our infrastructure and retain and motivate our
high-performing employees. See Part II, Item 8, Financial Statements and Supplementary Data -
Note 13, Restructuring Charge for additional details.
Operating margin and net operating margin increased to 25.6% and 36.0% in 2007, respectively, from
23.4% and 31.4% in 2006, respectively. See Part II, Item 7, Managements Discussion and Analysis of Financial Condition
and Results of Operations Schedule of Non-GAAP Information for a reconciliation of operating income to
net operating income (and by calculation, a reconciliation of operating margin to net operating
margin) and for important additional disclosures.
On December 4, 2007, we moved our primary listing to the New York Stock Exchange and redomiciled
the company from the United Kingdom to Bermuda in a transaction previously approved by
shareholders. To accomplish this, our predecessor company INVESCO PLC effected a court-approved
U.K. Scheme of Arrangement under which our shareholders received common shares in Invesco Ltd., our
new Bermuda parent company, in exchange for their ordinary shares in INVESCO PLC. Holders of our
American Depositary Shares (ADSs) and our Canadian exchangeable shares also received common shares
in the new Bermuda parent company. Following the redomicile, Invesco Ltd. effected a one-for-two
reverse stock split, such that all of our shareholders now hold common shares, par value $0.20 per
share, in Invesco Ltd. Per share amounts have been adjusted throughout this Annual Report on Form
10-K to give effect to the reverse stock split. See Part I, Item 4, Submission of Matters to a
Vote of Security Holders and Part II, Item 8, Financial Statements and Supplementary Data Note
1, Accounting Policies for additional information.
Certain Demographic and Industry Trends
During 2007, we saw demographic and economic trends around the world continue to transform the
investment management industry and our business:
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Population and economic growth are creating a larger universe 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. The effect of the
recent changes to U.S. pension laws could potentially further
increase the size of the defined contribution market. We believe we are well-positioned to attract 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 demand from clients for alpha and beta to be separated as investment
strategies in the investment management industry. (Alpha is defined as excess return
attributable to a manager, and beta refers to the return of an underlying benchmark.) This
trend reflects how clients are differentiating between low-cost beta solutions such as
passive, index and ETF products and higher-priced alpha strategies such as alternative
products.
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Investors are increasingly seeking to invest outside their domestic markets. They seek firms
that operate globally and have investment expertise in markets around the world. Invesco,
with 15 distinct investment centers worldwide, has the global capabilities to benefit from
this trend.
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Our plans for taking the business forward acknowledge these demographic and economic trends, as
well as our competitive position. Our multi-year strategy is designed to leverage our global
presence, our distinctive worldwide investment management capabilities and our talented people to
grow our business and ensure our long-term success.
During the last half of 2007 and continuing into early 2008 through the date of this Report, the
fixed income markets experienced unprecedented disruptions impacting the liquidity and valuation of
certain securities, including a variety of asset-backed securities and other securities with
complex structures, particularly those exposed to sub-prime mortgage securities. These market
events, in turn, caused the investment management industry to experience a marked decline in
investor demand for certain credit-sensitive U.S. fixed income products, in particular certain
collateralized debt obligations (CDO) vehicles that directly or indirectly held these types of
securities. In addition, certain other products, including certain short duration fixed income
funds, experienced liquidity and valuation difficulties with respect to investments in these types
of securities. These events had a negative impact on several financial institutions, as well as
many asset managers; some of these firms decided to provide financial support to these products in
order to offset or prevent losses, as securities were sold at, or portfolio values adjusted to
reflect, distressed prices. Although Invesco does have limited levels of exposure to these types of
securities within its CDOs and certain un-registered short duration funds, among other products it
manages, this exposure has not created any material financial loss or a need to fund any payment
under support agreements as of the date of this Report. In addition, as of the date of this
Report, none of Invescos registered money market funds have experienced any significant liquidity
or valuation disruptions as a result of these market factors.
Investment Management Capabilities
Invesco is a leading independent global investment manager with offices in 20 countries. As of
December 31, 2007, Invesco managed $500.1 billion in assets for retail, institutional and
high-net-worth investors around the world. By delivering the combined power of our distinctive
worldwide investment management capabilities, including AIM, Atlantic Trust, Invesco, Perpetual,
PowerShares, Trimark and WL Ross, Invesco provides a comprehensive array of enduring solutions for
our clients. Invesco shares are traded publicly on the New York Stock Exchange under the symbol
IVZ.
Supported by a global operating platform, Invesco delivers a broad array of investment products and
services to retail, institutional and high-net-worth investors on a global basis. We have a
significant presence in the institutional and retail segments of the investment management industry
in North America, Europe and Asia-Pacific, with clients in more than 100 countries.
We 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 money market, fixed income,
balanced, equity and alternatives. Approximately 49.6% of our AUM as of December 31, 2007, was
invested in equities, with the balance invested in fixed income and other securities. We believe
that having our investment professionals working in and investing from many of the worlds
financial markets is one of our core strengths.
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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
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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
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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
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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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Municipal Bonds
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Sector Funds
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Short Bonds
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International
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Stable Value
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Global
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Regional/Single
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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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Retail
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Institutional
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Private Wealth Management
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Mutual Funds
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Institutional Separate Accounts
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Separate Accounts
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ICVCs*
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Collective Trust Funds
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Managed Accounts
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Investment Trusts
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Managed Accounts
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Mutual Funds
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Individual Savings Accounts
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Exchange-Traded Funds
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Exchange-Traded Funds
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Exchange-Traded Funds
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Private Capital Funds
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Private Capital Funds
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Investment companies with variable capital
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The following tables present a breakdown of AUM by client domicile, distribution channel and asset
class as of December 31, 2007:
AUM Diversification
($ in billions)
See Part II, Item 8, Financial Statements and Supplementary Data Note 14, Geographic
Information, for a geographic breakdown of our consolidated operating revenues for the years ended December
31, 2007, 2006 and 2005.
Distribution Channels
Retail
Invesco is a significant provider of retail investment solutions to clients through our
distribution channels: AIM in the U.S., 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 $259.5 billion as of December 31, 2007. We offer retail products within all
of the major asset classes (money market, fixed income, balanced, equity and alternatives). Our
retail products are primarily distributed through third-party financial intermediaries, including
traditional broker-dealers, fund supermarkets, retirement platforms, financial advisors,
insurance companies and trust companies.
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The U.S., Canadian and U.K. retail operations rank among the largest, by AUM, in their respective
regions: as of year end 2007, AIM was the 11
th
largest non-proprietary mutual fund
complex in the U.S., Trimark was the 5
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largest retail fund manager in Canada, and
Invesco Perpetual was the largest retail fund provider in the U.K. In addition, Invesco Great Wall,
our joint venture in China was the second-largest Sino-foreign manager in China, with AUM of
approximately $14.6 billion as of December 31, 2007. PowerShares adds a leading set of ETF products
(with $14.5 billion in AUM and 105 exchanged-traded funds as of December 31, 2007) to the
extensive choices available to our retail investors. In 2007, PowerShares successfully launched ETF
products in Europe. We now provide our retail clients with one of the industrys most robust and
comprehensive product lines.
Institutional
We provide investment solutions to institutional investors globally, with a major presence in the
U.S., Canada, U.K., Continental Europe and Asia-Pacific regions through Invesco and AIM ($223.1
billion in AUM as of December 31, 2007). We offer a broad suite of domestic and global products,
including traditional equities, structured equities, fixed income, real estate, private equity
(expanded through our 2006 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. We have a diversified client base that includes major
public entities, corporate, union, non-profit, endowments, foundations, and financial institutions.
Clients of AIMs institutional money market funds included 22 of the 25 largest U.S. banks, nine of
the largest 25 global banks, 10 of the Fortune 25 U.S. corporations, and seven of the top 25
Fortune Global Corporations all as of December 31, 2007.
Private Wealth Management
Through Atlantic Trust, Invesco provides high-net-worth individuals and their families with a broad
range of personalized and sophisticated wealth management services, including financial counseling,
estate planning, asset allocation, investment management (including sale of third party-managed
investment products), private equity, trust, custody and family office services. Atlantic Trust
also provides asset management services to foundations and endowments in the U.S.
Atlantic Trust obtains new clients through referrals from existing clients, recommendations from other
professionals serving the high net worth market such as attorneys and accountants and from
financial intermediaries such as brokers. Atlantic Trust has offices in 11 U.S. cities and manages
$17.5 billion as of December 31, 2007.
Employees
As of December 31, 2007, we had 5,475 employees, the majority of whom were located in North
America. As of December 31, 2006 and 2005, we had 5,574 and 5,798 employees, respectively. None of
our employees is covered under collective bargaining agreements.
Competition
The investment management business is highly competitive, with points of differentiation including
investment performance, the range of products offered, brand recognition, business reputation,
financial strength, the depth and continuity of relationships, quality of service and the level of
fees charged for services. We compete with a large number of investment management firms,
commercial banks, investment banks, broker dealers, hedge funds, insurance companies and other
financial institutions. We believe that the diversity of our investment styles, product types and
channels of distribution enable us to compete effectively in the investment management business.
We also believe being an independent investment manager is a competitive advantage, as our business
model avoids conflicts that are inherent within institutions that both distribute investment
products and manage investment products.
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, money market 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 and private wealth management clients may elect to terminate their
relationship with us or reduce the aggregate amount of assets under management upon very
short-notice periods.
7
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, 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 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 U.S. Securities and Exchange
Commission (SEC), the Financial Industry Reporting Authority (FINRA), 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 Company Act), the Investment Advisers Act of 1940
and the Employee Retirement Income Security Act of 1974. The Investment Advisers Act of 1940, as
amended (the Investment Advisers Act), imposes numerous obligations on registered investment
advisers, including record-keeping requirements, operational requirements, marketing requirements,
disclosure obligations and prohibitions on fraudulent activities. The Investment Company Act
imposes similar obligations on registered investment companies, as well as detailed operational
requirements on investment advisers. The SEC is authorized to institute proceedings and impose
sanctions for violations of the Investment Advisers Act and the Investment Company Act, ranging
from fines and censure to termination of an investment advisers registration. Investment advisers
also are subject to certain state securities laws and regulations. In addition, in recent years,
the SEC adopted various rules, the effect of which has been to further regulate the investment
management industry and has imposed on Invesco additional compliance obligations and costs for
fulfilling such obligations.
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 Austrian Financial
Market Authority (FMA), the Bundesamt für Finanzdienstleistungsaufsicht (BaFin) in Germany, the
Canadian securities administrators (including the Ontario Securities Commission), the Financial
Regulator in Ireland, the
Autorité des Marchs Financiers
in France, the China Securities Regulatory
Commission in the Peoples Republic of China, the Financial Supervisory Commission of the Ministry
of Finance and the Investment Commission of the Ministry of Economic Affairs of the Peoples
Republic of China, the Securities and Futures Commission of Hong Kong, the Commission Bancaire,
Financière et des Assurances (CBFA) in Belgium, the Australian Securities & Investments Commission, the
Commissione Nazionale per le Società e la Borsa
(CONSOB) in Italy, the Swiss Federal Banking
Commission, La Comisión Nacional del Mercado de Valores (CNMV) in Spain, the Monetary Authority of
Singapore, the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg, the Jersey
Financial Services Commission and the Dubai Financial Services Authority.
Certain of our subsidiaries are required to maintain minimum levels of capital. These and other
similar provisions of applicable law may have the effect of limiting withdrawals of capital,
repayment of intercompany loans and payment of dividends by such entities. After redomicile and
after consultation with the U.K. FSA, it has been determined that,
for the purposes of prudential supervision, Invesco Ltd. is not subject to regulatory consolidated
capital requirements under current European Union (EU) Directives. A sub-group, however, including
all of our regulated EU subsidiaries, is subject to these consolidated capital requirements, and
capital is maintained within this sub-group to satisfy these regulations. At December 31, 2007, the
European sub-group had cash and cash equivalent balances of $758.1 million, much of which is used
to satisfy these regulatory requirements. Complying with our regulatory commitments may result in
an increase in the capital requirements applicable to the European sub-group. As a result of
corporate restructuring and the regulatory undertakings that we have given, certain of these EU
subsidiaries may be required to limit their distributions. We cannot guarantee that
further corporate restructuring will not be required to comply with applicable legislation. See
Part 1, Item 1A, Risk Factors.
8
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.
Available Information
We file current and periodic reports, proxy statements, and other information with the SEC, copies
of which can be obtained from the SECs Public Reference Room at 100 F Street, NE., Washington, DC
20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC
at 1-800-SEC-0330.
The SEC maintains an Internet site that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the SEC, at www.sec.gov. We make
available free of charge on our Web site, www.Invesco.com, our Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended,
as soon as reasonably practicable after we electronically file such material with, or furnish it
to, the SEC.
Item 1A.
Risk Factors
Our revenues would be adversely affected by any reduction in assets under our management as a
result of either a decline in market value of such assets or net outflows, which would reduce the
investment management fees we earn.
We derive substantially all of our revenues from investment management contracts with clients.
Under these contracts, the investment management fees paid to us are typically based on the market
value from time to time of assets under management. Assets under management may decline for various
reasons. For any period in which revenues decline, our income and
operating margin may decline by a
greater proportion because certain expenses remain relatively fixed. Factors that could decrease
assets under management (and therefore revenues) include the following:
Declines in the Market Value of the Assets in the Funds and Accounts Managed.
These could be
caused by price declines in the securities markets generally or by price declines in the
market segments in which those assets are concentrated. Approximately 49.6% of our total
assets under management were invested in equity securities and approximately 50.4% were
invested in fixed income and other securities at December 31, 2007. Through the date of the
filing of the Annual Report on Form 10-K with the SEC, markets continue to be volatile, and
our AUM as of January 31, 2008 had fallen 4.9% from year-end levels. We cannot predict
whether the continued volatility in the markets will result in substantial or sustained
declines in the securities markets generally or result in price declines in market segments
in which our assets under management are concentrated. Any of the foregoing could
negatively impact our revenues, income and operating margin.
Redemptions and Other Withdrawals from, or Shifting Among, the Funds and Accounts Managed.
These could be caused by investors (in response to adverse market conditions or pursuit of
other investment opportunities) reducing their investments in funds and accounts in general
or in the market segments on which Invesco focuses; investors taking profits from their
investments; poor investment performance of the funds and accounts managed by Invesco; and
portfolio risk characteristics, which could cause investors to move assets to other
investment managers. Poor performance relative to other investment management firms tends to
result in decreased sales, increased redemptions of fund shares, and the loss of private
institutional or individual accounts, with corresponding decreases in our revenues. Failure
of our funds and accounts to perform well could, therefore, have a material adverse effect
on us. Furthermore, the fees we earn vary with the types of assets being managed, with
higher fees earned on actively managed equity and balanced accounts, along with real estate
and alternative asset products, and lower fees earned on fixed income and stable return
accounts. Therefore, our revenues may decline if clients shift their investments to lower
fee accounts.
Declines in the value of seed capital and partnership investments.
The company has
investments in sponsored investment products that invest in a variety of asset classes,
including but not limited to equities,
fixed income products, and real estate. Investments in these products are generally made to
establish a track record. Adverse market conditions may result in the need to write down
the value of these seed investments. As of December 31, 2007 the
company had $113.6 million
in seed capital and partnership investments.
9
Our investment advisory agreements are subject to termination or non-renewal, and our fund and
other investors may withdraw their assets at any time.
Substantially all of our revenues are derived from investment advisory agreements. Investment
advisory agreements are generally terminable upon 30 or fewer days notice. Agreements with U.S.
mutual funds may be terminated with notice, or terminated in the event of an assignment (as
defined in the Investment Company Act), and must be renewed annually by the disinterested members
of each funds board of directors or trustees, as required by law. In addition, the board of
trustees or directors of certain other funds accounts of Invesco or our subsidiaries generally may
terminate these investment advisory agreements upon written notice for any reason. Mutual fund and
unit trust investors may generally withdraw their funds at any time without prior notice.
Institutional clients may elect to terminate their relationships with us or reduce the aggregate
amount of assets under our management, and individual clients may elect to close their accounts,
redeem their shares in our funds, or shift their funds to other types of accounts with different
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.
Our revenues and profitability from money market and other fixed-income assets may be harmed by
interest rate, liquidity and credit volatility.
In a rising-rate environment, certain institutional investors using money market products and other
short-term duration fixed-income products for cash management purposes may shift these investments
to direct investments in comparable instruments in order to realize higher yields than those
available in money market and other fund products holding lower yielding instruments. These
redemptions would reduce managed assets, thereby reducing our revenues. In addition, rising
interest rates will tend to reduce the market value of bonds held in various investment portfolios
and other products. Thus, increases in interest rates could have an adverse effect on our revenues
from money market portfolios and from other fixed-income products. If securities within a money
market portfolio default, or investor redemptions force the portfolio to realize losses, there
could be negative pressure on its net asset value. Although money market investments are not
guaranteed instruments, the company might decide, under such a scenario, that it is in its best
interest to provide support in the form of a support agreement, capital infusion, or other
methods to help stabilize a declining net asset value. Some of these methods could have an adverse
impact on our profitability. Additionally, we have $39.0 million of equity at risk invested in our
collateralized loan and debt obligation products, the valuation of which could change with changes in interest and
default rates. We have no significant or direct exposure to SIVs or sub-prime commercial paper.
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.
Certain of our subsidiaries are required to maintain minimum levels of capital. These and other
similar provisions of applicable law may have the effect of limiting withdrawals of capital,
repayment of intercompany loans and payment of dividends by such entities. After redomicile and
after consultation with the U.K. Financial Services Authority (FSA), it has been determined that,
for the purposes of prudential supervision, Invesco Ltd. is not subject to regulatory consolidated
capital requirements under current European Union (EU) Directives. A sub-group, however, including
all of our regulated EU subsidiaries, is subject to these consolidated capital requirements, and
capital is maintained within this sub-group to satisfy these regulations. At December 31, 2007, the
European sub-group had cash and cash equivalent balances of $758.1 million, much of which is used
to satisfy these regulatory requirements. Complying with our regulatory
commitments may result in an increase in the capital
requirements applicable to the European sub-group. As a result of corporate restructuring and the
regulatory undertakings that we have given, certain of these EU subsidiaries may be required to
limit their distributions. We cannot guarantee that further corporate restructuring will not be
required to comply with applicable legislation.
10
The regulatory environment in which we operate frequently changes and has seen significant
increased regulation in recent years. We may be adversely affected as a result of new or revised
legislation or regulations or by changes in the interpretation or enforcement of existing laws and
regulations. To the extent that existing regulations are amended or future regulations are adopted
that reduce the sale, or increase the redemptions, of our products and services, or that negatively
affect the investment performance of our products, our aggregate assets under management and our
revenues could be adversely affected. In addition, regulatory changes could impose additional
costs which could negatively impact our profitability.
Civil litigation and governmental enforcement actions and investigations could adversely affect our
assets under management and future financial results, and increase our costs of doing business.
Invesco and certain related entities have in recent years been subject to various legal proceedings
arising from normal business operations and/or matters that have been the subject of previous
regulatory actions. See Part I, Item 3, Legal Proceedings, for additional information.
Our investment management professionals and other key employees are a vital part of our ability to
attract and retain clients, and the loss of a significant portion of those professionals could
result in a reduction of our revenues and profitability.
Retaining highly skilled technical and management personnel is important to our ability to attract
and retain clients and retail shareholder accounts. The market for investment management
professionals is competitive and has grown more so in recent periods as the investment management
industry has experienced growth. The market for investment managers is also increasingly
characterized by the movement of investment managers among different firms. Our policy has been to
provide our investment management professionals with compensation and benefits that we believe are
competitive with other leading investment management firms. However, we may not be successful in
retaining our key personnel, and the loss of 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, adversely affect our revenues and profitability. During
2007, several members of our Stable Value team departed for a competitor, which resulted in net
outflows of AUM of $16.2 billion.
If our reputation is harmed, we could suffer losses in our business, revenues and net income.
Our business depends on earning and maintaining the trust and confidence of clients, regulators and
other market participants, and the resulting good reputation is critical to our business. Our
reputation is vulnerable to many threats that can be difficult or impossible to control, and costly
or impossible to remediate. Regulatory inquiries, employee misconduct and rumors, among other
things, can substantially damage our reputation, even if they are baseless or satisfactorily
addressed. Any damage to our reputation could impede our ability to attract and retain clients and
key personnel, and lead to a reduction in the amount of our assets under management, any of which
could have a material adverse effect on our revenues and net income.
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, strength and continuity of client and intermediary
relationships, quality of service, level of fees charged for services and the level of compensation
paid and distribution support offered to financial intermediaries. We continue to face market
pressures regarding fee levels in certain products.
We face strong competition in every market in which we operate. Our competitors include a large
number of investment management firms, commercial banks, investment banks, broker-dealers, hedge
funds, insurance companies and other financial institutions. Some of these institutions have
greater capital and other resources, and offer more comprehensive lines of products and services,
than we do. The recent trend toward consolidation within the investment management industry has
served to increase the strength of a number of our competitors. These
11
strengthened competitors seek to expand their market share in many of the products and services we
offer. If these competitors are successful, our revenues and profitability could be adversely
affected. In addition, there are relatively few barriers to entry by new investment management
firms, and the successful efforts of new entrants into our various distribution channels around the
world have also resulted in increased competition.
We may engage in strategic transactions that could create risks.
As part of our business strategy, we regularly review, and from time to time have discussions with
respect to potential strategic transactions, including potential acquisitions, dispositions,
consolidations, joint ventures or similar transactions, some of which may be material. There can be
no assurance that we will find suitable candidates for strategic transactions at acceptable prices,
have sufficient capital resources to accomplish such transactions, or be successful in entering
into agreements for desired transactions.
Acquisitions, including completed acquisitions, also pose the risk that any business we acquire may
lose customers or employees or could underperform relative to expectations. We could also
experience financial or other setbacks if transactions encounter unanticipated problems, including
problems related to execution or integration. Following the completion of an acquisition, we may
have to rely on the seller to provide administrative and other support, including financial
reporting and internal controls, to the acquired business for a period of time. There can be no
assurance that the seller will do so in a manner that is acceptable to us.
Our substantial indebtedness could adversely affect our financial position.
We have a significant amount of indebtedness. As of December 31, 2007, we had outstanding total
long-term debt of $1,276.4 million (which excludes $116.6 million of debt held by consolidated
investment products) and shareholders equity of $6,590.6 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. Any or all of the above factors could materially adversely affect our financial
position.
We have received credit ratings of A3 and BBB+ from Moodys and Standard & Poors credit rating
agencies, respectively, as of the date of this Annual Report on Form 10-K. Both Standard & Poors
and Moodys have a stable outlook for the rating as of the date of this Annual Report on Form
10-K. We believe that rating agency concerns include but are not limited to: our ability to
sustain net positive asset flows across customer channels, product type and geographies, our
substantial indebtedness, and our ability to maintain consistent positive investment performance.
Material deterioration of these factors, and 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. 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.
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.
Our 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
12
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. There is no
assurance that our investment products will be among their recommended choices in the future.
Additionally, if one of our major distributors were to cease operations, it could have a
significant adverse effect on our revenues and profitability. Moreover, any failure to maintain
strong business relationships with these distribution sources would impair our ability to sell our
products, which could have a negative effect on our revenues and profitability.
We could be subject to losses if we fail to properly safeguard confidential and sensitive
information.
We maintain and transmit confidential information about our clients as well as proprietary
information relating to our business operations as part of our regular operations. Our systems
could be attacked by unauthorized users or corrupted by computer viruses or other malicious
software code, or authorized persons could inadvertently or intentionally release confidential or
proprietary information.
Such disclosure could, among other things, damage our reputation, allow competitors to access our
proprietary business information, result in liability for failure to safeguard our clients data,
result in the termination of contracts by our existing customers, subject us to regulatory action,
or require material capital and operating expenditures to investigate and remediate the breach.
Our business is vulnerable to 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 fund
shareholders 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.
If we are unable to successfully recover from a disaster or other business continuity problem, we
could suffer material financial loss, loss of human capital, regulatory actions, reputational harm
or legal liability.
If we were to experience a local or regional disaster or other business continuity problem, such as
a pandemic or other natural or man-made disaster, our continued success will depend, in part, on
the availability of our personnel, our office facilities and the proper functioning of our
computer, telecommunication and other related systems and operations. In such an event, our
operational size, the multiple locations from which we operate, and our existing back-up systems
would provide us with an important advantage. Nevertheless, we could still experience near-term
operational challenges with regard to particular areas of our operations, such as key executive
officers or technology personnel. Further, as we expand our operations in particular areas, such as
India, the potential for particular types of natural or man-made disasters, political, economic or
infrastructure instabilities, or other country- or region-specific business continuity risks
increases. Although we seek to regularly assess and improve our existing business continuity plans,
a major disaster, or one that affected certain important operating areas, or our inability to
successfully recover should we experience a disaster or other business continuity problem, could
materially interrupt our business operations and cause material financial loss, loss of human
capital, regulatory actions, reputational harm or legal liability.
Since many of our subsidiary operations are located outside of the United States and have
functional currencies other than the U.S. dollar, changes in the exchange rates to the U.S. dollar
may affect our reported financial results from one period to the next.
The largest component of our net assets, revenues and expenses, as well as our assets under
management, is presently derived from the United States. However, we have a large number of
subsidiaries outside of the United States whose functional currencies are not the U.S. dollar.
13
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.
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 $6,848.0 million at December 31, 2007 (2006: $6,360.7 million). 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 write-down of the related asset would occur, adversely affecting our
results of operations for the period.
Bermuda law differs from the laws in effect in the United States and may afford less protection to
shareholders.
Our shareholders may have more difficulty protecting their interests than shareholders of a
corporation incorporated in a jurisdiction of the United States. As a Bermuda company, we are
governed by the Companies Act 1981 of Bermuda (Companies Act). The Companies Act differs in some
material respects from laws generally applicable to United States corporations and shareholders,
including provisions relating to interested directors, mergers, amalgamations and acquisitions,
takeovers, shareholder lawsuits and indemnification of directors.
Under Bermuda law, the duties of directors and officers of a company are generally owed to the
company only. Shareholders of Bermuda companies do not generally have rights to take action against
directors or officers of the company, and may only do so in limited circumstances. Directors and
officers may owe duties to a companys creditors in cases of impending insolvency. Directors and
officers of a Bermuda company must, in exercising their powers and performing their duties, act
honestly and in good faith with a view to the best interests of the company and must exercise the
care and skill that a reasonably prudent person would exercise in comparable circumstances.
Directors have a duty not to put themselves in a position in which their duties to the company and
their personal interests may conflict and also are under a duty to disclose any personal interest
in any material contract or proposed material contract with the company or any of its subsidiaries.
If a director or officer of a Bermuda company is found to have breached his duties to that company,
he may be held personally liable to the company in respect of that breach of duty.
Our bye-laws provide for indemnification of our directors and officers in respect of any loss
arising or liability attaching to them in respect of any negligence, default, breach of duty or
breach of trust of which a director or officer may be guilty in relation to us other than in
respect of his own fraud or dishonesty, which is the maximum extent of indemnification permitted
under the Companies Act. Under our bye-laws, each of our shareholders agrees to waive any claim or
right of action, other than those involving fraud, against us or any of our officers or directors.
Legislative and other measures that may be taken by U.S. and/or other governmental authorities
could materially increase our tax burden or otherwise adversely affect our financial conditions,
results of operations or cash flows.
Under current laws, as the company is domiciled and tax resident in Bermuda, taxation in other
jurisdictions is dependent upon the types and the extent of the activities of the company
undertaken in those jurisdictions. There is a risk that changes in either the types of activities
undertaken by the company or changes in tax rules relating to tax residency could subject the
company and its shareholders to additional taxation. Additionally, under existing U.S. tax rules
earnings from non-U.S. subsidiaries of the company are not subject to U.S. taxation.
We continue to assess the impact of various U.S. federal and state legislative proposals, and
modifications to existing tax treaties between the United States and foreign countries, that could
result in a material increase in our U.S. federal and state taxes. More recently, several
proposals have been introduced in the U.S. Congress that, if ultimately enacted, could limit treaty
benefits on certain payments made by our U.S. subsidiaries to non-U.S. affiliates. We cannot
predict the outcome of any specific legislative proposals. However, if such proposals were to be
enacted, or if modifications were to be made to certain existing tax treaties, the consequences
could have a materially adverse impact on the company, including increasing our tax burden,
increasing costs of our tax compliance or otherwise adversely affecting our financial condition,
results of operations or cash flows.
14
Examinations and audits by tax authorities could result in additional tax payments for prior
periods.
The company and its subsidiaries income tax returns periodically are examined by various tax
authorities. The calculation of our tax liabilities involves dealing with uncertainties in the
application of complex tax regulations in a multitude of jurisdictions across our global
operations. We recognize potential liabilities and record tax liabilities for anticipated tax audit
issues based on our estimate of whether, and the extent to which, additional income taxes will be
due. We adjust these liabilities in light of changing facts and circumstances. Due to the
complexity of some of these uncertainties, however, the ultimate resolution may result in a payment
that is materially different from our current estimate of the tax liabilities.
Item 1B.
Unresolved Staff Comments
N/A
Item 2.
Properties
Our registered office is located in Hamilton, Bermuda, and our principal executive offices are in
leased office space at 1360 Peachtree Street N.E., Atlanta, Georgia, 30309, U.S.A. We own office
facilities at Perpetual Park, Henley-on-Thames, Oxfordshire, RG9 1HH, United Kingdom, and at 301 W.
Roosevelt, Wheaton, Illinois, 60187, and we lease our additional principal offices located at 30
Finsbury Square, London, EC2A 1AG, United Kingdom; 11 Greenway Plaza, Houston, Texas 77046; 4350
South Monaco Street, Denver, Colorado 80237; and in Canada at 5140 Yonge Street, Toronto, Ontario
M2N 6X7. We have entered into a lease for a new principal office location at 1555 Peachtree Street,
NE, Atlanta, Georgia 30309, which we expect to occupy by the latter half of 2008. We lease office
space in 17 other countries.
Item 3.
Legal Proceedings
Following the industry-wide regulatory investigations, multiple lawsuits based on market timing
allegations were filed against various parties affiliated with Invesco. These lawsuits were
consolidated in the United States District Court for the District of Maryland, together with market
timing lawsuits brought against affiliates of other mutual fund companies, and on September 29,
2004, three amended complaints were filed against company-affiliated parties: (1) a putative
shareholder class action complaint brought on behalf of shareholders of AIM funds formerly advised
by INVESCO Funds Group, Inc.; (2) a derivative complaint purportedly brought on behalf of certain AIM
funds and the shareholders of such funds; and (3) an ERISA complaint purportedly brought on behalf of participants in
the companys 401(k) plan. On September 15, 2006, the court dismissed the ERISA lawsuit with
prejudice. The plaintiff has appealed that dismissal to the United States Court of Appeals for the
Fourth Circuit. Oral argument was held on December 5, 2007. The company and plaintiffs have
reached a settlement in principle of the shareholder class action and derivative lawsuits. The
proposed settlement, which is subject to court approval, calls for a payment by the company of $9.8
million, recorded in general and administrative costs in the 2007 Consolidated Statement of Income,
in exchange for dismissal with prejudice of all pending claims. In addition, under the terms of
the proposed settlement the company may incur certain costs in connection with providing notice of
the proposed settlement to affected shareholders. Based on information currently available, it is
not believed that any such incremental notice costs will have any material effect on the
consolidated financial position or results of operations of the company.
The company and/or company-affiliated parties have also been named as defendants in a lawsuit
alleging that one or more of the companys funds inadequately employed fair value pricing, and
thereby made such funds more susceptible to market timing. The lawsuit is a purported class action
seeking unspecified monetary damages. It is now pending in the State court in Madison County,
Illinois after a series of removals to the United States District Court for the Southern District
of Illinois and remands back to the State Court. 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. The action against AIM was initiated on
August 30, 2005. AIMs time to respond to the Auditors proceeding has not yet elapsed. Although
there can be no assurances, based on information currently available, the company does not believe
it is probable that the ultimate outcome of any of these actions will have a material adverse
effect on the companys consolidated financial position or results of operations.
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
15
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 or results of
operations of the company.
Item 4.
Submission of Matters to a Vote of Security Holders
On July 18, 2007, our predecessor, INVESCO PLC, announced that it had lost its foreign private
issuer status in the United States, chiefly as a result of U.S. share ownership exceeding fifty
percent of issued share capital. As a result of this, INVESCO PLC immediately became subject to the
full requirements of two primary securities regulators, the SEC in the United States and the FSA in
the United Kingdom, and two different accounting standards, U.S. Generally Accepted Accounting
Principles (U.S. GAAP) and International Financial Reporting Standards (IFRS). Different
regulatory and accounting standards placed INVESCO PLC in an untenable position that may have
produced supervisory conflicts that may have impeded full compliance with the requirements of
either primary regulatory scheme. In response, INVESCO PLC proposed to its shareholders that the
company change its primary listing from the London Stock Exchange to the New York Stock Exchange
and redomicile from the U.K. to Bermuda by order of a scheme of arrangement.
On November 14, 2007, two meetings of INVESCO PLC shareholders were held a court meeting and an
extraordinary general meeting. The court meeting was convened so that the appropriate U.K. court
would have the authority to sanction the scheme of arrangement if approved by INVESCO PLC
shareholders. The extraordinary general meeting was held to authorize the implementation of the
following inter-related proposals (Proposals):
|
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to move Invescos primary listing from the London Stock Exchange to the New York Stock Exchange;
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to reorganize pursuant to a court approved scheme of arrangement under
the laws of England and Wales so that INVESCO PLC would become a
wholly-owned subsidiary of Invesco Ltd. and the former holders of
INVESCO PLC shares would become shareholders of Invesco Ltd.;
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to implement a reverse stock split, also known as a share capital
consolidation, on a one-for-two basis immediately after the scheme of
arrangement becoming effective; and
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|
to transfer Invescos regulated business in the European Union from
INVESCO PLC to Invesco Ltd. promptly after the scheme of arrangement
becoming effective. The transfer was accomplished by INVESCO PLC
issuing bonus shares, cancelling such bonus shares (see resolutions 2
and 3 of the Extraordinary General Meeting below) and utilizing the
distributable reserves created by such issuance and cancellation to
transfer Invescos regulated business from INVESCO plc to Invesco Ltd.
|
The shareholders of INVESCO PLC approved the scheme of arrangement at the court meeting and the
Proposals at the extraordinary general meeting. The results of voting at each of the court meeting
and the extraordinary meeting are set forth below.
Court Meeting
At the Court Meeting, (i) a majority in number of Invesco PLC shareholders who voted (either in
person or by proxy), and (ii) over 75 percent in value of all Invesco PLC shares held by such
shareholders, voted in favor of the resolution to approve the Scheme of Arrangement. The final
result was as follows:
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|
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|
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|
Number of Votes
|
|
% of Votes Cast
|
In Favor
|
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|
137,239,891
|
|
|
|
97.15
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Against
|
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|
4,020,247
|
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|
2.85
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16
Extraordinary General Meeting
At the Extraordinary General Meeting, the special resolutions proposed in relation to the Scheme
were also passed by the requisite majorities. The final result was as follows:
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|
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Number of Votes
|
|
% of Votes Cast
|
Resolution 1. To
approve the
Scheme of
Arrangement
|
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In Favor
|
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|
140,253,078
|
|
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|
97.05
|
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|
|
Against
|
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|
4,262,972
|
|
|
|
2.95
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Abstaining
|
|
|
1,910,835
|
|
|
|
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|
Resolution 2. To
approve the
issue of bonus
shares to
Invesco Ltd.
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In Favor
|
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|
141,286,241
|
|
|
|
97.40
|
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|
Against
|
|
|
3,776,776
|
|
|
|
2.60
|
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|
Abstaining
|
|
|
1,363,870
|
|
|
|
|
|
Resolution 3. To
approve the
reduction
of capital relating
to the New Shares
|
|
In Favor
|
|
|
141,346,030
|
|
|
|
97.44
|
|
|
|
Against
|
|
|
3,719,193
|
|
|
|
2.56
|
|
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|
Abstaining
|
|
|
1,361,663
|
|
|
|
|
|
The scheme of arrangement became effective on December 4, 2007. As a result, INVESCO PLC became a
wholly-owned subsidiary of Invesco Ltd. and the shareholders of INVESCO PLC received common shares
of Invesco Ltd. in exchange for their ordinary shares of INVESCO PLC.
17
PART II
Item 5.
Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Invesco Ltd. is organized under the laws of Bermuda, and our common shares are listed and traded on
the New York Stock Exchange under the symbol IVZ.
Prior to December 4, 2007, we had outstanding ordinary shares that were listed on the Official List
of The U.K. Listing Authority and were traded on the London Stock Exchange. We also had American
Depositary Shares (ADSs) listed for trading on the NYSE, also under the symbol IVZ. Each ADS
represented the right to receive two ordinary shares. We also had exchangeable shares, which were
issued by one of our subsidiaries and were listed for trading on the Toronto Stock Exchange. Each
exchangeable share represented the right to receive one ordinary share.
On December 4, 2007, we redomiciled the company from the United Kingdom to Bermuda in a transaction
previously approved by shareholders. To accomplish this, our predecessor company, INVESCO PLC,
effected a court-approved U.K. scheme of arrangement under which our shareholders received common
shares in Invesco Ltd., the new Bermuda parent company, in exchange for their ordinary shares in
INVESCO PLC. Holders of our ADSs and our exchangeable shares also received common shares in the new
Bermuda parent company in exchange for their holdings. Following the redomicile, Invesco Ltd.
effected a one-for-two reverse stock split, such that all of our shareholders now hold only common
shares, par value $0.20 per share, in Invesco Ltd.
The following table sets forth, for the periods indicated, the high and low reported share prices
on the New York Stock Exchange, based on data as reported by Bloomberg. All figures prior to
December 4, 2007 represent high and low share prices of our ADSs. One ADS represented two ordinary
shares of INVESCO PLC.
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|
|
|
|
|
|
|
|
|
|
|
Invesco Ltd.
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|
|
|
|
|
|
Common Shares (or equivalent)
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
|
|
|
|
|
High
|
|
Low
|
|
Declared
|
Fourth Quarter
|
|
|
2007
|
|
|
$
|
32.25
|
|
|
$
|
24.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
|
2007
|
|
|
$
|
27.66
|
|
|
$
|
21.09
|
|
|
$
|
0.164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
|
2007
|
|
|
$
|
26.52
|
|
|
$
|
22.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
2007
|
|
|
$
|
26.05
|
|
|
$
|
20.35
|
|
|
$
|
0.208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter
|
|
|
2006
|
|
|
$
|
25.04
|
|
|
$
|
21.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
|
2006
|
|
|
$
|
22.09
|
|
|
$
|
16.67
|
|
|
$
|
0.154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
|
2006
|
|
|
$
|
23.12
|
|
|
$
|
16.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
2006
|
|
|
$
|
20.53
|
|
|
$
|
15.46
|
|
|
$
|
0.203
|
|
18
The following graph illustrates the cumulative total shareholder return of our common shares
(ordinary shares prior to December 4, 2007) over the five-year period ending December 31, 2007 and
compares it to the cumulative total return on the Standard and Poors (S&P) 500 Index and to a
group of peer asset management companies. This table is not intended to forecast future performance
of our common shares.
The chart below illustrates the cumulative total shareholder return of our common shares (ordinary
shares prior to December 4, 2007) over the period since the company began its comprehensive
operating plan designed to strengthen the business, build renewed momentum and identify the most
promising opportunities for future growth.
Note: The Asset Manager Index includes Affiliated Managers Group, Alliance Bernstein, BlackRock,
Eaton Vance, Federated Investors, Franklin Resources, Gamco Investors, Invesco Ltd., Janus, Legg
Mason, Schroders, T. Rowe Price, Waddell & Reed, and W.P. Stewart & Co.
Important Information Regarding Dividend Payments
An interim dividend of $0.164 per INVESCO PLC ADS was declared on August 2, 2007 and paid on
October 25, 2007. On February 1, 2008, the board of directors declared a final (semi-annual)
dividend for 2007 of $0.22 per common share. The dividend will be paid on April 7, 2008 to holders
of record on March 19, 2008.
If dividends are paid in the future, they will be declared and paid on a quarterly basis. The
declaration, payment and amount of any future dividends will be declared by our board of directors
and will depend upon, among other factors, our earnings, financial condition and capital
requirements at the time such declaration and payment are considered. The board has a policy of
managing dividends in a prudent fashion, with due consideration given to profit levels, overall
debt levels, and historical dividend payouts. See also Part II, Item 7. Managements Discussion
and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources -
Dividends, for additional details regarding dividends.
19
Holders
At January 31, 2008, we had 424.8 million common shares issued and outstanding, and there were
approximately 8,094 holders of record of our common shares.
Repurchases of Equity Securities
The following table shows share repurchase activity during the three months ended December 31,
2007:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Number
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
(or Approximate
|
|
|
(a)
|
|
|
|
|
|
Total Number of
|
|
Dollar Value) of
|
|
|
Total Number
|
|
(b)
|
|
Shares Purchased
|
|
Shares that May
|
|
|
of Shares
|
|
Average Price
|
|
as Part of Publicly
|
|
Yet Be Purchased
|
|
|
Purchased
|
|
Paid Per Share
|
|
Announced Plans
|
|
Under the Plans
|
Month
(1)
|
|
(millions)
(2)(3)
|
|
($)
|
|
or Programs (millions)
(4)
|
|
or Programs (millions)
(4)
|
|
|
|
October 1 31, 2007
|
|
|
1.5
|
|
|
|
28.88
|
|
|
|
1.5
|
|
|
|
351.7
|
|
November 1 30, 2007
|
|
|
10.4
|
|
|
|
26.03
|
|
|
|
4.0
|
|
|
|
246.7
|
|
December 1 31, 2007
|
|
|
5.5
|
|
|
|
27.18
|
|
|
|
3.2
|
|
|
|
154.5
|
|
|
|
|
|
|
|
(1)
|
|
Purchases from October 1, 2007 through December 3, 2007 were made by INVESCO PLC and
were comprised of ordinary shares trading on the London Stock Exchange. Purchases made
after December 3, 2007 were comprised of Invesco Ltd. common shares trading on the New
York Stock Exchange. Historical share prices were converted into U.S. dollars using the
foreign exchange rate in effect on the date that the shares were purchased.
|
|
(2)
|
|
From time to time, the trustees of the Invesco Global Stock Plan (GSP) and the
Invesco Employee Share Option Trust purchased ordinary shares in the open market. These
trusts were established to satisfy our obligations to issue ordinary
shares under the GSP,
our share option and other share-based schemes. During the fourth quarter 2007, the
company contributed $216.6 million to these trusts, which in turn purchased 16.9 million
ordinary shares (equivalent to 8.4 million common shares). All transactions during the
quarter were executed before the redomicile and relisting of the company discussed above.
At the 2008 annual meeting of shareholders, the company will be proposing for shareholder
approval two new equity compensation plans. Provided that such plans are approved, the
company does not intend to fund further purchases by these trusts.
|
|
(3)
|
|
An aggregate of 0.3 million shares were repurchased in private transactions from
current executive officers at the respective NYSE closing prices for the common shares on
the preceding day.
|
|
(4)
|
|
On June 13, 2007, our board of directors authorized a share repurchase program of up
to $500.0 million of the companys shares through June 30, 2008. A public announcement of
the authorization was made on June 14, 2007. Of the total amount authorized, $154.5
million remained as of December 31, 2007. During the fourth quarter, purchases related to
this program totaled $240.3 million, representing 8.7 million shares.
|
20
Item 6.
Selected Financial Data
The following tables present selected consolidated financial information for the company as of and
for each of the five fiscal years in the period ended December 31, 2007. The consolidated financial
information has been prepared in accordance with U.S. generally accepted accounting principles.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Years Ended December 31,
|
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
|
(Dollars in millions, except per share and other data)
|
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
|
3,878.9
|
|
|
|
3,246.7
|
|
|
|
2,872.6
|
|
|
|
2,757.5
|
|
|
|
2,342.0
|
|
Net revenues *
|
|
|
2,888.4
|
|
|
|
2,428.0
|
|
|
|
2,166.6
|
|
|
|
2,124.5
|
|
|
|
1,901.1
|
|
Operating income
|
|
|
994.3
|
|
|
|
759.2
|
|
|
|
407.9
|
|
|
|
11.7
|
|
|
|
428.7
|
|
Net operating income *
|
|
|
1,039.8
|
|
|
|
762.1
|
|
|
|
407.9
|
|
|
|
11.7
|
|
|
|
428.7
|
|
Operating margin
|
|
|
25.6
|
%
|
|
|
23.4
|
%
|
|
|
14.2
|
%
|
|
|
0.42
|
%
|
|
|
18.3
|
%
|
Net operating margin *
|
|
|
36.0
|
%
|
|
|
31.4
|
%
|
|
|
18.8
|
%
|
|
|
0.55
|
%
|
|
|
22.6
|
%
|
Net income/(loss)
|
|
|
673.6
|
|
|
|
482.7
|
|
|
|
219.8
|
|
|
|
(85.9
|
)
|
|
|
248.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings/(loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-basic
|
|
|
1.69
|
|
|
|
1.22
|
|
|
|
0.55
|
|
|
|
(0.21
|
)
|
|
|
0.62
|
|
-diluted
|
|
|
1.64
|
|
|
|
1.19
|
|
|
|
0.54
|
|
|
|
(0.21
|
)
|
|
|
0.61
|
|
Dividends per share
|
|
|
0.372
|
|
|
|
0.357
|
|
|
|
0.330
|
|
|
|
0.323
|
|
|
|
0.375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
12,925.2
|
|
|
|
12,228.5
|
|
|
|
10,702.7
|
|
|
|
10,580.3
|
|
|
|
10,307.9
|
|
Long-term debt
|
|
|
1,276.4
|
|
|
|
979.0
|
|
|
|
1,220.0
|
|
|
|
1,381.7
|
|
|
|
1,290.3
|
|
Shareholders equity
|
|
|
6,590.6
|
|
|
|
6,164.0
|
|
|
|
5,529.8
|
|
|
|
5,519.6
|
|
|
|
5,717.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AUM (in billions)
|
|
$
|
500.1
|
|
|
$
|
462.6
|
|
|
$
|
386.3
|
|
|
$
|
382.1
|
|
|
$
|
370.6
|
|
Headcount
|
|
|
5,475
|
|
|
|
5,574
|
|
|
|
5,798
|
|
|
|
6,693
|
|
|
|
6,747
|
|
|
|
|
*
|
|
Net revenues are operating revenues less third-party distribution, service and advisory costs,
plus our proportional share of revenues, net of third-party distribution costs, from joint venture
investments. Net operating margin is equal to net operating income divided by net revenues. Net
operating income is operating income plus our proportional share of the net operating income from
joint venture investments. See Part II, Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations Schedule of Non-GAAP Information for
reconciliations of operating revenues to net revenues and from operating income to net operating
income.
|
Item 7.
Managements Discussion and Analysis of Financial Condition and Results of Operations
Executive Overview
The following executive overview summarizes the significant trends affecting our results of
operations and financial condition for the periods presented. This overview and the remainder of
this managements discussion and analysis supplements, and should be read in conjunction with, the
Consolidated Financial Statements of Invesco Ltd. and its subsidiaries (collectively, the company
or Invesco) and the notes thereto contained elsewhere in this Annual Report on Form 10-K.
During the year ended December 31, 2007, we had net income of $673.6 million, compared to $482.7
million during 2006. The 39.5% increase in net income was driven by the following factors:
|
|
|
An increase in operating revenues of $632.2 million (19.5%) driven mainly by growth in
average assets under management (AUM) of $64.9 billion (15.3%), while at the same time
limiting the increase in operating expenses to $397.1 million (16.0%).
|
|
|
|
|
Growth in equity in earnings of unconsolidated affiliates of $43.8 million, from $4.3
million in 2006 to $48.1 million in 2007.
|
The factors above that contributed to the growth in operating income during the year ended December
31, 2007 were offset, in part, by the following:
|
|
|
An increase of $67.1 million (6.3%) in employee compensation expense due predominantly
to increases in base salaries, sales incentive bonuses and staff bonuses driven by
performance against corporate objectives and $25.0 million in amortization of a
|
21
|
|
|
component of the cost of the October 2006 acquisition
of WL Ross & Co, which was accounted for as prepaid compensation
(see Part II, Item 8, Financial Statements and Supplementary
Data Note 2, Acquisitions and Dispositions for
additional details).
|
|
|
|
|
An increase in general and administrative expenses of $88.2 million (42.5%). The
increase included growth in legal costs related to a $24.0 million insurance recovery in
2006 and to fund launches, a $12.8 million charge related to the relisting of the company
on the New York Stock Exchange and a $9.8 million charge related to the proposed final
settlement of market-timing private litigation that commenced in 2003.
|
|
|
|
|
An increase in income tax expense of $102.7 million (40.3%), which was consistent with
the increase in income before taxes.
|
Invesco ended 2007 with a record year-end AUM of $500.1 billion, an 8.1% increase over 2006
resulting from a combination of market gains, positive flows into money market funds and foreign
currency translation partially offset by net outflows of $3.4 billion. Larger AUM increased operating revenues
to $3,878.9 million, a 19.5% increase over the previous year. Operating expenses increased 16.0% to
$2,884.6 million. The growth in operating revenues exceeded the increase in operating expenses,
producing record operating income of $994.3 million in 2007, an increase of 31.0% over operating
income of $759.2 million in 2006, and a significant expansion of operating margin and net operating
margin to 25.6% and 36.0% in 2007, respectively, from 23.4% and 31.4% in 2006, respectively.
Diluted earnings per share improved 37.8%, from $1.19 in 2006 to $1.64 in 2007. See Schedule of Non-GAAP
Information for a
reconciliation of operating income to net operating income (and by calculation, a reconciliation of
operating margin to net operating margin) and important additional disclosures.
Achieving strong investment performance continues to be a strategic focus for Invesco. Within our
retail products, the U.K. has continued to have strong relative performance versus its competitors
throughout 2007. The U.S., Continental Europe and Asia were ahead of peers over most relevant time
periods, while the relative performance in Canada tended to lag peers due to certain portfolios
being underweight in the resources sector while being relatively overweight in consumer
discretionary businesses. The strong Canadian dollar was an additional impediment for funds with
higher-than-average investment in foreign securities. Many of our institutional products were ahead
of benchmark over most relevant time periods with our fixed income and money market products once
again delivering consistent outstanding relative performance.
Industry Discussion
Global equity markets generally increased for the full year of 2007. However, both equity and
credit markets suffered sharp corrections at times during the fourth quarter, mainly due to
sub-prime related write-downs from the large investment banks and tighter liquidity in short-term
money markets. In North America during 2007, the Dow Jones Industrial Average, the S&P 500, the
Nasdaq Composite Index, and the S&P/TSX Composite (Canada) were up 8.9%, 5.5%, 10.7%. and 9.8%,
respectively; in Europe the FTSE 100 was up 7.8% and the FTSE World Europe was up 3.3%; and in Asia
the China SE Shanghai Composite was up 97.9% while the Nikkei 225 was down 10.2%. The Lehman
Brothers U.S. Aggregate Bond Index returned 7.0% for the year, bolstered by two interest rate cuts
by the Federal Reserve in the fourth quarter, and despite credit concerns that increased across the
broader economy. The markets continue to be volatile in early 2008. Our AUM at the end of 2007 were
$500.1 billion (2006: $462.6 billion). At January 31, 2008, AUM decreased by $24.5 billion (4.9%)
to $475.6 billion due primarily to this market volatility.
Assets Under Management
Average AUM for 2007 were $489.1 billion, compared to $424.2 billion in 2006. Net outflows for the
year ended December 31, 2007, were $3.4 billion, with inflows of $119.9 billion and outflows of
$123.3 billion. The primary driver of net outflows for 2007 were net outflows from the Stable Value
product of $16.2 billion. These outflows occurred following the departure of several members of our
Stable Value team to a competitor in April 2007. Our retail net inflows for 2007 were $6.0 billion,
compared to net inflows of $0.5 billion in 2006. Institutional net outflows were $9.2 billion in
2007 (including the Stable Value net outflows of $16.2 billion) versus net outflows of $1.2 billion
in 2006. Our Private Wealth Management (PWM) channel had net outflows of $0.2 billion in 2007
compared to net outflows of $0.7 billion in 2006.
22
Changes in AUM were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in billions
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1,
|
|
$
|
462.6
|
|
|
$
|
386.3
|
|
|
$
|
382.1
|
|
Inflows
|
|
|
119.9
|
|
|
|
85.8
|
|
|
|
66.3
|
|
Outflows
|
|
|
(123.3
|
)
|
|
|
(87.2
|
)
|
|
|
(82.5
|
)
|
|
|
|
Net flows
|
|
|
(3.4
|
)
|
|
|
(1.4
|
)
|
|
|
(16.2
|
)
|
Net flows in money market funds and other
|
|
|
10.1
|
|
|
|
12.8
|
|
|
|
0.5
|
|
Market gains/reinvestment
|
|
|
20.0
|
|
|
|
46.5
|
|
|
|
24.4
|
|
Acquisitions/disposals
|
|
|
|
|
|
|
8.9
|
|
|
|
|
|
Foreign currency
|
|
|
10.8
|
|
|
|
9.5
|
|
|
|
(4.5
|
)
|
|
|
|
December 31,
|
|
$
|
500.1
|
|
|
$
|
462.6
|
|
|
$
|
386.3
|
|
|
|
|
Average long-term AUM
|
|
$
|
424.2
|
|
|
$
|
366.3
|
|
|
$
|
331.7
|
|
Average institutional money market AUM
|
|
|
64.9
|
|
|
|
57.9
|
|
|
|
45.9
|
|
|
|
|
Average AUM
|
|
$
|
489.1
|
|
|
$
|
424.2
|
|
|
$
|
377.6
|
|
Net revenue yield on AUM (annualized) (1)
|
|
|
59.1
|
bps
|
|
|
56.9
|
bps
|
|
|
57.4
|
bps
|
|
|
|
Net revenue yield on AUM before performance fees (annualized) (1)
|
|
|
57.7
|
bps
|
|
|
55.0
|
bps
|
|
|
56.5
|
bps
|
|
|
|
|
|
|
|
(1)
|
|
Net revenue yield on AUM is equal to net revenue divided by average AUM. Net revenues are
operating revenues less third-party distribution, service and advisory costs, plus our proportional
share of net revenues from joint venture investments. See
Schedule of Non-GAAP Information for a reconciliation of operating revenues to net revenues and important additional
disclosures.
|
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.
The returns from global capital markets declined in 2007. The total returns (in local currency
terms) of the FTSE 100, the S&P 500 and the Dow Jones Industrial Average (DJIA) all declined in
2007 from 2006: FTSE 100 from 14.8% to 7.8%, S&P 500 from 15.8% to 5.5% and the DJIA from
19.0% to 8.9%, respectively. The total returns of the NASDAQ increased slightly from 10.4% to
10.7%. Our AUM by channel, by asset class, and by client domicile were as follows:
AUM by Channel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in billions
|
|
Total
|
|
Retail
|
|
Institutional
|
|
PWM
|
|
|
|
January 1, 2005
|
|
$
|
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
|
|
|
(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/disposals
|
|
|
8.9
|
|
|
|
6.3
|
|
|
|
2.6
|
|
|
|
|
|
Foreign currency
|
|
|
9.5
|
|
|
|
5.9
|
|
|
|
3.6
|
|
|
|
|
|
|
|
|
December 31, 2006
|
|
$
|
462.6
|
|
|
$
|
234.0
|
|
|
$
|
211.8
|
|
|
$
|
16.8
|
|
|
|
|
Inflows
|
|
|
119.9
|
|
|
|
86.6
|
|
|
|
28.2
|
|
|
|
5.1
|
|
Outflows
|
|
|
(123.3
|
)
|
|
|
(80.6
|
)
|
|
|
(37.4
|
)
|
|
|
(5.3
|
)
|
|
|
|
Net flows
|
|
|
(3.4
|
)
|
|
|
6.0
|
|
|
|
(9.2
|
)
|
|
|
(0.2
|
)
|
Net flows in money market funds and other
|
|
|
10.1
|
|
|
|
(0.3
|
)
|
|
|
10.4
|
|
|
|
|
|
Market gains/reinvestment
|
|
|
20.0
|
|
|
|
11.3
|
|
|
|
7.8
|
|
|
|
0.9
|
|
Foreign currency
|
|
|
10.8
|
|
|
|
8.5
|
|
|
|
2.3
|
|
|
|
|
|
December 31, 2007
|
|
$
|
500.1
|
|
|
$
|
259.5
|
|
|
$
|
223.1
|
|
|
$
|
17.5
|
|
|
|
|
23
AUM by Asset Class
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
|
|
|
|
|
|
Money
|
|
Stable
|
|
|
$ in billions
|
|
Total
|
|
Equity (b)
|
|
Income
|
|
Balanced
|
|
Market
|
|
Value
|
|
Alternatives (c)
|
|
|
|
January 1, 2005 (a)
|
|
$
|
382.1
|
|
|
$
|
177.0
|
|
|
$
|
27.5
|
|
|
$
|
37.2
|
|
|
$
|
51.8
|
|
|
$
|
42.1
|
|
|
$
|
46.5
|
|
|
|
|
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 (a)
|
|
$
|
386.3
|
|
|
$
|
176.0
|
|
|
$
|
32.0
|
|
|
$
|
34.3
|
|
|
$
|
52.1
|
|
|
$
|
45.7
|
|
|
$
|
46.2
|
|
|
|
|
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 (a)
|
|
$
|
462.6
|
|
|
$
|
217.5
|
|
|
$
|
42.8
|
|
|
$
|
38.2
|
|
|
$
|
64.3
|
|
|
$
|
46.9
|
|
|
$
|
52.9
|
|
|
|
|
Inflows
|
|
|
119.9
|
|
|
|
74.6
|
|
|
|
10.7
|
|
|
|
10.1
|
|
|
|
1.5
|
|
|
|
4.0
|
|
|
|
19.0
|
|
Outflows
|
|
|
(123.3
|
)
|
|
|
(64.2
|
)
|
|
|
(14.9
|
)
|
|
|
(9.6
|
)
|
|
|
(2.1
|
)
|
|
|
(20.2
|
)
|
|
|
(12.3
|
)
|
|
|
|
Net flows
|
|
|
(3.4
|
)
|
|
|
10.4
|
|
|
|
(4.2
|
)
|
|
|
0.5
|
|
|
|
(0.6
|
)
|
|
|
(16.2
|
)
|
|
|
6.7
|
|
Net flows in money market funds
|
|
|
10.1
|
|
|
|
(0.6
|
)
|
|
|
0.3
|
|
|
|
(1.3
|
)
|
|
|
10.6
|
|
|
|
(0.1
|
)
|
|
|
1.2
|
|
Market gains/reinvestment
|
|
|
20.0
|
|
|
|
14.1
|
|
|
|
2.1
|
|
|
|
0.2
|
|
|
|
|
|
|
|
1.6
|
|
|
|
2.0
|
|
Foreign currency translation
|
|
|
10.8
|
|
|
|
6.5
|
|
|
|
1.2
|
|
|
|
2.8
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
|
December 31, 2007
|
|
$
|
500.1
|
|
|
$
|
247.9
|
|
|
$
|
42.2
|
|
|
$
|
40.4
|
|
|
$
|
74.4
|
|
|
$
|
32.3
|
|
|
$
|
62.9
|
|
|
|
|
|
|
|
(a)
|
|
The beginning balances were adjusted to reflect certain asset reclassifications.
|
|
(b)
|
|
Includes PowerSharess ETF AUM ($14.5 billion at December 31, 2007), which are primarily
invested in equity securities.
|
|
(c)
|
|
Assets have been restated beginning December 31, 2006 to reflect an amended definition of the
alternative asset class. The alternative asset class includes real estate, private equity and
absolute return strategies.
|
AUM by Client Domicile
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in billions
|
|
Total
|
|
U.S.
|
|
Canada
|
|
U.K.
|
|
Europe
|
|
Asia
|
|
|
|
January 1, 2006 (a)
|
|
$
|
386.3
|
|
|
$
|
250.6
|
|
|
$
|
38.8
|
|
|
$
|
53.8
|
|
|
$
|
25.0
|
|
|
$
|
18.1
|
|
|
|
|
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
|
|
|
$
|
280.4
|
|
|
$
|
43.3
|
|
|
$
|
74.7
|
|
|
$
|
38.1
|
|
|
$
|
26.1
|
|
|
|
|
Inflows
|
|
|
119.9
|
|
|
|
48.2
|
|
|
|
6.7
|
|
|
|
22.0
|
|
|
|
21.4
|
|
|
|
21.6
|
|
Outflows
|
|
|
(123.3
|
)
|
|
|
(64.7
|
)
|
|
|
(6.8
|
)
|
|
|
(10.0
|
)
|
|
|
(25.6
|
)
|
|
|
(16.2
|
)
|
|
|
|
Net flows
|
|
|
(3.4
|
)
|
|
|
(16.5
|
)
|
|
|
(0.1
|
)
|
|
|
12.0
|
|
|
|
(4.2
|
)
|
|
|
5.4
|
|
Net flows in money market funds
|
|
|
10.1
|
|
|
|
11.0
|
|
|
|
|
|
|
|
0.2
|
|
|
|
(0.5
|
)
|
|
|
(0.6
|
)
|
Market gains/reinvestment
|
|
|
20.0
|
|
|
|
14.9
|
|
|
|
(4.1
|
)
|
|
|
2.7
|
|
|
|
1.8
|
|
|
|
4.7
|
|
Foreign currency translation
|
|
|
10.8
|
|
|
|
|
|
|
|
7.6
|
|
|
|
0.4
|
|
|
|
2.0
|
|
|
|
0.8
|
|
|
|
|
December 31, 2007
|
|
$
|
500.1
|
|
|
$
|
289.8
|
|
|
$
|
46.7
|
|
|
$
|
90.0
|
|
|
$
|
37.2
|
|
|
$
|
36.4
|
|
|
|
|
|
|
|
(a)
|
|
The beginning balances were adjusted to reflect certain asset reclassifications. The company
began documenting and presenting AUM by client domicile in 2006.
|
24
Investment Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail Results
|
|
% of AUM in Top Half of Peer Group
|
|
|
One-year
|
|
Three-year
|
|
Five-year
|
|
|
Dec-07
|
|
Dec-06
|
|
Dec-07
|
|
Dec-06
|
|
Dec-07
|
|
Dec-06
|
U.S. (Lipper)
|
|
|
45
|
%
|
|
|
62
|
%
|
|
|
64
|
%
|
|
|
74
|
%
|
|
|
67
|
%
|
|
|
67
|
%
|
U.S. (Morningstar)
|
|
|
49
|
%
|
|
|
60
|
%
|
|
|
65
|
%
|
|
|
51
|
%
|
|
|
50
|
%
|
|
|
77
|
%
|
Canada
|
|
|
4
|
%
|
|
|
80
|
%
|
|
|
15
|
%
|
|
|
54
|
%
|
|
|
14
|
%
|
|
|
81
|
%
|
U.K.
|
|
|
75
|
%
|
|
|
89
|
%
|
|
|
80
|
%
|
|
|
98
|
%
|
|
|
92
|
%
|
|
|
87
|
%
|
Cont. Europe & Asia
|
|
|
72
|
%
|
|
|
47
|
%
|
|
|
57
|
%
|
|
|
90
|
%
|
|
|
85
|
%
|
|
|
57
|
%
|
|
Institutional Results
|
|
% of AUM Ahead of Benchmark
|
|
|
One-year
|
|
Three-year
|
|
Five-year
|
Equity
|
|
|
12
|
%
|
|
|
53
|
%
|
|
|
56
|
%
|
|
|
59
|
%
|
|
|
56
|
%
|
|
|
100
|
%
|
Fixed Income
|
|
|
65
|
%
|
|
|
92
|
%
|
|
|
89
|
%
|
|
|
96
|
%
|
|
|
91
|
%
|
|
|
99
|
%
|
Money Market
|
|
|
98
|
%
|
|
|
97
|
%
|
|
|
98
|
%
|
|
|
97
|
%
|
|
|
98
|
%
|
|
|
97
|
%
|
Alternative
|
|
|
42
|
%
|
|
|
92
|
%
|
|
|
97
|
%
|
|
|
100
|
%
|
|
|
93
|
%
|
|
|
100
|
%
|
|
|
|
Note:
|
|
As of December 31, 2007. Certain funds and products were
excluded from the analysis because of limited benchmark or peer group
data. Had these been available, results may be different. These results are preliminary and subject to
revision. Performance assumes the reinvestment of dividends. Past performance is not indicative of
future results and may not reflect an investors experience.
|
Within U.S. retail, over 64% of assets were in the top half of their respective peer groups on both
a three- and five-year Lipper basis while 45% of assets were in the top half on a one-year basis.
Morningstar peer groups result in 49%, 65%, and 50% of AUM being in the top half on a one-, three-
and five-year basis, respectively. During 2007, we evaluated, rationalized and merged five funds in
the U.S. retail product line and introduced six new target date allocation funds as part of our
efforts to ensure we are delivering the best possible investment solutions to our clients.
In our Canadian retail operations, certain portfolios lagged peers in 2007 due to being underweight
in the resources sectors while overweight in consumer discretionary businesses. The strong Canadian
dollar was an additional headwind for funds with higher-than-average investment in foreign
securities.
The U.K. retail operations have produced particularly strong results across all measured time
frames. In Continental Europe and Asia, 72%, 57% and 85% of AUM are performing in the top half of
their peer groups on a one-, three- and five-year basis, respectively.
In our institutional operations, over 98% of our money market assets were in the top-half of their
respective peer groups over one-, three-and five-year periods. At least 89% of alternatives and
fixed income AUM were ahead of benchmark over three and five year periods. The institutional equity
products experienced some relative weakness over a one year period but had 56% of AUM ahead of
benchmark over a three- and five-year period. Although measuring our investment performance against
benchmarks is an important criterion, our institutional operations are also evaluated against peer
groups and consultant perception.
Results of Operations
Results of Operations for the Year Ended December 31, 2007 Compared with the Year Ended December
31, 2006
Operating Revenues and Net Revenues
Operating revenues increased by 19.5% in 2007 to $3,878.9 million (2006: $3,246.7 million). Net
revenues are operating revenues less third-party distribution, service and advisory costs, plus our
proportional share of net revenues from joint venture arrangements. Net revenues increased by 19.0%
in 2007 to $2,888.4 million (2006: $2,428.0 million). See Schedule of Non-GAAP Information
for additional important disclosures regarding the use of net revenues. The main
categories of revenues, and the dollar and percentage change between the periods, are as follows:
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
%
|
$ in millions
|
|
2007
|
|
2006
|
|
Change
|
|
Change
|
Investment management fees
|
|
|
3,080.1
|
|
|
|
2,508.2
|
|
|
|
571.9
|
|
|
|
22.8
|
%
|
Performance fees
|
|
|
70.3
|
|
|
|
82.1
|
|
|
|
(11.8
|
)
|
|
|
(14.4
|
)%
|
Service and distribution fees
|
|
|
593.1
|
|
|
|
534.9
|
|
|
|
58.2
|
|
|
|
10.9
|
%
|
Other
|
|
|
135.4
|
|
|
|
121.5
|
|
|
|
13.9
|
|
|
|
11.4
|
%
|
|
|
|
Total operating revenues
|
|
|
3,878.9
|
|
|
|
3,246.7
|
|
|
|
632.2
|
|
|
|
19.5
|
%
|
Third-party distribution,
service and advisory costs
|
|
|
(1,051.1
|
)
|
|
|
(826.8
|
)
|
|
|
(224.3
|
)
|
|
|
(27.1
|
)%
|
Proportional share of
revenues, net of third-party
distribution costs, from
joint venture investments
|
|
|
60.6
|
|
|
|
8.1
|
|
|
|
52.5
|
|
|
|
648.1
|
%
|
|
|
|
Net revenues
|
|
|
2,888.4
|
|
|
|
2,428.0
|
|
|
|
460.4
|
|
|
|
19.0
|
%
|
|
|
|
Investment Management Fees
Investment management fees 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. Investment
management fees for products offered in the retail distribution channel are generally calculated as
a percentage of the daily average asset balances and therefore vary as the levels of AUM change
resulting from inflows, outflows and market movements. Investment management fees for products
offered in the institutional and private wealth management distribution channels are calculated in
accordance with the underlying investment management contracts and also vary in relation to the
level of client assets managed.
Investment management fees increased 22.8% in 2007 to $3,080.1 million (2006: $2,508.2 million) due
to increases in assets under management during the year. AUM at December 31, 2007 were $500.1
billion (2006: $462.6 billion).
Performance Fees
Performance fee revenues are only generated on certain management contracts when certain
performance hurdles are achieved. They are recorded in operating revenues as of the performance
measurement date, or on the date of achievement of the performance hurdle, when the outcome can be
estimated reliably. The performance measurement date is defined in each contract in which incentive
and performance fee revenue agreements are in effect.
Performance fees will fluctuate from period to period and may not correlate with general market
changes, since most of the fees are driven by relative performance to the respective benchmark
rather than absolute performance. In 2007, these fees decreased 14.4% to $70.3 million (2006: $82.1
million). The performance fees generated in 2006 were the result of outstanding investment
performance across a number of our investment disciplines.
Service and Distribution Fees
Service fees are generated through fees charged to cover several types of expenses, including fund
accounting fees, SEC filings and other maintenance costs for mutual funds, unit trusts and ICVCs,
and administrative fees received from closed-ended funds. Service fees 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 fees include 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 fees typically vary in relation to the amount of client assets
managed. Retail products offered outside of the U.S. do not generate a separate distribution fee,
as the quoted management fee rate is inclusive of these services; instead fees for distribution
services are included within investment management fee revenues for these locations.
In 2007, service and distribution fees increased 10.9% to $593.1 million (2006: $534.9 million) due
to increased sales and assets under management.
26
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. Real estate transaction fees are
derived from commissions earned through the buying and selling of properties. The performance
measurement date in which revenues are recorded is the date on which the transaction is legally
closed. Other revenues also include the revenues of consolidated investment products.
In 2007, other revenues increased 11.4% to $135.4 million (2006: $121.5 million) driven by
increases in sales volumes of funds subject to front-end commissions, offset by declines in real
estate transaction fees from 2006. Increases in other revenues were also offset by decreases in the
revenues of consolidated investment products, which were primarily the result of the
deconsolidation of certain variable interest entities following the companys determination that it
was no longer the primary beneficiary of those entities. See Item 8, Financial Statements and
Supplementary Data Note 18, Consolidated Investment Products.
Third-Party Distribution, Service and Advisory Costs
Third-party distribution, service and advisory costs 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. Third-party distribution costs 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 costs are sub-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 costs may increase or decrease at a
rate different from the rate of change in service and distribution fee revenues due to the
inclusion of distribution, service and advisory costs for the U.K. and Canada, where the related
revenues are recorded as investment management fee revenues, as noted above.
Third-party distribution, service and advisory costs increased 27.1% in 2007 to $1,051.1 million
(2006: $826.8 million), driven by increased renewal commissions generated by increased assets under
management. Additionally, the trend towards platform and fund supermarket sales in the U.K. has
further contributed to the increase in these costs.
Proportional share of revenues, net of third-party distribution costs, from joint venture
investments
Management believes that the addition of our proportional share of revenues, net of third-party
distribution costs, from joint venture arrangements should be added to operating revenues to arrive
at net revenues, as it is important to evaluate the contribution to the business that our joint
venture arrangements are making. See Schedule of Non-GAAP Information for
additional disclosures regarding the use of net revenues. The companys most significant joint
venture arrangement, as identified in Item 8, Financial Statements and Supplementary Data Note
3, Investments, is our 49.0% investment in INVESCO Great Wall Fund Management Company Limited. The
648.1% increase in our proportional share of revenues, net of third-party distribution costs, to
$60.6 million in 2007 (2006: $8.1 million), is driven by the significant growth in assets under
management in this joint venture.
Operating Expenses
During 2007, operating expenses increased 16.0% to $2,884.6 million (2006: $2,487.5 million),
driven by increases in employee compensation, third-party distribution, service and advisory costs
and general and administrative costs.
The main categories of operating expenses are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
%
|
$ in millions
|
|
2007
|
|
2006
|
|
Change
|
|
Change
|
|
|
|
Employee compensation
|
|
|
1,137.6
|
|
|
|
1,070.5
|
|
|
|
67.1
|
|
|
|
6.3
|
%
|
Third-party distribution, service and advisory
|
|
|
1,051.1
|
|
|
|
826.8
|
|
|
|
224.3
|
|
|
|
27.1
|
%
|
Marketing
|
|
|
157.6
|
|
|
|
138.8
|
|
|
|
18.8
|
|
|
|
13.5
|
%
|
Property, office and technology
|
|
|
242.5
|
|
|
|
230.7
|
|
|
|
11.8
|
|
|
|
5.1
|
%
|
General and administrative
|
|
|
295.8
|
|
|
|
207.6
|
|
|
|
88.2
|
|
|
|
42.5
|
%
|
Restructuring charge
|
|
|
|
|
|
|
13.1
|
|
|
|
(13.1
|
)
|
|
|
(100.0
|
)%
|
|
|
|
Total operating expenses
|
|
|
2,884.6
|
|
|
|
2,487.5
|
|
|
|
397.1
|
|
|
|
16.0
|
%
|
|
|
|
27
The table below sets forth these cost categories as a percentage of total operating expenses,
operating revenues and net revenues, which we believe provides useful information as to the
relative significance of each type of cost.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
% of
|
|
% of
|
|
|
|
|
|
Total
|
|
% of
|
|
% of
|
|
|
|
|
|
|
Operating
|
|
Operating
|
|
Net
|
|
|
|
|
|
Operating
|
|
Operating
|
|
Net
|
$ in millions
|
|
2007
|
|
Expenses
|
|
Revenues
|
|
Revenues*
|
|
2006
|
|
Expenses
|
|
Revenues
|
|
Revenues*
|
|
|
|
Employee compensation
|
|
|
1,137.6
|
|
|
|
39.4
|
%
|
|
|
29.3
|
%
|
|
|
39.4
|
%
|
|
|
1,070.5
|
|
|
|
43.0
|
%
|
|
|
33.0
|
%
|
|
|
44.1
|
%
|
Third-party
distribution,
service and advisory
|
|
|
1,051.1
|
|
|
|
36.4
|
%
|
|
|
27.1
|
%
|
|
|
N/A
|
|
|
|
826.8
|
|
|
|
33.2
|
%
|
|
|
25.5
|
%
|
|
|
N/A
|
|
Marketing
|
|
|
157.6
|
|
|
|
5.5
|
%
|
|
|
4.1
|
%
|
|
|
5.5
|
%
|
|
|
138.8
|
|
|
|
5.6
|
%
|
|
|
4.3
|
%
|
|
|
5.7
|
%
|
Property, office and
technology
|
|
|
242.5
|
|
|
|
8.4
|
%
|
|
|
6.3
|
%
|
|
|
8.4
|
%
|
|
|
230.7
|
|
|
|
9.3
|
%
|
|
|
7.1
|
%
|
|
|
9.5
|
%
|
General and
administrative
|
|
|
295.8
|
|
|
|
10.3
|
%
|
|
|
7.6
|
%
|
|
|
10.2
|
%
|
|
|
207.6
|
|
|
|
8.3
|
%
|
|
|
6.4
|
%
|
|
|
8.6
|
%
|
Restructuring charge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.1
|
|
|
|
0.6
|
%
|
|
|
0.4
|
%
|
|
|
0.5
|
%
|
|
|
|
Total operating
expenses
|
|
|
2,884.6
|
|
|
|
100.0
|
%
|
|
|
74.4
|
%
|
|
|
N/A
|
|
|
|
2,487.5
|
|
|
|
100.0
|
%
|
|
|
76.7
|
%
|
|
|
N/A
|
|
|
|
|
|
|
|
*
|
|
Net revenues are operating revenues less third-party distribution, service and advisory costs,
plus our proportional share of net revenues from joint venture investments. See Schedule of
Non-GAAP Information for a reconciliation of operating revenues to net revenues and
important additional disclosures.
|
Employee Compensation
Employee compensation continues to be the largest component of total operating expenses, accounting
for 39.4% of total operating expenses for 2007 (2006: 43.0%). Competitive compensation is critical
for the success of the company in attracting and retaining the highest caliber employees.
Employee compensation increased $67.1 million, or 6.3%, in 2007 from 2006 due predominantly to
increases in base salaries, sales incentive bonuses and staff bonuses for performance against
corporate objectives, and $25.0 million in amortization related to a component of the cost of the
October 2006 acquisition of WL Ross & Co., which was accounted for as prepaid compensation (see
Item 8, Financial Statements and Supplementary Data Note 2, Acquisitions and Dispositions).
Third-Party Distribution, Service and Advisory Costs
Third-party distribution, service and advisory costs are discussed above in the operating and net
revenues section.
Marketing
Marketing expenses include marketing support payments, which are payments made to distributors of
certain of our retail products over and above the 12b-1 distribution payments. These fees are
contracted separately with each distributor. Marketing expenses also include the cost of direct
advertising of our products through trade publications, television and other media. Public
relations costs, such as the marketing of the companys products through conferences or other
sponsorships, are also included in marketing costs, as well as the cost of marketing-related
employee travel.
Marketing expenses increased 13.5% in 2007 to $157.6 million (2006: $138.8 million) due to
increased marketing support payments related to increased sales and AUM in the U.S. but were
relatively flat as a percentage of net revenues (5.5% of net revenues in 2007 vs. 5.7% of net
revenues in 2006).
Property, Office and Technology
Property, office and technology expenses include rent and utilities for our various leased
facilities, depreciation of company-owned property and capitalized computer equipment costs, minor
non-capitalized computer equipment and software purchases and related maintenance payments, and
costs related to externally provided computer, record-keeping and portfolio management services.
28
Property, office and technology costs increased 5.1% to $242.5 million in 2007 from $230.7 million
in 2006, due primarily to a $7.4 million lease charge for unused office space.
General and Administrative
General and administrative expenses include professional services costs, such as information
service subscriptions, consulting fees, professional insurance costs, audit, tax and legal fees,
non-marketing related employee travel expenditures, recruitment and training costs, and the
amortization of certain intangible assets.
General and administrative expenses increased by $88.2 million (42.5%) to $295.8 million in 2007
from $207.6 million in 2006. This increase included growth in legal and other costs related to a
$24.0 million insurance recovery in 2006 and to fund launch costs for a broad array of new ETF
products through PowerShares. In addition, during the fourth quarter of 2007, we recorded a $12.8
million charge related to the relisting of the company on the New York Stock Exchange and a $9.8
million charge related to the proposed final settlement of market-timing private litigation that
commenced in 2003.
Restructuring Charge
We did not incur any restructuring costs in 2007. In 2006, we recorded $13.1 million in remaining
charges related to the operational restructuring efforts that began in 2005. See Item 8,
Financial Statements and Supplementary Data Note 13, Restructuring Charge, for additional
information.
Operating Income, Net Operating Income, Operating Margin and Net Operating Margin
Operating income increased 31.0% to $994.3 million in 2007 from $759.2 million in 2006, driven by
the growth in operating revenues. Operating margin (operating income divided by operating
revenues) was 25.6% in 2007, up from 23.4% in 2006. Net operating income (operating income plus
our proportional share of the operating income from joint venture arrangements) increased 36.4% to
$1,039.8 million in 2007 from $762.1 million in 2006. Net operating margin is equal to net
operating income divided by net revenues. Net revenues are equal to operating revenues less
third-party distribution, service and advisory costs, plus our proportional share of the net
revenues from our joint venture arrangements. Net operating margin was 36.0% in 2007, up from
31.4% in 2006. See Schedule of Non-GAAP Information for a
reconciliation of operating revenues to net revenues, a reconciliation of operating income to net
operating income and additional important disclosures regarding net revenues, net operating income
and net operating margins.
Other Income and Expenses
Interest income increased 80.3% to $48.5 million in 2007 from $26.9 million in 2006 largely as a
result of growth in our interest-earning cash balances during the year. Interest expense
decreased 7.6% to $71.3 million in 2007 from $77.2 million in 2006 due to lower credit facility
balances and a lower coupon interest rate on the new senior notes issued in April 2007.
Other gains and losses, net decreased 63.1% to $9.9 million in 2007 from $26.8 million in 2006.
Included in other gains and losses, net are gains on disposals of investments, which increased to
$32.2 million in 2007 from $18.1 million in 2006, primarily driven by gains realized upon the
redemption of seed money investments. Also included in other gains are net foreign exchange gains
and losses. In 2007, we incurred $10.3 million in net foreign exchange losses; whereas in 2006 we
benefited from $8.5 million in net foreign exchange gains. Additionally, we incurred $13.6 million
in write-downs and losses on seed capital investments during 2007 (2006: $1.7 million). See Item
8, Financial Statements and Supplementary Data Note 15, Other Gains and Losses, Net, for
additional details related to other gains and losses.
Included in other income and expenses are net other realized and unrealized gains of consolidated
investment products. These net gains decreased 27.2% to $214.3 million in 2007 from $294.3 million
in 2006, primarily due to the deconsolidation of certain variable interest entities for which we
determined that we were no longer the primary beneficiary.
29
Income Tax Provision
Our subsidiaries operate in several taxing jurisdictions around the world, each with its own
statutory income tax rate. As a result, our effective tax rate will vary from year to year
depending on the mix of the profits and losses of our subsidiaries. The majority of our profits are
earned in the U.S., Canada and the U.K. The current U.K. statutory tax rate is 30.0%, the Canadian
statutory tax rate is 36.0% and the U.S. Federal statutory tax rate is 35.0%.
On July 19, 2007, legislation was enacted that will decrease the U.K.s tax rate to 28.0% effective
April 1, 2008. On December 14, 2007, legislation was enacted to reduce the Canadian income tax
rate over the next five years. Beginning January 1, 2008, the Canadian tax rate will be reduced to
33.5%, with further reductions to 33.0% in 2009, 32.0% in 2010, 30.5% in 2011, and finally 29.0% in
2012.
Our effective tax rate excluding minority interest for 2007 was 34.6%, as compared to 34.5% in
2006. In 2007 a larger percentage of our profits originated from the U.K. than in 2006, which
further decreased our effective tax rate. Similar to 2006, this reduction was offset by state
taxes, additional taxes on subsidiary dividends, and an increase in the net valuation allowance for
subsidiary operating losses. In 2007, we also reduced our Canadian and U.K. deferred tax assets to
reflect the tax rate changes discussed above and we incurred transaction costs associated with our
change in listing and domicile that were not deductible for tax purposes.
The inclusion of income from minority interests reduced our effective tax rate to 28.7% in 2007 and
24.6% in 2006.
Results of Operations for the Year Ended December 31, 2006 Compared with the Year Ended December
31, 2005
Operating Revenues and Net Revenues
Operating revenues increased by 13.0% in 2006 to $3,246.7 million (2005: $2,872.6 million). Net
revenues are operating revenues less third-party distribution, service and advisory costs, plus our
proportional share of revenues, net of third-party distribution costs, from joint venture
arrangements. Net revenues increased by 12.1% in 2006 to $2,428.0 million (2005: $2,166.6
million). See Schedule of Non-GAAP Information for additional important
disclosures regarding the use of net revenues. The main categories of revenues, and the dollar and
percentage change between the periods, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
%
|
|
$ in millions
|
|
2006
|
|
|
2005
|
|
|
Change
|
|
|
Change
|
|
Investment management fees
|
|
|
2,508.2
|
|
|
|
2,166.7
|
|
|
|
341.5
|
|
|
|
15.8
|
%
|
Performance fees
|
|
|
82.1
|
|
|
|
33.5
|
|
|
|
48.6
|
|
|
|
145.1
|
%
|
Service and distribution fees
|
|
|
534.9
|
|
|
|
538.2
|
|
|
|
(3.3
|
)
|
|
|
(0.6
|
)%
|
Other
|
|
|
121.5
|
|
|
|
134.2
|
|
|
|
(12.7
|
)
|
|
|
(9.5
|
)%
|
|
|
|
Total operating revenues
|
|
|
3,246.7
|
|
|
|
2,872.6
|
|
|
|
374.1
|
|
|
|
13.0
|
%
|
Third-party distribution,
service and advisory costs
|
|
|
(826.8
|
)
|
|
|
(706.0
|
)
|
|
|
(120.8
|
)
|
|
|
(17.1
|
)%
|
Proportional share of
revenues, net of third-party
distribution costs, from
joint venture investments
|
|
|
8.1
|
|
|
|
|
|
|
|
8.1
|
|
|
|
N/A
|
|
|
|
|
Net revenues
|
|
|
2,428.0
|
|
|
|
2,166.6
|
|
|
|
261.4
|
|
|
|
12.1
|
%
|
|
|
|
Investment Management Fees
Investment management fees increased 15.8% in 2006 over 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
Performance fees increased to $82.1 million in 2006 from $33.5 million in 2005, as several
institutional products exceeded performance hurdles. In the U.K., strong investment performance
contributed to the increase in performance fees.
30
Service and Distribution Fees
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 fees 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 fees 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.
Other Revenues
In 2006, other revenues decreased 9.5% from 2005, primarily due to lower real estate transaction
commissions and reduced transaction commissions following the sale of our German banking license.
In 2005, other revenues included fees earned from our German banking business, such as interest
earned from balances available on demand from clients and credit institutions and commissions
earned from derivative instruments.
Third-Party Distribution, Service and Advisory Costs
Third-party distribution, service and advisory costs increased 17.1% to $826.8 million in 2006
(2005: $706.0 million) due primarily to increases in renewal commissions, partially offset by
declines in third-party distribution fees.
Proportional share of revenues, net of third-party distribution costs, from joint venture
investments
Management believes that the addition of our proportional share of revenues, net of third-party
distribution costs, from joint venture arrangements should be added to operating revenues to arrive
at net revenues, as it is important to evaluate the contribution to the business that our joint
venture arrangements are making. See Schedule of Non-GAAP
Information for
additional disclosures regarding the use of net revenues. The $8.1 million increase in our
proportional share of revenues, net of third-party distribution costs, in 2006 (2005: $nil), is
driven by the growth in assets under management in our Chinese joint venture, Invesco Great Wall
Fund Management Company Limited.
Operating Expenses
The main categories of operating expenses are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
%
|
|
$ in millions
|
|
2006
|
|
|
2005
|
|
|
Change
|
|
|
Change
|
|
|
|
|
Employee compensation
|
|
|
1,070.5
|
|
|
|
1,044.7
|
|
|
|
25.8
|
|
|
|
2.5
|
%
|
Third-party distribution, service and advisory
|
|
|
826.8
|
|
|
|
706.0
|
|
|
|
120.8
|
|
|
|
17.1
|
%
|
Marketing
|
|
|
138.8
|
|
|
|
139.5
|
|
|
|
(0.7
|
)
|
|
|
(0.5
|
)%
|
Property, office and technology
|
|
|
230.7
|
|
|
|
270.9
|
|
|
|
(40.2
|
)
|
|
|
(14.8
|
)%
|
General and administrative
|
|
|
207.6
|
|
|
|
224.4
|
|
|
|
(16.8
|
)
|
|
|
(7.5
|
)%
|
Restructuring charge
|
|
|
13.1
|
|
|
|
62.6
|
|
|
|
(49.5
|
)
|
|
|
(79.1
|
)%
|
Goodwill impairment
|
|
|
|
|
|
|
16.6
|
|
|
|
(16.6
|
)
|
|
|
(100.0
|
)%
|
|
|
|
Total operating expenses
|
|
|
2,487.5
|
|
|
|
2,464.7
|
|
|
|
22.8
|
|
|
|
0.9
|
%
|
|
|
|
31
The table below sets forth these cost categories as a percentage of total operating expenses,
operating revenues and net revenues, which we believe provides useful information as to the
relative significance of each type of cost.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
% of
|
|
|
% of
|
|
|
|
|
|
|
Total
|
|
|
% of
|
|
|
% of
|
|
|
|
|
|
|
|
Operating
|
|
|
Operating
|
|
|
Net
|
|
|
|
|
|
|
Operating
|
|
|
Operating
|
|
|
Net
|
|
$ in millions
|
|
2006
|
|
|
Expenses
|
|
|
Revenues
|
|
|
Revenues*
|
|
|
2005
|
|
|
Expenses
|
|
|
Revenues
|
|
|
Revenues*
|
|
|
|
|
Employee compensation
|
|
|
1,070.5
|
|
|
|
43.0
|
%
|
|
|
33.0
|
%
|
|
|
44.1
|
%
|
|
|
1,044.7
|
|
|
|
42.4
|
%
|
|
|
36.4
|
%
|
|
|
48.2
|
%
|
Third-party
distribution, service
and advisory
|
|
|
826.8
|
|
|
|
33.2
|
%
|
|
|
25.5
|
%
|
|
|
N/A
|
|
|
|
706.0
|
|
|
|
28.6
|
%
|
|
|
24.6
|
%
|
|
|
N/A
|
|
Marketing
|
|
|
138.8
|
|
|
|
5.6
|
%
|
|
|
4.3
|
%
|
|
|
5.7
|
%
|
|
|
139.5
|
|
|
|
5.7
|
%
|
|
|
4.8
|
%
|
|
|
6.4
|
%
|
Property, office and
technology
|
|
|
230.7
|
|
|
|
9.3
|
%
|
|
|
7.1
|
%
|
|
|
9.5
|
%
|
|
|
270.9
|
|
|
|
11.0
|
%
|
|
|
9.4
|
%
|
|
|
12.5
|
%
|
General and
administrative
|
|
|
207.6
|
|
|
|
8.3
|
%
|
|
|
6.4
|
%
|
|
|
8.6
|
%
|
|
|
224.4
|
|
|
|
9.1
|
%
|
|
|
7.8
|
%
|
|
|
10.4
|
%
|
Restructuring charge
|
|
|
13.1
|
|
|
|
0.6
|
%
|
|
|
0.4
|
%
|
|
|
0.5
|
%
|
|
|
62.6
|
|
|
|
2.5
|
%
|
|
|
2.2
|
%
|
|
|
2.9
|
%
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16.6
|
|
|
|
0.7
|
%
|
|
|
0.6
|
%
|
|
|
0.8
|
%
|
|
|
|
Total operating expenses
|
|
|
2,487.5
|
|
|
|
100.0
|
%
|
|
|
76.7
|
%
|
|
|
N/A
|
|
|
|
2,464.7
|
|
|
|
100.0
|
%
|
|
|
85.8
|
%
|
|
|
N/A
|
|
|
|
|
|
|
|
*
|
|
Net revenues are operating revenues less third-party distribution, service and advisory costs,
plus our proportional share of net revenues from joint venture investments. See Schedule of
Non-GAAP Information
for a reconciliation of operating revenues to net revenues and
important additional disclosures.
|
Employee Compensation
Employee compensation continues to be the largest component of total operating expenses, accounting
for 43.0% of total operating expenses for 2006: (2005: 42.4%). Employee compensation expenses
increased $25.8 million, or 2.5%. in 2006 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
($0.08 per share, net of tax) 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 2005 as it was not expected in 2005 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.
Third-Party Distribution, Service and Advisory Costs
Third-party distribution, service and advisory costs increased 17.1% to $826.8 million in 2006
(2005: $706.0 million) due primarily to increases in renewal commissions, partially offset by
declines in third-party distribution fees.
Marketing
Marketing expenses decreased 0.5% in 2006 from 2005 and were 5.7% of net revenues in 2006 compared
to 6.4% of net revenues in 2005.
Property, Office and Technology
Property, office and technology costs decreased 14.8% to $230.7 million in 2006 from $270.9 million
in 2005. Lower costs reflect a reduction in the amount of leased office space and lower
depreciation expense caused by a decline in overall hardware purchases.
General and Administrative
General and administrative costs decreased 7.5% in 2006 compared to 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.
32
Restructuring Charge
In 2006 we recorded $13.1 million in remaining charges related to the operational and structural
restructuring efforts that began in 2005. In 2005, we incurred $62.6 million in restructuring
costs. See Item 8, Financial Statements and Supplementary Data Note 13, Restructuring Charge,
for additional information.
Goodwill Impairment
In 2005, we recorded a $16.6 million non-cash goodwill impairment charge related to our Private
Wealth Management business. See Item 8, Financial Statements and Supplementary Data Note 8,
Goodwill for additional details.
Operating Income, Net Operating Income, Operating Margin and Net Operating Margin
Operating income increased 86.1% to $759.2 million in 2006 from $407.9 million in 2005, driven by
the growth in operating revenues. Operating margin (operating income divided by operating
revenues) was 23.4% in 2006, up from 14.2% in 2005. Net operating income (operating income plus
our proportional share of the operating income from joint venture arrangements) increased 86.8% to
$762.1 million in 2006 from $407.9 million in 2005. Net operating margin is equal to net operating
income divided by net revenues. Net revenues are equal to operating revenues less third-party
distribution, service and advisory costs, plus our proportional share of the net revenues from our
joint venture arrangements. Net operating margin was 31.4% in 2006, up from 18.8% in 2005. See
Schedule of Non-GAAP Information below for a reconciliation of operating
revenues to net revenues, a reconciliation of operating income to net operating income and
additional important disclosures regarding net revenues, net operating income and net operating
margins.
Other Income and Expenses
Interest income increased 61.1% to $26.9 million in 2006 from $16.7 million in 2005 as a result,
largely, of growth in our interest-earning cash balances during the year. Other gains and losses,
net increased $26.8 million in 2006 from $13.4 million in
2005, driven by the realization of gains from
our investments in collateralized debt obligations, fund seed money and foreign exchange gains.
In 2005, we recognized $32.6 million in gain upon the sale of the AMVESCAP Retirement business.
Income
Tax Provision
Our effective tax rate excluding minority interest for 2006 was 34.5%, as compared to 40.8% in
2005. In 2006 a larger percentage of our profits originated from the U.K. than in 2005, which
further decreased our effective tax rate. This reduction was offset by state taxes, additional
taxes on subsidiary dividends, and an increase in the net valuation allowance for subsidiary
operating losses. In 2005, our effective tax rate excluding minority interest was higher due
primarily to the absence of lower taxed profits, Europe and Asia operating losses, nondeductible
restructuring expenses and nondeductible investment write-downs.
The inclusion of income from minority interests reduced our effective tax rate to 24.6% in 2006 and
31.4% in 2005.
Schedule of Non-GAAP Information
Net revenues, net operating income and net operating margin are non-GAAP financial measures.
Management believes that these measures are additional meaningful measures to evaluate our
operating performance. The most comparable U.S. GAAP measures are operating revenues, operating
income and operating margin. Management believes that the deduction of third-party distribution,
service and advisory costs from operating revenues in the computation of net revenues and the
related computation of net operating margin provides useful information to investors because the
distribution, service and advisory fee amounts represent costs that are passed through to external
parties, which essentially are a share of the related revenues. Management also believes that the
addition of our proportional share of operating revenues, net of distribution costs, from joint
venture investments in the computation of net revenues and the addition of our proportional share
of operating income in the related computations of net operating income and net operating margin
also provides useful information to investors, as management considers it appropriate to evaluate
the contribution of its growing joint venture investment to the operations of the business. Net
revenues, net operating income and net operating margin should not be considered
as substitutes for
any measures derived in accordance with U.S. GAAP and may not be comparable to other similarly
titled measures of other companies.
33
The following is a reconciliation of operating revenues, operating income and operating margin on a
U.S. GAAP basis to net revenues, net operating income and net operating margin.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
$ in millions
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
Operating revenues, GAAP basis
|
|
|
3,878.9
|
|
|
|
3,246.7
|
|
|
|
2,872.6
|
|
Third-party distribution,
service and advisory costs
|
|
|
(1,051.1
|
)
|
|
|
(826.8
|
)
|
|
|
(706.0
|
)
|
Proportional share of
revenues, net of third-party
distribution costs, from
joint venture investments
|
|
|
60.6
|
|
|
|
8.1
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
2,888.4
|
|
|
|
2,428.0
|
|
|
|
2,166.6
|
|
|
|
|
|
Operating income, GAAP basis
|
|
|
994.3
|
|
|
|
759.2
|
|
|
|
407.9
|
|
Proportional share of
operating income from joint
venture investments
|
|
|
45.5
|
|
|
|
2.9
|
|
|
|
|
|
|
|
|
Net operating income
|
|
|
1,039.8
|
|
|
|
762.1
|
|
|
|
407.9
|
|
|
|
|
Operating margin*
|
|
|
25.6
|
%
|
|
|
23.4
|
%
|
|
|
14.2
|
%
|
Net operating margin**
|
|
|
36.0
|
%
|
|
|
31.4
|
%
|
|
|
18.8
|
%
|
|
|
|
*
|
|
Operating margin is equal to operating income divided by operating revenues.
|
|
**
|
|
Net operating margin is equal to net operating income divided by net revenues.
|
Balance Sheet Discussion
The following table presents a comparative analysis of significant balance sheet line items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
%
|
$ in millions
|
|
2007
|
|
2006
|
|
Change
|
|
Change
|
|
|
|
Cash and cash equivalents
|
|
|
915.8
|
|
|
|
778.9
|
|
|
|
136.9
|
|
|
|
17.6
|
%
|
Unsettled fund receivables
|
|
|
605.5
|
|
|
|
561.6
|
|
|
|
43.9
|
|
|
|
7.8
|
%
|
Current investments
|
|
|
177.2
|
|
|
|
187.8
|
|
|
|
(10.6
|
)
|
|
|
(5.6
|
)%
|
Assets held for policyholders
|
|
|
1,898.0
|
|
|
|
1,574.9
|
|
|
|
323.1
|
|
|
|
20.5
|
%
|
Non-current investments
|
|
|
122.3
|
|
|
|
79.9
|
|
|
|
42.4
|
|
|
|
53.1
|
%
|
Investments of consolidated investment products
|
|
|
1,205.6
|
|
|
|
1,482.0
|
|
|
|
(276.4
|
)
|
|
|
(18.7
|
)%
|
Goodwill
|
|
|
6,848.0
|
|
|
|
6,360.7
|
|
|
|
487.3
|
|
|
|
7.7
|
%
|
Policyholder payables
|
|
|
1,898.0
|
|
|
|
1,574.9
|
|
|
|
323.1
|
|
|
|
20.5
|
%
|
Current portion of long-term debt
|
|
|
|
|
|
|
300.0
|
|
|
|
(300.0
|
)
|
|
|
(100
|
%)
|
Long-term debt
|
|
|
1,276.4
|
|
|
|
979.0
|
|
|
|
297.4
|
|
|
|
30.4
|
%
|
Minority interests in equity of consolidated
affiliates
|
|
|
1,121.2
|
|
|
|
1,504.6
|
|
|
|
(383.4
|
)
|
|
|
(25.5
|
)%
|
Shareholders equity
|
|
|
6,590.6
|
|
|
|
6,164.0
|
|
|
|
426.6
|
|
|
|
6.9
|
%
|
|
|
|
Cash and Cash Equivalents
Cash and cash equivalents increased from December 31, 2006 to December 31, 2007 primarily because
cash provided by our operating activities significantly exceeded cash used for operations and the
purchase of our shares in the market under our share repurchase program. Details regarding changes
in cash balances are provided within our Consolidated Statements of Cash Flows.
34
Invesco has local capital requirements in several jurisdictions, as well as regional requirements
for entities that are part of the European sub-group. These requirements mandate the retention of
liquid resources in those jurisdictions, which we meet in part by holding cash. This retained cash
can be used for general business purposes in the European sub-group or in the countries where it is
located. Due to the capital restrictions, the ability to transfer cash between certain
jurisdictions may be limited. In addition, transfers of cash between international jurisdictions
may have adverse tax consequences that may substantially limit such activity. At December 31, 2007,
the European sub-group had cash and cash equivalent balances of $758.1 million, much of which is
used to satisfy these regulatory requirements. We are in compliance with all regulatory minimum
net capital requirements.
Unsettled Fund Receivables
Unsettled fund receivables increased from $561.6 million at December 31, 2006 to $605.5 million at
December 31, 2007 due to the timing of fund and investor settlements. Unsettled fund receivables
are created by the normal settlement periods on transactions initiated by certain clients of our
U.K. and offshore funds. We are legally required to establish a receivable and a substantially
offsetting payable at trade date with both the investor and the fund for normal purchases and
sales.
Investments (Non-current and current)
As of December 31, 2007, we had $299.5 million in investments, of which $122.3 million were
non-current investments and $177.2 million were current investments. Included in current
investments are $60.9 million of seed money in affiliated funds and $58.8 million of investments
related to assets held for deferred compensation plans. Included in non-current investments are
$74.7 million in equity method investments in our Chinese joint venture and in certain of the
companys private equity, real estate and other investment. Additionally, non-current investments
include $39.0 million of investments in collateralized loan and debt obligation structures managed
by us. Our investments in collateralized debt obligation structures are generally in the form of a
relatively small portion of the unrated, junior, subordinated position. As such these positions would share
in the first losses to be incurred if the structures were to experience significant increases in
default rates of underlying investments above historical levels.
Assets Held for Policyholders and Policyholder Payables
One of our subsidiaries, Invesco Pensions Limited, is an insurance-type company that was
established to facilitate retirement savings plans in the U.K. The entity holds assets that are
managed for its clients on its balance sheet with an equal and offsetting liability. The increasing
balance in these accounts was the result of success in growing this product offering.
Investments of consolidated investment products
Financial Accounting Standards Board Interpretation (FIN) No. 46(R), Consolidation of Variable
Interest Entities, an Interpretation of Accounting Research Bulletin No. 51 requires that the
primary beneficiary of variable interest entities (VIEs) consolidate the VIEs. A VIE is an entity
that does not have sufficient equity to finance its operations without additional subordinated
financial support, or an entity for which the risks and rewards of ownership are not directly
linked to voting interests. Generally, limited partnership entities where the general partner does
not have substantive equity investment at risk and where the other limited partners do not have
substantive (greater than 50%) rights to remove the general partner or to dissolve the limited
partnership are also VIEs. The primary beneficiary is the party to the VIE who absorbs a majority
of the losses or absorbs the majority of the rewards generated by the VIE. Emerging Issues Task
Force (EITF) Issue No. 04-5, Determining Whether a General Partner, or the General Partners as a
Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain
Rights requires that the general partner in a partnership that is not a VIE consolidate the
partnership, because the general partner is deemed to control the partnership where the other
limited partner do not have substantive kick-out or participation rights. Investments of
consolidated investment products include the investments of both consolidated VIEs and partnerships
that have been consolidated under EITF 04-5.
As of December 31, 2007, investments of consolidated investment products totaled $1,205.6 million
(2006: $1,482.0 million). These investments are offset primarily in minority interests on the
Consolidated Balance Sheets, as the companys equity investment in these structures is very small.
The decrease from 2006 reflects the deconsolidation of certain previously-consolidated VIEs
resulting from the companys determination that it was no longer was the primary beneficiary of
these entities.
35
Goodwill
Goodwill increased from $6,360.7 million at December 31, 2006 to $6,848.0 million at December 31,
2007 primarily due to the impact of foreign currency translation for certain subsidiaries whose
functional currency differs from that of the parent. The weakening of the U.S. dollar during 2007,
mainly against that of the Canadian dollar, resulted in a $332.4 million increase in goodwill, upon
consolidation, with a corresponding increase to equity. Additional goodwill was also recorded in
2007 related to the earn-out on the Power Shares acquisition ($129.6 million), the earn-out on the
Stein Roe acquisition ($11.3 million) and other
acquisition-related adjustments ($17.0
million).
Current Portion of Long-term Debt
This balance decreased from December 31, 2006 as a result of the maturity and repayment, on January
15, 2007, of $300.0 million of 5.9% senior notes.
Long-term Debt
The
increase in this balance was due to the issuance of $300.0 million of 5.625% senior notes on
April 17, 2007.
Minority interests in equity of consolidated entities
Minority interests in equity of consolidated entities decreased from $1,504.6 million at December
31, 2006 to $1,121.2 million at December 31, 2007 primarily due to the deconsolidation of VIEs for
which the company determined that it was no longer the primary
beneficiary of the arrangements as a result of reconsideration events. The minority interests
in equity of consolidated entities are generally offset by the investments of consolidated
investment products, as the companys equity investment in the investment products is very small.
Total Equity
Shareholders equity increased from $6,164.0 million at December 31, 2006 to $6,590.6 million at
December 31, 2007, an increase of $426.6 million. The increase included net income of $673.6
million, share issuance on employee option exercises of $137.4 million, and foreign currency
translation gains of $351.1 million with respect to subsidiaries whose functional currency differs
from that of the parent. These increases were partially offset by $352.9 million in share
repurchases under a plan initiated in June 2007 and share purchases of $330.8 million to be held by
employee trusts in association with share-based compensation arrangements.
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
operating, debt and other obligations as they come due and anticipated future capital requirements.
Invesco has local capital requirements in several jurisdictions, as well as regional requirements
for entities that are part of the European sub-group. These requirements require the retention of
liquid resources in those jurisdictions, which we meet in part by holding cash. This retained cash
can be used for general business purposes in the European sub-group or in the countries where it is
located. Due to the capital restrictions, the ability to transfer cash between certain
jurisdictions may be limited. In addition, transfers of cash between international jurisdictions
may have adverse tax consequences that may substantially limit such activity. At December 31, 2007,
the European sub-group had cash and cash equivalent balances of $758.1 million, much of which is
used to satisfy these regulatory requirements. We are in compliance with all regulatory minimum
net capital requirements.
36
Cash Flows
The ability to consistently generate cash from operations in excess of capital expenditures and
dividend payments is one of our companys fundamental financial strengths. Operations continue to
be financed from current earnings and borrowings. Our principal uses of cash, other than for
operating expenses, include dividend payments, capital expenditures, acquisitions, purchase of our
shares in the open market and investments in certain new investment products.
Cash flows of consolidated investment products (discussed in Item 8, Financial Statements and
Supplementary Data Note 18, Consolidated Investment Products) are reflected in Invescos cash
provided by operating activities, provided by/(used in) investing activities and used in financing
activities. Cash held by consolidated investment products is not available for general use by
Invesco, nor is Invesco cash available for general use by its consolidated investment products.
Cash flows for the years ended December 31, 2007, 2006 and 2005 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in millions
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
Cash flow from:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
913.7
|
|
|
|
455.9
|
|
|
|
306.9
|
|
Investing activities
|
|
|
(46.4
|
)
|
|
|
(258.7
|
)
|
|
|
112.0
|
|
Financing activities
|
|
|
(740.8
|
)
|
|
|
(163.1
|
)
|
|
|
(251.0
|
)
|
|
|
|
Increase/(decrease) in cash and cash equivalents
|
|
|
126.5
|
|
|
|
34.1
|
|
|
|
167.9
|
|
Cash and cash equivalents, beginning of year
|
|
|
778.9
|
|
|
|
709.5
|
|
|
|
546.9
|
|
Foreign exchange
|
|
|
10.4
|
|
|
|
35.3
|
|
|
|
(5.3
|
)
|
|
|
|
Cash and cash equivalents, end of year*
|
|
|
915.8
|
|
|
|
778.9
|
|
|
|
709.5
|
|
|
|
|
|
|
|
*
|
|
Included in cash and cash equivalents are $3.3 million of client cash (2006: $2.9 million;
2005: $227.1 million). The decrease in client cash was due primarily to one depository account
sponsored by our former banking subsidiary being replaced by an unaffiliated investment fund.
|
Operating Activities
Cash provided by operating activities is generated by the receipt of investment management and
other fees generated from AUM, offset by operating expenses.
Cash
provided by operating activities in 2007 was $913.7 million, an
increase of $457.8 million or
100.4% over 2006. Changes in operating assets and liabilities
contributed $307.2 million of the
increase, and higher net income contributed $190.9 million of the increase in cash flows generated
from operating activities.
Cash
provided by operating activities in 2006 was $455.9 million, an
increase of $149.0 million
48.6% 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 former
banking subsidiary being replaced by an unaffiliated investment fund.
Investing Activities
In our
institutional operations, we periodically invest through a relatively
small portion of the unrated,
junior subordinated position in our collateralized loan and debt obligation structures and in
our private equity funds, as is customary in the industry. Other investors into these structures
have no recourse against the company for any losses sustained in the
structures. Many of our private equity products are structured as
limited partnerships. Our investment may take the form of the general
partner or as a limited partner. We received $10.1 million (2006: $13.6 million; 2005: $13.4
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 2007, we invested $21.6 million in new funds and
recaptured $4.8 million from redemptions of prior investments.
During the fiscal years ended December 31, 2007, 2006 and 2005, our capital expenditures were $36.7
million, $37.9 million and $38.8 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
37
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. These projects have been funded with proceeds from our operating cash flows. During
the fiscal years ended December 31, 2007, 2006 and 2005, our capital divestitures were not
significant relative to our total fixed assets.
Net cash outflows of $56.0 million in 2007 and $200.1 million in 2006 related primarily to the
acquisitions of PowerShares and WL Ross & Co. In 2005, we received $53.6 million in cash from
business dispositions, primarily related to the sale of the retirement business.
Financing Activities
Net cash
used in financing activities increased from $163.1 million in
2006 to $740.8 million in
2007, primarily due to the purchase of shares held by employee trusts (held in treasury) totaling
$363.1 million and the purchase of treasury shares totaling $352.9 million under our share
repurchase program.
Net cash
used in financing activities decreased from $251.0 million in 2005 to $163.1 million in
2006 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 share-based compensation awards.
A summary of shares purchased by month for the fourth quarter of 2007 is
presented in Part II, Item 5, Market for Registrants
Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
Dividends
An interim dividend of $0.164 per INVESCO PLC American Depositary share was declared on August 2,
2007 and paid on October 25, 2007. On February 1, 2008, the board of directors declared a final
(semi-annual) 2007 dividend of $0.22 per Invesco Ltd. common share, payable on April 7, 2008, to
shareholders of record as of March 19, 2008. Shareholders who have a United Kingdom address and
are directly registered with our transfer agent, The Bank of New York Mellon, will receive the
dividend in Sterling.
The following table sets forth the historical amounts for interim, final and total dividends per
American Depositary Share in respect of each year indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Cents per American
|
|
|
Depositary Share
|
Years Ended December 31,
|
|
Interim
|
|
Final
|
|
Total
|
2003
|
|
|
16.63
|
|
|
|
23.31
|
|
|
|
39.94
|
|
2004
|
|
|
9.02
|
|
|
|
19.00
|
|
|
|
28.02
|
|
2005
|
|
|
14.02
|
|
|
|
20.33
|
|
|
|
34.35
|
|
2006
|
|
|
15.40
|
|
|
|
20.80
|
|
|
|
36.20
|
|
2007
|
|
|
16.40
|
|
|
|
22.00
|
(1)
|
|
|
38.40
|
|
|
|
|
|
(1)
|
|
The final dividend for 2007 was declared on February 1, 2008. The scheduled payment date is
April 7, 2008 to shareholders of record on March 19, 2008.
|
If
dividends will be paid in the future, they will be declared in U.S.
dollars on a quarterly basis. The
declaration, payment and amount of any future dividends will be declared 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 of directors has a
policy of managing dividends in a prudent fashion, with due consideration given to income levels,
overall cash and debt levels, and historical dividend payouts.
38
Debt
Our total indebtedness at December 31, 2007 is $1,276.4 million and is comprised of the following:
|
|
|
|
|
$ in millions
|
|
|
|
Unsecured Senior Notes:
|
|
|
|
|
5.9% due January 15, 2007
|
|
|
|
|
4.5% due December 15, 2009
|
|
|
300.0
|
|
5.625% due April 17, 2012
|
|
|
300.0
|
|
5.375% due February 27, 2013
|
|
|
350.0
|
|
5.375% due December 15, 2014
|
|
|
200.0
|
|
Floating rate credit facility expiring March 31, 2010
|
|
|
126.4
|
|
|
|
|
|
Total long-term debt
|
|
|
1,276.4
|
|
Less: current maturities of long-term debt
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
1,276.4
|
|
|
|
|
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. 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
April 17, 2007 the company issued $300.0 million five-year 5.625% senior notes. The net proceeds
from the offering were used to repay amounts outstanding under our credit facility and for general
corporate purposes. Interest is paid semi-annually on the senior notes. The senior notes are
unsecured.
On March 31, 2005, we entered into a five-year unsecured $900.0 million credit facility with a
group of lenders that was amended and restated in December 2007 in conjunction with the redomicile
and relisting of the company. 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. As of December 31, 2007, we were in compliance with our debt covenants. The
coverage ratios, as defined in our credit facility, were as follows during 2007, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
Leverage Ratio
|
|
|
1.18
|
|
|
|
0.97
|
|
|
|
0.91
|
|
|
|
1.04
|
|
Interest Coverage Ratio
|
|
|
12.96
|
|
|
|
13.54
|
|
|
|
14.30
|
|
|
|
17.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
We have received credit ratings of A3 and BBB+ from Moodys and Standard & Poors credit rating
agencies, respectively, as of the date of this Annual Report on Form 10-K. Both Standard & Poors
and Moodys have a stable outlook for the rating as of the date of this Annual Report on Form
10-K. According to Moodys, obligations rated A are considered upper medium grade and are
subject to low credit risk. Invescos rating of A3 is at the low end of the A range (A1, A2, A3),
but three notches above the lowest investment grade rating of Baa3. Standard and Poors rating of
BBB+ is at the upper end of the BBB rating, with BBB- representing Standard and Poors lowest
investment grade rating. According to Standard and Poors, BBB obligations exhibit adequate
protection parameters; however adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of the obligor to meet its financial commitments. We believe
that rating agency concerns include but are not limited to: our ability to sustain net positive
asset flows across customer channels, product type and geographies, our substantial indebtedness,
and our ability to maintain consistent positive investment performance.
39
Material deterioration of
these factors, and 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 our credit facility borrowing rates are not tied to credit ratings, and
interest rates on our 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. Disclosure of these ratings is not a
recommendation to buy, sell or hold our debt. These credit ratings may be subject to revision or
withdrawal at anytime by Moodys or Standard & Poors. Each rating should be evaluated
independently.
Credit and Liquidity Risk
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 (as discussed in Item
7A, Quantitative and Qualitative Disclosures About Market Risk), 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.
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. As of December
31, 2007, our maximum exposure to credit risk related to our cash and cash equivalent
balances is $915.8 million.
|
|
|
|
|
Certain trust subsidiaries of the company accept deposits and place deposits with other
institutions on behalf of our customers. As of December 31, 2007, our maximum exposure to
credit risk related to these transactions is $3.3 million.
|
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
$1,276.4 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.
Effects of Inflation
Inflation can impact our organization primarily in two ways. First, inflationary pressures can
result in increases in our cost structure, especially to the extent that large expense components
such as compensation are impacted. To the degree that these expense increases are not recoverable
or cannot be counterbalanced through pricing increases due to the competitive environment, our
profitability could be negatively impacted. Secondly, the value of the investments that we manage
may be negatively impacted when inflationary expectations result in a rising interest rate
environment. Declines in the values of these investments could lead to reduced revenues as
management fees are generally calculated based upon the size of assets under management.
Off Balance Sheet Commitments
The company transacts with various private equity, real estate and other investment entities
sponsored by the company for the investment of client assets in the normal course of business.
Certain of these investments are considered to be variable interest entities of which the company
40
is the
primary beneficiary and certain of these investments are limited partnerships for which the
company is the general partner and is deemed to have control (with the absence of substantive
kick-out or participation rights of the other limited partners) and are consolidated into the
companys financial statements under EITF 04-5 (see Item 8, Financial Statements and Supplementary
Data Note 18, Consolidated Investment Products and Note 1, Accounting Policies for additional
information on consolidated and unconsolidated investment products).
Many of our private equity products are structured as limited partnerships. Our investment may
take the form of the general partner or as a limited partner. The private equity funds are
structured such that each partner makes capital commitments that are to be drawn down over the life
of the partnership as investment opportunities are identified. At December 31, 2007, our undrawn
capital commitments were $60.2 million (2006: $19.2 million).
The volatility and valuation dislocations that occurred during 2007 in certain sectors of the fixed
income market have generated some pricing issues in many areas of the market. As a result of these
valuation dislocations, during the fourth quarter of 2007, Invesco elected to enter into contingent
support agreements for two of its investment trusts to enable them to sustain a stable pricing
structure. These two trusts are unregistered trusts that invest in fixed income securities and are
available only to accredited investors. The fair value of these agreements at December 31, 2007
was estimated to be $4.5 million, which was recorded in other current liabilities on the
Consolidated Balance Sheet at that date. As of the date of this Annual Report on Form 10-K, the
maximum support that could be provided under these agreements is $33.0 million. No payments have
been made under either agreement nor has Invesco realized any losses from the support agreements
through the date of this Report. These trusts were not consolidated because the company was not
deemed to be the primary beneficiary under FIN 46R.
Contractual Obligations
We have various financial obligations that require future cash payments. The following table
outlines the timing of payment requirements related to our commitments as of December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within
|
|
1-3
|
|
3-5
|
|
More Than
|
$
in millions
|
|
Total
|
|
1 Year
|
|
Years
|
|
Years
|
|
5 Years
|
Total debt
|
|
|
1,276.4
|
|
|
|
|
|
|
|
426.4
|
|
|
|
300.0
|
|
|
|
550.0
|
|
Estimated interest payments on total debt
(1)
|
|
|
290.1
|
|
|
|
59.9
|
|
|
|
106.4
|
|
|
|
92.9
|
|
|
|
30.9
|
|
Finance leases
|
|
|
0.4
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
0.2
|
|
|
|
|
|
Operating leases
(2)
|
|
|
588.0
|
|
|
|
64.5
|
|
|
|
121.0
|
|
|
|
99.8
|
|
|
|
302.7
|
|
Defined benefit pension and post-retirement medical
obligations
(3)
|
|
|
428.7
|
|
|
|
10.9
|
|
|
|
21.9
|
|
|
|
27.2
|
|
|
|
368.7
|
|
Acquisition liabilities
(4)
|
|
|
129.6
|
|
|
|
129.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,713.2
|
|
|
|
265.0
|
|
|
|
675.8
|
|
|
|
520.1
|
|
|
|
1,252.3
|
|
|
|
|
|
|
|
(1)
|
|
Total debt includes $1,150.0 million of fixed rate debt. Fixed interest payments are
therefore reflected in the table above in the periods they are due. The credit facility,
$900.0 million at December 31, 2007, provides for borrowings of various maturities. Interest
is payable based upon LIBOR, Prime, Federal Funds or other bank-provided rates in existence at
the time of each borrowing. Estimated credit facility interest payments in the table above
are based upon an assumption that the credit facility balance of $126.4 million and the
interest rate that existed at December 31, 2007 will remain until credit facility maturity on
March 31, 2010.
|
|
(2)
|
|
Operating leases reflect obligations for leased building space and sponsorship and naming
rights agreements
.
See Part II, Item 8, Financial Statements and Supplementary
Data Note 20, Operating Leases for sublease information.
|
|
(3)
|
|
See Part II, Item 8, Financial Statements and Supplementary
Data Note 21, Retirement Benefit Plans for detailed benefit pension and post-retirement plans.
|
|
(4)
|
|
Acquisition liabilities include deferred consideration payable in respect of the PowerShares
and HVB acquisitions. Other contingent payments related to acquisitions at December 31, 2007
include $500.0 million related to the PowerShares acquisition and $220.0 million related to
the WL Ross & Co. acquisition, which are excluded until such time as they are probable and
reasonably estimable.
|
|
(5)
|
|
Due to the uncertainty with respect to the timing of future cash flows associated with
unrecognized tax benefits at December 31, 2007, the company is unable to make reasonably
reliable estimates of the period of cash settlement with the respective taxing authorities.
Therefore, $69.0 million of gross unrecognized tax benefits have been excluded from the
contractual obligations table above. See Part II, Item 8, Financial Statements and Supplementary
Data, Note 16 Taxation for a discussion on income taxes.
|
41
Critical Accounting Policies and Estimates
Our significant accounting policies are disclosed in Part II, Item 8, Financial Statements and Supplementary
Data Note 1, Accounting Policies to our Consolidated Financial
Statements, contained elsewhere within this Report. The accounting policies and estimates that we
believe are the most critical to an
understanding of our results of operations and financial condition are those that require complex
management judgment regarding matters that are highly uncertain at the time policies were applied
and estimates were made. These accounting policies and estimates are discussed below. Different
estimates reasonably could have been used in the current period that would have had a material
effect on these financial statements, and changes in these estimates are likely to occur from
period-to-period in the future.
Share-Based Compensation.
We have issued equity-settled share-based awards to certain employees,
which are measured at fair value at the date of grant. These awards consist of restricted and
deferred share incentive awards and share option awards. 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.
The fair value of these awards is determined at the grant date and is expensed on a straight-line
basis over the vesting period, based on the companys estimate of shares that will eventually vest.
The forfeiture rate applied to most grants is 5% per annum, based upon our historical experience
with respect to employee turnover. Fair value for restricted and deferred share awards representing
equity interests identical to those associated with shares traded in the open market are determined
using the market price at the time of grant. Fair value is measured by use of the Black Scholes
valuation model for certain deferred share incentive awards that do not include dividend rights and
a stochastic model (a lattice-based model) for share option awards. The expected life of
share-based payment awards used in these models is adjusted, based on managements best estimate,
for the effects of non-transferability, exercise restrictions, and behavioral considerations.
Changes in the assumptions used in the stochastic valuation model for share option awards, 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. Assumptions used in association with option awards granted during 2005 are presented in the
table below (no option awards were granted in 2006 or 2007).
|
|
|
|
|
|
|
2005
|
|
Weighted average share price *
|
|
|
876p
|
|
Weighted average exercise price *
|
|
|
878p
|
|
Expected volatility
|
|
|
52.0
|
%
|
Expected term
|
|
7.8 years
|
Risk free rate
|
|
|
4.2
|
%
|
Expected dividends
|
|
|
2.2
|
%
|
|
|
|
|
*
|
|
Share option prices are in pounds sterling, the currency of the awards. Upon exercise, the
exercise price will be converted to U. S. dollars using the rate prevailing on the exercise date.
|
Deferred share awards that do not include dividend rights or cash payments in lieu of dividends are
valued using the Black-Scholes model. There were no such awards granted in 2007. The assumptions
used in the Black-Scholes model for these awards granted in 2006 and 2005 are as follows:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
Weighted average share price *
|
|
|
1034p
|
|
|
|
666p
|
|
Expected term
|
|
5.3 years
|
|
4.0 years
|
Expected dividend yield
|
|
|
1.84
|
%
|
|
|
2.25
|
%
|
|
|
|
|
*
|
|
Share option prices are in pounds sterling, the currency of the awards. Upon exercise, the
exercise price will be converted to U. S. dollars using the rate prevailing on the exercise date.
|
42
The table below is a summary, as of December 31, 2007, of equity-settled stock-based compensation
awards outstanding under the companys non-retirement stock-based compensation programs. Details
relating to each program are included in Part II, Item 8, Financial Statements and Supplementary Data
Note 19, Share-Based Compensation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards Outstanding
|
|
Vesting During the Years Ended December 31,
|
millions of shares
|
|
Total
|
|
2008
|
|
2009
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
|
|
Time-vested
|
|
|
15.2
|
|
|
|
4.2
|
|
|
|
6.0
|
|
|
|
1.6
|
|
|
|
2.7
|
|
|
|
0.3
|
|
|
|
0.2
|
|
|
|
0.2
|
|
Performance-vested
|
|
|
6.2
|
|
|
|
1.5
|
|
|
|
1.1
|
|
|
|
2.6
|
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Incentive Awards *
|
|
|
21.4
|
|
|
|
5.7
|
|
|
|
7.1
|
|
|
|
4.2
|
|
|
|
3.7
|
|
|
|
0.3
|
|
|
|
0.2
|
|
|
|
0.2
|
|
|
|
|
|
|
|
*
|
|
16.1 million share incentive awards were included in the diluted earnings
per share calculation at December 31, 2007. See Item 8, Financial Statements and Supplementary Data Note 17,
Earnings Per Share.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards
|
|
Fully Vested at
|
|
|
|
|
|
|
millions of shares
|
|
Outstanding
|
|
December 31,
|
|
Vesting During the Years Ended December 31,
|
Share Option Awards:
|
|
Total
|
|
2007
|
|
2008
|
|
2009
|
|
2010
|
|
|
|
Time vested:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise Price *
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50p - 400p
|
|
|
1.0
|
|
|
|
0.4
|
|
|
|
0.3
|
|
|
|
0.3
|
|
|
|
|
|
401p - 800p
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
801p - 1000p
|
|
|
2.3
|
|
|
|
2.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1001p - 1200p
|
|
|
1.4
|
|
|
|
1.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1201p - 1400p
|
|
|
3.8
|
|
|
|
3.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1401p - 1600p
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1601p - 2000p
|
|
|
5.3
|
|
|
|
5.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2001p - 2400p
|
|
|
4.9
|
|
|
|
4.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2401p -3400p
|
|
|
0.4
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal time-vested
|
|
|
19.2
|
|
|
|
18.6
|
|
|
|
0.3
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
Performance-vested:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise price *
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
601p - 800p
|
|
|
7.4
|
|
|
|
2.1
|
|
|
|
5.2
|
|
|
|
0.1
|
|
|
|
|
|
801p - 1000p
|
|
|
3.1
|
|
|
|
0.6
|
|
|
|
0.1
|
|
|
|
2.4
|
|
|
|
|
|
|
|
|
Subtotal performance-vested
|
|
|
10.5
|
|
|
|
2.7
|
|
|
|
5.3
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
Total Share Option Awards **
|
|
|
29.7
|
|
|
|
21.3
|
|
|
|
5.6
|
|
|
|
2.8
|
|
|
|
|
|
|
|
|
|
Sharesave Plan Shares
|
|
|
1.0
|
|
|
|
0.1
|
|
|
|
0.3
|
|
|
|
|
|
|
|
0.6
|
|
|
|
|
|
|
|
*
|
|
Share options prices are in pounds sterling, the currency of the awards. Upon exercise, the
exercise price will be converted to U. S. dollars using the rate prevailing on the exercise date.
|
|
**
|
|
6.0 million share option awards were included in the diluted earnings per
share calculation at December 31, 2007. See Part II, Item 8, Financial Statements and Supplementary Data Note 17, Earnings
Per Share.
|
Other Compensation Arrangements.
We offer certain performance-based cash awards to many of our
employees that are based upon purely discretionary determinations or, alternatively, certain
formulaic compensation arrangements. The formulaic arrangements require that we monitor on an
ongoing basis whether or not pre-established metrics are expected to be met in order to properly
record the related expense amounts. Because many of the metrics relate to matters that are highly
uncertain or susceptible to change, our estimates may not accurately reflect the ultimate outcomes
that will be achieved, and associated expense that should be recognized, with respect to these
compensation arrangements.
43
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 that represent our filing positions within
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. 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.
Income taxes are provided for in accordance with FASB Statement No. 109, Accounting for Income
Taxes. Deferred tax assets and liabilities are recorded for temporary differences between the tax
basis of assets and liabilities and the reported amounts in the Consolidated Financial Statements,
using the statutory tax rates in effect for the year in which the differences are expected to
reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in the results of operations in the period that includes the enactment date. A valuation allowance
is recorded to reduce the carrying amounts of deferred tax assets to the amount that is more likely
than not to be realized.
As a multinational corporation, the company operates in various locations outside of Bermuda and
generates substantially all of its earnings from our subsidiaries. Deferred tax liabilities are
recognized for taxes that would be payable on the unremitted earnings of the companys
subsidiaries, consolidated investment products, and joint ventures, except where it is our
intention to continue to indefinitely reinvest the undistributed earnings. Our Canadian and U.S.
subsidiaries continue to be directly owned by Invesco Holding Company
Limited (formerly INVESCO PLC, our predecessor company), which is
directly owned by Invesco Ltd. Our Canadian unremitted earnings, for which we are indefinitely
reinvested, are estimated to be $880 million at December 31, 2007 compared with $600 million at
December 31, 2006. If distributed as a dividend, Canadian withholding tax of 5.0% would be due.
Deferred tax liabilities in the amount of $14.1million (2006: $7.0 million) for additional U.K. tax
have been recognized for unremitted earnings of certain subsidiaries that have regularly remitted
earnings 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 additional taxes on dividends from the U.K. to
Bermuda.
44
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 operations.
Invesco adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No.
48, Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109,
(FIN 48) on January 1, 2007. This interpretation prescribes a specific recognition threshold and
measurement attribute for the financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. The two-step process prescribed by FIN 48 for
evaluating a tax position involves first determining whether it is more likely than not that a tax
position will be sustained upon examination by the appropriate taxing authorities. If it is, the
second step then requires a company to measure this tax position benefit as the largest amount of
benefit that is greater than 50 percent likely of being realized upon ultimate settlement. As a
result of the implementation of FIN 48, Invesco increased its net tax contingencies liability by
$17.6 million. The increase in the liability and the related change in deferred taxes were
accounted for as a decrease to retained earnings at January 1, 2007. Invesco classifies any
interest and penalties on tax liabilities (or any overpayments) on the Consolidated Statements of
Income as components of income tax expense.
Goodwill.
Goodwill represents the excess of the cost of an acquired entity over the net of the
amounts assigned to assets acquired and liabilities assumed and is recorded in the functional
currency of the acquired entity. Goodwill is tested for impairment at the single reporting unit
level on an annual basis, or more often if events or circumstances indicate that impairment may
exist. If the carrying amount of goodwill at the reporting unit exceeds its implied fair value,
then a charge for the excess would be recorded as an impairment loss. The principal method of
determining fair value of the reporting unit is an income approach where future cash flows are
discounted to arrive at a single present value amount. The discount rate used is derived based on
the time value of money and the risk profile of the stream of future cash flows. Recent results
and projections based on expectations regarding revenues, expenses, capital expenditures and
acquisition earn out payments produce a present value for the reporting unit. While the company
believes all assumptions utilized in our assessment are reasonable and appropriate, changes in
these estimates could produce different fair value amounts and therefore different goodwill
impairment assessments. The most sensitive of these assumptions are the estimated cash flows and
the use of our weighted average cost of capital as the discount rate to determine present value.
The company also utilizes a market approach to provide a secondary fair value of the reporting unit
by using comparable company and transaction multiples to estimate values for our single reporting
unit. Discretion and judgment is required in determining whether the transaction data available
represents information for companies of comparable nature, scope and size.
45
We have determined that we have one reporting unit as defined under FASB Statement No. 131,
Disclosures about Segments of an Enterprise and Related Information. Our goodwill impairment
testing conducted during 2007 and 2006 indicated that there was no impairment at the reporting unit
level. With respect to the 2007 impairment test, neither a 5.0% increase in the discount rate, nor
the impact on revenues of a 5.0% reduction in our assumed AUM would have changed the conclusion.
The company cannot predict the occurrence of future events that might adversely affect the reported
value of goodwill that totaled $6,848.0 million and $6,360.7 million at December 31, 2007 and
December 31, 2006, respectively. 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.
Most of our investments are carried at fair value on our balance sheet with the
periodic mark-to-market recorded either in accumulated other comprehensive income in the case of
available-for-sale investments or directly to earnings in the case of trading assets. Fair value is
generally determined by reference to an active trading market, using quoted close or bid prices as
of each reporting period end. When a readily ascertainable market value does not exist for an
investment (such as our collateralized loan and debt obligations, discussed below) 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 of investments for which active markets do not exist, the actual value that may be realized
upon the sale of these investments could differ from the current carrying values. Fair value
calculations are also required in association with our quarterly impairment testing of investments.
The accuracy of our other than temporary impairment assessments are dependent upon the extent to
which we are able to accurately determine fair values.
The company provides investment management services to a number of collateralized loan and debt
obligation entities (CLO/CDOs). These entities are investment vehicles created for the sole
purpose of issuing collateralized loan and debt instruments that offer investors the opportunity
for returns that vary with the risk level of their investment. The notes issued by the CLO/CDOs are
backed by diversified portfolios consisting primarily of loans or structured debt. The company
earns investment management fees, including subordinated management fees in some cases, for
managing the collateral for the CLO/CDO entities, as well as incentive fees that are contingent on
certain performance conditions. The company has invested in certain of the entities, generally
taking a relatively small portion of the unrated, junior subordinated position. At December 31, 2007, the
company held $39.0 million of investment in these CLO/CDOs, which represents its maximum risk of
loss. Our interests in collateralized loan or debt entities are generally subordinated to other
interests in the entity and entitles the investor to receive the residual cash flows, if any, from
the entity. As a result, the companys investment is sensitive to changes in the credit quality of
the issuers of the collateral securities, including changes in the forecasted default rates and any
declines in anticipated recovery rates. Investors in CLO/CDOs have no recourse against the company
for any losses sustained in the CLO/CDO structure.
Management has concluded that the company is not the primary beneficiary of any of the CLO/CDO
entities and it has recorded its investments at fair value primarily using discounted cash flow
analyses. The excess of actual and anticipated future cash flows over the initial investment at the
date of purchase is recognized as interest income over the life of the investment using the
effective yield method in accordance with Emerging Issues Task Force (EITF) 99-20, Recognition of
Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized
Financial Assets. The company reviews cash flow estimates throughout the life of each CLO/CDO
entity. Cash flow estimates are based on the underlying pool of securities and take into account
the overall credit quality of the issuers, the forecasted default rate of the securities and the
companys past experience in managing similar securities. If the updated estimate of future cash
flows (taking into account both timing and amounts) is less than the last revised estimate, an
impairment loss is recognized based on the excess of the carrying amount of the investment over its
fair value and is recorded through the income statement if the decline in value is determined to be
other than temporary. Fair value is determined using current information, notably market yields
and projected cash flows based on forecasted default and recovery rates that a market participant
would use in determining the current fair value of the equity interest. Market yields, default
rates and recovery rates used in the companys estimate of fair value vary based on the nature of
the investments in the underlying collateral pools. In periods of rising credit default rates and
lower debt recovery rates, the fair value, and therefore carrying value, of the companys
investments in these CLO/CDO entities may be adversely affected. An increase or decrease in the
discount rate of 1.0% would change the valuation of the CLO/CDOs by $0.9 million (2006: $1.2
million; 2005: $1.3 million).
46
Consolidated
Investment Products
. Financial Accounting Standards Board Interpretation (FIN) No.
46(R), Consolidation of Variable Interest Entities, an Interpretation of Accounting Research
Bulletin No. 51 requires that
the primary beneficiary of variable interest entities (VIEs) consolidate the VIEs. A VIE is an
entity that does not have sufficient equity to finance its operations without additional
subordinated financial support, or an entity for which the risks and rewards of ownership are not
directly linked to voting interests. Generally, limited partnership entities where the general
partner does not have substantive equity investment at risk and where the other limited partners do
not have substantive (greater than 50%) rights to remove the general partner or to dissolve the
limited partnership are also VIEs. The primary beneficiary is the party to the VIE who absorbs a
majority of the losses or retains the majority of the rewards generated by the VIE. Additionally,
certain investment products are structured as limited partnerships of which the company is the
general partner and is deemed to have control with the lack of substantive kick-out or
participation rights of the other limited partners. These investment products are also
consolidated into the companys financial statements under Emerging Issues Task Force (EITF) Issue
No. 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a
Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights.
Assessing if an entity is a VIE or an entity falling under the consolidation requirements of EITF
04-5 involves judgment and analysis on a structure-by-structure basis. Factors included in this
assessment include the legal organization of the entity, the companys contractual involvement with
the entity and any related party or defacto agent implications of the companys involvement with
the entity. Determining if the company is the primary beneficiary of a VIE also requires
significant judgment, as the calculation of expected losses and residual returns involves
estimation and probability assumptions. If current financial statements are not available for
consolidated VIEs or an investment product consolidated under EITF 04-5, estimation of investment
valuation is required, which includes assessing portfolio activity since the last financial
statement date and making inquiries of the fund manager. Significant changes in these assumptions
could impact the reported value of the investments held by consolidated investment products and the
related minority interest. As of December 31, 2007, the company consolidated VIEs that held
investments of $826.5 million (2006: $1,227.8 million) and partnership investments under EITF 04-5
of $379.1 million (2006: $254.2 million) and also determined that certain previously-consolidated
VIEs should be deconsolidated since the company no longer was the primary beneficiary of these
entities. As circumstances, supporting estimates and factors change, the determination of VIE
and primary beneficiary status may change, as could the determination of the necessity of
consolidation under EITF 04-5.
Contingencies.
Contingencies arise when we have a present obligation (legal or constructive) as a
result of a past event that is both probable and reasonably estimable. We must from time to time
make material estimates with respect to legal and other contingencies. The nature of our business
requires compliance with various state and federal statutes and exposes us to a variety of legal
proceedings and matters in the ordinary course of business. While the outcomes of matters such as
these are inherently uncertain and difficult to predict, we maintain reserves reflected in other
current and other non-current liabilities, as appropriate, for identified losses that are, in our
judgment, probable and reasonably estimable. Managements judgment is based on the advice of legal
counsel, ruling on various motions by the court where a complaint against the company has been
filed, review of the outcome of similar matters, if applicable, and review of guidance from state
or federal agencies, if applicable. Deferred contingent consideration payable in relation to a
business acquisition is recorded when the outcome of the contingency is resolved and the
consideration is issued or becomes issuable.
Recent Accounting Developments
See Part
II, Item 8, Financial Statements and Supplementary Data Note 1, Accounting Policies Recent
Accounting Pronouncements.
47
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
In the normal course of its business, the company is primarily exposed to market risk in the form
of market risk, interest rate risk, and foreign exchange rate risk.
AUM Market Price Risk
The companys investment management revenues are comprised of fees based on a percentage of the
value of AUM. Declines in equity or fixed income security market prices could cause revenues to
decline because of lower investment management fees by:
|
|
|
Causing the value of AUM to decrease.
|
|
|
|
Causing the returns realized on AUM to decrease.
|
|
|
|
|
Causing clients to withdraw funds in favor of investments in markets that they perceive
to offer greater opportunity and that the company does not serve.
|
|
|
|
|
Causing clients to rebalance assets away from investments that the company manages into
investments that the company does not manage.
|
|
|
|
|
Causing clients to reallocated assets away from products that earn higher revenues into
products that earn lower revenues.
|
Underperformance of client accounts relative to competing products could exacerbate these factors.
Market Risk
The company has investments in sponsored investment products that invest in a variety of asset
classes. Investments are generally made to establish a track record or to hedge exposure to
certain deferred compensation plans. The companys exposure to market risk arises from its
investments. The following table summarizes the fair values of the investments exposed to market
risk and provides a sensitivity analysis of the estimated fair values of those investments,
assuming a 10% increase or decrease in fair values:
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Fair Value
|
|
|
Carrying
|
|
assuming 10%
|
|
assuming 10%
|
$ in millions
|
|
Value
|
|
increase
|
|
decrease
|
|
|
|
December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
related to deferred compensation plans
|
|
|
58.8
|
|
|
|
64.7
|
|
|
|
52.9
|
|
Other
|
|
|
27.8
|
|
|
|
30.6
|
|
|
|
25.0
|
|
|
|
|
Total trading investments
|
|
|
86.6
|
|
|
|
95.3
|
|
|
|
77.9
|
|
|
|
|
Available-for-sale investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Seed money in affiliated funds
|
|
|
60.9
|
|
|
|
67.0
|
|
|
|
54.8
|
|
Other
|
|
|
8.6
|
|
|
|
9.5
|
|
|
|
7.7
|
|
|
|
|
Total
available-for-sale investments
|
|
|
69.5
|
|
|
|
76.5
|
|
|
|
62.5
|
|
|
|
|
Equity method investments
|
|
|
74.7
|
|
|
|
82.2
|
|
|
|
67.2
|
|
Total market risk on investments
|
|
|
230.8
|
|
|
|
254.0
|
|
|
|
207.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in
millions
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
64.8
|
|
|
|
71.3
|
|
|
|
58.3
|
|
Other
|
|
|
1.9
|
|
|
|
2.1
|
|
|
|
1.7
|
|
|
|
|
Total
trading investments
|
|
|
66.7
|
|
|
|
73.4
|
|
|
|
60.0
|
|
|
|
|
Available-for-sale investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Seed money in affiliated funds
|
|
|
97.1
|
|
|
|
106.8
|
|
|
|
87.4
|
|
Other
|
|
|
13.5
|
|
|
|
14.9
|
|
|
|
12.2
|
|
|
|
|
Total
available-for-sale investments
|
|
|
110.6
|
|
|
|
121.7
|
|
|
|
99.6
|
|
|
|
|
Equity method investments
|
|
|
18.4
|
|
|
|
20.2
|
|
|
|
16.6
|
|
Total market risk on investments
|
|
|
195.7
|
|
|
|
215.3
|
|
|
|
176.2
|
|
|
|
|
49
Interest Rate Risk
Interest rate risk relates to the risk that the fair value of future cash flows of a financial
instrument will fluctuate because of changes in market interest rates. The company is exposed to
interest rate risk primarily through its external debt and cash and cash equivalent investments. On
December 31, 2007, the interest rates on 90% of the companys borrowings were fixed for an average
period of 4 years. The remainder of the companys borrowings were floating. The interest rate
profile of the financial assets of the company on December 31, 2007 was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Fair Value
|
|
|
|
|
|
|
assuming a
|
|
assuming a
|
|
|
Carrying
|
|
+1% interest
|
|
-1% interest
|
$ in millions
|
|
Value
|
|
rate change
|
|
rate change
|
|
|
|
December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized debt obligations
|
|
|
39.0
|
|
|
|
38.1
|
|
|
|
39.4
|
|
Foreign time deposits
|
|
|
22.7
|
|
|
|
22.6
|
|
|
|
22.8
|
|
Other
|
|
|
1.0
|
|
|
|
1.0
|
|
|
|
1.0
|
|
|
|
|
Total
available-for-sale investments
|
|
|
62.7
|
|
|
|
61.7
|
|
|
|
63.2
|
|
U.S.
Treasury and governmental agency securities
|
|
|
6.0
|
|
|
|
6.0
|
|
|
|
6.0
|
|
|
|
|
Total investments
|
|
|
68.7
|
|
|
|
67.7
|
|
|
|
69.2
|
|
|
|
|
|
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized debt obligations
|
|
|
48.9
|
|
|
|
48.2
|
|
|
|
50.0
|
|
Foreign time deposits
|
|
|
11.1
|
|
|
|
11.0
|
|
|
|
11.2
|
|
Other
|
|
|
1.0
|
|
|
|
1.0
|
|
|
|
1.0
|
|
|
|
|
Total
available-for-sale investments
|
|
|
61.0
|
|
|
|
60.2
|
|
|
|
62.2
|
|
U.S.
Treasury and governmental agency securities
|
|
|
11.0
|
|
|
|
10.9
|
|
|
|
11.1
|
|
|
|
|
Total investments
|
|
|
72.0
|
|
|
|
71.1
|
|
|
|
73.3
|
|
|
|
|
The interest rate profile of the financial liabilities of the company on December 31 was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
Weighted Average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
Period for Which
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
Rate is Fixed
|
$ in millions
|
|
Total
|
|
Floating Rate
|
|
Fixed Rate*
|
|
Rate (%)
|
|
(Years)
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. dollar
|
|
|
1,276.4
|
|
|
|
126.4
|
|
|
|
1,150.0
|
|
|
|
5.2
|
|
|
|
4.4
|
|
Japanese yen
|
|
|
0.4
|
|
|
|
|
|
|
|
0.4
|
|
|
|
9.3
|
|
|
|
3.0
|
|
|
|
|
|
|
|
1,276.8
|
|
|
|
126.4
|
|
|
|
1,150.4
|
|
|
|
5.2
|
|
|
|
4.4
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. dollar
|
|
|
1,279.0
|
|
|
|
129.0
|
|
|
|
1,150.0
|
|
|
|
5.3
|
|
|
|
4.0
|
|
Japanese yen
|
|
|
0.5
|
|
|
|
|
|
|
|
0.5
|
|
|
|
9.4
|
|
|
|
4.0
|
|
|
|
|
|
|
|
1,279.5
|
|
|
|
129.0
|
|
|
|
1,150.5
|
|
|
|
5.3
|
|
|
|
4.0
|
|
|
|
|
|
|
|
*
|
|
Measured at amortized cost.
|
See Part II, Item 8, Financial Statements and Supplementary Data Note 10, Long-Term Debt 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 $1.3 million.
The
companys only fixed interest financial assets at
December 31, 2007 are in foreign time deposit
investments of $22.7 million (2006: $11.1 million) and in U.S. Treasury and U.S. governmental
agency securities of $6.0 million (2006: $11.0 million). The weighted average interest rate on
these investments is 2.63% (2006: 2.89%) and the average weighted time for which the rate is fixed
is 0.4 years (2006: 0.7 years).
50
Foreign Exchange Rate Risk
The company has transactional currency exposures that 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.
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
note balances as hedges against its net investments in its U.S.
subsidiaries. Part II, Item 8, Financial
Statements and Supplementary Data Note 10, Long-Term Debt details the fair values of the U.S.
dollar senior notes (the hedging instruments) at December 31, 2007 and 2006. 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 Consolidated Statement of Income related to the unhedged portion of debt.
The company is exposed to foreign exchange revaluation into the income statement on monetary assets
and liabilities that are held by subsidiaries in different functional currencies than the
subsidiaries functional currencies. Net foreign exchange revaluation losses were $10.3 million in
2007 (2006: gain of $8.5 million), and are included in other gains and losses, net on the
Consolidated Statements of Income. We continue to monitor our exposure to foreign
exchange revaluation.
51
Supplementary Quarterly Financial Data
The following is selected unaudited consolidated data for Invesco Ltd. for the quarters ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in millions, except per share data
|
|
Q407
|
|
Q307
|
|
Q207
|
|
Q107
|
|
Q406
|
|
Q306
|
|
Q206
|
|
Q106
|
|
|
|
Operating Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management fees
|
|
$
|
816.4
|
|
|
$
|
791.7
|
|
|
$
|
765.7
|
|
|
$
|
706.3
|
|
|
$
|
688.2
|
|
|
$
|
626.3
|
|
|
$
|
611.9
|
|
|
$
|
581.8
|
|
Performance fees
|
|
|
13.1
|
|
|
|
4.0
|
|
|
|
34.4
|
|
|
|
18.8
|
|
|
|
25.9
|
|
|
|
10.4
|
|
|
|
12.6
|
|
|
|
33.2
|
|
Service and distribution fees
|
|
|
150.8
|
|
|
|
150.7
|
|
|
|
148.2
|
|
|
|
143.4
|
|
|
|
135.4
|
|
|
|
130.8
|
|
|
|
133.0
|
|
|
|
135.7
|
|
Other
|
|
|
42.8
|
|
|
|
30.2
|
|
|
|
30.7
|
|
|
|
31.7
|
|
|
|
22.1
|
|
|
|
21.2
|
|
|
|
33.5
|
|
|
|
44.7
|
|
|
|
|
Total Operating Revenues
|
|
|
1,023.1
|
|
|
|
976.6
|
|
|
|
979.0
|
|
|
|
900.2
|
|
|
|
871.6
|
|
|
|
788.7
|
|
|
|
791.0
|
|
|
|
795.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation
|
|
|
286.3
|
|
|
|
278.1
|
|
|
|
288.9
|
|
|
|
284.3
|
|
|
|
273.2
|
|
|
|
289.7
|
|
|
|
252.8
|
|
|
|
254.8
|
|
Third-party distribution,
service and advisory
|
|
|
284.9
|
|
|
|
270.8
|
|
|
|
263.0
|
|
|
|
232.4
|
|
|
|
223.5
|
|
|
|
204.2
|
|
|
|
200.2
|
|
|
|
198.9
|
|
Marketing
|
|
|
43.9
|
|
|
|
40.9
|
|
|
|
35.8
|
|
|
|
37.0
|
|
|
|
37.0
|
|
|
|
30.8
|
|
|
|
35.2
|
|
|
|
35.8
|
|
Property, office and technology
|
|
|
60.3
|
|
|
|
66.6
|
|
|
|
58.2
|
|
|
|
57.4
|
|
|
|
57.4
|
|
|
|
57.5
|
|
|
|
56.9
|
|
|
|
58.9
|
|
General and administrative
|
|
|
104.0
|
|
|
|
63.7
|
|
|
|
71.1
|
|
|
|
57.0
|
|
|
|
38.9
|
|
|
|
59.8
|
|
|
|
58.8
|
|
|
|
63.2
|
|
|
|
|
Total Operating Expenses
|
|
|
779.4
|
|
|
|
720.1
|
|
|
|
717.0
|
|
|
|
668.1
|
|
|
|
630.0
|
|
|
|
642.0
|
|
|
|
603.9
|
|
|
|
611.6
|
|
|
|
|
Operating Income
|
|
|
243.7
|
|
|
|
256.5
|
|
|
|
262.0
|
|
|
|
232.1
|
|
|
|
241.6
|
|
|
|
146.7
|
|
|
|
187.1
|
|
|
|
183.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income/(expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of
unconsolidated affiliates
|
|
|
21.0
|
|
|
|
14.9
|
|
|
|
6.4
|
|
|
|
5.8
|
|
|
|
2.3
|
|
|
|
0.8
|
|
|
|
0.9
|
|
|
|
0.3
|
|
Interest income
|
|
|
11.8
|
|
|
|
14.1
|
|
|
|
12.3
|
|
|
|
10.3
|
|
|
|
10.0
|
|
|
|
6.6
|
|
|
|
5.2
|
|
|
|
5.1
|
|
Realized and unrealized gains of
consolidated investment
products, net
|
|
|
55.8
|
|
|
|
58.7
|
|
|
|
69.8
|
|
|
|
30.0
|
|
|
|
182.8
|
|
|
|
41.4
|
|
|
|
38.9
|
|
|
|
31.2
|
|
Interest expense
|
|
|
(17.7
|
)
|
|
|
(16.4
|
)
|
|
|
(18.6
|
)
|
|
|
(18.6
|
)
|
|
|
(20.9
|
)
|
|
|
(19.7
|
)
|
|
|
(19.3
|
)
|
|
|
(17.3
|
)
|
Other gains and losses, net
|
|
|
6.3
|
|
|
|
(3.7
|
)
|
|
|
(0.2
|
)
|
|
|
7.5
|
|
|
|
12.4
|
|
|
|
11.1
|
|
|
|
6.4
|
|
|
|
(3.1
|
)
|
|
|
|
Income before income taxes and
minority interest
|
|
|
320.9
|
|
|
|
324.1
|
|
|
|
331.7
|
|
|
|
267.1
|
|
|
|
428.2
|
|
|
|
186.9
|
|
|
|
219.2
|
|
|
|
200.0
|
|
Income tax provision
|
|
|
(91.3
|
)
|
|
|
(92.7
|
)
|
|
|
(91.4
|
)
|
|
|
(81.9
|
)
|
|
|
(83.4
|
)
|
|
|
(47.6
|
)
|
|
|
(65.4
|
)
|
|
|
(58.2
|
)
|
|
|
|
Income before minority interest
|
|
|
229.6
|
|
|
|
231.4
|
|
|
|
240.3
|
|
|
|
185.2
|
|
|
|
344.8
|
|
|
|
139.3
|
|
|
|
153.8
|
|
|
|
141.8
|
|
Minority interest income of
consolidated entities, net
of tax
|
|
|
(53.7
|
)
|
|
|
(64.4
|
)
|
|
|
(64.8
|
)
|
|
|
(30.0
|
)
|
|
|
(179.6
|
)
|
|
|
(38.0
|
)
|
|
|
(37.4
|
)
|
|
|
(42.0
|
)
|
|
|
|
|
Net Income
|
|
$
|
175.9
|
|
|
$
|
167.0
|
|
|
$
|
175.5
|
|
|
$
|
155.2
|
|
|
$
|
165.2
|
|
|
$
|
101.3
|
|
|
$
|
116.4
|
|
|
$
|
99.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share *:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic
|
|
$
|
0.45
|
|
|
$
|
0.42
|
|
|
$
|
0.44
|
|
|
$
|
0.39
|
|
|
$
|
0.42
|
|
|
$
|
0.26
|
|
|
$
|
0.30
|
|
|
$
|
0.25
|
|
diluted
|
|
$
|
0.43
|
|
|
$
|
0.41
|
|
|
$
|
0.43
|
|
|
$
|
0.38
|
|
|
$
|
0.40
|
|
|
$
|
0.25
|
|
|
$
|
0.29
|
|
|
$
|
0.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares outstanding *:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic
|
|
|
393.6
|
|
|
|
400.0
|
|
|
|
399.9
|
|
|
|
398.9
|
|
|
|
397.9
|
|
|
|
395.2
|
|
|
|
391.6
|
|
|
|
395.4
|
|
diluted
|
|
|
407.6
|
|
|
|
410.5
|
|
|
|
410.6
|
|
|
|
410.1
|
|
|
|
408.2
|
|
|
|
404.8
|
|
|
|
402.0
|
|
|
|
405.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per share *:
|
|
|
|
|
|
$
|
0.164
|
|
|
|
|
|
|
$
|
0.208
|
|
|
|
|
|
|
$
|
0.154
|
|
|
|
|
|
|
$
|
0.203
|
|
|
|
|
*
|
|
All per share amounts have been adjusted to reflect the impact of the December 4, 2007
one-for-two reverse stock split. See Part II, Item 8, Financial
Statements and Supplementary Data Note 1, Accounting Policies for
additional details. The sum of the quarterly earnings per share amounts may differ from the annual
earnings per share amounts due to the required method of computing the weighted average number of
shares in interim periods.
|
52
Item 8.
Financial Statements and Supplementary Data
Index to Financial Statements and Supplementary Data
53
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Invesco Ltd.
We have audited the accompanying consolidated balance sheets of Invesco Ltd. as of December 31,
2007 and 2006, and the related consolidated statements of income, shareholders equity, and cash
flows for each of the three years in the period ended December 31, 2007. 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 Invesco Ltd. at December 31, 2007 and 2006, and
the consolidated results of its operations and its cash flows for each of the three years in the
period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Invesco Ltd.s internal control over financial reporting as of December 31,
2007, based on criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25,
2008 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Atlanta, Georgia
February 25, 2008
54
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Invesco Ltd.
We have audited Invesco Ltd.s internal control over financial reporting as of December 31, 2007,
based on criteria established in Internal ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the COSO criteria). Invesco Ltd.s management
is responsible for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting included in the
accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility
is to express an opinion on 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, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk,
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, Invesco Ltd. maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2007, 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 Invesco Ltd. as of December 31, 2007 and
2006, and the related consolidated statements of income, shareholders equity, and cash flows for
each of the three years in the period ended December 31,
2007, of Invesco Ltd. and our report dated
February 25, 2008 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Atlanta, Georgia
February 25, 2008
55
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
$ in millions
|
|
As of December 31,
|
|
|
|
2007
|
|
|
2006
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
915.8
|
|
|
$
|
778.9
|
|
Cash and cash equivalents of consolidated investment products
|
|
|
36.6
|
|
|
|
55.4
|
|
Unsettled fund receivables
|
|
|
605.5
|
|
|
|
561.6
|
|
Accounts receivable
|
|
|
292.1
|
|
|
|
243.3
|
|
Investments
|
|
|
177.2
|
|
|
|
187.8
|
|
Prepaid assets
|
|
|
65.9
|
|
|
|
68.5
|
|
Other current assets
|
|
|
203.3
|
|
|
|
238.6
|
|
Assets held for policyholders
|
|
|
1,898.0
|
|
|
|
1,574.9
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
4,194.4
|
|
|
|
3,709.0
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Investments
|
|
|
122.3
|
|
|
|
79.9
|
|
Investments of consolidated investment products
|
|
|
1,205.6
|
|
|
|
1,482.0
|
|
Prepaid assets
|
|
|
55.6
|
|
|
|
82.2
|
|
Deferred sales commissions
|
|
|
31.3
|
|
|
|
31.6
|
|
Deferred tax asset, net
|
|
|
133.8
|
|
|
|
118.5
|
|
Property and equipment, net
|
|
|
180.0
|
|
|
|
198.7
|
|
Intangible assets, net
|
|
|
154.2
|
|
|
|
165.9
|
|
Goodwill
|
|
|
6,848.0
|
|
|
|
6,360.7
|
|
|
|
|
|
|
|
|
|
|
|
8,730.8
|
|
|
|
8,519.5
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
12,925.2
|
|
|
$
|
12,228.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities, Minority Interests and Shareholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
$
|
|
|
|
$
|
300.0
|
|
Unsettled fund payables
|
|
|
581.2
|
|
|
|
533.0
|
|
Income taxes payable
|
|
|
140.6
|
|
|
|
99.7
|
|
Other current liabilities
|
|
|
1,021.1
|
|
|
|
857.8
|
|
Policyholder payables
|
|
|
1,898.0
|
|
|
|
1,574.9
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
3,640.9
|
|
|
|
3,365.4
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
1,276.4
|
|
|
|
979.0
|
|
Borrowings of consolidated investment products
|
|
|
116.6
|
|
|
|
37.0
|
|
Other non-current liabilities
|
|
|
179.5
|
|
|
|
178.5
|
|
|
|
|
|
|
|
|
|
|
|
1,572.5
|
|
|
|
1,194.5
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
5,213.4
|
|
|
|
4,559.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interests in equity of consolidated entities
|
|
|
1,121.2
|
|
|
|
1,504.6
|
|
Commitments and contingencies (Note 22)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
Common shares ($0.20 par value; 1,050.0 million authorized;
424.7 million shares issued and outstanding)
|
|
|
84.9
|
|
|
|
|
|
Ordinary shares (1,050.0 million authorized; 831.9 million
shares issued and outstanding)
|
|
|
|
|
|
|
83.2
|
|
Exchangeable shares (19.8 million shares issued and outstanding)
|
|
|
|
|
|
|
377.4
|
|
Additional paid-in-capital
|
|
|
5,306.3
|
|
|
|
4,966.1
|
|
Treasury shares
|
|
|
(954.4
|
)
|
|
|
(577.9
|
)
|
Retained earnings
|
|
|
1,201.7
|
|
|
|
700.7
|
|
Accumulated other comprehensive income, net of tax
|
|
|
952.1
|
|
|
|
614.5
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
6,590.6
|
|
|
|
6,164.0
|
|
|
|
|
|
|
|
|
Total liabilities, minority interests and shareholders equity
|
|
$
|
12,925.2
|
|
|
$
|
12,228.5
|
|
|
|
|
|
|
|
|
See accompanying notes.
56
Consolidated Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in millions, except per share data
|
|
Years Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Operating Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management fees
|
|
$
|
3,080.1
|
|
|
$
|
2,508.2
|
|
|
$
|
2,166.7
|
|
Performance fees
|
|
|
70.3
|
|
|
|
82.1
|
|
|
|
33.5
|
|
Service and distribution fees
|
|
|
593.1
|
|
|
|
534.9
|
|
|
|
538.2
|
|
Other
|
|
|
135.4
|
|
|
|
121.5
|
|
|
|
134.2
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Revenues
|
|
|
3,878.9
|
|
|
|
3,246.7
|
|
|
|
2,872.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation
|
|
|
1,137.6
|
|
|
|
1,070.5
|
|
|
|
1,044.7
|
|
Third-party distribution, service and advisory
|
|
|
1,051.1
|
|
|
|
826.8
|
|
|
|
706.0
|
|
Marketing
|
|
|
157.6
|
|
|
|
138.8
|
|
|
|
139.5
|
|
Property, office and technology
|
|
|
242.5
|
|
|
|
230.7
|
|
|
|
270.9
|
|
General and administrative
|
|
|
295.8
|
|
|
|
207.6
|
|
|
|
224.4
|
|
Restructuring charge
|
|
|
|
|
|
|
13.1
|
|
|
|
62.6
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
16.6
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
2,884.6
|
|
|
|
2,487.5
|
|
|
|
2,464.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
994.3
|
|
|
|
759.2
|
|
|
|
407.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income/(expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
48.1
|
|
|
|
4.3
|
|
|
|
0.7
|
|
Interest income
|
|
|
48.5
|
|
|
|
26.9
|
|
|
|
16.7
|
|
Realized and unrealized gains of consolidated
investment products, net
|
|
|
214.3
|
|
|
|
294.3
|
|
|
|
128.8
|
|
Interest expense
|
|
|
(71.3
|
)
|
|
|
(77.2
|
)
|
|
|
(85.1
|
)
|
Other gains and losses, net
|
|
|
9.9
|
|
|
|
26.8
|
|
|
|
13.4
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and minority interest
|
|
|
1,243.8
|
|
|
|
1,034.3
|
|
|
|
482.4
|
|
Income tax provision
|
|
|
(357.3
|
)
|
|
|
(254.6
|
)
|
|
|
(151.1
|
)
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest
|
|
|
886.5
|
|
|
|
779.7
|
|
|
|
331.3
|
|
Minority interest income of consolidated
entities, net of tax
|
|
|
(212.9
|
)
|
|
|
(297.0
|
)
|
|
|
(111.5
|
)
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
673.6
|
|
|
$
|
482.7
|
|
|
$
|
219.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
-basic
|
|
$
|
1.69
|
|
|
$
|
1.22
|
|
|
$
|
0.55
|
|
-diluted
|
|
$
|
1.64
|
|
|
$
|
1.19
|
|
|
$
|
0.54
|
|
Dividends declared per share
|
|
$
|
0.372
|
|
|
$
|
0.357
|
|
|
$
|
0.330
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
57
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
$ in millions
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
673.6
|
|
|
$
|
482.7
|
|
|
$
|
219.8
|
|
Adjustments to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization, depreciation, and goodwill impairment
|
|
|
64.1
|
|
|
|
67.5
|
|
|
|
94.5
|
|
Share related compensation expense
|
|
|
105.2
|
|
|
|
140.6
|
|
|
|
40.6
|
|
Loss/(gain) on disposal of property, equipment, software, and business
|
|
|
(1.1
|
)
|
|
|
4.0
|
|
|
|
(28.8
|
)
|
Gain on disposal of investments
|
|
|
(12.6
|
)
|
|
|
(7.3
|
)
|
|
|
(0.6
|
)
|
Unrealized gain on trading investments, net
|
|
|
(223.5
|
)
|
|
|
(300.0
|
)
|
|
|
(129.2
|
)
|
Tax benefit from share-based compensation
|
|
|
38.2
|
|
|
|
17.9
|
|
|
|
|
|
Excess tax benefits from share-based compensation
|
|
|
(23.1
|
)
|
|
|
(12.3
|
)
|
|
|
|
|
Minority
interest in earnings of consolidated entities
|
|
|
212.9
|
|
|
|
297.0
|
|
|
|
111.5
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
(48.1
|
)
|
|
|
(4.3
|
)
|
|
|
(0.7
|
)
|
Sale/(purchase) of trading investments
|
|
|
0.4
|
|
|
|
(50.4
|
)
|
|
|
25.3
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash held at consolidated investment products
|
|
|
(4.8
|
)
|
|
|
1.3
|
|
|
|
(43.2
|
)
|
(Increase)/decrease in receivables
|
|
|
(59.6
|
)
|
|
|
(160.7
|
)
|
|
|
53.4
|
|
Increase/(decrease) in payables
|
|
|
192.1
|
|
|
|
(20.1
|
)
|
|
|
(35.7
|
)
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
913.7
|
|
|
|
455.9
|
|
|
|
306.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(36.7
|
)
|
|
|
(37.9
|
)
|
|
|
(38.8
|
)
|
Disposal of property and equipment
|
|
|
0.1
|
|
|
|
2.5
|
|
|
|
2.2
|
|
Purchase of available for sale investments
|
|
|
(80.3
|
)
|
|
|
(289.4
|
)
|
|
|
(316.5
|
)
|
Proceeds from sale of available for sale investments
|
|
|
111.8
|
|
|
|
254.3
|
|
|
|
427.0
|
|
Purchase of investments by consolidated investment products
|
|
|
(331.5
|
)
|
|
|
(372.3
|
)
|
|
|
(412.3
|
)
|
Proceeds from sale of investments by consolidated investment products
|
|
|
143.6
|
|
|
|
122.6
|
|
|
|
210.9
|
|
Returns of
capital in investments of consolidated investment products
|
|
|
196.0
|
|
|
|
257.5
|
|
|
|
185.3
|
|
Proceeds from held to maturity investments
|
|
|
5.0
|
|
|
|
2.0
|
|
|
|
0.6
|
|
Acquisitions of businesses, net of cash acquired of $8.9 million in 2006
|
|
|
(56.0
|
)
|
|
|
(200.1
|
)
|
|
|
|
|
Disposal of businesses, including cash of $0.6 million in 2005
|
|
|
1.6
|
|
|
|
2.1
|
|
|
|
53.6
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in)/provided by investing activities
|
|
|
(46.4
|
)
|
|
|
(258.7
|
)
|
|
|
112.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercises of share options
|
|
|
137.4
|
|
|
|
66.8
|
|
|
|
7.7
|
|
Purchases of treasury shares
|
|
|
(716.0
|
)
|
|
|
(155.9
|
)
|
|
|
|
|
Dividends paid
|
|
|
(155.0
|
)
|
|
|
(143.6
|
)
|
|
|
(134.1
|
)
|
Excess tax benefits from stock-based compensation
|
|
|
23.1
|
|
|
|
12.3
|
|
|
|
|
|
Capital invested into consolidated investment products
|
|
|
211.0
|
|
|
|
345.3
|
|
|
|
329.7
|
|
Capital distributed by consolidated investment products
|
|
|
(318.2
|
)
|
|
|
(301.2
|
)
|
|
|
(351.7
|
)
|
Borrowings of consolidated investment products
|
|
|
112.6
|
|
|
|
46.3
|
|
|
|
118.1
|
|
Repayments of borrowings of consolidated investment products
|
|
|
(33.1
|
)
|
|
|
(82.1
|
)
|
|
|
(60.2
|
)
|
Net (repayments)/borrowings under credit facility
|
|
|
(2.6
|
)
|
|
|
59.0
|
|
|
|
(81.0
|
)
|
Issuance of senior notes
|
|
|
300.0
|
|
|
|
|
|
|
|
|
|
Repayments of senior notes
|
|
|
(300.0
|
)
|
|
|
(10.0
|
)
|
|
|
(79.5
|
)
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(740.8
|
)
|
|
|
(163.1
|
)
|
|
|
(251.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents
|
|
|
126.5
|
|
|
|
34.1
|
|
|
|
167.9
|
|
Foreign exchange movement on cash and cash equivalents
|
|
|
10.4
|
|
|
|
35.3
|
|
|
|
(5.3
|
)
|
Cash and cash equivalents, beginning of year
|
|
|
778.9
|
|
|
|
709.5
|
|
|
|
546.9
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
915.8
|
|
|
$
|
778.9
|
|
|
$
|
709.5
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
(72.0
|
)
|
|
$
|
(73.4
|
)
|
|
$
|
(84.4
|
)
|
Taxes paid
|
|
$
|
(328.2
|
)
|
|
$
|
(213.1
|
)
|
|
$
|
(118.8
|
)
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
58
Consolidated Statements of Changes in Shareholders Equity and Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Other
|
|
Total
|
|
|
Common
|
|
Ordinary
|
|
|
|
|
|
Paid-in-
|
|
Treasury
|
|
Retained
|
|
Comprehensive
|
|
Shareholders
|
$ in millions
|
|
Shares
|
|
Shares
|
|
Exchangeable Shares
|
|
Capital
|
|
Shares
|
|
Earnings
|
|
Income
|
|
Equity
|
|
January 1, 2005
|
|
$
|
|
|
|
$
|
388.9
|
|
|
$
|
593.0
|
|
|
$
|
4,738.3
|
|
|
$
|
(456.7
|
)
|
|
$
|
339.5
|
|
|
$
|
(7.8
|
)
|
|
$
|
5,595.2
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
219.8
|
|
|
|
|
|
|
|
219.8
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation
differences on investments in overseas subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
360.4
|
|
|
|
360.4
|
|
Change in minimum
pension liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.8
|
|
|
|
6.8
|
|
Change in net
unrealized gains on
available-for-sale
investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4.1
|
)
|
|
|
(4.1
|
)
|
Tax impacts of changes
in accumulated OCI
balances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3.6
|
)
|
|
|
(3.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
579.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee share plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40.6
|
|
Vested stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6.4
|
)
|
|
|
6.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of options
|
|
|
|
|
|
|
0.5
|
|
|
|
|
|
|
|
7.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.7
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(134.1
|
)
|
|
|
|
|
|
|
(134.1
|
)
|
Business combinations
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.2
|
|
Currency translation
differences from change
in presentation currency
|
|
|
|
|
|
|
(37.5
|
)
|
|
|
(69.1
|
)
|
|
|
(434.1
|
)
|
|
|
43.2
|
|
|
|
(63.6
|
)
|
|
|
|
|
|
|
(561.1
|
)
|
Conversion of
exchangeable shares into
ordinary shares
|
|
|
|
|
|
|
0.7
|
|
|
|
(92.1
|
)
|
|
|
91.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redenomination of share
capital
|
|
|
|
|
|
|
(271.0
|
)
|
|
|
|
|
|
|
271.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
|
|
|
|
81.8
|
|
|
|
431.8
|
|
|
|
4,710.0
|
|
|
|
(407.1
|
)
|
|
|
361.6
|
|
|
|
351.7
|
|
|
|
5,529.8
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
482.7
|
|
|
|
|
|
|
|
482.7
|
|
Other comprehensive income
Currency translation
differences
on investments in
overseas subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
268.3
|
|
|
|
268.3
|
|
Change in minimum
pension liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25.3
|
|
|
|
25.3
|
|
Change in net
unrealized gains on
available-for-sale
investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6.6
|
)
|
|
|
(6.6
|
)
|
Tax impacts of changes
in accumulated OCI
balances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.7
|
)
|
|
|
(0.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
769.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial impact of
adopting FASB 158, net of
tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23.5
|
)
|
|
|
(23.5
|
)
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(143.6
|
)
|
|
|
|
|
|
|
(143.6
|
)
|
Employee share plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
140.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
140.6
|
|
Vested stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17.4
|
)
|
|
|
17.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of options
|
|
|
|
|
|
|
1.1
|
|
|
|
|
|
|
|
65.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66.8
|
|
Tax impact of
share-based payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.3
|
|
Purchase of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(188.2
|
)
|
|
|
|
|
|
|
|
|
|
|
(188.2
|
)
|
Business combinations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.8
|
|
Conversion of
exchangeable shares into
ordinary shares
|
|
|
|
|
|
|
0.3
|
|
|
|
(54.4
|
)
|
|
|
54.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006
|
|
|
|
|
|
|
83.2
|
|
|
|
377.4
|
|
|
|
4,966.1
|
|
|
|
(577.9
|
)
|
|
|
700.7
|
|
|
|
614.5
|
|
|
|
6,164.0
|
|
|
59
Consolidated Statements of Changes in Shareholders Equity and Comprehensive Income
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Other
|
|
Total
|
|
|
Common
|
|
Ordinary
|
|
|
|
Paid-in-
|
|
Treasury
|
|
Retained
|
|
Comprehensive
|
|
Shareholders
|
$ in millions
|
|
Shares
|
|
Shares
|
|
Exchangeable Shares
|
|
Capital
|
|
Shares
|
|
Earnings
|
|
Income
|
|
Equity
|
|
December 31, 2006
|
|
|
|
|
|
|
83.2
|
|
|
|
377.4
|
|
|
|
4,966.1
|
|
|
|
(577.9
|
)
|
|
|
700.7
|
|
|
|
614.5
|
|
|
|
6,164.0
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
673.6
|
|
|
|
|
|
|
|
673.6
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation
differences on
investments in
overseas subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
351.1
|
|
|
|
351.1
|
|
Change in accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OCI related to employee
benefit plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.7
|
|
|
|
7.7
|
|
Change in net
unrealized gains on
available-for-sale
investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16.8
|
)
|
|
|
(16.8
|
)
|
Tax impacts of changes
in accumulated OCI
balances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4.4
|
)
|
|
|
(4.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,011.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adoption of FIN 48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17.6
|
)
|
|
|
|
|
|
|
(17.6
|
)
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(155.0
|
)
|
|
|
|
|
|
|
(155.0
|
)
|
Employee share plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105.2
|
|
Vested stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(53.9
|
)
|
|
|
53.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of options
|
|
|
|
|
|
|
1.6
|
|
|
|
|
|
|
|
135.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137.4
|
|
Tax impact of
share-based payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.1
|
|
Purchase of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(683.7
|
)
|
|
|
|
|
|
|
|
|
|
|
(683.7
|
)
|
Cancellation of
treasury shares
|
|
|
|
|
|
|
(1.9
|
)
|
|
|
|
|
|
|
(251.4
|
)
|
|
|
253.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business combinations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.0
|
|
Conversion of
exchangeable shares into
ordinary shares
|
|
|
|
|
|
|
2.0
|
|
|
|
(377.4
|
)
|
|
|
375.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation of ordinary
shares and issuance of
common shares
|
|
|
84.9
|
|
|
|
(84.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
$
|
84.9
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
5,306.3
|
|
|
$
|
(954.4
|
)
|
|
$
|
1,201.7
|
|
|
$
|
952.1
|
|
|
$
|
6,590.6
|
|
|
See accompanying notes.
60
Notes to the Consolidated Financial Statements
1. ACCOUNTING POLICIES
Corporate Information
Invesco Ltd. (Parent) and all of its consolidated entities (collectively, the company or Invesco)
provide retail, institutional and high-net-worth clients with an array of global investment
management capabilities. The company operates globally and its sole business is asset management.
On July 18, 2007, the predecessor to Invesco Ltd., INVESCO PLC, announced that it had lost its
foreign private issuer status in the United States with the U.S. Securities and Exchange Commission
(SEC), chiefly as a result of U.S. share ownership exceeding fifty percent of issued share capital.
As a result of this, INVESCO PLC immediately became subject to the full requirements of two primary
securities regulators, the SEC in the United States and the FSA in the United Kingdom, and two
different accounting standards, Generally Accepted Accounting Principles in the United States (U.S.
GAAP) and International Financial Reporting Standards (IFRS). On December 4, 2007, INVESCO PLC
became a wholly-owned subsidiary of Invesco Ltd. and the shareholders of INVESCO PLC received
common shares of Invesco Ltd. in exchange for their ordinary shares of INVESCO PLC. This
transaction was accounted for in a manner similar to a pooling of interests. Additionally, the
companys primary share listing moved from the London Stock Exchange to the New York Stock
Exchange, a share capital consolidation was immediately implemented (a reverse stock split) on a
one-for-two basis, and the companys regulated business in the European Union was transferred from
INVESCO PLC to Invesco Ltd. All prior period share and earnings per share amounts have been
adjusted to reflect the reverse stock split.
Basis of Accounting and Consolidation
The financial statements have been prepared in accordance with U.S. GAAP and consolidate the
financial statements of the Parent, all of its controlled subsidiaries, any variable interest
entities (VIEs) required to be consolidated under Financial Accounting Standards Board (FASB)
Interpretation (FIN) No. 46(R), Consolidation of Variable Interest Entities, an Interpretation of
Accounting Research Bulletin No. 51, and any entities required to be consolidated under Emerging
Issues Task Force (EITF) Issue No. 04-5, Determining Whether a General Partner, or the General
Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners
Have Certain Rights (EITF 04-5). Under FASB Statement No. 94, Consolidation of All
Majority-Owned Subsidiaries, control is deemed to be present when the Parent holds a majority
voting interest or otherwise has the power to govern the financial and operating policies of the
subsidiary so as to obtain the benefits from its activities. FIN 46(R) requires that VIEs, or
entities in which the risks and rewards of ownership are not directly linked to voting interests,
for which the company is the primary beneficiary (having the majority of rewards/risks of
ownership) be consolidated. Certain of the companys managed products are structured as
partnerships in which the company is the general partner receiving a management and/or performance
fee. If the company is deemed to have a variable interest in these entities and is determined to
be the primary beneficiary, these entities are consolidated into the companys financial
statements. See Note 18 for further discussion. If the company is not determined to be the
primary beneficiary, the equity method of accounting is used to account for the companys
investment in these entities. In accordance with EITF 04-5, non-VIE general partnership
investments would be deemed to be controlled by the company and would be consolidated, unless the
limited partners have the substantive ability to remove the general partner without cause based
upon a simple majority vote or can otherwise dissolve the partnership, or unless the limited
partners have substantive participating rights over decision making. Investment products that are
consolidated as variable interest entities as well as under EITF 04-5 are referred to as
consolidated investment products in the Consolidated Financial Statements.
As required by Accounting Principles Board (APB) 18, The Equity Method of Accounting for
Investments in Common Stock, the equity method of accounting is used to account for investments in
joint ventures and non-controlled subsidiaries in which the companys ownership is between 20 and
50 percent. Equity investments are carried initially at cost (subsequently adjusted to recognize
the companys share of the profit or loss of the investee after the date of acquisition) and are
included in investments on the Consolidated Balance Sheets. The proportionate share of income or
loss is included in equity in earnings of unconsolidated affiliates in the Consolidated Statements
of Income.
The reporting currency of the company changed from Sterling to U.S. Dollars effective December 31,
2005. On December 8, 2005, INVESCO PLC 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 INVESCO PLC. All periods are
presented in U.S. Dollars.
61
The financial statements have been prepared primarily on the historical cost basis; however,
certain items are presented using other bases such as fair value, where such treatment is
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
U.S. GAAP from local generally accepted accounting principles or reporting regulations. All
intercompany transactions, balances, revenues and expenses are eliminated upon consolidation.
Minority interests represent the interests in certain entities consolidated by the company either
because the company has control over the entity or has determined that it is the primary
beneficiary under FIN 46(R), but of which the company does not own all of the equity.
In preparing the financial statements, management is required to make estimates and assumptions
that affect reported revenues, expenses, assets, liabilities and disclosure of contingent
liabilities. The primary estimates relate to investment valuation, goodwill impairment and taxes.
Use of available information and application of judgment are inherent in the formation of
estimates. Actual results in the future could differ from such estimates and the differences may be
material to the financial statements.
Acquisition Accounting
Upon acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured
at their fair values at the date of acquisition. In accordance with FASB Statement No. 141,
Business Combinations, 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 pre-acquisition
carrying values of the acquired net assets. The results of entities acquired or sold during the
year are included from or to the date control changes.
Deferred contingent consideration payable in relation to a business acquisition is recorded when
the outcome of the contingency is resolved and the consideration is issued or becomes issuable.
Deferred contingent consideration results in recognition of additional goodwill.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash at banks and in hand and short-term deposits with a
maturity upon acquisition of three months or less. Also included in cash and cash equivalents at
December 31, 2007 is $3.3 million in cash to facilitate trust operations and customer transactions
in the companys affiliated funds. Cash and cash equivalents invested in affiliated money market
funds (related parties) totaled $183.0 million at December 31, 2007. Cash and cash equivalents of
consolidated investment products are not available for general use by the company.
Cash balances may not be readily accessible to the Parent due to certain capital adequacy
requirements. Invesco has local capital requirements in several jurisdictions, as well as regional
requirements for entities that are part of the European sub-group. These requirements require the
retention of liquid resources in those jurisdictions, which we meet by holding cash. This retained
cash can be used for general business purposes in the European sub-group or in the countries where
it is located. Due to the capital restrictions, the ability to transfer cash between certain
jurisdictions may be limited. In addition, transfers of cash between international jurisdictions
may have adverse tax consequences that may substantially limit such activity. At December 31, 2007,
the European sub-group had cash and cash equivalent balances of $758.1 million, much of which is
used to satisfy these regulatory requirements. We are in compliance with all regulatory minimum
net capital requirements.
Accounts Receivable and Payable
Accounts receivable and payable are recorded at their original invoice amounts. Accounts
receivable are also recorded less any allowance for uncollectible amounts.
Investments
Investments in equity securities that have readily determinable fair values and investments in debt
securities are classified as either trading or available-for-sale in accordance with FASB Statement
No. 115, Accounting for Certain Investments in Debt and Equity Securities. Investments in debt
securities are classified in accordance with FASB Statement No. 115 as held-to-maturity
investments if the intent is to hold the investments until maturity. Trading securities are
securities bought and held principally for the purpose of selling them in the near term.
Securities are classified as held-to-maturity when the company has the intent and ability to hold
the securities to maturity. Available-for-sale securities are those neither classified as trading
nor as held to maturity. Trading and available-for-sale investments are measured at fair value.
Gains or losses arising from changes in the fair value of trading investments are included in
income, and gains or losses arising from changes in the fair value of available-for-sale
investments are recognized in accumulated other comprehensive income (OCI), net of tax, until the
investment is sold or otherwise disposed of, or until the investment is determined to be other than temporarily
62
impaired, at which time the cumulative gain or loss previously reported in equity is
included in income. The specific identification method is used to determine the realized gain or
loss on securities sold or otherwise disposed. 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 sold or
other than temporarily impaired.
Investments in joint ventures, non-controlled subsidiaries and certain investment products that are
not consolidated under FIN 46R or EITF 04-5 are investments over which the company has significant
influence but not control and are accounted for using the equity method, where the investment is
initially recorded at cost and the carrying amount is increased or decreased to recognize the
companys share of the after-tax 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 also accounted for using the equity method to reflect
the substance and economic reality of the companys interest in jointly controlled entities.
Equity investments are included in investments on the Consolidated Balance Sheets in accordance
with APB 18. The proportionate share of income or loss is included in equity in earnings of
unconsolidated affiliates in the Consolidated Income Statements.
Fair value is generally determined by reference to an active trading market, using quoted closing
or 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
loan and debt obligations, discussed below)
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.
The company evaluates the carrying value of investments for impairment on a quarterly basis. In
its impairment analysis, the company takes into consideration numerous criteria, including the
duration and extent of any decline in fair value, the intent and ability of the company to hold the
security for a period of time sufficient for a recovery in value, recent events specific to the
issuer or industry and external credit ratings and recent downgrades with respect to issuers of
debt securities held. If the decline in value is determined to be other than temporary, the
carrying value of the security is written down to fair value through the income statement in
accordance with FASB Statement No. 115.
The company provides investment management services to a number of collateralized loan and debt
obligation entities (CLO/CDOs). These entities are investment vehicles created for the sole
purpose of issuing collateralized loan and debt instruments that offer investors the opportunity
for returns that vary with the risk level of their investment. The notes issued by the CLO/CDOs are
backed by diversified portfolios consisting primarily of loans or structured debt. The company
earns investment management fees, including subordinated management fees in some cases, for
managing the collateral for the CLO/CDO entities, as well as incentive fees that are contingent on
certain performance conditions. The company has invested in certain of the entities, generally
taking a relatively small portion of the unrated, junior subordinated position. At December 31, 2007, the
company held $39.0 million of investment in these CLO/CDOs, which represents its maximum risk of
loss. The companys investments in collateralized loan or debt
entities are generally subordinated to other
interests in the entities and entitles the investors to receive the residual cash flows, if any, from
the entities. Investors in CLO/CDOs have no recourse against the company for any losses sustained in
the CLO/CDO structure.
Management has concluded that the company is not the primary beneficiary of any of the CLO/CDO
entities and it has recorded its investments at fair value using discounted cash flow analyses. The
excess of actual and anticipated future cash flows over the initial investment at the date of
purchase is recognized as interest income over the life of the investment using the effective yield
method in accordance with Emerging Issues Task Force (EITF) 99-20, Recognition of Interest Income
and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets.
The company reviews cash flow estimates throughout the life of each CLO/CDO entity. Cash flow
estimates are based on the underlying pool of securities and take into account the overall credit
quality of the issuers, the forecasted default rate of the securities and the companys past
experience in managing similar securities. If the updated estimate of future cash flows (taking
into account both timing and amounts) is less than the last revised estimate, an impairment loss is
recognized based on the excess of the carrying amount of the investment over its fair value and is
recorded through the income statement, if the decline in value is determined to be other than
temporary. Fair value is determined using current information, notably market yields and projected
cash flows based on forecasted default and recovery rates that a market participant would use in
determining the current fair value of the equity interest.
Assets Held for Policyholders and Policyholder Payables
One of the companys subsidiaries is an insurance-type entity, established to facilitate retirement
savings plans. Investments and policyholder payables held by this business meet the definition of
financial instruments and are carried in the Consolidated Balance Sheets as separate account assets
and liabilities at fair value in accordance with the American
Institute of Certified Public Accountants
Statement of Position No. 03-1, Accounting and Reporting by Insurance Enterprises for Certain
Nontraditional Long-Duration Contracts and for Separate Accounts. Changes in fair value are
recorded and offset to zero in the Consolidated Statements of Income
in other operating revenues.
63
The liability to
the policyholders is linked to the value of the investments. The investments are legally
segregated and are generally not subject to claims that arise from any of the companys other
businesses. Management fees earned from policyholder investments are accounted for as described in
the companys revenue recognition accounting policy.
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).
Property, Equipment and Depreciation
Property and equipment includes owned property, leasehold improvements, computer hardware/software
and other equipment and is stated at cost less accumulated depreciation or amortization and any
previously recorded impairment in value. Expenditures for major additions and improvements are
capitalized; minor replacements, maintenance and repairs are charged to expense as incurred.
Depreciation is provided on property and equipment at rates calculated to write off the cost, less
estimated residual value, of each asset on a straight-line basis 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; and computers and other various equipment between three and seven years.
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. The company
re-evaluates the useful life determination for property and equipment each reporting period to
determine whether events and circumstances warrant a revision to the remaining useful life. On
sale or retirement, the asset cost and related accumulated depreciation are removed from the
financial statements and any related gain or loss is reflected in income.
The carrying amounts of property and equipment are reviewed for impairment under FASB Statement No.
144 Accounting for the Impairment or Disposal of Long-Lived Assets, 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,
recoverability is tested by comparing the carrying amount of the asset to the net undiscounted cash
flows expected to be generated from the asset. If those net undiscounted cash flows do not exceed
the carrying amount (i.e. the asset is not recoverable), the next step would be performed, which is
to determine the fair value of the asset and record an impairment charge, if any.
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, which reflects the pattern in which the
economic benefits are realized. 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. The company
reevaluates the useful life determination for intangible assets each reporting period to determine
whether events and circumstances warrant a revision to the remaining useful life or an indication
of impairment. Definite-lived intangibles are reviewed for impairment whenever events or changes
in circumstances indicate that their carrying amount may not be recoverable (i.e. carrying amount
exceeds the sum of the fair value of the intangible). Intangible assets not subject to
amortization are tested for impairment annually or more frequently if events or changes in
circumstances indicate that the asset might be impaired. The impairment test consists of a
comparison of the fair value of an intangible asset with its carrying amount. If the carrying
amount of the intangible asset exceeds its fair value, an impairment loss is recognized in an
amount equal to that excess. Fair value is determined using a discounted cash flow analysis.
64
Goodwill
Goodwill represents the excess of 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 on September 30 and between annual tests when events and
circumstances indicate that an impairment may have occurred. The impairment test for goodwill, as
outlined in FASB Statement No. 142, Goodwill and Other Intangible Assets, uses a two-step
approach, which is performed at the reporting unit level. The company has determined that it has
one reporting unit for goodwill impairment testing purposes, the consolidated Invesco Ltd. single
operating segment level, which is the level at which internal reporting is generated that reflects
the way that the company manages its operations and to which goodwill is naturally associated. If
the carrying amount of goodwill at the reporting unit exceeds its implied fair value, then a charge
for the excess would be recorded as an impairment loss. The principal method of determining fair
value of the reporting unit is an income approach where future cash flows are discounted to arrive
at a single present value amount. The discount rate used is derived based on the time value of
money and the risk profile of the stream of future cash flows. Recent results and projections
based on expectations regarding revenue, expenses, capital expenditure and acquisition earn out
payments produce a present value for the reporting unit. While the company believes all
assumptions utilized in our assessment are reasonable and appropriate, changes in these estimates
could produce different fair value amounts and therefore different goodwill impairment
assessments. The most sensitive of these assumptions are the estimated cash flows and the use of
our weighted average cost of capital as the discount rate to determine present value.
The company also utilizes a market approach to provide a secondary fair value of the reporting unit
by using comparable company and transaction multiples to estimate values for our single reporting
unit. Discretion and judgment is required in determining whether the transaction data available
represents information for companies of comparable nature, scope and size.
Debt and Financing Costs
Debt issuance costs are recognized as a deferred asset under APB 21, Interest on Receivables and
Payables. After initial recognition, debt issuance costs are measured at amortized cost. Finance
charges and debt issuance costs are amortized over the term of the debt using the effective
interest method. Interest charges are recognized in the Consolidated
Statement of Income in the period in which
they are incurred.
Treasury Shares
Treasury shares are valued at cost and are included as deductions from equity.
Revenue Recognition
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, value
added tax and other sales-related taxes. Revenue is recognized when there is persuasive evidence of
an arrangement, delivery has occurred or services have been provided, collectibility is reasonably
assured 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 in accordance with Method 1 of EITF Topic No. D-96, Accounting for
Management Fees Based on a Formula, which indicates that performance fees shall be recorded and
recognized at the end of the performance measurement period instead of on an interim basis
throughout the measurement period. 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. For the year ended December 31, 2007, management fees from affiliated fund products were
$2,481.6 million (2006: $1,996.4 million; 2005: $1,658.5 million). 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 affiliated 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 certain affiliated funds to cover the expense of transferring shares of a
mutual fund or units of a unit trust into the investors name. Other fees generally include trading
fees derived from generally non-recurring security or investment transactions.
Distribution, service and advisory fees that are passed through to external parties are presented
separately as expenses in accordance with EITF 99-19, Reporting Revenue Gross as a Principal
versus Net as an Agent.
Interest income is accrued on interest-bearing assets.
Dividend income from investments is recognized on the ex-dividend date.
65
Share-Based Compensation
The company issues equity-settled stock-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 the stochastic (a lattice model) or Black Scholes
valuation models. The expected life of stock-based compensation awards used in the lattice model is
adjusted, based on managements best estimate, for the effects of non-transferability, exercise
restrictions and behavioral considerations.
Prior to January 1, 2006, the company accounted for its stock-based employee compensation plans
under the intrinsic value method as described in APB 25 and related interpretations. Generally, no
compensation expense was recognized for stock option grants if the exercise price was at or above
the quoted market price of the underlying stock on the date of grant.
Effective January 1, 2006, the company adopted FASB Statement No. 123(R), using the modified
prospective transition method. Under that transition method, compensation cost recognized in 2006
includes: (a) compensation cost for all stock-based compensation granted prior to, but not yet
vested, as of January 1, 2006, based on the grant-date fair value estimated in accordance with the
original provisions of FASB Statement No. 123, and (b) compensation cost for all stock-based
compensation granted subsequent to January 1, 2006, based on the grant-date fair value estimated in
accordance with the provisions of FASB Statement No. 123(R).
Pensions
For defined contribution plans, contributions payable related to the accounting period are charged
to the income statement. For defined benefit plans, the cost of providing benefits is separately
determined for each plan using the projected unit credit method, based on actuarial valuations
performed 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. Prior
service costs are recognized over the remaining service periods of active employees.
The company adopted FASB Statement No. 158, Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans an Amendment of FASB Statement Nos. 87, 88, 106 and 132(R), on
December 31, 2006. FASB Statement No. 158 requires that the net funded status of defined benefit
plans be recognized on the balance sheet and that unrecognized net actuarial gains and losses and
prior service costs, which have previously been recorded as part of the postretirement asset or
liability, be recorded directly to other comprehensive income. Upon adoption, an increase of $34.5
million, $23.5 million net of tax, was recorded in the pension liability included within other
liabilities with a corresponding reduction in accumulated other comprehensive income. The
companys annual measurement date is December 31.
Advertising Costs
The company expenses the cost of all advertising and promotional activities as incurred. The
company incurred advertising costs of $28.6 million for the year ended December 31, 2007 (2006:
$28.5 million; 2005: $31.7 million). These amounts are included in marketing expenses in the
Consolidated Statements of Income.
Leases
Rentals under operating leases, where the lessor retains substantially all the risks and benefits
of ownership of the asset, are charged evenly to expense over the lease term. Benefits received and
receivable as an incentive to enter an operating lease are also spread evenly over the lease term.
The Company accounts for lease termination costs in accordance with FASB Statement No. 146,
Accounting for Costs Associated with Exit or Disposal Activities, which requires that (1) a
liability for costs to terminate a contract before the end of its term shall be recognized at the
time termination occurs and measured at fair value and (2) a liability for costs that will continue
to be incurred under a contract for its remaining term without economic benefit to the company be
recognized and measured at its fair value when the company ceases to use the right conveyed by the
contract, net of estimated sublease rentals that could reasonably be obtained even if the company
does not anticipate entering into any subleasing arrangements.
66
Taxation
Income taxes are provided for in accordance with FASB Statement No. 109, Accounting for Income
Taxes. Deferred tax assets and liabilities are recorded for temporary differences between the tax
basis of assets and liabilities and the reported amounts in the Consolidated Financial Statements,
using the statutory tax rates in effect for the year in which the differences are expected to
reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in the results of
operations in the period that includes the enactment date. A valuation allowance is recorded to
reduce the carrying amounts of deferred tax assets to the amount that is more likely than not to be
realized.
As a multinational corporation, the company operates in various locations outside of Bermuda and
generates substantially all of its earnings from its subsidiaries. Deferred tax liabilities are
recognized for taxes that would be payable on the unremitted earnings of the companys
subsidiaries, consolidated investment products, and joint ventures, except where it is our
intention to continue to indefinitely reinvest the undistributed earnings. Our Canadian and U.S.
subsidiaries continue to be directly owned by Invesco Holding Company Limited (formerly INVESCO PLC, our predecessor company), which is
directly owned by Invesco, Ltd. Our Canadian unremitted earnings, for which we are indefinitely
reinvested, are estimated to be $880 million at December 31, 2007 compared with $600 million at
December 31, 2006. If distributed as a dividend, Canadian withholding tax of 5.0% would be due.
Deferred tax liabilities in the amount of $14.1 million (2006: $7.0 million) for additional U.K.
tax have been recognized for unremitted earnings of certain subsidiaries that have regularly
remitted earnings 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 the company has U.K. tax credits available. There are no additional taxes on
dividends from the U.K. to Bermuda.
The
company adopted FASB Interpretation No. 48 L.C., Accounting for Uncertainty in Income Taxes An
Interpretation of FASB Statement No. 109, on January 1, 2007. Accordingly, the company reports a
liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to
be taken in a tax return. The company recognizes interest and penalties, if any, related to
unrecognized tax benefits in income tax expense.
Earnings Per Share
Basic earnings per share is calculated by dividing net income available to shareholders by the
weighted average number of shares outstanding during the periods, excluding treasury shares.
Diluted earnings per share is computed using the treasury stock method outlined in FASB Statement
No. 128, Earnings per Share, which requires computing share equivalents and dividing net income
by the total weighted average number of shares and share equivalents outstanding during the period.
Comprehensive Income
Under FASB Statement No. 130, Reporting Comprehensive Income, the companys other comprehensive
income/(loss) consists of changes in unrealized gains and losses on investment securities
classified as available-for-sale, reclassification adjustments for realized gains/(losses) on those
investment securities classified as available-for-sale, foreign currency translation adjustments
and pension liability adjustments. Such amounts are recorded net of applicable taxes.
Dividends to Shareholders
Dividends to shareholders are recognized on the declaration date.
Translation of Foreign Currencies
The company accounts for the impact of foreign currency under the guidance provided in FASB
Statement No. 52, Foreign Currency Translation. 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 remeasured into the functional
currencies of the companys subsidiaries at the rates prevailing at the balance sheet date. Gains
and losses arising on revaluation 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 accumulated other
comprehensive income in equity until the disposal of the net investment, at which time they are
recognized in the income statement. At December 31, 2007 and 2006, the company did not have any
hedges against net investments in foreign entities.
The companys reporting 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 prevailing 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 the net assets of foreign operations are taken directly to
67
accumulated other comprehensive income in 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 prevailing at the balance sheet date.
The company does not utilize derivative financial instruments to provide a hedge against interest
rate or foreign exchange exposures.
Recent Accounting Pronouncements
FASB Statement No. 157, Fair Value Measurements and FASB Statement No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities including an amendment of FASB Statement
No. 115 are effective for the company beginning January 1, 2008. FASB Statement No. 157
establishes a framework for measuring fair value, and FASB Statement No. 159 permits companies the
choice of measuring certain financial instruments and other items at fair value. The company
expects that the adoption of these two standards not will have a material impact on its
consolidated financial statements.
In December 2007, the FASB issued FASB Statement No. 141 (revised 2007), Business Combinations,
and FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements, an
amendment of ARB No. 51. Under FASB Statement No. 141(R), the acquirer must recognize, with
certain exceptions, 100% of the fair values of assets acquired, liabilities assumed, and
noncontrolling interests in acquisitions of less than 100% controlling interest when the
acquisition constitutes a change in control of the acquired entity. Additionally, when an acquirer
obtains partial ownership in an acquiree, an acquirer recognizes and consolidates assets acquired,
liabilities assumed and any noncontrolling interests at 100% of their fair values at that date
regardless of the percentage ownership in the acquiree. As goodwill is calculated as a residual,
all goodwill of the acquired business, not just the acquirers share, is recognized under this
full-goodwill approach. Contingent consideration obligations that are elements of consideration
transferred are recognized as of the acquisition date as part of the fair value transferred in
exchange for the acquired business. Acquisition-related costs incurred in connection with a
business combination shall be expensed. FASB Statement No. 160 establishes new accounting and
reporting standards for noncontrolling interests (formerly known as minority interests) in a
subsidiary and for the deconsolidation of a subsidiary.
FASB Statement No. 141(R) and FASB Statement No. 160 will be effective for the company beginning
January 1, 2009. FASB Statement No. 141(R) will be applied prospectively, while FASB Statement No.
160 requires retroactive adoption of the presentation and disclosure requirements for existing
minority interests but prospective adoption of all of its other requirements. The company is
currently assessing the impact of these two new standards.
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). The initial consideration for the transaction
was $107.5 million, which included transaction costs of $6.3 million. The initial purchase price
did not include contingent consideration, or earn-outs, of up to $630.0 million, payable in two
components, as detailed below:
|
|
|
$130.0 million payable when aggregate management fees total $50.0 million or more in any
consecutive 12-month period in Year 1 to Year 4 (referred to as the second contingent
payment);
|
|
|
|
|
A payment (referred to as the third contingent payment) calculated at the end of Year 5
based on compound annual growth in management fees from an assumed base of $17.5 million at
closing. The Year 5 management fees are reduced by $50.0 million if the second contingent
payment is earned. For a compound annual growth rate (CAGR) in Year 5 between 15% and 75%,
$5.0 million for each CAGR point above 15%, for a maximum payment of $300.0 million for a
75% CAGR. For a CAGR in Year 5 between 75% and 100%, $300.0 million, plus an additional
$8.0 million for each CAGR point above 75%, for a maximum total payment of $500.0 million
for a 100% CAGR.
|
At the companys option, up to 35% of the contingent payments are payable in equity. The
additional purchase price will not be recognized until the contingency is resolved. Any such
payments would result in an increase to goodwill.
At the date of the acquisition, PowerShares managed assets of approximately $6.3 billion, offering
37 exchange-traded funds to investors. PowerShares offered 105 exchange-traded funds, with assets
under management of $14.5 billion as of December 31, 2007 (2006: $8.5 billion). Tax deductible
goodwill and management contract intangible assets of $107.1 million were recorded in relation to
this acquisition. The company evaluated current industry practice and estimated a value of ten
times earnings before interest, taxes, depreciation and amortization of the acquired entity to
arrive at the value of $99.7 million for management contract intangible assets.
68
The management
contract intangibles were assigned an indefinite useful life and are therefore not subject to
amortization. The acquired management contracts are renewable at minimal cost to the company; it
is the companys intention to renew these contracts indefinitely; the increased demand in the asset
management industry for exchange-traded fund products and the independence of these contracts from
other assets acquired contributed to the companys determination of an indefinite useful life. The
excess additional purchase price of $7.4 million was allocated to goodwill.
The fair value of net assets acquired was determined as follows:
|
|
|
|
|
$ in millions
|
|
|
|
|
Property and equipment
|
|
|
2.6
|
|
Receivables
|
|
|
3.4
|
|
Cash and cash equivalents
|
|
|
2.1
|
|
Payables
|
|
|
(7.7
|
)
|
|
|
|
|
|
Net assets
|
|
|
0.4
|
|
Goodwill
|
|
|
7.4
|
|
Management contract intangibles
|
|
|
99.7
|
|
|
|
|
|
|
Fair value of net assets acquired
|
|
|
107.5
|
|
|
|
|
|
|
Satisfied by:
|
|
|
|
|
Cash paid to seller at closing
|
|
|
101.2
|
|
Transaction costs
|
|
|
6.3
|
|
|
|
|
|
|
Total purchase price
|
|
|
107.5
|
|
|
|
|
|
|
The results of operations of PowerShares were included in the companys Consolidated Statements of
Income from the date of acquisition. From September 18, 2006 through the end of 2006, PowerShares
net income was $0.9 million.
At December 31, 2007, the second contingent earn-out payment of $129.6 million was earned and
accrued, to be paid in 2008, and reflected as an increase to goodwill. The amount was adjusted
down by $0.4 million following a recalculation of the initial consideration paid. As detailed
above, this contingent payment became payable when aggregate earn-out management fees as defined in
the agreement reached $50.0 million for the preceding twelve months.
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. The initial consideration
for the transaction was $134.1 million, which included $30.0 million of deferred consideration and
transaction costs of $4.1 million. Such deferred consideration was classified as a current
liability at the date of acquisition, as it represented a contractually guaranteed payment.
Additional contingent consideration, or earn-outs, of up to $245.0 million is payable over the
five years following the date of the acquisition depending on the achievement of annual fund launch
targets over the five years following the completion of the acquisition. The additional purchase
price will not be recognized until the contingency is resolved and the additional consideration is
issued or issuable. Any such payments would result in an increase to goodwill.
At the time of the acquisition, WL Ross managed assets of approximately $2.6 billion. At December
31, 2007, WL Rosss assets under management were $6.8 billion (2006: $2.8 billion). Due to the
terms of an employment agreement, a prepaid compensation asset of $100.0 million, amortizable over
five years, was recognized as a result of the acquisition and is included within prepaid assets on
the balance sheet at December 31, 2006. Tax deductible goodwill, management contracts and other
intangible assets of $27.4 million have been recorded in
relation to this acquisition. Identified
intangibles are being amortized over a weighted average useful life of five years.
69
The fair value of net assets acquired was determined as follows:
|
|
|
|
|
$ in 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
|
|
|
13.7
|
|
Management contract intangibles
|
|
|
13.7
|
|
Prepaid compensation
|
|
|
100.0
|
|
|
|
|
|
|
Fair value of net assets acquired
|
|
|
134.1
|
|
|
|
|
|
|
|
|
|
|
|
Satisfied by:
|
|
|
|
|
Cash paid to seller at closing
|
|
|
100.0
|
|
Deferred consideration
|
|
|
30.0
|
|
Transaction costs
|
|
|
4.1
|
|
|
|
|
|
|
Total purchase price
|
|
|
134.1
|
|
|
|
|
|
|
The book value of net assets acquired was approximately equal to the fair value of these assets and
liabilities. The results of operations of WL Ross are included in the companys Consolidated
Statements of Income from the date of acquisition. From October 3, 2006 through the end of 2006, WL
Rosss net income was $1.3 million.
During the fourth quarter of 2007, payments of $44.8 million were made related to the WL Ross
acquisition, of which $30.0 million related to deferred consideration. Goodwill was increased by
$18.9 million during 2007. Of this $18.9 million, $14.8 million related to the earn-out payment
and $4.1 million related to other goodwill adjustments.
The following unaudited pro forma results of operations for the years ended December 31, 2006 and
2005 assume that the acquisitions of PowerShares and WL Ross had taken place on January 1, 2005,
the earliest period presented herein. These unaudited pro forma results are not necessarily
indicative of the actual results of operations that would have been achieved nor are they
necessarily indicative of future results of operations.
|
|
|
|
|
|
|
|
|
$ in millions (except per share amounts)
|
|
2006
|
|
2005
|
Operating revenues
|
|
|
3,294.4
|
|
|
|
2,904.7
|
|
Net income
|
|
|
491.8
|
|
|
|
226.6
|
|
Basic earnings per share
|
|
|
1.24
|
|
|
|
0.57
|
|
Diluted earnings per share
|
|
|
1.21
|
|
|
|
0.56
|
|
Disposition of AMVESCAP Retirement Business
On July 15, 2005, the company completed the sale of a portion 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 outstanding 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:
|
|
|
|
|
$ in 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
|
|
Gain on sale recognized in 2007
|
|
|
1.6
|
|
|
|
|
Cash consideration received (2007: $1.6 million, 2006: $1.7 million, 2005: $56.1 million)
|
|
|
59.4
|
|
|
|
|
Other
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 other gains and losses, net in the
2006 Consolidated Statements of Income is a gain of $0.2 million related to this transaction.
70
3. INVESTMENTS
Current Investments
|
|
|
|
|
|
|
|
|
$ in millions
|
|
2007
|
|
2006
|
Available-for-sale investments:
|
|
|
|
|
|
|
|
|
Seed money in affiliated funds
|
|
|
60.9
|
|
|
|
97.1
|
|
Foreign time deposits
|
|
|
22.7
|
|
|
|
11.1
|
|
Other
|
|
|
1.0
|
|
|
|
5.9
|
|
Trading investments:
|
|
|
|
|
|
|
|
|
Investments related to deferred compensation plans*
|
|
|
58.8
|
|
|
|
64.8
|
|
Other
|
|
|
27.8
|
|
|
|
1.9
|
|
Held-to-maturity investments:
|
|
|
|
|
|
|
|
|
U.S. Treasury and government agency securities
|
|
|
6.0
|
|
|
|
7.0
|
|
|
|
|
Total current investments
|
|
|
177.2
|
|
|
|
187.8
|
|
|
|
|
Non-current Investments
|
|
|
|
|
|
|
|
|
$ in millions
|
|
2007
|
|
2006
|
Available-for-sale investments:
|
|
|
|
|
|
|
|
|
Collateralized loan and debt obligations
|
|
|
39.0
|
|
|
|
48.9
|
|
Other
|
|
|
8.6
|
|
|
|
8.6
|
|
Held-to-maturity investments:
|
|
|
|
|
|
|
|
|
U.S. Treasury and government agency securities
|
|
|
|
|
|
|
4.0
|
|
Equity method investments
|
|
|
74.7
|
|
|
|
18.4
|
|
|
|
|
Total non-current investments
|
|
|
122.3
|
|
|
|
79.9
|
|
|
|
|
|
|
|
*
|
|
Investments related to deferred compensation plans include investments in affiliated mutual fund
product that are held to economically hedge current and non-current deferred compensation
liabilities.
|
Investments classified as available-for-sale and trading are recorded at fair value. Investments
classified as held-to-maturity are recorded at amortized cost.
The company provides investment management services to a number of collateralized loan and debt
obligation (CLO/CDO) entities that meet the definition of variable interest entities (VIEs) as
defined in FIN No. 46 (revised December 2003), Consolidation of Variable Interest Entities. The
company has invested in certain of the entities, generally taking a
relatively small portion of the
unrated, junior subordinated position. At December 31, 2007, the company held $39.0 million of
investment in these CLO/CDOs, which represents its maximum risk of
loss. Our investments in
collateralized loan or debt entities are generally subordinated to
other interests in the entities and
entitles the investors to receive the residual cash flows, if any,
from the entities. Investors in
CLO/CDOs have no recourse against the company for any losses sustained in the CLO/CDO structure.
Management has concluded that the company is not the primary beneficiary of any of the CLO/CDO
entities and it has recorded its investments at fair value using discounted cash flow analyses. An
increase or decrease in the discount rate of 1.0% would change the valuation of the CLO/CDOs by
$0.9 million (2006: $1.2 million). Dividend income for these investments is recorded in other
income on the Consolidated Statements of Income.
71
Realized gains and losses recognized in the income statement during the year from investments
classified as available-for-sale are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
|
Proceeds
|
|
Gross
|
|
Gross
|
|
Proceeds
|
|
Gross
|
|
Gross
|
|
Proceeds
|
|
Gross
|
|
Gross
|
|
|
from
|
|
Realized
|
|
Realized
|
|
from
|
|
Realized
|
|
Realized
|
|
from
|
|
Realized
|
|
Realized
|
$ in millions
|
|
sales
|
|
Gains
|
|
Losses
|
|
sales
|
|
Gains
|
|
Losses
|
|
sales
|
|
Gains
|
|
Losses
|
|
|
|
|
|
|
|
Current
available-for-sale
investments
|
|
|
102.8
|
|
|
|
20.6
|
|
|
|
|
|
|
|
239.4
|
|
|
|
9.7
|
|
|
|
(0.4
|
)
|
|
|
418.5
|
|
|
|
3.0
|
|
|
|
(1.9
|
)
|
Noncurrent
available-for-sale
investments
|
|
|
9.0
|
|
|
|
2.6
|
|
|
|
(5.4
|
)
|
|
|
14.9
|
|
|
|
8.4
|
|
|
|
(1.3
|
)
|
|
|
8.5
|
|
|
|
2.6
|
|
|
|
(0.1
|
)
|
Upon the sale of available-for-sale securities, realized gains of $17.8 million, $16.4 million and
$3.6 million were transferred from accumulated other comprehensive income into the Consolidated
Statements of Income during 2007, 2006, and 2005, respectively. The portion of trading gains and
losses for the period that relates to trading securities still held at December 31, 2007 and
December 31, 2006 were $4.7 million and $4.4 million, respectively.
Gross unrealized holding gains and losses recognized in other accumulated comprehensive income from
available-for-sale investments are presented in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
Gross
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Gross
|
|
Gross
|
|
|
|
|
|
|
|
|
Unrealized
|
|
Unrealized
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
Unrealized
|
|
|
|
|
|
|
|
|
Holding
|
|
Holding
|
|
Fair
|
|
|
|
|
|
Holding
|
|
Holding
|
|
Fair
|
$ in millions
|
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seed money
in affiliated funds
|
|
|
58.6
|
|
|
|
3.0
|
|
|
|
(0.7
|
)
|
|
|
60.9
|
|
|
|
88.2
|
|
|
|
9.4
|
|
|
|
(0.5
|
)
|
|
|
97.1
|
|
Foreign time deposits
|
|
|
22.7
|
|
|
|
|
|
|
|
|
|
|
|
22.7
|
|
|
|
11.1
|
|
|
|
|
|
|
|
|
|
|
|
11.1
|
|
Other
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
1.0
|
|
|
|
1.1
|
|
|
|
4.8
|
|
|
|
|
|
|
|
5.9
|
|
|
|
|
|
|
Current
available-for-sale
investments
|
|
|
82.3
|
|
|
|
3.0
|
|
|
|
(0.7
|
)
|
|
|
84.6
|
|
|
|
100.4
|
|
|
|
14.2
|
|
|
|
(0.5
|
)
|
|
|
114.1
|
|
Noncurrent:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized debt obligations
|
|
|
41.4
|
|
|
|
0.6
|
|
|
|
(3.0
|
)
|
|
|
39.0
|
|
|
|
45.9
|
|
|
|
4.0
|
|
|
|
(1.0
|
)
|
|
|
48.9
|
|
Other
|
|
|
6.9
|
|
|
|
1.7
|
|
|
|
|
|
|
|
8.6
|
|
|
|
6.9
|
|
|
|
1.7
|
|
|
|
|
|
|
|
8.6
|
|
|
|
|
|
|
Noncurrent
available-for-sale
investments:
|
|
|
48.3
|
|
|
|
2.3
|
|
|
|
(3.0
|
)
|
|
|
47.6
|
|
|
|
52.8
|
|
|
|
5.7
|
|
|
|
(1.0
|
)
|
|
|
57.5
|
|
|
|
|
|
|
|
|
|
130.6
|
|
|
|
5.3
|
|
|
|
(3.7
|
)
|
|
|
132.2
|
|
|
|
153.2
|
|
|
|
19.9
|
|
|
|
(1.5
|
)
|
|
|
171.6
|
|
|
|
|
|
|
The net carrying amount, gross unrecognized gains, gross unrecognized losses and estimated fair
value of held to maturity securities is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
|
Net
|
|
Gross
|
|
Gross
|
|
|
|
Net
|
|
Gross
|
|
Gross
|
|
|
|
|
carrying
|
|
unrecognized
|
|
unrecognized
|
|
Fair
|
|
carrying
|
|
unrecognized
|
|
unrecognized
|
|
Fair
|
$ in millions
|
|
amount
|
|
gains
|
|
losses
|
|
Value
|
|
amount
|
|
gains
|
|
losses
|
|
Value
|
|
|
|
|
|
Treasury and
governmental agency
securities
|
|
|
6.0
|
|
|
|
|
|
|
|
|
|
|
|
6.0
|
|
|
|
11.0
|
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
10.9
|
|
72
Available-for-sale
and held to maturity debt securities as of December 31, 2007, by maturity, are
set out below:
|
|
|
|
|
|
|
|
|
$ in millions
|
|
Available-for-sale
(Fair Value)
|
|
Held to maturity
(Net Carrying Amount)
|
|
|
|
Less than one year
|
|
|
22.7
|
|
|
|
6.0
|
|
One to five years
|
|
|
27.3
|
|
|
|
|
|
Five to ten years
|
|
|
11.7
|
|
|
|
|
|
Greater than ten years
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale
and held to maturity debt securities
|
|
|
61.7
|
|
|
|
6.0
|
|
|
|
|
The following table provides the breakdown of available-for-sale investments with unrealized losses
at December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months
|
|
12 months or greater
|
|
Total
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
$ in millions
|
|
Fair Value
|
|
Losses
|
|
Fair Value
|
|
Losses
|
|
Fair Value
|
|
Losses
|
|
|
|
|
|
|
|
Seed money in affiliated funds
|
|
|
8.7
|
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
(0.2
|
)
|
|
|
8.7
|
|
|
|
(0.7
|
)
|
Collateralized debt obligations
|
|
|
|
|
|
|
(2.0
|
)
|
|
|
23.7
|
|
|
|
(1.0
|
)
|
|
|
23.7
|
|
|
|
(3.0
|
)
|
|
|
|
|
|
|
|
|
|
|
8.7
|
|
|
|
(2.5
|
)
|
|
|
23.7
|
|
|
|
(1.2
|
)
|
|
|
32.4
|
|
|
|
(3.7
|
)
|
|
|
|
|
|
|
|
The following table provides the breakdown of available-for-sale investments with unrealized losses
at December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months
|
|
12 months or greater
|
|
Total
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
$ in millions
|
|
Fair Value
|
|
Losses
|
|
Fair Value
|
|
Losses
|
|
Fair Value
|
|
Losses
|
|
|
|
|
|
|
|
Seed money in affiliated funds
|
|
|
33.1
|
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
|
|
|
|
33.1
|
|
|
|
(0.5
|
)
|
Collateralized debt obligations
|
|
|
|
|
|
|
|
|
|
|
7.8
|
|
|
|
(1.0
|
)
|
|
|
7.8
|
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
|
|
|
|
33.1
|
|
|
|
(0.5
|
)
|
|
|
7.8
|
|
|
|
(1.0
|
)
|
|
|
40.9
|
|
|
|
(1.5
|
)
|
|
|
|
|
|
|
|
The company has reviewed investment securities for other-than-temporary impairment in accordance
with its accounting policy outlined in Note 1. The gross unrealized losses in collateralized debt
obligations during 2007 and 2006 were primarily caused by discount rate changes. The gross
unrealized losses in seed money during 2007 and 2006 were primarily caused by declines in the
market value of the underlying funds. The company does not consider any material portion of its
securities to be other-than-temporarily impaired because the securities are expected to recover
their value over time and the company has the intent and ability to hold the securities until this
recovery occurs.
The company owns 100% of the voting control of its subsidiary entities, directly or indirectly,
with the exception of the following entities, which are consolidated with resulting minority
interests:
|
|
|
|
|
|
|
|
|
|
|
Country of
|
|
|
Name of Company
|
|
Incorporation
|
|
% Voting Interest Owned
|
|
|
|
|
|
|
INVESCO Real Estate GmbH
|
|
Germany
|
|
|
75.1
|
%
|
INDIA Asset Recovery Management Limited
|
|
India
|
|
|
80.1
|
%
|
Following are the companys investments in joint ventures and affiliates, which are accounted for
using the equity method and are recorded as long-term investments on the Consolidated Balance
Sheets:
|
|
|
|
|
|
|
|
|
|
|
Country of
|
|
|
Name of Company
|
|
Incorporation
|
|
% Voting Interest 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
|
%
|
|
Equity method investments also include the companys investments in various of its sponsored
private equity, real estate and other investment entities. The companys investment is generally
less than 5% of the capital of these entities. These entities include variable interest entities
for which the company has determined that it is not the primary beneficiary and other investment
products structured as partnerships for which the company is the general partner and the other
limited partners lack either substantive kick-out or participation rights. See Note 18 for
additional information. Equity in earnings of unconsolidated affiliates for the year ended
December 31, 2007 was $48.1 million (2006:
$4.3 million; 2005: $0.7 million).
73
4. OTHER CURRENT ASSETS
Components of other current assets are as follows:
|
|
|
|
|
|
|
|
|
$ in millions
|
|
2007
|
|
2006
|
Deferred tax assets, net
|
|
|
32.5
|
|
|
|
25.7
|
|
Property held for sale
|
|
|
4.7
|
|
|
|
11.9
|
|
Deferred financing costs
|
|
|
6.4
|
|
|
|
6.3
|
|
Other accounts receivable
|
|
|
159.7
|
|
|
|
194.7
|
|
|
|
|
|
|
|
|
203.3
|
|
|
|
238.6
|
|
|
|
|
|
During 2006, property held for sale of $15.8 million was transferred from land and buildings to
other current assets and was written down to its estimated recoverable amount, resulting in a loss
of $4.6 million.
5. ASSETS HELD FOR POLICYHOLDERS AND POLICYHOLDER PAYABLES
One of the
companys subsidiaries, INVESCO Pensions Limited, is an
insurance-type company which was
established to facilitate retirement savings plans in the U.K. The entity holds assets on its
balance sheet that are legally segregated and are generally not subject to claims that arise from
any other Invesco business and which are managed for its clients with an offsetting liability. Both
the asset and the liability are reported at fair value. At December 31, 2007, the assets held for
policyholders and the linked policyholder payables were $1,898.0 million (2006: $1,574.9 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 policyholder payables is linked to the value of the
assets held for policyholders.
6. PROPERTY AND EQUIPMENT
Changes in property and equipment balances are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology and
|
|
|
|
|
|
Land and
|
|
|
$ in millions
|
|
Other Equipment
|
|
Software
|
|
Buildings *
|
|
Total
|
Cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2007
|
|
|
484.0
|
|
|
|
228.4
|
|
|
|
85.7
|
|
|
|
798.1
|
|
Foreign exchange
|
|
|
12.6
|
|
|
|
3.6
|
|
|
|
0.6
|
|
|
|
16.8
|
|
Additions
|
|
|
16.3
|
|
|
|
18.9
|
|
|
|
1.5
|
|
|
|
36.7
|
|
Transfer to investments
|
|
|
|
|
|
|
|
|
|
|
(4.7
|
)
|
|
|
(4.7
|
)
|
Re-classifications
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
1.0
|
|
|
|
|
|
Disposals
|
|
|
(46.5
|
)
|
|
|
(13.0
|
)
|
|
|
|
|
|
|
(59.5
|
)
|
|
|
|
|
December 31, 2007
|
|
|
465.4
|
|
|
|
237.9
|
|
|
|
84.1
|
|
|
|
787.4
|
|
|
|
|
|
|
Accumulated depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2007
|
|
|
(399.3
|
)
|
|
|
(194.9
|
)
|
|
|
(5.2
|
)
|
|
|
(599.4
|
)
|
Foreign exchange
|
|
|
(11.0
|
)
|
|
|
(3.2
|
)
|
|
|
|
|
|
|
(14.2
|
)
|
Depreciation expense
|
|
|
(33.0
|
)
|
|
|
(18.0
|
)
|
|
|
(1.1
|
)
|
|
|
(52.1
|
)
|
Re-classifications
|
|
|
0.4
|
|
|
|
|
|
|
|
(0.4
|
)
|
|
|
|
|
Disposals
|
|
|
45.5
|
|
|
|
12.8
|
|
|
|
|
|
|
|
58.3
|
|
|
|
|
|
December 31, 2007
|
|
|
(397.4
|
)
|
|
|
(203.3
|
)
|
|
|
(6.7
|
)
|
|
|
(607.4
|
)
|
|
|
|
|
Net book value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
|
68.0
|
|
|
|
34.6
|
|
|
|
77.4
|
|
|
|
180.0
|
|
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology and
|
|
|
|
|
|
Land and
|
|
|
$ in millions
|
|
Other Equipment
|
|
Software
|
|
Buildings*
|
|
Total
|
Cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2006
|
|
|
492.9
|
|
|
|
207.8
|
|
|
|
88.7
|
|
|
|
789.4
|
|
Foreign exchange
|
|
|
31.8
|
|
|
|
6.9
|
|
|
|
9.9
|
|
|
|
48.6
|
|
Acquisitions
|
|
|
3.4
|
|
|
|
|
|
|
|
2.2
|
|
|
|
5.6
|
|
Additions
|
|
|
21.2
|
|
|
|
16.0
|
|
|
|
2.7
|
|
|
|
39.9
|
|
Transfer to investments
|
|
|
|
|
|
|
|
|
|
|
(19.8
|
)
|
|
|
(19.8
|
)
|
Transfer from investments
|
|
|
|
|
|
|
|
|
|
|
2.0
|
|
|
|
2.0
|
|
Disposals
|
|
|
(65.3
|
)
|
|
|
(2.3
|
)
|
|
|
|
|
|
|
(67.6
|
)
|
|
|
|
|
December 31, 2006
|
|
|
484.0
|
|
|
|
228.4
|
|
|
|
85.7
|
|
|
|
798.1
|
|
|
|
|
|
|
Accumulated depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2006
|
|
|
(394.8
|
)
|
|
|
(171.1
|
)
|
|
|
(7.4
|
)
|
|
|
(573.3
|
)
|
Foreign exchange
|
|
|
(31.1
|
)
|
|
|
(5.3
|
)
|
|
|
(0.7
|
)
|
|
|
(37.1
|
)
|
Depreciation expense
|
|
|
(35.7
|
)
|
|
|
(20.5
|
)
|
|
|
(1.1
|
)
|
|
|
(57.3
|
)
|
Transfer to investments
|
|
|
|
|
|
|
|
|
|
|
4.0
|
|
|
|
4.0
|
|
Disposals
|
|
|
62.3
|
|
|
|
2.0
|
|
|
|
|
|
|
|
64.3
|
|
|
|
|
|
December 31, 2006
|
|
|
(399.3
|
)
|
|
|
(194.9
|
)
|
|
|
(5.2
|
)
|
|
|
(599.4
|
)
|
|
|
|
|
Net book value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006
|
|
|
84.7
|
|
|
|
33.5
|
|
|
|
80.5
|
|
|
|
198.7
|
|
|
|
|
|
|
|
|
*
|
|
Included within land and buildings are $36.8 million at December 31, 2007 (2006: $36.6 million) in
non-depreciable land assets.
|
75
7. INTANGIBLE ASSETS
Intangible assets are predominately investment management contracts acquired through acquisitions.
Amortization of investment management contracts is included within general and administrative costs
in the Consolidated Statements of Income. No impairments of intangible assets have been identified
in the periods presented. The weighted average amortization period of intangible assets is nine
years.
|
|
|
|
|
|
|
|
|
$ in millions
|
|
2007
|
|
2006
|
Cost:
|
|
|
|
|
|
|
|
|
January 1
|
|
|
205.3
|
|
|
|
91.4
|
|
Foreign exchange
|
|
|
0.3
|
|
|
|
0.5
|
|
Business acquisitions
|
|
|
|
|
|
|
113.4
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
205.6
|
|
|
|
205.3
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
amortization:
|
|
|
|
|
|
|
|
|
January 1, 2007
|
|
|
(39.4
|
)
|
|
|
(29.3
|
)
|
Foreign exchange
|
|
|
|
|
|
|
(0.1
|
)
|
Amortization expense
|
|
|
(12.0
|
)
|
|
|
(10.0
|
)
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
(51.4
|
)
|
|
|
(39.4
|
)
|
|
|
|
|
|
|
|
|
|
|
Net book
value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
154.2
|
|
|
|
165.9
|
|
|
|
|
|
|
|
|
|
|
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.
Estimated amortization expense for each of the five succeeding fiscal years based upon the
companys intangible assets at December 31, 2007 is as follows:
|
|
|
|
|
Years ended December 31,
|
|
$ in millions
|
2008
|
|
|
12.0
|
|
2009
|
|
|
12.0
|
|
2010
|
|
|
11.4
|
|
2011
|
|
|
7.5
|
|
2012
|
|
|
4.3
|
|
8. GOODWILL
The table below details changes in the goodwill balance:
|
|
|
|
|
|
|
|
|
$ in millions
|
|
2007
|
|
2006
|
January 1
|
|
|
6,360.7
|
|
|
|
6,069.9
|
|
Business acquisitions earn-outs
|
|
|
157.9
|
|
|
|
23.0
|
|
Other adjustments
|
|
|
(3.0
|
)
|
|
|
(0.8
|
)
|
Foreign exchange
|
|
|
332.4
|
|
|
|
268.6
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
6,848.0
|
|
|
|
6,360.7
|
|
|
|
|
|
|
|
|
|
|
Prior to the strategic initiative that commenced in 2005 (see Note 13), the components of the
company were separate businesses and reporting units. 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 $0.03 per share) related to the former Private Wealth Management reporting
unit. The key assumptions used in the discounted cash flow analysis used to determine the fair
value of the Private Wealth Management reporting 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.
76
9. OTHER CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
$ in millions
|
|
2007
|
|
2006
|
Accruals and other liabilities
|
|
|
322.3
|
|
|
|
277.2
|
|
Compensation and benefits
|
|
|
71.5
|
|
|
|
88.5
|
|
Accrued bonus
|
|
|
356.1
|
|
|
|
302.0
|
|
Accrued deferred compensation
|
|
|
14.3
|
|
|
|
3.1
|
|
Accounts payable
|
|
|
235.4
|
|
|
|
168.5
|
|
Other
|
|
|
21.5
|
|
|
|
18.5
|
|
|
|
|
|
Other current liabilities
|
|
|
1,021.1
|
|
|
|
857.8
|
|
|
|
|
|
10. LONG-TERM DEBT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
$ in millions
|
|
Book Value
|
|
Fair Value
|
|
Book Value
|
|
Fair Value
|
Unsecured Senior Notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.9% due January 15, 2007
|
|
|
|
|
|
|
|
|
|
|
300.0
|
|
|
|
299.9
|
|
4.5% due December 15, 2009
|
|
|
300.0
|
|
|
|
297.9
|
|
|
|
300.0
|
|
|
|
292.2
|
|
5.625% due April 17, 2012
|
|
|
300.0
|
|
|
|
300.8
|
|
|
|
|
|
|
|
|
|
5.375% due February 27, 2013
|
|
|
350.0
|
|
|
|
341.8
|
|
|
|
350.0
|
|
|
|
346.0
|
|
5.375% due December 15, 2014
|
|
|
200.0
|
|
|
|
194.1
|
|
|
|
200.0
|
|
|
|
196.4
|
|
Floating rate credit facility expiring
March 31, 2010
|
|
|
126.4
|
|
|
|
126.4
|
|
|
|
129.0
|
|
|
|
129.0
|
|
|
|
|
Total long-term debt
|
|
|
1,276.4
|
|
|
|
1,261.0
|
|
|
|
1,279.0
|
|
|
|
1,263.5
|
|
Less: current maturities of long-term debt
|
|
|
|
|
|
|
|
|
|
|
(300.0
|
)
|
|
|
(299.9
|
)
|
|
|
|
Long-term debt
|
|
|
1,276.4
|
|
|
|
1,261.0
|
|
|
|
979.0
|
|
|
|
963.6
|
|
|
|
|
Analysis of Borrowings by Maturity:
|
|
|
|
|
$ in millions
|
|
December 31, 2007
|
2008
|
|
|
|
|
2009
|
|
|
300.0
|
|
2010
|
|
|
126.4
|
|
2011
|
|
|
|
|
2012
|
|
|
300.0
|
|
Thereafter
|
|
|
550.0
|
|
|
|
|
Total long-term debt
|
|
|
1,276.4
|
|
|
|
|
There are no restrictive covenants in the companys Senior Note agreements.
The
floating rate credit facility provides for borrowings of various maturities, contains
certain conditions and is unsecured. As of December 31, 2007, $773.6 million (2006: $771.0
million) remained available on the credit facility. Standard conditions for borrowing under the
facility exist, such as compliance with laws, payment of taxes and maintenance of insurance. The
company pays quarterly commitment fees and an annual administration fee for the maintenance of the
credit facility. These fees, which are not significant in amount, are recorded in interest expense
on the Consolidated Statements of Income.
Financial covenants under the credit facility 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
(EBITDA, as defined in the credit facility/interest payable for the four consecutive fiscal
quarters ended before the date of determination) of not less than 4.00:1.00. Examples of
restrictive covenants in the credit facility include, but are not limited to: prohibitions on
creating, incurring or assuming any liens; making or holding external loans; entering into certain
restrictive merger arrangements; selling, leasing, transferring or otherwise disposing of assets
which generated up to 20% of the consolidated operating income of the borrower; making certain
investments; making a material change in the nature of our business; making an amendment to company
bylaws that would have a material adverse effect; making a significant accounting policy change in
certain situations; making certain limitations on subsidiary entities; becoming a general partner
to certain investments; transacting with affiliates except in the ordinary course of business; and
incurring a certain amount of indebtedness through the non-guarantor subsidiaries. The company was
in compliance with these covenants for the years ended December 31, 2007 and 2006.
77
Fees, which range from 9 to 25 basis points, and borrowing margins, which range from 36 to 75 basis
points, are derived from tiers defined by debt/EBITDA ratios, as outlined in the credit facility.
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. The weighted average interest rate
on the credit facility was 5.28% at December 31, 2007 (2006: 5.74%).
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 indicative
pricing and analysis from various debt market-makers. Such analysis included comparison of the
terms of the companys debt with other actively traded debt of similar companies.
78
11. COMMON, ORDINARY, EXCHANGEABLE AND TREASURY SHARES
Movements in common, ordinary and exchangeable shares issued and outstanding are represented in the
table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
Ordinary
|
|
Exchangeable
|
in millions
|
|
Shares
|
|
Shares
|
|
Shares
|
January 1, 2005
|
|
|
|
|
|
|
810.7
|
|
|
|
28.1
|
|
Exercise of options
|
|
|
|
|
|
|
1.4
|
|
|
|
|
|
Business combinations
|
|
|
|
|
|
|
0.5
|
|
|
|
|
|
Conversion of exchangeable shares into ordinary shares
|
|
|
|
|
|
|
5.5
|
|
|
|
(5.5
|
)
|
|
|
|
December 31, 2005
|
|
|
|
|
|
|
818.1
|
|
|
|
22.6
|
|
|
|
|
Exercises of options
|
|
|
|
|
|
|
10.5
|
|
|
|
|
|
Business combinations
|
|
|
|
|
|
|
0.5
|
|
|
|
|
|
Conversion of exchangeable shares into ordinary shares
|
|
|
|
|
|
|
2.8
|
|
|
|
(2.8
|
)
|
|
|
|
December 31, 2006
|
|
|
|
|
|
|
831.9
|
|
|
|
19.8
|
|
|
|
|
Exercise of options
|
|
|
|
|
|
|
15.0
|
|
|
|
|
|
Business combinations
|
|
|
|
|
|
|
0.6
|
|
|
|
|
|
Conversion of exchangeable shares into ordinary shares
|
|
|
|
|
|
|
19.8
|
|
|
|
(19.8
|
)
|
Cancellation of ordinary shares held in treasury shares
|
|
|
|
|
|
|
(19.4
|
)
|
|
|
|
|
Cancellation of ordinary shares and issuance of common shares
|
|
|
847.9
|
|
|
|
(847.9
|
)
|
|
|
|
|
One-for-two share capital consolidation
|
|
|
(423.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
December 4, 2007
|
|
|
424.0
|
|
|
|
|
|
|
|
|
|
Exercise of options
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
|
424.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares of Invesco Ltd.
|
|
2007
|
|
|
|
|
|
|
Book
|
in millions
|
|
Number
|
|
Value
|
Authorized common shares of 20 cents each
|
|
|
1,050.0
|
|
|
|
210.0
|
|
Issued and outstanding common shares of 20 cents each
|
|
|
424.7
|
|
|
|
84.9
|
|
On December 4, 2007, INVESCO PLC became a wholly-owned subsidiary of Invesco Ltd. and the
shareholders of INVESCO PLC received common shares of Invesco Ltd. in exchange for their ordinary
shares of INVESCO PLC. The primary listing of shares of the company moved from the London Stock
Exchange to the New York Stock Exchange. This transaction was accounted for in a manner similar to
a pooling of interests. A share capital consolidation, also known as a reverse stock split, on a
one-for-two basis was immediately effected. Share amounts and prices have been retroactively
restated to reflect the reverse stock split, where appropriate.
As of December 31, 2007, unissued common shares were reserved for the following purposes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Last
|
|
|
|
|
|
|
|
|
|
|
Expiration
|
Shares in millions
|
|
Shares
|
|
Prices *
|
|
Date
|
Options arising from acquisitions
|
|
|
0.4
|
|
|
|
1373p-2732p
|
|
|
Feb 2010
|
Subscription agreement (options) with the Employee Share
Option Trust
|
|
|
12.1
|
|
|
|
513p-3360p
|
|
|
Apr 2013
|
Options
granted under the AMVESCAP 2000 Share Option Plan
|
|
|
17.3
|
|
|
|
639p-2880p
|
|
|
Dec 2015
|
Options granted under Sharesave plans
|
|
|
1.0
|
|
|
|
572p-1008p
|
|
|
May 2010
|
|
|
|
*
|
|
Share option prices are in pounds sterling, the currency of the awards. Upon exercise, the
exercise price will be converted to U.S. dollars using the rate prevailing on the exercise date.
|
79
|
|
|
|
|
|
|
|
|
Ordinary Shares of INVESCO PLC
|
|
2006
|
|
|
|
|
|
|
Book
|
in millions
|
|
Number
|
|
Value
|
Authorized ordinary shares of 10 cents each
|
|
|
1,050.0
|
|
|
$
|
105.0
|
|
Allotted, called up and fully paid ordinary shares of 10 cents each (2005: 10 cents each)
|
|
|
831.9
|
|
|
$
|
83.2
|
|
Authorized and issued deferred sterling shares of £1 each
|
|
|
0.1
|
|
|
$
|
0.1
|
|
As of December 31, 2006, unissued ordinary shares were reserved for the following purposes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Last
|
|
|
|
|
|
|
|
|
|
|
Expiration
|
Shares in millions
|
|
Shares
|
|
Prices
|
|
Date
|
Options arising from acquisitions
|
|
|
0.9
|
|
|
|
686p-1366p
|
|
|
Feb 2010
|
Conversion of exchangeable shares
|
|
|
19.8
|
|
|
|
|
|
|
Dec 2009
|
Subscription agreement (options) with the Employee Share
Option Trust
|
|
|
33.6
|
|
|
|
25p-1680p
|
|
|
Apr 2013
|
Options
granted under the AMVESCAP 2000 Share Option Plan
|
|
|
45.4
|
|
|
|
319.25p-1440p
|
|
|
Dec 2015
|
Options granted under Sharesave plans
|
|
|
1.8
|
|
|
|
268p-805p
|
|
|
May 2010
|
Exchangeable Shares
The
exchangeable shares issued by INVESCO Inc. were exchangeable into
ordinary shares of INVESCO PLC
on a one-for-one basis at any time at the request of the holder. They had, as nearly as
practicable, the economic equivalence of the ordinary shares of INVESCO PLC, including the same
voting and dividend rights as the ordinary shares. Prior to the December 4, 2007 share capital
reorganization, all of the companys exchangeable shares were redeemed in accordance with their
terms, and each holder of INVESCO Inc. exchangeable shares received one INVESCO PLC ordinary share.
Prior to their redemption, the exchangeable shares were included as part of shareholders equity in
the Consolidated Balance Sheet to present a complete view of the companys capital structure, as
they were economically equivalent to ordinary shares.
Treasury Shares
On June 13, 2007, the companys board of directors authorized a share repurchase program of up to
$500.0 million of the ordinary shares of INVESCO PLC. The share repurchase authorization has an
expiration of June 30, 2008 and is expected to be fully utilized by that date. Through December 4,
2007, 19.4 million ordinary shares had been repurchased at a cost of $253.3 million, which was
reflected as an increase in Treasury Shares on the Consolidated Balance Sheet. On November 30,
2007, 19.4 million Treasury Shares were cancelled. Between December 4 and 31, 2007, 3.5 million
common shares of Invesco Ltd. were purchased at a cost of $99.6 million, reflected as Treasury
Shares on the Consolidated Balance Sheet. Of the total share repurchase program amount authorized,
$154.5 million remains as of December 31, 2007. The share purchases in December 2007 included 0.3
million common shares at a cost of $7.4 million from current executive officers of the company that
have not been included in arriving at the remaining authorized amount.
Treasury shares include trust shares that represent the holdings of the common shares of Invesco
Ltd. by its employee share ownership trusts in association with certain employee share-based
payment programs. They are accounted for under the treasury stock method. The Invesco Global
Stock Plan trust purchased 13.3 million INVESCO PLC ordinary shares at a cost of $330.8 million
before December 4, 2007, which were converted to common shares of Invesco Ltd. on that date.
Between December 4 and 31, 2007, there were no purchases of common shares under the Invesco Global
Stock Plan trust. See Note 19, Share-Based Compensation.
The trustees of the Employee Share Option Trust waived dividends amounting to $3.6 million in 2007
(2006: $3.2 million). The trustees of the Global Stock Plan waived dividends amounting to $1.5
million in 2007 (2006: $1.0 million); 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.
80
Movements
in Treasury Shares comprise:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury
|
in millions
|
|
Trust Shares
|
|
Shares
|
January 1, 2005
|
|
|
50.7
|
|
|
|
|
|
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
|
|
|
|
|
|
Purchases of ordinary shares
|
|
|
26.5
|
|
|
|
19.4
|
|
Dividend shares
|
|
|
0.5
|
|
|
|
|
|
Distribution of ordinary shares
|
|
|
(3.1
|
)
|
|
|
|
|
Cancellation of ordinary shares held in Treasury
|
|
|
|
|
|
|
(19.4
|
)
|
One-for-two share capital consolidation
|
|
|
(44.9
|
)
|
|
|
|
|
|
|
|
December 4, 2007
|
|
|
45.0
|
|
|
|
|
|
Purchases of common shares
|
|
|
|
|
|
|
3.5
|
|
Distribution of common shares
|
|
|
(3.5
|
)
|
|
|
|
|
|
|
|
December 31, 2007
|
|
|
41.5
|
|
|
|
3.5
|
|
|
|
|
The market price of common shares at the end of 2007 was $31.38. The total market value of the
companys combined 45.0 million trust and treasury shares was $1,412.1 million on December 31,
2007.
12. ACCUMULATED OTHER COMPREHENSIVE INCOME
The components of accumulated other comprehensive income at December 31 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in millions
|
|
2007
|
|
2006
|
|
2005
|
Net unrealized gains (losses) on available-for-sale investments
|
|
|
1.6
|
|
|
|
18.4
|
|
|
|
25.0
|
|
Tax on unrealized gains (losses) on available-for-sale investments
|
|
|
(2.2
|
)
|
|
|
(2.6
|
)
|
|
|
(4.7
|
)
|
Cumulative foreign currency translation adjustments
|
|
|
987.9
|
|
|
|
636.8
|
|
|
|
368.5
|
|
Tax on cumulative foreign currency translation adjustments
|
|
|
6.3
|
|
|
|
8.0
|
|
|
|
3.1
|
|
Pension liability adjustments
|
|
|
(59.1
|
)
|
|
|
(66.8
|
)
|
|
|
(57.6
|
)
|
Tax on pension liability adjustments
|
|
|
17.6
|
|
|
|
20.7
|
|
|
|
17.4
|
|
|
|
|
Total accumulated other comprehensive income
|
|
|
952.1
|
|
|
|
614.5
|
|
|
|
351.7
|
|
|
|
|
Total other comprehensive income details are presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in millions
|
|
2007
|
|
2006
|
|
2005
|
Net Income
|
|
|
673.6
|
|
|
|
482.7
|
|
|
|
219.8
|
|
Unrealized holding gains (losses) on available-for-sale investments
|
|
|
1.0
|
|
|
|
9.8
|
|
|
|
(0.5
|
)
|
Tax on unrealized holding (gains) losses on available-for-sale investments
|
|
|
0.2
|
|
|
|
(1.1
|
)
|
|
|
(4.7
|
)
|
Reclassification adjustments for (gains) losses on available-for-sale
investments included in net income
|
|
|
(17.8
|
)
|
|
|
(16.4
|
)
|
|
|
(3.6
|
)
|
Tax on reclassification adjustments for gains (losses) on
available-for-sale investments included in net income
|
|
|
0.2
|
|
|
|
3.2
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
351.1
|
|
|
|
268.3
|
|
|
|
360.4
|
|
Tax on foreign currency translation adjustments
|
|
|
(1.7
|
)
|
|
|
4.9
|
|
|
|
3.1
|
|
Adjustments to pension liability
|
|
|
7.7
|
|
|
|
25.3
|
|
|
|
6.8
|
|
Tax on adjustments to pension liability
|
|
|
(3.1
|
)
|
|
|
(7.7
|
)
|
|
|
(2.0
|
)
|
|
|
|
Total other comprehensive income
|
|
|
1,011.2
|
|
|
|
769.0
|
|
|
|
579.3
|
|
|
|
|
13. RESTRUCTURING CHARGE
In 2005, the company commenced a strategic initiative to identify steps required to move toward
becoming a more integrated global investment manager. The company began the process of integrating
enterprise support functions, such as Human Resources, Finance and Legal and Compliance. In
addition, the company began to combine its managed account platforms
81
and merge certain client
service functions across the companys retail business. Measures were implemented that reduced
headcount, eliminated office space in certain locations, and streamlined the companys product
line. The plan was completed in 2006. The company recorded restructuring charges of $13.1
million in 2006 ($8.3 million net of tax) and $62.6
million ($48.0 million net of tax, or $0.12 per share) in 2005 related to these initiatives in
accordance with FASB Statement No. 146, Accounting for Costs Associated with Exit or Disposal
Activities.
The following table summarizes restructuring liabilities for the three years ended December 31,
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Staff
|
|
|
|
|
|
Fund
|
|
|
|
|
|
restructuring
|
$ in millions
|
|
termination
|
|
Property
|
|
rationalization
|
|
Other
|
|
liabilities
|
Total charge at initial recognition
|
|
|
32.0
|
|
|
|
20.4
|
|
|
|
6.9
|
|
|
|
3.3
|
|
|
|
62.6
|
|
Less non-cash charges
|
|
|
|
|
|
|
(7.0
|
)
|
|
|
|
|
|
|
|
|
|
|
(7.0
|
)
|
|
|
|
Cash charges
recognized as expense during the year
|
|
|
32.0
|
|
|
|
13.4
|
|
|
|
6.9
|
|
|
|
3.3
|
|
|
|
55.6
|
|
Cash paid
|
|
|
(15.8
|
)
|
|
|
(4.6
|
)
|
|
|
|
|
|
|
(2.8
|
)
|
|
|
(23.2
|
)
|
Foreign exchange
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.3
|
)
|
|
|
|
December 31, 2005
|
|
|
15.9
|
|
|
|
8.8
|
|
|
|
6.9
|
|
|
|
0.5
|
|
|
|
32.1
|
|
Charge recognized as expense during the year
|
|
|
13.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.1
|
|
Cash paid
|
|
|
(23.0
|
)
|
|
|
(8.9
|
)
|
|
|
(4.4
|
)
|
|
|
(0.4
|
)
|
|
|
(36.7
|
)
|
Foreign exchange
|
|
|
0.6
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
0.8
|
|
|
|
|
December 31, 2006
|
|
|
6.6
|
|
|
|
0.1
|
|
|
|
2.5
|
|
|
|
0.1
|
|
|
|
9.3
|
|
|
|
|
Cash paid
|
|
|
(6.6
|
)
|
|
|
(0.1
|
)
|
|
|
(2.5
|
)
|
|
|
(0.1
|
)
|
|
|
(9.3
|
)
|
December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
--
|
|
|
|
|
Cumulative charges incurred (gross)
|
|
|
45.1
|
|
|
|
20.4
|
|
|
|
6.9
|
|
|
|
3.3
|
|
|
|
75.7
|
|
|
|
|
Staff termination, fund rationalization and other costs were accrued in current liability accounts.
Property costs were included in other liabilities and reflect calculations of the lease payments
for the remaining term in excess of the estimated sublease proceeds that could reasonably be
obtained.
14. GEOGRAPHIC INFORMATION
The company operates under one business segment, asset management. Geographical information is
presented below. The company generally records intercompany services and transfers as if the
services or transfers were provided to third parties at current market prices.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in millions
|
|
U.S.
|
|
U.K./Ireland
|
|
Canada
|
|
Europe/Asia
|
|
Total
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
revenues
|
|
|
1,587.7
|
|
|
|
1,436.2
|
|
|
|
697.3
|
|
|
|
157.7
|
|
|
|
3,878.9
|
|
Inter-company
|
|
|
61.3
|
|
|
|
(163.5
|
)
|
|
|
(22.0
|
)
|
|
|
124.2
|
|
|
|
|
|
|
|
|
|
|
|
1,649.0
|
|
|
|
1,272.7
|
|
|
|
675.3
|
|
|
|
281.9
|
|
|
|
3,878.9
|
|
|
|
|
Long-lived
assets
|
|
|
80.1
|
|
|
|
81.1
|
|
|
|
8.4
|
|
|
|
10.4
|
|
|
|
180.0
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
|
1,456.2
|
|
|
|
1,033.8
|
|
|
|
624.1
|
|
|
|
132.6
|
|
|
|
3,246.7
|
|
Inter-company
|
|
|
51.5
|
|
|
|
(130.4
|
)
|
|
|
(14.0
|
)
|
|
|
92.9
|
|
|
|
|
|
|
|
|
|
|
|
1,507.7
|
|
|
|
903.4
|
|
|
|
610.1
|
|
|
|
225.5
|
|
|
|
3,246.7
|
|
|
|
|
Long-lived assets
|
|
|
90.8
|
|
|
|
85.0
|
|
|
|
11.3
|
|
|
|
11.6
|
|
|
|
198.7
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
|
1,463.4
|
|
|
|
704.2
|
|
|
|
592.1
|
|
|
|
112.9
|
|
|
|
2,872.6
|
|
Inter-company
|
|
|
30.8
|
|
|
|
(62.8
|
)
|
|
|
(10.6
|
)
|
|
|
42.6
|
|
|
|
|
|
|
|
|
|
|
|
1,494.2
|
|
|
|
641.4
|
|
|
|
581.5
|
|
|
|
155.5
|
|
|
|
2,872.6
|
|
Operating revenues reflect the geographical regions from which services are provided.
82
15. OTHER GAINS AND LOSSES, NET
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in millions
|
|
2007
|
|
2006
|
|
2005
|
Other gains:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of investments
|
|
|
32.2
|
|
|
|
18.1
|
|
|
|
5.6
|
|
Gain on sale of business
|
|
|
1.6
|
|
|
|
1.9
|
|
|
|
32.6
|
|
Net foreign exchange gains
|
|
|
|
|
|
|
8.5
|
|
|
|
|
|
|
|
|
Total other gains
|
|
|
33.8
|
|
|
|
28.5
|
|
|
|
38.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other than temporary impairment of
available-for-sale investments
|
|
|
(5.4
|
)
|
|
|
|
|
|
|
|
|
Loss incurred on fund liquidation
|
|
|
(8.2
|
)
|
|
|
|
|
|
|
(11.3
|
)
|
Other realized losses
|
|
|
|
|
|
|
(1.7
|
)
|
|
|
(2.0
|
)
|
Net foreign exchange losses
|
|
|
(10.3
|
)
|
|
|
|
|
|
|
(11.5
|
)
|
|
|
|
Total other losses
|
|
|
(23.9
|
)
|
|
|
(1.7
|
)
|
|
|
(24.8
|
)
|
|
|
|
Other gains and losses, net
|
|
|
9.9
|
|
|
|
26.8
|
|
|
|
13.4
|
|
|
|
|
16. TAXATION
The companys (provision)\benefit for income taxes is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in millions
|
|
2007
|
|
2006
|
|
2005
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(107.4
|
)
|
|
|
(98.2
|
)
|
|
|
(11.7
|
)
|
State
|
|
|
(9.0
|
)
|
|
|
(10.4
|
)
|
|
|
(6.2
|
)
|
Foreign
|
|
|
(260.6
|
)
|
|
|
(181.8
|
)
|
|
|
(114.3
|
)
|
|
|
|
|
|
|
(377.0
|
)
|
|
|
(290.4
|
)
|
|
|
(132.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
25.1
|
|
|
|
25.9
|
|
|
|
(38.7
|
)
|
State
|
|
|
2.5
|
|
|
|
(1.2
|
)
|
|
|
0.9
|
|
Foreign
|
|
|
(7.9
|
)
|
|
|
11.1
|
|
|
|
18.9
|
|
|
|
|
|
|
|
19.7
|
|
|
|
35.8
|
|
|
|
(18.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax
(provision)\benefit
|
|
|
(357.3
|
)
|
|
|
(254.6
|
)
|
|
|
(151.1
|
)
|
|
|
|
83
The net deferred tax recognized in our balance sheet at December 31 includes the following:
|
|
|
|
|
|
|
|
|
$ in millions
|
|
2007
|
|
2006
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
Deferred compensation arrangements
|
|
|
116.7
|
|
|
|
112.9
|
|
Onerous lease provisions
|
|
|
19.1
|
|
|
|
16.7
|
|
Tax loss carryforwards
|
|
|
55.1
|
|
|
|
43.1
|
|
Post-retirement medical, pension and other benefits
|
|
|
33.3
|
|
|
|
32.5
|
|
Fixed asset depreciation
|
|
|
12.8
|
|
|
|
7.5
|
|
Unrealized foreign exchange
|
|
|
13.8
|
|
|
|
13.3
|
|
Investment basis differences
|
|
|
10.1
|
|
|
|
5.2
|
|
Other
|
|
|
17.0
|
|
|
|
11.4
|
|
|
|
|
Total Deferred
Tax Assets
|
|
|
277.9
|
|
|
|
242.6
|
|
|
|
|
Valuation Allowance
|
|
|
(51.2
|
)
|
|
|
(39.2
|
)
|
|
|
|
Deferred Tax Assets, net of valuation allowance
|
|
|
226.7
|
|
|
|
203.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Tax Liabilities:
|
|
|
|
|
|
|
|
|
Deferred sales commissions
|
|
|
(17.8
|
)
|
|
|
(20.2
|
)
|
Intangible asset amortization
|
|
|
(17.9
|
)
|
|
|
(16.7
|
)
|
Undistributed earnings of subsidiaries
|
|
|
(14.1
|
)
|
|
|
(7.0
|
)
|
Basis differences on available-for-sale assets
|
|
|
(4.1
|
)
|
|
|
(3.2
|
)
|
Revaluation reserve
|
|
|
(6.4
|
)
|
|
|
(6.4
|
)
|
Other
|
|
|
(0.1
|
)
|
|
|
(5.7
|
)
|
|
|
|
Total Deferred Tax Liabilities
|
|
|
(60.4
|
)
|
|
|
(59.2
|
)
|
|
|
|
Net Deferred Tax Assets
|
|
|
166.3
|
|
|
|
144.2
|
|
|
|
|
Net current deferred tax assets of $32.5 million (2006: $25.7 million) are included in other
current assets on the Consolidated Balance Sheets (see Note 4).
A reconciliation between the statutory rate and the effective tax rate on income from operations
for the years ended December 31, 2007, 2006 and 2005 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
2005
|
Statutory Rate
|
|
|
35.0
|
%
|
|
|
30.0
|
%
|
|
|
30.0
|
%
|
|
Foreign jurisdiction statutory income tax rates
|
|
|
(4.6
|
%)
|
|
|
2.5
|
%
|
|
|
5.3
|
%
|
State taxes, net of federal tax effect
|
|
|
0.9
|
%
|
|
|
2.1
|
%
|
|
|
1.9
|
%
|
Additional tax on unremitted earnings
|
|
|
1.1
|
%
|
|
|
0.9
|
%
|
|
|
0.0
|
%
|
Change in valuation allowance for unrecognized tax losses
|
|
|
0.8
|
%
|
|
|
0.0
|
%
|
|
|
1.2
|
%
|
Non-deductible expenses related to relisting/redomicile
|
|
|
0.4
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Europe and
Asia restructuring provisions
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
2.6
|
%
|
Non-deductible
investment write-off/non-taxable income
|
|
|
(0.3
|
%)
|
|
|
(0.5
|
%)
|
|
|
1.5
|
%
|
Other
|
|
|
1.3
|
%
|
|
|
(0.5
|
%)
|
|
|
(1.7
|
%)
|
|
|
|
|
Effective tax rate (excluding minority interest)
|
|
|
34.6
|
%
|
|
|
34.5
|
%
|
|
|
40.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from minority interests
|
|
|
(5.9
|
%)
|
|
|
(9.9
|
%)
|
|
|
(9.4
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
tax rate per Consolidated Statements of Income
|
|
|
28.7
|
%
|
|
|
24.6
|
%
|
|
|
31.4
|
%
|
|
|
|
|
The companys effective tax rate for 2006 and 2005 is reconciled to the U.K. statutory tax rate of
30% as that was the statutory rate of our predecessor company INVESCO PLC. As a result of the
change in our domicile in 2007 to Bermuda, the U.S. statutory rate of 35.0% is used for 2007.
84
The companys subsidiaries operate in several taxing jurisdictions around the world, each with its
own statutory income tax rate. As a result, the blended average statutory tax rate will vary from
year to year depending on the mix of the profits and losses of the companys 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. Federal statutory tax rate is
35.0%.
On July 19, 2007, legislation was enacted that will decrease the U.K.s tax rate to 28.0% effective
April 1, 2008. On December 14, 2007, legislation was enacted to reduce the Canadian income tax rate
over the next five years. Beginning January 1, 2008, the Canadian rate will be reduced to 33.5%,
with further reductions to 33.0% in 2009, 32.0% in 2010, 30.5% in 2011, and finally 29.0% in 2012.
The reduction in our Canadian and U.K. deferred tax assets in 2007 as a result of these rate
changes increased our effective tax rate by 0.3% and is included in Other above.
At December 31, 2007, the company had tax loss carryforwards accumulating in certain subsidiaries
in the aggregate of $139.8 million (2006: $107.1 million), approximately $13.9 million of which
expire between 2008 and 2013, with the remaining $125.9 million having an indefinite life. A full
valuation allowance has been recorded against the deferred tax assets related to these losses based
on a history of losses in these subsidiaries which make it unlikely that the deferred tax assets
will be realized.
Deferred tax liabilities are recognized for taxes that would be payable on the unremitted earnings
of the companys subsidiaries, consolidated investment products, and joint ventures except where
it is our intention to continue to indefinitely reinvest the undistributed earnings. Our Canadian
and U.S. subsidiaries continue to be directly owned by Invesco
Holding Company Limited (formerly INVESCO PLC, our predecessor
company), which
is directly owned by Invesco, Ltd. Our Canadian unremitted earnings, for which we are indefinitely
reinvested, are estimated to be $880 million at December 31, 2007 compared with $600 million at
December 31, 2006. If distributed as a dividend, Canadian withholding tax of 5.0% would be due.
Deferred tax liabilities in the amount of $14.1 million (2006: $7.0 million) for additional U.K.
tax have been recognized for unremitted earnings of certain subsidiaries that have regularly
remitted earnings 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 additional taxes on dividends from
the U.K. to Bermuda.
FIN 48, which became effective on January 1, 2007, clarifies the accounting for uncertain income
tax positions. Upon adoption of FIN 48, the company recognized an
increase of approximately $17.6
million in income tax reserves for uncertain income tax positions, and a corresponding reduction to
beginning retained earnings.
At adoption, the company had approximately $68.5 million of gross unrecognized income tax benefits
(UTBs). Of this total, $29.0 million (net of tax benefits in other jurisdictions and the federal
benefit of state taxes) represents the amount of unrecognized tax benefits that, if recognized,
would favorably affect the effective tax rate in future periods. A reconciliation of the change in
the UTB balance from January 1, 2007 to December 31, 2007 is as follows:
|
|
|
|
|
|
|
Gross Unrecognized
|
$ in millions
|
|
Income Tax Benefits
|
|
|
|
Balance at January 1, 2007
|
|
|
68.5
|
|
Additions for tax positions related to the
current year
|
|
|
8.6
|
|
Additions for tax positions related to prior years
|
|
|
|
|
Other reductions for tax positions related to
prior years
|
|
|
(4.2
|
)
|
Settlements
|
|
|
(3.9
|
)
|
|
|
|
Balance at December 31, 2007
|
|
|
69.0
|
|
|
|
|
The company recognizes accrued interest and penalties, as appropriate, related to unrecognized tax
benefits as a component of the income tax provision. At December 31, 2007, the total amount of
gross unrecognized tax benefits was $69.0 million. Of this total, $24.8 million (net of tax
benefits in other jurisdictions and the federal benefit of state taxes) represents the amount of
unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate in
future periods. The Consolidated Balance Sheet includes accrued interest and
penalties of $30.8 million at December 31, 2007, including
$3.5 million in 2007 tax expense. As a
result of the expiration of statutes of limitations for various jurisdictions and anticipated
legislative changes it is reasonably possible that the companys gross unrecognized tax benefits
balance may change within the next twelve months by a range of zero to $15.0 million. The company
and its subsidiaries are routinely examined by various taxing authorities worldwide. The company
and its subsidiaries file income tax returns in the federal jurisdiction, various states and
foreign jurisdictions. With few exceptions, the company is no longer subject to income tax
85
examinations by the primary tax authorities for years before 2003. Management monitors changes in
tax statutes and regulations and the issuance of judicial decisions to determine the potential
impact to uncertain income tax positions. As of December 31, 2007, management had identified no
other potential subsequent events that could have a significant impact on the unrecognized tax
benefits balance.
17. EARNINGS PER SHARE
The calculation of earnings per share is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
in millions, except per share data
|
|
Net Income
|
|
Number of Shares*
|
|
Per Share Amount*
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
673.6
|
|
|
|
398.0
|
|
|
$
|
1.69
|
|
Dilutive effect of share-based awards
|
|
|
|
|
|
|
12.3
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
673.6
|
|
|
|
410.3
|
|
|
$
|
1.64
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
482.7
|
|
|
|
396.1
|
|
|
$
|
1.22
|
|
Dilutive effect of share-based awards
|
|
|
|
|
|
|
10.0
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
482.7
|
|
|
|
406.1
|
|
|
$
|
1.19
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
219.8
|
|
|
|
397.0
|
|
|
$
|
0.55
|
|
Dilutive effect of share-based awards
|
|
|
|
|
|
|
5.5
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
219.8
|
|
|
|
402.5
|
|
|
$
|
0.54
|
|
|
|
|
|
|
|
*
|
|
Prior period weighted average number of shares and earnings per share amounts have been adjusted
to give effect to the one-for-two reverse stock split that the company effected on December 4, 2007
in connection with its relisting and redomicile. See Note 1 for additional information.
|
See Note 19 for a summary of share awards outstanding under the companys stock-based payment
programs. These programs could result in the issuance of common shares that would affect the
measurement of basic and diluted earnings per share.
Options to purchase 15.5 million common shares at a weighted average exercise price of
1886p were outstanding during the year ended December 31, 2007 (2006: 37.1 million share options
over the ordinary shares of INVESCO PLC at a weighted average exercise price of 917p; 2005: 108.8
million share options over the ordinary shares of INVESCO PLC at a weighted average exercise price
of 607p), but were not included in the computation of diluted earnings per share because the
options exercise price was greater than the average market price of the common shares and
therefore their inclusion would have been anti-dilutive. No shares of time-vested share incentive
awards and no contingently issuable shares (including performance-vested share incentive awards)
were excluded from the computation of diluted earnings per share during the year ended December 31,
2007, 2006 and 2005 due to their inclusion being anti-dilutive.
The
company excluded 1.0 million contingently issuable common shares from the diluted earnings per
share computation for the year ended December 31, 2007 (2006: 42.2 million contingently issuable
ordinary shares of INVESCO PLC) because the necessary performance conditions for the shares to be
issuable had not been satisfied at the end of the period.
18. CONSOLIDATED INVESTMENT PRODUCTS
The company transacts with various private equity, real estate and other investment entities
sponsored by the company for the investment of client assets in the normal course of business.
Certain of these investments are considered to be variable interest entities in which the company
is the primary beneficiary and are consolidated into the companys financial statements. Other
partnership entities are consolidated under EITF 04-5, as the company is the general partner and is
presumed to have control, in the absence of substantive kick-out or participating rights of the
other limited partners. The following table reflects this impact of consolidation of these
investment products into the income statements for the periods ended December 31, 2007, 2006 and
2005 and balance sheets as of December 31, 2007 and 2006. The companys risk is limited to its
equity ownership (generally less than 5%) and any uncollected management fees. During the fourth
quarter of 2007, the company deconsolidated several variable interest entities, as the company
determined that it was no longer the primary beneficiary of the arrangements as a result of
reconsideration events.
86
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Variable
|
|
Consolidated
|
|
|
|
|
Before
|
|
Interest
|
|
Investment
|
|
Consolidated
|
$ in millions
|
|
Consolidation
|
|
Entities
|
|
Products
|
|
Total
|
As of December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
4,155.8
|
|
|
|
34.3
|
|
|
|
4.3
|
|
|
|
4,194.4
|
|
Non-current assets
|
|
|
7,543.4
|
|
|
|
816.5
|
|
|
|
370.9
|
|
|
|
8,730.8
|
|
|
|
|
Total assets
|
|
|
11,699.2
|
|
|
|
850.8
|
|
|
|
375.2
|
|
|
|
12,925.2
|
|
|
|
|
Current liabilities
|
|
|
3,634.1
|
|
|
|
5.9
|
|
|
|
0.9
|
|
|
|
3,640.9
|
|
Non-current liabilities
|
|
|
1,455.9
|
|
|
|
(1.0
|
)
|
|
|
117.6
|
|
|
|
1,572.5
|
|
|
|
|
Total liabilities
|
|
|
5,090.0
|
|
|
|
4.9
|
|
|
|
118.5
|
|
|
|
5,213.4
|
|
|
|
|
Minority interests in
equity of consolidated
entities
|
|
|
14.0
|
|
|
|
850.5
|
|
|
|
256.7
|
|
|
|
1,121.2
|
|
Total shareholders equity
|
|
|
6,595.2
|
|
|
|
(4.6
|
)
|
|
|
|
|
|
|
6,590.6
|
|
|
|
|
Total liabilities,
minority interests and
shareholders equity
|
|
|
11,699.2
|
|
|
|
850.8
|
|
|
|
375.2
|
|
|
|
12,925.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Variable
|
|
Consolidated
|
|
|
|
|
Before
|
|
Interest
|
|
Investment
|
|
Consolidated
|
$ in millions
|
|
Consolidation
|
|
Entities
|
|
Products
|
|
Total
|
As of December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
3,630.0
|
|
|
|
76.6
|
|
|
|
2.4
|
|
|
|
3,709.0
|
|
Non-current assets
|
|
|
7,054.7
|
|
|
|
1,214.9
|
|
|
|
249.9
|
|
|
|
8,519.5
|
|
|
|
|
Total assets
|
|
|
10,684.7
|
|
|
|
1,291.5
|
|
|
|
252.3
|
|
|
|
12,228.5
|
|
|
|
|
Current liabilities
|
|
|
3,356.7
|
|
|
|
8.0
|
|
|
|
0.7
|
|
|
|
3,365.4
|
|
Non-current liabilities
|
|
|
1,157.5
|
|
|
|
(0.2
|
)
|
|
|
37.2
|
|
|
|
1,194.5
|
|
|
|
|
Total liabilities
|
|
|
4,514.2
|
|
|
|
7.8
|
|
|
|
37.9
|
|
|
|
4,559.9
|
|
|
|
|
Minority interests in
equity of consolidated
entities
|
|
|
5.1
|
|
|
|
1,285.1
|
|
|
|
214.4
|
|
|
|
1,504.6
|
|
Total shareholders equity
|
|
|
6,165.4
|
|
|
|
(1.4
|
)
|
|
|
|
|
|
|
6,164.0
|
|
|
|
|
Total liabilities,
minority interests and
shareholders equity
|
|
|
10,684.7
|
|
|
|
1,291.5
|
|
|
|
252.3
|
|
|
|
12,228.5
|
|
|
|
|
|
|
Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Variable
|
|
Consolidated
|
|
|
|
|
Before
|
|
Interest
|
|
Investment
|
|
Consolidated
|
$ in millions
|
|
Consolidation
|
|
Entities
|
|
Products
|
|
Total
|
Year ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
3,872.4
|
|
|
|
(0.7
|
)
|
|
|
7.2
|
|
|
|
3,878.9
|
|
Total operating expenses
|
|
|
(2,876.3
|
)
|
|
|
(2.8
|
)
|
|
|
(5.5
|
)
|
|
|
(2,884.6
|
)
|
|
|
|
Operating income
|
|
|
996.1
|
|
|
|
(3.5
|
)
|
|
|
1.7
|
|
|
|
994.3
|
|
|
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
52.2
|
|
|
|
(4.1
|
)
|
|
|
|
|
|
|
48.1
|
|
Interest income
|
|
|
48.5
|
|
|
|
|
|
|
|
|
|
|
|
48.5
|
|
Other investment income
|
|
|
9.9
|
|
|
|
202.7
|
|
|
|
11.6
|
|
|
|
224.2
|
|
Interest expense
|
|
|
(71.3
|
)
|
|
|
|
|
|
|
|
|
|
|
(71.3
|
)
|
|
|
|
Income before income taxes and minority
interest
|
|
|
1,035.4
|
|
|
|
195.1
|
|
|
|
13.3
|
|
|
|
1,243.8
|
|
|
|
|
Income tax provision
|
|
|
(357.5
|
)
|
|
|
0.2
|
|
|
|
|
|
|
|
(357.3
|
)
|
|
|
|
Income before minority interest
|
|
|
677.9
|
|
|
|
195.3
|
|
|
|
13.3
|
|
|
|
886.5
|
|
|
|
|
Minority interest income of consolidated
entities, net of tax
|
|
|
(4.3
|
)
|
|
|
(195.3
|
)
|
|
|
(13.3
|
)
|
|
|
(212.9
|
)
|
|
|
|
Net income
|
|
|
673.6
|
|
|
|
|
|
|
|
|
|
|
|
673.6
|
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
Variable
|
|
|
Consolidated
|
|
|
|
|
|
|
Before
|
|
|
Interest
|
|
|
Investment
|
|
|
Consolidated
|
|
$ in millions
|
|
Consolidation
|
|
|
Entities
|
|
|
Products
|
|
|
Total
|
|
Year ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
3,231.5
|
|
|
|
10.7
|
|
|
|
4.5
|
|
|
|
3,246.7
|
|
Total operating expenses
|
|
|
(2,478.2
|
)
|
|
|
(5.4
|
)
|
|
|
(3.9
|
)
|
|
|
(2,487.5
|
)
|
|
|
|
Operating income
|
|
|
753.3
|
|
|
|
5.3
|
|
|
|
0.6
|
|
|
|
759.2
|
|
|
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
9.9
|
|
|
|
(5.6
|
)
|
|
|
|
|
|
|
4.3
|
|
Interest income
|
|
|
26.9
|
|
|
|
|
|
|
|
|
|
|
|
26.9
|
|
Other investment income
|
|
|
26.8
|
|
|
|
246.5
|
|
|
|
47.8
|
|
|
|
321.1
|
|
Interest expense
|
|
|
(77.2
|
)
|
|
|
|
|
|
|
|
|
|
|
(77.2
|
)
|
|
|
|
Income before income taxes and minority
interest
|
|
|
739.7
|
|
|
|
246.2
|
|
|
|
48.4
|
|
|
|
1,034.3
|
|
|
|
|
Income tax provision
|
|
|
(256.3
|
)
|
|
|
1.7
|
|
|
|
|
|
|
|
(254.6
|
)
|
|
|
|
Income before minority interest
|
|
|
483.4
|
|
|
|
247.9
|
|
|
|
48.4
|
|
|
|
779.7
|
|
|
|
|
Minority interest income of consolidated
entities, net of tax
|
|
|
(0.7
|
)
|
|
|
(247.9
|
)
|
|
|
(48.4
|
)
|
|
|
(297.0
|
)
|
|
|
|
Net income
|
|
|
482.7
|
|
|
|
|
|
|
|
|
|
|
|
482.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
Variable
|
|
|
Consolidated
|
|
|
|
|
|
|
Before
|
|
|
Interest
|
|
|
Investment
|
|
|
Consolidated
|
|
$ in millions
|
|
Consolidation
|
|
|
Entities
|
|
|
Products
|
|
|
Total
|
|
Year ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
2,878.1
|
|
|
|
(8.2
|
)
|
|
|
2.7
|
|
|
|
2,872.6
|
|
Total operating expenses
|
|
|
(2,453.9
|
)
|
|
|
(8.2
|
)
|
|
|
(2.6
|
)
|
|
|
(2,464.7
|
)
|
|
|
|
Operating income
|
|
|
424.2
|
|
|
|
(16.4
|
)
|
|
|
0.1
|
|
|
|
407.9
|
|
|
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
|
|
|
|
0.7
|
|
|
|
|
|
|
|
0.7
|
|
Interest income
|
|
|
16.7
|
|
|
|
|
|
|
|
|
|
|
|
16.7
|
|
Other investment income
|
|
|
13.4
|
|
|
|
125.6
|
|
|
|
3.2
|
|
|
|
142.2
|
|
Interest expense
|
|
|
(85.1
|
)
|
|
|
|
|
|
|
|
|
|
|
(85.1
|
)
|
|
|
|
Income before income taxes and minority
interest
|
|
|
369.2
|
|
|
|
109.9
|
|
|
|
3.3
|
|
|
|
482.4
|
|
|
|
|
Income tax provision
|
|
|
(148.3
|
)
|
|
|
(2.8
|
)
|
|
|
|
|
|
|
(151.1
|
)
|
|
|
|
Income before minority interest
|
|
|
220.9
|
|
|
|
107.1
|
|
|
|
3.3
|
|
|
|
331.3
|
|
|
|
|
Minority interest income of consolidated
entities, net of tax
|
|
|
(1.1
|
)
|
|
|
(107.1
|
)
|
|
|
(3.3
|
)
|
|
|
(111.5
|
)
|
|
|
|
Net income
|
|
|
219.8
|
|
|
|
|
|
|
|
|
|
|
|
219.8
|
|
|
|
|
At December 31, 2007, the companys maximum risk of loss in significant VIEs in which the company
is not the primary beneficiary is presented in the table below.
|
|
|
|
|
|
|
Companys
|
|
|
Maximum
|
|
|
Risk of
|
$ in millions
|
|
Loss
|
Collateralized debt obligations
|
|
|
39.0
|
|
Private equity investments
|
|
|
19.6
|
|
Support agreements (See Note 22)
|
|
|
33.0
|
|
|
|
|
|
|
Total
|
|
|
91.6
|
|
|
|
|
|
|
88
19. SHARE-BASED COMPENSATION
The company recognized total expenses of $105.2 million, $140.6 million and $40.6 million related
to equity-settled share-based payment transactions in 2007, 2006 and 2005, respectively. The total
income tax benefit recognized in the Consolidated Statements of
Income for share-based compensation
arrangements was $36.8 million for 2007 (2006: $47.4 million; 2005: $13.7 million).
Cash
received from exercise of share options and similar instruments
granted under share-based
compensation arrangements was $137.4 million in 2007 (2006: $66.8 million; 2005: $7.7 million).
The tax benefit realized from share option exercises was $38.2 million in 2007 (2006: $17.9
million; 2005: $nil).
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 categories: time-vested and performance-vested share awards. All equity
awards are granted under the companys 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 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 accrue 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 6.8 million awards in 2007 at a weighted average share
price of 1251p. Throughout this note, share award numbers and share prices have been adjusted to
reflect the one-for-two share consolidation that occurred on December 4, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
Time-
|
|
|
Performance-
|
|
Grant Date
|
|
millions of shares, except fair values
|
|
Vested
|
|
|
Vested
|
|
Fair Value (pence)
|
|
Unvested at the beginning of year
|
|
|
15.6
|
|
|
|
4.6
|
|
|
|
750.10
|
|
Granted during the year
|
|
|
4.9
|
|
|
|
1.9
|
|
|
|
1251.24
|
|
Forfeited during the year
|
|
|
(1.4
|
)
|
|
|
(0.3
|
)
|
|
|
852.30
|
|
Vested and distributed during the year
|
|
|
(3.9
|
)
|
|
|
|
|
|
|
664.76
|
|
|
|
|
Unvested at the end of the year
|
|
|
15.2
|
|
|
|
6.2
|
|
|
|
915.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
|
Time-
|
|
|
Performance-
|
|
|
Time-
|
|
|
Performance-
|
|
millions of shares
|
|
Vested
|
|
|
Vested
|
|
|
Vested
|
|
|
Vested
|
|
Unvested at the beginning of year
|
|
|
16.6
|
|
|
|
2.5
|
|
|
|
15.8
|
|
|
|
|
|
Granted during the year
|
|
|
1.7
|
|
|
|
2.2
|
|
|
|
2.5
|
|
|
|
2.5
|
|
Forfeited during the year
|
|
|
(0.7
|
)
|
|
|
(0.1
|
)
|
|
|
(1.7
|
)
|
|
|
|
|
Vested and distributed during the year
|
|
|
(2.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested at the end of the year
|
|
|
15.6
|
|
|
|
4.6
|
|
|
|
16.6
|
|
|
|
2.5
|
|
|
|
|
The awards outstanding at December 31, 2007 had a weighted average remaining contractual life of
2.01 years.
The total grant date fair value of shares vested during 2007 was $51.7 million (2006: $29.3
million; 2005: $8.1million). The weighted average fair value at the date of grant of these share
incentive awards was 665p (2006: 684p; 2005: 668p).
Deferred share awards that do not include dividend rights or cash payments in lieu of dividends are
valued using the Black-Scholes model. There were no such awards granted in 2007. The assumptions
used in the Black-Scholes model for these awards granted in 2006 and 2005 are as follows:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
2005
|
Weighted average share price
|
|
1034p
|
|
666p
|
Expected term
|
|
5.3 years
|
|
4.0 years
|
Expected dividend yield
|
|
|
1.84
|
%
|
|
|
2.25
|
%
|
|
|
|
At December 31, 2007, there was $209.4 million of total unrecognized compensation cost related to
non-vested share incentive awards; that cost is expected to be recognized over a weighted average
period of 1.80 years.
89
Share Options
The company maintains two option plans: the 2000 Share Option Plan and the No. 3 Executive Share
Option Scheme. As of December 31, 2007, 29.7 million shares were reserved for awards under these
option plans. The company has not made any awards under the latter plan since April 2003.
Since November 2002, the exercises of share options awarded under the 2000 Plan are subject to the
satisfaction of the performance conditions described further below. 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 earnings per share since the date of the award has grown by a specified
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. Upon the exercise of share
options, the company either issues new shares or can utilize shares held by employee trusts (see
Note 11) to satisfy the exercise.
The share option plans provide for a grant price equal to the quoted market price of the companys
shares on the date of grant. The cliff 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
|
Price
|
|
|
|
|
|
Price
|
|
|
|
|
|
Price
|
|
$ in millions, except prices
|
|
Options
|
|
|
(pence)
|
|
|
Options
|
|
|
(pence)
|
|
|
Options
|
|
|
(pence)
|
|
Outstanding at the beginning of year
|
|
|
40.5
|
|
|
|
1220.54
|
|
|
|
64.4
|
|
|
|
1086.18
|
|
|
|
67.5
|
|
|
|
1114.40
|
|
Granted during the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1
|
|
|
|
665.00
|
|
Forfeited during the year
|
|
|
(3.1
|
)
|
|
|
1399.81
|
|
|
|
(19.1
|
)
|
|
|
936.38
|
|
|
|
(5.7
|
)
|
|
|
1243.44
|
|
Exercised during the year
|
|
|
(7.7
|
)
|
|
|
855.27
|
|
|
|
(4.8
|
)
|
|
|
673.44
|
|
|
|
(0.5
|
)
|
|
|
517.76
|
|
|
|
|
Outstanding at the end of the year
|
|
|
29.7
|
|
|
|
1296.72
|
|
|
|
40.5
|
|
|
|
1220.54
|
|
|
|
64.4
|
|
|
|
1086.18
|
|
|
|
|
Exercisable at the end of the year
|
|
|
21.3
|
|
|
|
1546.31
|
|
|
|
24.4
|
|
|
|
1560.44
|
|
|
|
31.7
|
|
|
|
1409.50
|
|
No grants were issued in 2007 or 2006. The options outstanding at December 31, 2007 had a range of
exercise prices from 50p to 3360p, and a weighted average remaining contractual life of 4.19 years
(for options exercisable at December 31, 2007, the weighted average remaining contractual life is
3.13 years). The weighted average grant date fair value of options granted during 2005 was 394p.
The total intrinsic value of options exercised during the years ended December 31, 2007, 2006 and
2005 was $67.9 million, $40.4 million and $3.0 million, respectively. At December 31, 2007, the
aggregate intrinsic value of options outstanding and options exercisable was $275.5 million and
$122.1 million, respectively. The market price at the end of 2007 was $31.38 (2006: 1192p). Upon
exercise, the sterling exercise price will be converted to U.S. dollars using the foreign exchange
rate in effect on the exercise date.
On February 12, 2007, 6.2 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 ($0.08 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 (a lattice model) using the
following assumptions for 2005 (no grants were issued in 2007 or 2006):
|
|
|
|
|
|
|
2005
|
Weighted average share price
|
|
|
876p
|
|
Weighted average exercise price
|
|
|
878p
|
|
Expected volatility
|
|
|
52.0
|
%
|
Expected term
|
|
7.8 years
|
Risk free rate
|
|
|
4.2
|
%
|
Expected dividends
|
|
|
2.2
|
%
|
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.
90
At December 31, 2007, there was $3.3 million of total unrecognized compensation cost related to
non-vested share options under the two option plans; that cost is expected to be recognized over a
weighted average period of 1 year.
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, 2007, 1.0 million
shares were reserved for awards under 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, 2007, there are 1.0 million
options to purchase shares outstanding under these programs. The fair value of these options was
determined using the stochastic valuation model (a lattice model), and the weighted average
contractual life of these awards is 1.89 years at December 31, 2007.
At December 31, 2007, there was $5.2 million of total unrecognized compensation cost related to
non-vested share options granted under sharesave plans; that cost is expected to be recognized over
a weighted average period of 1.46 years.
Employee Share Ownership Plan
The company sponsors the Invesco Employee Share Ownership Plan (ESOP) for certain of its U.S.-based
employees. The ESOP was a leveraged employee stock ownership retirement plan designed to invest
primarily in company shares. The plan was closed to further participants effective
January 1, 2000, and no contributions were made into this plan after this date. All shares held by
the ESOP have been allocated to employee accounts.
Adoption of FAS 123(R)
As a result of adopting FAS 123(R) on January 1, 2006, the companys income before income taxes and
minority interest and net income for the year ended December 31, 2006 are $63.8 million and $42.0 million lower,
respectively, than if it had continued to account for share-based compensation under APB 25. Basic
and diluted earnings per share for the year ended December 31,
2006 are $0.10 lower than if the company continued to account for share-based compensation under APB 25.
Prior to adoption of FAS 123(R), the company presented all tax benefits of deductions resulting
from the exercise of share options as operating activities in the Consolidated Statements of Cash
Flows. FAS 123(R) requires the cash flows resulting from the tax benefits resulting from tax
deductions in excess of the compensation cost recognized for those options (excess tax benefits) to
be classified as financing activities. The $12.3 million excess tax benefit classified as a
financing activity in 2006 would have been classified as an operating activity if the company had
not adopted FAS 123(R).
91
The following table illustrates the effect of the change from applying the APB 25 option of FAS 123
to applying FAS 123(R) in 2006 on income before income taxes and minority interest, net income, net
cash provided by operating activities, net cash used in financing activities and earnings per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
Income before
|
|
|
|
|
|
|
Net cash
|
|
|
Net cash
|
|
|
|
income taxes and
|
|
|
|
|
|
|
provided by
|
|
|
used in
|
|
|
|
minority
|
|
|
|
|
|
operating
|
|
|
financing
|
|
$ in millions, except earnings per share
|
|
interest
|
|
|
Net income
|
|
|
activities
|
|
|
activities
|
|
As reported
|
|
|
1,034.3
|
|
|
|
482.7
|
|
|
|
455.9
|
|
|
|
(163.1
|
)
|
Add: Total
share-based compensation
expense determined under FAS 123(R) for
all awards, net of related tax effects
of $47.4 million
|
|
|
140.6
|
|
|
|
93.2
|
|
|
|
(5.6
|
)
|
|
|
(12.3
|
)
|
Deduct: Share-based compensation
expense calculated under APB 25, net of
related tax effects of $25.6 million
|
|
|
(76.8
|
)
|
|
|
(51.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma amounts
|
|
|
1,098.1
|
|
|
|
524.7
|
|
|
|
450.3
|
|
|
|
(175.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basicas reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.22
|
|
Basicpro forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.32
|
|
Dilutedas reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.19
|
|
Dilutedpro forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.29
|
|
The following table illustrates the effect of the change from applying FAS 123(R) in 2005 on net income and earnings per share:
|
|
|
|
|
|
|
2005
|
|
$ in millions, except earnings per share
|
|
Net income
|
|
As reported
|
|
|
219.8
|
|
Deduct:
Total share-based compensation expense determined under
FAS 123(R) for all awards, net of related tax effects of $17.7
million
|
|
|
(34.9
|
)
|
Add: Share-based compensation expense calculated under APB
25, net of related tax effects of $13.7 million
|
|
|
26.9
|
|
|
|
|
|
Pro forma amount
|
|
|
211.8
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
Basicas reported
|
|
$
|
0.55
|
|
Basicpro forma
|
|
$
|
0.53
|
|
Dilutedas reported
|
|
$
|
0.54
|
|
Dilutedpro forma
|
|
$
|
0.53
|
|
92
20. OPERATING LEASES
The company leases office space in the majority of its locations of business under non-cancelable
operating leases. Sponsorship and naming rights commitments relate to INVESCO Field at Mile High, a
sports stadium in Denver, Colorado. These leases and commitments expire on varying dates through
2022. Certain leases provide for renewal options and contain escalation clauses providing for
increased rent based upon maintenance, utility and tax increases.
As of December 31, 2007, the companys total future commitments by year under non-cancelable
operating leases are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sponsorship and
|
|
|
$ in millions
|
|
Total
|
|
Buildings
|
|
Naming Rights
|
|
Other
|
2008
|
|
|
64.5
|
|
|
|
56.6
|
|
|
|
6.0
|
|
|
|
1.9
|
|
2009
|
|
|
63.7
|
|
|
|
55.9
|
|
|
|
6.0
|
|
|
|
1.8
|
|
2010
|
|
|
57.3
|
|
|
|
49.6
|
|
|
|
6.0
|
|
|
|
1.7
|
|
2011
|
|
|
50.7
|
|
|
|
43.1
|
|
|
|
6.0
|
|
|
|
1.6
|
|
2012
|
|
|
49.1
|
|
|
|
41.5
|
|
|
|
6.0
|
|
|
|
1.6
|
|
Thereafter
|
|
|
302.7
|
|
|
|
247.9
|
|
|
|
51.5
|
|
|
|
3.3
|
|
|
|
|
Gross
lease commitments
|
|
|
588.0
|
|
|
|
494.6
|
|
|
|
81.5
|
|
|
|
11.9
|
|
|
|
|
Less: future minimum
payments expected to
be received under
non-cancelable
subleases
|
|
|
(159.1
|
)
|
|
|
(159.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net lease
commitments
|
|
|
428.9
|
|
|
|
335.5
|
|
|
|
81.5
|
|
|
|
11.9
|
|
|
|
|
The company recognized $57.7 million, $46.6 million, and $52.9 million in operating lease costs in
the Consolidated Statements of Income in 2007, 2006 and 2005, respectively. These costs are net of
$1.6 million, $1.8 million and $1.0 million of sublease income in 2007, 2006 and 2005,
respectively.
The company maintains approximately $39.2 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 $26.1 million of the letters of credit support office lease
obligations.
21. 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 Consolidated Statements of Income for the year ended December 31,
2007 of $44.3 million (2006: $38.1 million; 2005: $60.5 million) represents contributions payable
to these plans by the company at rates specified in the rules of the plans. As of December 31,
2007, contributions of $21.2 million (2006: $19.5 million) due for the current year 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 plans, the employees are generally 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, 2007. The benefit obligation, the related current service
cost and prior service cost were measured using the projected unit credit method.
93
Obligations and Funded Status
The amounts included in the Consolidated Balance Sheets arising from the companys obligations and
plan assets in respect of its defined benefit retirement plans is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans
|
|
|
Medical Plan
|
|
|
|
|
$ in millions
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Benefit obligation
|
|
|
(381.0
|
)
|
|
|
(378.8
|
)
|
|
|
(47.7
|
)
|
|
|
(44.6
|
)
|
Fair value of plan assets
|
|
|
341.3
|
|
|
|
329.5
|
|
|
|
7.6
|
|
|
|
7.3
|
|
|
|
|
Funded status
|
|
|
(39.7
|
)
|
|
|
(49.3
|
)
|
|
|
(40.1
|
)
|
|
|
(37.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in
the Consolidated Balance
Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
1.6
|
|
|
|
1.9
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
(3.2
|
)
|
|
|
|
|
|
|
(0.7
|
)
|
|
|
(0.8
|
)
|
Non-current liabilities
|
|
|
(38.1
|
)
|
|
|
(51.2
|
)
|
|
|
(39.4
|
)
|
|
|
(36.5
|
)
|
|
|
|
Funded status
|
|
|
(39.7
|
)
|
|
|
(49.3
|
)
|
|
|
(40.1
|
)
|
|
|
(37.3
|
)
|
|
|
|
|
Changes in the benefit obligations were as follows:
|
|
|
|
Retirement Plans
|
|
Medical Plan
|
|
|
|
$ in millions
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
|
|
January 1
|
|
|
378.7
|
|
|
|
334.4
|
|
|
|
44.6
|
|
|
|
72.4
|
|
Service cost
|
|
|
7.5
|
|
|
|
8.4
|
|
|
|
0.1
|
|
|
|
0.7
|
|
Interest cost
|
|
|
19.3
|
|
|
|
16.1
|
|
|
|
2.6
|
|
|
|
2.5
|
|
Contributions from plan participants
|
|
|
|
|
|
|
|
|
|
|
0.7
|
|
|
|
0.8
|
|
Actuarial (gains)/losses
|
|
|
(19.7
|
)
|
|
|
(0.6
|
)
|
|
|
2.1
|
|
|
|
(3.7
|
)
|
Exchange difference
|
|
|
4.3
|
|
|
|
38.9
|
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(9.0
|
)
|
|
|
(7.6
|
)
|
|
|
(2.4
|
)
|
|
|
(2.2
|
)
|
Plan amendments
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
(25.9
|
)
|
Settlement and other
|
|
|
(0.3
|
)
|
|
|
(10.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
381.0
|
|
|
|
378.8
|
|
|
|
47.7
|
|
|
|
44.6
|
|
|
|
|
|
Plan amendments in 2006 for the medical plan reflect the adjustment to eliminate benefits for all
participants who will not meet retirement eligibility by 2008.
|
|
Key assumptions used in plan valuations are detailed below. Appropriate local
mortality tables are also used. The weighted average assumptions used to determine defined benefit
obligations at December 31, 2007 and 2006 are:
|
|
|
|
Retirement Plans
|
|
Medical Plan
|
|
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
|
|
Discount rate
|
|
|
5.73
|
%
|
|
|
5.10
|
%
|
|
|
5.75
|
%
|
|
|
5.75
|
%
|
Expected rate of salary increases
|
|
|
5.82
|
%
|
|
|
5.41
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Future
pension/ medical cost trend rate increases
|
|
|
3.28
|
%
|
|
|
2.86
|
%
|
5.50%-9.00
|
%
|
5.50%-9.00
|
%
|
|
|
|
|
Changes in the fair value of plan assets in the current period were as follows:
|
|
|
|
Retirement Plans
|
|
Medical Plan
|
|
|
|
$ in millions
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
|
|
January 1
|
|
|
329.5
|
|
|
|
254.1
|
|
|
|
7.3
|
|
|
|
7.0
|
|
Actual return on plan assets
|
|
|
10.1
|
|
|
|
31.6
|
|
|
|
0.5
|
|
|
|
0.6
|
|
Exchange difference
|
|
|
3.4
|
|
|
|
32.9
|
|
|
|
|
|
|
|
|
|
Contributions from the company
|
|
|
7.6
|
|
|
|
27.7
|
|
|
|
|
|
|
|
|
|
Contributions from plan participants
|
|
|
|
|
|
|
|
|
|
|
0.4
|
|
|
|
0.5
|
|
Benefits paid
|
|
|
(9.0
|
)
|
|
|
(7.6
|
)
|
|
|
(0.6
|
)
|
|
|
(0.8
|
)
|
Settlement and other
|
|
|
(0.3
|
)
|
|
|
(9.2
|
)
|
|
|
|
|
|
|
|
|
|
|
-
|
December 31
|
|
|
341.3
|
|
|
|
329.5
|
|
|
|
7.6
|
|
|
|
7.3
|
|
|
|
|
94
The components of the amount recognized in accumulated other comprehensive income/(loss) at
December 31, 2007 and 2006 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans
|
|
Medical Plan
|
$ in millions
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
|
|
Prior service cost/(credit)
|
|
|
0.4
|
|
|
|
0.3
|
|
|
|
(19.9
|
)
|
|
|
(21.9
|
)
|
Transition obligation
|
|
|
(0.1
|
)
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
Net actuarial loss/(gain)
|
|
|
55.4
|
|
|
|
62.7
|
|
|
|
23.3
|
|
|
|
25.8
|
|
|
|
|
|
|
|
55.7
|
|
|
|
62.9
|
|
|
|
3.4
|
|
|
|
3.9
|
|
|
|
|
The amounts in accumulated other comprehensive income expected to be amortized into net periodic
benefit cost during the year ending December 31, 2008 are as follows:
|
|
|
|
|
|
|
|
|
$ in millions
|
|
Retirement Plans
|
|
Medical Plan
|
|
|
|
Prior service cost/(credit)
|
|
|
|
|
|
|
(2.0
|
)
|
Net actuarial loss/(gain)
|
|
|
1.4
|
|
|
|
3.7
|
|
|
|
|
Total
|
|
|
1.4
|
|
|
|
1.7
|
|
|
|
|
The total accumulated benefit obligation, the accumulated benefit obligation and fair value of plan
assets for plans with accumulated benefit obligations in excess of plan assets and the projected
benefit obligation and fair value of plan assets for pension plans with projected benefit
obligations in excess of plan assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans
|
$ in millions
|
|
2007
|
|
2006
|
|
|
|
Plans with accumulated benefit obligation in excess of plan assets:
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
|
(342.0
|
)
|
|
|
(300.8
|
)
|
Fair value of plan assets
|
|
|
327.4
|
|
|
|
284.4
|
|
Plans with projected benefit obligation in excess of plan assets:
|
|
|
|
|
|
|
|
|
Projected benefit obligation
|
|
|
(368.7
|
)
|
|
|
(346.6
|
)
|
Fair value of plan assets
|
|
|
327.4
|
|
|
|
295.5
|
|
Components of Net Periodic Benefit Cost
The components of net periodic benefit cost in respect of these defined benefit plans are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans
|
|
Medical Plan
|
$ in millions
|
|
2007
|
|
2006
|
|
2005
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
Service cost
|
|
|
(7.6
|
)
|
|
|
(8.4
|
)
|
|
|
(18.3
|
)
|
|
|
(0.1
|
)
|
|
|
(0.7
|
)
|
|
|
(4.2
|
)
|
Interest cost
|
|
|
(19.3
|
)
|
|
|
(16.1
|
)
|
|
|
(15.1
|
)
|
|
|
(2.6
|
)
|
|
|
(2.5
|
)
|
|
|
(3.8
|
)
|
Expected return on plan assets
|
|
|
22.6
|
|
|
|
19.0
|
|
|
|
15.3
|
|
|
|
0.4
|
|
|
|
0.5
|
|
|
|
0.5
|
|
Amortization of prior service cost/(credit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.0
|
|
|
|
1.8
|
|
|
|
(0.4
|
)
|
Amortization of net actuarial gain/(loss)
|
|
|
(1.9
|
)
|
|
|
(3.0
|
)
|
|
|
(4.1
|
)
|
|
|
(4.6
|
)
|
|
|
(4.5
|
)
|
|
|
(1.9
|
)
|
Settlement
|
|
|
(0.1
|
)
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
|
(6.3
|
)
|
|
|
(8.6
|
)
|
|
|
(22.2
|
)
|
|
|
(4.9
|
)
|
|
|
(5.4
|
)
|
|
|
(9.8
|
)
|
|
|
|
Assumptions
The weighted average assumptions used to determine net periodic benefit cost for the years ended
December 31, 2007, 2006 and 2005 are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans
|
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
Discount rate
|
|
|
5.10
|
%
|
|
|
4.61
|
%
|
|
|
5.22
|
%
|
Expected return on plan assets
|
|
|
6.74
|
%
|
|
|
6.84
|
%
|
|
|
6.95
|
%
|
Expected rate of salary increases
|
|
|
5.41
|
%
|
|
|
4.82
|
%
|
|
|
4.76
|
%
|
Future pension rate increases
|
|
|
2.86
|
%
|
|
|
2.75
|
%
|
|
|
2.75
|
%
|
|
95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Plan
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.75
|
%
|
|
|
5.75
|
%
|
|
|
5.50
|
%
|
|
|
|
|
Expected return on plan assets
|
|
|
7.00
|
%
|
|
|
7.00
|
%
|
|
|
8.00
|
%
|
|
|
|
|
Expected rate of salary increases
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
4.50
|
%
|
|
|
|
|
Future medical cost trend rate
increases
|
|
|
5.50%-9.00
|
%
|
|
|
5.50%-9.00
|
%
|
|
|
5.50%-9.00
|
%
|
|
|
|
|
|
|
|
|
|
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. Discount rate assumptions were based upon AA-rated corporate
bonds of suitable terms and currencies.
The assumed health care cost rates are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Plan
|
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
Health care cost trend rate assumed for next year
|
|
|
9.0
|
%
|
|
|
9.0
|
%
|
|
|
9.0
|
%
|
Rate to which cost trend rate gradually declines
|
|
|
5.5
|
%
|
|
|
5.5
|
%
|
|
|
5.5
|
%
|
Year the rate reaches level it is assumed to remain thereafter
|
|
|
2011
|
|
|
|
2010
|
|
|
|
2009
|
|
A one percent change in the assumed rate of increase in healthcare costs would have the following
effects:
|
|
|
|
|
|
|
|
|
$ in millions
|
|
Increase
|
|
Decrease
|
|
|
|
Effect on aggregate service and interest costs
|
|
|
0.4
|
|
|
|
(0.3
|
)
|
Effect on defined benefit obligation
|
|
|
5.9
|
|
|
|
(4.9
|
)
|
|
Plan Assets
The analysis of the plan assets at the balance sheet date was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans
|
|
|
Medical Plan
|
|
|
|
|
|
|
|
% Fair Value
|
|
|
|
|
|
|
|
|
|
|
% Fair Value
|
|
|
|
|
$ in millions
|
|
2007
|
|
|
of Plan Assets
|
|
|
2006
|
|
|
2007
|
|
|
of Plan Assets
|
|
|
2006
|
|
Equity instruments
|
|
|
222.4
|
|
|
|
65.2
|
|
|
|
230.0
|
|
|
|
3.5
|
|
|
|
46.1
|
|
|
|
2.9
|
|
Debt instruments
|
|
|
97.3
|
|
|
|
28.5
|
|
|
|
76.8
|
|
|
|
3.8
|
|
|
|
50.0
|
|
|
|
4.1
|
|
Other assets
|
|
|
21.6
|
|
|
|
6.3
|
|
|
|
22.7
|
|
|
|
0.3
|
|
|
|
3.9
|
|
|
|
0.3
|
|
|
|
|
|
|
|
341.3
|
|
|
|
100.0
|
|
|
|
329.5
|
|
|
|
7.6
|
|
|
|
100.0
|
|
|
|
7.3
|
|
|
|
|
The investment policies and strategies for plan assets held by defined benefit plans include:
|
|
Funding to have sufficient assets available to pay members benefits;
|
|
|
|
Security to maintain the minimum Funding Requirement;
|
|
|
|
Stability to have due regard to the employers ability in meeting contribution payments given their size and incidence.
|
Certain plan assets are invested in affiliated funds. Plan assets are not held in company stock.
Cash Flows
The estimated amounts of contributions expected to be paid to the plans during 2008 is $7.9 million
for retirement plans, with no expected contribution to the medical plan.
96
There are no future annual benefits of plan participants covered by insurance contracts issued by
the employer or related parties.
The benefits expected to be paid in each of the next five fiscal years and in the five fiscal years
thereafter are as follows:
|
|
|
|
|
|
|
|
|
|
|
Retirement
|
|
Medical
|
$ in millions
|
|
Plans
|
|
Plan
|
|
|
|
Expected benefit payments:
|
|
|
|
|
|
|
|
|
2008
|
|
|
8.9
|
|
|
|
2.0
|
|
2009
|
|
|
8.3
|
|
|
|
2.2
|
|
2010
|
|
|
9.0
|
|
|
|
2.4
|
|
2011
|
|
|
11.2
|
|
|
|
2.5
|
|
2012
|
|
|
10.9
|
|
|
|
2.6
|
|
Thereafter in the succeeding five years
|
|
|
68.3
|
|
|
|
14.1
|
|
Adoption of FASB Statement No. 158
Effective December 31, 2006, the company adopted the recognition and disclosure provisions of FASB
Statement No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement
Plans an Amendment of FASB Statement No. 87, 88, 106 and 132(R). FASB Statement No. 158
required the company to recognize the funded status (i.e., the difference between the fair value of
plan assets and the projected benefit obligations) of its retirement plans and medical plan in the
December 31, 2006 Consolidated Balance Sheet, with a corresponding adjustment to accumulated other
comprehensive income, net of tax. The adjustment to accumulated other comprehensive income at
adoption represents the net unrecognized actuarial losses, unrecognized prior service costs and
unrecognized transition obligation remaining from the initial adoption of FASB Statement No. 87,
Employers Accounting for Pensions, all of which were previously netted against the plans funded
status in the companys balance sheet pursuant to the provisions of FASB Statement No. 87. These
amounts will be subsequently recognized as net periodic pension cost pursuant to the companys
historical accounting policy for amortizing such amounts. Further, actuarial gains and losses that
arise in subsequent periods will be recognized as a component of other comprehensive income. Those
amounts will be subsequently recognized as a component of net periodic pension cost on the same
basis as the amounts recognized in accumulated other comprehensive income at the adoption of FASB
Statement No. 158.
The incremental effects of adopting the provisions of FASB Statement No. 158 on the companys
Consolidated Balance Sheet at December 31, 2006 are presented in the following table. The adoption
of FASB Statement No. 158 had no effect on the companys Consolidated Statement of Income for the
year ended December 31, 2006, or for any prior period presented, and it will not affect the
companys operating results in future periods.
The following table illustrates the effect of the adoption of the recognition provisions of FASB
Statement No. 158 at December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before
|
|
|
|
|
|
|
|
|
Application
|
|
|
|
|
|
After Application
|
$ in million
|
|
of FAS 158
|
|
Adjustments
|
|
of FAS 158
|
|
|
|
Asset for pension benefits
|
|
|
5.1
|
|
|
|
(3.2
|
)
|
|
|
1.9
|
|
Non-current deferred income tax asset
|
|
|
107.5
|
|
|
|
11.0
|
|
|
|
118.5
|
|
Total assets
|
|
|
12,220.7
|
|
|
|
7.8
|
|
|
|
12,228.5
|
|
Liability for pension benefits
|
|
|
57.2
|
|
|
|
31.3
|
|
|
|
88.5
|
|
Total liabilities
|
|
|
4,591.2
|
|
|
|
31.3
|
|
|
|
4,559.9
|
|
Accumulated other comprehensive income
|
|
|
638.0
|
|
|
|
(23.5
|
)
|
|
|
614.5
|
|
Total shareholders equity
|
|
|
6,187.5
|
|
|
|
(23.5
|
)
|
|
|
6,164.0
|
|
22. OTHER COMMITMENTS AND CONTINGENCIES
Commitments and contingencies may arise in the ordinary course of business.
The
companys private equity products are structured as limited
partnerships. The companys investment may
take the form of the general partner or a limited partner. The private equity funds are structured
such that each partner makes capital commitments that are to be drawn down over the life of the
partnership as investment opportunities are identified. At
December 31, 2007, the companys undrawn capital
commitments were $60.2 million (2006: $19.2 million).
97
The volatility and valuation dislocations that occurred during 2007 in certain sectors of the fixed
income market have generated some pricing issues in many areas of the market. As a result of these
valuation dislocations, during the fourth quarter of 2007, Invesco
elected to enter into contingent support agreements for
two of its investment trusts to enable them to sustain a stable pricing structure. These two trusts
are unregistered trusts that invest in fixed income securities and are available only to accredited
investors. The fair value of these agreements at December 31, 2007 was estimated to be $4.5
million, which was recorded in other current liabilities on the Consolidated Balance Sheet at that
date as a guarantee obligation in accordance with FASB Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others An Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of
FASB Interpretation No. 34. As of the date of this Annual Report on Form 10-K, the maximum
support that could be provided under these agreements is $33.0 million. No payments have been made
under either agreement nor has Invesco realized any losses from the support agreements through the
date of this Report. These trusts were not consolidated because the company was not deemed to be
the primary beneficiary under FIN 46R.
Acquisition Contingencies
Contingent consideration related to acquisitions includes the following:
|
|
$500.0 million earn-out relating to the PowerShares acquisition. A contingent payment up to a
maximum of $500.0 million will be due in October 2011, five years after the date of
acquisition. The maximum payment would require a compound annual growth rate in management
fees of 100%. At the companys option, up to 35% of the contingent payment is payable in
equity.
|
|
|
|
$220.0 million earn-out relating to the WL Ross acquisition. Contingent payments of up to
$55.0 million are due each year for the five years following the October 2006 date of
acquisition based on the size and number of future fund launches. The maximum contingent
payments of $220.0 million would require annual fund launches to total $4.0 billion. The
first anniversary payment equaled $44.8 million and was paid in October 2007.
|
Legal Contingencies
Following the industry-wide regulatory investigations, multiple lawsuits based on market timing
allegations were filed against various parties affiliated with Invesco. These lawsuits were
consolidated in the United States District Court for the District of Maryland, together with market
timing lawsuits brought against affiliates of other mutual fund companies, and on September 29,
2004, three amended complaints were filed against company-affiliated parties: (1) a putative
shareholder class action complaint brought on behalf of shareholders of AIM funds formerly advised
by INVESCO Funds Group, Inc.; (2) a derivative complaint
purportedly brought on behalf of certain AIM
funds and the shareholders of such funds; and (3) an ERISA complaint purportedly brought on behalf of
participants in the companys 401(k) plan. On September 15, 2006, the court dismissed the ERISA
lawsuit with prejudice. The plaintiff has appealed that dismissal to the United States Court of
Appeals for the Fourth Circuit. Oral argument was held on December 5, 2007. The company and
plaintiffs have reached a settlement in principle of the shareholder class action and derivative
lawsuits. The proposed settlement, which is subject to court approval, calls for a payment by the
company of $9.8 million, recorded in general and administrative costs in the 2007 Consolidated
Statement of Income, in exchange for dismissal with prejudice of all pending claims. In addition,
under the terms of the proposed settlement the company may incur certain costs in connection with
providing notice of the proposed settlement to affected shareholders. Based on information
currently available, it is not believed that any such incremental notice costs will have any
material effect on the consolidated financial position or results of operations of the company.
The company and/or company-affiliated parties have also been named as defendants in a lawsuit
alleging that one or more of the companys funds inadequately employed fair value pricing, and
thereby made such funds more susceptible to market timing. The lawsuit is a purported class action
seeking unspecified monetary damages. It is now pending in the State court in Madison County,
Illinois after a series of removals to the United States District Court for the Southern District
of Illinois and remands back to the State Court.
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. The action against AIM was initiated on August 30, 2005. AIMs time to respond to
the Auditors proceeding has not yet elapsed.
Although there can be no assurances, based on information currently available, the company does not
believe it is probable that the ultimate outcome of any of these actions will have a material
adverse effect on the companys consolidated financial position or results of operations.
98
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 or results of
operations of the company.
23. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial assets and liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
|
|
2007 Book
|
|
2007 Fair
|
|
2006 Book
|
|
2006 Fair
|
$ in millions
|
|
Reference
|
|
Value
|
|
Value
|
|
Value
|
|
Value
|
Cash and cash equivalents
|
|
|
1
|
|
|
|
915.8
|
|
|
|
915.8
|
|
|
|
778.9
|
|
|
|
778.9
|
|
Cash and cash equivalents of
consolidated investment
products
|
|
|
18
|
|
|
|
36.6
|
|
|
|
36.6
|
|
|
|
55.4
|
|
|
|
55.4
|
|
Investments
|
|
|
3
|
|
|
|
299.5
|
|
|
|
299.5
|
|
|
|
267.7
|
|
|
|
267.6
|
|
Investments of consolidated
investment products
|
|
|
18
|
|
|
|
1,205.6
|
|
|
|
1,205.6
|
|
|
|
1,482.0
|
|
|
|
1,482.0
|
|
Assets held for policyholders
|
|
|
5
|
|
|
|
1,898.0
|
|
|
|
1,898.0
|
|
|
|
1,574.9
|
|
|
|
1,574.9
|
|
Policyholder payables
|
|
|
5
|
|
|
|
(1,898.0
|
)
|
|
|
(1,898.0
|
)
|
|
|
(1,574.9
|
)
|
|
|
(1,574.9
|
)
|
Total debt
|
|
|
10
|
|
|
|
(1,276.4
|
)
|
|
|
(1,261.0
|
)
|
|
|
(1,279.0
|
)
|
|
|
(1,263.5
|
)
|
Borrowings of consolidated
investment products
|
|
|
18
|
|
|
|
(116.6
|
)
|
|
|
(116.6
|
)
|
|
|
(37.0
|
)
|
|
|
(37.0
|
)
|
In determining the fair value of its financial instruments, the company uses a variety of methods
and assumptions that are based on market conditions and risk existing at each balance sheet date.
For the majority of financial instruments, standard market conventions and techniques such as
quoted market prices and discounted cash flow analysis are used to determine fair value. Dealer
quotes are used for the remaining financial instruments. All methods of assessing fair value
result in a general approximation of value, and such value may never actually be realized.
Cash and cash equivalents, marketable securities and investments are financial assets with carrying
values that approximate fair value because of the short maturity of those instruments. 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 indicative pricing
and analysis from various debt market-makers. Such analysis included comparison of the terms of the
companys debt with other actively traded debt of similar companies.
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 receivables.
Book value approximates fair value for cash deposits, which comprise deposits placed primarily in
affiliated money market accounts and seven-day deposits. Interest income recognized during the year
was $48.5 million (2006: $26.9 million; 2005: $16.7 million).
99
24. GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Prior to the December 4, 2007, redomicile and relisting discussed in Note 1, Invesco Holding
Company Limited (the Issuer, formerly INVESCO PLC), a subsidiary of Invesco Ltd. (the Parent)
issued 5.625% $300.0 million senior notes
due 2012, 4.5% $300.0 million senior notes due 2009,
5.375% $350.0 million senior notes due 2013 and 5.375% $200.0 million senior notes due 2014. These
senior notes are fully and unconditionally guaranteed as to payment of principal, interest and any
other amounts due thereon by the Parent together with 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 companys remaining consolidated subsidiaries
are Non-Guarantors. The guarantees of each of the guarantor subsidiaries are joint and several.
Presented below are condensed consolidating balance sheets as of
December 31, 2007 and 2006 and condensed consolidating income and cash flow statements of the
company for the years ended December 31, 2007, 2006 and 2005. The 2007 data has been presented
with the new Parent separately stated.
Condensed Consolidating Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
$ in millions
|
|
Guarantors
|
|
Guarantors
|
|
Issuer
|
|
Parent
|
|
Eliminations
|
|
Consolidated
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets held for policyholders
|
|
|
|
|
|
|
1,898.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,898.0
|
|
Other current assets
|
|
|
109.4
|
|
|
|
2,159.3
|
|
|
|
16.1
|
|
|
|
11.6
|
|
|
|
|
|
|
|
2,296.4
|
|
|
|
|
Total current assets
|
|
|
109.4
|
|
|
|
4,057.3
|
|
|
|
16.1
|
|
|
|
11.6
|
|
|
|
|
|
|
|
4,194.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
2,302.8
|
|
|
|
4,040.2
|
|
|
|
505.0
|
|
|
|
|
|
|
|
|
|
|
|
6,848.0
|
|
Investments in subsidiaries
|
|
|
662.5
|
|
|
|
1,759.6
|
|
|
|
1,514.5
|
|
|
|
6,605.2
|
|
|
|
(10,541.8
|
)
|
|
|
|
|
Other non-current assets
|
|
|
101.4
|
|
|
|
1,770.6
|
|
|
|
10.8
|
|
|
|
|
|
|
|
|
|
|
|
1,882.8
|
|
|
|
|
Total assets
|
|
|
3,176.1
|
|
|
|
11,627.7
|
|
|
|
2,046.4
|
|
|
|
6,616.8
|
|
|
|
(10,541.8
|
)
|
|
|
12,925.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Policyholder payables
|
|
|
|
|
|
|
1,898.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,898.0
|
|
Other current liabilities
|
|
|
427.8
|
|
|
|
1,305.4
|
|
|
|
4.3
|
|
|
|
5.4
|
|
|
|
|
|
|
|
1,742.9
|
|
|
|
|
Total current liabilities
|
|
|
427.8
|
|
|
|
3,203.4
|
|
|
|
4.3
|
|
|
|
5.4
|
|
|
|
|
|
|
|
3,640.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany balances
|
|
|
121.2
|
|
|
|
218.3
|
|
|
|
(360.3
|
)
|
|
|
20.8
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
24.8
|
|
|
|
271.3
|
|
|
|
1,276.4
|
|
|
|
|
|
|
|
|
|
|
|
1,572.5
|
|
|
|
|
Total liabilities
|
|
|
573.8
|
|
|
|
3,693.0
|
|
|
|
920.4
|
|
|
|
26.2
|
|
|
|
|
|
|
|
5,213.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interests in equity
of consolidated entities
|
|
|
|
|
|
|
1,121.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,121.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
2,602.3
|
|
|
|
6,813.5
|
|
|
|
1,126.0
|
|
|
|
6,590.6
|
|
|
|
(10,541.8
|
)
|
|
|
6,590.6
|
|
|
|
|
Total liabilities, minority
interests and shareholders
equity
|
|
|
3,176.1
|
|
|
|
11,627.7
|
|
|
|
2,046.4
|
|
|
|
6,616.8
|
|
|
|
(10,541.8
|
)
|
|
|
12,925.2
|
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
and
|
|
|
|
|
$ in millions
|
|
Guarantors
|
|
Guarantors
|
|
Issuer*
|
|
Eliminations
|
|
Consolidated
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets held for policyholders
|
|
|
|
|
|
|
1,574.9
|
|
|
|
|
|
|
|
|
|
|
|
1,574.9
|
|
Other current assets
|
|
|
142.4
|
|
|
|
1,950.1
|
|
|
|
41.6
|
|
|
|
|
|
|
|
2,134.1
|
|
|
|
|
Total current assets
|
|
|
142.4
|
|
|
|
3,525.0
|
|
|
|
41.6
|
|
|
|
|
|
|
|
3,709.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
2,318.5
|
|
|
|
3,555.2
|
|
|
|
487.0
|
|
|
|
|
|
|
|
6,360.7
|
|
Investments in subsidiaries
|
|
|
476.0
|
|
|
|
2,306.5
|
|
|
|
6,475.8
|
|
|
|
(9,258.3
|
)
|
|
|
|
|
Other non-current assets
|
|
|
94.3
|
|
|
|
2,064.3
|
|
|
|
0.2
|
|
|
|
|
|
|
|
2,158.8
|
|
|
|
|
Total assets
|
|
|
3,031.2
|
|
|
|
11,451.0
|
|
|
|
7,004.6
|
|
|
|
(9,258.3
|
)
|
|
|
12,228.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Policyholder payables
|
|
|
|
|
|
|
1,574.9
|
|
|
|
|
|
|
|
|
|
|
|
1,574.9
|
|
Other current liabilities
|
|
|
284.6
|
|
|
|
1,126.5
|
|
|
|
379.4
|
|
|
|
|
|
|
|
1,790.5
|
|
|
|
|
Total current liabilities
|
|
|
284.6
|
|
|
|
2,701.4
|
|
|
|
379.4
|
|
|
|
|
|
|
|
3,365.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany balances
|
|
|
151.1
|
|
|
|
376.6
|
|
|
|
(527.7
|
)
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
0.7
|
|
|
|
204.9
|
|
|
|
988.9
|
|
|
|
|
|
|
|
1,194.5
|
|
|
|
|
Total liabilities
|
|
|
436.4
|
|
|
|
3,282.9
|
|
|
|
840.6
|
|
|
|
|
|
|
|
4,559.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interests in equity
of consolidated entities
|
|
|
|
|
|
|
1,504.6
|
|
|
|
|
|
|
|
|
|
|
|
1,504.6
|
|
|
Total shareholders equity
|
|
|
2,594.8
|
|
|
|
6,663.5
|
|
|
|
6,164.0
|
|
|
|
(9,258.3
|
)
|
|
|
6,164.0
|
|
|
|
|
Total liabilities, minority
interests and shareholders
equity
|
|
|
3,031.2
|
|
|
|
11,451.0
|
|
|
|
7,004.6
|
|
|
|
(9,258.3
|
)
|
|
|
12,228.5
|
|
|
|
|
|
|
|
*
|
|
Prior to December 4, 2007, the Parent entity, INVESCO PLC, was also the issuer of the debt.
|
Condensed Consolidating Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
$ in millions
|
|
Guarantors
|
|
Guarantors
|
|
Issuer
|
|
Parent
|
|
Eliminations
|
|
Consolidated
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
772.3
|
|
|
|
3,106.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,878.9
|
|
Total operating expenses
|
|
|
(562.7
|
)
|
|
|
(2,282.9
|
)
|
|
|
(28.2
|
)
|
|
|
(10.8
|
)
|
|
|
|
|
|
|
(2,884.6
|
)
|
|
|
|
Operating income/(loss)
|
|
|
209.6
|
|
|
|
823.7
|
|
|
|
(28.2
|
)
|
|
|
(10.8
|
)
|
|
|
|
|
|
|
994.3
|
|
Equity in earnings of
unconsolidated affiliates
|
|
|
75.9
|
|
|
|
183.1
|
|
|
|
684.7
|
|
|
|
684.4
|
|
|
|
(1,580.0
|
)
|
|
|
48.1
|
|
Other income/(expense)
|
|
|
(1.5
|
)
|
|
|
214.4
|
|
|
|
(11.5
|
)
|
|
|
|
|
|
|
|
|
|
|
201.4
|
|
|
|
|
Income/(loss) before income
taxes and minority interest
|
|
|
284.0
|
|
|
|
1,221.2
|
|
|
|
645.0
|
|
|
|
673.6
|
|
|
|
(1,580.0
|
)
|
|
|
1,243.8
|
|
Income tax (provision)/benefit
|
|
|
(71.6
|
)
|
|
|
(293.2
|
)
|
|
|
7.5
|
|
|
|
|
|
|
|
|
|
|
|
(357.3
|
)
|
|
|
|
Income before minority interest
|
|
|
212.4
|
|
|
|
928.0
|
|
|
|
652.5
|
|
|
|
673.6
|
|
|
|
(1,580.0
|
)
|
|
|
886.5
|
|
|
|
|
Minority interest income of
consolidated entities, net
of tax
|
|
|
|
|
|
|
(212.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(212.9
|
)
|
|
|
|
Net income
|
|
|
212.4
|
|
|
|
715.1
|
|
|
|
652.5
|
|
|
|
673.6
|
|
|
|
(1,580.0
|
)
|
|
|
673.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
and
|
|
|
|
|
$ in millions
|
|
Guarantors
|
|
Guarantors
|
|
Issuer*
|
|
Eliminations
|
|
Consolidated
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
769.0
|
|
|
|
2,477.7
|
|
|
|
|
|
|
|
|
|
|
|
3,246.7
|
|
Total operating expenses
|
|
|
(540.5
|
)
|
|
|
(1,928.3
|
)
|
|
|
(18.7
|
)
|
|
|
|
|
|
|
(2,487.5
|
)
|
|
|
|
Operating income/(loss)
|
|
|
228.5
|
|
|
|
549.4
|
|
|
|
(18.7
|
)
|
|
|
|
|
|
|
759.2
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
60.9
|
|
|
|
147.3
|
|
|
|
481.6
|
|
|
|
(685.5
|
)
|
|
|
4.3
|
|
Other income/(expense)
|
|
|
(4.3
|
)
|
|
|
262.8
|
|
|
|
12.3
|
|
|
|
|
|
|
|
270.8
|
|
|
|
|
Income/(loss) before income taxes and minority
interest
|
|
|
285.1
|
|
|
|
959.5
|
|
|
|
475.2
|
|
|
|
(685.5
|
)
|
|
|
1,034.3
|
|
Income tax (provision)/benefit
|
|
|
(79.8
|
)
|
|
|
(182.3
|
)
|
|
|
7.5
|
|
|
|
|
|
|
|
(254.6
|
)
|
|
|
|
Income before minority interest
|
|
|
205.3
|
|
|
|
777.2
|
|
|
|
482.7
|
|
|
|
(685.5
|
)
|
|
|
779.7
|
|
Minority interest income of consolidated
entities, net of tax
|
|
|
|
|
|
|
(297.0
|
)
|
|
|
|
|
|
|
|
|
|
|
(297.0
|
)
|
|
|
|
Net income
|
|
|
205.3
|
|
|
|
480.2
|
|
|
|
482.7
|
|
|
|
(685.5
|
)
|
|
|
482.7
|
|
|
|
|
|
|
|
*
|
|
Prior to December 4, 2007, the Parent entity, INVESCO PLC, was also the issuer of the debt.
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
and
|
|
|
|
|
$ in millions
|
|
Guarantors
|
|
Guarantors
|
|
Issuer*
|
|
Eliminations
|
|
Consolidated
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
722.6
|
|
|
|
2,150.0
|
|
|
|
|
|
|
|
|
|
|
|
2,872.6
|
|
Total operating expenses
|
|
|
(570.8
|
)
|
|
|
(1,895.2
|
)
|
|
|
1.3
|
|
|
|
|
|
|
|
(2,464.7
|
)
|
|
|
|
Operating income/(loss)
|
|
|
151.8
|
|
|
|
254.8
|
|
|
|
1.3
|
|
|
|
|
|
|
|
407.9
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
79.3
|
|
|
|
80.1
|
|
|
|
252.0
|
|
|
|
(410.7
|
)
|
|
|
0.7
|
|
Other income/(expense)
|
|
|
(31.3
|
)
|
|
|
137.6
|
|
|
|
(32.5
|
)
|
|
|
|
|
|
|
73.8
|
|
|
|
|
Income/(loss) before income taxes and minority
interest
|
|
|
199.8
|
|
|
|
472.5
|
|
|
|
220.8
|
|
|
|
(410.7
|
)
|
|
|
482.4
|
|
Income tax (provision)/benefit
|
|
|
(40.4
|
)
|
|
|
(109.7
|
)
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
(151.1
|
)
|
|
|
|
Income before minority interest
|
|
|
159.4
|
|
|
|
362.8
|
|
|
|
219.8
|
|
|
|
(410.7
|
)
|
|
|
331.3
|
|
Minority interest income of consolidated
entities, net of tax
|
|
|
|
|
|
|
(111.5
|
)
|
|
|
|
|
|
|
|
|
|
|
(111.5
|
)
|
|
|
|
Net income
|
|
|
159.4
|
|
|
|
251.3
|
|
|
|
219.8
|
|
|
|
(410.7
|
)
|
|
|
219.8
|
|
|
|
|
|
|
|
*
|
|
Prior to December 4, 2007, the Parent entity, INVESCO PLC, was also the issuer of the debt.
|
Condensed Consolidating Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
$ in millions
|
|
Guarantors
|
|
Guarantors
|
|
Issuer
|
|
Parent
|
|
Eliminations
|
|
Consolidated
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
14.6
|
|
|
|
469.9
|
|
|
|
418.0
|
|
|
|
92.7
|
|
|
|
(81.5
|
)
|
|
|
913.7
|
|
Net cash (used in)/provided by investing
activities
|
|
|
(9.1
|
)
|
|
|
(33.6
|
)
|
|
|
203.0
|
|
|
|
|
|
|
|
(206.7
|
)
|
|
|
(46.4
|
)
|
Net cash used in financing activities
|
|
|
|
|
|
|
(296.3
|
)
|
|
|
(646.0
|
)
|
|
|
(86.7
|
)
|
|
|
288.2
|
|
|
|
(740.8
|
)
|
|
|
|
|
Increase/(decrease) in cash and cash
equivalents
|
|
|
5.5
|
|
|
|
140.0
|
|
|
|
(25.0
|
)
|
|
|
6.0
|
|
|
|
|
|
|
|
126.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
and
|
|
|
|
|
$ in millions
|
|
Guarantors
|
|
Guarantors
|
|
Issuer*
|
|
Eliminations
|
|
Consolidated
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
124.5
|
|
|
|
362.1
|
|
|
|
34.5
|
|
|
|
(65.2
|
)
|
|
|
455.9
|
|
Net cash (used in)/provided by investing
activities
|
|
|
(134.8
|
)
|
|
|
(132.4
|
)
|
|
|
8.5
|
|
|
|
|
|
|
|
(258.7
|
)
|
Net cash provided by/(used in) financing
activities
|
|
|
0.5
|
|
|
|
(214.7
|
)
|
|
|
(14.1
|
)
|
|
|
65.2
|
|
|
|
(163.1
|
)
|
|
|
|
(Decrease)/increase in cash and cash
equivalents
|
|
|
(9.8
|
)
|
|
|
15.0
|
|
|
|
28.9
|
|
|
|
|
|
|
|
34.1
|
|
|
|
|
|
* Prior to December 4, 2007, the Parent entity, INVESCO PLC, was also the issuer of the debt.
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
and
|
|
|
|
|
$ in millions
|
|
Guarantors
|
|
Guarantors
|
|
Issuer*
|
|
Eliminations
|
|
Consolidated
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
19.9
|
|
|
|
347.6
|
|
|
|
143.1
|
|
|
|
(203.7
|
)
|
|
|
306.9
|
|
Net cash (used in)/provided by investing
activities
|
|
|
(28.1
|
)
|
|
|
1.4
|
|
|
|
138.7
|
|
|
|
|
|
|
|
112.0
|
|
Net cash used in financing activities
|
|
|
|
|
|
|
(172.9
|
)
|
|
|
(281.8
|
)
|
|
|
203.7
|
|
|
|
(251.0
|
)
|
|
|
|
(Decrease)/increase in cash and cash
equivalents
|
|
|
(8.2
|
)
|
|
|
176.1
|
|
|
|
|
|
|
|
|
|
|
|
167.9
|
|
|
|
|
|
|
|
*
|
|
Prior to December 4, 2007, the Parent entity, INVESCO PLC, was also the issuer of the debt.
|
102
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
N/A
Item 9A.
Controls and Procedures
Disclosure Controls and Procedures
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, 2007. 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.
Report of Management on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as defined in the Securities Exchange Act of 1934 Rules 13a-15(f) and
15d-15(f). Under the supervision and with the participation of our chief executive officer and
chief financial officer, management assessed the effectiveness of our internal control over
financial reporting as of December 31, 2007. In making this assessment, we used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
ControlIntegrated Framework. Based on our assessment, management concluded that our internal
control over financial reporting was effective as of December 31, 2007.
Our management, including our chief executive officer and chief financial officer, has evaluated
any change in our internal control over financial reporting that occurred during the fourth quarter
of 2007, and has concluded that there was no change during the fourth quarter of 2007 that has
materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
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.
Our independent auditors, Ernst & Young LLP, have issued an audit report on the effectiveness of
our internal control over financial reporting. This report appears in
Part II, Item 8, Financial Statements and Supplementary
Data of this Annual Report
on Form 10-K.
Item 9B.
Other Information
None.
103
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Invesco
has filed the certification of its Chief Financial Officer with the
New York Stock Exchange (NYSE) as required pursuant to
Section 303A.12 of the NYSE Listed Company Manual. In addition,
Invesco has filed the Sarbanes-Oxley Act Section 302 certifications of
its Chief Executive Officer and Chief Financial Officer with the
Securities and Exchange Commission, which certifications are attached
hereto as Exhibit 31.0 and Exhibit 31.1, respectively.
The information required by this Item will be included in the definitive Proxy Statement for the
companys annual meeting of shareholders, which will be filed with the SEC no later than 120 days
after the close of the fiscal year ended December 31, 2007, and is incorporated by reference in
this Report.
Item 11.
Executive Compensation
The information required by this Item will be included in the definitive Proxy Statement for the
companys annual meeting of shareholders, which will be filed with the SEC no later than 120 days
after the close of the fiscal year ended December 31, 2007, and is incorporated by reference in
this Report.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this Item will be included in the definitive Proxy Statement for the
companys annual meeting of shareholders, which will be filed with the SEC no later than 120 days
after the close of the fiscal year ended December 31, 2007, and is incorporated by reference in
this Report.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this Item will be included in the definitive Proxy Statement for the
companys annual meeting of shareholders, which will be filed with the SEC no later than 120 days
after the close of the fiscal year ended December 31, 2007, and is incorporated by reference in
this Report.
Item 14.
Principal Accountant Fees and Services
The information required by this Item will be included in the definitive Proxy Statement for the
companys annual meeting of shareholders, which will be filed with the SEC no later than 120 days
after the close of the fiscal year ended December 31, 2007, and is incorporated by reference in
this Report.
104
PART IV
Item 15.
Exhibits and Financial Statement Schedules
(a)(1) The
financial statements filed as part of this Report are listed in Part
II, Item 8, Financial Statements and Supplementary
Data.
(a)(2) No
financial statement schedules are required to be filed as part of this Report because all such schedules have been omitted.
Such omission has been made on the basis that information is provided
in the financial statements or related footnotes in Part II, Item 8,
Financial Statements and
Supplementary Data, or is not required to be filed as the
information is not applicable.
(a)(3) The
exhibits listed on the Exhibit Index are included with this
Report.
Exhibit Index
|
|
|
3.1
|
|
Memorandum of Association of Invesco Ltd., incorporating amendments up to and
including December 4, 2007, incorporated by reference to exhibit 3.1 to
Invescos Current Report on Form 8-K, filed with the Securities and Exchange
Commission on December 12, 2007
|
|
|
|
3.2
|
|
Amended and Restated Bye-Laws of Invesco Ltd., incorporating amendments up to
and including December 4, 2007, incorporated by reference to exhibit 3.2 to
Invescos Current Report on Form 8-K, filed with the Securities and Exchange
Commission on December 12, 2007
|
|
|
|
4.1
|
|
Specimen Certificate for Common Shares of Invesco Ltd., incorporated by
reference to exhibit 4.1 to Invescos Current Report on Form 8-K, filed with the
Securities and Exchange Commission on December 12, 2007
|
|
|
|
4.2
|
|
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
|
|
|
|
4.3
|
|
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
|
|
|
|
4.4
|
|
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
|
|
|
|
4.5
|
|
Indenture, dated as of April 11, 2007, for AMVESCAPs 5.625% Senior Notes Due
2012, 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
The Bank of New York Trust Company, N.A., incorporated by reference to exhibit
99.1 to AMVESCAPs Report on Form 6-K, filed with the Securities and Exchange
Commission on April 18, 2007
|
|
|
|
4.6
|
|
Supplemental Indenture, dated as of November 27, 2007, among INVESCO PLC, a
public limited company organized under the laws of England and Wales, and
formerly known as AMVESCAP PLC, A I M Advisors, Inc., A I M Management Group
Inc., INVESCO Institutional (N.A.), Inc., and INVESCO North American Holdings,
Inc., Invesco Ltd., a Bermuda corporation, and U.S. Bank National Association,
as Successor Trustee to SunTrust Bank, incorporated by reference to exhibit 4.1
to Invescos Current Report on Form 8-K, filed with the Securities and Exchange
Commission on November 30, 2007
|
105
|
|
|
|
|
|
4.7
|
|
Supplemental Indenture No. 2, dated as of November 27, 2007, among INVESCO PLC,
a public limited company organized under the laws of England and Wales, and
formerly known as AMVESCAP PLC, A I M Advisors, Inc., A I M Management Group
Inc., INVESCO Institutional (N.A.), Inc., and INVESCO North American Holdings,
Inc., Invesco Ltd., a Bermuda corporation, and The Bank of New York Trust
Company, N.A., incorporated by reference to exhibit 4.2 to Invescos Current
Report on Form 8-K, filed with the Securities and Exchange Commission on
November 30, 2007
|
|
|
|
4.8
|
|
Supplemental Indenture, dated as of November 27, 2007, among INVESCO PLC, a
public limited company organized under the laws of England and Wales, and
formerly known as AMVESCAP PLC, A I M Advisors, Inc., A I M Management Group
Inc., INVESCO Institutional (N.A.), Inc., and INVESCO North American Holdings,
Inc., Invesco Ltd., a Bermuda corporation, and U.S. Bank National Association,
as Successor Trustee to SunTrust Bank, incorporated by reference to exhibit 4.3
to Invescos Current Report on Form 8-K, filed with the Securities and Exchange
Commission on November 30, 2007
|
|
|
|
4.9
|
|
Supplemental Indenture, dated as of November 27, 2007, among INVESCO PLC, a
public limited company organized under the laws of England and Wales, and
formerly known as AMVESCAP PLC, A I M Advisors, Inc., A I M Management Group
Inc., INVESCO Institutional (N.A.), Inc., and INVESCO North American Holdings,
Inc., Invesco Ltd., a Bermuda corporation, and U.S. Bank National Association,
as Successor Trustee to SunTrust Bank, incorporated by reference to exhibit 4.4
to Invescos Current Report on Form 8-K, filed with the Securities and Exchange
Commission on November 30, 2007
|
|
|
|
4.10
|
|
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 December 31, 2002, filed with the Securities and
Exchange Commission on March 27, 2003.
|
|
|
|
10.1
|
|
Amended and Restated Five Year Credit Agreement, dated as of December 3, 2007,
among INVESCO PLC, Invesco Ltd., the banks, financial institutions and other
institutional lenders from time to time a party thereto and Bank of America,
N.A., as administrative agent
|
|
|
|
10.2
|
|
Third Amended and Restated Purchase and Sale Agreement, dated as of August 18,
2003, among Citibank, N.A., Citicorp North America, Inc., A I M Management Group
Inc., A I M Distributors, Inc., A I M Advisors, Inc. and Invesco Funds Group,
Inc.
|
|
|
|
10.3
|
|
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
|
|
|
|
10.4
|
|
Amendment No. 5 to Facility Documents, dated as of August 18, 2003, among
Invesco Funds Group, Inc., A I M Management Group Inc., A I M Advisors, Inc., A
I M Distributors, Inc., Citibank, N.A., Citicorp North America, Inc. and
Deutsche Bank Trust Company Americas
|
106
|
|
|
10.5
|
|
Global Stock Plan, as amended and restated as of August 31, 2005
|
|
|
|
10.6
|
|
No. 3 Executive Share Option Scheme, as revised as of August 2006
|
|
|
|
10.7
|
|
2000 Share Option Plan, as revised as of January 26, 2005
|
|
|
|
10.8
|
|
Invesco ESOP, as amended and restated, generally effective as of February 1,
2005
|
|
|
|
10.9
|
|
Wholesale Representatives Deferral Plan, amended and restated effective as of
December 10, 2002
|
|
|
|
10.10
|
|
2003 Share Option Plan (Canada), dated June 2003
|
|
|
|
10.11
|
|
Deferred Fees Share Plan, incorporated by reference to exhibit 4.22
to Invescos Annual Report on Form 20-F for the year ended December 31, 2000,
filed with the Securities and Exchange Commission on May 17, 2001.
|
|
|
|
10.12
|
|
Rules of the AMVESCAP International Sharesave Plan, dated May 8, 1997
|
|
|
|
10.13
|
|
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.
|
|
|
|
10.14
|
|
Global Partner Agreement, dated November 10, 2005, between AMVESCAP PLC and
Loren M. Starr
|
|
|
|
10.15
|
|
Global Partner Agreement, dated January 1, 2001, between AIM Funds Management
Inc. and Philip A. Taylor
|
|
|
|
10.16
|
|
Global Partner Agreement, dated July 12, 2001, between INVESCO UK Limited and
Robert J. Yerbury
|
|
|
|
10.17
|
|
Global Partners Employment Contract, dated April 1, 2000, between INVESCO
Pacific Holdings Limited and Andrew Lo
|
|
|
|
10.18
|
|
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.
|
|
|
|
16
|
|
Letter, dated January 17, 2008, from Ernst & Young LLP (UK) to the Commission,
incorporated by reference to exhibit 16 to Invescos Current Report on Form 8-K,
filed with the Securities and Exchange Commission on January 18, 2008
|
|
|
|
21
|
|
List of Subsidiaries
|
|
|
|
23.1
|
|
Consent of Ernst & Young LLP, dated February 25, 2008
|
|
|
|
31.1
|
|
Certification of Martin L. Flanagan pursuant to Rule 13a-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
31.2
|
|
Certification of Loren M. Starr pursuant to Rule 13a-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
32.1
|
|
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
|
|
|
|
32.2
|
|
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
|
107
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
|
|
|
|
|
|
|
Invesco Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ MARTIN L. FLANAGAN
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
Martin L. Flanagan
|
|
|
|
|
Title:
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
|
February 29, 2008
|
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed
below by the following persons on behalf of the registrant and in the capacities indicated and on
the dates indicated.
|
|
|
|
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
/s/ MARTIN L. FLANAGAN
Martin L. Flanagan
|
|
Chief Executive
Officer (Principal
Executive Officer) and
President; Director
|
|
February 29, 2008
|
|
|
|
|
|
/s/ LOREN M. STARR
Loren M. Starr
|
|
Senior Managing
Director and Chief
Financial Officer
(Principal Financial
Officer)
|
|
February 29, 2008
|
|
|
|
|
|
/s/ DAVID A. HARTLEY
David A. Hartley
|
|
Chief Accounting
Officer (Principal
Accounting Officer)
|
|
February 29, 2008
|
|
|
|
|
|
/s/ REX D. ADAMS
Rex D. Adams
|
|
Chairman and Director
|
|
February 29, 2008
|
|
|
|
|
|
/s/ SIR JOHN BANHAM
Sir John Banham
|
|
Director
|
|
February 29, 2008
|
|
|
|
|
|
/s/ JOSEPH R. CANION
Joseph R. Canion
|
|
Director
|
|
February 29, 2008
|
|
|
|
|
|
/s/ JEROME P. KENNEY
Jerome P. Kenney
|
|
Director
|
|
February 29, 2008
|
|
|
|
|
|
/s/ DENIS KESSLER
Denis Kessler
|
|
Director
|
|
February 29, 2008
|
|
|
|
|
|
/s/ EDWARD P. LAWRENCE
Edward P. Lawrence
|
|
Director
|
|
February 29, 2008
|
|
|
|
|
|
/s/ J. THOMAS PRESBY
J. Thomas Presby
|
|
Director
|
|
February 29, 2008
|
|
|
|
|
|
/s/ JAMES I. ROBERTSON
James I. Robertson
|
|
Director
|
|
February 29, 2008
|
108
EXHIBIT 10.1
EXECUTION VERSION
Published Deal CUSIP Number:
Published Revolving Commitment CUSIP Number:
U.S. $900,000,000
AMENDED AND RESTATED
FIVE YEAR CREDIT AGREEMENT
Dated as of December 3, 2007
Among
INVESCO PLC
as
Borrower
INVESCO LTD.
as Parent
and
THE INITIAL LENDERS NAMED HEREIN
as
Initial
Lenders
and
BANK OF AMERICA, N.A.
as
Administrative
Agent
BANC OF AMERICA SECURITIES LLC
and
CITIGROUP GLOBAL MARKETS INC.
as
Joint
Lead
Arrangers
and
Book
Managers
CITIBANK N.A.
as
Syndication
Agent
HSBC BANK USA, NATIONAL ASSOCIATION,
JPMORGAN CHASE BANK, N.A.
and
WACHOVIA BANK, NATIONAL ASSOCIATION
as Co-Documentation Agents
Table of Contents
|
|
|
|
|
|
|
Page
|
|
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
|
|
|
1
|
|
|
|
|
|
|
Section 1.01 Amendment and Restatement
|
|
|
1
|
|
Section 1.02 Certain Defined Terms
|
|
|
2
|
|
Section 1.03 Computation of Time Periods
|
|
|
18
|
|
Section 1.04 Accounting Terms
|
|
|
18
|
|
|
|
|
|
|
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES
|
|
|
18
|
|
|
|
|
|
|
Section 2.01 The Advances
|
|
|
18
|
|
Section 2.02 Making the Advances
|
|
|
19
|
|
Section 2.03 Swing Line Loans
|
|
|
20
|
|
Section 2.04 Fees
|
|
|
23
|
|
Section 2.05 Termination, Reduction or Increase of the Commitments
|
|
|
23
|
|
Section 2.06 Repayment of Advances
|
|
|
25
|
|
Section 2.07 Interest on Advances
|
|
|
26
|
|
Section 2.08 Interest Rate Determination
|
|
|
26
|
|
Section 2.09 Optional Conversion of Advances
|
|
|
27
|
|
Section 2.10 Prepayments of Advances
|
|
|
27
|
|
Section 2.11 Increased Costs
|
|
|
29
|
|
Section 2.12 Illegality; Circumstances Affecting Availability
|
|
|
30
|
|
Section 2.13 Payments Generally and Computations
|
|
|
30
|
|
Section 2.14 Taxes
|
|
|
31
|
|
Section 2.15 Sharing of Payments, Etc.
|
|
|
35
|
|
Section 2.16 Use of Proceeds
|
|
|
35
|
|
|
|
|
|
|
ARTICLE III CONDITIONS TO EFFECTIVENESS AND LENDING
|
|
|
35
|
|
|
|
|
|
|
Section 3.01 Conditions Precedent to Effectiveness
|
|
|
35
|
|
Section 3.02 Conditions Precedent to Each Borrowing and Each Increase Date
|
|
|
36
|
|
Section 3.03 Determinations Under Section 3.01
|
|
|
37
|
|
|
|
|
|
|
ARTICLE IV REPRESENTATIONS AND WARRANTIES
|
|
|
37
|
|
|
|
|
|
|
Section 4.01 Representations and Warranties of the Parent and the Borrower
|
|
|
37
|
|
|
|
|
|
|
ARTICLE V COVENANTS OF THE BORROWER
|
|
|
41
|
|
|
|
|
|
|
Section 5.01 Affirmative Covenants
|
|
|
41
|
|
Section 5.02 Negative Covenants
|
|
|
46
|
|
Section 5.03 Financial Covenants
|
|
|
51
|
|
-i-
Table of Contents
(continued)
|
|
|
|
|
|
|
Page
|
|
ARTICLE VI EVENTS OF DEFAULT
|
|
|
51
|
|
|
|
|
|
|
Section 6.01 Events of Default
|
|
|
51
|
|
Section 6.02 Application of Funds
|
|
|
54
|
|
|
|
|
|
|
ARTICLE VII Administrative Agent
|
|
|
55
|
|
|
|
|
|
|
Section 7.01 Appointment and Authority
|
|
|
55
|
|
Section 7.02 Rights as a Lender
|
|
|
55
|
|
Section 7.03 Exculpatory Provisions
|
|
|
55
|
|
Section 7.04 Reliance by Administrative Agent
|
|
|
56
|
|
Section 7.05 Delegation of Duties
|
|
|
56
|
|
Section 7.06 Resignation of Administrative Agent
|
|
|
56
|
|
Section 7.07 Non-Reliance on Administrative Agent and Other Lenders
|
|
|
57
|
|
Section 7.08 No Other Duties, Etc.
|
|
|
58
|
|
Section 7.09 Administrative Agent May File Proofs of Claim
|
|
|
58
|
|
Section 7.10 Guaranty Matters
|
|
|
58
|
|
|
|
|
|
|
ARTICLE VIII MISCELLANEOUS
|
|
|
59
|
|
|
|
|
|
|
Section 8.01 Amendments, Etc.
|
|
|
59
|
|
Section 8.02 Notices; Effectiveness; Electronic Communication
|
|
|
60
|
|
Section 8.03 No Waiver; Remedies
|
|
|
62
|
|
Section 8.04 Expenses; Indemnity; Damage Waiver
|
|
|
62
|
|
Section 8.05 Right of Set-off
|
|
|
64
|
|
Section 8.06 Successors and Assigns
|
|
|
64
|
|
Section 8.07 Treatment of Certain Information; Confidentiality
|
|
|
67
|
|
Section 8.08 Governing Law
|
|
|
68
|
|
Section 8.09 Execution in Counterparts
|
|
|
68
|
|
Section 8.10 Survival of Representations and Warranties
|
|
|
68
|
|
Section 8.11 Replacement of Lenders
|
|
|
68
|
|
Section 8.12 Jurisdiction, Etc.
|
|
|
69
|
|
Section 8.13 Judgment
|
|
|
70
|
|
Section 8.14 Waiver of Jury Trial
|
|
|
71
|
|
Section 8.15 USA PATRIOT Act Notice
|
|
|
71
|
|
Section 8.16 Consent to Reorganization
|
|
|
71
|
|
-ii-
|
|
|
|
|
Schedules
|
|
|
|
|
|
|
|
|
|
Schedule I
|
|
-
|
|
List of Applicable Lending Offices
|
Schedule 1.01
|
|
-
|
|
Mandatory Costs
|
Schedule 4.01(b)
|
|
-
|
|
Subsidiaries
|
Schedule 4.01(d)
|
|
-
|
|
Required Authorizations
|
Schedule 4.01(i)
|
|
-
|
|
Disclosed Litigation
|
Schedule 4.01(v)
|
|
-
|
|
Existing Debt
|
Schedule 5.02(a)
|
|
-
|
|
Existing Liens
|
Schedule 8.02
|
|
-
|
|
Administrative Agents Office; Certain Addresses for Notices
|
Schedule 8.06
|
|
-
|
|
Processing and Recordation Fees
|
|
|
|
|
|
Exhibits
|
|
|
|
|
|
|
|
|
|
Exhibit A
|
|
-
|
|
Form of Note
|
Exhibit B-1
|
|
-
|
|
Form of Notice of Borrowing
|
Exhibit B-2
|
|
-
|
|
Form of Swing Line Loan Notice
|
Exhibit C
|
|
-
|
|
Form of Assignment and Assumption
|
Exhibit D
|
|
-
|
|
Form of Assumption Agreement
|
Exhibit E-1
|
|
-
|
|
Form of Subsidiary Guaranty
|
Exhibit E-2
|
|
-
|
|
Form of Parent Guaranty
|
Exhibit F
|
|
-
|
|
Form of Opinion of U.S. Counsel for the Borrower and Parent
|
Exhibit G
|
|
-
|
|
Form of Opinion of U.K. Counsel for the Borrower
|
Exhibit H
|
|
-
|
|
Form of Opinion of Bermuda Counsel for the Parent
|
Exhibit I
|
|
-
|
|
UK Tax Compliance Certificate
|
iii
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
This Amended and Restated Five Year Credit Agreement (the
Agreement
) is entered into
as of December 3, 2007 among INVESCO PLC, a company organized under the laws of England and Wales,
and its successors (the
Borrower
), INVESCO LTD., a company organized under the laws of
Bermuda (the
Parent
), the banks, financial institutions and other institutional lenders
(the
Initial Lenders
) listed on the signature pages hereof, and BANK OF AMERICA, N.A.
(
Bank of America
), as administrative agent (the
Administrative Agent
or
Agent
) for the Lenders (as hereinafter defined), hereby agree as follows:
PRELIMINARY STATEMENTS:
The Borrower, Bank of America (as Administrative Agent) and certain lenders party thereto (the
Existing Lenders
) entered into that certain Five Year Credit Agreement dated March 31,
2005 pursuant to which the Existing Lenders provided the Borrower with a revolving credit facility
in an initial principal amount of up to $900,000,000 (the
Existing Credit Agreement
). To
facilitate a corporate reorganization of the Borrower and its Subsidiaries resulting in (i) the
formation of the Parent as the holding company of the Borrower (and the Borrower as a wholly owned
Subsidiary of the Parent) and (ii) the distribution by the Borrower to the Parent of the Borrowers
ownership interest in certain of its foreign subsidiaries (the
Reorganization
), the
Borrower has requested that the Administrative Agent and the Existing Lenders amend and restate the
Existing Credit Agreement (the
Amendment and Restatement
) upon the terms and conditions
of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01
Amendment and Restatement
. In order to facilitate the Amendment and
Restatement and otherwise to effectuate the desires of the Borrower, the Administrative Agent and
the Lenders:
(a) The Borrower, the Administrative Agent and the Lenders hereby agree that upon the
effectiveness of this Agreement, the terms and provisions of the Existing Credit Agreement which in
any manner govern or evidence the obligations of the Borrower and the Guarantors, the rights and
interests of the Administrative Agent and the Lenders and any terms, conditions or matters related
to any thereof, shall be and hereby are amended and restated in their entirety by the terms,
conditions and provisions of this Agreement, and the terms and provisions of the Existing Credit
Agreement, except as otherwise expressly provided herein, shall be superseded by this Agreement.
(b) Notwithstanding this amendment and restatement of the Existing Credit Agreement, including
anything in this
Section 1.01
, and of any related Loan Documents (as such term is defined
in the Existing Credit Agreement and referred to herein, individually or
1
collectively, as the
Existing Credit Documents
), (i) all of the indebtedness,
liabilities and obligations owing by any Person under the Existing Credit Agreement and other
Existing Credit Documents shall continue as obligations hereunder, and (ii) each of this Agreement
and the Notes and any other Loan Document (as defined herein) is given as a substitution of and
modification of, and not as a payment of or novation of, the indebtedness, liabilities and
obligations of the Borrower under the Existing Credit Agreement or any Existing Credit Document and
neither the execution and delivery of such documents nor the consummation of any other transaction
contemplated hereunder is intended to constitute a novation of the Existing Credit Agreement or of
any of the other Existing Credit Documents or any obligations thereunder. Upon the effectiveness
of this Agreement, all Advances (including all Swing Line Loans) owing by the Borrower, and
outstanding under the Existing Credit Agreement shall continue as Advances hereunder and shall
constitute advances hereunder. Base Rate Advances under the Existing Credit Agreement shall accrue
interest at the Base Rate hereunder and the parties hereto agree that the Interest Periods for all
Eurocurrency Rate Advances outstanding under the Existing Credit Agreement on the Effective Date
shall remain in effect without renewal, interruption or extension as Eurocurrency Rate Advances
under this Agreement and accrue interest at the Eurocurrency Rate hereunder.
Section 1.02
Certain Defined Terms
. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
Adjusted Debt
outstanding on any date means the sum, without duplication, of
(a) the aggregate principal amount of all Debt of the Parent and its Subsidiaries, on a
Consolidated basis, outstanding on such date of the kinds referred to in clauses (a), (c),
(d), (e), (f) and (h) (exclusive in clause (h) of the Debt of the kind referred to in
clauses (b) and (g)) of the definition of Debt and (b) the aggregate principal amount of
all Debt of the Parent and its Subsidiaries, on a Consolidated basis, outstanding on such
date of the kinds referred to in clause (i) of the definition of Debt that relates to Debt
of other Persons of the kinds referred to in clauses (a), (c), (d), (e), (f) and (h)
(exclusive in clause (h) of the Debt of the kind referred to in clauses (b) and (g)), of the
definition of Debt.
Administrative Agents Account
means (a) in the case of Advances denominated
in Dollars the account of the Administrative Agent maintained by the Administrative Agent at
Bank of America with its office at Charlotte, North Carolina, ABA No. 026009593, Account No.
1366212250600 Bank of America N.A. New York, NY Account Name: Corporate Credit Support Re:
INVESCO, and (b) in the case of Advances denominated in Sterling, the account of the
Administrative Agent maintained by the Administrative Agent at Midland Bank PLC with its
office at 110 Cannon Street, EC4N 6AA London, England, for the account of Bank of America,
N.A., Account # 00478549 Ref: INVESCO.
Advance
means an advance by a Lender to the Borrower as part of a Borrowing
and, unless such Borrowing is a Swing Line Loan, refers to a Base Rate Advance or a
Eurocurrency Rate Advance (each of which shall be a
Type
of Advance), and, as the
context may require, includes an advance of a Swing Line Loan by the Swing Line Lender to
the Borrower.
2
Affiliate
means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such Person or is a
director or officer of such Person. For purposes of this definition, the term control
(including the terms controlling, controlled by and under common control with) of a
Person means the possession, direct or indirect, of the power to vote 10% or more of the
Voting Stock of such Person or to direct or cause the direction of the management and
policies of such Person, whether through the ownership of Voting Stock, by contract or
otherwise.
Applicable Accounting Standards
means either (i) International Financial
Reporting Standards, or (ii) if the Parent has elected to change its accounting policies or
reporting practices in accordance with
Section 5.02(h)(ii)
, US GAAP;
provided
, that, following any such change, commencing with the next occurring
quarter end, with respect to financial reporting, covenant compliance or other financial
measurements over time, Applicable Accounting Standards shall be US GAAP during the entire
applicable measurement or reporting period in question following any such change in
accordance with
Section 5.02(h)(ii)
.
Applicable Lending Office
means, with respect to each Lender, such Lenders
Domestic Lending Office in the case of a Base Rate Advance and such Lenders Eurocurrency
Lending Office in the case of a Eurocurrency Rate Advance.
Applicable Margin
means, as of any date, a percentage per annum determined by
reference to the Performance Level applicable on such date as set forth below:
|
|
|
|
|
|
|
Applicable Margin for
|
|
Applicable Margin for
|
Performance Level
|
|
Base Rate Advances
|
|
Eurocurrency Rate Advances
|
I
|
|
0%
|
|
0.360%
|
II
|
|
0%
|
|
0.400%
|
III
|
|
0%
|
|
0.475%
|
IV
|
|
0%
|
|
0.575%
|
V
|
|
0%
|
|
0.750%
|
For purposes of this definition, the Performance Level shall be determined as at the end of
each fiscal quarter of the Parent based upon the calculation of the Debt/EBITDA Ratio for
such fiscal quarter set forth in the compliance certificate delivered pursuant to
Section 5.01(j)(i)
or
(ii)
. The Applicable Margin shall be adjusted (if
necessary) upward or downward as of the first day of each fiscal quarter to reflect the
Performance Level as of the last day of the immediately preceding fiscal quarter;
provided
that if such compliance certificate is delivered after the first day of a fiscal quarter,
such adjustment shall be made on the first day following the delivery of such compliance
certificate and shall be deemed to have become effective as of the first day of such fiscal
quarter. Initially, from the Effective Date until the next date for which a compliance
certificate is delivered pursuant to Section
5.01(j)(i)
or
(ii)
, the
Applicable Margin shall be determined by reference to Performance Level I.
3
Applicable Percentage
means, as of any date, a percentage per annum
determined by reference to the Performance Level applicable on such date as set forth below:
|
|
|
Performance
|
|
Applicable
|
Level
|
|
Percentage
|
I
|
|
0.090%
|
II
|
|
0.100%
|
III
|
|
0.125%
|
IV
|
|
0.175%
|
V
|
|
0.250%
|
For purposes of this definition, the Performance Level shall be determined as at the end of
each fiscal quarter of the Parent based upon the calculation of the Debt/EBITDA Ratio for
such fiscal quarter set forth in the compliance certificate delivered pursuant to
Section 5.01(j)(i)
or
(ii)
. The Applicable Percentage shall be adjusted (if
necessary) upward or downward as of the first day of each fiscal quarter to reflect the
Performance Level as of the last day of the immediately preceding fiscal quarter;
provided
that if such compliance certificate is delivered after the first day of a fiscal quarter,
such adjustment shall be made on the first day following the delivery of such compliance
certificate and shall be deemed to have become effective as of the first day of such fiscal
quarter. Initially, from the Effective Date until the next date for which a compliance
certificate is delivered pursuant to Section
5.01(j)(i)
or
(ii)
, the
Applicable Percentage shall be determined by reference to Performance Level I.
Approved Fund
means any Fund that is administered or managed by (a) a Lender,
(b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers
or manages a Lender.
Arrangers
means the entities listed as Joint Lead Arrangers on the cover page
hereto.
Assignee Group
means two or more Eligible Assignees that are Affiliates of
one another or two or more Approved Funds managed by the same investment advisor.
Assignment and Assumption
means an assignment and assumption agreement
entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent,
in substantially the form of
Exhibit C
attached hereto.
Assuming Lender
means an Eligible Assignee not previously a Lender that
becomes a Lender hereunder pursuant to
Section 2.05(b)
.
Assumption Agreement
means an agreement in substantially the form of
Exhibit D
attached hereto by which an Eligible Assignee agrees to become a Lender
hereunder pursuant to
Section 2.05(b)
, in each case agreeing to be bound by all
obligations of a Lender hereunder.
4
Bank of America
has the meaning specified in the recital of parties to this
Agreement.
Base Rate
means for any day a fluctuating rate per annum equal to the higher
of (a) the Federal Funds Rate plus
1
/
2
of 1% and (b) the rate of interest in effect for such
day as publicly announced from time to time by Bank of America as its prime rate. The
prime rate is a rate set by Bank of America based upon various factors including Bank of
Americas costs and desired return, general economic conditions and other factors, and is
used as a reference point for pricing some loans, which may be priced at, above, or below
such announced rate. Any change in such rate announced by Bank of America shall take effect
at the opening of business on the day specified in the public announcement of such change.
Base Rate Advance
means an Advance denominated in Dollars that bears interest
as provided in
Section 2.07(a)(i)
.
Borrower
has the meaning specified in the recital of parties to this
Agreement.
Borrowing
means a borrowing consisting of simultaneous Advances of the same
Type, and in the case of Eurocurrency Rate Advances, having the same Interest Period, made
by each of the Lenders pursuant to
Section 2.01
or a Swing Line Borrowing, or both,
as the context may require.
Business Day
means a day of the year other than a day on which banks are
required or authorized by law to close in New York City and Charlotte, North Carolina and,
if the applicable Business Day relates to any Eurocurrency Rate Advances, a day on which
dealings are carried on in the London interbank market and banks are open for business in
London.
Capital Leases
means all leases that have been or should be, in accordance
with Applicable Accounting Standards, recorded as capital leases.
Commitment
means, as to any Lender, the Dollar amount set forth opposite its
name on the signature pages hereof or, if such Lender has entered into any Assumption
Agreement or Assignment and Assumption, the Dollar amount set forth for such Lender in the
Register maintained by the Administrative Agent pursuant to
Section 8.06(c)
, in each
case as such amount may be reduced pursuant to
Section 2.05(a)
or increased pursuant
to
Section 2.05(b)
.
Consolidated
refers to the consolidation of accounts in accordance with
Applicable Accounting Standards.
Convert
,
Conversion
and
Converted
each refers to a
conversion of Advances of one Type into Advances of the other Type pursuant to
Section
2.08
or
2.09
.
Debt
of any Person means, without duplication, (a) all indebtedness of such
Person for borrowed money, (b) all obligations of such Person for the deferred purchase
price of property or services (other than trade payables incurred in the ordinary course of
5
such Persons business and payable on customary terms), (c) all obligations of such
Person evidenced by notes, bonds, debentures or other similar instruments, (d) all
obligations of such Person created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even though the rights
and remedies of the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property) (other than trade payables incurred in the
ordinary course of such Persons business and payable on customary terms), (e) all
obligations of such Person as lessee under Capital Leases, (f) all obligations, contingent
or otherwise, of such Person in respect of acceptances, letters of credit or similar
extensions of credit, (g) all net payment obligations of such Person in respect of Hedge
Agreements on the date of determination, (h) all Debt of others referred to in clauses (a)
through (g) above or clause (i) below guaranteed directly or indirectly in any manner by
such Person, or in effect guaranteed directly or indirectly by such Person through a written
agreement (1) to pay or purchase such Debt or to advance or supply funds for the payment or
purchase of such Debt, (2) to purchase, sell or lease (as lessee or lessor) property, or to
purchase or sell services, primarily for the purpose of enabling the debtor to make payment
of such Debt or to assure the holder of such Debt against loss, (3) to supply funds to or in
any other manner invest in the debtor (including any agreement to pay for property or
services irrespective of whether such property is received or such services are rendered) or
(4) otherwise to assure a creditor against loss, and (i) all Debt referred to in clauses (a)
through (h) above secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including, without
limitation, accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Debt,
provided
that, in no
event shall Debt include any obligations of the Parent or any of its Subsidiaries incurred
in connection with any securitization program described in
Section 5.02(d)(ii)
.
Debt/EBITDA Ratio
means, as of any date of determination, the ratio of
Adjusted Debt (excluding (i) Subsidiary Non-Recourse Debt and (ii) so long as the Parent and
its Subsidiaries own 100% of the Office Equipment Sale and Leaseback Bonds, liabilities with
respect to the Office Equipment Sale and Leaseback Lease, in each case to the extent
otherwise included in Adjusted Debt) to EBITDA (excluding for purpose of this calculation of
EBITDA only that portion of EBITDA attributable to the net income, expenses, losses, charges
and gains of each Special Purpose Subsidiary) for each period of four consecutive fiscal
quarters of the Parent ended on or immediately prior to such time.
Default
means any Event of Default or any event that would constitute an
Event of Default but for the requirement that notice be given or time elapse or both.
Defaulting Lender
means any Lender that (a) has failed to fund any portion of
the Advances or participations in Swing Line Loans required to be funded by it hereunder
within one Business Day of the date required to be funded by it hereunder, unless such
failure has been cured, (b) has otherwise failed to pay over to the Administrative Agent or
any other Lender any other amount required to be paid by it hereunder within one Business
Day of the date when due, unless such failure is the subject of a good faith
6
dispute or unless such failure has been cured or (c) has been deemed insolvent or
become the subject of a bankruptcy or insolvency proceeding.
Disclosed Litigation
has the meaning specified in
Section 4.01(i)
.
Dollars
and the
$
sign each means lawful money of the United States
of America.
Domestic Lending Office
means, with respect to any Lender, the office of such
Lender specified as its Domestic Lending Office opposite its name on
Schedule I
hereto or in the Assumption Agreement or the Assignment and Assumption pursuant to which it
became a Lender, or such other office of such Lender as such Lender may from time to time
specify to the Borrower and the Administrative Agent.
EBITDA
means, for any period, net income (or net loss) of the Parent and its
Subsidiaries, on a Consolidated basis
plus
the sum of (a) interest expense, (b) income tax
expense, (c) depreciation expense, (d) amortization expense, (e) extraordinary losses, (f)
exceptional losses, and (g) all non-cash charges exclusive of any non-cash charge to the
extent it represents a reserve for cash expenditures in any future period,
minus
(x)
extraordinary gains and (y) exceptional gains, in each case determined in accordance with
Applicable Accounting Standards for such period, and (z) all non-cash gains exclusive of
gains for which the Parent expects cash proceeds in a future period;
provided
, that, for
purposes of calculating EBITDA for the Parent and its Subsidiaries for any period, the
EBITDA of any Person (or assets or division of such Person) acquired by the Parent or any of
its Subsidiaries during such period shall be included on a
pro forma
basis for such period
(assuming the consummation of such acquisition occurred on the first day of such period).
Effective Date
has the meaning specified in
Section 3.01
.
Eligible Assignee
means (a) a Lender; (b) an Affiliate of a Lender; (c) an
Approved Fund; and (d) any other Person (other than a natural person) approved by (i) the
Administrative Agent and the Swing Line Lender, and (ii) unless an Event of Default has
occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld
or delayed);
provided
that notwithstanding the foregoing, Eligible Assignee shall not
include the Parent, the Borrower or any of the Parents Affiliates or Subsidiaries; and
provided further
,
however
, that an Eligible Assignee shall include only a Lender, an
Affiliate of a Lender or another Person, which, through its lending offices, is capable of
lending Sterling to the Borrower without the imposition of any additional Indemnified Taxes
Environmental Laws
means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or governmental restrictions relating
to pollution and the protection of the environment or the release of any materials into the
environment, including those related to hazardous substances or wastes, air emissions and
discharges to waste or public systems.
7
Equivalent
in Dollars of Sterling on any date means the equivalent in Dollars
of Sterling determined by using the quoted spot rate at which Bank of Americas principal
office in London offers to exchange Dollars for Sterling in London at 11:00 A.M. (London
time) two Business Days prior to such date, and the
Equivalent
in Sterling of
Dollars means the equivalent in Sterling of Dollars determined by using the quoted spot rate
at which Bank of Americas principal office in London offers to exchange Sterling for
Dollars in London at 11:00 A.M. (London time) two Business Days prior to such date.
ERISA
means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations promulgated and rulings issued thereunder.
ERISA Affiliate
means any Person that for purposes of Title IV of ERISA is a
member of any Loan Partys controlled group, or under common control with any Loan Party,
within the meaning of Section 414 (b) or (c) of the Internal Revenue Code or, for purposes
of Sections 412(c)(ii) and 412(u) of the Internal Revenue Code, under Section 414(m) or (o)
of the Internal Revenue Code.
ERISA Event
means (a) (i) the occurrence of a reportable event, within the
meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day notice
requirement with respect to such event has been waived by the PBGC, or (ii) at the time when
the requirements of subsection (1) of Section 4043(b) of ERISA (without regard to subsection
(2) of such Section) are applicable to any Loan Party or any ERISA Affiliate an event
described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is
reasonably expected to occur with respect to a Plan within the following 30 days; (b) the
filing by any Loan Party or any ERISA Affiliate of an application for a minimum funding
waiver with respect to a Plan; (c) the provision by the administrator of any Plan of a
notice of intent to terminate such Plan pursuant to Section 4041(a)(2) of ERISA (including
any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA);
(d) the cessation of operations at a facility of any Loan Party or any ERISA Affiliate in
the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by any Loan
Party or any ERISA Affiliate from a Multiple Employer Plan during a plan year for which it
was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (f) the conditions
for the imposition of a lien under Section 302(f) of ERISA on the assets of any Loan Party
or any ERISA Affiliate shall have been met with respect to any Plan; (g) the adoption of an
amendment to a Plan requiring any Loan Party or any ERISA Affiliate to provide security to
such Plan pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of
proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any
event or condition described in Section 4042 of ERISA that constitutes grounds for the
termination of, or the appointment of a trustee to administer, a Plan,
provided
,
however
,
that the event or condition set forth in Section 4042(a)(4) of ERISA shall be an ERISA Event
only if the PBGC has notified any Loan Party or any ERISA Affiliate that it has made a
determination under such section or that it is considering termination of a Plan on such
grounds.
Exchange Act
means the Securities Exchange Act of 1934, as amended.
8
Eurocurrency Base Rate
has the meaning specified in the definition of
Eurocurrency Rate.
Eurocurrency Lending Office
means, with respect to any Lender, the office of
such Lender specified as its Eurocurrency Lending Office opposite its name on
Schedule
I
hereto or in the Assumption Agreement or the Assignment and Assumption pursuant to
which it became a Lender (or, if no such office is specified, its Domestic Lending Office),
or such other office of such Lender as such Lender may from time to time specify to the
Borrower and the Administrative Agent.
Eurocurrency Rate
means for any Interest Period with respect to a
Eurocurrency Rate Advance, a rate per annum determined by the Administrative Agent pursuant
to the following formula:
|
|
|
|
|
|
|
|
|
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Eurocurrency Base Rate
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Eurocurrency Rate
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=
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1.00 Eurocurrency Reserve
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Percentage
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Where,
Eurocurrency Base Rate
means, for such Interest Period:
(a) the rate per annum equal to the British Bankers Association LIBOR Rate
(
BBA LIBOR
), as published by Reuters (or other commercially available
source providing quotations of BBA LIBOR as designated by the Administrative Agent
from time to time) as approximately 11:00 A.M. (London time), two Business Days
prior to the commencement of such Interest Period, for deposits in the relevant
currency (for delivery on the first day of such Interest Period) with a term
equivalent to such Interest Period.
(b) If such rate referenced in the preceding clause (a) is not available at
such time for any reason, then the Eurocurrency Base Rate for such Interest Period
shall be the rate per annum determined by the Administrative Agent to be the rate at
which deposits in the relevant currency for delivery on the first day of such
Interest Period in Same Day Funds in the approximate amount of the Eurocurrency Rate
Advance being made, continued or converted by Bank of America and with a term
equivalent to such Interest Period would be offered by Bank of Americas London
Branch (or other Bank of America branch or Affiliate) to major banks in the London
or other offshore interbank market for such currency at their request at
approximately 11:00 A.M. (London time) two Business Days prior to the commencement
of such Interest Period.
Eurocurrency Reserve Percentage
means, for any day during any
Interest Period, the reserve percentage (expressed as a decimal, carried out to five
decimal places) in effect on such day under regulations issued from time to time by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including any emergency,
9
supplemental or other marginal reserve requirement) with respect to
Eurocurrency funding (currently referred to as Eurocurrency liabilities). The
Eurocurrency Rate for each outstanding Eurocurrency Rate Advance shall be adjusted
automatically as of the effective date of any change in the Eurocurrency Reserve
Percentage.
Eurocurrency Rate Advance
means an Advance that bears interest as provided in
Section 2.07(a)(ii)
.
Events of Default
has the meaning specified in
Section 6.01
.
Existing Debt
means the Debt of the Parent and its Subsidiaries outstanding
as of March 31, 2005, as listed on
Schedule 4.01(v)
.
Federal Funds Rate
means, for any day, the rate per annum equal to the
weighted average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as published by the
Federal Reserve Bank of New York on the Business Day next succeeding such day;
provided
that
(a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such
rate on such transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (b) if no such rate is so published on such next succeeding
Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward,
if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America on such day on
such transactions as determined by the Administrative Agent.
Fee Letter
means the letter agreement, dated February 2, 2005, among the
Borrower, the Administrative Agent and Banc of America Securities LLC (
BAS
).
Fund
means any Person (other than a natural person) that is (or will be)
engaged in making, purchasing, holding or otherwise investing in commercial loans and
similar extensions of credit in the ordinary course of its business.
Guarantors
means Parent, INVESCO Institutional (N.A.) Inc., a Delaware
corporation, INVESCO North American Holdings, Inc., a Delaware corporation, AIM Management
Group Inc., a Delaware corporation, AIM Advisors, Inc., a Delaware corporation and upon the
execution and delivery of an Assumption of Guaranty (as defined in the Subsidiary Guaranty)
pursuant to
Section 5.01(h)
or otherwise by any other Subsidiary of the Parent, such
other Subsidiary.
Guaranty
means each of the Parent Guaranty and the Subsidiary Guaranty.
Hedge Agreements
means interest rate swap, cap or collar agreements, interest
rate future or option contracts, currency swap agreements, currency future or option
contracts and other similar agreements.
Initial Lenders
has the meaning specified in the recital of parties to this
Agreement.
10
Insufficiency
means, with respect to any Plan, the amount, if any, of its
unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA.
Interest Period
means, for each Eurocurrency Rate Advance comprising part of
the same Borrowing, the period commencing on the date of such Eurocurrency Rate Advance or
the date of the Conversion of any Base Rate Advance into such Eurocurrency Rate Advance and
ending on the last day of the period selected by the Borrower pursuant to the provisions
below and, thereafter, with respect to Eurocurrency Rate Advances, each subsequent period
commencing on the last day of the immediately preceding Interest Period and ending on the
last day of the period selected by the Borrower pursuant to the provisions below. The
duration of each such Interest Period for each Eurocurrency Rate Advance shall be one, two,
three or six months, as the Borrower may, upon notice received by the Administrative Agent
not later than 11:00 A.M. (New York City time) on the third Business Day prior to the first
day of such Interest Period, select;
provided
,
however
, that:
(i) the Borrower may not select any Interest Period that ends after the
Termination Date;
(ii) Interest Periods commencing on the same date for Eurocurrency Rate
Advances comprising part of the same Borrowing shall be of the same duration;
(iii) whenever the last day of any Interest Period would otherwise occur on a
day other than a Business Day, the last day of such Interest Period shall be
extended to occur on the next succeeding Business Day,
provided
,
however
, that, if
such extension would cause the last day of such Interest Period to occur in the next
following calendar month, the last day of such Interest Period shall occur on the
next preceding Business Day; and
(iv) whenever the first day of any Interest Period occurs on a day of an
initial calendar month for which there is no numerically corresponding day in the
calendar month that succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such Interest Period shall
end on the last Business Day of such succeeding calendar month.
Internal Control Event
means, (i) a material weakness in
internal control
over financial reporting
, as that term is defined in Rule 13a-15(f) of the Exchange Act, of
the Parent and its Subsidiaries, or (ii) material fraud that involves members of the senior
management of the Parent or any Subsidiary.
Internal Revenue Code
means the Internal Revenue Code of 1986, as amended
from time to time, and the regulations promulgated and rulings issued thereunder.
International Financial Reporting Standards
means the accounting standards
and principles issued or published by the International Accounting Standards Board and
interpreted by the International Financial Reporting Interpretations Committee and
11
applicable in the circumstances as of the date of a report, as such principles are
supplemented, amended or modified from time to time.
Investment
in any Person means any purchase or other acquisition of any
capital stock, warrants, rights, options, obligations or other securities or all or
substantially all of the assets of such Person, any capital contribution to such Person or
any other investment in such Person (other than a loan or advance), including, without
limitation, any arrangement pursuant to which the investor incurs Debt of the types referred
to in clauses (h) and (i) of the definition of
Debt
in respect of such Person.
Lenders
means the Initial Lenders, each Assuming Lender and each Person that
shall become a party hereto pursuant to
Section 8.06
.
Lien
means any lien, security interest or other charge or encumbrance of any
kind, including, without limitation, the lien or retained security title of a conditional
vendor and any easement, right of way or other encumbrance on title to real property.
Loan Documents
means this Agreement, the Notes and each Guaranty.
Loan Parties
means the Borrower and each Guarantor (each a
Loan
Party
).
Mandatory Costs
means with respect to any period, the percentage rate per
annum determined in accordance with
Schedule 1.01
.
Material Adverse Change
means any material adverse change in the business,
condition (financial or otherwise), operations, performance or properties of the Parent and
its Subsidiaries taken as a whole (or where the context requires for time periods prior to
the Effective Date, the Borrower and its Subsidiaries taken as a whole).
Material Adverse Effect
means a material adverse effect on (a) the business,
condition (financial or otherwise), operations, performance or properties of the Parent and
its Subsidiaries taken as a whole, (b) the rights and remedies of the Administrative Agent
or any Lender under this Agreement or any Note or (c) the ability of the Borrower to perform
its obligations under this Agreement or any Note.
Material Subsidiary
means each Subsidiary of the Parent to which as of the
end of any fiscal year of the Parent is attributed twenty percent or more of the
Consolidated operating income of the Parent and its Subsidiaries taken as a whole,
determined by reference to the most recent annual audited financial statements delivered by
the Parent, or with respect to the fiscal year ended December 31, 2006, the Borrower, to the
Lenders pursuant to
Section 5.01(j)
or, in the case of any Subsidiary of the Parent
that is acquired or is merged with or into any other Subsidiary of the Parent, determined by
reference to the pro forma financial statements of the Parent and its Subsidiaries prepared
in accordance with Applicable Accounting Standards as of the most recent fiscal year end of
the Parent, or with respect to the fiscal year ended December 31, 2006, the Borrower, giving
effect to such acquisition or merger as if such transaction had been consummated as of the
last day of such fiscal year.
12
Multiemployer Plan
means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate is making or accruing an
obligation to make contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
Multiple Employer Plan
means a single employer plan, as defined in Section
4001(a)(15) of ERISA, that is maintained for current or former employees of any Loan Party
or any ERISA Affiliate and at least one Person other than such Loan Party and the ERISA
Affiliates.
Note
means a promissory note, or as requested by any Lender, an amended and
restated promissory note, of the Borrower payable to the order of any Lender, in
substantially the form of
Exhibit A
hereto, evidencing the aggregate indebtedness of
the Borrower to such Lender resulting from the Advances made by such Lender, as it may be
amended, restated or modified from time to time, or any substitute therefor or replacement
thereof.
Notice of Borrowing
has the meaning specified in
Section 2.02(a)
.
Office Equipment Sale and Leaseback
means a sale and leaseback transaction
pursuant to which Invesco Group Services, Inc. will sell the office equipment for its
Atlanta, Georgia headquarters facility to the Development Authority of Fulton County for an
aggregate price not to exceed $20,000,000 and then lease back such office equipment from the
Development Authority of Fulton County.
Office Equipment Sale and Leaseback Bonds
means those certain industrial
revenue bonds issued by the Development Authority of Fulton County for the purpose of
financing the purchase by the Development Authority of Fulton County of that certain office
equipment the subject matter of the Office Equipment Sale and Leaseback.
Office Equipment Sale and Leaseback Lease
the lease by Invesco Group
Services, Inc. of that certain office equipment subject to the Office Equipment Sale and
Leaseback from the Development Authority of Fulton County.
Overnight Rate
means, for any day, (a) with respect to any amount denominated
in Dollars, the greater of (i) the Federal Funds Rate and (ii) an overnight rate determined
by the Administrative Agent or the Swing Line Lender, as the case may be, in accordance with
banking industry rules on interbank compensation, and (b) with respect to any amount
denominated in Sterling, the rate of interest per annum at which overnight deposits in
Sterling, in an amount approximately equal to the amount with respect to which such rate is
being determined, would be offered for such day by a branch or Affiliate of Bank of America
in the applicable offshore interbank market for such currency to major banks in such
interbank market.
Parent
has the meaning specified in the recital of parties to this Agreement.
Parent Guaranty
means that certain Guaranty dated as of the date hereof
executed and delivered by the Parent in favor of the Administrative Agent in substantially
13
the form of
Exhibit E-2
, as amended, supplemented or otherwise modified from
time to time.
PBGC
means the Pension Benefit Guaranty Corporation (or any successor).
Performance Level
means, as of any date of determination, the level set forth
below as then applicable:
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I
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Debt/EBITDA Ratio is less than or equal to 1.25:1.00.
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II
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Debt/EBITDA Ratio is greater than 1.25:1.00 but less than or
equal to 1.75:1.00.
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III
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Debt/EBITDA Ratio is greater than 1.75:1.00 but less than or
equal to 2.25:1.00.
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IV
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Debt/EBITDA Ratio is greater than 2.25:1.00 but less than or
equal to 2.75:1.00.
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V
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Debt/EBITDA Ratio is greater than 2.75:1.00.
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Permitted Liens
means such of the following as to which no enforcement,
collection, execution, levy or foreclosure proceeding shall have been commenced except as
otherwise provided: (a) Liens for taxes, assessments or other governmental charges being
contested in good faith by appropriate proceedings promptly initiated and diligently
conducted and for which such reserves or other appropriate provision, if any, as shall be
required by Applicable Accounting Standards or, if otherwise applicable, generally accepted
accounting principles, shall have been made and maintained in accordance with Applicable
Accounting Standards or, if otherwise applicable, generally accepted accounting principles,
and past practices of the Parent and its Subsidiaries therefor and as to which any
enforcement, collection, execution, levy or foreclosure proceeding which shall commence or
have commenced could not reasonably be expected to result in a Material Adverse Effect; (b)
statutory Liens of landlords and Liens of carriers, warehousemen, mechanics and materialmen
incurred in the ordinary course of business for sums not yet due or being contested in good
faith by appropriate proceedings promptly initiated and diligently conducted and for which
such reserves or other appropriate provision, if any, as shall be required by Applicable
Accounting Standards or, if otherwise applicable, generally accepted accounting principles,
shall have been made therefor and as to which any enforcement, collection, execution, levy
or foreclosure proceeding which shall commence or have commenced could not reasonably be
expected to result in a Material Adverse Effect; (c) Liens (other than any Lien imposed by
ERISA) incurred or deposits made in the ordinary course of business (i) in connection with
workers compensation, unemployment insurance and other types of social security or (ii) to
secure (or to obtain letters of credit that secure) the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, performance bonds, purchase,
construction or sales contracts and other similar obligations, in each case not incurred or
made in connection with the borrowing of money, the obtaining of advances or credit or the
payment of the deferred purchase price of property; (d) any Liens securing
14
attachments or judgments unless the judgment it secures results or has resulted in an
Event of Default under
Section 6.01(f)
; and (e) leases or subleases granted to
others, easements, rights of way and other encumbrances on title to real property that, in
the case of any property material to the operation of the business of the Parent and its
Subsidiaries taken as a whole, do not render title to the property encumbered thereby
unmarketable or materially adversely affect the use of such property for its present
purposes.
Person
means an individual, partnership, corporation (including a business
trust), joint stock company, trust, unincorporated association, joint venture, limited
liability company or other entity, or a government or any political subdivision or agency
thereof.
Plan
means a Single Employer Plan or a Multiple Employer Plan.
Pro Rata Share
of any amount means, with respect to any Lender at any time,
the product of such amount
times
a fraction the numerator of which is the amount of such
Lenders Commitment at such time and the denominator of which is the Total Commitment at
such time.
Register
has the meaning specified in
Section 8.07(d)
.
Relevant Taxing Authority
means the taxing authority with which the
applicable Treaty Form is required to be filed, in the country of residence of a Lender.
Related Parties
means with respect to any Person, such Persons Affiliates
and the partners, directors, officers, employees, agents and advisors of such Person and of
such Persons Affiliates.
Required Lenders
means at any time Lenders owed greater than 50% of the then
aggregate unpaid principal amount of the Advances owing to Lenders, including participations
in all Swing Line Loans then outstanding, or, if no such principal amount is then
outstanding, Lenders holding greater than 50% of the Commitments
provided
that the portion
of the aggregate unpaid principal amount of the Advances owing to or deemed held by, and the
Commitment of, any Defaulting Lender shall be excluded for purposes of making a
determination of Required Lenders.
Restricted Subsidiary
means the Borrower and each Subsidiary of the Parent
that (a) is a Guarantor or a Subsidiary of a Subsidiary Guarantor or (b) is subject to any
agreement described in
Section 5.02(i)(i)
,
(ii)
or
(iii)
,
provided
that such Subsidiary shall be a Restricted Subsidiary under this clause (b) only so long as
such agreement is in effect.
Same Day Funds
means (a) with respect to disbursements and payments in
Dollars, immediately available funds, and (b) with respect to disbursements and payments in
Sterling, same day or other funds as may be determined by the Administrative Agent, as the
case may be, to be customary in the place of disbursement or payment for the settlement of
international banking transactions in Sterling.
15
Sarbanes-Oxley
means the Sarbanes-Oxley Act of 2002.
Securities Laws
means the Securities Act, the Exchange Act, Sarbanes-Oxley
and the applicable accounting and auditing principles, rules, standards and practices
promulgated, approved or incorporated by the SEC or the Public Company Accounting Oversight
Board, as each of the foregoing may be amended and in effect on any applicable date
hereunder.
Securities Act
means the Securities Act of 1933, as amended.
Significant Subsidiary
means each Subsidiary of the Parent, including the
Borrower, that (a) is organized under the laws of the United States or any political
subdivision thereof or (b) is an operating Subsidiary of the Parent or a Subsidiary of the
Parent that directly or indirectly owns an operating Subsidiary of the Parent.
Single Employer Plan
means a single employer plan, as defined in Section
4001(a)(15) of ERISA, that is maintained for employees of any Loan Party or any ERISA
Affiliate and no Person other than any Loan Party and the ERISA Affiliates.
Solvent
and
Solvency
mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property of such Person is
greater than the total amount of liabilities, including, without limitation, contingent
liabilities, of such Person, (b) the present fair salable value of the assets of such Person
is not less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person does not intend to,
and does not believe that it will, incur debts or liabilities beyond such Persons ability
to pay such debts and liabilities as they mature and (d) such Person is not engaged in
business or a transaction, and is not about to engage in business or a transaction, for
which such Persons property would constitute an unreasonably small capital. The amount of
contingent liabilities at any time shall be computed as the amount that, in the light of all
the facts and circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
Special Purpose Subsidiary
means a Subsidiary created or acquired, and wholly
owned, directly or indirectly, by the Parent whose primary business is investing in real
estate properties or other investment assets, the acquisition of which properties or assets
are financed in whole, or in part, with Subsidiary Non-Recourse Debt, and whose primary
assets consist of such real estate properties and other investment assets.
Sterling
means lawful money of the United Kingdom of Great Britain and
Northern Ireland.
Subsidiary
of any Person means any corporation, limited liability company,
partnership, joint venture, trust or estate of which (or in which) more than 50% of (a) in
the case of a corporation, the issued and outstanding capital stock having ordinary voting
power to elect a majority of the Board of Directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such corporation shall or
might have voting power upon the occurrence of any contingency), (b) in the case of a
16
limited liability company, partnership or joint venture, the interest in the capital or
profits of such limited liability company, partnership or joint venture or (c) in the case
of a trust or estate, the beneficial interest in such trust or estate, in each instance
above is at the time directly or indirectly owned or controlled by such Person, by such
Person and one or more of its other Subsidiaries or by one or more of such Persons other
Subsidiaries.
Subsidiary Guarantor
means each Guarantor other than the Parent.
Subsidiary Guaranty
means that certain Guaranty dated as of March 31, 2005
executed and delivered by each Subsidiary Guarantor in favor of the Administrative Agent in
substantially the form of
Exhibit E-1
, as amended, supplemented or otherwise
modified from time to time.
Subsidiary Non-Recourse Debt
means with respect to all Special Purpose
Subsidiaries of the Parent, Debt incurred by such Special Purpose Subsidiaries up to an
aggregate principal amount for all such Special Purpose Subsidiaries at any time outstanding
not to exceed $500,000,000, (i) the proceeds of which are used to finance the acquisition of
real estate properties and other investment assets by such Special Purpose Subsidiary, (ii)
that is not Guaranteed by either the Borrower nor any Guarantor, and (iii) where recourse
for repayment of such Debt is contractually limited to such Special Purpose Subsidiary and
the specific real estate properties or other investment assets of such Special Purpose
Subsidiary financed with the proceeds thereof.
Swing Line
means the revolving credit facility made available by the Swing
Line Lender pursuant to
Section 2.03
.
Swing Line Borrowing
means a borrowing of a Swing Line Loan pursuant to
Section 2.03
.
Swing Line Lender
means Bank of America in its capacity as provider of Swing
Line Loans, or any successor swing line lender hereunder.
Swing Line Loan
has the meaning specified in
Section 2.03(a)
.
Swing Line Loan Notice
means a notice of a Swing Line Borrowing pursuant to
Section 2.03(b)
, which, if in writing, shall be substantially in the form of
Exhibit B-2
.
Swing Line Sublimit
means an amount equal to the lesser of (a) $50,000,000
and (b) the Total Commitments. The Swing Line Sublimit is part of, and not in addition to,
the Total Commitment.
Termination Date
means the earlier of March 31, 2010, and the date of
termination in whole of the Commitments pursuant to
Section 2.05 or 6.01
.
Total Commitment
means, at any time, the aggregate amount of the Lenders
Commitments at such time.
17
Treaty Form
means a form of claim for the benefits of an income tax treaty
between the United Kingdom and the country of residence of a Lender or the Administrative
Agent, as is specified from time to time by the Financial Intermediaries and Claims Office
(International) of the Board of Inland Revenue for the United Kingdom.
Type
has the meaning therefor in the definition of Advance.
US GAAP
means generally accepted accounting principles in the United States
set forth in the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or such other principles as may be approved by a
significant segment of the accounting profession in the United States, that are applicable
to the circumstances as of the date of determination, consistently applied.
Voting Stock
means capital stock issued by a corporation, or equivalent
interests in any other Person, the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or persons performing similar
functions) of such Person, even if the right so to vote has been suspended by the happening
of such a contingency.
Withdrawal Liability
has the meaning specified in Part I of Subtitle E of
Title IV of ERISA.
Section 1.03
Computation of Time Periods
. In this Agreement in the computation of
periods of time from a specified date to a later specified date, the word from means from and
including and the words to and until each mean to but excluding.
Section 1.04
Accounting Terms
. All accounting terms not specifically defined herein
shall be construed in accordance with Applicable Accounting Standards as in effect for the relevant
period of time or measurement.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
Section 2.01
The Advances
. Each Lender severally agrees, on the terms and conditions
hereinafter set forth, to make Advances to the Borrower from time to time on any Business Day
during the period from the Effective Date until the Termination Date in an aggregate principal
amount (based in respect of any Advance denominated in Sterling on the Equivalent in Dollars), not
to exceed at any time outstanding the amount of such Lenders Commitment less such Lenders Pro
Rata Share of the aggregate outstanding principal amount of all Swing Line Loans. Each Borrowing
shall be in an aggregate amount of $5,000,000 (or the Equivalent thereof in Sterling) or an
integral multiple of $1,000,000 (or the Equivalent thereof in Sterling) in excess thereof and shall
consist of Advances of the same Type made on the same day by the Lenders ratably according to their
respective Commitments. Within the limits of each Lenders Commitment, the Borrower may borrow
under this
Section 2.01
, prepay pursuant to
Section 2.10
and reborrow under this
Section 2.01
.
18
Section 2.02
Making the Advances
. (a) Each Borrowing shall be made on notice, given
not later than (x) 11:00 A.M. (New York City time) on the third Business Day prior to the date of
the proposed Borrowing in the case of a Borrowing consisting of Eurocurrency Rate Advances
denominated in Dollars, (y) 11:00 A.M. (New York City time) on the fifth Business Day prior to the
date of the proposed Borrowing in the case of a Borrowing consisting of Eurocurrency Rate Advances
denominated in Sterling, or (z) 9:00 A.M. (New York City time) on the date of the proposed
Borrowing in the case of a Borrowing consisting of Base Rate Advances, by the Borrower to the
Administrative Agent, which shall give to each Lender prompt notice thereof. Each such notice of a
Borrowing (a
Notice of Borrowing
) shall be by telephone, confirmed immediately in
writing, and signed by a duly authorized officer of the Borrower in substantially the form of
Exhibit B-1
hereto, specifying therein the requested (i) date of such Borrowing, (ii) Type
of Advances comprising such Borrowing, (iii) aggregate amount of such Borrowing, and (iv) in the
case of a Borrowing consisting of Eurocurrency Rate Advances, the initial Interest Period and
whether such Advance shall be in Dollars or in Sterling. Each Lender shall, before 11:00 A.M. (New
York City time) on the date of such Borrowing, make available for the account of its Applicable
Lending Office to the Administrative Agent at the applicable Administrative Agents Account, in
Same Day Funds, such Lenders Pro Rata Share of such Borrowing. After the Administrative Agents
receipt of such funds and upon fulfillment of the applicable conditions set forth in
Article
III
, the Administrative Agent will make such funds available to the Borrower at the
Administrative Agents address referred to in
Section 8.02
.
(b) Anything in subsection (a) above to the contrary notwithstanding, (i) the Borrower may not
select Eurocurrency Rate Advances for any Borrowing if the aggregate amount of such Borrowing is
less than $5,000,000 (or the Equivalent thereof in Sterling) or if the obligation of the Lenders to
make Eurocurrency Rate Advances shall then be suspended pursuant to
Section 2.08
or
2.12
and (ii) the Eurocurrency Rate Advances may not be outstanding as part of more than
ten separate Borrowings.
(c) Each Notice of Borrowing shall be irrevocable and binding on the Borrower. In the case of
any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurocurrency
Rate Advances, the Borrower shall indemnify each Lender against any loss, cost or expense incurred
by such Lender as a result of any failure to fulfill on or before the date specified in such Notice
of Borrowing for such Borrowing the applicable conditions set forth in
Article III
,
including, without limitation, any loss (excluding loss of anticipated profits), cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such
Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance,
as a result of such failure, is not made on such date.
(d) Unless the Administrative Agent shall have received notice from a Lender prior to the time
of any Borrowing that such Lender will not make available to the Administrative Agent such Lenders
Pro Rata Share of such Borrowing, the Administrative Agent may assume that such Lender has made
such amount available to the Administrative Agent on the date of such Borrowing in accordance with
subsection (a) of this
Section 2.02
and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount. If and to the
extent that such Lender shall not have so made such amount available to the Administrative Agent,
such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on
demand such corresponding amount together with interest
19
thereon, for each day from the date such amount is made available to the Borrower until the
date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, the
interest rate applicable at the time to Advances comprising such Borrowing and (ii) in the case of
such Lender, the Overnight Rate. If such Lender shall repay to the Administrative Agent such
corresponding amount, such amount so repaid shall constitute such Lenders Advance as part of such
Borrowing for purposes of this Agreement.
(e) The failure of any Lender to make the Advance to be made by it as part of any Borrowing
shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the
date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to
make the Advance to be made by such other Lender on the date of any Borrowing.
Section 2.03
Swing Line Loans
.
(a)
The Swing Line
. Subject to the terms and conditions set forth herein, the Swing
Line Lender agrees, in reliance upon the agreements of the other Lenders set forth in this
Section 2.03
, to make Advances (each such Advance, a
Swing Line Loan
) to the
Borrower from time to time on any Business Day during the period from the Effective Date to the
Termination Date in an aggregate amount not to exceed at any time outstanding the amount of the
Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated with the
Pro Rata Share of the aggregate outstanding principal amount of Advances of the Swing Line Lender,
may exceed the amount of such Lenders Commitment;
provided, however
, that after giving effect to
any Swing Line Loan, (i) the aggregate outstanding principal amount of all Advances and all Swing
Line Loans shall not exceed the Total Commitment, and (ii) the aggregate outstanding principal
amount of the Advances of any Lender
plus
such Lenders Pro Rata Share of the aggregate
outstanding principal amount of all Swing Line Loans shall not exceed such Lenders Commitment, and
provided, further
, that the Borrower shall not use the proceeds of any Swing Line Loan to refinance
any outstanding Swing Line Loan. Within the foregoing limits, and subject to the other terms and
conditions hereof, the Borrower may borrow under this
Section 2.03
, prepay under
Section 2.10
, and reborrow under this
Section 2.03
. Each Swing Line Loan shall be
in Dollars. Immediately upon the making of a Swing Line Loan, each Lender shall be deemed to, and
hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk
participation in such Swing Line Loan in an amount equal to the product of such Lenders Pro Rata
Share
times
the amount of such Swing Line Loan.
(b)
Borrowing Procedures
. Each Swing Line Borrowing shall be made upon the Borrowers
irrevocable notice to the Swing Line Lender and the Administrative Agent, which may be given by
telephone. Each such notice must be received by the Swing Line Lender and the Administrative Agent
not later than 1:00 P.M. (New York City time) on the requested borrowing date, and shall specify
(i) the amount to be borrowed, which shall be a minimum of $1,000,000, and (ii) the requested
borrowing date, which shall be a Business Day. Each such telephonic notice must be confirmed
promptly by delivery to the Swing Line Lender and the Administrative Agent of a written Swing Line
Loan Notice, appropriately completed and signed by a duly authorized officer of the Borrower.
Promptly after receipt by the Swing Line Lender of any telephonic Swing Line Loan Notice, the Swing
Line Lender will confirm with the Administrative Agent (by telephone or in writing) that the
Administrative Agent has also received such Swing
20
Line Loan Notice and, if not, the Swing Line Lender will notify the Administrative Agent (by
telephone or in writing) of the contents thereof. Unless the Swing Line Lender has received notice
(by telephone or in writing) from the Administrative Agent (including at the request of any Lender)
prior to 2:00 P.M. (New York City time) on the date of the proposed Swing Line Borrowing (A)
directing the Swing Line Lender not to make such Swing Line Loan as a result of the limitations set
forth in the first proviso to the first sentence of
Section 2.03(a)
, or (B) that one or
more of the applicable conditions specified in
Section 3.02
is not then satisfied, then,
subject to the terms and conditions hereof, the Swing Line Lender will, not later than 3:00 P.M.
(New York City time) on the borrowing date specified in such Swing Line Loan Notice, make the
amount of its Swing Line Loan available to the Borrower in Same Day Funds.
(c)
Refinancing of Swing Line Loans
.
(i) The Swing Line Lender at any time in its sole and absolute discretion may request,
on behalf of the Borrower (which hereby irrevocably authorizes the Swing Line Lender to so
request on its behalf), that each Lender make a Base Rate Advance in an amount equal to such
Lenders Pro Rata Share of the amount of Swing Line Loans then outstanding. Such request
shall be made in writing (which written request shall be deemed to be a Notice of Borrowing
for purposes hereof) and in accordance with the requirements of
Section 2.02
,
without regard to the minimum and multiples specified in
Section 2.01
for the
principal amount of Base Rate Advances, but subject to the unutilized portion of the Total
Commitments and the conditions set forth in
Section 3.02
. The Swing Line Lender
shall furnish the Borrower with a copy of the applicable Notice of Borrowing promptly after
delivering such notice to the Administrative Agent. Each Lender shall make an amount equal
to its Pro Rata Share of the amount specified in such Notice of Borrowing available to the
Administrative Agent in immediately available funds for the account of the Swing Line Lender
at the Administrative Agents office not later than 1:00 P.M. (New York City time) on the
day specified in such Notice of Borrowing, whereupon, subject to
Section
2.03(c)(ii)
, each Lender that so makes funds available shall be deemed to have made a
Base Rate Advance to the Borrower in such amount. The Administrative Agent shall remit the
funds so received to the Swing Line Lender.
(ii) If for any reason any Swing Line Loan cannot be refinanced by such an Advance in
accordance with
Section 2.03(c)(i)
, the request for Base Rate Advances submitted by
the Swing Line Lender as set forth herein shall be deemed to be a request by the Swing Line
Lender that each of the Lenders fund its risk participation in the relevant Swing Line Loan
and each Lenders payment to the Administrative Agent for the account of the Swing Line
Lender pursuant to
Section 2.03(c)(i)
shall be deemed payment in respect of such
participation.
(iii) If any Lender fails to make available to the Administrative Agent for the account
of the Swing Line Lender any amount required to be paid by such Lender pursuant to the
foregoing provisions of this
Section 2.03(c)
by the time specified in
Section
2.03(c)(i)
, the Swing Line Lender shall be entitled to recover from such Lender (acting
through the Administrative Agent), on demand, such amount with interest thereon for the
period from the date such payment is required to the date on which such payment
21
is immediately available to the Swing Line Lender at a rate per annum equal to the
greater of the Federal Funds Rate and a rate determined by the Swing Line Lender in
accordance with banking industry rules on interbank compensation. A certificate of the
Swing Line Lender submitted to any Lender (through the Administrative Agent) with respect to
any amounts owing under this clause (iii) shall be conclusive absent manifest error.
(iv) Each Lenders obligation to make Advances or to purchase and fund risk
participations in Swing Line Loans pursuant to this
Section 2.03(c)
shall be
absolute and unconditional and shall not be affected by any circumstance, including (A) any
setoff, counterclaim, recoupment, defense or other right which such Lender may have against
the Swing Line Lender, the Borrower or any other Person for any reason whatsoever, (B) the
occurrence or continuance of a Default, or (C) any other occurrence, event or condition,
whether or not similar to any of the foregoing;
provided, however
, that each Lenders
obligation to make Advances pursuant to this
Section 2.03(c)
is subject to the
conditions set forth in
Section 3.02
. No such funding of risk participations shall
relieve or otherwise impair the obligation of the Borrower to repay Swing Line Loans,
together with interest as provided herein.
(d)
Repayment of Participations
.
(i) At any time after any Lender has purchased and funded a risk participation in a
Swing Line Loan, if the Swing Line Lender receives any payment on account of such Swing Line
Loan, the Swing Line Lender will distribute to such Lender its Pro Rata Share of such
payment (appropriately adjusted, in the case of interest payments, to reflect the period of
time during which such Lenders risk participation was funded) in the same funds as those
received by the Swing Line Lender.
(ii) If any payment received by the Swing Line Lender in respect of principal or
interest on any Swing Line Loan is required to be returned by the Swing Line Lender
(including pursuant to any settlement entered into by the Swing Line Lender in its
discretion), each Lender shall pay to the Swing Line Lender its Pro Rata Share thereof on
demand of the Administrative Agent, plus interest thereon from the date of such demand to
the date such amount is returned, at a rate per annum equal to the Federal Funds Rate. The
Administrative Agent will make such demand upon the request of the Swing Line Lender. The
obligations of the Lenders under this clause shall survive the payment in full of the all
amounts owing hereunder and under any Loan Document and the termination of this Agreement.
(e)
Interest for Account of Swing Line Lender
. The Swing Line Lender shall be
responsible for invoicing the Borrower for interest on the Swing Line Loans. Until a Lender funds
its Base Rate Advance or risk participation pursuant to this
Section 2.03
to refinance such
Lenders Pro Rata Share of any Swing Line Loan, interest in respect of such Pro Rata Share shall be
solely for the account of the Swing Line Lender, and after such Lender funds its Base Rate Advance
or risk participation pursuant to this
Section 2.03
to refinance such Lenders Pro Rata
Share of any Swing Line Loan, such interest shall be for the account of such Lender.
22
(f)
Payments Directly to Swing Line Lender
. The Borrower shall make all payments of
principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender.
Section 2.04
Fees
.
(a)
Facility Fee
. The Borrower agrees to pay to the Administrative Agent for the
account of each Lender a facility fee on the aggregate amount of such Lenders Commitment from the
Effective Date in the case of each Initial Lender and from the effective date specified in the
Assumption Agreement or the Assignment and Assumption pursuant to which it became a Lender in the
case of each other Lender until the Termination Date at a rate per annum equal to the Applicable
Percentage in effect from time to time, payable in arrears quarterly on the last day of each March,
June, September and December (each, a
Facility Fee Payment Date
), commencing with the
Facility Fee Payment Date first occurring after the Effective Date, and on the Termination Date.
(b)
Agents Fees
. The Borrower shall pay to the Administrative Agent for its own
account such fees as may from time to time be agreed between the Borrower and the Administrative
Agent, including without limitation in the Fee Letter.
Section 2.05
Termination, Reduction or Increase of the Commitments
.
(a)
Termination or Reduction
. The Borrower shall have the right, upon at least three
Business Days notice to the Administrative Agent, to terminate in whole or permanently reduce
ratably in part the unused portions of the respective Commitments of the Lenders,
provided
that
each partial reduction of the Total Commitment shall be in the aggregate amount of $50,000,000 or
an integral multiple of $1,000,000 in excess thereof.
(b)
Increase in Aggregate of the Commitments
. The Borrower may at any time, by notice
to the Administrative Agent, propose that the Total Commitment be increased (such aggregate amount
being, a
Commitment Increase
), effective as at a date prior to the Termination Date (an
Increase Date
) as to which agreement is to be reached by an earlier date specified in
such notice (a
Commitment Date
);
provided
,
however
, that (A) the Borrower may not propose
more than two Commitment Increases in any twelve month period, (B) the minimum proposed Commitment
Increase per notice shall be $50,000,000, (C) in no event shall the Total Commitment at any time
exceed $1,200,000,000, (D) at the time of and after giving effect to such Commitment Increase, the
Debt/EBITDA Ratio is less than or equal to 2.75:1.00, (E) no Default shall have occurred and be
continuing on such Increase Date and (F) an officers certificate as to corporate authorization for
such Commitment Increase and other appropriate documentation reasonably requested by the
Administrative Agent, any Increasing Lender (as defined below) or any Assuming Lender are received
by the Administrative Agent. The Administrative Agent shall notify the Lenders thereof promptly
upon its receipt of any such notice. The Administrative Agent agrees that it will cooperate with
the Borrower in discussions with the Lenders and other Eligible Assignees with a view to arranging
the proposed Commitment Increase through the increase of the Commitments of one or more of the
Lenders (each such Lender that is willing to increase its Commitment hereunder being an
Increasing Lender
) and the addition of one or more other Eligible Assignees as Assuming
Lenders and as parties to this Agreement;
provided, however
, that it shall be in each Lenders sole
discretion
23
whether to increase its Commitment hereunder in connection with the proposed Commitment
Increase; and
provided further
that the minimum Commitment of each such Assuming Lender that
becomes a party to this Agreement pursuant to this
Section 2.05(b)
, shall be at least equal
to $25,000,000. If any of the Lenders agree to increase their respective Commitments by an
aggregate amount in excess of the proposed Commitment Increase, the proposed Commitment Increase
shall be allocated among such Lenders as determined at such time by the Borrower. If agreement is
reached on or prior to the applicable Commitment Date with any Increasing Lenders and Assuming
Lenders as to a Commitment Increase (which may be less than but not greater than specified in the
applicable notice from the Borrower), such agreement to be evidenced by a notice in reasonable
detail from the Borrower to the Administrative Agent on or prior to the applicable Commitment Date,
such Assuming Lenders, if any, shall become Lenders hereunder as of the applicable Increase Date,
the Commitments of such Assuming Lenders shall be, as of the Increase Date, the amounts specified
in such notice and the Commitments of each Increasing Lender shall be, as of the Increase Date,
increased by the amounts specified in such notice;
provided
that:
(x) the Administrative Agent shall have received (with copies for each Lender,
including each such Assuming Lender) by no later than 10:00 A.M. (New York City
time) on the applicable Increase Date a copy certified by the Secretary, an
Assistant Secretary or a comparable officer of the Borrower, of the resolutions
adopted by the Board of Directors of the Borrower authorizing such Commitment
Increase;
(y) each such Assuming Lender shall have delivered to the Administrative Agent
by no later than 10:00 A.M. (New York City time) on such Increase Date, an
appropriate Assumption Agreement in substantially the form of
Exhibit D
hereto, duly executed by such Assuming Lender and the Borrower; and
(z) each such Increasing Lender shall have delivered to the Administrative
Agent by no later than 10:00 A.M. (New York City time) on such Increase Date
confirmation in writing satisfactory to the Administrative Agent as to its increased
Commitment.
(c) In the event that the Administrative Agent shall have received notice from the Borrower as
to its agreement to a Commitment Increase on or prior to the applicable Commitment Date and each of
the actions provided for in clauses (x) through (z) above shall have occurred prior to 10:00 A.M.
(New York City time) on the applicable Increase Date to the satisfaction of the Administrative
Agent, the Administrative Agent shall notify the Lenders (including any Assuming Lenders) and the
Borrower of the occurrence of such Commitment Increase by telephone, confirmed immediately in
writing, and in any event no later than 1:00 P.M. (New York City time) on such Increase Date and
shall record in the Register the relevant information with respect to each Increasing Lender and
Assuming Lender. Each Increasing Lender and each Assuming Lender shall, before 2:00 P.M. (New York
City time) on the applicable Increase Date, make available for the account of its Applicable
Lending Office to the Administrative Agent at the applicable Administrative Agents Account, in
Same Day Funds, in the case of such Assuming Lender, an amount equal to such Assuming Lenders Pro
Rata Share of the Borrowings then outstanding (calculated based on its Commitment as a percentage
of the
24
aggregate Commitments outstanding after giving effect to the relevant Commitment Increase)
and, in the case of such Increasing Lender, an amount equal to the excess of (i) such Increasing
Lenders Pro Rata Share of the Borrowings then outstanding (calculated based on its Commitment as a
percentage of the aggregate Commitments outstanding after giving effect to the relevant Commitment
Increase) over (ii) such Increasing Lenders Pro Rata Share of the Borrowings then outstanding
(calculated based on its Commitment (without giving effect to the relevant Commitment Increase) as
a percentage of the aggregate Commitments (without giving effect to the relevant Commitment
Increase). After the Administrative Agents receipt of such funds from each such Increasing Lender
and each such Assuming Lender, the Administrative Agent will promptly thereafter cause to be
distributed like funds to the other Lenders for the account of their respective Applicable Lending
Offices in an amount to each other Lender such that the aggregate amount of the outstanding
Advances owing to each Lender after giving effect to such distribution equals such Lenders ratable
portion of the Borrowings then outstanding (calculated based on its Commitment as a percentage of
the aggregate Commitments outstanding after giving effect to the relevant Commitment Increase),
provided
that the Borrower will be subject to the payment of other costs, if any, pursuant to
Section 8.04(c)
in connection with any such distribution. Within five Business Days after
the Borrower receives notice from the Administrative Agent, the Borrower, at its own expense, shall
execute and deliver to the Administrative Agent Notes payable to the order of each Assuming Lender,
if any, and, each Increasing Lender, dated as of the applicable Increase Date, in a principal
amount equal to such Lenders Commitment after giving effect to the relevant Commitment Increase,
and substantially in the form of
Exhibit A
attached hereto. The Administrative Agent, upon
receipt of such Notes, shall promptly deliver such Notes to the respective Assuming Lenders and
Increasing Lenders.
(d) In the event that the Administrative Agent shall not have received notice from the
Borrower as to such agreement on or prior to the applicable Commitment Date or the Borrower shall,
by notice to the Administrative Agent prior to the applicable Increase Date, withdraw its proposal
for a Commitment Increase or any of the actions provided for above in clauses (b)(i)(x) through
(b)(i)(z) shall not have occurred by 10:00 A.M. (New York City time) on such Increase Date, such
proposal by the Borrower shall be deemed not to have been made. In such event, any actions
theretofore taken under clauses (b)(i)(x) through (b)(i)(z) above shall be deemed to be of no
effect and all the rights and obligations of the parties shall continue as if no such proposal had
been made.
Section 2.06
Repayment of Advances
.
(a) The Borrower shall repay to the Administrative Agent for the ratable account of the
Lenders on the Termination Date the aggregate principal amount of all Advances then outstanding
together with all accrued and unpaid interest, fees and costs associated therewith. Repayments
made pursuant to this clause (a) shall be in the same currency in which such outstanding Advances
were made.
(b) The Borrower shall repay each Swing Line Loan together with accrued and unpaid interest
thereon on the earlier to occur of (i) the date twenty-one (21) days after such Swing Line Loan is
made and (ii) the Termination Date.
25
Section 2.07
Interest on Advances
.
(a)
Scheduled Interest
. The Borrower shall pay interest on the unpaid principal
amount of each Advance owing to each Lender from the date of such Advance until such principal
amount shall be paid in full, at the following rates per annum:
(i)
Base Rate Advances
. During such periods as such Advance is a Base Rate
Advance, a rate per annum equal at all times to the sum of (x) the Base Rate in effect from
time to time
plus
(y) the Applicable Margin in effect from time to time, payable in arrears
quarterly on the last day of each March, June, September and December during such periods
and on the date such Base Rate Advance shall be Converted or paid in full.
(ii)
Eurocurrency Rate Advances
. During such periods as such Advance is a
Eurocurrency Rate Advance, a rate per annum equal at all times during each Interest Period
for such Advance to the sum of (x) the Eurocurrency Rate for such Interest Period for such
Advance
plus
(y) the Applicable Margin in effect from time to time
plus
(z) in the case of
each Advance in Sterling, the Mandatory Cost, payable in arrears on the last day of such
Interest Period and, if such Interest Period has a duration of more than three months, on
each day that occurs during such Interest Period every three months from the first day of
such Interest Period and on the date such Eurocurrency Rate Advance shall be Converted or
paid in full.
(iii)
Swing Line Loans
. With respect to each Swing Line Loan, a rate per annum
equal at all times to (i) the sum of (x) the Base Rate in effect from time to time
plus
(y)
the Applicable Margin for Base Rate Advances in effect from time to time, or (ii) such other
rate from time to time offered by the Swing Line Lender and accepted by the Borrower, in
either event payable in arrears on the date of repayment or refinancing, in whole or in
part, of such Swing Line Loan.
(b)
Default Interest
. Upon the occurrence and during the continuance of an Event of
Default, the Borrower shall pay interest on (i) the unpaid principal amount of each Advance owing
to each Lender, payable in arrears on the dates referred to in clause (a)(i) or (a)(ii) above, at a
rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on
such Advance pursuant to clause (a)(i) or (a)(ii) above and (ii) to the fullest extent permitted by
law, the amount of any interest, fee or other amount payable hereunder that is not paid when due,
from the date such amount shall be due until such amount shall be paid in full, payable in arrears
on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times
to 2% per annum above the rate per annum required to be paid on Base Rate Advances pursuant to
clause (a)(i) above.
Section 2.08
Interest Rate Determination
.
(a) The Administrative Agent shall give prompt notice to the Borrower and the Lenders of the
applicable interest rate determined by the Administrative Agent for purposes of
Section
2.07(a)(i)
or
(ii)
.
(b) If, with respect to any Eurocurrency Rate Advances, the Required Lenders notify the
Administrative Agent that the Eurocurrency Rate for any Interest Period for such Advances
26
will not adequately reflect the cost to such Required Lenders of making, funding or
maintaining their respective Eurocurrency Rate Advances for such Interest Period, the
Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon (i) each
Eurocurrency Rate Advance will automatically, on the last day of the then existing Interest Period
therefor, Convert into a Base Rate Advance, and (ii) the obligation of the Lenders to make, or to
Convert Base Rate Advances into, Eurocurrency Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such
suspension no longer exist.
(c) If the Borrower shall fail to select the duration of any Interest Period for any
Eurocurrency Rate Advances in accordance with the provisions contained in the definition of
Interest Period in
Section 1.02
, the Administrative Agent will forthwith so notify the
Borrower and the Lenders and such Advances will automatically, on the last day of the then existing
Interest Period for such Eurocurrency Rate Advance, Convert into Base Rate Advances.
(d) On the date on which the aggregate unpaid principal amount of Eurocurrency Rate Advances
comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than
$5,000,000, such Advances shall automatically Convert into Base Rate Advances.
(e) Upon the occurrence and during the continuance of any Event of Default, (i) each
Eurocurrency Rate Advance will automatically, on the last day of the then existing Interest Period
therefor, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to
Convert Advances into, Eurocurrency Rate Advances shall be suspended.
Section 2.09
Optional Conversion of Advances
. The Borrower may on any Business Day,
upon notice given to the Administrative Agent not later than 11:00 A.M. (New York City time) on the
third Business Day, with respect to Advances in Dollars, or the fifth Business Day, with respect to
Advances in Sterling, prior to the date of the proposed Conversion and subject to the provisions of
Sections 2.08
and
2.12
, Convert all Advances of one Type comprising the same
Borrowing into Advances of the other Type;
provided
,
however
, that any Conversion of Eurocurrency
Rate Advances into Base Rate Advances shall be made only on the last day of an Interest Period for
such Eurocurrency Rate Advances, any Conversion of Base Rate Advances into Eurocurrency Rate
Advances shall be in an amount not less than the minimum amount specified in
Section
2.02(b)
and no Conversion of any Advances shall result in more separate Eurocurrency Rate
Borrowings than permitted under
Section 2.02(b)
. Each such notice of a Conversion shall,
within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Advances
to be Converted, and (iii) if such Conversion is into Eurocurrency Rate Advances, the duration of
the initial Interest Period for each such Advance. Each notice of Conversion shall be irrevocable
and binding on the Borrower.
Section 2.10
Prepayments of Advances
.
(a)
Optional Prepayments
. The Borrower may, upon notice to the Administrative Agent
stating the proposed date and aggregate principal amount of the prepayment, given not later than
11:00 A.M. (New York City time) on the third Business Day, with respect to Advances in Dollars, or
the fifth Business Day, with respect to Advances in Sterling, prior to the date of
27
such proposed prepayment, in the case of Eurocurrency Rate Advances, and not later than 11:00
A.M. (New York City time) on the day of such proposed prepayment, in the case of Base Rate
Advances, and if such notice is given the Borrower shall, prepay the outstanding principal amount
of the Advances comprising part of the same Borrowing in whole or ratably in part, together with
accrued interest to the date of such prepayment on the principal amount prepaid, with such
prepayment to be made in the currency in which such Advances were made;
provided, however
, that (x)
except in the case of prepayments of Swing Line Loans, as described in clause (z) below, each
partial prepayment shall be in an aggregate principal amount of $5,000,000 or the Equivalent
thereof in Sterling or an integral multiple of $1,000,000 or the Equivalent thereof in Sterling in
excess thereof, (y) in the event of any such prepayment of a Eurocurrency Rate Advance, the
Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to
Section
8.04(c)
and (z) in the case of a Swing Line Loan, the Borrower may prepay the outstanding
principal amount of such Swing Line Loan, together with accrued interest to the date of such
prepayment on the principal amount prepaid, at any time in minimum increments of $100,000.
(b)
Mandatory Prepayments
.
(i) If at any time the sum of (A) the aggregate principal amount of all Advances
denominated in Dollars then outstanding plus (B) the Equivalent in Dollars of the aggregate
principal amount of all Advances denominated in Sterling then outstanding exceeds the Total
Commitment on such date, the Borrower shall, within two Business Days after receipt of such
notice given pursuant to (ii) below, prepay the outstanding principal amount of any Advances
in an aggregate amount sufficient to reduce such sum to an amount not to exceed the Total
Commitment on such date.
(ii) Each prepayment made pursuant to this
Section 2.10(b)
(A) shall be made
together with any interest accrued to the date of such prepayment on the principal amounts
prepaid and, in the case of any prepayment of a Eurocurrency Rate Advance on a date other
than the last day of an Interest Period or at its maturity, any additional amounts which
such Borrower shall be obligated to reimburse to the Lenders in respect thereof pursuant to
Section 8.04(c)
, and (B) shall be made in the currency in which the Advances subject
to such prepayment were made. The Administrative Agent shall give prompt notice of any
prepayment required under this
Section 2.10(b)
to the Borrower and the Lenders.
(c)
Hedging Agreements
. All Hedging Agreements, if any, between Borrower and any
Lender or its affiliates are independent agreements governed by the written provisions of such
Hedging Agreements, which will remain in full force and effect, unaffected by any repayment,
prepayment, acceleration, reduction, increase or change in terms of this Agreement or the Notes,
except as otherwise expressly provided in said written swap agreements, and any payoff statements
from the Administrative Agent relating to this Agreement shall not apply to said Hedging
Agreements, except as otherwise expressly provided in such payoff statement.
28
Section 2.11
Increased Costs
.
(a) If, due to either (i) the introduction of or any change in or in the interpretation of any
law or regulation occurring after the date hereof, (ii) the compliance with any guideline or
request from any central bank or other governmental authority (whether or not having the force of
law) issued or made after the date hereof, or (iii) the Mandatory Cost, as calculated hereunder,
not representing the cost to any Lender of complying with the requirements of the Bank of England
and/or the Financial Services Authority or the European Central Bank in relation to its making,
funding or maintaining Eurocurrency Rate Advances, there shall be any increase in the cost to any
Lender of agreeing to make or making, funding or maintaining Eurocurrency Rate Advances (excluding
for purposes of this
Section 2.11
any such increased costs resulting from (i) Indemnified
Taxes or Other Taxes (as to which
Section 2.14
shall govern) and (ii) changes in taxes
measured by or imposed upon the net income or gross income or franchise taxes, or taxes measured by
or imposed upon capital or net worth, or branch taxes, of such Lender or its Applicable Lending
Office), then the Borrower shall from time to time, within ten days of demand by such Lender (with
a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account
of such Lender additional amounts sufficient to compensate such Lender for such increased cost;
provided
that, before making any such demand, each Lender agrees to use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions) to designate a
different Applicable Lending Office if the making of such a designation would avoid the need for,
or reduce the amount of, such additional cost and would not, in the reasonable judgment of such
Lender, be otherwise disadvantageous to such Lender.
(b) If any Lender reasonably determines that compliance with any law or regulation or any
guideline or request from any central bank or other governmental authority regarding capital
adequacy (whether or not having the force of law) issued or made after the date hereof affects or
would affect the amount of capital required or expected to be maintained by such Lender or any
corporation controlling such Lender and that the amount of such capital is increased by or based
upon the existence of such Lenders commitment to lend hereunder and other commitments of this
type, and such Lender reasonably determines that the rate of return on its or such controlling
corporations capital as a consequence is reduced to a level below that which such Lender or such
controlling corporation would have achieved but for the occurrence of such conditions, then, within
ten days of demand by such Lender (with a copy of such demand to the Administrative Agent), the
Borrower shall pay to the Administrative Agent for the account of such Lender, from time to time as
specified by such Lender, additional amounts sufficient to compensate such Lender or such
corporation in the light of such circumstances, to the extent that such Lender reasonably
determines such increase in capital to be allocable to the existence of such Lenders commitment to
lend hereunder.
(c) If a Lender changes its Applicable Lending Office (other than pursuant to this
Section
2.11
or
Section 2.12
or
2.14(h)
) and the effect of such change, as of the date
of such change, would be to cause the Borrower to become obligated to pay any additional amounts
under this
Section 2.11
, the Borrower shall not be obligated to pay such additional amount.
(d) A certificate of a Lender setting forth the amount of any claim made under this
Section 2.11
and identifying with reasonable specificity the basis for calculating such
amount,
29
shall be delivered to the Borrower and the Administrative Agent and shall be conclusive absent
manifest error.
Section 2.12
Illegality; Circumstances Affecting Availability
. Notwithstanding any
other provision of this Agreement, if any Lender shall notify the Administrative Agent (who will
promptly notify the Borrower and the other Lenders) that the introduction of or any change in or in
the interpretation of any law or regulation after the date hereof makes it unlawful, or any central
bank or other governmental authority asserts that it is unlawful, for any Lender or its
Eurocurrency Lending Office to perform its obligations hereunder to make Eurocurrency Rate Advances
or to fund or maintain Eurocurrency Rate Advances hereunder, or if the Administrative Agent
determines that by reason of circumstances affecting foreign exchange and interbank markets
generally, the Eurocurrency Rate cannot be determined, then (A) each Eurocurrency Rate Advance will
automatically, upon such demand, Convert into a Base Rate Advance, and (B) the obligation of the
Lenders to make Eurocurrency Rate Advances or to Convert Base Rate Advances into Eurocurrency Rate
Advances shall be suspended until the Administrative Agent shall notify the Borrower and the
Lenders that the circumstances causing such suspension or inability to determine the Eurocurrency
Rate no longer exist or that such Lender has entered into one or more Assignment and Assumptions
pursuant to
Section 8.06
assigning its Commitment to one or more Eligible Assignees;
provided
that, before making any such demand, each Lender agrees to use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions) to designate a
different Applicable Lending Office if the making of such a designation would not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.
Section 2.13
Payments Generally and Computations
.
(a)
General
. All payments hereunder and under the Notes to be made by the Borrower
shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff.
The Borrower shall make each payment hereunder and under the Notes not later than 11:00 A.M. (New
York City time) on the day when due in Dollars, in the case of Advances denominated in Dollars, or
in Sterling, in the case of Advances denominated in Sterling, to the Administrative Agent at the
applicable Administrative Agents Account in Same Day Funds. The Administrative Agent will
promptly thereafter cause to be distributed like funds relating to the payment of principal or
interest or facility fees ratably (other than amounts payable pursuant to
Section 2.11
,
2.14
or
8.04(c)
) to the Lenders for the account of their respective Applicable
Lending Offices, and like funds relating to the payment of any other amount payable to any Lender
to such Lender for the account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Assumption
and recording of the information contained therein in the Register pursuant to
Section
8.06(c)
, from and after the effective date specified in such Assignment and Assumption, the
Administrative Agent shall make all payments hereunder and under the Notes in respect of the
interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and
Assumption shall make all appropriate adjustments in such payments for periods prior to such
effective date directly between themselves. Upon any Assuming Lender becoming a Lender hereunder
as a result of a Commitment Increase pursuant to
Section 2.05(b)
and upon the
Administrative Agents receipt of such Lenders Assumption Agreement and recording the information
contained therein in the Register, from and after the
30
applicable Increase Date, the Administrative Agent shall make all payments hereunder and under
the Notes in respect of the interest assumed thereby to such Assuming Lender.
(b) All computations of interest based on the Base Rate or the Federal Funds Rate shall be
made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and
all computations of interest based on the Eurocurrency Rate, of interest for Swing Line Loans if
not based on the Base Rate, and of facility fees, shall be made by the Administrative Agent on the
basis of a year of 360 days, in each case for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest or facility fees are
payable. Each determination by the Administrative Agent of an interest rate hereunder shall be
conclusive and binding for all purposes, absent manifest error.
(c) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other
than a Business Day, such payment shall be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of payment of interest or
facility fee, as the case may be;
provided
,
however
, that, if such extension would cause payment of
interest on or principal of Eurocurrency Rate Advances to be made in the next following calendar
month, such payment shall be made on the next preceding Business Day.
(d) Unless the Administrative Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Lenders hereunder that the Borrower will not make such
payment in full, the Administrative Agent may assume that the Borrower has made such payment in
full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon
such assumption, cause to be distributed to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent the Borrower shall not have so made such payment
in full to the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith
on demand such amount distributed to such Lender together with interest thereon, for each day from
the date such amount is distributed to such Lender until the date such Lender repays such amount to
the Administrative Agent, at the Overnight Rate.
Section 2.14
Taxes
.
(a) Except as otherwise required by law, any and all payments by the Borrower hereunder or
under the Notes issued hereunder shall be made, in accordance with
Section 2.13
, free and
clear of and without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings and all liabilities with respect thereto (all such taxes,
levies, imposts, deductions, charges, withholdings, and liabilities in respect of payments
hereunder or under the Notes being hereafter referred to as
Taxes
),
excluding
, in the
case of payments made to any Lender or the Administrative Agent (A) Taxes imposed on or measured by
its net income, and franchise Taxes, branch Taxes, Taxes on doing business and Taxes measured by or
imposed upon its capital or net worth, in each case imposed as a result of such Lender (and or such
Lenders Applicable Lending Office) or the Administrative Agent being organized under the laws of,
or being a legal resident of, or having a fixed place of business or a permanent establishment or
doing business in the jurisdiction imposing such Tax (other than any such connection arising solely
from such Lender (and or such Lenders Applicable Lending Office) or the Administrative Agent
having executed, delivered or performed its obligations, or having
31
received a payment, or having enforced its rights and remedies, under this Agreement or any of
the other Loan Documents), (B) United Kingdom withholding Taxes except to the extent such United
Kingdom withholding Taxes would not have been imposed but for a change, after the date such Lender
or the Administrative Agent (as the case may be) becomes a party hereto, in United Kingdom tax law
or United Kingdom officially published Inland Revenue practice or an amendment or revocation, after
the date such Lender or the Administrative Agent (as the case may be) becomes a party hereto, of an
applicable United Kingdom income tax treaty with Austria, Denmark, Finland, France, Germany,
Ireland, Iceland, Luxembourg, Netherlands, Norway, Sweden, Switzerland or the United States, (C)
United Kingdom Taxes imposed as a result of the failure of the Inland Revenue to approve, on or
before a payment of interest to a Lender hereunder, a claim by such Lender for exemption from such
United Kingdom Taxes, where such failure is due to such Lenders failure to timely submit a validly
completed and executed Treaty Form within a time sufficient for the Inland Revenue to approve such
Lenders claim prior to such payment of interest, it being understood that after any such approval
by the Inland Revenue of such Lenders claim for exemption, such United Kingdom Taxes with respect
to such Lender shall not be excluded from the application of this
Section 2.14(a)
, and (D)
United States withholding Taxes except to the extent such United States withholding Taxes are
imposed solely as a result of (1) a change, after the date such Lender or the Administrative Agent
(as the case may be) becomes a party hereto, in the Internal Revenue Code or any regulations
promulgated thereunder (or in the official interpretation of the Internal Revenue Code or any
regulations promulgated thereunder) or an amendment or revocation or change in official
interpretation, after the date such Lender or the Administrative Agent (as the case may be) becomes
a party hereto, of an applicable United States income tax treaty with Austria, Denmark, Finland,
France, Germany, Ireland, Iceland, Luxembourg, Netherlands, Norway, Sweden or the United Kingdom or
(2) the failure by the Borrower to timely request an updated or successor Form W-8BEN or W-8ECI, as
appropriate, under
Section 2.14(e)
(all such non-excluded Taxes hereinafter referred to as
Indemnifiable Taxes
). If the Borrower shall be required by law to deduct any
Indemnifiable Taxes from or in respect of any sum payable hereunder or under any Note issued
hereunder to any Lender or the Administrative Agent or, if the Administrative Agent shall be
required by law to deduct any Indemnifiable Taxes from or in respect of any sum paid or payable
hereunder or under any Note to any Lender, (i) the sum payable shall be increased as may be
necessary so that after making all required deductions for Indemnifiable Taxes (including
deductions for Indemnifiable Taxes, whether by the Borrower or the Administrative Agent, applicable
to additional sums payable under this
Section 2.14
) such Lender or the Administrative Agent
(as the case may be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower (or, as the case may be and as required by applicable law,
the Administrative Agent) shall make such deductions and (iii) the Borrower (or, as the case may be
and as required by applicable law, the Administrative Agent) shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any present or future stamp or documentary taxes or
any other excise (other than income) or property taxes, charges or similar levies that arise from
any payment made hereunder or under the Notes or from the execution, delivery or registration of,
or performing under this Agreement or the Notes or any document to be furnished under or in
connection with any thereof or any modification or amendment in respect of this Agreement or the
Notes (hereinafter referred to as
Other Taxes
).
32
(c) The Borrower shall indemnify each Lender and the Administrative Agent for the full amount
of Indemnifiable Taxes or Other Taxes imposed on or paid by such Lender or the Administrative Agent
(as the case may be) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto. This indemnification shall be made within 30 days from the date
such Lender or the Administrative Agent (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Indemnifiable Taxes under
Section
2.14(a)
by the Borrower, the Borrower shall furnish to the Administrative Agent, at its address
referred to in
Section 8.02
, the original or a certified copy of a receipt evidencing such
payment to the extent such receipt is received by the Borrower, or other written proof of payment
reasonably satisfactory to the Administrative Agent showing payment thereof. In the case of any
payment hereunder or under the Notes issued hereunder by or on behalf of the Borrower through an
account or branch outside the United Kingdom or by or on behalf of the Borrower by a payor that is
not a United Kingdom person, if the Borrower determines that no Indemnifiable Taxes are payable in
respect thereof, the Borrower shall furnish, or shall cause such payor to furnish, to the
Administrative Agent, at such address, an opinion of counsel acceptable to the Administrative Agent
stating that such payment is exempt from Indemnifiable Taxes.
(e) Each Lender organized under the laws of a jurisdiction outside the United States, on or
prior to the date of its execution and delivery of this Agreement in the case of each Initial
Lender and on the date of the Assumption Agreement or the Assignment and Assumption pursuant to
which it becomes a Lender in the case of each other Lender, and from time to time thereafter as
requested in writing by the Borrower shall provide each of the Administrative Agent and the
Borrower with (i) two original Internal Revenue Service Form W-8BEN or W-8ECI, as appropriate, or
any successor or other from prescribed by the Internal Revenue Service, certifying that such Lender
is exempt from United States withholding tax and (ii) to the extent that any such form or other
certification becomes obsolete with respect to any Lender, such Lender shall, upon the written
request of the Borrower to such Lender and the Administrative Agent, promptly provide either an
updated or successor form or certification to the Borrower and the Administrative Agent unless, in
each case, any change in treaty, law or regulation has occurred after the date such Lender becomes
a party hereunder which renders all such forms inapplicable or which would prevent such Lender from
duly completing and delivering any such form with respect to it and such Lender so advises the
Borrower and the Administrative Agent.
(f) Each Lender shall (i) as soon as reasonably practicable following the date it becomes a
party hereto, submit to its Relevant Taxing Authority a validly completed Treaty Form (or successor
Treaty Form thereto) claiming exemption from United Kingdom withholding Tax on interest, or (ii)
(A) on or before the date it becomes a party hereto, furnish to the Borrower, with a copy to the
Administrative Agent, a certificate substantially in the form of
Exhibit I
(a
U.K. Tax
Compliance Certificate
) certifying that such Lender (1) is a Bank within the meaning of
Section 840A of the Income and Corporation Taxes Act of 1988 of the United Kingdom and (2) is
within the charge to corporation tax in the United Kingdom with respect to payment hereunder and
(B) agree, upon reasonable request by the Borrower, to provide to the Borrower and the
Administrative Agent, to the extent it is legally entitled to do so, such other forms as may be
required by law in order to establish the legal entitlement of such Lender to an exemption from
United Kingdom withholding Tax with respect to payments under this
33
Agreement and the Notes issued hereunder, unless, in each case, any change in treaty, law or
regulation has occurred after the date such Lender becomes a party hereunder which renders any such
forms inapplicable or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Borrower and the Administrative Agent.
(g) For any period with respect to which a Lender has failed to provide the Borrower with the
appropriate form described in
Section 2.14(e)
or
(f)
(
other than
if the Borrower
has failed to timely request with reasonable notice any appropriate renewal, successor or other
form or if any such form otherwise is not required under subsection (e) or (f)), such Lender shall
not be entitled to indemnification under
Section 2.14(a)
or
(c)
with respect to
Indemnifiable Taxes imposed by the United Kingdom or the United States by reason of such failure;
provided
,
however
, that should a Lender become subject to Indemnifiable Taxes or United Kingdom
withholding Taxes because of its failure to deliver a form required hereunder, the Borrower shall
take such steps as such Lender shall reasonably request to assist such Lender to recover such
Indemnifiable Taxes or United Kingdom withholding Taxes.
(h) If a condition or an event occurs which would, or would upon the passage of time or giving
notice, result in the payment of any additional amounts pursuant to this
Section 2.14
, each
Lender agrees to use reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions) to change the jurisdiction of its Applicable Lending Office if the making
of such a change would avoid the need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable judgment of such Lender, be otherwise
disadvantageous to such Lender.
(i) If the Administrative Agent or any Lender, in its sole opinion, determines that it has
finally and irrevocably received or been granted a refund in respect of any Indemnifiable Taxes or
Other Taxes as to which indemnification has been paid by the Borrower pursuant to
Section
2.14(a)
or
(c)
, it shall promptly remit such refund to the Borrower, net of all
out-of-pocket expenses of the Administrative Agent or such Lender;
provided
,
however
, that the
Borrower upon the request of the Administrative Agent or such Lender, agrees promptly to return
such refund to such party in the event such party is required to repay such refund to the relevant
taxing authority. The Administrative Agent or such Lender shall provide the Borrower with a copy
of any notice or assessment from the relevant taxing authority (deleting any confidential
information contained therein) requiring the repayment of such refund. Nothing contained herein
shall impose an obligation on the Administrative Agent or any Lender to apply for any refund or to
disclose to any party any information regarding their proprietary information regarding tax affairs
and computations. If the Borrower determines in good faith that a reasonable basis exists for
contesting any Taxes for which indemnification has been demanded hereunder, the relevant Lender or
the Administrative Agent, as applicable, to the extent permitted by law, rule or regulation, shall
reasonably cooperate with the Borrower in challenging such Taxes at the Borrowers expense if so
requested by the Borrower in writing.
(j) If a Lender changes its Applicable Lending Office (other than pursuant to subsection (h)
above or
Section 2.11
or
2.12
) and the effect of such change, as of the date of
such change, would be to cause the Borrower to become obligated to pay any additional amounts under
this
Section 2.14
, the Borrower shall not be obligated to pay such additional amount.
34
(k) A certificate of a Lender setting forth such amount or amounts as shall be necessary to
compensate such Lender specified in
Section 2.14(a)
,
(b)
, or
(c)
above, as
the case may be, and identifying with reasonable specificity the basis for calculation of such
amount or amounts, shall be delivered to the Borrower and the Administrative Agent and shall be
conclusive absent manifest error.
(l) The obligations of a Lender under this
Section 2.14
shall survive the termination
of this Agreement and the payment of the Advances and all amounts payable hereunder.
Section 2.15
Sharing of Payments, Etc
. If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on
account of the Advances owing to it (other than pursuant to
Section 2.11
,
2.14
or
8.04(c)
) in excess of its ratable share of payments on account of the Advances obtained by
all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in
the Advances owing to them as shall be necessary to cause such purchasing Lender to share the
excess payment ratably with each of them;
provided
,
however
, that if all or any portion of such
excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the
extent of such recovery together with an amount equal to such Lenders ratable share (according to
the proportion of (i) the amount of such Lenders required repayment to (ii) the total amount so
recovered from the purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender
so purchasing a participation from another Lender pursuant to this
Section 2.15
may, to the
fullest extent permitted by law, exercise all of its rights of payment (including the right of
setoff) with respect to such participation as fully as if such Lender were the direct creditor of
the Borrower in the amount of such participation.
Section 2.16
Use of Proceeds
. The proceeds of the Advances shall be available (and
the Borrower agrees that it shall use such proceeds) solely (i) to refinance Existing Debt, (ii) to
provide liquidity support for commercial paper issued by the Borrower and (iii) for working capital
and other general corporate purposes (including acquisitions) of the Borrower and its Subsidiaries
and (following use of such proceeds by the Borrower to pay a dividend to the Parent or to make an
intercompany loan to the Parent) the Parent and its Subsidiaries.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
Section 3.01
Conditions Precedent to Effectiveness
. This Agreement shall become
effective on the date (the
Effective Date
) the Borrower sends written notice to the
Administrative Agent requesting that this Agreement become effective;
provided
, that
following conditions precedent have been satisfied:
(a) The Borrower shall have paid all fees and expenses of the Administrative Agent and the
Lenders payable hereunder and accrued as of the Effective Date (including the accrued fees and
expenses of counsel to the Administrative Agent).
35
(b) On the Effective Date, the following statements shall be true and the Administrative Agent
shall have received for the account of each Lender a certificate signed by a duly authorized
officer of the Borrower, dated the Effective Date, stating that:
(i) The representations and warranties contained in
Section 4.01
are correct in
all material respects on and as of the Effective Date, and
(ii) No event has occurred and is continuing that constitutes a Default.
(c) The Administrative Agent shall have received on or before the Effective Date the
following, each dated such day, in form and substance satisfactory to the Administrative Agent and
(except for the Notes) in sufficient copies for each Lender:
(i) If requested by a Lender, a replacement Note payable to the order of each such
Lender, in a principal amount equal to each such Lenders Commitment.
(ii) Certified copies of the resolutions of the Board of Directors (or committee
thereof) of the Borrower and each other Loan Party approving this Agreement, the Notes and
each Guaranty to which it is or is to be a party, and of all documents evidencing other
necessary corporate action and governmental and other third party approvals and consents, if
any, with respect to this Agreement, the Notes and each Guaranty.
(iii) A certificate of the Secretary or an Assistant Secretary of each Loan Party
certifying the names and true signatures of the officers of such Loan Party authorized to
sign the Loan Documents to which it is a party and the other documents to be delivered
hereunder.
(iv) A reaffirmation of the Subsidiary Guaranty executed by each Subsidiary Guarantor,
and the Parent Guaranty duly executed by the Parent.
(v) An opinion of Alston & Bird, LLP, counsel for the Loan Parties, in substantially
the form of
Exhibit F
attached hereto.
(vi) An opinion of Linklaters, English counsel for the Borrower, in substantially the
form of
Exhibit G
attached hereto and to such other matters as any Lender through
the Administrative Agent may reasonably request.
(vii) An opinion of APPLEBY, Bermuda counsel for the Parent, in substantially the form
of
Exhibit H
attached hereto and to such other matters as any Lender through the
Administrative Agent may reasonably request.
(d) An acceptance of the appointment of the Process Agent (as such term is defined in
Section 8.12
) for each of the Parent and the Borrower.
Section 3.02
Conditions Precedent to Each Borrowing and Each Increase Date
. The
obligation of each Lender to make an Advance on the occasion of each Borrowing and each increase of
Commitments pursuant to
Section 2.05(b)
shall be subject to the conditions precedent that
the Effective Date shall have occurred and on the date of such Borrowing or such Increase
36
Date the following statements shall be true (and each of the giving of the applicable Notice
of Borrowing and request for Commitment increase and the acceptance by the Borrower of the proceeds
of such Borrowing shall constitute a representation and warranty by the Borrower that on the date
of such Borrowing or such Increase Date such statements are true):
(a) the representations and warranties contained in
Section 4.01
(excluding, in
the case of Borrowings, clauses (g) and (i)(i) of
Section 4.01
) are correct in all
material respects on and as of the date of such date, before and after giving effect to such
Borrowing or such Increase Date and to the application of the proceeds therefrom, as though
made on and as of such date except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations and warranties
shall have been correct in all material respects on and as of such earlier date (other than
in the case of the representations and warranties made in
Section 4.01(d)
, which
shall be correct in all material respects on and as of such date of Borrowing or such
Increase Date as though made on and as of such date, without regard to any earlier date
referenced therein), and
(b) no event has occurred and is continuing, or would result from such Borrowing or
from the application of the proceeds therefrom, or such Increase Date that constitutes a
Default.
Section 3.03
Determinations Under Section 3.01
. For purposes of determining
compliance with the conditions specified in Section 3.01, each Lender shall be deemed to have
consented to, approved or accepted or to be satisfied with each document or other matter required
thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an
officer of the Administrative Agent responsible for the transactions contemplated by this Agreement
shall have received notice from such Lender prior to the date that the Borrower, by notice to the
Lenders, designates as the proposed Effective Date, specifying its objection thereto. The
Administrative Agent shall promptly notify the Lenders and the Borrower of the occurrence of the
Effective Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01
Representations and Warranties of the Parent and the Borrower
. Each of
the Parent and the Borrower represents and warrants as follows:
(a) Each Loan Party (i) is duly organized or formed, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization, (ii) is duly qualified and
in good standing in each other jurisdiction in which it owns or leases property or in which the
conduct of its business requires it to so qualify or be licensed except where the failure to so
qualify or be licensed is not reasonably likely to have a Material Adverse Effect and (iii) has all
requisite power and authority (including, without limitation, all governmental licenses, permits
and other approvals) to own or lease and operate its properties and to carry on its business as now
conducted and as proposed to be conducted except where failure to possess such power or authority
is not reasonably likely to have a Material Adverse Effect.
37
(b) Set forth on
Schedule 4.01(b)
hereto is a complete and accurate list of all
Subsidiaries of each Loan Party as of March 31, 2005, showing as of such date (as to each such
Subsidiary) the jurisdiction of its incorporation or organization. All of the outstanding capital
stock of all of such Subsidiaries has been validly issued, is fully paid and non-assessable and is
owned by such Loan Party or one or more of its Subsidiaries free and clear of all Liens. Each such
Subsidiary (i) is duly organized or formed, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization, (ii) is duly qualified and in good standing
in each other jurisdiction in which it owns or leases property or in which the conduct of its
business requires it to so qualify or be licensed except where the failure to so qualify or be
licensed is not reasonably likely to have a Material Adverse Effect and (iii) has all requisite
power and authority (including, without limitation, all governmental licenses, permits and other
approvals) to own or lease and operate its properties and to carry on its business as now conducted
and as proposed to be conducted except where failure to possess such power or authority is not
reasonably likely to have a Material Adverse Effect.
(c) The execution, delivery and performance by each Loan Party of this Agreement, the Notes
and each other Loan Document to which it is or is to be a party, and the incurrence of the
obligations provided for herein and therein, are within such Loan Partys corporate powers, have
been duly authorized by all necessary corporate action, and do not (i) contravene such Loan Partys
charter or bylaws, (ii) violate any law (including, without limitation, the Securities Exchange Act
of 1934), rule, regulation (including, without limitation, Regulations T, U and X of the Board of
Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination
or award, (iii) conflict with or result in the breach of, or constitute a default under, any
contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on
or affecting any Loan Party, any of its Subsidiaries or any of their properties or (iv) result in
or require the creation or imposition of any Lien upon or with respect to any of the properties of
any Loan Party or any of its Subsidiaries. No Loan Party or any of its Subsidiaries is in
violation of any such law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed
of trust, lease or other instrument, the violation or breach of which is reasonably likely to have
a Material Adverse Effect.
(d) No authorization or approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body or any other third party is required for (i) the due
execution, delivery, recordation, filing or performance by any Loan Party of this Agreement, the
Notes or any other Loan Document to which it is or is to be a party, or for the performance of any
Loan Document or (ii) the exercise by the Administrative Agent or any Lender of its rights under
the Loan Documents as of March 31, 2005, except for the authorizations, approvals, actions, notices
and filings listed on
Schedule 4.01(d)
, all of which have been duly obtained, taken, given
or made and are in full force and effect.
(e) This Agreement has been, and each of the Notes and each other Loan Document when delivered
hereunder will have been, duly executed and delivered by each Loan Party party thereto. This
Agreement is, and each of the Notes and each other Loan Document when delivered hereunder will be,
the legal, valid and binding obligation of each Loan Party party thereto, enforceable against such
Loan Party in accordance with its terms.
38
(f) The Consolidated and consolidating balance sheets of the Borrower and its Subsidiaries as
at December 31, 2006, and the related Consolidated and consolidating statements of income and
Consolidated statement of cash flows of the Borrower and its Subsidiaries for the fiscal year then
ended, and the Consolidated and consolidating balance sheets of the Borrower and its Subsidiaries
as at June 30, 2007, and the related Consolidated and consolidating statements of income and
Consolidated statement of cash flows of the Borrower and its Subsidiaries for the six months then
ended, duly certified by the chief financial officer of the Borrower, copies of which have been
furnished to each Lender in accordance with
Section 5.01(j)
of the Existing Credit
Agreement, fairly present, subject, in the case of said balance sheets as at June 30, 2007, and
said statements of income and cash flows for the six months then ended, to year-end audit
adjustments, the Consolidated and consolidating financial condition of the Borrower and its
Subsidiaries as at such dates and the Consolidated and consolidating results of the operations of
the Borrower and its Subsidiaries for the periods ended on such dates, all in accordance with
International Financial Reporting Standards applied on a consistent basis.
(g) Since December 31, 2006, there has been no Material Adverse Change.
(h) No written information, exhibit or report furnished by any Loan Party to any Agent or any
Lender in connection with the negotiation of the Loan Documents or pursuant to the terms of the
Loan Documents contains any untrue statement of a material fact or omits to state a material fact
necessary to make the statements made therein not misleading in light of the circumstances under
which they were made.
(i) There is no action, suit, investigation, litigation or proceeding affecting any Loan Party
or, to the best knowledge of the Loan Parties, any of its Subsidiaries pending or, to the best
knowledge of the Loan Parties, threatened before any court, governmental agency or arbitrator that
(i) would be reasonably likely to have a Material Adverse Effect as of March 31, 2005 (other than
the matters described on
Schedule 4.01(i)
hereto (the
Disclosed Litigation
)) and
there has been no change or other development in the Disclosed Litigation which is reasonably
likely to result in a material adverse change in the business, financial condition or results of
operations of the Parent and its Subsidiaries, taken as a whole, or (ii) purports to affect the
legality, validity or enforceability of this Agreement, any Note or any other Loan Document or the
consummation of the transactions contemplated hereby.
(j) Following application of the proceeds of each Advance, not more than 25 percent of the
value of the assets (either of the Borrower only or of the Borrower and its Subsidiaries on a
Consolidated basis) subject to the provisions of
Section 5.02(a)
or
5.02(d)
or
subject to any restriction contained in any agreement or instrument between the Borrower and any
Lender or any Affiliate of any Lender relating to Debt and within the scope of
Section
6.01(e)
will be margin stock (within the meaning of Regulation U issued by the Board of
Governors of the Federal Reserve System). Neither the making of any Advance nor the use of
proceeds thereof will violate or be inconsistent with the provisions of Regulations T, U or X of
the Board of Governors of the Federal Reserve System.
(k) No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan
that has resulted in or is reasonably expected to result in a Material Adverse Effect.
39
(l) Schedule B (Actuarial Information) to the most recent annual report (Form 5500 Series)
required to be filed for each Plan, copies of which have been filed with the Internal Revenue
Service and, with respect to each Plan whose funded current liability percentage (as defined in
Section 302(d)(8) of ERISA) is less than 100%, furnished to the Lenders, is complete and accurate
and fairly presents the funding status of such Plan, and since the date of such Schedule B there
has been no material adverse change in such funding status.
(m) Neither any Loan Party nor any ERISA Affiliate has incurred or is reasonably expected to
incur (i) any liability under Section 4064 or 4069 of ERISA or (ii) any Withdrawal Liability to any
Multiemployer Plan that has resulted or would be reasonably likely to result in a Material Adverse
Effect.
(n) Neither any Loan Party nor any ERISA Affiliate has been notified by the sponsor of a
Multiemployer Plan that such Multiemployer Plan is in reorganization or has been terminated, within
the meaning of Title IV of ERISA, and, to the best knowledge of any Loan Party or any ERISA
Affiliate, no such Multiemployer Plan is reasonably expected to be in reorganization or to be
terminated, within the meaning of Title IV of ERISA.
(o) Each Loan Party and each of its Subsidiaries and Affiliates has filed, has caused to be
filed or has been included in all tax returns (Federal, state, local and foreign) required to be
filed and has paid all taxes shown thereon to be due, together with applicable interest and
penalties.
(p) Neither any Loan Party nor any of its Subsidiaries is an investment company, or a
company controlled by an investment company, as such terms are defined in the Investment
Company Act of 1940, as amended. Neither the making of any Advances nor the application of the
proceeds or repayment thereof by the Borrower, nor the consummation of the other transactions
contemplated hereby, will violate any provision of such Act or any rule, regulation or order of the
Securities and Exchange Commission thereunder.
(q) [Intentionally Deleted]
(r) Each Subsidiary of the Parent engaged in advisory or management activities, if any, is
duly registered as an investment adviser as and to the extent required under the Investment
Advisers Act of 1940, as amended, and the rules and regulations promulgated thereunder. Each
Subsidiary of the Parent engaged in the broker-dealer business, if any, is duly registered as a
broker-dealer as and to the extent required under the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder and, as and to the extent required is a member
in good standing of the National Association of Securities Dealers, Inc.
(s) As of the Effective Date, neither the Parent nor any of its Subsidiaries is in default and
no waiver of default is in effect with respect to the payment of any principal or interest of any
Existing Debt for borrowed money.
(t) The obligations of each Loan Party under the Loan Documents to which it is a party
constitute direct, unconditional and general obligations of such Loan Party that rank and will rank
at least pari passu in priority of payment and in all other respects with all other Debt of such
Loan Party.
40
(u) Each Loan Party is, individually and together with its Subsidiaries, Solvent.
(v) Set forth on
Schedule 4.01(v)
hereto is a complete and accurate list of all
Existing Debt showing as of the date hereof the principal amount outstanding thereunder.
(w) The Parent and each of its Significant Subsidiaries owns or has fully sufficient right to
use, free from all material restrictions (other than Permitted Liens and Liens permitted under
Section 5.02(a)
), all real and personal (including, without limitation, intellectual)
properties that are necessary for the operation of their respective businesses as currently
conducted.
(x) As of the Effective Date, except under documents governing any Existing Debt, and except
as may be provided by applicable laws, rules or regulations (including those restrictions imposed
by governmental authorities), no Subsidiary of the Parent (other than any Special Purpose
Subsidiary) is party to any agreement prohibiting, conditioning or limiting the payment of
dividends or other distributions to the Parent or any of its Subsidiaries or the repayment of Debt
owed to the Parent by any Subsidiary of the Parent.
(y)
Environmental Compliance
. The Parent and each Subsidiary is in compliance with
all Environmental Laws, except where the failure to be in compliance could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
ARTICLE V
COVENANTS OF THE BORROWER
Section 5.01
Affirmative Covenants
. So long as any Advance shall remain unpaid or any
Lender shall have any Commitment hereunder, each of the Parent and the Borrower will:
(a)
Compliance with Laws, Etc
. Comply, and cause each of its Subsidiaries to comply,
in all material respects, with all applicable laws, rules, regulations and orders, such compliance
to include (to the extent applicable), without limitation, compliance with the Investment Advisers
Act of 1940, as amended, ERISA and environmental laws, except where the failure to do so would not,
and would not be reasonably expected to, have a Material Adverse Effect.
(b)
Payment of Taxes, Etc
. Pay and discharge, and cause each of its Subsidiaries to
pay and discharge, before the same shall become delinquent, all taxes, assessments, claims and
governmental charges or levies imposed upon it or upon its property, except to the extent that any
failure to do so would not, and would not be reasonably expected to, have a Material Adverse
Effect;
provided, however
, that neither the Parent nor any of its Subsidiaries shall be required to
pay or discharge any such tax, assessment, claim or charge that is being contested in good faith
and by proper proceedings and as to which appropriate reserves are being maintained.
(c)
Maintenance of Insurance
. Maintain, and cause each of its Significant
Subsidiaries to maintain, insurance with responsible and reputable insurance companies or
associations in such amounts and covering such risks as is usually carried by companies engaged
41
in similar businesses and owning similar properties in the same general areas in which the
Parent or such Significant Subsidiary operates.
(d)
Preservation of Corporate Existence, Etc
. Preserve and maintain, and cause each
of its Subsidiaries to preserve and maintain, its existence, legal structure, legal name, rights
(charter and statutory), permits, licenses, approvals, registrations, privileges and franchises;
provided, however
, that the Borrower may change its name to INVESCO Holding Company Limited by
December 31, 2007, and the Parent and its Subsidiaries may consummate any merger or consolidation
permitted under
Section 5.02(c)
; and
provided further
that neither the Parent nor any of
its Subsidiaries shall be required to preserve any right, permit, license, approval, registration,
privilege or franchise if the Board of Directors of the Parent or such Subsidiary shall determine
that the failure to so maintain such existence (in the case of any Subsidiary that is not a Loan
Party) or such rights and franchises (in the case of the Parent or any of its Subsidiaries) would
not, and would not be reasonably expected to, have a Material Adverse Effect.
(e)
Visitation Rights
. At any reasonable time and from time to time, permit the
Administrative Agent or any of the Lenders or any agents or representatives thereof, to examine and
make copies of and abstracts from the records and books of account of, and visit the properties of,
the Parent and any of its Subsidiaries, and to discuss the affairs, finances and accounts of the
Parent and any of its Subsidiaries with any of their officers or directors and with their
independent certified public accountants.
(f)
Keeping of Books
. Keep, and cause each of its Significant Subsidiaries to keep,
proper books of record and account, in which full and correct entries shall be made of all
financial transactions and the assets and business of the Parent and each such Significant
Subsidiary in accordance with generally accepted accounting principles applicable to such Person in
effect from time to time.
(g)
Maintenance of Properties, Etc
. Take all reasonable action to maintain and
preserve, and cause each of its Subsidiaries to take all reasonable action to maintain and
preserve, all of its properties that are necessary in the conduct of its business in good working
order and condition, ordinary wear and tear excepted, except where the failure to so maintain and
preserve such properties would not, and would not be reasonably expected to, have a Material
Adverse Effect.
(h)
New Material Subsidiaries
. Promptly and in any event within 30 days following the
request of the Required Lenders made after either (i) the organization or acquisition of any new
Material Subsidiary or (ii) the delivery of audited annual financial statements pursuant to
Section 5.01(j)
that indicate that a Subsidiary of the Parent that is not at such time a
Guarantor is a Material Subsidiary, cause such Material Subsidiary to execute and deliver an
Assumption of Guaranty (as defined in the Guaranty), together with such documents as the Required
Lenders may request evidencing corporate action taken to authorize such execution and delivery and
the incumbency and signatures of officers of such Material Subsidiary,
provided
that a Material
Subsidiary shall not be required to become a Guarantor if (A) a guaranty by such Material
Subsidiary would result in materially adverse tax consequences to the Parent and its Subsidiaries
or shareholders of the Parent or (B) a guaranty by such Material Subsidiary is prohibited or
limited by regulatory requirements or applicable law.
42
(i)
Use of Proceeds
. Use the proceeds of the Advances solely as provided in
Section 2.16
and otherwise in accordance with the terms hereof.
(j)
Reporting Requirements
. Furnish to the Administrative Agent and the Lenders:
(i) as soon as available and in any event within 45 days after the end of each of the
first three quarters of each fiscal year of the Parent, Consolidated and, consistent with
past practice subject to any change in Applicable Accounting Standards, consolidating
balance sheets of the Parent and its Subsidiaries as of the end of such quarter and
Consolidated and, consistent with past practice subject to any change in Applicable
Accounting Standards, consolidating statements of income and Consolidated cash flows of the
Parent and its Subsidiaries for the period commencing at the end of the previous fiscal year
and ending with the end of such quarter, duly certified (subject to year-end audit
adjustments) by the chief financial officer of the Parent as having been prepared in
accordance with Applicable Accounting Standards and certificates of the chief financial
officer of the Parent as to compliance with the terms of this Agreement and setting forth in
reasonable detail the calculations necessary to demonstrate compliance with
Section
5.03
,
provided
that in the event of any material change in Applicable Accounting
Standards used in the preparation of such financial statements, the Parent shall also
provide, at the request of the Administrative Agent, (a) a statement of reconciliation
conforming such financial statements to the Applicable Accounting Standards as in effect on
the Effective Date and (b) another certificate of the chief financial officer of the Parent
setting forth in reasonable detail the calculations, utilizing such former Applicable
Accounting Standards as of the Effective Date, necessary to demonstrate compliance with
Section 5.03
;
provided further
that the statement of reconciliation required under
clause (a) above shall only be required once at the end of the fiscal period immediately
following such a change in the Applicable Accounting Standard and shall not be required if a
statement of reconciliation was given pursuant to
Section 5.01(j)(ii)(A)(ii)(a)
below.
(ii) (A) as soon as available and in any event within 120 days after the end of each
fiscal year of the Parent, a copy of the annual report for such year for the Parent and its
Subsidiaries, containing a Consolidated balance sheet of the Parent and its Subsidiaries as
of the end of such fiscal year and a Consolidated statement of income and Consolidated cash
flows of the Parent and its Subsidiaries for such fiscal year, in each case accompanied by
(i) a report and opinion as to such Consolidated financial statements by Ernst & Young LLP
or other independent public accountants approved by the audit committee of the Parents
board of directors and, if other than Deloitte & Touche LLP, KPMG LLP, or
PricewaterhouseCoopers LLP, reasonably acceptable to the Required Lenders (the
Auditor
), which report and opinion shall be prepared in accordance with applicable
audit standards, and which report and opinion shall not be subject to any going concern or
like qualification or exception or any qualification or exception as to the scope of such
audit, and (ii) certificates of the chief financial officer of the Parent as to compliance
with the terms of this Agreement and setting forth in reasonable detail the calculations
necessary to demonstrate compliance with
Section 5.03
,
provided
that in the event of
any material change in Applicable Accounting Standards used in the preparation of such
financial statements, the Borrower shall also provide, at the request of the
43
Administrative Agent, (a) a statement of reconciliation conforming such financial
statements to the Applicable Accounting Standards in effect as of the Effective Date and (b)
another certificate of the chief financial officer of the Parent setting forth in reasonable
detail the calculations, utilizing such former Applicable Accounting Standards as of the
Effective Date, necessary to demonstrate compliance with
Section 5.03
;
provided
further
that the statement of reconciliation required under clause (a) above shall only be
required once at the end of the fiscal year immediately following such a change in the
Applicable Accounting Standard and shall not be required if a statement of reconciliation
was given pursuant to
Section 5.01(j)(i)(a)
above.
(B) as soon as available and in any event within 120 days after the end of each fiscal
year of the Parent (i) consistent with past practice subject to any change in Applicable
Accounting Standards, a copy of consolidating balance sheets as of the end of such fiscal
year and consolidating statements of income, and (ii) following such time as Section 404 of
Sarbanes-Oxley is applicable to the Parent, a report of management on the Parents internal
control over financial reporting pursuant to Item 308(a) of Regulation S-K promulgated under
the Exchange Act, a report of the Auditor on managements assessment of the Parents
internal control over financial reporting pursuant to Item 308(b) of Regulation S-K
promulgated under the Exchange Act, and an independent assessment by the Auditor as to the
effectiveness of the Parents internal control over financial reporting;
(iii) as soon as possible and in any event within five days after the occurrence of
each Default continuing on the date of such statement, a statement of the chief financial
officer of the Parent setting forth details of such Default and the action that the Parent
has taken and proposes to take with respect thereto;
(iv) promptly after the commencement thereof, notice of all actions and proceedings
before any court, governmental agency or arbitrator affecting the Parent or any of its
Subsidiaries of the type described in
Section 4.01(i)
;
(v) (A) promptly and in any event within 20 days after any Loan Party or any ERISA
Affiliate knows or has reason to know that (1) any ERISA Event has occurred which could
result in a material liability of any Loan Party or any ERISA Affiliate, or (2) any Loan
Party or any ERISA Affiliate has incurred or is reasonably expected to incur a material
liability under Section 4064 or 4069 of ERISA, a statement of the chief financial officer of
the Borrower describing such ERISA Event and the circumstances giving rise to, and the
amount of such liability and the action, if any, that such Loan Party or such ERISA
Affiliate has taken and proposes to take with respect thereto and (B) on the date any
records, documents or other information must be furnished to the PBGC with respect to any
Plan pursuant to Section 4010 of ERISA, a copy of such records, documents and information;
(vi) promptly and in any event within two Business Days after receipt thereof by any
Loan Party or any ERISA Affiliate, copies of each notice from the PBGC stating its intention
to terminate any Plan or to have a trustee appointed to administer any Plan;
44
(vii) promptly upon request from the Administrative Agent or any Lender, copies of each
Schedule B (Actuarial Information) to the annual report (Form 5500 Series) required to be
filed with respect to each Plan whose funded current liability percentage (as defined in
Section 302(d)(8) of ERISA) is less than 100%;
(viii) promptly and in any event within 20 days after receipt thereof by any Loan Party
or any ERISA Affiliate from the sponsor of a Multiemployer Plan, copies of each notice
concerning (A) the imposition on any Loan Party or any ERISA Affiliate of Withdrawal
Liability in a material amount by any such Multiemployer Plan, (B) the reorganization or
termination, within the meaning of Title IV of ERISA, of any such Multiemployer Plan or (C)
the amount of liability incurred, or that may be incurred, by any Loan Party or any ERISA
Affiliate in connection with any event described in clause (A) or (B),
(ix) promptly and in any event within five Business Days after the organization or
acquisition of any Material Subsidiary, notice of such event;
(x) following such time as Section 404 of Sarbanes-Oxley is applicable to the Borrower,
promptly, notice of the Auditors determination (in connection with its preparation of its
report under
Section 5.01(j)(ii)(A)
) or the Parents determination of the occurrence
or existence of any Internal Control Event at any time; and
(xi) such other information respecting the Parent or any of its Subsidiaries as the
Administrative Agent or any Lender acting through the Administrative Agent may from time to
time reasonably request.
Documents required to be delivered pursuant to
Section 5.01(j)(i)
or
(ii)
may
be delivered electronically and if so delivered, shall be deemed to have been delivered on the date
(i) on which the Parent posts such documents, or provides a link thereto on the Parents website on
the Internet at the website address listed on
Schedule 8.02
; or (ii) on which such
documents are posted on the Parents behalf on an Internet or intranet website, if any, to which
each Lender and the Administrative Agent have access (whether a commercial, third-party website or
whether sponsored by the Administrative Agent);
provided
that: (i) the Parent shall deliver paper
copies of such documents to the Administrative Agent until a written request to cease delivering
paper copies is given by the Administrative Agent and (ii) the Parent shall notify the
Administrative Agent (by telecopier or electronic mail) of the posting of any such documents and
provide to the Administrative Agent by electronic mail electronic versions (
i.e.
, soft
copies) of such documents. Notwithstanding anything contained herein, in every instance the
Borrower shall be required to provide paper copies of the compliance certificate required by
Section 5.01(j)(i)
and
(ii)
to the Administrative Agent. Except for such
compliance certificate, the Administrative Agent shall have no obligation to request the delivery
or to maintain copies of the documents referred to above, and in any event shall have no
responsibility to monitor compliance by the Parent with any such request for delivery, and each
Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such
documents.
The Parent and the Borrower hereby acknowledge that (a) the Administrative Agent and/or the
Arrangers will make available to the Lenders information provided by or on behalf of
45
the Parent and/or the Borrower hereunder (collectively,
Borrower Materials
) by
posting the Borrower Materials on IntraLinks or another similar electronic system (the
Platform
) and (b) certain of the Lenders may be public-side Lenders (
i.e.,
Lenders that
do not wish to receive material non-public information with respect to the Borrower or its
securities) (each, a
Public Lender
). Each of the Parent and the Borrower hereby agrees
that (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly
and conspicuously marked PUBLIC which, at a minimum, shall mean that the word PUBLIC shall
appear prominently on the first page thereof; (x) by marking Borrower Materials PUBLIC, the
Parent and the Borrower shall be deemed to have authorized the Administrative Agent, each Arranger
and the Lenders to treat such Borrower Materials as not containing any material non-public
information with respect to the Parent and the Borrower or its securities for purposes of United
States Federal and state securities laws (
provided, however
, that to the extent such Borrower
Materials constitute Information, they shall be treated as set forth in
Section 8.07
); (y)
all Borrower Materials marked PUBLIC are permitted to be made available through a portion of the
Platform designated Public Investor; and (z) the Administrative Agent and each Arranger shall be
entitled to treat the Borrower Materials that are not marked PUBLIC as being suitable only for
posting on a portion of the Platform not designated Public Investor.
(k)
Internal Control Events
. Following such time as Section 404 of Sarbanes-Oxley is
applicable to the Parent, upon notification from the Administrative Agent to the Parent that the
Required Lenders require remediation of any Internal Control Event of which they have received
notice pursuant to
Section 5.01(j)(x)
or as reported in any report delivered pursuant to
Section 5.01(j)(ii)
, remediate or cause to be remediated such Internal Control Event, and
to test and confirm such remediation, not later than the end of the time period reasonably agreed
by the Required Lenders with the Parent as necessary for such remediation (the
Remediation
Period
). It is understood that the Remediation Period will require a sufficient period of
time to permit testing required by the relevant Securities Laws.
Section 5.02
Negative Covenants
. So long as any Advance shall remain unpaid or any
Lender shall have any Commitment hereunder, neither the Parent nor the Borrower will at any time:
(a)
Liens, Etc
. Create, incur, assume or suffer to exist, or permit any of its
Subsidiaries to create, incur, assume or suffer to exist, any Lien on or with respect to any of its
properties of any character (including, without limitation, accounts) whether now owned or
hereafter acquired, or assign, or permit any of its Subsidiaries to assign, any accounts or other
right to receive income,
excluding
,
however
, from the operation of the foregoing restrictions the
following:
(i) Permitted Liens;
(ii) Liens on deposit accounts of the Parent and its Subsidiaries in respect of their
cash pooling operations;
(iii) purchase money Liens upon or in real property or equipment acquired or held by
the Parent or any of its Subsidiaries in the ordinary course of business to secure the
purchase price of such property or equipment or to secure Debt incurred solely for the
46
purpose of financing the acquisition of any such property or equipment, or Liens
existing on any such property or equipment at the time of acquisition (other than any such
Liens created in contemplation of such acquisition that were not incurred to finance the
acquisition of such property);
provided
,
however
, that no such Lien shall extend to or cover
any properties of any character other than the property or equipment being acquired, and no
such extension, renewal or replacement shall extend to or cover any property not theretofore
subject to the Lien being extended, renewed or replaced; and
provided further
that the
aggregate principal amount of the Debt secured by Liens permitted by this clause (iii) and
clause (iv) below shall not exceed $100,000,000 at any time outstanding;
(iv) Liens on property of a Person existing at the time such Person is merged into or
consolidated with the Parent or any Subsidiary of the Parent or becomes a Subsidiary of the
Parent;
provided
that such Liens were not created in contemplation of such merger,
consolidation or investment and do not extend to any assets other than those of the Person
merged into or consolidated with the Parent or such Subsidiary or acquired by the Parent or
such Subsidiary;
provided
,
further
, that the aggregate principal amount of the Debt secured
by Liens permitted by this clause (iv) and clause (iii) above shall not exceed $100,000,000
at any time outstanding;
(v) Liens arising pursuant to one or more securitization programs permitted pursuant to
Section 5.02(d)(ii)
;
(vi) the replacement, extension or renewal of any Lien permitted by clauses (iii)
through (iv) above upon or in the same property theretofore subject thereto or the
replacement, extension or renewal (without increase in the amount or addition of any direct
or contingent obligor) of the Debt secured thereby;
(vii) Liens existing as of March 31, 2005 as described on
Schedule 5.02(a)
;
(viii) Liens which are floating charges under English law in the form of an industry
standard granted by INVESCO Pensions Limited (
IPL
) on its revolving business
assets (without attaching to any particular asset until the floating charge crystallises on
insolvency events which will result in steps being taken to make payment of a dividend to
creditors or where the reinsurance creditor reasonably considers this may happen) to
reinsurance creditors to support the obligations of IPL thereto under reinsurance contracts
and limited in the amount secured to the amount which would have been recoverable had the
secured amount been an unsecured debt owed to a direct policy holder of IPL;
(ix) Liens to secure Subsidiary Non-Recourse Debt,
provided
that no such Lien shall
extend to or cover any properties or assets other than the property or assets being acquired
with such Subsidiary Non-Recourse Debt and proceeds thereof; and
(x) Liens on the office equipment sold and leased back pursuant to the Office Equipment
Sale and Leaseback and proceeds thereof.
47
(b)
Loans
. Make or hold, or permit any of its Subsidiaries to make or hold, loans or
advances to any Person other than (i) loans or advances between or among the Parent and any of its
Subsidiaries, (ii) loans or advances to Affiliates of the Parent in an aggregate principal amount
at any one time outstanding not to exceed $100,000,000
provided
that all such loans or advances
made to Affiliates that are employees of the Parent or any Subsidiary shall not exceed $25,000,000
in an aggregate principal amount at any one time outstanding, and (iii) loans or advances not
otherwise permitted by clauses (i) and (ii) above in an aggregate amount at any one time
outstanding not to exceed $40,000,000.
(c)
Mergers, Etc
. Merge into or consolidate with any Person or permit any Person to
merge into it, or permit any of its Subsidiaries to do so, except that
(i) any of the Parents Subsidiaries, other than the Borrower and Subsidiaries of the
Borrower, may merge into the Parent,
(ii) any of the Borrowers Subsidiaries may merge into the Borrower,
(iii) any Subsidiary of the Parent that is not a Restricted Subsidiary may merge with
any other Subsidiary of the Parent that is not a Restricted Subsidiary,
(iv) any Subsidiary of a Subsidiary Guarantor may merge with any Subsidiary Guarantor
or a Subsidiary of a Subsidiary Guarantor,
(v) any Subsidiary Guarantor may merge with any other Subsidiary of the Borrower, and
(vi) mergers in connection with acquisitions of Investments to the extent not
prohibited pursuant to
Section 5.02(e)
;
provided
,
however
, that in each case, immediately after giving effect thereto, no event shall occur
and be continuing that constitutes a Default and, in the case of any such merger to which the
Borrower is a party, the Borrower is the surviving corporation or, in the case of any merger to
which a Guarantor, but not the Borrower, is a party, the surviving corporation is a Guarantor and
is not (as a result of such merger) subject to any agreement described in
Section
5.02(i)(iv)
.
(d)
Sales, Etc. of Assets
. Sell, lease, transfer or otherwise dispose of, or permit
any of its Subsidiaries to sell, lease, transfer or otherwise dispose of, any assets, or grant any
option or other right to purchase, lease or otherwise acquire any assets, except:
(i) in a transaction authorized by subsection (c) of this
Section
,
(ii) the sale or other disposition to a third-party investor by the Parent or any of
its Subsidiaries of its rights to receive distribution fees and contingent deferred sales
charges pursuant to a securitization program,
(iii) the Parent and its Subsidiaries may, during any fiscal year of the Parent, sell,
lease, transfer or otherwise dispose of assets (including equity securities owned by such
Persons) which generated up to, but not to exceed, twenty percent (20%) of the
48
Consolidated operating income of the Parent during the immediately preceding fiscal
year of the Parent,
(iv) any Subsidiary of the Parent that is not a Restricted Subsidiary may sell, lease,
transfer or otherwise dispose of all or substantially all of its assets to (a) the Parent,
(b) the Borrower, (c) a wholly-owned Subsidiary of the Parent or the Borrower that is not a
Restricted Subsidiary, or (d) a Guarantor,
(v) any Subsidiary Guarantor or any Subsidiary of a Subsidiary Guarantor may sell,
lease, transfer or otherwise dispose of all or substantially all of its assets to any other
Subsidiary Guarantor or a Subsidiary of a Subsidiary Guarantor,
(vi) sales or other dispositions of obsolete equipment and furniture, and
(vii) the sale of office equipment of Invesco Group Services, Inc. pursuant to the
Office Equipment Sale and Leaseback.
(e)
Investments
. Make, or permit any of its Subsidiaries to make, any Investment in
any Person unless each of the following conditions are satisfied: (i) at the time of making, and
after giving effect to, such Investment, no Event of Default shall have occurred and be continuing,
and (ii) if and to the extent such Investment relates to the purchase or acquisition of all of the
capital stock of, or all or substantially all of the assets of, such Person (A) such Person shall
be in substantially similar lines of business as the Parent and its Subsidiaries or businesses
reasonably related or complimentary thereto, (B) after giving effect to such Investment, the Parent
will, on a
pro forma
basis, be in compliance with the financial covenants set forth in
Section
5.03
, and (C) members of the board of directors of the Parent or investing Subsidiary prior to
such purchase or acquisition shall continue to constitute a majority of such members of such board
immediately following the effectiveness of such purchase or acquisition.
(f)
Change in Nature of Business
. Make, or permit any of its Significant Subsidiaries
to make, any material change in the nature of its business as carried on at the date hereof.
(g)
Charter Amendments
. Amend, or permit any of its Significant Subsidiaries to
amend, its certificate of incorporation or bylaws in a manner that has a Material Adverse Effect.
(h)
Accounting Changes
. Make or permit, or permit any of its Significant Subsidiaries
to make or permit, any material change in accounting policies or reporting practices, except (i) as
required by Securities Laws, the Security Exchange Commission or generally accepted accounting
principles applicable to the Parent or such Significant Subsidiary, (ii) to adopt US GAAP (A) on or
before December 31, 2008 with respect to the Parent and its Subsidiaries on a consolidated basis
and (B) at any time with respect separately to any Significant Subsidiary of the Parent, or (iii)
any change by a Significant Subsidiary to International Financial Reporting Standards as may be
required by applicable regulatory authorities.
(i)
Limitations on Certain Restrictions on Subsidiaries
. Enter into or suffer to
exist, or permit any of its Subsidiaries (other than any Special Purpose Subsidiary) to enter into
or suffer to exist, any agreement prohibiting, conditioning or limiting (i) the payment of
dividends
49
by any Subsidiary of the Parent, (ii) the payment of Debt of a Subsidiary of the Parent to the
Parent, the Borrower or other Subsidiaries of the Parent, (iii) the ability of any Subsidiary of
the Parent to guaranty Debt of the Borrower or the Parent, or (iv) the creation or assumption of
any Lien upon any of its material property or material assets, other than in each such case, (A)
under this Agreement and the other Loan Documents in favor of the Administrative Agent and the
Lenders and (in the case of clause (iv) immediately above) any other agreement that permits the
granting of Liens in favor of the Lenders, (B) in connection with any Existing Debt (including any
extensions or refinancing of any such Existing Debt), (C) restrictions contained in documents
governing Debt of a Person that is acquired by, and not merged with or into, the Parent or any
Subsidiary of the Parent, (D) as required by any law or regulation applicable to such Person or (E)
with respect to clause (iv) above only, with respect to purchase money liens, capital leases and
operating leases, but only as to the assets so purchased or leased.
(j)
Partnerships, Etc
. Become a general partner in any general or limited partnership
or joint venture, or permit any of its Subsidiaries to do so, other than any Subsidiary the sole
assets of which consist of its interest in such partnership or joint venture.
(k)
Transactions with Affiliates
. Conduct, or permit any of its Subsidiaries to
conduct, transactions with any of their Affiliates except in the ordinary course of business of and
pursuant to the reasonable requirements of the Parents, the Borrowers or such Subsidiarys
business and upon fair and reasonable terms that are no less favorable to the Parent, the Borrower
or such Subsidiary, as the case may be, than those which would be obtained in a comparable
arms-length transaction with a Person not an Affiliate;
provided
that the foregoing restrictions
shall not apply to
(i) any transaction (A) between any Loan Parties, (B) between any Subsidiary of the
Parent that is not a Restricted Subsidiary and any other Subsidiary of the Parent that is
not a Restricted Subsidiary (C) between the Borrower and any of its Subsidiaries, (D)
between any Subsidiary Guarantor and any of its Subsidiaries, (E) with any Special Purpose
Subsidiary, and (F) between the Parent or any of its Subsidiaries and their respective
employees to make loans to such employees for purposes of exercising stock options of such
employees and paying tax liabilities of such employees associated therewith,
provided
that
the total of all such loans shall not exceed $25,000,000 in an aggregate principal amount at
any one time outstanding, and
(ii) transactions between the Parent or any Subsidiary or other Investment Company
sponsored by the Parent or any Subsidiary or for which the Parent or any Subsidiary provides
advisory, administrative, supervisory, management, consulting, underwriting or similar
services, that are otherwise permissible under the Investment Company Act of 1940, the
Investment Advisers Act of 1940 and the applicable management contract.
(l)
Non-Guarantor Subsidiary Debt
. Permit its Subsidiaries, other than the Borrower
and Subsidiaries that are Guarantors, collectively to incur Adjusted Debt in excess of $100,000,000
in aggregate principal amount at any one time outstanding;
provided
,
however
, that the foregoing
restriction shall not apply to any (i) Adjusted Debt of a Subsidiary (including any Person that
will be or become a Subsidiary) of the Parent that is incurred or assumed in
50
connection with a transaction that is permitted pursuant to
Section 5.02(e)(ii)
or
(ii) Subsidiary Non-Recourse Debt.
Section 5.03
Financial Covenants
. So long as any Advance shall remain unpaid or any
Lender shall have any Commitment hereunder, the Parent will:
(a)
Debt/EBITDA Ratio
. Maintain at the end of each fiscal quarter of the Parent a
Debt/EBITDA Ratio of not greater than 3.25:1.00.
(b)
Coverage Ratio
. Maintain at the end of each fiscal quarter of the Parent a ratio
of EBITDA (excluding for purpose of this calculation of EBITDA only that portion of EBITDA
attributable to the net income, expenses, losses, charges and gains of each Special Purpose
Subsidiary) for the four consecutive fiscal quarters of the Parent ended on or immediately prior to
the date of determination to interest payable on, and amortization of debt discount in respect of,
Adjusted Debt (excluding from Adjusted Debt for purposes of this
Section 5.03(b)
(i)
Subsidiary Non-Recourse Debt and (ii) so long as the Parent and its Subsidiaries own 100% of the
Office Equipment Sale and Leaseback Bonds, liabilities with respect to the Office Equipment Sale
and Leaseback Lease, in each case to the extent otherwise included in Adjusted Debt) for such
period, of not less than 4.00:1.00.
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01
Events of Default
. If any of the following events (
Events of
Default
) shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Advance when the same becomes due and
payable; or the Borrower shall fail to pay any interest on any Advance or make any other payment of
fees or other amounts payable under this Agreement or any Note within three Business Days after the
same becomes due and payable; or
(b) Any representation or warranty made by the Parent, the Borrower or any Loan Party under
any Loan Document or by either of the Parent or the Borrower (or any of its respective officers) in
connection with any Loan Document shall prove to have been incorrect in any material respect when
made; or
(c) (i) The Parent or the Borrower shall fail to perform or observe any term, covenant or
agreement contained in
Section 5.01(d)
,
(e)
or
(j)
,
5.02
or
5.03
, or (ii) the Parent or the Borrower shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement on its part to be performed or observed if such
failure shall remain unremedied for 30 days after written notice thereof shall have been given to
the Borrower by the Administrative Agent or any Lender; or
(d) The Parent or any of its Subsidiaries shall fail to pay any principal of or premium or
interest on any Debt that is outstanding in a principal or notional amount of at least $50,000,000
(or the equivalent thereof in any other currencies) in the aggregate (but excluding Debt
outstanding hereunder) of the Parent or such Subsidiary (as the case may be), when the
51
same becomes due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such Debt; or any other event
shall occur or condition shall exist under any agreement or instrument relating to any such Debt
and shall continue after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and
payable, or required to be prepaid or redeemed, purchased or defeased, or an offer to prepay,
redeem, purchase or defease such Debt shall be required to be made, in each case prior to the
stated maturity thereof; or
(e) The Parent or any of its Significant Subsidiaries or any Guarantor shall generally not pay
its debts as such debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall
be instituted by or against the Parent or any of its Significant Subsidiaries or any Guarantor
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking
the entry of an order for relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either such proceeding shall remain
undismissed or unstayed for a period of 45 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against, or the appointment of a
receiver, trustee, custodian or other similar official for, it or for any substantial part of its
property) shall occur; or the Parent or any of its Significant Subsidiaries or any Guarantor shall
take any corporate action to authorize any of the actions set forth above in this subsection (e);
or
(f) Any judgment or order for the payment of money in excess of $50,000,000 (or the equivalent
thereof in any other currencies) shall be rendered against the Parent or any of its Subsidiaries
and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment
or order or (ii) there shall be any period of 30 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect;
provided
,
however
, that any such judgment or order shall not be an Event of Default under
this
Section 6.01(f)
if and for so long as (i) the amount of such judgment or order in
excess of $50,000,000 (or the equivalent thereof in any other currencies) is covered by a valid and
binding policy of insurance between the defendant and the insurer covering payment thereof and (ii)
such insurer, which shall be rated at least A by A.M. Best Company, has been notified of, and has
not disputed the claim made for payment of, the amount of such excess amount; or
(g) Any non-monetary judgment or order shall be rendered against the Parent or any of its
Subsidiaries that could be reasonably expected to have a Material Adverse Effect, and there shall
be any period of 30 consecutive days during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect; or
(h) (i) Any Person or two or more Persons acting in concert shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
52
Commission under the Securities Exchange Act of 1934), directly or indirectly, of Voting Stock
of the Parent (or other securities convertible into such Voting Stock) representing 33% or more of
the combined voting power of all Voting Stock of the Parent; or (ii) during any period of up to 24
consecutive months, commencing after the date of this Agreement, individuals who at the beginning
of such 24-month period were directors of the Parent shall cease for any reason to constitute a
majority of the board of directors of the Parent; or
(i) Any ERISA Event shall have occurred with respect to a Plan, or any Loan Party or any ERISA
Affiliate shall have incurred or be reasonably expected to incur liability under Section 4064 or
4069 of ERISA, and the sum (determined as of the date of occurrence of such ERISA Event) of the
Insufficiency of such Plan and the Insufficiency of any and all other Plans with respect to which
an ERISA Event shall have occurred and then exist (or the liability of the Loan Parties and the
ERISA Affiliates incurred or expected to be incurred with respect to Section 4064 or 4069 of ERISA
or related to such ERISA Event) exceeds $25,000,000; or
(j) Any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a
Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an
amount that, when aggregated with all other amounts required to be paid to Multiemployer Plans by
the Loan Parties and the ERISA Affiliates as Withdrawal Liability (determined as of the date of
such notification), exceeds $25,000,000 or requires payments exceeding $5,000,000 per annum; or
(k) Any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a
Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within
the meaning of Title IV of ERISA, and as a result of such reorganization or termination the
aggregate annual contributions of the Loan Parties and the ERISA Affiliates to all Multiemployer
Plans that are then in reorganization or being terminated have been or will be increased over the
amounts contributed to such Multiemployer Plans for the plan years of such Multiemployer Plans
immediately preceding the plan year in which such reorganization or termination occurs by an amount
exceeding $25,000,000;
(l) Any governmental authority or regulatory body shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and which prohibits, enjoins or otherwise
restricts the Parent or any of its Subsidiaries in a manner that has a Material Adverse Effect; or
(m) Any material provision of either Guaranty shall for any reason cease to be valid and
binding on any applicable Guarantor or any Guarantor shall so state in writing, but in either case,
only if such event could reasonably be expected to have a Material Adverse Effect;
then, and in any such event, the Administrative Agent (i) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the obligation of each Lender
to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at
the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare
the Advances and the Notes, all interest thereon and all other amounts payable under this Agreement
and the Notes to be forthwith due and payable and pursue all rights under
53
any Guaranty, whereupon the Advances and the Notes, all such interest and all such amounts shall
become and be forthwith due and payable, without presentment, demand, protest or further notice of
any kind, all of which are hereby expressly waived by the Borrower;
provided, however
, that in the
event of an actual or deemed entry of an order for relief with respect to the Parent or any
Significant Subsidiary or any Guarantor under the Bankruptcy Code of the United States, or any
other liquidation, conservatorship, bankruptcy, reorganization or other similar debtor relief laws
of the United States, the United Kingdom or Bermuda, (A) the obligation of each Lender to make
Advances shall automatically be terminated and (B) the Notes, all such interest and all such
amounts shall automatically become and be due and payable, without presentment, demand, protest or
any notice of any kind, all of which are hereby expressly waived by the Borrower.
Section 6.02
Application of Funds
. After the exercise of remedies provided for in
Section 6.01
(or after the Notes have automatically become immediately due and payable as
set forth in
Section 6.01
), any amounts received on account of the Notes, all interest
thereon and all other amounts payable under this Agreement (and with Advances, collectively
referred to in this
Section 6.02
as the
Obligations
) shall be applied by the
Administrative Agent in the following order:
First
, to payment of that portion of the Obligations constituting fees, indemnities,
expenses and other amounts (including fees, charges and disbursements of counsel to the
Administrative Agent and amounts payable under
Article II
) payable to the Administrative
Agent in its capacity as such;
Second
, to payment of that portion of the Obligations constituting fees, indemnities
and other amounts (other than principal and interest) payable to the Lenders (including fees,
charges and disbursements of counsel to the respective Lenders and amounts payable under
Article II
), ratably among them in proportion to the respective amounts described in this
clause
Second
payable to them;
Third
, to payment of that portion of the Obligations constituting accrued and unpaid
interest on any Swing Line Loans, payable only to the Swing Line Lender;
Fourth
, to payment of that portion of the Obligations constituting unpaid principal on
any Swing Line Loans, payable only to the Swing Line Lender;
Fifth
, to payment of that portion of the Obligations constituting accrued and unpaid
interest on any of the Advances (other than Swing Line Loans), payable to the Lenders, ratably
among them in proportion to the respective amounts described in this clause
Fifth
held by
them;
Sixth
, to payment of that portion of the Obligations constituting unpaid principal on
any of the Advances (other than Swing Line Loans), ratably among the Lenders in proportion to the
respective amounts described in this clause
Sixth
held by them;
Last
, the balance, if any, after all of the Obligations have been indefeasibly paid in
full, to the Borrower or as otherwise required by Law.
54
ARTICLE VII
ADMINISTRATIVE AGENT
Section 7.01
Appointment and Authority
. Each of the Lenders hereby irrevocably
appoints Bank of America to act on its behalf as the Administrative Agent hereunder and under the
other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and
to exercise such powers as are delegated to the Administrative Agent by the terms hereof or
thereof, together with such actions and powers as are reasonably incidental thereto. The
provisions of this Article are solely for the benefit of the Administrative Agent and the Lenders,
and neither the Borrower, the Parent nor any other Loan Party shall have rights as a third party
beneficiary of any of such provisions.
Section 7.02
Rights as a Lender
. The Person serving as the Administrative Agent
hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and
may exercise the same as though it were not the Administrative Agent and the term Lender or
Lenders shall, unless otherwise expressly indicated or unless the context otherwise requires,
include the Person serving as the Administrative Agent hereunder in its individual capacity. Such
Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or
in any other advisory capacity for and generally engage in any kind of business with the Parent,
the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the
Administrative Agent hereunder and without any duty to account therefor to the Lenders.
Section 7.03
Exculpatory Provisions
. The Administrative Agent shall not have any
duties or obligations except those expressly set forth herein and in the other Loan Documents.
Without limiting the generality of the foregoing, the Administrative Agent:
(a) shall not be subject to any fiduciary or other implied duties, regardless of whether a
Default has occurred and is continuing;
(b) shall not have any duty to take any discretionary action or exercise any discretionary
powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan
Documents that the Administrative Agent is required to exercise as directed in writing by the
Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided
for herein or in the other Loan Documents),
provided
that the Administrative Agent shall not be
required to take any action that, in its opinion or the opinion of its counsel, may expose the
Administrative Agent to liability or that is contrary to any Loan Document or applicable law; and
(c) shall not, except as expressly set forth herein and in the other Loan Documents, have any
duty to disclose, and shall not be liable for the failure to disclose, any information relating to
the Parent, the Borrower or any of its respective Affiliates that is communicated to or obtained by
the Person serving as the Administrative Agent or any of its Affiliates in any capacity.
The Administrative Agent shall not be liable for any action taken or not taken by it (i) with
the consent or at the request of the Required Lenders (or such other number or percentage
55
of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good
faith shall be necessary, under the circumstances as provided in
Sections 8.01
and
8.02
) or (ii) in the absence of its own gross negligence or willful misconduct,
provided
,
such limitation of liability of the Administrative Agent shall not prohibit or limit any cause of
action the Borrower may otherwise have against any Lender. The Administrative Agent shall be
deemed not to have knowledge of any Default unless and until notice describing such Default is
given to the Administrative Agent by the Borrower or a Lender.
The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection with this Agreement or
any other Loan Document, (ii) the contents of any certificate, report or other document delivered
hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance
of any of the covenants, agreements or other terms or conditions set forth herein or therein or the
occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this
Agreement, any other Loan Document or any other agreement, instrument or document or (v) the
satisfaction of any condition set forth in
Article III
or elsewhere herein, other than to
confirm receipt of items expressly required to be delivered to the Administrative Agent.
Section 7.04
Reliance by Administrative Agent
. The Administrative Agent shall be
entitled to rely upon, and shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing (including any electronic
message, Internet or intranet website posting or other distribution) reasonably believed by it to
be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The
Administrative Agent also may rely upon any statement made to it orally or by telephone and
reasonably believed by it to have been made by the proper Person, and shall not incur any liability
for relying thereon. In determining compliance with any condition hereunder to the making of a
Loan that by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent
may presume that such condition is satisfactory to such Lender unless the Administrative Agent
shall have received notice to the contrary from such Lender prior to the making of such Loan. The
Administrative Agent may consult with legal counsel (who may be counsel for the Parent or the
Borrower), independent accountants and other experts selected by it, and shall not be liable for
any action taken or not taken by it in good faith in accordance with the advice of any such
counsel, accountants or experts.
Section 7.05
Delegation of Duties
. The Administrative Agent may perform any and all
of its duties and exercise its rights and powers hereunder or under any other Loan Document by or
through any one or more sub agents appointed by the Administrative Agent. The Administrative Agent
and any such sub agent may perform any and all of its duties and exercise its rights and powers by
or through their respective Related Parties. The exculpatory provisions of this Article shall
apply to any such sub agent and to the Related Parties of the Administrative Agent and any such sub
agent, and shall apply to their respective activities in connection with the syndication of the
credit facilities provided for herein as well as activities as Administrative Agent.
Section 7.06
Resignation of Administrative Agent
. The Administrative Agent may at any
time give notice of its resignation to the Lenders and the Borrower. Upon receipt of any
56
such notice of resignation, the Required Lenders shall have the right, in consultation with
the Borrower so long as no Event of Default has occurred and is continuing, to appoint a successor,
which shall be a bank with an office in the United States, or an Affiliate of any such bank with an
office in the United States. If no such successor shall have been so appointed by the Required
Lenders and shall have accepted such appointment within 30 days after the retiring Administrative
Agent gives notice of its resignation, then the retiring Administrative Agent may on behalf of the
Lenders, appoint a successor Administrative Agent meeting the qualifications set forth above;
provided
that if the Administrative Agent shall notify the Borrower and the Lenders that no
qualifying Person has accepted such appointment, then such resignation shall nonetheless become
effective in accordance with such notice and (1) the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder and under the other Loan Documents and (2) all
payments, communications and determinations provided to be made by, to or through the
Administrative Agent shall instead be made by or to each Lender directly, until such time as the
Required Lenders appoint a successor Administrative Agent as provided for above in this
Section
;
provided
, such Lenders so acting directly shall be and be deemed to be protected
by all indemnities and other provisions herein for the benefit and protection of the Administrative
Agent as if each such Lender were itself the Administrative Agent. Upon the acceptance of a
successors appointment as Administrative Agent hereunder, such successor shall succeed to and
become vested with all of the rights, powers, privileges and duties of the retiring (or retired)
Administrative Agent, and the retiring Administrative Agent shall be discharged from all of its
duties and obligations hereunder or under the other Loan Documents (if not already discharged
therefrom as provided above in this
Section
). The fees payable by the Borrower to a
successor Administrative Agent shall be the same as those payable to its predecessor unless
otherwise agreed between the Borrower and such successor. After the retiring Administrative
Agents resignation hereunder and under the other Loan Documents, the provisions of this Article
and
Section 8.04
shall continue in effect for the benefit of such retiring Administrative
Agent, its sub agents and their respective Related Parties in respect of any actions taken or
omitted to be taken by any of them while the retiring Administrative Agent was acting as
Administrative Agent.
Any resignation by Bank of America as Administrative Agent pursuant to this
Section
shall also constitute its resignation as Swing Line Lender. Upon the acceptance of a successors
appointment as Administrative Agent hereunder, (a) such successor shall succeed to and become
vested with all of the rights, powers, privileges and duties of the retiring Swing Line Lender and
(b) the Swing Line Lender shall be discharged from all of its respective duties and obligations
hereunder or under the other Loan Documents.
Section 7.07
Non-Reliance on Administrative Agent and Other Lenders
. Each Lender
acknowledges that it has, independently and without reliance upon the Administrative Agent or any
other Lender or any of their Related Parties and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each
Lender also acknowledges that it will, independently and without reliance upon the Administrative
Agent or any other Lender or any of their Related Parties and based on such documents and
information as it shall from time to time deem appropriate, continue to make its own decisions in
taking or not taking action under or based upon this Agreement, any other Loan Document or any
related agreement or any document furnished hereunder or thereunder.
57
Section 7.08
No Other Duties, Etc
. Anything herein to the contrary notwithstanding,
none of the Arrangers listed on the cover page hereof shall have any powers, duties or
responsibilities under this Agreement or any of the other Loan Documents, except in its capacity,
as applicable, as the Administrative Agent or a Lender.
Section 7.09
Administrative Agent May File Proofs of Claim
. In case of the pendency
of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to any Loan Party, the Administrative Agent
(irrespective of whether the principal of any Loan shall then be due and payable as herein
expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall
have made any demand on the Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise
(a) to file and prove a claim for the whole amount of the principal and interest owing and
unpaid in respect of the Advances and all other Obligations that are owing and unpaid and to file
such other documents as may be necessary or advisable in order to have the claims of the Lenders
and the Administrative Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders and the Administrative Agent and their respective agents
and counsel, and all other amounts, due the Lenders and the Administrative Agent under
Section
8.04
) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such
claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Lender to make such payments to the
Administrative Agent and, in the event that the Administrative Agent shall consent to the making of
such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the
reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its
agents and counsel, and any other amounts due the Administrative Agent under
Sections 2.04
and 8
.04
.
Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or
consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement,
adjustment or composition affecting any amount owing by a Loan Party to a Lender or the
Administrative Agent or the rights of any Lender or to authorize the Administrative Agent to vote
in respect of the claim of any Lender in any such proceeding.
Section 7.10
Guaranty Matters
. The Lenders irrevocably authorize the Administrative
Agent, at its option and in its discretion, to release any Subsidiary Guarantor from its
obligations under the Subsidiary Guaranty if such Person ceases to be a Subsidiary of the Borrower
or a Subsidiary of the Parent as a result of a transaction permitted hereunder.
Upon request by the Administrative Agent at any time, the Lenders shall promptly confirm in
writing the Administrative Agents authority to release any Guarantor from its obligations under
the Subsidiary Guaranty pursuant to this
Section 7.10
.
58
ARTICLE VIII
MISCELLANEOUS
Section 8.01
Amendments, Etc
. No amendment or waiver of any provision of this
Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other
Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the
Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative
Agent, and each such waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given;
provided, however
, that no such amendment, waiver or consent
shall:
(a) waive any condition set forth in
Section 3.01
without the written consent of each
Lender;
(b) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated)
or require any Lender to make Advances in any currency other than Dollars or Sterling without the
written consent of such Lender;
(c) postpone any date fixed by this Agreement or any other Loan Document for any payment or
mandatory prepayment of principal, interest, fees or other amounts due to the Lenders (or any of
them) hereunder or under any other Loan Document without the written consent of each Lender
directly affected thereby;
(d) reduce the principal of, or the rate of interest specified herein on any Advance, or
(subject to clause (iii) of the last proviso to this
Section 8.01
) any fees or other
amounts payable hereunder or under any other Loan Document without the written consent of each
Lender directly affected thereby;
provided, however
, that only the consent of the Required Lenders
shall be necessary to amend the definition of Default Rate or to waive any obligation of the
Borrower to pay interest at the Default Rate;
(e) change
Section 2.15
or Section 6.02
in a manner that would alter the pro
rata sharing of payments required thereby without the written consent of each Lender;
(f) change any provision of this
Section
or the definition of Required Lenders or
any other provision hereof specifying the number or percentage of Lenders required to amend, waive
or otherwise modify any rights hereunder or make any determination or grant any consent hereunder
without the written consent of each Lender; or
(g) and except in connection with permitted asset sales under
Section 5.02(d)
and
other transactions permitted hereunder and in accordance with
Section 7.10
hereof, release
any Guarantor from its Guaranty without the written consent of each Lender
;
and,
provided further
, that (i) no amendment, waiver or consent shall, unless in writing and signed
by the Swing Line Lender in addition to the Lenders required above, affect the rights or duties of
the Swing Line Lender under this Agreement; (ii) no amendment, waiver or consent shall, unless in
writing and signed by the Administrative Agent in addition to the Lenders required above, affect
the rights or duties of the Administrative Agent under this Agreement or
59
any other Loan Document; and (iii) the Fee Letter may be amended, or rights or privileges
thereunder waived, in a writing executed only by the parties thereto. Notwithstanding anything to
the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any
amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be
increased or extended and no payment due such Lender may be reduced or extended without the consent
of such Lender.
Section 8.02
Notices; Effectiveness; Electronic Communication
.
(a)
Notices Generally
. Except in the case of notices and other communications
expressly permitted to be given by telephone (and except as provided in subsection (b) below), all
notices and other communications provided for herein shall be in writing and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as
follows, and all notices and other communications expressly permitted hereunder to be given by
telephone shall be made to the applicable telephone number, as follows:
(i) if to the Borrower, the Parent, the Administrative Agent or the Swing Line Lender,
to the address, telecopier number, electronic mail address(es) or telephone number specified
for such Person on
Schedule 8.02
; and
(ii) if to any other Lender, to the address, telecopier number, electronic mail
address(es) or telephone number specified for such Lenders Domestic Lending Office on
Schedule I
.
Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall
be deemed to have been given when received; notices sent by telecopier shall be deemed to have been
given when sent (except that, if not given during normal business hours for the recipient, shall be
deemed to have been given at the opening of business on the next Business Day for the recipient).
Notices delivered through electronic communications to the extent provided in subsection (b) below,
shall be effective as provided in such subsection (b).
(b)
Electronic Communications
. Notices and other communications to the Lenders
hereunder, except for any notice of service of process under
Section 8.12
or otherwise
which shall be given in writing only as provided by applicable law, may be delivered or furnished
by electronic communication (including e-mail and Internet or intranet websites) pursuant to
procedures approved by the Administrative Agent,
provided
that the foregoing shall not apply to
notices to any Lender pursuant to
Article II
. The Administrative Agent or the Borrower
may, in its discretion, agree to accept notices and other communications to it hereunder by
electronic communications pursuant to procedures approved by it,
provided
that approval of such
procedures may be limited to particular notices or communications.
Unless the Administrative Agent otherwise prescribes, (i) notices and other communications
sent to an e-mail address shall be deemed received upon the senders receipt of an acknowledgement
from the intended recipient (such as by the return receipt requested function, as available,
return e-mail or other written acknowledgement),
provided
that if such notice or other
communication is not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on the
60
next business day for the recipient, and (ii) notices or communications posted to an Internet
or intranet website shall be deemed received upon the deemed receipt by the intended recipient at
its e-mail address as described in the foregoing clause (i) of notification that such notice or
communication is available and identifying the website address therefor.
(c)
The Platform
. THE PLATFORM IS PROVIDED AS IS AND AS AVAILABLE. THE AGENT
PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR
THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE
BORROWER MATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR
FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE
BORROWER MATERIALS OR THE PLATFORM. In no event shall the Administrative Agent or any of its
Related Parties (collectively, the
Agent Parties
) have any liability to the Parent, the
Borrower, any Lender, or any other Person for losses, claims, damages, liabilities or expenses of
any kind (whether in tort, contract or otherwise) arising out of the Parents, the Borrowers or
the Administrative Agents transmission of Borrower Materials through the Internet, except to the
extent that such losses, claims, damages, liabilities or expenses are determined by a court of
competent jurisdiction by a final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Agent Party;
provided, however
, that in no event shall any
Agent Party have any liability to the Borrower, any Lender, or any other Person for indirect,
special, incidental, consequential or punitive damages (as opposed to direct or actual damages).
(d)
Change of Address, Etc
. Each of the Borrower, the Administrative Agent, and the
Swing Line Lender may change its address, telecopier or telephone number for notices and other
communications hereunder by notice to the other parties hereto. Each other Lender may change its
address, telecopier or telephone number for notices and other communications hereunder by notice to
the Borrower, the Administrative Agent and the Swing Line Lender. In addition, each Lender agrees
to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on
record (i) an effective address, contact name, telephone number, telecopier number and electronic
mail address to which notices and other communications may be sent and (ii) accurate wire
instructions for such Lender.
(e)
Reliance by Administrative Agent and Lenders
. The Administrative Agent and the
Lenders shall be entitled to rely and act upon any notices (including telephonic Notices of
Borrowing and Swing Line Loan Notices) that the Administrative Agent or such Lender reasonably
believes has been given by or on behalf of the Borrower even if (i) such notices were not made in a
manner specified herein, were incomplete or were not preceded or followed by any other form of
notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any
confirmation thereof. The Borrower shall indemnify the Administrative Agent, each Lender and the
Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the
reliance by such Person on each notice that the Administrative Agent, such Lender or such Related
Party reasonably believes has been given by or on behalf of the Borrower. All telephonic notices
to and other telephonic communications with the
61
Administrative Agent may be recorded by the Administrative Agent, and each of the parties
hereto hereby consents to such recording.
Section 8.03
No Waiver; Remedies
. No failure on the part of any Lender or the
Administrative Agent to exercise, and no delay in exercising, any right, remedy, power or privilege
hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, remedy, power or privilege preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.
Section 8.04
Expenses; Indemnity; Damage Waiver
.
(a)
Costs and Expenses
. The Borrower shall pay (i) all reasonable out of pocket
expenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees,
charges and disbursements of counsel for the Administrative Agent), in connection with the
syndication of the credit facilities provided for herein, the preparation, negotiation, execution,
delivery and administration of this Agreement and the other Loan Documents or any amendments,
modifications or waivers of the provisions hereof or thereof (whether or not the transactions
contemplated hereby or thereby shall be consummated) and (ii) all out of pocket expenses incurred
by the Administrative Agent, any Lender (including the reasonable fees, charges and disbursements
of any counsel for the Administrative Agent and any Lender), in connection with the enforcement or
protection of its rights (A) in connection with this Agreement and the other Loan Documents,
including its rights under this
Section
, or (B) in connection with the Advances made or the
Notes issued hereunder, including all such out of pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Advances or Notes.
(b)
Indemnification by The Borrower
. The Borrower agrees to indemnify and hold
harmless the Administrative Agent and each Lender and each of their Affiliates and each Related
Party of the foregoing Persons (each, an
Indemnified Party
) from and against (i) any and
all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable
fees, charges, disbursements and expenses of counsel for any Indemnified Party) that may be
incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in
connection with or by reason of (including, without limitation, in connection with any
investigation, litigation or proceeding or preparation of a defense in connection therewith) the
Notes, this Agreement, any other Loan Document, any of the transactions contemplated herein or
therein, the actual or proposed use of the proceeds of the Advances, or, in the case of the
Administrative Agent (and any sub-agent thereof) and its Related Parties only, the administration
of this Agreement and the other Loan Documents except to the extent such claim, damage, loss,
liability or expense resulted from such Indemnified Partys gross negligence or willful misconduct.
In the case of an investigation, litigation or other proceeding to which the indemnity in this
Section 8.04(b)
applies, such indemnity shall be effective whether or not such
investigation, litigation or proceeding is brought by the Borrower or any other Loan Party, its
respective directors, shareholders or creditors or an Indemnified Party or any other Person or any
Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated
hereby are consummated.
62
(c)
Other Costs
. If any payment of principal of, or Conversion of, any Eurocurrency
Rate Advance is made (i) by the Borrower to or for the account of a Lender other than on the last
day of the Interest Period for such Advance, as a result of a payment or Conversion pursuant to
Section 2.08(c)
or
(d)
,
2.10
or
2.12
, acceleration of the maturity
of the Notes pursuant to
Section 6.01
or for any other reason, (ii) by an Eligible Assignee
to a Lender other than on the last day of the Interest Period for such Advance upon an assignment
of rights and obligations under this Agreement pursuant to
Section 8.06
as a result of a
demand by the Borrower pursuant to
Section 8.11
, or (iii) as part of a distribution by the
Administrative Agent to a Lender as a result of a Commitment Increase pursuant to
Section
2.05(c)
, the Borrower shall, upon demand by such Lender (with a copy of such demand to the
Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts
required to compensate such Lender for any additional losses, costs or expenses that it may
reasonably incur as a result of such payment or Conversion, including, without limitation, any loss
(excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance,
less the return such Lender reasonably expects to receive on its redeployment of funds.
(d)
Reimbursement by Lenders
. To the extent that the Borrower for any reason fails to
indefeasibly pay any amount required under subsection (a) or (b) of this
Section
to be paid
by it to the Administrative Agent (or any sub-agent thereof) or any Related Party thereof, each
Lender severally agrees to pay to the Administrative Agent (or any such sub-agent) or such Related
Party, as the case may be, such Lenders Pro Rata Share (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount,
provided
that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as
the case may be, was incurred by or asserted against the Administrative Agent (or any such
sub-agent) or against any Related Party thereof acting for the Administrative Agent (or any such
sub-agent) in connection with such capacity. The obligations of the Lenders under this subsection
(d) are subject to the provisions of
Section 2.02(e)
.
(e)
Waiver of Consequential Damages, Etc
. To the fullest extent permitted by
applicable law, no Loan Party shall assert, and each hereby waives, any claim against any
Indemnified Party, on any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the
transactions contemplated hereby or thereby, any Advance or the use of the proceeds thereof. No
Indemnified Party referred to in subsection (b) above shall be liable for any damages arising from
the use by unintended recipients of any information or other materials distributed by it through
telecommunications, electronic or other information transmission systems in connection with this
Agreement or the other Loan Documents or the transactions contemplated hereby or thereby except as
a result of such Indemnified Partys gross negligence of willful misconduct.
(f)
Survival
. Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in this
Section
and
Sections 2.11
and
2.14
herein shall survive the resignation of
the Administrative Agent, the replacement of any Lender, the termination of the Total Commitment
and the repayment,
63
satisfaction or discharge of all the other obligations of the Borrower and any other Loan
Party in connection with any Loan Document.
Section 8.05
Right of Set-off
. Upon the occurrence and during the continuance of any
Event of Default, each Lender and each of its Affiliates is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and other indebtedness
at any time owing by such Lender or such Affiliate to or for the credit or the account of the
Borrower against any and all of the obligations of the Borrower now or hereafter existing under
this Agreement and the Note held by such Lender, whether or not such Lender shall have made any
demand under this Agreement or such Note and although such obligations may be unmatured. Each
Lender agrees promptly to notify the Borrower after any such set-off and application,
provided
that
the failure to give such notice shall not affect the validity of such set-off and application. The
rights of each Lender and its Affiliates under this
Section
are in addition to other rights
and remedies (including, without limitation, other rights of set-off) that such Lender and its
Affiliates may have.
Section 8.06
Successors and Assigns
.
(a)
Successors and Assigns Generally
. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby, except that no Loan Party may assign or otherwise transfer any of its
rights or obligations hereunder without the prior written consent of the Administrative Agent and
each Lender (except by operation of law or to the extent permitted hereunder) and no Lender may
assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible
Assignee in accordance with the provisions of subsection (b) of this
Section
, (ii) by way
of participation in accordance with the provisions of subsection (d) of this
Section
, and
(iii) by way of pledge or assignment of a security interest subject to the restrictions of
subsection (f) of this
Section
(and any other attempted assignment or transfer by any party
hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their respective successors and
assigns permitted hereby, Participants to the extent provided in subsection (d) of this
Section
and, to the extent expressly contemplated hereby, the Related Parties of each of
the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by
reason of this Agreement.
(b)
Assignments by Lenders
. Any Lender may at any time assign to one or more Eligible
Assignees all or a portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Advances (including for purposes of this subsection (b),
participations in Swing Line Loans) at the time owing to it);
provided
that
(i) except in the case of an assignment of the entire remaining amount of the assigning
Lenders Commitment and the Advances at the time owing to it or in the case of an assignment
to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the
aggregate amount of the Commitment (which for this purpose includes Advances outstanding
thereunder) or, if the Commitment is not then in effect, the principal outstanding balance
of the Advances of the assigning Lender subject to each such assignment, determined as of
the date the Assignment and Assumption with respect
64
to such assignment is delivered to the Administrative Agent or, if Trade Date is
specified in the Assignment and Assumption, as of the Trade Date, shall not be less than
$10,000,000 and increments of $1,000,000 in excess thereof unless each of the Administrative
Agent and, so long as no Event of Default has occurred and is continuing, the Borrower
otherwise consents (each such consent not to be unreasonably withheld or delayed);
provided,
however
, that concurrent assignments to members of an Assignee Group and concurrent
assignments from members of an Assignee Group to a single Eligible Assignee (or to an
Eligible Assignee and members of its Assignee Group) will be treated as a single assignment
for purposes of determining whether such minimum amount has been met;
(ii) each partial assignment shall be made as an assignment of a proportionate part of
all the assigning Lenders rights and obligations under this Agreement with respect to the
Advances or the Commitment assigned, except that this clause (ii) shall not apply to rights
of the Swing Line Lender in respect of Swing Line Loans;
(iii) any assignment of a Commitment must be approved by the Administrative Agent and
the Swing Line Lender unless the Person that is the proposed assignee is itself a Lender,
provided that
the approval of the Administrative Agent shall not be required in the case of
an assignment of a Commitment to an Affiliate of a Lender (in either case, whether or not
the proposed assignee would otherwise qualify as an Eligible Assignee), and
provided further
that such approval shall not be unreasonably withheld or delayed; and
(iv) the parties to each assignment shall execute and deliver to the Administrative
Agent an Assignment and Assumption, together with a processing and recordation fee in the
amount, if any, required as set forth in
Schedule 8.06
, and the Eligible Assignee,
if it shall not be a Lender, shall deliver to the Administrative Agent an administrative
questionnaire, and the Administrative Agent shall further deliver such administrative
questionnaire to the Borrower.
Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c)
of this
Section
, from and after the effective date specified in each Assignment and
Assumption, the Eligible Assignee thereunder shall be a party to this Agreement with respect to the
interest assigned and, to the extent of the interest assigned by such Assignment and Assumption,
have the rights and obligations of a Lender under this Agreement in addition to any rights and
obligations it may theretofore have as a Lender, and the assigning Lender thereunder shall, to the
extent of the interest assigned by such Assignment and Assumption, be released from its obligations
under this Agreement (and, in the case of an Assignment and Assumption covering all of the
assigning Lenders rights and obligations under this Agreement, such Lender shall cease to be a
party hereto) but shall continue to be entitled to the benefits of
Sections 2.11
,
2.14
, and
8.04
with respect to facts and circumstances occurring prior to the
effective date of such assignment. Upon request, the Borrower (at its expense) shall execute and
deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this subsection shall be treated for
purposes of this Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with subsection (d) of this
Section
.
65
(c)
Register
. The Administrative Agent, acting solely for this purpose as an agent of
the Borrower, shall maintain at the Administrative Agents office a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and addresses of the
Lenders, and the Commitments of, and principal amounts of the Advances owing to each Lender
pursuant to the terms hereof from time to time (the
Register
). The entries in the
Register shall be conclusive, absent manifest error, and the Borrower, the Administrative Agent and
the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms
hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Borrower and the Lenders at any
reasonable time and from time to time upon reasonable prior notice.
(d)
Participations
. Any Lender may at any time, without the consent of, or notice to,
the Borrower or the Administrative Agent, sell participations to any Person (other than a natural
person or the Parent, the Borrower or any of the Parents Affiliates or Subsidiaries) (each, a
Participant
) in all or a portion of such Lenders rights and/or obligations under this
Agreement (including all or a portion of its Commitment and/or the Advances (including such
Lenders participations in Swing Line Loans) owing to it);
provided
that (i) such Lenders
obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations and (iii) the
Borrower, the Administrative Agent and the Lenders shall continue to deal solely and directly with
such Lender in connection with such Lenders rights and obligations under this Agreement.
Any agreement or instrument pursuant to which a Lender sells such a participation shall
provide that such Lender shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement;
provided
that such agreement
or instrument may provide that such Lender will not, without the consent of the Participant, agree
to any amendment, waiver or other modification described in the first proviso to
Section
8.01
that affects such Participant. Subject to subsection (e) of this
Section
, the
Borrower agrees that each Participant shall be entitled to the benefits of
Sections 2.11
,
2.14
and
8.04
to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to subsection (b) of this
Section
. To the extent permitted
by law, each Participant also shall be entitled to the benefits of
Section 8.05
as though
it were a Lender,
provided
such Participant agrees to be subject to
Section 2.15
as though
it were a Lender.
(e)
Limitation upon Participant Rights
. A Participant shall not be entitled to
receive any greater payment under
Section 2.11
or
2.14
than the applicable Lender
would have been entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the Borrowers prior written
consent. A Participant that would be a foreign Lender if it were a Lender shall not be entitled to
the benefits of
Section 2.14
unless the Borrower is notified of the participation sold to
such Participant and such Participant agrees, for the benefit of the Borrower, to comply with
Section 2.14
as though it were a Lender.
(f)
Certain Pledges
. Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement (including under its Note(s), if any) to
secure obligations of such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank;
provided
that no such pledge or assignment shall release such Lender
66
from any of its obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.
(g)
Electronic Execution of Assignments
. The words execution, signed,
signature, and words of like import in any Assignment and Assumption shall be deemed to include
electronic signatures or the keeping of records in electronic form, each of which shall be of the
same legal effect, validity or enforceability as a manually executed signature or the use of a
paper-based recordkeeping system, as the case may be, to the extent and as provided for in any
applicable law, including the Federal Electronic Signatures in Global and National Commerce Act,
the New York State Electronic Signatures and Records Act, or any other similar state laws based on
the Uniform Electronic Transactions Act.
(h)
Resignation as Swing Line Lender after Assignment
. Notwithstanding anything to
the contrary contained herein, if at any time Bank of America assigns all of its Commitment and
Advances pursuant to subsection (b) above, Bank of America may, upon 30 days notice to the
Borrower and the Lenders, resign as Swing Line Lender. In the event of any such resignation, the
Borrower shall be entitled to appoint from among the Lenders a successor Swing Line Lender
hereunder;
provided, however
, that no failure by the Borrower to appoint any such successor shall
affect the resignation of Bank of America as Swing Line Lender. If Bank of America resigns as
Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder
with respect to Swing Line Loans made by it and outstanding as of the effective date of such
resignation, including the right to require the Lenders to make Base Rate Advances or fund risk
participations in outstanding Swing Line Loans pursuant to
Section 2.03(c)
. Upon the
appointment of a successor and acceptance of such appointment by the Swing Line Lender, such
successor shall succeed to and become vested with all of the rights, powers, privileges and duties
of the retiring Swing Line Lender, as the case may be.
Section 8.07
Treatment of Certain Information; Confidentiality
. Each of the
Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its Affiliates and to its and its
Affiliates respective partners, directors, officers, employees, agents, advisors and
representatives (it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority purporting to have
jurisdiction over it (including any self-regulatory authority, such as the National Association of
Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any
subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the
exercise of any remedies hereunder or under any other Loan Document or any action or proceeding
relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or
thereunder, (f) subject to an agreement containing provisions substantially the same as those of
this
Section
, to (i) any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement or (ii) any actual or
prospective counterparty (or its advisors) to any swap or derivative transaction relating to the
Borrower and its obligations, (g) with the consent of the Parent or the Borrower or (h) to the
extent such Information (x) becomes publicly available other than as a result of a breach of this
Section
actually known to or caused by the disclosing party or (y) becomes available to the
67
Administrative Agent, any Lender, or any of their respective Affiliates on a nonconfidential
basis from a source other than the Parent or the Borrower.
For purposes of this
Section
,
Information
means all information received
from the Parent, the Borrower or any Subsidiary of the Parent relating to the Parent, the Borrower
or any such Subsidiary or any of their respective businesses, other than any such information that
is available to the Administrative Agent or any Lender on a nonconfidential basis prior to
disclosure by the Parent, the Borrower or any such Subsidiary,
provided
that, in the case of
information received from the Parent, the Borrower or any such Subsidiary after the date hereof,
such information is clearly identified at the time of delivery as confidential. Any Person
required to maintain the confidentiality of Information as provided in this
Section
shall
be considered to have complied with its obligation to do so if such Person has exercised the same
degree of care to maintain the confidentiality of such Information as such Person would accord to
its own confidential information.
Each of the Administrative Agent and the Lenders acknowledges that (a) the Information may
include material non-public information concerning the Parent, the Borrower or a Subsidiary of
either thereof, as the case may be, (b) it has developed compliance procedures regarding the use of
material non-public information and (c) it will handle such material non-public information in
accordance with applicable law, including Federal and state securities laws with respect to Lenders
subject to such laws and only to the extent such laws are applicable to such Lender.
Section 8.08
Governing Law
. This Agreement and the Notes shall be governed by, and
construed in accordance with, the laws of the State of New York.
Section 8.09
Execution in Counterparts
. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall constitute one and
the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of this Agreement.
Section 8.10
Survival of Representations and Warranties
. All representations and
warranties made hereunder and in any other Loan Document or other document delivered pursuant
hereto or thereto or in connection herewith or therewith shall survive the execution and delivery
hereof and thereof. Such representations and warranties have been or will be relied upon by the
Administrative Agent and each Lender, regardless of any investigation made by the Administrative
Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any
Lender may have had notice or knowledge of any Default at the time of any Borrowing or any Advance,
and shall continue in full force and effect as long as any Advance or any other Obligation
hereunder shall remain unpaid or unsatisfied.
Section 8.11
Replacement of Lenders
. (i) If any Lender requests compensation under
Section 2.11
, (ii) if the Borrower is required to pay any additional amount to any Lender
or any governmental authority for the account of any Lender pursuant to
Section 2.14
, (iii)
if any Lender is, or within 15 Business Days of such assignment or delegation was, a Defaulting
68
Lender, (iv) if any Lender is unable to make Eurocurrency Rate Advances pursuant to
Section 2.12
, or (v) if any Lender shall fail to provide any consent, or consent to any
waiver or amendment, agreed to by the Required Lenders then the Borrower may, at its sole expense
and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign
and delegate, without recourse (in accordance with and subject to the restrictions contained in,
and consents required by,
Section 8.06
), all of its interests, rights and obligations under
this Agreement and the related Loan Documents to an assignee that shall assume such obligations
(which assignee may be another Lender, if a Lender accepts such assignment),
provided
that:
(a) the Borrower shall have paid (or cause to be paid) to the Administrative Agent the
assignment fee specified in
Section 8.06(b)
;
(b) such Lender shall have received payment of an amount equal to the outstanding principal of
its Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder
and under the other Loan Documents (including any amounts under
Section 8.04(c)
from the
assignee (to the extent of such outstanding principal and accrued interest and fees) or the
Borrower (in the case of all other amounts);
(c) in the case of any such assignment resulting from a claim for compensation under
Section 2.11
or payments required to be made pursuant to
Section 2.14
, such
assignment will result in a reduction in such compensation or payments thereafter;
(d) such assignment does not conflict with applicable Laws;
(e) no Default or Event of Default shall have occurred and be continuing; and
(f) such parties to the assignment shall execute and deliver to the Administrative Agent an
Assignment and Assumption and the assignee shall deliver to the Administrative Agent an
administrative questionnaire.
A Lender shall not be required to make any such assignment or delegation if, prior thereto, as
a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to
require such assignment and delegation cease to apply.
Section 8.12
Jurisdiction, Etc
.
(a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and
its property, to the nonexclusive jurisdiction of any New York State court or federal court of the
United States of America sitting in New York City, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Agreement or the Notes, or for recognition
or enforcement of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the extent permitted by law, in such federal
court. The Parent and the Borrower each hereby agree that service of process in any such action or
proceeding brought in any such New York State court or in such federal court may be made upon the
Parent or the Borrower c/o IVZ Inc. at its offices at 1315 Peachtree Street N.E., Suite 500,
Atlanta, Georgia 30309, Attention: General Counsel (the
Process Agent
), and hereby
further agrees that the failure of the Process Agent to give any
69
notice of any such service to the Parent or the Borrower, as applicable, shall not impair or
affect the validity of such service or of any judgment rendered in any action or proceeding based
thereon. Each of the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by law. Nothing in this Agreement shall affect any right that any party may
otherwise have to bring any action or proceeding relating to this Agreement or the Notes in the
courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent
it may legally and effectively do so, any objection that it may now or hereafter have to the laying
of venue of any suit, action or proceeding arising out of or relating to this Agreement or the
Notes in any New York State or federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(c) To the extent that either the Parent or the Borrower has or hereafter may acquire any
immunity from the jurisdiction of any court or from any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with
respect to itself or its property, each of the Parent and the Borrower hereby irrevocably waives
such immunity in respect of its obligations under this Agreement and the other Loan Documents.
Section 8.13
Judgment
.
(a)
Rate of Exchange
. If, for the purpose of obtaining judgment in any court, it is
necessary to convert a sum due hereunder or under the Notes in another currency into Dollars, the
parties hereto agree, to the fullest extent that they may effectively do so, that the rate of
exchange used shall be that at which, in accordance with normal banking procedures, the
Administrative Agent could purchase such other currency with Dollars in New York City, New York, at
the close of business on the Business Day immediately preceding the day on which final judgment is
given, together with any premiums and costs of exchange payable in connection with such purchase.
(b)
Indemnity
. The obligation of the Borrower in respect of any sum due from it to
the Administrative Agent or any Lender hereunder or under any Note shall, notwithstanding any
judgment in a currency other than Dollars, be discharged only to the extent that on the Business
Day next succeeding receipt by the Administrative Agent or such Lender of any sum adjudged to be so
due in such other currency, the Administrative Agent or such Lender, as the case may be, may, in
accordance with normal banking procedures, purchase Dollars with such other currency. If the
Dollars so purchased are less than the sum originally due to the Administrative Agent or such
Lender in Dollars, the Borrower agrees, as a separate obligation and notwithstanding any such
judgment, to indemnify the Administrative Agent or such Lender against such loss, and if the
Dollars so purchased exceed the sum originally due to any the Administrative Agent or any Lender in
Dollars, the Administrative Agent or such Lender agrees to remit to the Borrower such excess.
70
Section 8.14
Waiver of Jury Trial
. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT
OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE
OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION
.
Section 8.15
USA PATRIOT Act Notice
. Each Lender that is subject to the Act (as
hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender)
hereby notifies the Borrower and the Parent that pursuant to the requirements of the USA Patriot
Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the
Act
), it is
required to obtain, verify and record information that identifies the Borrower, which information
includes the name and address of the Borrower and other information that will allow such Lender or
the Administrative Agent, as applicable, to identify the Borrower in accordance with the Act.
Section 8.16
Consent to Reorganization
. The Lenders and the Administrative Agent
hereby consent to the Reorganization.
71
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their
respective officers thereunto duly authorized, as of the date first above written.
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INVESCO PLC
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By:
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Name:
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Title:
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INVESCO LTD.
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By:
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Name:
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Title:
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S-1
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ADMINISTRATIVE AGENT
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BANK OF AMERICA, N.A.
, as Administrative Agent
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By:
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Name:
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Title:
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S-2
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LENDERS
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$95,000,000.00
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BANK OF AMERICA, N.A.
, as a Lender
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By:
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Name:
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Title:
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S-3
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$95,000,000.00
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CITIBANK N.A.
, as a Lender
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By:
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Name:
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Title:
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S-4
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$85,000,000.00
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HSBC BANK USA,
NATIONAL ASSOCIATION
, as a Lender
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By:
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Name:
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Title:
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S-5
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$85,000,000.00
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JPMORGAN CHASE BANK, N.A.
, as a Lender
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By:
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Name:
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Title:
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S-6
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$85,000,000.00
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WACHOVIA BANK, NATIONAL
ASSOCIATION
, as a Lender
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By:
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Name:
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Title:
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S-7
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$65,000,000.00
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DEUTSCHE BANK AG, NEW YORK
BRANCH
, as a Lender
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By:
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Name:
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Title:
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By:
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Name:
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Title:
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S-8
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$65,000,000.00
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SUNTRUST BANK ATLANTA
, as a Lender
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By:
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Name:
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Title:
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S-9
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$55,000,000.00
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CIBC INC.
, as a Lender
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By:
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Name:
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Title:
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S-10
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$55,000,000.00
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ROYAL BANK OF CANADA EUROPE
LIMITED,
as a Lender
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By:
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Name:
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Title:
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S-11
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$43,000,000.00
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THE BANK OF NEW YORK
, as a Lender
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By:
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Name:
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Title:
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S-12
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$43,000,000.00
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BARCLAYS BANK PLC
, as a Lender
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By:
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Name:
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Title:
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S-13
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$43,000,000.00
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BNP PARIBAS
, as a Lender
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By:
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Name:
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Title:
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S-14
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$43,000,000.00
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STATE STREET BANK AND TRUST
COMPANY
, as a Lender
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By:
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Name:
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Title:
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S-15
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$43,000,000.00
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THE TORONTO-DOMINION BANK
, as a Lender
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By:
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Name:
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Title:
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S-16
EXHIBIT 10.2
THIRD AMENDED AND RESTATED
PURCHASE AND SALE AGREEMENT
among
A I M MANAGEMENT GROUP INC.,
as Seller
A I M DISTRIBUTORS, INC.,
as Distributor
A I M ADVISORS, INC.,
as Advisor
INVESCO FUNDS GROUP, INC.,
as Advisor
CITIBANK, N.A.,
as Purchaser
and
CITICORP NORTH AMERICA, INC.,
as Program Agent
Dated as of August 18, 2003
TABLE OF CONTENTS
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Page
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ARTICLE I
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DEFINITIONS AND RULES OF CONSTRUCTION
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SECTION 1.01. Definitions
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2
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SECTION 1.02. Rules of Construction
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2
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ARTICLE II
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PURCHASE AND SALE OF RECEIVABLES; ADDITIONAL FUNDS
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SECTION 2.01. Purchase of Receivables
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2
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SECTION 2.02. Purchase Notices and Funding Notices
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2
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SECTION 2.03. Additional Funds and Companies
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3
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ARTICLE III
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CONDITIONS PRECEDENT
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SECTION 3.01. Conditions Precedent to Effectiveness
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4
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SECTION 3.02. Conditions Precedent to the Purchasers Obligation to Purchase
Receivables
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5
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ARTICLE IV
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REPRESENTATIONS AND WARRANTIES
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SECTION 4.01. Representations and Warranties of the Seller,
the Distributor and the Advisors
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6
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SECTION 4.02 Additional Representations and Warranties of the Seller
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11
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SECTION 4.03 Additional Representations and Warranties of the Distributor
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13
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ARTICLE V
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COVENANTS
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SECTION 5.01. Affirmative Covenants of the Seller, the
Distributor and the Advisors
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12
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SECTION 5.02. Negative Covenants of the Seller, the
Distributor and the Advisors
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17
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SECTION 5.03 Additional Covenants of the Seller
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21
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SECTION 5.04 Additional Covenants of the Distributor
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22
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Page
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ARTICLE VI
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EVENTS OF TERMINATION
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SECTION 6.01. Events of Termination.
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22
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ARTICLE VII
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THE PROGRAM AGENT
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SECTION 7.01. Authorization and Action
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25
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SECTION 7.02. Program agents Reliance, Etc.
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26
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SECTION 7.03. Indemnification
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26
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SECTION 7.04. Rights of the Program Agent
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27
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ARTICLE VIII
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SECTION 8.01. Undertakings; Payment of Damages
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27
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SECTION 8.02. Agreement Not Affected
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27
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SECTION 8.03. Waiver of Notice; No Offset; No Subrogation
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27
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ARTICLE IX
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MISCELLANEOUS
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SECTION 9.01. No Waiver; Modifications in Writing
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28
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SECTION 9.02. Payment
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28
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SECTION 9.03. Notices, etc.
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28
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SECTION 9.04. Costs and Expenses; Indemnification
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31
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SECTION 9.05. Taxes
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35
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SECTION 9.06. Execution in Counterparts
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37
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SECTION 9.07. Binding Effect; Assignment
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37
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SECTION 9.08. Governing Law; Submission to Jurisdiction
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38
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SECTION 9.09. Severability of Provisions
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38
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SECTION 9.10. Confidentiality
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38
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SECTION 9.11. Intent of Agreement
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39
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SECTION 9.12. Liability to Any Company
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39
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Page
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SECTION 9.13. Merger
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39
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SECTION 9.14. Further acts
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39
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SECTION 9.15. Assignee Rights; Etc.
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40
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SECTION 9.16. Specific Performance; Other Rights and Remedies
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41
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SCHEDULES
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SCHEDULE I
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Form of Purchaser Report
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SCHEDULE II
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List of Funds, List of Companies and Shares
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SCHEDULE III
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CDSCs
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SCHEDULE IV
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List of Fundamental Investment Objectives
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SCHEDULE V
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Form of Legend
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SCHEDULE VI
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Conditions For a Permitted Change in Control
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SCHEDULE VII
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Location of Records
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EXHIBITS
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EXHIBIT A
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Form of Purchase Notice
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EXHIBIT B-1
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Form of Distributors Certificate
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EXHIBIT B-2
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Form of Sellers Certificate
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EXHIBIT B-3
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Form of Advisors Certificate
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EXHIBIT C
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Form of Irrevocable Payment Instruction
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EXHIBIT D
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Form of Additional Eligible Fund Addendum
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EXHIBIT E
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Allocation Procedures
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EXHIBIT F
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Form of Take-out Notice
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APPENDIX A
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Definition List
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THIRD AMENDED AND RESTATED
PURCHASE AND SALE AGREEMENT
THIRD AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT dated as of August 18, 2003 (as amended
and supplemented, this Agreement) among CITIBANK, N.A. (together with its successors and assigns,
the Purchaser), CITICORP NORTH AMERICA, INC., as agent for the Purchaser (together with its
permitted successors and assigns, the Program Agent), A I M MANAGEMENT GROUP INC. (together with
its permitted successors and assigns, the Seller), A I M DISTRIBUTORS, INC. (together with its
permitted successors and assigns, the Distributor), A I M ADVISORS, INC. (AAI) and INVESCO
FUNDS GROUP, INC. (IFG).
WITNESSETH
WHEREAS, the Seller, the Distributor, AAI, the Purchaser and the Program Agent are parties to
that certain Second Amended and Restated Purchase and Sale Agreement dated as of December 14, 2000
(as amended and supplemented prior to the date hereof, the Existing AIM Purchase Agreement);
WHEREAS, the Distributor, IFG, the Purchaser and the Program Agent are parties to that certain
Purchase and Sale Agreement dated as of December 14, 2000 (as amended and supplemented prior to the
date hereof, the Existing INVESCO Purchase Agreement); and
WHEREAS, the parties hereto desire to combine, amend and restate the Existing AIM Purchase
Agreement and the Existing INVESCO Purchase Agreement as set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.01.
Definitions
.
Capitalized terms not otherwise defined herein shall have the meanings assigned to such terms
in the Definitions List attached hereto as Appendix A.
Section 1.02.
Rules of Construction.
For all purposes of this Agreement, except as otherwise expressly provided or unless the
context otherwise requires (a) each use in this Agreement of a singular version of a pronoun shall
be deemed to include references to the plural, and vice versa, (b) Article and Section headings are
for convenience of reference only and shall not affect the construction of this Agreement, and (c)
references to this section or words of similar import shall be deemed to refer to the entire
section and not to a particular subsection, and references to hereunder,
1
herein or words of similar import shall be deemed to refer to this entire Agreement and not
to the particular section or subsection.
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES; ADDITIONAL FUNDS
Section 2.01.
Purchase of Receivables.
On each Purchase Date and subject to and upon the terms and conditions set forth in this
Agreement, the Seller shall sell, transfer, convey and assign to the Purchaser on and as of such
Purchase Date, all of the Sellers right, title and interest in, to and under the Receivables and
the Collections and Ancillary Rights in respect thereof relating to the sales of Shares (other than
Excluded Shares) of each Fund for the Purchase Period to which such Purchase Date relates, and the
Purchaser shall purchase from the Seller such Receivables and Ancillary Rights in respect thereof
and Collections for an amount equal to the aggregate Purchase Prices payable in respect of such
Receivables. The Purchase Prices to be paid by the Purchaser on each Purchase Date shall be paid
in immediately available funds by wire transfer to the Sellers Account. Notwithstanding anything
in this Agreement to the contrary, the Purchaser shall not purchase on any Purchase Date and the
Seller shall not sell to the Purchaser any Receivables relating to any Excluded Shares.
Section 2.02.
Purchase Notices
.
With respect to the Receivables to be purchased on any Purchase Date, the Seller shall
transmit or shall cause to be transmitted to the Program Agent, not later than 10:00 a.m. (New York
City time) on the Business Day which is two Business Days prior to such proposed Purchase Date, a
Purchase Notice;
provided
,
however
, that no more than two (2) Purchase Dates shall
occur in any calendar week. The Seller agrees that it shall deliver from time to time prior to the
Termination Date, but no less frequently than once each calendar month, a Purchase Notice,
sufficient to initiate the sale of the Receivables for the period from the immediately preceding
Sale Cutoff Date to the Sale Cutoff Date specified in such Purchase Notice, which Sale Cutoff Date
shall not be more than five (5) Business Days prior to the proposed Purchase Date.
The Seller may, unless otherwise notified to the contrary by the Program Agent, transmit
Purchase Notices to the Program Agent by electronic mail (each, an E-Mail Purchase Notice);
provided
,
that
, (i) each E-Mail Purchase Notice shall be formatted as the Program
Agent may designate from time to time, (ii) each E-Mail Purchase Notice shall be sent to the
Program Agent at an electronic mail address designated by the Program Agent, and (iii) the executed
signature page for each E-Mail Purchase Notice shall be transmitted via facsimile transmission to
the Program Agent at the facsimile numbers specified for the Program Agent in Section 9.03. Each
E-Mail Purchase Notice shall be deemed given when receipt of such transmission is acknowledged by
the Program Agent.
Section 2.03.
Additional Funds and Companies
.
Unless an Event of Termination (or an event which, with the passage of time or notice, or
both, would constitute an Event of Termination) shall have occurred and be continuing, the Seller
may request that on the applicable Addition Effective Date an Additional
2
Eligible Fund become a Fund under this Agreement and if such Additional Eligible Fund is not
a series of an existing Company under this Agreement the Seller may request that the investment
company of which such Additional Fund is a series becomes a Company under this Agreement;
provided
, that such additional investment company (the Additional Company) is registered
with the SEC under the Investment Company Act. On and as of such Addition Effective Date, (i) each
Additional Eligible Fund and Additional Company shall become a Fund and a Company, respectively,
hereunder, (ii) the Servicing Agreement shall be deemed to be supplemented to reflect such
addition, (iii) Schedules II and IV hereto shall be deemed to be supplemented to add the applicable
information relating to such Fund set forth in the Additional Eligible Fund Addendum relating to
such Additional Eligible Fund and (iv) any reference in this Agreement to any change or
modification since the date of this Agreement to the underwriting agreement, distribution plan,
advisory agreement, prospectus, the fundamental investment objectives or contingent deferred sales
charge arrangement in respect of such Additional Eligible Fund shall be deemed to refer to any
change or modification thereof since such Addition Effective Date.
The term Addition Effective Date shall mean with respect to any Additional Eligible Fund,
the first date on which all of the following conditions shall have been satisfied:
(i) the Program Agent shall have received a fully executed Additional Eligible Fund
Addendum, together with such signed opinions of counsel to the applicable Company,
the Distributor, the applicable Advisor and the Seller, each dated a date reasonably
near the Addition Effective Date, as the Program Agent shall have reasonably
requested, all in form, scope and substance reasonably satisfactory to the Program
Agent;
provided
,
however
, that neither the Seller nor the
Distributor will be required to deliver a True Sale opinion in connection with such
addition;
(ii) the Program Agent shall have received such instruments, certificates and
documents regarding the addition of such Additional Eligible Fund from the
Distributor, the Seller, the applicable Advisor and the applicable Company, as the
Program Agent shall have reasonably requested;
provided
,
however
,
that an officers certificate in the form of Exhibits B-1 and B-2 shall not be
required;
(iii) the Program Agent and the Seller shall have agreed in writing to any change in
the Purchase Price Percentage applicable to the Receivables relating to such Fund;
and
(iv) the Program Agent shall have received evidence satisfactory to it that (a) the
conditions in respect of such Additional Eligible Fund set forth in Section 3.01 of
this Agreement immediately after the Addition Effective Date shall be satisfied, and
(b) that on such Addition Effective Date the Receivables relating to such Additional
Eligible Fund shall constitute Eligible Receivables.
3
ARTICLE III
CONDITIONS PRECEDENT
Section 3.01.
Conditions Precedent to Effectiveness
.
The effectiveness of each of the Existing Purchase Agreements was subject to the fulfillment
of the following conditions precedent:
(a) such Existing Purchase Agreement, the Servicing Agreement, the Collection Agency
Agreement, the Irrevocable Payment Instructions, the Underwriting Agreement and the Transfer
Agreement (as such terms are defined in such Existing Purchase Agreement) shall each have been duly
executed by the parties thereto and shall each be in full force and effect, and the Program Agent
shall have received fully executed copies thereof;
(b) the Program Agent shall have received fully executed copies of each Underwriting
Agreement, Distribution Plan, Prospectus and Advisory Agreement relating to each Fund which shall
be in full force and effect and shall be in form and substance reasonably satisfactory to the
Program Agent;
(c) the Program Agent shall have received such opinions of counsel as it shall have reasonably
requested in form, scope and substance reasonably satisfactory to the Program Agent;
(d) the Program Agent shall have received a signed certificate of the President or a Vice
President and a Secretary or Assistant Secretary of the Distributor (as defined in such Existing
Purchase Agreement), the Seller (as defined in such Existing Purchase Agreement)and the applicable
Advisor, substantially in the form of Exhibits B-1, B-2 and B-3 hereto, respectively;
(e) the Program Agent shall have received time stamped receipt copies of proper financing
statements duly filed under the UCC of all jurisdictions that the Program Agent may reasonably deem
necessary or desirable in order to perfect the ownership interest of the Seller in the Receivables
(as defined in such Existing Purchase Agreement) sold pursuant to the Transfer Agreement and to
perfect the ownership interest of the Purchaser in the Purchased Receivables (as defined in such
Existing Purchase Agreement) relating to each Fund, as contemplated by such Existing Purchase
Agreement, and the Collections in respect thereto, each of which shall be in form, scope and
substance satisfactory to the Program Agent as of the date given;
(f) the Program Agent shall have received certified copies of requests for information (Form
UCC-11) (or a similar search report certified by a party acceptable to the Program Agent), dated
reasonably near the initial Purchase Date under such Existing Purchase Agreement, listing all
effective financing statements which name the Distributor or the Seller (under their present names
or any previous names), as debtor and which are filed in the jurisdictions in which filings were
required to be made pursuant to Section 3.01(e) of such Existing Purchase Agreement, together with
copies of such financing statements (none of which, shall indicate any Adverse Claim on any
Receivables); and
4
(g) the Board of Trustees of each Company shall have approved the Distribution Plan and
Underwriting Agreement relating to each Fund related to such Company by a vote of the majority of
its Trustees who are not interested persons, within the meaning of the Investment Company Act, in
recognition of the transactions contemplated by the Facility Documents by resolution acceptable as
of the date given to the Program Agent.
Section 3.02.
Conditions Precedent to the Purchasers Obligation to Purchase
Receivables
.
The obligation of the Purchaser to purchase Receivables relating to a Fund on any Purchase
Date shall be subject to the fulfillment at or prior to the time of such Purchase Date of the
following conditions:
(a) no Event of Termination (or event which, with the passage of time or notice, or both,
would constitute an Event of Termination) shall have occurred and be continuing at or prior to such
Purchase Date or shall result therefrom and there shall not be continuing any proceeding of the
type referred to in Section 6.01(f);
(b) the Seller (as Servicer or otherwise) shall have delivered to the Program Agent all
Purchaser Reports, Transfer Agent Reports and Sub-transfer Agent Reports as and when required to
have been delivered pursuant to this Agreement and the Servicing Agreement, which shall be in form
and substance reasonably satisfactory to the Purchaser and the Program Agent;
(c) the Receivables relating to such Fund to be purchased on the applicable Purchase Date
shall constitute Eligible Receivables;
(d) each of the Facility Documents shall be in full force and effect;
(e) as of the Calculation Date relating to the calendar month immediately preceding the
Purchase Date upon which such Receivables are to be sold, the Weighted Average Percentage Decline
in the Net Asset Value of Shares of all Funds (adjusted for stock splits and excluding declines in
the Net Asset Value resulting from the payment of Normal Distributions) from the end of the
immediately preceding calendar month shall not be twenty-five percent (25%) or more, unless the
aggregate Net Asset Value of Shares of the Funds relating to Purchased Receivables shall thereafter
rise to a level of at least seventy-six percent (76%) of the aggregate Net Asset Value of Shares of
the Funds as of the Calculation Date immediately preceding the Calculation Date that the condition
specified in this clause (e) was not satisfied and was not subsequently complied with;
provided
,
that
, for the avoidance of doubt, this condition shall be satisfied with
respect to any Purchase Date that does not occur on a Calculation Date if it was satisfied as of
the Calculation Date immediately preceding such Purchase Date.
(f) such Fund or the Company in respect of such Fund shall not be prevented by any Authority
or by any Applicable Law from paying Collections or Related Collections relating to such Fund to
the Demand Deposit Account for further credit to the Collection Account in accordance with the
applicable Irrevocable Payment Instruction and neither such Fund nor the Company in respect of such
Fund shall have so asserted in writing;
5
(g) the Purchaser and the Program Agent shall have received from the Distributor, the Advisors
and the Seller such instruments and documents as the Purchaser and the Program Agent may have
reasonably requested in connection with the Receivables relating to such Fund and any Purchase
Price payable on any such Purchase Date;
(h) immediately after giving effect to all such purchases on such Purchase Date, the aggregate
Unamortized Aggregate Purchase Price relating to the Purchased Receivables of all Funds shall not
exceed the Purchase Limit;
(i) such Fund or the Company relating to such Fund shall not be subject to any of the events
described in clauses (g), (q) or (r) of Section 6.01; and
(j) such Fund (and in the case of any Fund which constitutes a Portfolio, the related Company
in respect of such Fund) shall not have proposed or effected a merger, consolidation or other
combination with or sale of its assets other than a Permitted Merger or proposed or effected any
Liquidation Plan.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01.
Representations and Warranties of the Seller, the Distributor and each
Advisor
.
The Seller, the Distributor and each Advisor (provided that for purposes of the
representations and warranties to be made by an Advisor under this Section 4.01, each reference to
Funds, Receivables or Purchased Receivables shall be deemed to refer only to the Funds in respect
of which such Advisor acts as investment advisor and to the Receivables and Purchased Receivables
relating to such Funds) represents and warrants to the Purchaser and the Program Agent, as to
itself, on and as of the date hereof and on and as of each Purchase Date, as follows:
(a) it is duly organized and is validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power and authority to own and operate its
property, conduct the business in which it is now engaged and to execute and deliver and perform
its obligations under this Agreement and the other Facility Documents to which it is a party;
(b) it is duly qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the nature of its business or the performance of its obligations under
this Agreement and the other Program Documents to which it is a party requires such qualification,
where the failure to be so qualified could give rise to a reasonable possibility of an Adverse
Effect;
(c) the execution, delivery and performance by it of this Agreement, the other Facility
Documents to which it is a party and the other instruments and agreements contemplated hereby or
thereby have been duly authorized by all requisite corporate action and have been duly executed and
delivered by it and constitute its legal, valid and binding obligations, enforceable against it in
accordance with their respective terms, except as such enforceability may be limited
6
by applicable bankruptcy laws and any other similar laws affecting the rights and remedies of
creditors generally and by equitable principles;
(d) (i) it has the requisite corporate power and authority and legal right to execute and
deliver this Agreement and the other Facility Documents to which it is a party and to perform its
obligations hereunder and thereunder, and (ii) the Distributor and the Seller have the requisite
corporate power and authority and legal right to from time to time, sell Receivables (and in the
case of the Seller, the Ancillary Rights with respect thereto) relating to each Fund, and the
Collections with respect thereto in accordance with the terms of the Facility Documents and it has
duly authorized each such sale by all necessary action;
(e) neither the execution and delivery of this Agreement, the other Program Documents to which
it is a party, or any instrument or agreement referred to herein or therein, or contemplated hereby
or thereby, nor the consummation of any of the transactions herein or therein contemplated, nor
compliance with the terms, conditions and provisions hereof or thereof by it (i) will conflict
with, or result in a breach or violation of, or constitute a default under, its certificate of
incorporation or by-laws, (ii) will conflict with, or result in a breach or violation of, or
constitute a default under, or permit the acceleration of any obligation or liability in, or but
for any requirement of the giving of notice or the passage of time (or both) would constitute such
a conflict with, breach or violation of, or default under, or permit any such acceleration in, any
contractual obligation or any agreement or document to which it is a party or by which it or any of
its properties is bound (or to which any such obligation, agreement or document relates, or under
any Underwriting Agreement, any Advisory Agreement or any Distribution Plan) where such conflict,
breach or violation could give rise to a reasonable possibility of an Adverse Effect, (iii) will
violate any Applicable Law, the violation of which could give rise to a reasonable possibility of
an Adverse Effect, (iv) could give rise to or permit the creation or imposition of any Adverse
Claim upon any Receivables or any Collections or any Related Collections relating to any Fund, or
(v) could, in and of themselves, give rise to the termination of any Underwriting Agreement, any
Advisory Agreement or any Distribution Plan;
(f) it has obtained all Governmental Authorizations and Private Authorizations, and made all
Governmental Filings necessary for the execution, delivery and performance by it of this Agreement,
the other Program Documents to which it is party and the agreements and instruments contemplated
hereby or thereby and no consents which have not been obtained or waivers under any instruments to
which it is a party or by which it or any of its properties is bound are required to be obtained or
made by it in connection with the execution, delivery or performance of this Agreement and the
other Program Documents, except to the extent the failure to so obtain or make the same could not
give rise to a reasonable possibility of an Adverse Effect;
(g) it is not in default in any of its obligations under this Agreement or any other Program
Document to which it is a party which default could give rise to a reasonable possibility of an
Adverse Effect;
(h) there are no proceedings or investigations pending, or, to the best of its knowledge,
threatened, against it before any Authority (i) asserting the invalidity of this Agreement, any
other Facility Document to which it is a party or any certificate, document or
7
agreement executed by it in connection herewith or therewith, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or any other Facility
Document, or (iii) seeking any determination or ruling which, if granted, could adversely affect
the performance by it of its obligations under, or the validity or enforceability of, this
Agreement, any other Facility Document to which it is a party or any agreement, certificate or
document executed by it in connection herewith or therewith, which in each case, could reasonably
be expected to give rise to an Adverse Effect;
(i) it is not an investment company or a company controlled by an investment company
within the meaning of the Investment Company Act;
(j) it is not engaged principally or as one of its important activities in the business of
extending, or arranging for the extension of, credit for the purpose of purchasing or carrying any
margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve
System and no part of the proceeds of the purchase price paid to it for Receivables under any
Facility Document will be used to purchase or carry any margin stock within the meaning of said
regulation or to extend credit to others for such purpose;
(k) (i) all information (including, without limitation, the Purchaser Reports, the Transfer
Agent Reports, the Sub-transfer Agent Reports and the E-Mail Reports) provided by it or any of its
Affiliates, any Transfer Agent, any Sub-transfer Agent (other than information prepared by an
Unaffiliated Agent) or by any of their respective agents, auditors, legal counsel or other
representatives or any other Person at the request of any of the foregoing to the Purchaser, the
Program Agent or any other Person in writing for purposes of or in connection with this Agreement,
the other Facility Documents to which it or any of its Affiliates is a party or the transactions
contemplated hereby or thereby (including without limitation each Purchaser Report, each Transfer
Agent Report and each Sub-transfer Agent Report (other than a Transfer Agent Report or Sub-transfer
Agent Report prepared by an Unaffiliated Agent)) is, and all such information hereafter provided by
any such Person to the Purchaser, the Program Agent or any other Person in writing will be true,
correct and complete in all material respects on the date such information is stated or certified
and no such information contains, or will contain, any material misrepresentation or any omission
to state therein matters necessary to make the statements made therein not misleading in any
material respect, and (ii) to the best of its knowledge, all information (including, without
limitation, the Transfer Agent Reports and the Sub-transfer Agent Reports) prepared or provided by
or on behalf of any Unaffiliated Agent, to the Purchaser or the Program Agent in writing for
purposes of or in connection with this Agreement, the other Facility Documents or the transactions
contemplated hereby or thereby is, and all such information hereafter provided by any such
Unaffiliated Agent to the Purchaser, the Program Agent or any other Person in writing will be true,
correct and complete in all material respects on the date such information is stated or certified
and, to the best of its knowledge, no such information contains, or will contain, any material
misrepresentation or any omission to state therein matters necessary to make the statements made
therein not misleading in any material respect;
(l) neither the Transfer Agent, any Company nor any Fund is prevented by any Applicable Law
from paying the Collections or Related Collections directly to the Demand
8
Deposit Account for further credit to the Collection Account in accordance with the applicable
Irrevocable Payment Instruction;
(m) the Purchased Receivables relating to each Fund constitute Eligible Receivables;
(n) no Share of a Fund to which a Purchased Receivable relates contains any Conversion Feature
other than a Permitted Conversion Feature;
(o) no Share of a Fund (including, without limitation, a Share of a Fund resulting from one or
more Permitted Free Exchanges) taken into account in computing the Purchase Price paid pursuant to
this Agreement entitles the holder thereof to redeem the same in a Free Redemption except in the
specific situations set forth in the Prospectus of such Fund as in effect on the date hereof;
(p) each of the Companies and each Advisor has complied with the Fundamental Investment
Objectives relating to each Fund and such Fundamental Investment Objectives for each such Fund have
not changed from those set forth in Schedule IV to the Purchase Agreement, except as shall have
been consented to in writing by the Program Agent;
(q) it, each Company, each Fund, the Advisory Agreements, the Underwriting Agreements, the
Prospectus of each Fund, the Distribution Plans and the CDSC arrangements, in each case relating to
Shares of each Fund, are in compliance in all material respects with Applicable Law, including,
without limitation, Rule 12b-1 of the Investment Company Act and the Conduct Rules;
(r) the Asset Based Sales Charge and CDSC arrangement relating to the Shares of each Fund and
the payments provided for in, and actually being made pursuant to, the Distribution Plan and the
Prospectus for each such Fund are fairly and accurately described in the Distribution Plan and
Prospectus relating to each such Fund; and
(s) a true, correct and complete copy of each Underwriting Agreement, each Distribution Plan,
each Advisory Agreement and each Prospectus in effect on the date of this Agreement has been
delivered to the Program Agent on or before the date hereof, such Underwriting Agreements,
Distribution Plans and Advisory Agreements are each in full force and effect and have not been
amended or modified in any manner after the date hereof, except for such amendments or
modifications to the Prospectuses which do not affect any Fundamental Investment Objectives set
forth in Schedule IV hereto or any CDSC arrangement and which do not otherwise give rise to a
reasonable possibility of an Adverse Effect, unless the same is consented to in writing by the
Program Agent and such consent specifies the Fundamental Investment Objectives relating to each
affected Fund and amends Schedule IV in order to accurately and completely reflect the fundamental
investment objectives of each such affected Fund set forth in the then current Prospectus of such
Funds.
Section 4.02.
Additional Representations and Warranties of the Seller
.
The Seller represents and warrants to the Purchaser and the Program Agent on and as of the
date hereof and on and as of each Purchase Date as follows:
9
(a) each transfer of Receivables and the Ancillary Rights with respect thereto to the
Purchaser under this Agreement constitutes a valid and complete True Sale to the Purchaser of all
right, title and interest in and to such Purchased Receivables, the Ancillary Rights with respect
thereto and the Collections in respect thereto, free and clear of any Adverse Claim; such transfer
has not been made with an intent to hinder, delay or defraud any present or future creditor; the
Purchase Price for such Purchased Receivables and the Ancillary Rights with respect thereto is fair
consideration and of reasonably equivalent value to the Purchased Receivables; and immediately
after each purchase pursuant to this Agreement the Seller will remain solvent and will have
adequate capital for the conduct of its business;
(b) immediately after each purchase of Receivables by the Seller under the Transfer Agreement
and immediately prior to each purchase of Receivables and the Ancillary Rights with respect thereto
by the Purchaser hereunder, (i) no party claiming through the Distributor or the Seller has any
right, title or interest in such Receivables, the Ancillary Rights with respect thereto or the
Collections in respect thereto, including any payments or Proceeds in respect thereto, (ii) the
Seller owns such Receivables, the Ancillary Rights with respect thereto and the Collections in
respect thereto free and clear of all Adverse Claims or other such restrictions on transfer created
by or arising out of the acts or omissions of the Seller, the Distributor, the Transfer Agent or
any Selling Agent or any of its Affiliates, and (iii) such Receivables, the Ancillary Rights with
respect thereto and the right to Collections in respect thereto have not been sold, transferred or
assigned by the Seller to any other Person;
(c) all action necessary or advisable to protect, preserve and perfect the Purchasers first
priority ownership interest in the Purchased Receivables, the Ancillary Rights in respect thereto
and the Collections in respect thereto, free and clear of all Adverse Claims has been duly and
effectively taken and no security agreement, financing statement, equivalent security or lien
instrument or continuation statement covering all or any part of such Purchased Receivables or
Ancillary Rights in respect thereto is required to be on file or on record in any jurisdiction,
except such as may have been filed, recorded or made as contemplated by this Agreement and the
other Facility Documents;
(d) the Sellers jurisdiction of incorporation is the State of Delaware and the Sellers
principal place of business and principal executive office is 11 Greenway Plaza, Suite 100,
Houston, Texas 77046, or such other address as the Seller shall designate upon prior written notice
to the Program Agent, and the places where its records concerning the Purchased Receivables are
kept are at the addresses specified on Schedule VII hereto or such other location as the Seller
shall designate upon prior written notice to the Program Agent;
(e) this Agreement and the actions of the Seller required to be taken pursuant to the terms
hereof are and at all times shall be effective to transfer to the Purchaser all of the Sellers
right, title and interest in, to and under the Purchased Receivables and the Ancillary Rights with
respect thereto free and clear of any Adverse Claim; and
(f) the Seller owns all of the outstanding capital stock of the Distributor.
10
Section 4.03.
Additional Representations and Warranties of the Distributor.
The Distributor represents and warrants to each of the Purchaser and the Program Agent on and
as of the date hereof and on and as of each Purchase Date, as follows:
(a) each transfer of Receivables to the Seller under the Transfer Agreement constitutes a
valid and complete True Sale to the Seller of all right, title and interest of the Distributor in
and to such Receivables and the Collections in respect thereto, free and clear of all Adverse
Claims; such transfer has not been made with an intent to hinder, delay or defraud any present or
future creditor; the purchase price for such Receivables is fair consideration and of reasonably
equivalent value to the Receivables; and immediately after each purchase pursuant to the Transfer
Agreement the Distributor will remain solvent and will have adequate capital for the conduct of its
business;
(b) immediately prior to each purchase of Receivables by the Seller under the Transfer
Agreement, (i) no party claiming through the Distributor has any right, title or interest in such
Receivables or the Collections in respect thereto, including any payments or Proceeds in respect
thereto, (ii) the Distributor owns such Receivables and the Collections in respect thereto free and
clear of all Adverse Claims or other restrictions on transfer, and (iii) such Receivables and the
right to Collections in respect thereto have not been sold, transferred or assigned by the
Distributor to any other Person;
(c) all action necessary or advisable to protect, preserve and perfect the Sellers first
priority ownership interest in the Purchased Receivables and the Collections in respect thereto,
free and clear of all Adverse Claims has been duly and effectively taken and no security agreement,
financing statement, equivalent security or lien instrument or continuation statement covering all
or any part of such Receivables is required to be on file or on record in any jurisdiction, except
as have been filed or recorded;
(d) the Distributors jurisdiction of incorporation is the State of Delaware and the
Distributors principal place of business and principal executive office is 11 Greenway Plaza,
Suite 100, Houston, Texas 77046, or such other address as the Seller shall designate upon prior
written notice to the Program Agent, and the places where its records, if any, concerning the
Purchased Receivables are kept are at the addresses specified on Schedule VII hereto or such other
location as the Distributor shall designate upon prior written notice to the Program Agent;
(e) the Transfer Agreement and the actions of the Distributor required to be taken pursuant to
the terms thereof are and at all times shall be effective to transfer to the Seller all of the
Distributors right, title and interest in the Purchased Receivables free and clear of all Adverse
Claims; and
(f) a true and complete copy of the Transfer Agreement has been delivered to the Program Agent
and has not been amended in any manner which gives rise to a reasonable possibility of an Adverse
Effect.
11
ARTICLE V
COVENANTS
Section 5.01.
Affirmative Covenants of the Seller, the Distributor and each Advisor
.
The Seller, the Distributor and each Advisor (provided that an Advisors obligations under
this Section 5.01 in respect of any Fund or in respect of the Receivables or Purchased Receivables
relating to any Fund shall be deemed to refer to the Funds for which such Advisor acts as
investment advisor and the Receivables and Purchased Receivables relating to such Funds) covenants
and agrees that it shall:
(a) and shall cause the Transfer Agent to, and shall use its best efforts to cause each
Selling Agent to, (i) duly observe and conform to all requirements of Applicable Law relative to
it, the conduct of its business or its properties or assets, (ii) preserve and keep in full force
and effect its corporate existence, rights, privileges and franchises, and (iii) obtain, maintain
and keep in full force and effect all Governmental Authorizations and Private Authorizations which
are necessary or appropriate to properly carry out the transactions contemplated to be performed by
it under this Agreement and the other Program Documents, except in such case where the failure to
so observe, conform to, preserve, obtain, maintain or keep in full force and effect could not give
rise to a reasonable possibility of an Adverse Effect;
(b) duly fulfill all obligations on its part to be performed under or in connection with this
Agreement and the other Facility Documents and the agreements and instruments entered into in
connection herewith or therewith and use its best efforts to cause each Company to duly fulfill and
perform its obligations under the Facility Documents, the non-performance of which gives rise to a
reasonable possibility of an Adverse Effect;
(c) promptly deliver to the Program Agent copies of any amendments or modifications to its
certificate of incorporation or by-laws, certified by one of its authorized officers;
(d) (i) promptly give written notice to the Program Agent of the occurrence of any Event of
Termination (or event which, with the passage of time or notice, or both, would constitute an Event
of Termination), the failure of any conditions precedent set forth in Section 3.02 to be fully
satisfied during the period prior to the Termination Date, or any material breach of any term or
condition of any Facility Document, which in each case relates to or is caused by it or any of the
Affiliates or the performance of any such Persons under any Facility Document, (ii) give written
notice to the Program Agent, promptly after it becomes aware thereof, of any other Event of
Termination (or event which with the passage of time, notice or both would constitute such an Event
of Termination), or the failure of any other conditions precedent set forth in Section 3.02 or any
other material breach of any terms or conditions of any Facility Documents, (iii) promptly give
written notice to the Program Agent of any litigation or proceedings with respect to it or any
Significant Affiliates of the Seller or affecting it, any Significant Affiliates of the Seller or
any of their respective assets or properties, which if adversely determined, could give rise to a
reasonable possibility of an Adverse Effect, and (iv) upon request by the Program Agent, provide
such other information concerning its and the
12
Sellers Significant Affiliates assets, financial condition or operations, as the Program
Agent may from time to time reasonably request;
(e) cause to be computed, paid and discharged when due all taxes, assessments and other
charges or levies of any Authority imposed upon it, or upon any of its income or assets, prior to
the day on which any lien could be imposed in respect thereof unless and to the extent that the
same shall be contested in good faith by appropriate proceedings and could not give rise to a
reasonable possibility of an Adverse Effect;
(f) to the extent obtained or received by it, furnish or cause to be furnished to the Program
Agent a copy of all Private Authorizations and all Governmental Authorizations obtained or made or
required to be obtained or made by it in connection with the transactions contemplated by this
Agreement, the Transfer Agreement, the Servicing Agreement and any other Facility Document to which
it is a party;
(g) the Distributor and the Seller shall annually or more frequently as the Program Agent may
request upon the occurrence of an Event of Termination (or an event which upon the passage of time
or notice, or both, would constitute an Event of Termination) and at the sole cost and expense of
the Seller (i) cause an independent nationally recognized accounting firm selected by it and
reasonably satisfactory to the Program Agent to enter its premises (and each other Person to whom
it delegates any of its duties under the Facility Documents) and examine and audit the books,
records and accounts relating to the Receivables, the Collections in respect thereto and its or
such other Persons performance under the Facility Documents, (ii) permit such accounting firm to
discuss its or such other Persons affairs, finances, accounts and performance under the Facility
Documents with its or such other Persons officers, partners, employees and accountants,
(iii) cause such accounting firm to provide the Purchaser and the Program Agent with a certified
report in respect of the foregoing, which shall be in form and scope reasonably satisfactory to the
Program Agent and the Purchaser, and (iv) authorize such accounting firm to discuss such affairs,
finances, records and accounts with representatives of the Program Agent or the Purchaser and any
Permitted Designee;
provided
,
however
, that so long as no Event of Termination (or
an event which upon the passage of time or notice, or both, would constitute an Event of
Termination) shall have occurred or be continuing, such audits shall be limited to one per year and
it shall not be obligated to reimburse the Purchaser or the Program Agent for costs or expenses of
any single audit which together with the costs and expenses of all other audits of the Distributor
or the Seller, as the case may be, under this Section 5.01(g) exceed $7,500 per annum;
(h) permit and cause each Person to which it delegates any of its duties under the Facility
Documents to permit the Purchaser, the Program Agent or any Permitted Designee to, upon reasonable
advance notice and during normal business hours, visit and inspect its and such Persons books,
records and accounts relating to the Receivables, the Collections and Related Collections in
respect thereto and its and such other Persons performance under the Facility Documents and to
discuss the foregoing with its and such other Persons officers, partners, employees and
accountants, all as often as the Purchaser, the Program Agent, any such Permitted Designee may
reasonably request, all at the cost and expense of the requesting party;
provided
,
however
, that if under the terms of any agreement with any Person to whom it delegates any
of its duties hereunder, only the Seller, such Advisor or the Distributor, as the case
13
may be, is permitted to visit and inspect such Persons books, records and accounts, it shall
at the request of the Program Agent or any Permitted Designee, exercise the rights specified in
this Section 5.01(h) on behalf of such requesting parties, as frequently as the terms of any such
agreement permit, but in no event less frequently than annually;
provided
,
further
,
however
, that so long as no Event of Termination (or event which with the passage of time,
notice or both, would constitute an Event of Termination) shall have occurred and be continuing,
such inspections by the Purchaser, the Program Agent or any Permitted Designee shall be limited to
no more than two per calendar year;
(i) promptly, at its expense, execute and deliver to the Program Agent and the Purchaser such
further instruments and documents, and take such further action as the Program Agent or the
Purchaser may from time to time reasonably request, in order to further carry out the intent and
purpose of this Agreement and the other Facility Documents and to establish and protect the rights,
interests and remedies created, or intended to be created, hereby and thereby, including, without
limitation, the execution, delivery, recordation and filing of financing statements and
continuation statements under the UCC of any applicable jurisdiction;
(j) immediately deliver to the Program Agent copies of all notices, requests, agreements,
amendments, supplements, waivers and other documents received or delivered by it under or with
respect to any of the Facility Documents or any Selling Agents Agreement to the extent that such
notices, requests, agreements, supplements, waivers and other documents relate to any matter,
change, situation, action or occurrence which gives rise to a reasonable possibility of an Adverse
Effect;
(k) in the event that, notwithstanding the Irrevocable Payment Instructions it shall receive
any Collections or Related Collections from any Company or the Transfer Agent, promptly upon its
receipt of any such Collections or Related Collections remit the same to the Demand Deposit Account
for further credit to the Collection Account and until such funds are so deposited into the Demand
Deposit Account, ensure that such amounts are not commingled with any other funds;
(l) promptly notify the Program Agent and the Purchaser of any material adverse change with
respect to its or any of the Sellers Significant Affiliates business, properties (in respect of
properties, other than in the ordinary course of business, as conducted on September 30, 2000),
condition (financial or otherwise), results of operation or prospects since September 30, 2000;
(m) promptly furnish to the Program Agent such other information as the Program Agent or the
Purchaser may reasonably request;
(n) subject to its fiduciary obligations, if any, to the Funds and by a change in applicable
law after the date of this Agreement, use its best efforts to discourage any change in the
Fundamental Investment Objectives in respect of any Fund as set forth in Schedule IV hereto, and,
in the event it is unable to use its best efforts as a consequence of its fiduciary obligations to
the Funds or by any such applicable law, it shall, prior to taking any action inconsistent with
such best efforts, or failing to take the action it could otherwise take: (i) notify the Purchaser
and the Program Agent, in writing of the nature of such change, (ii) provide certification by one
of its
14
responsible officers that such change is necessary in order to comply with such fiduciary
obligations or by such a change in applicable law, and (iii) unless waived by the Program Agent,
enter into such undertakings as the Program Agent shall request, in form, scope and substance
satisfactory to the Program Agent whereby it will hold the Program Agent and the Purchaser harmless
from any and all losses, costs, expenses and damages sustained as a consequence of any such change
in Fundamental Investment Objectives, except to the extent (A) such change is required solely by a
change in law applicable to such Fund, or (B) to the extent the Purchaser or the Program Agent, as
the case may be, is indemnified for such loss pursuant to any other provision of the Facility
Documents;
provided
,
that
notwithstanding the foregoing, changes in such
Fundamental Investment Objectives in respect of any Fund as set forth in Schedule IV hereto may be
made with the prior written consent of the Program Agent;
(o) use its best efforts to cause each Company to comply with all Applicable Law;
(p) subject to its fiduciary obligations, if any, to the Funds, use its best efforts to obtain
the approval of the Board of Trustees of each Company in respect of Shares of each Fund to:
(a) annually re-approve the Distribution Plan and the Underwriting Agreement relating to each Fund
(if necessary in order to continue payments in respect of the Purchased Receivables relating to
each such Fund) and its practices with respect thereto by each Company as of the date of this
Agreement, and (b) in the event any of the foregoing shall be terminated with respect to any such
Fund, to approve a new distribution plan and distribution agreement between the Distributor and
each Company in respect of such Fund so as to permit the continued payments in respect of the
Purchased Receivables relating to such Fund as though no such termination had occurred and in the
event that it is unable to use its best efforts as a consequence of such fiduciary obligations to
the Funds, it shall, prior to taking any action inconsistent with such best efforts, or failing to
take any action it could otherwise take: (i) notify the Purchaser and the Program Agent in writing
of the nature of such failure to use its best efforts, and (ii) provide certification by a
responsible officer of the Seller that such failure to use its best efforts is required in order to
comply with such fiduciary obligations;
(q) provide prompt written notice to the Program Agent of any action by its Board of Trustees,
or officers or the Board of Trustees of any Company, to make or propose any modification, amendment
or supplement to, or any waiver of any provisions of, or any termination of, any Distribution Plan,
any Advisory Agreement, any CDSC arrangement, any Underwriting Agreement, any Prospectus (other
than modifications to the Prospectuses which neither affect the CDSC arrangement, the Fundamental
Investment Objectives as reflected in Schedule IV hereto or otherwise give rise to a reasonable
possibility of an Adverse Effect) or the Fundamental Investment Objectives of any Company with
respect thereto, each as in effect on the date of this Agreement (or as hereafter modified,
amended, waived or supplemented with the written consent of the Program Agent), or any
modification, amendment, supplement or waiver in the amounts payable or actually being paid
thereunder in respect of the Receivables, each as in effect on the date of this Agreement, or if a
new distribution plan, advisory agreement, contingent deferred sales charge arrangement, prospectus
or underwriting agreement is proposed to be approved and entered into, provide the Program Agent
with copies of any such proposed modification, amendment, supplement or waiver, as adopted, and a
newly adopted distribution plan, contingent deferred sales charge arrangement, advisory agreement
or underwriting
15
agreement promptly after such proposal, modification, amendment, supplement, waiver or
adoption has been made;
(r) use its best efforts to keep each Irrevocable Payment Instruction in full force and
effect;
(s) take all action necessary to protect and perfect the Purchasers first priority ownership
interest in the Purchased Receivables and the Collections in respect thereof, free and clear of all
Adverse Claims;
(t) (i) cause or ensure that all information (other than information prepared by an
Unaffiliated Agent) provided in writing to the Purchaser, the Program Agent or any other Person for
purposes of or in connection with this Agreement or any other Facility Document or the transactions
contemplated hereby or thereby by it, any of its Affiliates, the Transfer Agent, each Sub-transfer
Agent, each of its agents, representatives, officers, employees, auditors or counsel (or any other
Person at its request, its agents, representatives, officers, employees, auditors or counsel) is,
and all such information hereafter provided in writing by any such Person to the Purchaser, the
Program Agent or any other Person to be true, correct and complete in all material respects on the
date such information is stated or certified and ensure that no information contains, or will
contain, any material misrepresentation or any omission to state therein matters necessary to make
the statements made therein not misleading in any material respect, and (ii) use its best efforts
to cause or ensure that all information provided in writing to the Purchaser, the Program Agent for
purposes of or in connection with this Agreement or any other Facility Document or the transactions
contemplated hereby or thereby which is prepared by each Unaffiliated Agent is, and all such
information hereafter provided in writing to the Purchaser, the Program Agent or any other Person
will be true, correct and complete in all material respects on the date such information is stated
or certified and use its best efforts to ensure that no such information contains, or will contain,
any material misrepresentation or any omission to state therein matters necessary to make the
statements made therein not misleading in any material respect;
(u) in respect of each Advisor, manage each Fund for which it acts as investment advisor in
accordance with the fundamental investment objectives and policies in respect of such Fund as
reflected in the most current Prospectus for each Fund; and
(v) cause and ensure that all actions, which the opinion of Ballard Spahr Andrews & Ingersoll,
LLP dated on or about the date hereof on certain bankruptcy matters including true sale assumes
will be taken or not taken by it, will be taken or not taken by it.
Section 5.02.
Negative Covenants of the Seller, the Distributor and each Advisor.
The Seller, the Distributor and each Advisor covenants and agrees that it shall not:
(a) permit to exist any Adverse Claims on, or otherwise attempt to transfer any interest in,
any Receivables, any Ancillary Rights in respect thereto, the Collections or Related Collections or
the Sellers Class A and C CDSC Portion or any interest in any of the foregoing;
provided
,
however
, that in the event that the Purchaser shall determine not to purchase certain
Receivables relating to Shares of any Fund or the Seller determines to sell or pledge the
16
Sellers Class A and C CDSC Portion, the Seller may transfer all or a portion of its interest
in such Receivables and the Ancillary Rights with respect thereto to another Person provided each
of the following conditions are met: (1) that such Person, the Program Agent and the Purchaser
shall have entered into a mutually satisfactory intercreditor agreement and amendment to the
Collection Agency Agreement as contemplated by Section 15(a) thereof, and (2) the Program Agent
shall have received such certificates and opinions as it may reasonably request in connection
therewith all in form, scope and substance reasonably satisfactory to the Program Agent;
(b) in respect of the Seller and the Distributor, change its jurisdiction of incorporation
from the jurisdiction specified in Section 4.02(d) or 4.03(d), as applicable, or move its principal
executive office or the place where it keeps its records concerning the Purchased Receivables from
the offices specified in Sections 4.02(d) or 4.03(d) or Schedule VII, as applicable, unless (a) it
shall have given to the Program Agent and the Purchaser not less than twenty (20) days prior
written notice of its intention to do so, clearly describing the new jurisdiction or new location
and (b) it shall have taken such action, satisfactory to the Program Agent and the Purchaser, to
maintain the title or ownership of the Purchaser in the Purchased Receivables and the Ancillary
Rights with respect thereto at all times fully perfected and in full force and effect;
(c) without the prior written consent of the Program Agent, amend, waive, terminate or
otherwise modify the terms of any Irrevocable Payment Instruction or the Transfer Agreement or take
any action inconsistent with any Irrevocable Payment Instruction or the Transfer Agreement;
provided
, that it may, without the consent of the Program Agent (but with prompt written
notice to the Program Agent), amend Schedule I to the Irrevocable Payment Instruction solely to add
an Additional Eligible Fund to such Schedule in accordance with Section 2.03;
(d) until the Program Termination Date, change its operations in a manner which could give
rise to a reasonable possibility of an Adverse Effect, without the prior written consent of the
Program Agent;
(e) reflect the Purchased Receivables or Collections in respect thereto as being owned by it
or any of its Affiliates;
(f) upon the occurrence of a Complete Termination (as defined in the Distribution Plan in
effect on the date hereof) in respect of Shares of any Fund, directly or indirectly compensate the
Distributor or any other Person for any services for which the Service Fee for such terminated Fund
were intended to compensate the Distributor;
(g) (i) cancel, terminate, amend, modify, supplement or waive any term or condition of any
Underwriting Agreement, any Distribution Plan, any Advisory Agreement, any Fundamental Investment
Objectives, or the CDSC obligations of any holders of Shares of any Fund, each as in effect on the
date hereof (or as hereafter modified, amended or supplemented with the written consent of the
Program Agent) (other than to permit Free Redemptions as contemplated by the Prospectus of such
Fund in effect on the date hereof (or as hereafter modified, amended or supplemented with the
written consent of the Program Agent)), except
17
with the prior written consent of the Program Agent;
provided
, that with respect to
the Advisory Agreements, the consent of the Program Agent shall only be required in connection with
any such amendment, modification or waiver to the extent the same gives rise to a reasonable
possibility of an Adverse Effect, (ii) take any action designed to permit any Company to do so,
(iii) undertake any actions that are inconsistent with a program to maintain each Distribution
Plan, each CDSC arrangement, any Irrevocable Payment Instruction, each Underwriting Agreement and
the practices of any Company in respect thereof, each as in effect on the date hereof (or as
hereafter modified, amended or supplemented with the written consent of the Program Agent) in full
force and effect as they exist on the date of this Agreement and to maintain good relations with
each Company and the Board of Trustees of each Company, or (iv) without limiting the generality of
the foregoing, take any action or omit to take any action (other than redemptions of Shares in the
ordinary course of business as contemplated by the Prospectus for each Fund in effect on the date
of this Agreement) that could with respect to clauses (i), (ii), (iii) or (iv) of this Section
5.02(g), result in either (A) the aggregate Sales Charge paid or payable by any Company in respect
of the sales of Shares of any Fund being less than the Maximum Aggregate Sales Charge Allowable
(including interest thereon at the Maximum Interest Allowable) which, as of the last date upon
which Receivables are purchased by the Purchaser under the Purchase Agreement, is equal to not less
than the sum of 6.25% of the total Issue Price of the Shares of such fund sold during such period,
plus interest thereon at the prime rate in effect plus one percent (1%) per annum, (B) the amount
in clause (A) above accruing less frequently than daily or being payable in installments less
frequently than monthly or in amounts which are less on the average than the daily equivalent of
.75% per annum of the average daily Net Asset Value, or (C) otherwise could give rise to a
reasonable possibility of an Adverse Effect;
(h) except as a result of a Permitted Change in Control, or as specifically consented to in
writing by the Program Agent: (i) sell or otherwise dispose of all or a substantial portion of its
assets, (ii) consolidate with or merge into any other entity, or (iii) acquire all or substantially
all of the assets of another Person, if any such actions gives rise to a reasonable possibility of
an Adverse Effect;
(i) permit the record ownership on the records of the Transfer Agent of any Share of any Fund
to be in the name of any Sub-transfer Agents street account, unless (w) such Sub-transfer Agent
for such Omnibus Shares has tracking capabilities, procedures and reporting practices sufficient to
allocate Collections and Related Collections in respect of such Omnibus Shares as contemplated by
the Allocation Procedures, (x) the Program Agent shall have approved in writing the form of the
Sub-transfer Agent Report of such Sub-transfer Agent which sets forth the methodology to be used by
such Sub-transfer Agent to allocate Shares as contemplated by the Allocation Procedures, (y) if
such Sub-transfer Agent is not a Specified Sub-transfer Agent, such Sub-transfer Agent will, no
later than the second (2
nd
) Business Day following the end of the calendar week in which
Shares held in its Omnibus Account are redeemed, remit such CDSCs to the Demand Deposit Account in
accordance with the applicable Irrevocable Payment Instruction, and (z) if such Sub-transfer Agent
is a Specified Sub-transfer Agent, such Sub-transfer Agent will, no later than the tenth
(10
th
) Business Day of the calendar month next following the calendar month in which the
Shares relating to such CDSCs were redeemed, remit all CDSCs in respect of the Omnibus Shares in
its related Omnibus Account to the Demand Deposit Account in accordance with the applicable
Irrevocable Payment Instruction;
18
Section 5.03.
Additional Covenants of the Seller.
The Seller covenants and agrees that it shall:
(a) keep proper books of record and account in accordance with its normal business practice in
which full and appropriate entries shall be made of all dealings or transactions in relation to its
business and activities and shall mark its data processing or other records, if any, so as to
clearly indicate that the Purchased Receivables and the Ancillary Rights in respect thereto have
been sold to the Purchaser;
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(b)
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furnish to the Program Agent and the Purchaser:
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(A)
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annually within 150 days after the end of each fiscal
year: (i) unaudited consolidated financial statements of the Seller
and its respective subsidiaries prepared in accordance with GAAP for
such fiscal year, (ii) audited consolidated financial statements of
AMVESCAP plc and its respective subsidiaries (including the Seller,
each Advisor and the Distributor) prepared in accordance with generally
accepted accounting principles in the United Kingdom for such fiscal
year, and (iii) unaudited balance sheets of each Advisor and the
Distributor if not included in clause (i) above, prepared in accordance
with GAAP for such fiscal year and, in any event, an unaudited income
statement and balance sheet of each Advisor and the Distributor
prepared in accordance with GAAP for such year; and
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(B)
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promptly upon preparation, copies of the semi-annual
unaudited reports and annual audited reports of each Company;
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(c) use the Purchase Prices paid to it on each Purchase Date hereunder solely for the purpose
of purchasing Receivables or for reimbursing itself for the purchase price of the Receivables
purchased under the Transfer Agreement pursuant to and in accordance with the terms of the Transfer
Agreement;
provided
, that the Seller shall be entitled to retain the profit resulting from
any difference between the purchase price paid to the Seller for the Receivables and the purchase
price paid by the Seller for the Receivables;
(d) on the second Business Day following remittance to the Collection Account of the Sellers
Class A and C CDSC Portion, notify the Collection Agent and the Program Agent in writing of the
amount thereof by telefax or electronic mail and instruct the Collection Agent to immediately remit
such amount to the Sellers Account;
(e) treat each transfer of Receivables and the Ancillary Rights with respect thereto pursuant
to this Agreement as a sale and not as a secured loan on its financial statements, books and
records and tax returns, including without limitation its United States federal income tax returns,
except to the extent such treatment is prohibited by a change in Applicable Law after the date
hereof;
19
(f) cause each other Person acting on its behalf or as its agent to keep such books, records,
accounts and other information, as Persons carrying out similar functions typically maintain, so as
to verify and document its compliance with its obligations under the Facility Documents; and
(g) not sell any Receivables to the Purchaser if, as of the Calculation Date relating to the
calendar month immediately preceding the Purchase Date upon which such Receivables are to be sold,
the Weighted Average Percentage Decline in the Net Asset Value of Shares of all Funds (adjusted for
stock splits and excluding declines in the Net Asset Value resulting from the payment of Normal
Distributions) from the end of the immediately preceding calendar month shall not be twenty-five
percent (25%) or more, unless the aggregate Net Asset Value of Shares of the Funds relating to
Purchased Receivables shall thereafter rise to a level of at least seventy-six percent (76%) of the
aggregate Net Asset Value of Shares of the Funds as of the Calculation Date immediately preceding
the Calculation Date that the condition specified in this clause (g) was not satisfied and was not
subsequently complied with.
Section 5.04.
Additional Covenants of the Distributor.
The Distributor covenants and agrees that it shall:
(a) use its best efforts to cause each Selling Agent to duly fulfill all obligations on such
Selling Agents part to be performed under or in connection with this Agreement, the Underwriting
Agreements, the Distribution Plans and the other Facility Documents, the non-performance of which
gives rise to a reasonable possibility of an Adverse Effect;
(b) keep proper books of record and account in accordance with its normal business practice in
which full and appropriate entries shall be made of all dealings or transactions in relation to its
business and activities and shall mark its data processing or other records, if any, so as to
clearly indicate that the Purchased Receivables have been sold to the Seller;
(c) promptly (i) notify the Program Agent in writing of all filings with the SEC, any report
on Form N-SAR (or successor form), any registration statement on Form N-1A (or successor form), any
prospectus, any statement of additional information or any amendment or supplement to any of the
foregoing of each Fund, all proxy statements and all other notices (out of the ordinary course) to
shareholders of any Company or any Fund and any other filings (out of the ordinary course) made by
any Company in respect of any Fund, and (ii) to the extent the same are not readily obtainable by
the Program Agent through the Securities and Exchange Commissions Electronic Data Gathering,
Analysis and Retrieval system or other public on-line sources, deliver to the Program Agent copies
of such filings and mailings; and
(d) treat each transfer of Receivables pursuant to the Transfer Agreement as a sale and not as
a secured loan on its financial statements, books and records and tax returns, including without
limitation its United States federal income tax returns, except to the extent such treatment is
prohibited by a change in Applicable Law after the date hereof;
20
(e) ensure that (A) the tracking capabilities of the Distributor, each Company and each
Transfer Agent and each Sub-transfer Agent for each Fund are sufficient to: (i) track which
Receivables constitute Purchased Receivables and the Shares in respect thereto as contemplated by
the Allocation Procedures, and (ii) to allocate Collections and Related Collections in accordance
with this Agreement (including the Allocation Procedures) and the Collection Agency Agreement,
(B) that all CDSCs are remitted to the Demand Deposit Account in accordance with the Irrevocable
Payment Instructions, and (C) the Transfer Agent in respect of each Fund is party to the
Irrevocable Payment Instruction with the Company in respect of such Fund;
(f) exercise on behalf of the Purchaser all of the rights under the Underwriting Agreements,
the Distribution Plans, each Irrevocable Payment Instruction, the Transfer Agreement and at law or
equity to cause each Company and the Transfer Agent to pay to the Demand Deposit Account for
further credit to the Collection Account all amounts due from each Company or the holders of the
Shares in respect of the Purchased Receivables in accordance with the applicable Irrevocable
Payment Instruction; (ii) assist the Servicer in investigating delinquencies in the payment of
Collections by any Company and the Transfer Agent; (iii) respond to inquiries of the Purchaser and
the Program Agent relating to the Purchased Receivables and each Companys and the Transfer Agents
performance under the Facility Documents; and (iv) assist the Servicer in enforcement of the
Purchasers rights with respect to the Purchased Receivables and the Ancillary Rights with respect
thereto;
(g) maintain its net capital at such levels as are required by Applicable Law;
(h) cause each other Person acting on its behalf or as its agent to keep such books, records,
accounts and other information, as Persons carrying out similar functions typically maintain, so as
to verify and document its compliance with its obligations under the Facility Documents; and
(i) use its best efforts to cause (a) each Sub-transfer Agent (other than a Specified
Sub-transfer Agent), no later than the second (2
nd
) Business Day following the end of
the calendar week in which Shares held in such Sub-transfer Agents Omnibus Account are redeemed,
to remit such CDSCs to the Demand Deposit Account in accordance with the applicable Irrevocable
Payment Instruction, and (b) each Specified Sub-transfer Agent, no later than the tenth
(10
th
) Business Day of the calendar month next following the calendar month in which the
Shares relating to such CDSCs were redeemed, to remit all CDSCs in respect of the Omnibus Shares in
such Sub-transfer Agents Omnibus Account to the Demand Deposit Account in accordance with the
applicable Irrevocable Payment Instruction.
ARTICLE VI
EVENTS OF TERMINATION
Section 6.01.
Events of Termination.
If any of the following events (each an Event of Termination) shall occur:
(a) the Distributor, the Seller (as Servicer or otherwise), any Advisor, the Transfer Agent,
any Sub-transfer Agent or any Company shall fail to make or cause to be made
21
in the manner and when due any payment or deposit to be made or to be caused to be made by it
under this Agreement or any of the other Facility Documents and such failure shall continue for
three (3) Business Days; or
(b) the Distributor, the Seller (as Servicer or otherwise), any Advisor, the Transfer Agent or
any Sub-transfer Agent shall fail to perform or observe any covenant or agreement on its part to be
performed or observed under any Facility Document (other than those described in clause (a) of this
Section 6.01) and such failure shall continue for three (3) Business Days;
provided
, that
in respect of any Sub-transfer Agent such failure gives rise to a reasonable possibility of an
Adverse Effect; or
(c) (i) any representation or warranty made or deemed made by the Distributor, the Seller (as
Servicer or otherwise), any Advisor (or any of their respective officers) under or in connection
with any Facility Document shall have been incorrect in any material respect when made or deemed
made, or (ii) any Purchaser Report, Transfer Agent Report, Sub-transfer Agent Report (including
without limitation any Transfer Agent Report or Sub-transfer Agent Report prepared by any
Unaffiliated Agent) or any other statement, certificate or report delivered by or on behalf of the
Distributor or the Seller (as Servicer or otherwise) in connection with this Agreement or any other
Facility Document, shall have been false, incorrect or misleading in any material respect when
delivered; or
(d) the Seller, any Advisor or any of their Significant Affiliates shall fail to pay, any
amount in respect of any of its Debt in excess of $10,000,000, when the same becomes due and
payable, or there shall occur any default by the Seller, any Advisor or any such Significant
Affiliate which results or could result in any of its Debt in excess of $10,000,000 being declared
due and payable prior to its stated maturity date or due date; or
(e) (i) the Purchaser shall cease to have a 100% undivided ownership interest in any Purchased
Receivable, the Ancillary Rights with respect thereto and the Collections in respect thereto, free
and clear of any Adverse Claim, or (ii) any purchase of Receivables and the Collections in respect
thereto by the Seller pursuant to the Transfer Agreement or the Purchaser pursuant to this
Agreement shall for any reason not constitute a True Sale thereof; or
(f) (i) the Seller, any Advisor or any of their Significant Affiliates shall generally not pay
its Debts as such Debts become due, or shall admit in writing its inability to pay its Debts
generally, or shall make a general assignment for the benefit of creditors or in the case of the
Distributor, the Distributor shall otherwise become insolvent within the meaning of SIPA; or
(ii) any proceeding shall be instituted by or against the Seller, any Advisor or any such
Significant Affiliate seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or
its Debts under any Law relating to bankruptcy, insolvency or reorganization or relief of debtors,
or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or
other similar official for it or for any substantial part of its property and, in the case of any
such proceeding instituted against it (but not instituted by it), either such proceeding shall
remain undismissed or unstayed for a period of fifteen (15) days; or (iii) any of the actions
sought in any proceeding described in (ii) above (including an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official for, it or for any
substantial part of its
22
property) shall occur; or (iv) the Seller, any Advisor or any such Significant Affiliate shall
take any action to authorize any of the actions set forth above in this Section 6.01(f); or
(g) there shall have occurred any material adverse change in (i) the financial condition of
the Seller, the Distributor, any Advisor or each Company since September 30, 2000; or (ii) the
Sellers, the Distributors or each Companys operations as they relate to their respective
abilities to perform their obligations under any Facility Document, or which gives rise to a
reasonable possibility of an Adverse Effect; or
(h) any Underwriting Agreement, any Advisory Agreement, any Distribution Plan, any Fundamental
Investment Objectives, the CDSC arrangements applicable to holders of Shares of any Fund or the
terms of any Conversion Feature in respect of any Share of any Fund, each as in effect on the date
of this Agreement (or as hereafter modified, amended, waived or supplemented with the written
consent of the Program Agent), shall be amended, waived, supplemented or modified, in a manner or
by any means (including a change in Applicable Law) which, in the reasonable opinion of the Program
Agent, could give rise to a reasonable possibility of an Adverse Effect, including, but not limited
to (a) any change which could result in the aggregate Sales Charge paid or payable by the
applicable Company in respect of the Shares of such Fund being less than the Maximum Aggregate
Sales Charge Allowable as of the date hereof or (b) any change to or modification or waiver of the
CDSC arrangements or Conversion Feature arrangements in respect of Shares of such Fund as in effect
on the date of this Agreement (or as hereafter modified, amended or supplemented with the written
consent of the Program Agent), or (c) any change in the Fundamental Investment Objectives as
reflected in Schedule IV hereto in respect of Shares of any Fund; or
(i) any Underwriting Agreement, any Distribution Plan, any Advisory Agreement or any CDSC
arrangement applicable to holders of Shares of any Fund, in each case as in effect on the date of
this Agreement (or as hereafter modified, amended, waived or supplemented with the written consent
of the Program Agent), shall be terminated, no longer enforceable, or be otherwise ineffective, in
whole or in part, for any reason, whether voluntarily or involuntarily, including without
limitation by any Authority or as a result of any change in Applicable Law, unless (x) in respect
of the applicable Fund a replacement Underwriting Agreement, Distribution Plan or Advisory
Agreement, as the case may be, has become effective and which has terms, in the reasonable opinion
of the Program Agent at least as favorable to the Distributor, the applicable Advisor and the
Purchaser, as the Underwriting Agreement, the Distribution Plan or the Advisory Agreement, as the
case may be, each as in effect on the date of this Agreement (or as hereafter modified, amended or
supplemented with the written consent of the Program Agent), including, without limitation, in
respect of the timing and amount payable in respect of the Purchased Receivables relating to such
Fund as described in clause (h) above, and (y) no reasonable possibility of an Adverse Effect shall
arise as a result thereof; or
(j) except as a result of a Permitted Change in Control, the Seller shall cease to own
directly or indirectly a majority of the issued and outstanding stock and a majority of the voting
securities of the Distributor; or
23
(k) the Securities Investor Protection Corporation, established under SIPA, shall have applied
for a protective decree against the Distributor and the Distributor shall have failed to obtain a
dismissal of such application within thirty (30) days after such application; or
(l) the SEC shall have revoked the broker/dealer registration of the Distributor; or
(m) the Distributor shall have failed to meet the minimum capital requirements prescribed from
time to time by Rule 15c3-1 under the Exchange Act and such failure is not cured within thirty (30)
days after such failure, it being understood that a determination by a relevant Authority shall not
be deemed conclusive evidence of such failure so long as the Distributor is diligently contesting
such determination in good faith by appropriate proceedings; or
(n) the SEC or any other Authority shall have modified or terminated or shall propose to
modify, revoke, repeal or terminate Rule 12b-1 of the Investment Company Act or the Conduct Rules
in a manner which gives rise to a reasonable possibility of an Adverse Effect; or
(o) the Distributor shall cease to be registered as a broker/dealer under the Exchange Act and
with the NASD or any Advisor shall cease to be registered as an investment advisor under the
Investment Advisers Act; or
(p) any Company, any Transfer Agent or any Sub-transfer Agent shall fail to make or cause to
be made in a timely manner any payment or deposit required to be made under any Distribution Plan,
Underwriting Agreement or any Irrevocable Payment Instruction, or any Company or the Transfer Agent
shall fail to withhold from redemption proceeds paid to any holder of a Share any CDSCs required to
be withheld and remit such funds to the Demand Deposit Account for further credit to the Collection
Account in accordance with any Irrevocable Payment Instruction and such failure shall continue for
three (3) Business Days, or any such Person shall be prevented by any Authority or by any
Applicable Law from doing so or any Company, the Transfer Agent or Sub-transfer Agent shall so
assert in writing; or
(q) each Company shall be required by any Authority or any Applicable Law to suspend the sale
of Shares of any Fund under circumstances that gives rise to a reasonable possibility of an Adverse
Effect; or
(r) each Company shall cease to regularly offer Shares of any Fund to the public under
circumstances that gives rise to a reasonable possibility of an Adverse Effect; or
(s) except as a result of a Permitted Change in Control, either AAI or IFG, as the case may be
(or any successor advisor resulting from a Permitted Change in Control) shall cease to act as the
investment advisor of any Fund under the applicable Advisory Agreement; or
(t) except as a result of a Permitted Change in Control or as specifically consented to in
writing by the Program Agent, the Seller, any Advisor or the Distributor, as the case may be, shall
(i) sell or otherwise dispose of all or a substantial portion of its assets, (ii) consolidate with
or merge into any other entity, or (iii) acquire all or substantially all of the
24
assets of another Person, unless the assets acquired are less than twenty-five percent (25%)
of the assets of the Seller, such Advisor or the Distributor, as the case may be;
then in respect of any occurrence of any such event, the Program Agent may in respect of each such
occurrence, by notice to the Seller to be given within ninety (90) days of the Program Agents
receipt of notice of occurrence of each such event, declare the Termination Date to have occurred
(in which case the Termination Date shall be deemed to have occurred);
provided
, that, upon
the occurrence of any event (without any requirement for the giving of notice) described in
subsection (f) or (k) of this Section 6.01, the Termination Date shall be deemed automatically to
have occurred. Notwithstanding the foregoing, if an Event of Termination shall have occurred as a
result of a breach of Section 4.01(k) or Section 5.01(t) and such breach relates solely to the
information prepared by a Sub-transfer Agent that constitutes an Unaffiliated Agent (the Affected
Sub-transfer Agent), then (i) the Purchaser and the Program Agent, at the request of the Seller,
hereby agree to negotiate in good faith to amend this Agreement, the Collection Agency Agreement
and the Allocation Procedures to the extent necessary so as to permit the continued purchase of
Receivables which do not relate to such Affected Sub-transfer Agent, and (ii) the Program Agent
agrees that it shall not declare the Termination Date to have occurred as a result of any such
breach if either (A) the amendments referred to in clause (i) above have been agreed upon by the
Program Agent and the Seller within thirty (30) days after the Seller has knowledge of any such
breach, or (B) the Seller shall have demonstrated to the reasonable satisfaction of the Program
Agent (to be evidenced by written confirmation from the Program Agent), within thirty (30) days
after the Seller has knowledge of any such breach, that the systems, procedures and/or reporting
practices of the Affected Sub-transfer Agent have been modified so as to avoid further breaches
relating to the information to be prepared by such Affected Sub-transfer Agent.
ARTICLE VII
THE PROGRAM AGENT
Section 7.01.
Authorization and Action.
The Purchaser hereby irrevocably appoints and authorizes the Program Agent to take such action
as agent on its behalf and to exercise such powers under this Agreement, and the other Facility
Documents as are delegated to the Program Agent by the terms hereof and thereof, together with such
powers as are reasonably incidental thereto. As to any matters not expressly provided for by this
Agreement or the other Facility Documents, the Program Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of the Purchaser;
provided
,
however
, that the Program Agent shall not be required to take any action
which exposes the Program Agent to personal liability or which is contrary to this Agreement, the
other Program Documents or Applicable Law.
Section 7.02.
Program Agents Reliance, Etc.
Neither the Program Agent nor any of its directors, officers, agents or employees shall be
liable for any action taken or omitted to be taken by it or them under or in connection with this
Agreement or any of the other Program Documents, except for its or their own gross
25
negligence or willful misconduct. Without limiting the generality of the foregoing, the
Program Agent: (i) may consult with legal counsel (including counsel for the Seller, the
Distributor or any Advisor), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by it in accordance
with the advice of such counsel, accountants or experts; (ii) makes no warranty or representation
to the Purchaser and shall not be responsible to the Purchaser for any statements, warranties or
representations (whether written or oral) made in or in connection with this Agreement or the other
Program Documents; (iii) shall not have any duty to ascertain or to inquire as to the performance
or observance of any of the terms, covenants or conditions of this Agreement or the other Program
Documents on the part of the Seller (as Servicer or otherwise), the Distributor or any Advisor or
to inspect the property (including the books and records) of the Seller, the Distributor or any
Advisor; (iv) shall not be responsible to the Purchaser for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement, the other Program Documents or
any other instrument or document furnished pursuant hereto or thereto; and (v) shall incur no
liability under or in respect of this Agreement or any other Program Document by acting upon any
notice, consent, certificate or other instrument or writing (which may be by telecopier, telegram,
cable or telex or as otherwise specified in Section 9.03) believed by it to be genuine and signed
or sent by the proper party or parties.
Section 7.03.
Indemnification.
The Purchaser agrees to indemnify the Program Agent (to the extent not reimbursed by or on
behalf of the Seller) from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against the Program Agent in any way
relating to or arising out of this Agreement or any other Program Document or any action taken or
omitted by the Program Agent under this Agreement or any other Program Document;
provided
,
that
the Purchaser shall not be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the gross negligence or willful misconduct of the Program Agent. Without limitation of the
foregoing, the Purchaser agrees to reimburse the Program Agent promptly upon demand for any
out-of-pocket expenses (including counsel fees) incurred by the Program Agent in connection with
the preparation, execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) or legal advice in respect of rights
or responsibilities under this Agreement or the other Program Documents, to the extent that the
Program Agent is not reimbursed for such expenses by or on behalf of the Seller.
Section 7.04.
Rights of the Program Agent.
The Seller hereby agrees that the Program Agent is hereby authorized to deliver an Allocation
Notice to the Collection Agent (i) upon the occurrence of any Event of Termination (or event which
with the passage of time or notice, or both, would constitute an Event of Termination) which
relates to the Seller, the Distributor, any Advisor or any Significant Affiliate, or (ii) at any
time that the Program Agent in its sole discretion believes that the event contemplated in Section
6.01(f) could occur in respect of the Seller, the Distributor, any Advisor or any of their
Significant Affiliates.
26
ARTICLE VIII
Section 8.01.
Undertakings; Payment of Damages.
The Seller hereby irrevocably and unconditionally agrees for the benefit of (i) the Purchaser
and the Program Agent, and (ii) in respect of the obligations of the Distributor, the Transfer
Agent and each Advisor under the Facility Documents to cause the Distributor, the Transfer Agent
and each Advisor to perform and punctually and completely carry out each and every covenant of the
Distributor, such Advisor and the Transfer Agent under this Agreement, the Transfer Agreement, the
Servicing Agreement and each other Facility Document in accordance with the terms thereof.
Section 8.02.
Agreement Not Affected.
The Purchaser and the Program Agent may proceed to exercise any right or remedy which it might
have pursuant to this Article VIII without regard to any actions or omissions of the Purchaser, the
Program Agent or any other Person. The validity of this Article VIII shall not be affected by any
action or inaction which may be taken under or in respect of any Program Document. The Purchaser
and the Program Agent at its option may proceed in the first instance against the Seller to obtain
a remedy under any Program Document in the amount and in the manner set forth in such Program
Document, without being obliged to resort first to any claim or action against the Distributor, any
Advisor or the Transfer Agent.
Section 8.03.
Waiver of Notice; No Offset; No Subrogation.
The Seller hereby waives any and all notices or demands to which it may otherwise be entitled
in connection with the pursuit of any remedy hereunder, under any other Facility Document or, to
the extent permitted under Applicable Law;
provided
, that this sentence shall not
constitute a waiver on behalf of the Distributor, any Advisor or the Transfer Agent of any notice
or demand to which the Distributor, any Advisor or the Transfer Agent is entitled under the
Facility Documents. The obligations of the Seller under this Article VIII shall not be subject to
any defense, counterclaim or right of offset which the Seller, the Distributor, any Advisor or any
other Person has or may have against the Purchaser, the Program Agent or any other Person, whether
in respect of this Agreement, any other Facility Document, any Purchased Receivables or otherwise,
but nothing herein shall limit the right of the Seller to pursue any claim in a separate action.
ARTICLE IX
MISCELLANEOUS
Section 9.01.
No Waiver; Modifications in Writing.
No failure or delay on the part of the Program Agent or the Purchaser exercising any right,
power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. The remedies provided for herein are cumulative and
are not exclusive of any remedies that may be available to the Program Agent and the Purchaser, at
law or in equity. No amendment, modification, supplement, termination or
27
waiver of this Agreement shall be effective unless the same shall be in writing and signed by
each of the parties hereto. Any waiver of any provision of this Agreement, and any consent to any
departure by any party to this Agreement from the terms of any provision of this Agreement, shall
be effective only in the specific instance and for the specific purpose for which given. No notice
to or demand on any party to this Agreement in any case shall entitle the Seller, any Advisor or
the Distributor to any other or further notice or demand in similar or other circumstances.
Section 9.02.
Payment.
Unless otherwise provided herein, whenever any payment to be made hereunder shall be due on a
non-Business Day, such payment shall be made on the next succeeding Business Day. All amounts
owing and payable by the Seller, any Advisor or the Distributor to the Purchaser or the Program
Agent under this Agreement shall be paid in immediately available funds without counterclaim,
setoff, deduction, defense, abatement, suspension or deferment, but nothing herein shall limit the
right of the Seller, any Advisor or the Distributor to pursue any claim in a separate action. Each
of the Seller, any Advisor and the Distributor hereby agrees to pay interest on any amounts payable
by it under this Agreement, which shall not be paid in full when due, for the period commencing on
the due date thereof until, but not including, the date the same is paid in full at the
Post-Default Rate. For purposes of calculating the Post-Default Rate Interest, any amount received
by or on behalf of the Purchaser or the Program Agent after 3:00 p.m. (New York City time) shall be
deemed to have been received on the next succeeding Business Day.
Section 9.03.
Notices, Etc.
(a) Except as expressly provided in this Agreement, all notices, demands, instructions and
other communications required or permitted to be given to or made upon any party hereto shall be in
writing and shall be personally delivered or sent by registered, certified or express mail, postage
prepaid, or by prepaid telegram (with messenger delivery specified in the case of a telegram), or
by telecopier, or by prepaid courier service. Unless otherwise specified in a notice sent or
delivered in accordance with the foregoing provisions of this Section 9.03, notices, demands,
instructions and other communications in writing shall be given to or made upon the respective
parties hereto at their respective addresses (or to their respective telecopier numbers) indicated
below:
If to the Purchaser:
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Citibank, N.A.
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Global Securitized Markets
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388 Greenwich Street, 19
th
Floor
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New York, New York 10013
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Attention: Mr. Joseph Diamente, B Share Servicing
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Telephone No.: (212) 816-0497
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Facsimile No.: (212) 816-0336
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If to the Program Agent:
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Citicorp North America, Inc.
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Global Securitized Markets
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388 Greenwich Street, 19
th
Floor
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New York, New York 10013
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Attention: Mr. Joseph Diamente, B Share Servicing
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Telephone No.: (212) 816-0497
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Facsimile No.: (212) 816-0336
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With a copy to:
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Citicorp North America, Inc.
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Global Securitized Markets
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450 Mamaroneck Avenue
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Harrison, New York 10528
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Attention: B Share Servicing
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Telephone No.: (914) 899-7137
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Facsimile No.: (914) 899-7903
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If to the Seller:
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A I M Management Group Inc.
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11 Greenway Plaza
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Suite 100
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Houston, Texas 77046
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Attention: Controller
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Telephone No.: (713) 626-1919
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Facsimile No.: (713) 871-9348
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With a copy to:
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11 Greenway Plaza
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Suite 100
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Houston, Texas 77046
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Attention: General Counsel
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Telephone No.: (713) 626-1919
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Facsimile No.: (713) 993-9185
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If to the Distributor:
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A I M Distributors, Inc.
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11 Greenway Plaza
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Suite 100
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Houston, Texas 77046
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Attention: General Counsel
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Telephone No.: (713) 626-1919
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Facsimile No.: (713) 993-9185
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With a copy to:
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A I M Distributors, Inc.
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11 Greenway Plaza
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Suite 100
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Houston, Texas 77046
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Attention: Controller
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Telephone No.: (713) 626-1919
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Facsimile No.: (713) 871-9348
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If to AAI:
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A I M Advisors, Inc.
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11 Greenway Plaza
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Suite 100
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Houston, TX 77046
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Attention: Controller
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Telephone No.: (713) 626-1919
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Facsimile No.: (713) 871-9348
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With a copy to:
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11 Greenway Plaza
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Suite 100
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Houston, TX 77046
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Attention: Controller
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Telephone No.: (713) 626-1919
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Facsimile No.: (713) 871-9348
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If to IFG:
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INVESCO Funds Group, Inc.
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7800 East Union Avenue
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Mail Stop 201
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Denver, Colorado 80237
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Attention: Ronald L. Grooms
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Telephone No.: (303) 930-6267
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Facsimile No.: (303) 930-6307
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With a copy to:
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A I M Management Group Inc.
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11 Greenway Plaza
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Suite 100
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Houston, Texas 77046
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Attention: Controller
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Telephone No.: (713) 626-1919
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Facsimile No.: (713) 871-9348
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A I M Management Group Inc.
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11 Greenway Plaza
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Suite 100
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30
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Houston, Texas 77046
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Attention: General Counsel
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Telephone No.: (713) 626-1919
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Facsimile No.: (713) 993-9185
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(b) All notices, demands, consents, requests and other communications to be sent or delivered
hereunder shall be deemed to be given or become effective for all purposes of this Agreement as
follows: (a) when delivered in person, when given; (b) when sent by mail, when received by the
Person to whom it is given, unless it is mailed by registered, certified or express mail, in which
case it shall be deemed given or effective on the earlier of the date of receipt or refusal; and
(c) when sent by telegram, telecopy or other form of rapid transmission shall be deemed to be given
or effective when receipt of such transmission is acknowledged.
Section 9.04.
Costs and Expenses; Indemnification.
(a) Regardless of whether or not any of the transactions contemplated hereby are actually
consummated, the Seller agrees to promptly pay on demand (i) all reasonable costs and expenses in
connection with the administration and any modification, amendment and waiver of this Agreement,
the Transfer Agreement, the Servicing Agreement and the other Facility Documents,
provided
,
however
, that the Program Agent agrees to pay the reasonable costs associated with any
amendment or modification of the Facility Documents, if such amendment or modification is made upon
the request of the Program Agent, unless such amendment or modification is required or is requested
as a result of a breach by, or by a change in circumstances relating to, the Seller, the
Distributor, any Advisor, any of their Affiliates, any Transfer Agent, any Sub-transfer Agent, any
Company or any Fund or as a result of any Event of Termination (or event which with the giving of
notice or the lapse of time, or both, would constitute an Event of Termination), (ii) all costs and
expenses incurred in connection with the enforcement of, or preservation of, any rights under this
Agreement, the Transfer Agreement, the Servicing Agreement and the other Facility Documents,
(iii) subject to Section 5.01(g), all actuarial fees, UCC filing fees and periodic auditing
expenses in connection with the transactions contemplated by this Agreement, the Transfer
Agreement, the Servicing Agreement and the other Facility Documents, and (iv) all reasonable fees
and disbursements of counsel in connection with the foregoing.
(b)
Indemnification
. The Seller agrees to indemnify and hold harmless the Purchaser
(including without limitation any Transferee), the Program Agent, and each of their respective
Affiliates and the respective officers, directors, employees, agents, advisors of, and any Person
controlling any of, the foregoing (each, an Indemnified Party) from and against any and all
damages, losses, liabilities, expenses, obligations, penalties, actions, suits, judgments and
disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees
and disbursements of counsel) (collectively the Liabilities) that are incurred by or asserted or
awarded against any Indemnified Party, in each case arising out of or in connection with or by
reason of (and regardless of whether or not any such transactions are consummated) any of the
transactions contemplated by the Facility Documents, including without limitation, any one or more
of following:
31
(i) the execution, delivery, enforcement, performance, administration of, or otherwise
arising out of or incurred in connection with this Agreement, the Transfer Agreement, the
Servicing Agreement, any Irrevocable Payment Instruction or any other Facility Document;
(ii) preparation for a defense of, any investigation, litigation or proceeding arising
out of this Agreement or any other Facility Documents or the transactions contemplated
hereby or thereby ;
provided
,
however
, that the Sellers obligation under
this Section 9.04(b)(ii) to indemnify any Indemnified Party in respect of any Liability
described in this clause (ii) shall be limited, solely in respect of costs and expenses
incurred in the preparation of any such defense during the period prior to the date that any
service of process (whether as a party, as a witness or otherwise) is made on such
Indemnified Party (or any other Person with custody over the Purchased Receivables, the
Collections or Proceeds thereof) in respect thereof, to $100,000 in respect of such costs
and expenses of such Indemnified Party relating to any single investigation, litigation or
proceeding and to $200,000 in respect of all such costs and expenses of such Indemnified
Party, incurred during any twelve month period, relating to all to such investigations,
litigations or proceedings;
(iii) any failure or alleged (by Persons other than the Indemnified Party) failure by
the Distributor, the Seller (as Servicer or otherwise) or any Advisor to perform any of its
obligations, covenants, or agreement contained in any Facility Documents to which it is a
party promptly and fully;
(iv) any representation or warranty made or deemed made by the Distributor, the Seller
(as Servicer or otherwise) or any Advisor, contained in this Agreement or any Facility
Documents or in any certificate, written statement or report (including without limitation
each Purchase Report, each Transfer Agent Report and each Sub-transfer Agent Report)
delivered by or on behalf of any such Person in connection herewith or therewith is, or is
alleged (by Persons other than the Indemnified Party) to have been false or misleading in
any respect when made or any information (including without limitation any Sub-transfer
Agent Report or any Transfer Agent Report) prepared or provided by the Seller, the
Distributor, any Advisor, any of their Affiliates, any Sub-transfer Agent, Transfer Agent or
by any other Person (including, without limitation, any Unaffiliated Agent) to the Purchaser
or the Program Agent in writing for purposes of or in connection with any Facility Document
shall fail to be true, correct and complete in all material respects on the date such
information is stated or certified or any such information shall contain any material
misrepresentation or any omission to state therein matters necessary to make the statements
made therein not misleading in any material respect;
(v) any failure by the Distributor, the Seller (as Servicer or otherwise) or any
Advisor to comply promptly and fully with any Applicable Law or any contractual obligation
binding upon it;
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(vi) any failure of any transfer of Receivables by the Distributor to the Seller under
the Transfer Agreement or any failure of any transfer of Receivables by the Seller to the
initial Purchaser under this Agreement to constitute a True Sale;
(vii) any failure to vest in the Purchaser a first priority perfected ownership
interest in the Purchased Receivables, the Ancillary Rights with respect thereto and the
Collections related thereto free and clear of all Adverse Claims or any commingling of
Collections with any other funds;
(viii) any action or omission, not expressly required or contemplated to occur by the
Facility Documents by the Distributor, the Seller (as Servicer or otherwise) or any Advisor,
which has the effect of reducing or impairing the rights of the Purchaser or the Program
Agent with respect to the Purchased Receivables and the Collections related thereto or under
any Facility Document or which otherwise gives rise to an Adverse Effect;
(ix) any failure by the Distributor, the Seller (as Servicer or otherwise) or any
Advisor, to make or cause to be made in the manner and when due any payment or deposit
required to be paid by such party pursuant to any Facility Document or any failure of any
Sub-transfer Agent to remit all CDSCs in respect of Omnibus Shares in its related Omnibus
Account to the Demand Deposit Account as and when specified in the Irrevocable Payment
Instruction;
(x) any failure of any Distribution Plan, any Irrevocable Payment Instruction, any
Underwriting Agreement or any other Facility Document to comply with any Applicable Law,
unless such failure results from the failure of the Program Agent to, at the written request
of the Seller (which written request shall specify that such amendment is required for such
document to comply with Applicable Law), consent to an amendment to any such document which
could not give rise to a reasonable possibility of an Adverse Effect and which is necessary
in order for such document to comply with the Applicable Law;
(xi) the execution, delivery, enforcement, performance, administration of, any Selling
Agents Agreement, the failure or alleged failure (by Persons other than the Indemnified
Party) of any Selling Agent to perform its obligations under any Selling Agents Agreement
to which it is a party, any representation or warranty made by any Selling Agent is, or is
alleged (by Persons other than the Indemnified Party) to have been false or misleading in
any respect when made or deemed made, the failure of any Selling Agent to comply promptly
and fully with Applicable Law, or any other action or omission by any Selling Agent not
expressly required or contemplated to occur by the Program Documents;
(xii) if on any Purchase Date any condition precedent set forth in Article III of this
Agreement shall not have been fully satisfied;
(xiii) any proceeding by or against the Distributor, the Seller (as Servicer or
otherwise) or any Advisor seeking to adjudicate such Person, bankrupt or insolvent, or
33
seeking liquidation, winding up, administration, reorganization, arrangement,
adjustment, protection, relief, or composition of such Person or the debts of such Person
under any Law relating to bankruptcy, insolvency, liquidation, administration,
reorganization or relief of debtors or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian, administrator, liquidator, or other similar
official for such Person or for a substantial part of such Persons property;
(xiv) any change in Applicable Law after May 2, 1995 which causes any of the
representations and warranties of the Distributor or the Seller (as Servicer or otherwise)
set forth herein or in any Facility Document to no longer be true and correct as though such
representation or warranty had been made on the date of such change in Applicable Law or
which alters the obligations of the Distributor, the Seller (as Servicer or otherwise), any
Advisor or any Company as set forth in the Facility Documents other than in each case (i) a
change in Law applicable on an industry wide basis resulting in a Complete Termination of
the Distribution Plan of any Fund, or (ii) a reduction in the Maximum Aggregate Sales Charge
Allowable or in the annual limitation on the amount payable by any Company in respect of the
Sales Charge in respect of the Receivables relating to any Fund resulting solely from a
change in Law applicable on an industry wide basis;
(xv) the adoption by any Company or any Fund of a Liquidation Plan;
(xvi) any amendment to the Prospectus in respect of a Fund in effect on the date hereof
which changes the computation or timing of the CDSC or the rights of the Distributor in
respect thereof;
(xvii) Free Redemptions in excess of the Annual Redemption Threshold, it being
understood that the amount payable in respect of this clause from and after the first day
upon which the Annual Redemption Threshold has been met, shall be an amount equal to the
CDSCs that would have been payable upon the redemption of each Share relating to a Purchased
Receivable had each such excess redemption not constituted a Free Redemption and shall be
paid in arrears on each Monthly Settlement Date);
(xviii) any Adverse Claim in respect of the Receivables or the Collections; and
(xix) the Sellers Class A and C CDSC Portion being remitted to the Demand Deposit
Account or the Collection Account, including without limitation, the Sellers failure to
properly identify such amounts.
provided
,
however
, that the Seller shall not be required to indemnify any
Indemnified Party in respect of any Liability to the extent such Liability: (I) is found in a
final, non-appealable judgment by a court of competent jurisdiction or is agreed in writing by the
Indemnified Party to have resulted directly and primarily from one or more of the following
(A) such Indemnified Partys gross negligence or willful misconduct, or (B) the Purchased
Receivables proving to be uncollectible or, for the avoidance of doubt, being payable in an amount
less than expected as a result of changes in the Net Asset Value of the Shares, except to the
extent that such
34
uncollectibility or reduction in the amount payable is attributable to what would not have occurred
but for any one or more of the events described in clauses (i) through (xix); (II) constitutes a
liability arising out of a Take-out Transaction, except to the extent such Liability is
attributable to or would not have occurred but for any one or more of the events described in
clauses (i) through (xix) above; or (III) constitutes consequential damages, it being understood
that the limitation set forth in clause (III) of this Section 9.04(b) is not intended to preclude
any Transferee from being the beneficiary of, or from having the same rights to indemnification
under this Section 9.04(b) that such Transferee would have as Purchaser if it were the signatory to
this Agreement and the other Facility Documents to which the Purchaser is a party.
(c) Without prejudice to the survival of any other agreement of the Seller hereunder, the
agreement and obligations of the Seller contained in this Section 9.04 shall survive the
termination of this Agreement.
Section 9.05.
Taxes.
(a) Any and all payments by the Distributor, the Seller, any Advisor, the Transfer Agent or
any Company under this Agreement, the Transfer Agreement, the Purchase Agreement, any Irrevocable
Payment Instruction or any other Facility Document shall be made free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto,
excluding
, taxes imposed on the
recipients income, and franchise taxes imposed on the recipient, by (i) the United States federal
government, (ii) the jurisdiction under the laws of which the recipient is organized or any
political subdivision thereof, (iii) by the jurisdiction in which is located the principal
executive office of the recipient or any political subdivision thereof or (iv) by any other
jurisdiction which asserts the authority to impose such tax on the basis of contacts the recipient
maintains with such jurisdiction other than the contacts arising out of the transactions
contemplated hereby (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as Taxes). If the Distributor, the
Seller, any Advisor, the Transfer Agent or any Company shall be required by Law to deduct any Taxes
from or in respect of any sum payable hereunder or under any other Facility Document, (i) the sum
payable hereunder or thereunder shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable under this
Section 9.05) the recipient receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Distributor, the Seller, any Advisor, the Transfer Agent or any
Company shall make such deductions and (iii) the Seller shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with Applicable Law.
(b) In addition, the Seller agrees to pay any present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies which arise from any transfer of
Receivables in connection herewith or from the execution, delivery or registration of, or otherwise
with respect to, this Agreement, the Transfer Agreement or any other Facility Document other than
any such Tax imposed in respect of a Take-out Transaction (hereinafter referred to as Other
Taxes).
35
(c) The Seller will indemnify the Program Agent and the Purchaser for the full amount of Taxes
or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction
on amounts payable under this Section 9.05) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted, so long as there is a reasonable basis for the assertion of such
Taxes or Other Taxes. This indemnification shall be made within 30 days from the date the Program
Agent or the Purchaser makes written demand therefor to the Seller.
(d) Within thirty (30) days after the date of any payment of Taxes, the Seller will furnish to
the Purchaser and the Program Agent the original or a certified copy of a receipt evidencing
payment thereof.
(e) Unless the Seller, the Distributor or the applicable Advisor, as the case may be, shall
have assumed responsibility for contesting a Tax or Other Tax described in paragraph (c) of this
Section 9.05 as provided in the next sentence, the Purchaser may, but shall have no obligation to
contest, settle or compromise such Tax or Other Tax. The Seller, the Distributor or the applicable
Advisor, as the case may be, may pursue, at its sole cost and expense, such lawful rights as are
available at law to contest any Tax or Other Tax asserted against the Purchaser or the Program
Agent provided: (i) the Seller, the Distributor or the applicable Advisor, as the case may be, has
assumed responsibility for such contest and the Seller has conceded in writing its responsibility
to indemnify the Purchaser or the Program Agent, as the case may be, in accordance with this
Section, for the full amount of such Tax or Other Tax; (ii) such contest is conducted in a manner
which does not result in a Lien on the Receivables and if the manner of contest does not defer the
obligation to pay the Tax or Other Tax, the Seller shall pay such Tax or Other Tax when due,
subject to the right to recover such Tax or Other Tax if the contest is successful, (iii) to the
extent not covered by Section 9.04(b), the Seller shall have provided to the Purchaser or the
Program Agent, as the case may be, such undertakings as the Purchaser or the Program Agent, as the
case may be, shall request, in form and substance satisfactory to the Purchaser, or the Program
Agent, as the case may be, whereby the Seller agrees to hold the Purchaser or the Program Agent, as
the case may be, harmless from any and all liabilities, costs and expenses which may arise as a
consequence of such contest; (iv) the Seller shall have furnished the Purchaser or the Program
Agent, as the case may be, with an opinion, in form and scope reasonably satisfactory to the
Purchaser or the Program Agent, as the case may be, of counsel reasonably satisfactory to the
Purchaser or the Program Agent, as the case may be, that there is a meritorious basis for such
contest; (v) the contest of such Tax or Other Tax may be conducted in a manner which does not
affect the liability of the Purchaser or the Program Agent, as the case may be, for any tax not
indemnified by Seller; (vi) the contest of such Tax or Other Tax can be separated from any contest
of any other tax in respect of which the Seller has not indemnified Purchaser or the Program Agent,
as the case may be, without prejudicing the Purchasers or the Program Agents, as the case may be,
ability to deal with or otherwise contest such other liability; and (vii) the Purchaser or the
Program Agent, as the case may be, has not waived its right to indemnification by the Seller in
respect of such Tax or Other Tax. The Seller shall keep the Purchaser or the Program Agent, as the
case may be, fully advised on a current basis concerning any such contest, and, without limiting
the foregoing: (a) the Seller shall give the Purchaser or the Program Agent, as the case may be,
reasonable notice of and a reasonable opportunity to be present in person or by counsel at any
proceeding in connection
36
therewith; (b) the Seller shall give the Purchaser or the Program Agent, as the case may be,
notice of any proposed filings or papers to be served or filed by the Seller in connection with any
such proceedings and a reasonable opportunity to comment upon them; and (c) the Seller shall
promptly supply the Purchaser or the Program Agent, as the case may be, with copies of any filings
or papers served upon the Seller in connection with such proceedings; it being understood that the
Purchaser or the Program Agent, as the case may be, shall bear its own costs incurred in connection
with any participation by the Purchaser or the Program Agent, as the case may be, or its counsel in
the contest as contemplated by this sentence.
(f) In the event the Seller shall pay a Tax or Other Tax pursuant to this Section 9.05 and all
or a portion of such Tax or Other Tax previously paid by Seller is later refunded by the applicable
Taxing Authority the recipient of such refund shall pay to the Seller the portion of such refund
which relates to the amount previously paid by the Seller.
(g) Without prejudice to the survival of any other agreement of the Seller hereunder, the
agreements and obligations of the Seller contained in this Section 9.05 shall survive the
termination of this Agreement.
Section 9.06.
Execution in Counterparts.
This Agreement may be executed in any number of counterparts and by different parties hereto
on separate counterparts, each of which counterparts, when so executed and delivered, shall be
deemed to be an original and all of which counterparts, taken together, shall constitute but one
and the same Agreement.
Section 9.07.
Binding Effect; Assignment.
This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and
their respective successors and assigns. Except as a result of a Permitted Change in Control,
neither the Seller, the Distributor nor any Advisor shall assign its rights or obligations
hereunder or in connection herewith or any interest herein (voluntarily, or by operation of law or
otherwise) without the Program Agents and the Purchasers prior written consent. This Agreement
and the Program Agents and the Purchasers rights herein (including without limitation in respect
of the Purchased Receivables, the Collections and the Ancillary Rights with respect thereto) shall
be assignable, in whole or in part, by the Purchaser and the Program Agent and their respective
successors and assigns;
provided
,
however
, that in connection with any proposed
Take-out Transaction, prior to distributing to potential investors any offering materials which
contain information describing the Seller, any Advisor, the Distributor or any of their respective
Affiliates, the Program Agent shall give the Seller a reasonable opportunity to review and comment
upon such portion of such materials. Unless the Purchaser reasonably determines that disclosure is
required in order to comply with Law applicable to such Take-out Transaction, the Purchaser shall
not make any disclosure which the Seller reasonably identifies in its comments pursuant to the
preceding sentence as material, non-public information concerning the Seller or any of its
Affiliates, the release of which would have a material adverse consequence to the Seller or any of
its Affiliates (the Prohibited Financial Information);
provided
,
however
, that in
connection with the initial offering of any securities in a Take-out Transaction involving any
Purchased Receivables, the Purchaser shall not make any disclosure which the Seller
37
reasonably identifies as Prohibited Financial Information. Subject to Section 9.15, each of
the Seller, the Advisors and the Distributor hereby consents to the Purchaser and the Program Agent
entering into the Take-out Transactions.
Section 9.08.
Governing Law; Submission to Jurisdiction.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW
YORK AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID
STATE WITHOUT REGARD TO ITS CONFLICTS OF LAWS PROVISIONS.
(b) The Seller, each Advisor and the Distributor hereby irrevocably submits itself to the
non-exclusive jurisdiction of the courts of the State of New York and to the non-exclusive
jurisdiction of any Federal Court of the United States located in the southern district of New
York, for the purposes of any suit, action or other proceeding arising out of this Agreement, the
Servicing Agreement, the Collection Agency Agreement or any of the transactions contemplated hereby
or thereby.
Section 9.09.
Severability of Provisions.
Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 9.10.
Confidentiality.
Unless otherwise required by Applicable Law, the Seller, each Advisor and the Distributor
agree to use commercially reasonable efforts to maintain the confidentiality of the Facility
Documents (and all drafts hereof and thereof) and the transactions contemplated thereby other than
the Transfer Agents Agreement, the Underwriting Agreements, the Advisory Agreements, the
Distribution Plan and the Prospectuses in communications with third parties and otherwise;
provided
, that such documents and the transactions contemplated thereby may be disclosed
(i) to third parties to the extent such disclosure is consented to in writing by the Program Agent
(which consent shall not be unreasonably withheld) and such disclosure is made pursuant to a
written confidentiality agreement in form and substance substantially identical to this Section
9.10, and (ii) the officers, partners, directors and employees, legal counsel and auditors of the
Seller, the Advisors and the Distributor.
Notwithstanding anything in this Section 9.10 to the contrary, each party to this Agreement
and each of its officers, directors, partners, employees, legal counsel and auditors may disclose
to any and all Persons, without limitation of any kind, the U.S. tax treatment and U.S. tax
structure of the facility contemplated by the Facility Documents and all materials of any kind
(including opinions or other tax analyses) that are provided to it, relating to such U.S. tax
treatment and U.S. tax structure of the facility, other than any information for which
non-disclosure is reasonably necessary in order to comply with applicable securities laws.
38
Section 9.11.
Intent of Agreement.
It is the intention of this Agreement that each purchase of Receivables hereunder and the
Ancillary Rights with respect thereto shall convey to the Purchaser an undivided 100% ownership
interest in such Purchased Receivables, the Collections in respect thereto and the Ancillary Rights
with respect thereto on the Purchase Date therefor and that such transactions shall constitute a
True Sale and not a secured loan. If, notwithstanding such intention, any conveyance of
Receivables and the Collections and the Ancillary Rights with respect thereto from the Seller to
the Purchaser shall ever be recharacterized as a secured loan and not a sale, it is the intention
of this Agreement that this Agreement shall constitute a security agreement under Applicable Law,
and that the Seller shall be deemed to have granted to the Purchaser a duly perfected first
priority security interest in all of the Sellers right, title and interest in, to and under such
Purchased Receivables, the Collections and the Ancillary Rights in respect thereto free and clear
of any Adverse Claim.
Section 9.12.
Liability to any Company.
No obligation or liability to any Company, the Seller, any Advisor, the Distributor, any
shareholder of any Fund or any Person contracting with or related to any Company is intended to be
assumed by the Program Agent or the Purchaser under or as a result of this Agreement or the other
Program Documents and the transactions contemplated hereby and thereby and, to the maximum extent
permitted under provisions of Law, the Program Agent and the Purchaser expressly disclaim any such
assumption. The Seller shall indemnify, defend and hold harmless the Program Agent and the
Purchaser from any loss, liability or expense incurred as a result of any claim that any such
obligation or liability has been so assumed.
Section 9.13.
Merger.
The Facility Documents taken as a whole incorporate the entire agreement between the parties
thereto concerning the subject matter thereof. The Facility Documents supersede any prior
agreements among the parties relating to the subject matter thereof.
Section 9.14.
Further Acts.
Each party agrees that at any time, and from time to time, it will do all such things and
execute and deliver all such instruments, assignments, other documents and assurances, as such
other party or its counsel reasonably deems necessary or desirable in order to carry out the
express intent, purpose and conditions of this Agreement and the other Facility Documents and the
transactions contemplated hereby and thereby, and without limiting the generality of the foregoing,
to the extent permitted by Applicable Law, upon the Program Agents or the Purchasers written
request from time to time, the Seller, each Advisor and the Distributor shall make, execute,
acknowledge and deliver and file and record in the proper filing and recording places all such
instruments, and take all such actions, as the Program Agent or the Purchaser may reasonably deem
necessary or advisable for assuring or confirming to the Purchaser its rights and interest in and
to, and remedies in respect of, the Purchased Receivables, the Ancillary Rights and the Collections
related thereto.
39
Section 9.15.
Assignee Rights; Etc.
(a) The Seller, each Advisor and the Distributor acknowledge and agree that any Person which
purchases or otherwise acquires any interest in any Purchased Receivables or the Ancillary Rights
in respect thereof (or the right to receive any Collections with respect thereto) in a Take-out
Transaction (each such Person, a Transferee), (and in the case of indemnities, their respective
Affiliates and their officers, directors, employees and agents) shall each, to the extent of such
Transferees interest, be a beneficiary of the representations, warranties, indemnities, covenants,
agreements and undertakings of the Seller, each Advisor and the Distributor under this Agreement
and the other Facility Documents to which it is a party;
provided
, that such rights of the
Transferees in a Take-out Transaction may be enforced on behalf of such Transferees only by the
Master Servicer for the related Master Trust. The Seller, each Advisor and the Distributor agree
to execute and deliver such instruments and documents and shall take all such actions as the
Program Agent, the Purchaser or any Master Trust shall reasonably deem necessary in order to permit
the Purchaser to convey any portion of its right, title and interest in, to or under the Purchased
Receivables or the Ancillary Rights and Collections in respect thereof to any Transferee and to
confer upon any such Transferee the rights and privileges in and to the Purchased Receivables and
the Ancillary Rights in respect thereof to which such Transferee has an interest and under the
Facility Documents to the extent of such transfer and assignment. Without limiting the foregoing,
if any Program Document is amended, waived or modified and the Program Agent has not in connection
with such amendment, waiver or modification required that a new True Sale Opinion be delivered in
connection therewith, and subsequent to the effective date of such amendment, modification or
waiver the Program Agent has notified the Seller and the Distributor that S&P, Moodys or any other
nationally recognized rating agency has requested that the Program Agent obtain a new True Sale
Opinion, each of the Seller and the Distributor agrees to, as promptly as possible (and in any
event within two weeks after receipt of such notice) use its best efforts to cause its outside
counsel to deliver a new True Sale Opinion to the Purchaser and the Program Agent, which is in
form, scope and substance reasonably satisfactory to the Program Agent. In addition, the Seller
acknowledges and agrees that the effectiveness of any extension of the Termination Date is
conditioned upon the Seller and the Distributor delivering to the Purchaser and the Program Agent a
True Sale Opinion dated on or about the effective date of such extension, in form, scope and
substance reasonably satisfactory to the Program Agent;
provided
,
however
, that the
delivery of such new True Sale Opinion shall not be required as a condition to any such extension
if the Program Agent and the Purchaser shall have received a True Sale Opinion dated within 365
days of the effective date of such extension, which is in form, scope and substance reasonably
satisfactory to the Program Agent. Notwithstanding anything in this Section 9.15 to the contrary,
no Transferee shall be deemed to have assumed any of the obligations or liabilities of the Seller
or the Distributor under this Agreement or any other Program Document. No such transfer to a
Transferee shall alter the obligations of the Seller, any Advisor or the Distributor hereunder.
(b) Subject to the other requirements set forth in Section 9.07, the Program Agent agrees that
any written offering memorandum or circular used in connection with any Take-out Transaction
involving Purchased Receivables which contains information concerning the Seller or the Distributor
shall (i) incorporate language substantially in the form of Schedule VI hereto, and (ii) provide
that the securities which are the subject of such Take-out Transaction will be offered only to
institutional accredited investors (as defined in Rule 501(a)
40
under the Securities Act), to a qualified institutional buyer within the meaning of Rule 144A
under the Securities Act and/or to any Person in a transaction exempt from registration under the
Securities Act. The Program Agent also agrees that each Take-out Transaction involving Purchased
Receivables shall be structured in a manner so that the securities which are the subject of such
Take-out Transaction are to be offered and sold in a transaction exempt from registration under the
Securities Act.
The Seller, each Advisor and the Distributor acknowledge that under the documentation to be
entered into in connection with Take-out Transactions involving the Purchased Receivables (the
Take-out Documents) the holders of the securities issued in connection with such Take-out
Transaction may have the right to consent to the Purchaser and the Program Agent taking certain
actions and consenting to certain amendments, modifications or waivers under the Program Documents
(collectively, the Actions). The Program Agent agrees that without the prior written consent of
the Seller (which consent shall not be unreasonably withheld or delayed) the Take-out Documents
relating to any Take-out Transaction shall not provide that more than the holders which in the
aggregate have a 51% interest in the securities of each class issued in connection with such
Take-out Transaction (the Holders) be required to consent to the Purchaser or the Program Agent
taking any Action;
provided
,
however
, that with respect to any Action which could
affect the amount or timing of Collections relating to Purchased Receivables or which amend or
modify the Allocation Procedures, the Take-out Documents may provide that the consent of the
holders which in the aggregate have a 66-2/3% interest in the securities of any class issued in
connection with such Take-out Transaction be required for the Purchaser or the Program Agent to
take any such Action;
provided
,
further
, that no Holders (other than Citibank and
Citicorp North America, Inc.) will be entitled to require that the Program Agent declare the
Termination Date to have occurred following any Event of Termination.
Section 9.16.
Specific Performance; Other Rights and Remedies.
The parties hereto recognize that certain of their rights under this Agreement and the other
Facility Documents are unique and, accordingly, the parties hereto shall, in addition to such other
remedies as may be available to any of them at law or in equity or under this Agreement and the
other Facility Documents, have the right to enforce their rights hereunder and thereunder by
actions for injunctive permitted relief and specific performance to the extent permitted by
Applicable Law. The rights and remedies of the Program Agent and the Purchaser under this
Agreement and the other Facility Documents are cumulative and are not in lieu of, but are in
addition to, any other rights and remedies which the Program Agent and the Purchaser may have under
or by virtue of any Applicable Law, or in equity, or any other agreement or obligations to which
the Program Agent and the Purchaser is a party. The rights and remedies of the Program Agent and
the Purchaser under this Agreement and the other Facility Documents may be exercised from time to
time and as often as such exercise is deemed expedient. Without limiting the generality of the
foregoing, the Seller, each Advisor and the Distributor acknowledge and agree that it will be
impossible to measure in money the damage to the Program Agent or the Purchaser in the event of a
breach of any of the terms and provisions of this Agreement or any other Program Document, and
that, in the event of any such breach, the Program Agent and the Purchaser may not have an adequate
remedy at Law, although the foregoing shall not constitute a waiver of any of the Program Agents
or the Purchasers rights,
41
powers, privileges and remedies against or in respect of a breaching party, any collateral or
any other Person or thing under this Agreement, any other Facility Document or Applicable Law. It
is therefore agreed that each of the Program Agent and the Purchaser, in addition to all other such
rights, powers, privileges and remedies that it may have, shall be entitled to injunctive relief,
specific performance or such other equitable relief as it may request to exercise or otherwise
enforce any of the terms of those provisions and to enjoin or otherwise restrain any act prohibited
thereby, and the Seller, each Advisor and the Distributor agree that they shall not argue and
hereby waive any defense that there is an adequate remedy available at Law.
42
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their
respective officers thereunto duly authorized, as of the date first above written.
|
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CITIBANK, N.A.
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By:
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Name:
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Title:
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CITICORP NORTH AMERICA, INC.,
as Program Agent
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By:
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Name:
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Title:
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A I M MANAGEMENT GROUP INC.,
as Seller
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By:
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Name:
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Title:
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A I M DISTRIBUTORS, INC.,
as Distributor
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By:
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Name:
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Title:
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A I M ADVISORS, INC.,
as Advisor
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By:
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Name:
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Title:
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INVESCO FUNDS GROUP, INC.,
as Advisor
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By:
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Name:
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Title:
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SCHEDULE I
FORM OF PURCHASER REPORT
SCHEDULE II
COMPANY
: AIM FUNDS GROUP
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FUNDS
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SHARES
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1.
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AIM Balanced Fund
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Class B
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2.
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AIM Global Utilities Fund
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Class B
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3.
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AIM Global Value Fund
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Class B
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4.
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AIM European Small Company Fund
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Class B
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5.
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AIM International Emerging Growth Fund
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Class B
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6.
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AIM New Technology Fund
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Class B
|
7.
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AIM Small Cap Equity Fund
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Class B
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8.
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AIM Basic Balanced Fund
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Class B
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9.
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AIM Mid Cap Basic Value Fund
|
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Class B
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10.
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AIM Premier Equity Fund
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Class B
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11.
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AIM Premier Equity II Fund
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Class B
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12.
|
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AIM Select Equity Fund
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Class B
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COMPANY
: AIM INTERNATIONAL FUNDS, INC.
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FUNDS
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SHARES
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1.
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AIM Global Aggressive Growth Fund
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Class B
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2.
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AIM Global Growth Fund
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Class B
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3.
|
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AIM Asia Pacific Growth Fund
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|
Class B
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4.
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AIM European Growth Fund
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Class B
|
5.
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AIM International Growth Fund
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|
Class B
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COMPANY
: AIM ADVISOR FUNDS
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|
|
|
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FUNDS
|
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SHARES
|
1.
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AIM International Core Equity Fund
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Class B
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2.
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AIM Real Estate Fund
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Class B
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COMPANY
: AIM EQUITY FUNDS
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FUNDS
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SHARES
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1.
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AIM Charter Fund
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Class B
|
2.
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AIM Weingarten Fund
|
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Class B
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3.
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AIM Blue Chip Fund
|
|
Class B
|
4.
|
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AIM Capital Development Fund
|
|
Class B
|
5.
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AIM Constellation Fund
|
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Class B
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6.
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AIM Aggressive Growth Fund
|
|
Class B
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7.
|
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AIM Dent Demographic Trends Fund
|
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Class B
|
8.
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AIM Large Cap Growth Fund
|
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Class B
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9.
|
|
AIM Emerging Growth Fund
|
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Class B
|
10.
|
|
AIM Large Cap Basic Value Fund
|
|
Class B
|
11.
|
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AIM Mid Cap Growth Fund
|
|
Class B
|
12.
|
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AIM Basic Value II Fund
|
|
Class B
|
13.
|
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AIM Core Strategies Fund
|
|
Class B
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14.
|
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AIM Diversified Dividend Fund
|
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Class B
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15.
|
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AIM U.S. Growth Fund
|
|
Class B
|
2
COMPANY
: AIM SPECIAL OPPORTUNITIES FUNDS
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FUNDS
|
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SHARES
|
1.
|
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AIM Opportunities I Fund
|
|
Class B
|
2.
|
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AIM Opportunities II Fund
|
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Class B
|
3.
|
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AIM Opportunities III Fund
|
|
Class B
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COMPANY
: AIM TAX-EXEMPT FUNDS
|
|
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FUNDS
|
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SHARES
|
1.
|
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AIM High Income Municipal Fund
|
|
Class B
|
COMPANY
: AIM INVESTMENT FUNDS
|
|
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FUNDS
|
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SHARES
|
1.
|
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AIM Developing Markets Fund
|
|
Class B
|
2.
|
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AIM Global Energy Fund
|
|
Class B
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3.
|
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AIM Global Health Care Fund
|
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Class B
|
4.
|
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AIM Global Science & Technology Fund
|
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Class B
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5.
|
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AIM Libra Fund
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Class B
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6.
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AIM Global Financial Services Fund
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Class B
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COMPANY
: AIM GROWTH SERIES
|
|
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FUNDS
|
|
SHARES
|
1.
|
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AIM Basic Value Fund
|
|
Class B
|
2.
|
|
AIM Mid Cap Core Equity Fund
|
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Class B
|
3.
|
|
AIM Small Cap Growth Fund
|
|
Class B
|
3
COMPANY
: AIM SERIES TRUST
|
|
|
|
|
|
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FUNDS
|
|
SHARES
|
1.
|
|
AIM Global Trends Fund
|
|
Class B
|
COMPANY
: AIM INVESTMENT SECURITIES FUNDS
|
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FUNDS
|
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SHARES
|
1.
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AIM High Yield Fund
|
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Class B
|
2.
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AIM Income Fund
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Class B
|
3.
|
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AIM Municipal Bond Fund
|
|
Class B
|
4.
|
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AIM Money Market Fund
|
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Class B
|
5.
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AIM Intermediate Government Fund
|
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Class B
|
6.
|
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AIM Total Return Bond Fund
|
|
Class B
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COMPANY
: INVESCO COUNSELOR SERIES FUNDS, INC.
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FUNDS
|
|
SHARES
|
1.
|
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INVESCO Advantage Fund
|
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Class B
|
2.
|
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INVESCO Advantage Global Health Sciences Fund
|
|
Class B
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COMPANY
: INVESCO BOND FUNDS, INC.
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FUNDS
|
|
SHARES
|
1.
|
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INVESCO High Yield Fund
|
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Class B
|
2.
|
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INVESCO Select Income Fund
|
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Class B
|
3.
|
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INVESCO Tax-Free Bond Fund
|
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Class B
|
4.
|
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INVESCO U.S. Government Securities Fund
|
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Class B
|
4
COMPANY
: INVESCO COMBINATION STOCK & BOND FUNDS, INC.
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FUNDS
|
|
SHARES
|
1.
|
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INVESCO Balanced Fund
|
|
Class B
|
2.
|
|
INVESCO Core Equity Fund
|
|
Class B
|
3.
|
|
INVESCO Total Return Fund
|
|
Class B
|
COMPANY
: INVESCO INTERNATIONAL FUNDS, INC.
|
|
|
|
|
|
|
FUNDS
|
|
SHARES
|
1.
|
|
INVESCO European Fund
|
|
Class B
|
2.
|
|
INVESCO International Blue Chip Value Fund
|
|
Class B
|
COMPANY
: INVESCO MANAGER SERIES FUNDS, INC.
|
|
|
|
|
|
|
FUNDS
|
|
SHARES
|
1.
|
|
INVESCO Multi-Sector Fund
|
|
Class B
|
COMPANY
: INVESCO MONEY MARKET FUNDS, INC.
|
|
|
|
|
|
|
FUNDS
|
|
SHARES
|
1.
|
|
INVESCO Cash Reserves Fund
|
|
Class B
|
COMPANY
: INVESCO SECTOR FUNDS, INC.
|
|
|
|
|
|
|
FUNDS
|
|
SHARES
|
1.
|
|
INVESCO Energy Fund
|
|
Class B
|
2.
|
|
INVESCO Financial Services Fund
|
|
Class B
|
3.
|
|
INVESCO Gold & Precious Metals Fund
|
|
Class B
|
4.
|
|
INVESCO Health Sciences Fund
|
|
Class B
|
5.
|
|
INVESCO Leisure Fund
|
|
Class B
|
6.
|
|
INVESCO Real Estate Opportunity Fund
|
|
Class B
|
5
|
|
|
|
|
|
|
FUNDS
|
|
SHARES
|
7.
|
|
INVESCO Technology Fund
|
|
Class B
|
8.
|
|
INVESCO Telecommunications Fund
|
|
Class B
|
9.
|
|
INVESCO Utilities Fund
|
|
Class B
|
COMPANY
: INVESCO STOCK FUNDS, INC.
|
|
|
|
|
|
|
FUNDS
|
|
SHARES
|
1.
|
|
INVESCO Dynamics Fund
|
|
Class B
|
2.
|
|
INVESCO Growth Fund
|
|
Class B
|
3.
|
|
INVESCO Growth & Income Fund
|
|
Class B
|
4.
|
|
INVESCO Small Company Growth Fund
|
|
Class B
|
5.
|
|
INVESCO Value Equity Fund
|
|
Class B
|
6.
|
|
INVESCO Mid-Cap Growth Fund
|
|
Class B
|
6
SCHEDULE III
CDSC Schedule
relating to all Commission Shares other
than the Floating Rate Fund Exchange Shares and Excluded Shares
|
|
|
Years from
|
|
|
Fund Share Purchase
|
|
CDSC Rate
|
0-1
|
|
5.0%
|
1-2
|
|
4.0
|
2-3
|
|
3.0
|
3-4
|
|
3.0
|
4-5
|
|
2.0
|
5-6
|
|
1.0
|
6+
|
|
0.0
|
CDSC Schedule
relating to all Commission Shares which
constitute Floating Rate Fund Exchange Shares and Excluded Shares
|
|
|
|
|
|
|
Contingent
|
Years from date
|
|
Deferred
|
first issued by a Fund
|
|
Sales Charge
|
First
|
|
|
3.0
|
%
|
Second
|
|
|
2.5
|
|
Third
|
|
|
2.0
|
|
Fourth
|
|
|
1.0
|
|
Fifth and following
|
|
|
0.0
|
|
SCHEDULE IV
FUNDAMENTAL INVESTMENT
OBJECTIVES AND POLICIES
SCHEDULE V
FORM OF LEGEND
NEITHER ANY [DISTRIBUTOR], ANY [ADVISOR], ANY [FUND] NOR ANY OF THEIR RESPECTIVE
AFFILIATES WILL RECEIVE ANY PORTION OF THE PROCEEDS FROM THE SALE OF THE
[SECURITIES]. NEITHER ANY [DISTRIBUTOR], ANY [ADVISOR], ANY [FUND] NOR ANY OF
THEIR RESPECTIVE AFFILIATES IS RESPONSIBLE FOR THE ACCURACY OR COMPLETENESS OF THE
INFORMATION CONTAINED IN THIS [MEMORANDUM].
SCHEDULE VI
Permitted Change in Control
(A) In connection with such Change in Control relating to the Seller:
(i) either (A) the Advisors and the Distributor shall each remain
investment advisors and principal distributor, as the case may be, for the
Funds or (B) if another Person shall be retained to replace any Advisor or
the Distributor to act as investment advisor or principal distributor, as
the case may be, for the Funds, such Person shall (x) meet the requirements
of (iii) below with reference to the expertise, experience and capacity
applicable to the function it undertakes to perform and (y) have agreed, in
respect of periods from and after its retention, to be bound by the
undertakings, agreements and obligations of the Advisors or the Distributor,
as the case may be, under the Program Documents and shall have confirmed its
representations and warranties as an Advisor or as the Distributor, as the
case may be;
(ii) ownership of at least 51% of the voting securities of the
Distributor is retained by, or transferred, to a Person who will act as
Seller under the Facility Documents after such Change in Control (the
Immediate Parent) and each Advisor shall be an Affiliate of such Immediate
Parent;
(iii) the Immediate Parent, together with its affiliated consolidated
subsidiaries in the aggregate, have financial resources and, together with
the investment advisor or the principal distributor of the Funds (if either
is not an Affiliate of the Immediate Parent), mutual fund management,
distribution and investment advisory expertise, experience and capacity
immediately after the Change in Control substantially equal to, or better
than, the lesser of (i) the financial resources and mutual fund management,
distribution and investment advisory expertise, experience and capacity of
the Person who was the assignee or successor to the Seller immediately prior
to such change in control (the Existing Parent), together with its
Affiliates and the Existing Advisor (as defined below in Part C) or Existing
Distributor (as defined below in Part B) if either was not then an Affiliate
of the Immediate Parent, immediately prior to the Change in Control, or
(ii) the financial resources and investment advisory expertise, experience
and capacity of the Seller, together with its Affiliates in the aggregate,
as of June 30, 2003;
(iv) the Immediate Parent shall have agreed to be (or if the Existing
Parent, shall remain) bound by covenants identical to those of the Existing
Parent under the Purchase Agreement and the other Program
Documents, (including the undertaking set forth in Article VIII of the
Purchase Agreement in respect of each Person serving as investment advisor
and principal underwriter to the Funds) in respect of periods after the
Change in Control and, shall have affirmed the representations and
warranties of the Existing Parent under the Purchase Agreement and the Other
Program Documents; and
(v) a majority of the Board of Trustees of each Fund, including a
majority who are not Interested Persons (as defined by Section 2(a)(19) of
the Investment Company Act) shall have either (i) reapproved the
Underwriting Agreement with the Distributor and the Advisory Agreement with
the applicable Advisor (or, in either case, approved a substitute agreement
substantially identical thereto so as not to give rise to a reasonable
possibility of an Adverse Effect) in light of such Change in Control and
such agreements shall remain in full force and effect or (ii) if in
connection with such Change in Control a new distributor has become the
principal underwriter for the Funds and/or a new investment advisor has
become the investment advisor for the Funds, shall have approved
substantially identical underwriting agreements and/or advisory agreements,
as the case may be, between the Funds and such replacement distributor or
advisor, as the case may be, so as not to give rise to a reasonable
possibility of an Adverse Effect.
(B) In connection with such Change in Control relating to the Distributor:
(i) the assignee is a corporation at least 51% of the outstanding voting
securities of which is owned directly or indirectly by the Seller or by an Immediate
Parent resulting from a Change in Control permitted by this Part B and the Seller or
Immediate Parent, as the case may be, shall covenant or confirm that the Sellers
covenants and agreements in the Purchase Agreement (including the undertaking set
forth in Article VIII of the Purchase Agreement as to the Distributors performance
under the Program Documents) are in full force and effect;
(ii) the assignee shall have the mutual fund distribution expertise, experience
and capacity immediately after the effective date of such assignment substantially
equal to, or better than, the lesser of (i) the mutual fund distribution expertise,
experience and capacity of the Person who was the distributor immediately prior to the
effective date of such assignment (the Existing Distributor), or (ii) the mutual
fund distribution expertise, experience and capacity of the Distributor, as of
June 30, 2003;
(iii) the assignee shall have affirmed the representations of the Distributor
under the Program Documents and shall have agreed to be bound by undertakings and
agreements substantially identical to those of the Distributor in the Program
Documents in respect of periods after the assignment; and
2
(iv) a majority of the Board of Trustees of the Funds, including a majority who
are not Interested Persons (as defined by Section 2(a)(19) of the Investment Company
Act) shall have approved Underwriting Agreements with such assignee on substantially
identical terms to those in effect immediately prior to such assignment so as not to
give rise to a reasonable possibility of an Adverse Effect and such agreements shall
be in full force.
(C) In connection with such Change in Control relating to an Advisor:
(i) the assignee is a corporation at least 51% of the outstanding voting
securities of which is owned directly or indirectly by AMVESCAP plc or by an
Immediate Parent resulting from a Change in Control permitted by this Part C and the
Seller or Immediate Parent, as the case may be, shall covenant or confirm that the
Sellers covenants and agreements in the Program Documents (including the
undertaking set forth in Article VIII of the Purchase Agreement as to the Advisors
performance under the Program Documents) are in full force and effect;
(ii) the assignee shall have the mutual fund management and investment advisory
expertise, experience and capacity immediately after the effective date of such
assignment substantially equal to, or better than, the lesser of (i) the mutual fund
management and investment advisory expertise, experience and capacity of the Person
who was the predecessor advisor (the Existing Advisor) immediately prior to the
effective date of such assignment or (ii) the mutual fund management and investment
advisory expertise, experience and capacity of the Advisors, as of June 30, 2003;
(iii) the assignee shall have affirmed its representations and warranties as an
Advisor under the Program Documents and shall have agreed to be bound by
undertakings and agreements substantially identical to those of the Advisors in the
Program Documents in respect of periods after the assignment; and
(iv) a majority of the Board of Trustees of the Funds, including a majority who
are not Interested Persons (as defined by Section 2(a)(19) of the Investment
Company Act) shall have approved an Advisory Agreement with such assignee on
substantially identical terms to those in effect immediately prior to such
assignment so as not to give rise to a reasonable possibility of an Adverse Effect
and such agreements shall remain in full force.
3
SCHEDULE VII
LOCATION OF RECORDS
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
EXHIBIT A
PURCHASE NOTICE
A I M MANAGEMENT GROUP INC.
11 Greenway Plaza
Suite 100Houston, Texas 77046
Citicorp North America, Inc.,
as Program Agent
388 Greenwich Street, 19
th
Floor
New York, New York 10013
Attention: B Share Servicing
Citicorp North America, Inc.
U.S. Securitization
450 Mamaroneck Avenue
Harrison, New York 10528
Attention: B Share Servicing
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Re:
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Third Amended and Restated Purchase and Sale Agreement
dated as of August 18, 2003 (as from time to
time amended, the Purchase Agreement) among A I M
Management Group Inc., A I M Distributors, Inc.,
A I M Advisors, Inc., INVESCO Funds Group, Inc., Citibank, N.A.
and Citicorp North America, Inc., as Program Agent
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Pursuant to Section 2.02 of the above-referenced Purchase Agreement, you are hereby notified
that on ___, ___ (the Purchase Date), the undersigned proposes, subject to the terms
and conditions set forth in the Purchase Agreement, to sell to Citibank, N.A. certain Receivables
relating to each of the Funds, as set forth on Schedule I attached hereto. The Sale Cutoff Dates
and the Purchase Prices for such Receivables are set forth on Schedule I attached hereto. [The
date of the first issuance of Shares of each Fund to which the purchase on the initial Purchase
Date relates is ___, ___.]
1
Capitalized terms used herein unless otherwise
defined herein shall have the meanings assigned to such terms in the Purchase Agreement.
The undersigned certify that the conditions precedent set forth in Section 3.02 of the
Purchase Agreement have been satisfied.
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A I M MANAGEMENT GROUP INC.
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By:
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Authorized
Signatory
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1.
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Applicable to the first Purchase of Receivables relating to such Fund under the Purchase
Agreement.
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Purchase Period for each Fund
Sale Cutoff Date for each Fund
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Total Issue Price
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of Shares Related
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Name
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to Receivables
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Purchase
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of Fund
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to be Purchased
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Amount ($)
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$
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$
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$
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$
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$
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$
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$
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$
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EXHIBIT B-1
A I M DISTRIBUTORS, INC.
Certificate
(Pursuant to Section 3.01(d) of the
Third Amended and Restated Purchase and Sale Agreement)
I, the undersigned
[
Secretary
] [
Assistant Secretary
]
of A I M Distributors, Inc., a Delaware
corporation (the Company), DO HEREBY CERTIFY THAT:
1. This Certificate is furnished pursuant to Section 3.01(d) of that certain Third Amended and
Restated Purchase and Sale Agreement dated as of August 18, 2003 (said Purchase and Sale Agreement,
as in effect on the date of this Certificate, being herein called the Purchase Agreement) among
the Company, A I M Management Group Inc., A I M Advisors, Inc., INVESCO Funds Group, Inc.,
Citibank, N.A. and Citicorp North America, Inc., as Program Agent. Unless otherwise defined
herein, capitalized terms used in this Certificate shall have the meanings assigned to those terms
in the Purchase Agreement.
2. Attached hereto as Annex A is a copy of the Certificate of Incorporation of the Company as
in effect on the date hereof, certified by the Secretary of State of Delaware.
3. Attached hereto as Annex B is a true and correct copy of the By-laws of the Company as in
effect on the date hereof.
4. Attached hereto as Annex C is a true and correct copy of resolutions duly adopted by
unanimous consent of the Board of Directors of the Company on
___, 200 ___(___,
2003 in respect of the Transfer Agreement) which resolutions have not been revoked, modified,
amended or rescinded and are still in full force and effect, and the Purchase Agreement, the
Transfer Agreement and each Irrevocable Payment Instruction are in substantially the forms of those
documents submitted to, and approved by, the Board of Directors of the Company.
5. The below-named persons have been duly elected and have duly qualified as, and at all times
since
(to and including the date hereof) have been, officers of the Company,
holding the respective offices below set opposite their names, and the signatures below set
opposite their names are their genuine signatures:
WITNESS
my hand as of this ___ day of ___, 200___.
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By:
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[
Secretary
][
Assistant Secretary
]
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A I M Distributors, Inc.
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I, the undersigned
[
President
] [
Vice President
]
of the Company, DO HEREBY CERTIFY that:
1.
___ is the duly elected and qualified
[
Secretary
] [
Assistant Secretary
]
of
the Company and the signature above is
[
his
] [
her
]
genuine signature.
2. The Purchase Agreement and each other Program Document to which the Company is a party is
in full force and effect on the date hereof.
3. The representations and warranties on the part of the Company contained in the Purchase
Agreement and the other Program Documents to which the Company is a party are true and correct at
and as of the date hereof as though made on and as of the date hereof.
WITNESS
my hand as of this ___ day of
, 200___.
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By:
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[
President
] [
Vice President
]
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A I M Distributors, Inc.
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EXHIBIT B-2
A I M MANAGEMENT GROUP INC.
Certificate
(Pursuant to Section 3.01(d) of the
Third Amended and Restated Purchase and Sale Agreement)
I, the undersigned
[
Secretary
] [
Assistant Secretary
]
of A
I M MANAGEMENT GROUP INC., a
Delaware corporation (the Company), DO HEREBY CERTIFY THAT:
1. This Certificate is furnished pursuant to Section 3.01(d) of that certain Third Amended and
Restated Purchase and Sale Agreement dated as of August 18, 2003 (said agreement, as in effect on
the date of this Certificate, being herein called the Purchase Agreement) among the Company,
A I M Distributors, Inc., A I M Advisors, Inc., INVESCO Funds Group, Inc., Citibank, N.A. and
Citicorp North America, Inc. Unless otherwise defined herein, capitalized terms used in this
Certificate shall have the meanings assigned to those terms in the Purchase Agreement.
2. Attached hereto as Annex A is a copy of the Certificate of Incorporation of the Company as
in effect on the date hereof, certified by the Secretary of State of Delaware.
3. Attached hereto as Annex B is a true and correct copy of the By-laws of the Company as in
effect on the date hereof.
4. Attached hereto as Annex C are true and correct copies of the resolutions duly adopted by
the Board of Directors of the Company on
,
200 ___ (
, 200___, in respect of
the Transfer Agreement) which resolutions have not been revoked, modified, amended or rescinded and
are still in full force and effect, and the Purchase Agreement, Transfer Agreement, the Collection
Agency Agreement and the Servicing Agreement are in substantially the forms of those documents
submitted to, and approved by, the Board of Directors of the Company.
5. The below-named persons have been duly elected and have duly qualified as, and at all times
since
(to and including the date hereof) have been, officers of the Company,
holding the respective offices below set opposite their names, and the signatures below set
opposite their names are their genuine signatures:
WITNESS
my hand as of this ___ day of
, 200___.
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By:
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[
Secretary
][
Assistant Secretary
]
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A I M MANAGEMENT GROUP INC.
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I, the undersigned
[
President
] [
Vice President
]
of the Company, DO HEREBY CERTIFY that:
1.
is the duly elected and qualified
[
Secretary
] [
Assistant Secretary
]
of
the Company and the signature above is
[
his
] [
her
]
genuine signature.
2. Each of the Purchase Agreement, the Transfer Agreement, the Servicing Agreement, the
Collection Agency Agreement and each other Program Document to which the Company is a party is in
full force and effect on the date hereof.
3. The representations and warranties on the part of the Company contained in the Purchase
Agreement, the Transfer Agreement, the Servicing Agreement, the Collection Agency Agreement and the
other Program Documents to which the Company is a party are true and correct at and as of the date
hereof as though made on and as of the date hereof.
4. The conditions precedent set forth in Article III of the Purchase Agreement are fully
satisfied and no Event of Termination (or event which with the passage of time or notice, or both,
would constitute an Event of Termination) has occurred and is continuing.
WITNESS
my hand as of this ___ day of
, 200___
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By:
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[
President
] [
Vice President
]
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A I M MANAGEMENT GROUP INC.
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EXHIBIT B-3
[INSERT NAME OF ADVISOR]
Certificate
(Pursuant to Section 3.01(d) of the
Third Amended and Restated Purchase and Sale Agreement)
I, the undersigned
[
Secretary
] [
Assistant Secretary
]
of [INSERT NAME OF ADVISOR], a Delaware
corporation (the Company), DO HEREBY CERTIFY THAT:
1. This Certificate is furnished pursuant to Section 3.01(d) of that certain Third Amended and
Restated Purchase and Sale Agreement dated as of August 18, 2003 (said Purchase and Sale Agreement,
as in effect on the date of this Certificate, being herein called the Purchase Agreement) among
the Company, A I M Management Group Inc., A I M Distributors, Inc., [INSERT NAME OF OTHER ADVISOR],
Citibank, N.A. and Citicorp North America, Inc., as Program Agent. Unless otherwise defined
herein, capitalized terms used in this Certificate shall have the meanings assigned to those terms
in the Purchase Agreement.
2. Attached hereto as Annex A is a copy of the Certificate of Incorporation of the Company as
in effect on the date hereof, certified by the Secretary of State of Delaware.
3. Attached hereto as Annex B is a true and correct copy of the By-laws of the Company as in
effect on the date hereof.
4. Attached hereto as Annex C is a true and correct copy of resolutions duly adopted by
unanimous consent of the Board of Directors of the Company on
___, 200___ which
resolutions have not been revoked, modified, amended or rescinded and are still in full force and
effect, and the Purchase Agreement, is in substantially the form submitted to, and approved by, the
Board of Directors of the Company.
5. The below-named persons have been duly elected and have duly qualified as, and at all times
since
(to and including the date hereof) have been, officers of the Company,
holding the respective offices below set opposite their names, and the signatures below set
opposite their names are their genuine signatures:
WITNESS
my hand as of this ___ day of
, 200___.
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By:
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[
Secretary
][
Assistant Secretary
]
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[INSERT NAME OF ADVISOR]
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I, the undersigned
[
President
] [
Vice President
]
of the Company, DO HEREBY CERTIFY that:
1.
is the duly elected and qualified
[
Secretary
] [
Assistant Secretary
]
of
the Company and the signature above is
[
his
] [
her
]
genuine signature.
2. The Purchase Agreement and each other Program Document to which the Company is a party is
in full force and effect on the date hereof.
3. The representations and warranties on the part of the Company contained in the Purchase
Agreement and the other Program Documents to which the Company is a party are true and correct at
and as of the date hereof as though made on and as of the date hereof.
2
WITNESS
my hand as of this ___ day of
, 200___.
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By:
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[
President
] [
Vice President
]
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[INSERT NAME OF ADVISOR]
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IRREVOCABLE PAYMENT INSTRUCTION
A I M Distributors, Inc.
11 Greenway Plaza
Houston, Texas 77046
A I M Management Group Inc.
11 Greenway Plaza
Houston, Texas 77046
[INSERT NAME OF COMPANY]
[
ADDRESS
]
[INSERT NAME OF TRANSFER AGENT]
[ADDRESS]
August 18, 2003
You are hereby notified that A I M Distributors, Inc. (the Distributor) has entered into an
Amended and Restated Distribution Fee Purchase Agreement dated as of August 18, 2003 (as from time
to time amended, the Transfer Agreement) with A I M Management Group Inc. (together with its
successors and assigns, the Seller) pursuant to which the Distributor has agreed to from time to
time sell, convey, assign and transfer to the Seller all of its right, title and interest in, to
and under the Receivables (defined below) relating to the sales of Shares relating to each of the
Funds (defined below) during certain specified periods. You are hereby further notified that the
Seller has entered into that certain Third Amended and Restated Purchase and Sale Agreement dated
as of August 18, 2003 (as from time to time amended, the Purchase Agreement) with the
Distributor, A I M Advisors, Inc. (AAI), INVESCO Funds Group, Inc. (IFG) (AAI and IFG, together
with their respective successors and assigns, the Advisors) Citibank, N.A. (together with its
successors and assigns, the Purchaser) and Citicorp North America Inc., as agent for the
Purchaser (together with its successors and assigns, the Program Agent), pursuant to which the
Seller will sell certain Receivables to the Purchaser.
Capitalized terms used herein shall have the following meanings:
Asset Based Sales Charge
shall have the meaning set forth in Section 2830(b)(8)(A)
of the Conduct Rules.
Business Day
shall mean any day on which neither banks nor the New York Stock
Exchange are not authorized or required to close in New York City.
CDSC
shall mean with respect to Shares of any Fund, the contingent deferred sales
charges payable, either directly or by withholding from the proceeds of the redemption of the
Shares of the Fund, by the shareholders of such Fund on any redemption of Shares of such
Fund in accordance with the Distribution Plan, the Underwriting Agreement and the Prospectus
relating to such Fund and the Conduct Rules.
Company
shall mean [INSERT NAME OF COMPANY].
Complete Termination
shall, in respect of the Distribution Plan in respect of the
Shares of any Fund, (i) have the meaning assigned to such term in such Distribution Plan in effect
on the date hereof, or (ii) shall mean a complete termination of such Distribution Plan, which
results solely from a change in generally applicable law or an industry-wide action by the SEC
after October 31, 2000;
provided
,
however
, that in respect of clauses (i) and (ii)
above such termination occurs despite the Sellers, the Advisors, the Distributors and their
affiliates full compliance with their respective obligations under the Purchase Agreement.
Conduct Rules
shall mean the Conduct Rules of the NASD, including without
limitation, Section 2830, thereof, as amended, and the rules, regulations and interpretations of
the NASD in respect thereof.
Distribution Plan
shall mean with respect to the Receivables relating to any Fund
the distribution plan of the Company, in respect thereto pursuant to which Shares of such Fund are
distributed by the Distributor, as the same may be amended, supplemented, waived or modified from
time to time in accordance with the Purchase Agreement, and provided no Complete Termination has
occurred, any successor or replacement distribution plan.
Fund
shall mean each separate series of the Company specified on Schedule I hereto,
as the same may be supplemented from time to time in accordance herewith.
Maximum Aggregate Sales Charge Allowable
shall mean with respect to the Receivables
relating to any Fund the maximum Asset Based Sales Charge which may be paid by the Company, in
respect of such Fund to the Distributor pursuant to the Underwriting Agreement, the Distribution
Plan and the Prospectus, together with interest thereon at the Maximum Interest Allowable, relating
to such Fund and pursuant to the maximum sales charge rule set forth in Section 2830 of the
Conduct Rules, assuming the Company, in respect of such Fund pays a separate Service Fee, unreduced
by payments theretofore made in respect thereof by the Company, in respect of such Fund.
Maximum Interest Allowable
shall mean the maximum interest which may be taken into
account under Section 2830 of the Conduct Rules in computing the Maximum Aggregate Sales Charge
Allowable.
Monthly Settlement Date
shall mean the twelfth (12th) Business Day of each calendar
month during the term of the Purchase Agreement.
NASD
shall mean NASD, Inc., or any successor entity or entities.
Omnibus Account
shall mean, in respect of any Fund, any account maintained by the
Transfer Agent for such Fund (or any successor transfer agent for such Fund), reflecting the record
ownership of Shares of such Fund by an entity who maintains sub-transfer agents records reflecting
the actual beneficial ownership of such Shares in other persons or entities.
2
Prospectus
shall mean with respect to any Fund the prospectus filed with the
Securities and Exchange Commission as a part of the Companys Registration Statement on Form N-1A,
as amended, and shall include, without limitation, the Statement of Additional Information included
in such Registration Statement.
Receivables
shall mean with respect to each Fund, all of the rights under the
Underwriting Agreement, the Distribution Plan, the Prospectus and in accordance with the applicable
Conduct Rules to receive amounts paid or payable in respect of Asset Based Sales Charges (including
interest at the Maximum Interest Allowable) and CDSCs, in each case in respect of the issuance by
such Fund of Shares and in respect of Shares of any other Fund acquired in any exchange of Shares
of the Fund in question, including, without limitation, any similar amount paid or payable under
any replacement Underwriting Agreement, Distribution Plan, Prospectus or the Conduct Rules, and any
continuation payments in respect thereof paid or payable by the Company in respect of Shares of
such Fund in the event of a termination of the Distribution Plan or the Underwriting Agreement; it
being understood that such term does not include the Service Fee payable pursuant to the
Underwriting Agreement, the Distribution Plan, the Prospectus and the Conduct Rules.
Service Fee
shall have the meaning set forth in Section 2830(b)(9) of the Conduct
Rules.
Shares
shall mean in respect of any Fund, any class of shares of such Fund which are
specified on Schedule I hereto, as the same may be supplemented from time to time in accordance
herewith.
Specified Sub-transfer Agents
shall mean Merrill Lynch, Pierce, Fenner & Smith,
Citigroup Global Markets Inc. and Primerica Shareholder Services, together with each other
Sub-transfer Agent in respect of which the Program Agent has confirmed in writing that monthly
remittances of CDSCs by such Sub-transfer Agent is acceptable.
Sub-transfer Agent
shall mean, in respect of any Fund, the record owner of any
Omnibus Account.
Transfer Agent
shall mean [Insert name of Transfer Agent], together with its
permitted successors and assigns in such capacity.
Underwriting Agreement
shall mean with respect to the Receivables relating to any
Fund, the agreement between the Distributor and the Company, in respect of Shares of such Fund and
any replacement agreement as may be adopted in the future, pursuant to which the Distributor has
been appointed the principal underwriter in respect of the Receivables relating to such Fund.
You are hereby directed to make all payments in respect of all amounts (other than Service
Fees) paid or payable by the Fund pursuant to the Underwriting Agreement, the Distribution Plan,
the Prospectus and the Conduct Rules in respect of the Receivables relating to each Fund and all
proceeds therefrom (hereinafter, Payments), which otherwise would be payable by you to the
Distributor by wire in immediately available funds to the dedicated demand deposit account of
Deutsche Bank Trust Company Americas (the Collection Agent)
3
entitled the Bankers Trust Company A I M Demand Deposit Account, account no. 00-325-892
(the Demand Deposit Account) established and maintained by the Collection Agent at 60 Wall
Street, New York, New York 10005, for further transfer by the Collection Agent to the account of
the Collection Agent entitled the Bankers Trust Company A I M Collection Account: Account
No. 14781 (the Collection Account), as follows:
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(A)
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in the case of Asset Based Sales Charges, on or before the
eleventh (11
th
) Business Day of the calendar month immediately
following the calendar month to which they relate;
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(B)
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in the case of CDSCs withheld by any Specified Sub-transfer
Agent, on or before the eleventh (11
th
) Business Day of the calendar
month in which the same are withheld from the redemption proceeds of the
related Shares; and
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(C)
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in the case of CDSCs (other than the CDSCs described in clause
(B) above), on or before the second (2
nd
) Business Day of the
calendar week in which the same are withheld from the redemption proceeds of
the related Shares.
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You are further notified that:
1. This Irrevocable Payment Instruction is delivered on behalf of the Purchaser and the
Program Agent and is irrevocable and cannot be changed without the written consent of the Program
Agent, the Distributor and the Seller;
provided
,
however
, that Schedule I hereto
may be supplemented solely to add a new series of the Company to such Schedule without the written
consent of the Program Agent;
2. By your acknowledgment, you authorize the Distributor and the Seller to deliver a copy of
this Irrevocable Payment Instruction and your acknowledgment to the Purchaser, the Program Agent
and their respective successors and assigns; and
3. Any payment by you other than in compliance with the directions herein shall not be deemed
to discharge your obligations in respect of the Payments.
THIS IRREVOCABLE PAYMENT INSTRUCTION SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF SAID STATE WITHOUT REGARD TO ITS CONFLICTS OF LAWS PROVISIONS.
4
By your execution of this Irrevocable Payment Instruction you hereby acknowledge and agree to
abide by the foregoing instructions, it being understood that such acknowledgment and waiver does
not constitute a waiver of any defenses.
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A I M DISTRIBUTORS, INC.
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By:
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Authorized Signatory
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A I M MANAGEMENT GROUP INC.
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By:
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Authorized Signatory
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Acknowledged and
Agreed to as of the date
first written above:
[INSERT NAME OF COMPANY]
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By:
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Authorized Signatory
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[INSERT NAME OF TRANSFER AGENT]
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By:
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Authorized Signatory
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EXHIBIT D
ADDITIONAL ELIGIBLE FUND ADDENDUM
Reference is hereby made to that certain Third Amended and Restated Purchase and Sale
Agreement dated as of August 18, 2003 (as from time to time amended, supplemented, waived or
modified, the Purchase Agreement) among A I M Management Group Inc. (together with its permitted
successors and assigns, the Seller), A I M Distributors, Inc. (together with its successors and
assigns, the Distributor), A I M Advisors, Inc. (together with its successors and assigns, the
AAI), INVESCO Funds Group, Inc. (together with its successors and assigns, IFG), Citibank, N.A.
(together with its successors and assigns, the Purchaser) and Citicorp North America, Inc., as
agent for the Purchaser (together with its permitted successors and assigns, the Program Agent).
Capitalized terms used herein and not otherwise defined herein shall have the respective meanings
assigned to such terms in the Purchase Agreement.
Pursuant to the terms of Section 2.03 of the Purchase Agreement, the Seller hereby requests
that effective as of the Addition Effective Date [INSERT NAME OF FUND] a series of [INSERT NAME OF
COMPANY], an Additional Eligible Fund, become a Fund under and for all purposes of the Purchase
Agreement[and that [INSERT NAME OF COMPANY], an investment company registered with the SEC under
the Investment Company Act (the Additional Company) become a Company under and for all purposes
of the Purchase Agreement].
*
On and as of the Addition Effective Date, (i) such Additional Eligible Fund shall become a
Fund under and for all purposes of the Purchase Agreement, the Servicing Agreement, the Transfer
Agreement and the other Program Documents [and the Additional Company shall become a Company under
and for all other purposes of the Purchase Agreement and the other Program Documents],
*
(ii) the Purchase Agreement, the Servicing Agreement and the Collection Agency Agreement shall be
deemed to be supplemented to reflect the addition of such Additional Eligible Fund [and the
addition of the Additional Company],
*
and (iii) any reference in the Purchase Agreement
to the effectiveness on the date of the Purchase Agreement of, or any change or modification since
the date of the Purchase Agreement to the Underwriting Agreement, the Distribution Plan, the
Advisory Agreement, the Prospectus, the CDSC arrangement or Fundamental Investment Objectives in
respect of such Additional Eligible Fund shall be deemed to refer to the effectiveness thereof on,
and any change or modification thereof since, the Addition Effective Date.
In addition, on the Addition Effective Date the [SPECIFY PROGRAM DOCUMENT] shall be amended as
follows: [SPECIFY NECESSARY AMENDMENTS, IF ANY, TO WHICH THE PROGRAM AGENT HAS CONSENTED].
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*
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Insert if investment company relating to the Additional
Eligible Fund is not an existing Company under the Purchase Agreement.
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On and as of the Addition Effective Date, Schedule II to the Purchase Agreement is hereby
supplemented to add the following information under each heading:
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COMPANY
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[INSERT NAME OF
ADDITIONALCOMPANY]
*
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FUNDS
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SHARES
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[
INSERT NAME OF
ADDITIONAL
ELIGIBLE FUND
]
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Class ___
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In addition, on and as of the Addition Effective Date, Schedule IV to the Purchase Agreement
is hereby supplemented to add the following information under each heading:
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FUNDAMENTAL INVESTMENT
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FUND
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OBJECTIVES
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Each of the Seller, the Distributor and [AAI][IFG]
*
*
represents and
warrants to the Program Agent and the Purchaser that, on and immediately after the Addition
Effective Date, (i) attached hereto as Annexes A, B, C and D are true, correct and complete copies
of the Underwriting Agreement, Prospectus, Distribution Plan and Advisory Agreement relating to
such Additional Eligible Fund in effect on the date hereof, (ii) the representations and warranties
of the Seller, the Distributor and [AAI][IFG]** contained in Article IV of the Purchase Agreement
are true and correct in all respects, (iii) no Event of Termination (or event which with the
passage of time or notice, or both, would constitute an Event of Termination has occurred, and
(iv) the conditions precedent set forth in Article III to the Purchase Agreement are satisfied.
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*
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Insert if investment company relating to the Additional
Eligible Fund is not an existing Company under the Purchase Agreement.
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**
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Specify applicable Advisor.
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2
The Addition Effective Date shall occur when (a) a counterpart hereof, signed by the
Distributor, [AAI][IFG],** the Seller and the Program Agent has been received by the Program Agent,
and (b) the other requirements described in Section 2.03 of the Purchase Agreement have been fully
satisfied.
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A I M MANAGEMENT GROUP INC.
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By:
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Name:
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Title:
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Acknowledged and Agreed to
as of
, ___
A I M DISTRIBUTORS, INC.
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By:
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Name:
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Title:
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[SPECIFY APPLICABLE ADVISOR]
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By:
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Name:
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Title:
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CITICORP NORTH AMERICA, INC.,
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as Program Agent
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By:
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Name:
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Title:
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[DEUTSCHE BANK TRUST
COMPANY AMERICAS,
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as Collection Agent
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By:
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Name:
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Title:
1
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1.
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Required if Collection Agency Agreement is to be amended.
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ANNEX A
UNDERWRITING AGREEMENT OF
[INSERT NAME OF ADDITIONAL ELIGIBLE FUND]
ANNEX B
PROSPECTUS OF
[INSERT NAME OF ADDITIONAL ELIGIBLE FUND]
ANNEX C
DISTRIBUTION PLAN OF
[INSERT NAME OF ADDITIONAL ELIGIBLE FUND]
ANNEX D
ADVISORY AGREEMENT OF
[INSERT NAME OF ADDITIONAL ELIGIBLE FUND]
EXHIBIT E
TO PURCHASE AND SALE AGREEMENT
PROCEDURES FOR ALLOCATING RECEIVABLES AND SHARES
Receivables in respect of each Fund shall be allocated between Purchased Receivables and
Receivables which do not constitute Purchased Receivables in accordance with the rules set forth in
clauses (A), (B) and (C) below. Clause (A) attributes each Share either to the Seller or to the
Purchaser. Clauses (B) and (C) allocate Receivables to the Purchaser and the Seller with reference
to the Shares which have been attributed to each in accordance with clause (A). Unless otherwise
defined herein, defined terms used herein shall have the meanings assigned to such terms in
Appendix A to the Purchase and Sale Agreement.
(A)
Attribution of Shares
: Shares of each Fund outstanding from time to time shall be
attributed to either the Purchaser or the Seller in accordance with the following rules:
(1)
Commission Shares
: Each Commission Share is specifically tracked by the records
maintained by the Transfer Agent (or in the case of Omnibus Shares by the related Sub-transfer
Agent) with reference to the Date of Original Issuance of the Commission Share in question or of
the Commission Share from which the Commission Share in question derived through one or more
Permitted Free Exchanges.
The following Commission Shares outstanding from time to time shall be attributed to the
Purchaser: (a) Commission Shares issued other than in a Permitted Free Exchange, the Date of
Original Issuance of which occurs on or after the Inception Date and on or prior to the last Sale
Cutoff Date, including without limitation, all Commission Shares which constitute Floating Rate
Fund Exchange Shares, and (b) Commission Shares issued in a Permitted Free Exchange for Shares of
another Fund which were attributed to the Purchaser in accordance with this paragraph (1) of this
clause (A).
The following Commission Shares outstanding from time to time shall be attributed to the
Seller: (a) Commission Shares issued other than in a Permitted Free Exchange, the Date of Original
Issuance of which occurs prior to the Inception Date, (b) Commission Shares issued other than in a
Permitted Free Exchange, the Date of Original Issuance of which occurs after the last Sale Cutoff
Date, (c) all Commission Shares of such Fund which constitute Excluded Shares, and (d) Commission
Shares issued in a Permitted Free Exchange for Shares of another Fund which were attributed to
Seller in accordance with this paragraph (1) of this clause (A).
(2)
Free Shares (other than Omnibus Shares)
:
A Free Share (other than an Omnibus Share) of any Fund will be attributed to the Purchaser or
the Seller in accordance with the Transfer Agent Reports of the Transfer Agent for such Fund.
(3)
Omnibus Shares
:
(a) Omnibus Shares of any Fund which are Commission Shares shall be attributed to the
Purchaser or the Seller, as the case may be, in the same manner as outstanding Commission Shares of
such Fund which do not constitute Omnibus Shares are attributed to such parties.
(b) Omnibus Shares of any Fund which are Free Shares outstanding on any date shall be
attributed to the Purchaser or the Seller pursuant to the following rules:
(i) Such attributions shall be made separately for the Omnibus Shares held in each
individual Omnibus Account of such Fund, and the result of each such separate computation
shall be aggregated to provide the total Free Shares attributable to the Purchaser and the
Seller.
(ii) Free Shares which are Omnibus Shares issued (other than in connection with
Permitted Free Exchanges) during any calendar month shall be attributed to the Purchaser and
the Seller as of the end of such calendar month in a number computed as follows:
A x (B/C)
where:
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A =
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Omnibus Shares which are Free Shares issued (other than in connection with
Permitted Free Exchanges) during such calendar month.
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B =
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Commission Shares and Free Shares which are Omnibus Shares deemed to be
attributed to the Purchaser or the Seller, as the case may be, and outstanding as of
the close of business on the last day of the immediately preceding calendar month in
accordance with this Exhibit E.
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C =
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Total number of Commission Shares and Free Shares which are Omnibus Shares
outstanding as of the close of business on the last day of the immediately preceding
calendar month.
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(iii) Free Shares which are Omnibus Shares and redeemed (other than in connection with
Permitted Free Exchanges) during any calendar month shall be attributed to the Purchaser and
the Seller as of the end of such calendar month in a number computed as follows:
A x (B/C)
where:
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A =
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Omnibus Shares which are Free Shares redeemed (other than in connection with
Permitted Free Exchanges) during such calendar month.
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2
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B =
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Free Shares which are Omnibus Shares deemed to be attributed to the Purchaser
or the Seller, as the case may be, and outstanding as of the last day of the
immediately preceding calendar month in accordance with this Exhibit E.
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C =
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Total number of Free Shares which are Omnibus Shares outstanding as of the
close of business on the last day of the immediately preceding calendar month in
accordance with this Exhibit E.
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(iv) Free Shares which are Omnibus Shares exchanged into or out of a specific Fund
during any calendar month (such amount, which may be a positive or negative number, the Net
Exchange Shares) shall be computed as follows:
A B C + D
where:
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A =
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Total number of Free Shares which are Omnibus Shares outstanding as of the
close of business on the last day of the current calendar month.
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B =
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Total number of Free Shares which are Omnibus Shares outstanding as of the
close of business on the last day of the immediately preceding calendar month.
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C =
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Total number of Free Shares which are Omnibus Shares and issued during the
current calendar month and allocated among the Purchaser and the Seller in accordance
with clause (ii) immediately above.
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D =
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Total number of Free Shares which are Omnibus Shares and redeemed during the
current calendar month and allocated among the Purchaser and the Seller in accordance
with clause (iii) immediately above.
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The amount of Net Exchange Shares computed for a given calendar month shall be attributed to
the Purchaser and the Seller as of the end of such calendar month in a number computed as
follows:
E x (F/G)
where:
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E =
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Total number of Net Exchange Shares computed in a given month as of the close
of business on the last day of the current calendar month.
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F =
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Free Shares which are Omnibus Shares deemed to be attributed to the Purchaser
or the Seller, as the case may be, and outstanding as of the close of business on the
last day of the immediately preceding calendar month in accordance with this Exhibit E.
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3
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G =
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Total number of Free Shares which are Omnibus Shares outstanding as of the
close of business on the last day of the immediately preceding calendar month.
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(d) (i) If as of the close of business on the last day of any calendar month, Free
Shares which constitute Non-Omnibus Shares of any Fund are attributed to the Seller under
paragraph 2 of this Exhibit E and there are no Commission Shares which constitute
Non-Omnibus Shares attributed to the Seller in respect of such Fund, such Free Shares shall
be attributed to the Purchaser. If as of the close of business on the last day of any
calendar month Free Shares which constitute Omnibus Shares of any Fund in any Omnibus
Account are attributable to the Seller under paragraph 2 of this Exhibit E and there are no
Commission Shares in such Omnibus Account in respect of such Fund attributed to the Seller,
such Free Shares shall be attributed to the Purchaser.
(ii) If as of the close of business on the last day of any calendar month, Free Shares
which constitute Non-Omnibus Shares of any Fund are attributed to the Purchaser under
paragraph 2 of this Exhibit E and there are no Commission Shares which constitute
Non-Omnibus Shares attributed to the Purchaser in respect of such Fund, such Free Shares
shall be attributed to the Seller. If as of the close of business on the last day of any
calendar month Free Shares which constitute Omnibus Shares of any Fund in any Omnibus
Account are attributable to the Purchaser under paragraph 2 of this Exhibit E and there are
no Commission Shares in such Omnibus Account in respect of such Fund attributed to the
Purchaser, such Free Shares shall be attributed to the Seller.
(B)
Receivables Constituting CDSCs
: Except with respect to ML Omnibus Shares to the
extent set forth in clause (2) below, Receivables constituting CDSCs will be allocated to the
Purchaser and the Seller depending upon whether the related redeemed Shares were attributed to the
Purchaser or the Seller in accordance with clause (A) above.
(1) CDSCs relating to Non-Omnibus Shares, ML Omnibus Shares and Omnibus Shares for such Fund
shall be allocated between the Purchaser and the Seller on or prior to the tenth (10
th
)
Business Day of the calendar month immediately succeeding the calendar month in which they are
remitted to the Demand Deposit Account for further credit to the Collection Account.
(2)
Adjustment Amounts
. Any difference between CDSCs relating to ML Omnibus Shares of
such Fund remitted to the Demand Deposit Account and the CDSCs relating to ML Omnibus Shares of
such Fund reported in the ML Omnibus Redemption Report, which will accompany the Purchaser Report
(such difference, the Adjustment Amount), will be allocated as follows:
where:
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ADJ
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=
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Adjustment Amount for such ML Omnibus Shares.
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4
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PMLCDSC
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=
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The aggregate of all CDSCs for such ML Omnibus Shares shown on the ML
Omnibus Redemption Report, except ML Omnibus Shares attributed to the Seller as
specified therein, in accordance with these Allocation Procedures.
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FMLCDSC
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=
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The total CDSC amount for such ML Omnibus Shares shown on the ML Omnibus
Redemption Report.
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The balance of the Adjustment Amount shall be attributed to the Seller.
In any month in which a Calculation Event specified in clause (i) of the definition thereof
shall have occurred in respect of the ML Omnibus Shares, the ML Omnibus Shares shall be allocated
between the Purchaser and the Seller in accordance with clause (A) above. In any month in which a
Calculation Event specified in clause (ii) of the definition thereof shall have occurred, CDSCs
relating to ML Omnibus Shares shall be allocated between the Purchaser and the Seller depending
upon whether the related redeemed Shares were attributed to the Purchaser or the Seller in
accordance with clause (A) above until the aggregate Adjustment Amounts for all Funds do not exceed
three percent of the total CDSCs collected and remitted to the Demand Deposit Account in such
month. The remaining Adjustment Amounts will be allocated and distributed as described immediately
above.
(C)
Receivables Constituting Asset Based Sales Charges
: The Asset Based Sales Charges
accruing to the Purchaser during any calendar month shall be computed and allocated as follows:
where:
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A.
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=
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Total amount of Asset Based Sales Charges accrued
during such calendar month.
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B.
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=
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Shares attributed to the Purchaser and outstanding,
as of the close of business on the last day of the
immediately preceding calendar month, times Net Asset
Value per Share as of such time.
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C.
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=
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Shares attributed to the Purchaser and outstanding,
as of the close of business on the last day of such
calendar month, times Net Asset Value per Share as of
such time.
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D.
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=
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Total Shares outstanding as of the close of business
on the last day of the immediately preceding calendar
month, times Net Asset Value per Share as of such
time.
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5
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E.
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=
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Total Shares outstanding as of the close of business
on the last day of such calendar month, times Net
Asset Value per Share as of such time.
|
The balance of the Asset Based Sales Charges of such Fund accruing during such calendar month
shall be allocated to the Seller. The allocations contemplated by this paragraph shall be made on
or prior to the tenth (10th) Business Day of the immediately following calendar month.
Notwithstanding anything in this clause (C) to the contrary, if during any calendar month
there has been a waiver of the portion of the Asset Based Sales Charges relating to the Purchasers
New Shares of the INVESCO Cash Reserves Fund or the AIM Money Market Fund (any such affected Fund,
a Subject Fund) in accordance with the Waiver Agreement, then for purposes of allocating the
Asset Based Sales Charges accruing during such calendar month in respect of such Subject Fund
between the Purchaser and the Seller (x) the amount of the Asset Based Sales Charges accrued during
such calendar month in respect of such Subject Fund shall be deemed to be the total amount of the
Asset Based Sales Charges that would have accrued in respect of such Subject Fund if no waiver of
any Asset Based Sales Charges in respect of Purchasers New Shares had occurred, and (y) the Asset
Based Sales Charges allocated to the Purchaser pursuant to this clause (C) shall be reduced by an
amount equal to the Asset Based Sales Charges accrued during such calendar month in respect of such
Subject Fund which were waived by the Purchaser under the Waiver Agreement.
(D)
In General
. For purposes of the foregoing: (1) Shares will be deemed to be
issued, redeemed, exchanged and converted to class A shares (including without limitation by each
Sub-transfer Agent) in accordance with the rules used by the Transfer Agent for each Fund. All
allocations included in this Exhibit E shall be reported in the relevant Purchaser Report and all
computations required to confirm such allocations shall be included in the relevant Purchaser
Report, the Transfer Agent Reports and the Sub-transfer Agent Reports delivered to the Program
Agent; and (2) notwithstanding anything to the contrary set forth above: (i) all Shares of any Fund
attributed to the Seller with reference to Commission Shares issued prior to the Inception Date for
such Fund shall be deemed to have been redeemed at the point in time when the aggregate amount of
the CDSCs and Asset Based Sales Charges theretofore allocated to the Seller in respect of such
Shares shall equal the Maximum Aggregate Sales Charge Allowable in respect of the Shares of such
Fund on the assumption that the only Commission Shares issued by such Fund were the Commission
Shares of such Fund issued prior to the Inception Date for such Fund which were attributed to
Seller through such point in time; and (ii) all Shares of any Fund attributed to the Purchaser
shall be deemed to have been redeemed at the point in time when the Collection Agency Agreement
terminates in accordance with Section 14 thereof.
For purposes of paragraph (2) of clause (A) above, if the form of any Transfer Agent Report or
the practices or capabilities of the Transfer Agent in respect of any Fund change after August 18,
2003 and as a result of such changes the attributions of Free Shares (other than Omnibus Shares)
contemplated by paragraph (2) of clause (A) above no longer reach results which are consistent with
the results obtained under this Exhibit E if the form of such Transfer
6
Agent Report or the practices or capability of the Transfer Agent had not changed, then at the
request of the Program Agent or the Seller, the Purchaser, the Program Agent and the Seller shall
negotiate in good faith to cause the Transfer Agent to generate Transfer Agent Reports or to adjust
the Allocation Procedures as may be necessary to reach results consistent with those that would
have been produced if such report had not changed;
provided
, that if such parties cannot
reach agreement on such modifications within a reasonable period of time after the date of any such
change, the parties shall submit the question to arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association and the decision reached by the
arbitrator shall be final and binding on the parties hereto.
7
EXHIBIT F
FORM OF TAKE-OUT NOTICE
A I M Management Group Inc.
11 Greenway Plaza
Suite 1919
Houston, Texas 77046
A I M Distributors, Inc.
11 Greenway Plaza
Suite 1919
Houston, Texas 77046
Ladies and Gentlemen:
Pursuant to that certain Third Amended and Restated Purchase and Sale Agreement dated as of
August 18, 2003 (as amended and supplemented, the Purchase Agreement) among A I M Management Group
Inc., A I M Distributors, Inc., A I M Advisors, Inc., INVESCO Funds Group, Inc., Citibank N.A. and
the undersigned Citicorp North America, Inc., we hereby deliver this Take-out Notice advising you
that the Purchaser completed a Take-out Transaction [stipulate transaction]. The Take-out
Adjustment Amount in connection with such Take-out Transaction is $
. Capitalized terms
used herein and which are not otherwise defined herein shall have the meanings assigned to such
terms in the Purchase Agreement.
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Very truly yours,
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CITICORP NORTH AMERICA, INC.,
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as Program Agent
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By:
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Authorized Signatory
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Acknowledged and agreed as of
the date first written above:
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A I M MANAGEMENT GROUP INC.
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By:
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Authorized Signatory
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A I M DISTRIBUTORS, INC.
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By:
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Authorized Signatory
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Appendix A
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to
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Purchase and Sale Agreement
|
DEFINITIONS LIST
The following terms have the respective meanings set forth below for all purposes of the
Purchase Agreement, the Servicing Agreement, the Collection Agency Agreement and the exhibits and
schedules thereto and the definitions of such terms are equally applicable both to the singular and
plural forms of such terms.
AAI
shall mean A I M Advisors, Inc.
Addition Effective Date
shall have the meaning assigned to such term in Section 2.03
of the Purchase Agreement.
Additional Eligible Fund
shall mean any additional series of any Company:
(i) which shall have in full force and effect a distribution plan, advisory
agreement and underwriting agreement, substantially identical to the comparable
documents in respect of Shares of the Funds in effect on the date hereof and to the
extent not substantially identical, which shall be in the form, scope and substance
reasonably satisfactory to the Program Agent;
(ii) with respect to which the Distributor shall act as a principal underwriter and
an Advisor shall act as investment adviser;
(iii) the fundamental investment objectives and policies of which shall be in
compliance with all Applicable Law and fundamental investment objectives and
policies of which shall be substantially comparable to the Fundamental Investment
Objectives in respect of Shares of any Fund listed on Schedule II to the Purchase
Agreement, including without limitation in respect of the risks associated with such
fundamental investment objectives, and to the extent not substantially comparable,
which shall be reasonably satisfactory to the Program Agent;
(iv) with respect to which the Distributor shall be entitled to receive CDSCs on
terms substantially identical to those existing in respect of the Funds in effect on
the date of the Purchase Agreement and to the extent not substantially identical, on
terms which shall be reasonably satisfactory to the Program Agent;
(v) with respect to which there shall be in full force and effect an Irrevocable
Payment Instruction which has been acknowledged and agreed to by the related Company
and the Transfer Agent as contemplated thereby; and
(vi) in respect of which the Seller, the applicable Advisor or the Distributor shall
have furnished to the Purchaser and the Program Agent: (A) a true and
complete copy of the prospectus for such series; (B) a true and complete copy of the
distribution plan in respect of such series; and (C) a true and complete copy of the
underwriting agreement in respect of such series.
Additional Eligible Fund Addendum
shall mean the addendum substantially in the form
of Exhibit D to the Purchase Agreement.
Adjustment Amount
shall have the meaning assigned to such term in the Allocation
Procedures.
Adverse Claim
shall mean any Lien of any Person other than (i) any such right or
claim of the Purchaser or the Program Agent created by or pursuant to the Purchase Agreement, and
(ii) any Lien created by the Purchaser.
Adverse Effect
shall mean (i) any occurrence of, or any increase in, any Adverse
Claim on the Purchased Receivables or the Collections, (ii) any occurrence of, or any increase in,
any material claims, damages, losses, liabilities, expenses, obligations, penalties or
disbursements of any kind or nature of the Purchaser or the Program Agent arising out of the
transactions contemplated by the Facility Documents, (iii) any adverse effect upon the status of
any transfer of any Receivables under the Program Documents as a True Sale, (iv) any adverse effect
upon the Sellers (as Servicer or otherwise), any Advisors, the Distributors or any Companys
ability to pay or perform any of its respective material obligations under any Facility Document in
a timely manner, (v) any adverse effect on the status of the Receivables as Eligible Receivables,
(vi) any adverse effect on the amount or timing of any payment of any Collections, (vii) any
adverse effect on the timely receipt by the Collection Agent of any Collections in accordance with
the terms of any Irrevocable Payment Instruction or any other Program Document, (viii) any adverse
effect on the Purchasers right, title or interest in the Purchased Receivables, the Collections in
respect thereto, the Collection Account, the Demand Deposit Account or the Ancillary Rights in
respect of the Purchased Receivables, (ix) any material adverse effect on any of the other rights
of the Purchaser or the Program Agent under the Facility Documents, or (x) any adverse effect on
the remedies of the Purchaser or the Program Agent under any Facility Document.
Advisor
shall mean each of AAI and IFG, together with their respective permitted
successors and assigns.
Advisory Agreement
shall mean with respect to any Fund, the agreement between the
related Advisor and the related Company in respect of such Fund and any replacement agreement as
may be adopted in the future, pursuant to which an Advisor provides investment advisory services to
such Fund, as the same may be amended, supplemented, waived or modified from time to time.
Affiliate
of a referenced Person shall mean (a) another Person controlling,
controlled by or under common control with such referenced Person, (b) any other Person
beneficially owning or controlling ten percent (10%) or more of the outstanding voting securities
or rights or of the interest in the capital, distributions or profits of the referenced Person, or
(c) any officer (exclusive of a ministerial officer with no authority to bind a Person), director
of
2
or partner in the referenced Person;
provided
,
however
, the term Affiliate
shall not be deemed to include any Company or any similar investment company or account for which
the Seller and/or its Affiliates provide the type of services contemplated by the Distribution
Plan, Underwriting Agreement or any Advisory Agreement. The terms control, controlling,
controlled and the like shall mean the direct or indirect possession of the power to direct or
cause the direction of the management or policies of a Person or the disposition of its assets or
properties, whether through ownership, by contract, arrangement or understanding, or otherwise.
AIM GT Funds
shall have the meaning set forth in Amendment No. 1 to Facility
Documents.
Allocation Notice
shall mean a written notice from the Program Agent to the
Collection Agent (with a copy to each of the other parties hereto) stating funds are to be
allocated in accordance with Section 4.3(a) of the Collection Agency Agreement on a more frequent
basis, which notice shall specify the frequency of such allocation.
Allocation Procedures
shall mean the allocation procedures attached as Exhibit E to
the Purchase Agreement.
Amendment No. 1 to Facility Documents
shall mean the Amendment No. 1 to Facility
Documents dated as of September 8, 1998 among the Seller, the Purchaser and the Program Agent, as
consented and agreed to by AAI.
Amendment No. 2 to Facility Documents
shall mean the Amendment No. 2 to Facility
Documents dated as of September 1, 1999 among the Seller, the Purchaser, the Program Agent and the
Collection Agent, as consented and agreed to by the Distributor and AAI.
Amendment No. 3 to Facility Documents
shall mean the Amendment No. 3 to Facility
Documents dated as of December 14, 2000 among the Seller, the Distributor, AAI, the Purchaser, the
Program Agent, and the Collection Agent.
Amendment No. 4 to Facility Documents
shall mean the Amendment No. 4 to Facility
Documents dated as of August 24, 2001 among the Seller, the Distributor, AAI, the Purchaser, the
Program Agent and the Collection Agent.
Amendment No. 5 to Facility Documents
shall mean the Amendment No. 5 to Facility
Documents dated as of August 18, 2003 among the Seller, the Distributor, IFG, AAI, the Purchaser,
the Program Agent and the Collection Agent.
Amortized Maximum Aggregate Sales Charge Allowable
shall mean with respect to the
Receivables relating to any Fund as of any date of determination, (i) an amount equal to the
Maximum Aggregate Sales Charge Allowable payable in respect of such Receivables, minus (ii) the
aggregate amounts paid by the applicable Company and the holders of its Shares in respect of such
Receivables.
Ancillary Rights
shall mean all of the Sellers rights, remedies, title and
interests in, to and under (i) the Transfer Agreement (other than its rights to payments from the
applicable Companies and the holders of Shares of the Funds in respect of the Receivables relating
to each
3
Fund and the Service Fee payable under the Distribution Plans and the Underwriting Agreements)
and the other Facility Documents including, without limitation, the right to receive payments from
the Distributor pursuant thereto, (ii) all UCC financing statements covering any of the foregoing,
(iii) all Proceeds thereof, and (iv) all other rights the Seller may have in respect of the
foregoing under Applicable Law.
Annual Computation Date
shall mean the last day of each twelve month period ending
on the last day of each calendar month.
Annual Redemption Threshold
shall mean the first day during any twelve calendar
month period on which the aggregate Net Asset Values (determined with respect to each redeemed
Share as of the date of such redemption) of all Shares relating to Purchased Receivables, which
were redeemed in Free Redemptions during the portion of such period up to and including the day in
question, equals or exceeds the product of (a) the aggregate of the Net Asset Values relating to
Shares of all Funds as of the Annual Computation Date in respect of such twelve calendar month
period, and (b) two percent (2%).
Applicable Law
shall mean any Law of any Authority, whether domestic or foreign,
including, without limitation, all federal and state banking or securities laws, to which the
Person in question is subject or by which it or any of its property is bound.
Asset Based Sales Charge
shall have the meaning set forth in Section 2830(b)(8)(A)
of the Conduct Rules.
Assignment Agreement
shall mean the Assignment Agreement dated as of June 1, 1998
between GT Global, Inc. and the Distributor.
Authority
shall mean any governmental or self-regulatory authority (including,
without limitation, the NASD, the stock exchanges and the SEC), whether executive, legislative,
judicial, regulatory, administrative or other, or any combination thereof, including, without
limitation, any federal, state, territorial, county, municipal or other government or governmental
or self-regulatory agency, arbitrator, board, body, branch, bureau, commission, corporation, court,
department, instrumentality, master, mediator, panel, referee, system or other political unit or
subdivision or other entity of any of the foregoing, whether domestic or foreign.
Authorized Representative
shall have the meaning assigned to such term in Section
4.3(f) of the Collection Agency Agreement.
Authorized Representative Certificate
shall have the meaning assigned to such term
in Section 4.3(f) of the Collection Agency Agreement.
Bankruptcy Code
shall mean the United States Bankruptcy Code of 1978, as amended
from time to time or any similar legislation of the United States enacted in substitution or
replacement thereof.
Base Rate
shall mean, for any period, a fluctuating interest rate per annum as shall
be in effect from time to time which rate per annum shall at all times be equal to the higher of:
4
(a) the Prime Rate; and
(b) 1/2 of one percent per annum above the Federal Funds Rate.
Board of Trustees
shall mean (i) in respect of any Fund relating to a Company that
constitutes a trust, the board of trustees of such Fund, and (ii) in respect of any Fund relating
to a Company that constitutes a corporation or limited liability company, the board of directors of
such Fund.
Business Day
shall mean any day on which neither banks nor the New York Stock
Exchange are not authorized or required to close in New York City.
Calculation Date
shall mean the last day of each calendar month.
Calculation Event
shall mean in respect of the ML Omnibus Shares in respect of any
calendar month, the occurrence of any of the following events: (i) the Purchaser Report delivered
in respect of such calendar month shall not be accompanied by a correctly completed ML Omnibus
Redemption Report in respect of such ML Omnibus Shares, or (ii) the aggregate Adjustment Amounts
for all Funds relating to all ML Omnibus Shares shall exceed three percent (3%) of the aggregate
CDSCs remitted to the Collection Account during such calendar month.
Cash Equivalents
shall have the meaning assigned to such term in Section 4.4 of the
Collection Agency Agreement.
CDSC
shall mean with respect to Shares of any Fund, the contingent deferred sales
charges payable, either directly or by withholding from the proceeds of the redemption of the
Shares of such Fund, by the shareholders of such Fund on any redemption of Shares of such Fund in
accordance with the Distribution Plan, the Underwriting Agreement and the Prospectus relating to
such Fund and in accordance with the Conduct Rules, as set forth in Schedule III to the Purchase
Agreement.
Change in Control
shall mean a change in control within the meaning of Section
2(a)(9) of the Investment Company Act.
Citibank
shall mean Citibank, N.A.
Code
shall mean the Internal Revenue Code of 1986, as amended from time to time and
the regulations promulgated and the rulings issued thereunder.
Collection Account
shall have the meaning assigned to such term in Section 4.1 of
the Collection Agency Agreement.
Collection Agency Agreement
shall mean the Third Amended and Restated Collection
Agency Agreement, dated as of August 18, 2003, among the Purchaser, the Program Agent, the Seller
and the Collection Agent, as the same may from time to time be amended, supplemented, waived or
modified.
5
Collection Agent
shall mean Deutsche Bank Trust Company Americas, as collection
agent under the Collection Agency Agreement, together with its successors and assigns.
Collection Agent Fee
shall have the meaning assigned to such term in Section 13 of
the Collection Agency Agreement.
Collections
shall mean (i) all amounts paid or payable by each Company in respect of
the Purchased Receivables relating to each Fund and by each shareholder of each Fund in respect of
the Purchased Receivables relating to such Fund (including all CDSCs payable by such shareholders
and withheld from redemption proceeds payable to such shareholder by the applicable Company) and
all amounts payable by the Distributor, the Seller and any Advisor to the Purchaser or the Program
Agent under the Program Documents in respect of any Purchased Receivables or in connection with the
Ancillary Rights related thereto; and (ii) all Proceeds of the foregoing, including, without
limitation, all amounts in or to the credit of the Collection Account payable to the Purchaser in
accordance with the terms of the Collection Agency Agreement.
Commission Share
shall mean, in respect of any Fund, (i) each Share of such Fund
which is issued under circumstances which would normally give rise to an obligation of the holder
of such Share to pay a CDSC upon redemption of such Share, including, without limitation, any Share
of such Fund issued in connection with a Permitted Free Exchange, and any such Share shall not
cease to be a Commission Share prior to the redemption (including a redemption in connection with a
Permitted Free Exchange) or conversion even though the obligation to pay the CDSC shall have
expired or conditions for waivers thereof shall exist, and (ii) the Seed Shares of such Fund.
Company
shall mean each investment company registered with the SEC under the
Investment Company Act specified on Schedule II to the Purchase Agreement, as the same may be
deemed supplemented pursuant to Section 2.03 of the Purchase Agreement.
Complete Termination
shall, in respect of the Distribution Plan in respect of the
Shares of any Fund, (i) have the meaning assigned to such term in such Distribution Plan in effect
on the date hereof, or (ii) shall mean a complete termination of such Distribution Plan, which
results solely from a change in generally Applicable Law or an industry-wide action by the SEC
after October 31, 2000;
provided
,
however
, that in respect of clauses (i) and (ii)
above such termination occurs despite the Sellers, each Advisors, the Distributors and their
Affiliates full compliance with their respective obligations under the Facility Documents.
Conduct Rules
shall mean the Conduct Rules of the NASD, including without limitation
Section 2830, thereof, as amended, and the rules, regulations and interpretations of the NASD in
respect thereto.
Conversion Feature
shall mean with respect to any Share of any Fund, a mandatory or
elective provision (including, without limitation, a provision which permits or requires such Share
to be converted into a share of a different class) which may result in a reduction or termination
of any amount owing from the related Company in respect of such
6
Share or the shareholder in respect of the Receivable relating to such Share (or the Share
obtained by virtue of a conversion of such Share) at some point in the future.
Date of Original Issuance
shall mean in respect of any Commission Share of any Fund,
the date with reference to which the amount of the CDSC payable on redemption thereof, if any, is
computed.
Debt
of any Person shall mean at any date, without duplication, (i) all obligations
of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the
deferred purchase price of property or services, (iv) all obligations of such Person as lessee
under leases or other agreements which have been or should be included in determining total
liabilities in accordance with GAAP, (v) liabilities in respect of unfunded benefits under any
Plan, and (vi) all Secured or Guaranteed Debt.
Demand Deposit Account
shall have the meaning assigned to such term in Section 4.1
of the Collection Agency Agreement.
Deposited Funds
shall mean, all funds at any time and from time to time on deposit
in or otherwise to the credit of the Collection Account, including without limitation, the Cash
Equivalents.
Distribution Plan
shall mean with respect to the Receivables relating to any Fund
the distribution plan of the related Company in respect thereto pursuant to which Shares of such
Fund are distributed by the Distributor, as the same may be amended, supplemented, waived or
modified from time to time in accordance with the Facility Documents, and provided no Complete
Termination has occurred, any successor or replacement distribution plan.
Distributor
shall mean A I M Distributors, Inc., together with its permitted
successors and assigns.
Dollars
and
$
shall mean lawful money of the United States of America.
E-Mail Report
shall have the meaning specified in Section 3.01(b) of the Servicing
Agreement.
Eligible Receivable
shall mean a Receivable: (a) which constitutes an account or
general intangible, as such terms are defined in the UCC of all jurisdictions the laws of which
are applicable for determining whether the interests created by the Facility Documents are
perfected; (b) which is denominated and payable in Dollars; (c) which constitutes a legal, valid
and binding contractual obligation of the obligor thereof which is fully earned and vested, not
executory and is not subject to a dispute, offset, counterclaim, defense or Adverse Claim
whatsoever, except as enforceability may be limited by applicable bankruptcy laws and other similar
laws affecting the rights and remedies of creditors generally and equitable principles whether
considered in a proceeding in equity or law; (d) which does not contravene any Applicable Law; (e)
with respect to which the related Share does not have a Conversion Feature other than a Permitted
Conversion Feature, (f) such share is not an Excluded Share, and (g) if the Share relating to such
Receivable is a Commission Share, the terms under which the
7
CDSC relating thereto are payable are set forth on Schedule III to the Purchase Agreement and
such CDSC is calculated by applying the percentages set forth in such Schedule III to the lower of
the Net Asset Value of the related Share at the time such Share was issued and the Net Asset Value
of the related Share at the time such Share is redeemed.
Event of Termination
shall have the meaning specified in Section 6.01 of the
Purchase Agreement.
Exchange Act
shall mean the Securities Exchange Act of 1934, and the rules and
regulations of the SEC thereunder, all as from time to time in effect, or any successor law, rules
or regulations, and any reference to any statutory or regulatory provision shall be deemed to be a
reference to any successor statutory or regulatory provision.
Exchange Share
shall mean, in respect of any Fund, Shares of such Fund that were
issued in a Permitted Free Exchange of Shares of any other Fund.
Excluded Share
shall mean, in respect of any Fund, (i) each Share of such Fund
issued on or after September 1, 1998 in connection with an exchange of a share of the AIM Floating
Rate Fund, a closed-end mutual fund, in accordance with the prospectus of the AIM Floating Rate
Fund, (ii) each Share issued by the Fund in a Permitted Free Exchange for a Share derived from a
Share described in clause (i) above, and (iii) each Seed Share issued by such Fund.
Existing AIM Purchase Agreement
shall have the meaning as set forth in the recitals
to the Purchase Agreement.
Existing INVESCO Purchase Agreement
shall have the meaning as set forth in the
recitals to the Purchase Agreement.
Existing Purchase Agreements
shall mean the Existing AIM Purchase Agreement and the
Existing INVESCO Purchase Agreement.
Facility Documents
shall mean each Underwriting Agreement, each Distribution Plan,
each Prospectus, the Purchase Agreement, Amendment No. 1 to Facility Documents, Amendment No. 2 to
Facility Document, Amendment No. 3 to Facility Documents, Amendment No. 4 to Facility Documents,
Amendment No. 5 to Facility Documents, the First Facility Amendment, the Waiver Agreement, the
Servicing Agreement, the Collection Agency Agreement, the Assignment Agreement, the Transfer
Agreement, each Advisory Agreement, each Transfer Agents Agreement and the Irrevocable Payment
Instructions, all agreements expressly referred to herein and all exhibits, schedules and annexes
thereto.
Federal Funds Rate
shall mean, for any period, a fluctuating interest rate per annum
equal for each day during such period to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is
a Business Day, the average of the quotations for such day on
8
such transactions received by Citibank from three Federal funds brokers of recognized standing
selected by it.
First Facility Amendment
shall mean the First Facility Amendment dated as of July 1,
2003 among IFG, IDI, the Distributor, the Purchaser and the Program Agent.
Floating Rate Fund Exchange Share
shall mean, in respect of any Fund, (i) each Share
of such Fund other than Excluded Shares issued in connection with an exchange of a share of the AIM
Floating Rate Fund, a closed-end mutual fund, in accordance with the prospectus of the AIM Floating
Rate Fund, and (ii) each Share issued by the Fund in a Permitted Free Exchange for a Share derived
from a Share described in clause (i) above.
Free Appreciation Share
shall mean, in respect of any Fund, Shares of such Fund that
were issued in a Permitted Free Exchange of Shares of any other Fund, which represent the
appreciated value of such Shares of another Fund over the initial purchase price paid for such
Shares of such other Fund.
Free Exchange Transaction
shall mean a transaction in which Shares of one Fund (the
Redeeming Fund) are exchanged for Shares of another Fund (the Issuing Fund) where, pursuant to
the applicable constituent documents of the Issuing Fund, the Shares issued by the Issuing Fund in
exchange for the Shares of the Redeeming Fund, are deemed to have been acquired at the time when
the exchanged Shares of the Redeeming Fund were acquired (or deemed to have been acquired).
Free Redemptions
shall mean a redemption of Shares of any Fund (other than
Reinvested Shares and Free Appreciation Shares of such Fund) by a shareholder of such Fund under
any arrangement which relieves or defers, in whole or in part, such shareholders obligation to pay
the maximum CDSC which would have been payable in the absence of such arrangement by any other
shareholder of such Fund redeeming a Share of such Fund that had been held by such other
shareholder for the same period the Shares of such Fund had been held by the shareholder in
question, including, without limitation, (i) arrangements pursuant to which certain Persons are
entitled to acquire Shares of such Fund under circumstances in which no CDSCs will be payable by
them, and (ii) arrangements pursuant to which CDSCs are deferred in connection with the redemption
of Shares of such Fund because the redeeming shareholder is reinvesting all or a portion of the
proceeds of such redemption in shares of another fund;
provided
,
however
, that the
term Free Redemptions shall not include any Permitted Free Exchanges.
Free Share
shall mean, in respect of any Fund, each Share of such Fund other than a
Commission Share, including, without limitation, any Reinvested Share.
Fund
shall mean each separate series of a Company specified on Schedule II to the
Purchase Agreement, as the same may be deemed supplemented pursuant to Section 2.03 of the Purchase
Agreement.
Fundamental Investment Objectives
shall mean, with respect to any Fund, the
Fundamental Investment Objectives of such Fund specified in Schedule IV to the Purchase
9
Agreement, as the same may be amended or modified with prior written consent of the Program
Agent.
Funding Notice
shall mean a written notice substantially in the form attached to as
Exhibit A-2 to the Purchase Agreement.
Funding Period
shall mean each week commencing with Monday and ending on Sunday;
provided that the initial Funding Period shall commence on the initial Purchase Date and shall end
the following Sunday and the final Funding Period shall end on the Termination Date.
GAAP
shall mean generally accepted accounting principles in the United States, in
effect from time to time, consistently applied.
Governmental Authorizations
shall mean all franchises, permits, licenses, approvals,
consents and other authorizations of any kind of all Authorities.
Governmental Filings
shall mean all filings, including franchise and similar tax
filings, and the payment of all fees, assessments, interests and penalties associated with such
filings with all Authorities.
Guarantee
by any Person shall mean any obligation, contingent or otherwise, of such
Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in part);
provided
that the term Guarantee shall not include endorsements for collection or deposit in the ordinary
course of business. The term Guarantee used as a verb has a corresponding meaning.
IDI
shall mean INVESCO Distributors, Inc.
IFG
shall mean INVESCO Funds Group, Inc.
Inception Date
shall mean, with respect to any Fund, the first date upon which
Shares of such Fund were issued in a transaction taken into account in computing the Purchase Price
paid on any Purchase Date in respect of Receivables of such Fund.
Investment Advisers Act
shall mean the Investment Advisers Act of 1940, as amended,
and the rules and regulations of the SEC thereunder, all as from time to time in effect, or any
successor law, rules or regulations, and any reference to any statutory or regulatory provision
shall be deemed to be a reference to any successor statutory or regulatory provision.
Investment Company Act
shall mean the Investment Company Act of 1940, as amended,
and the rules and regulations of the SEC thereunder, all as from time to time in effect,
10
or any successor law, rules or regulations, and any reference to any statutory or regulatory
provision shall be deemed to be a reference to any successor statutory or regulatory provision.
Investment Earnings
shall mean as of any Monthly Settlement Date, the interest and
income resulting from the investment performance of the Cash Equivalents (taken as a whole), if
any, for the period from and including the immediately preceding Monthly Settlement Date to and
excluding the Monthly Settlement Date in question.
Investment Losses
shall mean as of any Monthly Settlement Date, the losses resulting
from the investment performance of the Cash Equivalents (taken as a whole), if any, for the period
from and including the immediately preceding Monthly Settlement Date to and excluding the Monthly
Settlement Date in question.
Irrevocable Payment Instruction
shall mean the Distributors irrevocable payment
instruction to each Company and the Transfer Agent in respect of each Fund, in the form of Exhibit
C to the Purchase Agreement.
Issue Price
shall mean, with respect to any Fund, the gross public offering price of
the Shares of such Fund as reported by the Transfer Agent for such Fund on the date of issuance of
such Shares.
Law
shall mean any (a) judicial, executive, legislative, administrative or other
action, code, consent decree, constitution, decree, directive, enactment, finding, guideline, law,
injunction, interpretation, judgment, order, ordinance, policy statement, proclamation,
promulgation, regulation, requirement, rule, rule of law, rule of public policy, settlement
agreement, statute, or writ, of any Authority, whether domestic or foreign, and whether or not
having the force of law, or any particular section, part or provision thereof, (b) common law or
other legal precedent, or (c) arbitrators, mediators or referees decision, finding, award or
recommendation, or, in any case, any particular section, part or provision thereof.
Lien
shall mean any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien or security interest (statutory or other), or preference, priority
or other security agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the foregoing, and the
filing of any financing statement under the UCC or comparable law of any jurisdiction), or other
charge or encumbrance, including the retained security title of a conditional vendor or lessor.
Liquidation Plan
shall mean with respect to any Company or any Fund, a plan of
dissolution or liquidation, a plan to dispose of a substantial portion of its assets out of the
ordinary course of business (except in connection with a Permitted Merger) or any other plan of
action with similar effect.
Master Trust
shall mean any trust or other special purpose entity to which any
interest in any of the Purchased Receivables relating to any Fund or the right to receive any
Collections with respect thereto has been transferred in connection with a Take-out Transaction.
11
Master Servicer
shall mean Citicorp North America, Inc., in its capacity as master
servicer for the Master Trusts, together with its successors and assigns.
Maximum Aggregate Sales Charge Allowable
shall mean with respect to the Receivables
relating to any Fund the maximum Asset Based Sales Charge which may be paid by the related Company,
in respect of such Fund to the Distributor pursuant to the Underwriting Agreement, the Distribution
Plan and the Prospectus, together with interest thereon at the Maximum Interest Allowable, relating
to such Fund and pursuant to the maximum sales charge rule set forth in Section 2830 of the
Conduct Rules, assuming the related Company, in respect of such Fund pays a separate Service Fee,
unreduced by payments theretofore made in respect thereof by such Company, in respect of such Fund.
Maximum Interest Allowable
shall mean the maximum interest which may be taken into
account under Section 2830 of the Conduct Rules in computing the Maximum Aggregate Sales Charge
Allowable.
ML Omnibus Redemption Report
shall mean the Sub-transfer Reportwhich details CDSC
collections and Share redemptions, substantially in the form provided to the Program Agent on June,
2003.
ML Omnibus Shares
shall mean in respect of any Fund, Omnibus Shares of such Fund
held in the name of the Merrill Lynch, Pierce, Fenner & Smith Street account on the records of the
Transfer Agent.
Monthly Settlement Date
shall mean the twelfth (12th) Business Day of each calendar
month during the term of the Purchase Agreement.
Moodys
shall mean Moodys Investors Service, Inc., together with its successors and
assigns.
NASD
shall mean NASD, Inc. or any successor entity or entities.
Net Asset Value
shall mean, (i) with respect to any Fund, as of the date any
determination thereof is made, the net asset value allocated to Shares of such Fund computed in the
manner such value is required to be computed by the applicable Company, in respect of such Fund in
its reports to its shareholders, and (ii) with respect to any Share of such Fund as of any date,
the quotient obtained by dividing the net asset value of such Fund (as computed in accordance with
clause (i) above) as of such date allocated to the Shares of such Fund (in accordance with the
Distribution Plan, the Underwriting Agreement and the Prospectus) by the number of Shares of such
Fund outstanding on such date.
Non-Omnibus Shares
shall mean, in respect of any Fund, all Shares of such Fund which
are not Omnibus Shares.
Normal Distributions
shall mean, in respect of any Fund for any taxable year, (a)
distributions out of investment company taxable income, (b) exempt-interest dividends and (c)
capital gain dividends, of such Fund, in each case, as such terms are used in Section 852 of the
Code; but only to the extent any gains giving rise to the distributions and dividends
12
described in clauses (a) and (c) arose in the ordinary course of such Funds investment
activities (including shifts in the proportion of assets held in cash or cash equivalents) and in
accordance with such Funds Fundamental Investment Objectives as the same may be amended,
supplemented or replaced in accordance with the Program Documents (it being understood that this
clause (c) includes gains resulting from sales to raise funds to satisfy shareholder redemption
requests made in the ordinary course of business).
Omnibus Account
shall mean, in respect of any Fund, any account maintained by the
Transfer Agent reflecting the record ownership of Shares of such Fund by a Person who maintains
sub-transfer agency records reflecting the actual beneficial ownership of such Shares in other
Persons.
Omnibus Shares
shall mean, in respect of any Fund, the Shares of such Fund held in
the name of a broker-dealer street account on records maintained by the Transfer Agent and for
which such broker-dealer provides sub-transfer agency services.
Permitted Banks
shall have the meaning assigned to such term in Section 4.4(a)(iv)
of the Collection Agency Agreement.
Permitted Change in Control
shall mean any Change in Control relating to the Seller,
the Distributor or any Advisor which satisfies the conditions specified in Schedule VI to the
Purchase Agreement.
Permitted Conversion Feature
shall mean with respect to any Share of any Fund, a
Conversion Feature in respect of such Fund which, by its terms, may not become effective prior to
the eighth year anniversary (seventh year anniversary in respect of any Share of the AIM Global
Trends Fund issued prior to May 29, 1998) of the issuance of such Share or, if such Share
constitutes an Exchange Share, of the Share from which such Exchange Share derives;
provided
, that Free Shares of any holder relating to any Fund shall convert in proportion
to the number of Shares (other than Free Shares) of that holder in such Fund being converted on
such date.
Permitted Designee
shall mean, (a) the Program Agent and the Purchaser, and (b) any
officer, partner, employee, agent, representative, legal counsel, auditors or trustee designated by
the Purchaser or the Program Agent, as the case may be, which has agreed to be bound by
confidentiality undertakings in substance comparable to Section 9.10 of the Purchase Agreement;
provided
,
however
, that any such designee appointed by the Program Agent or the
Purchaser shall not, without the consent of the Seller, be the principal underwriter of class B
shares of mutual funds.
Permitted Free Exchange
shall mean any exchange of Shares of one Fund (the
Redeeming Fund) for Exchange Shares and, perhaps Free Appreciation Shares of another Fund (the
Issuing Fund), where, pursuant to the applicable constituent documents of the Issuing Fund: (i)
Exchange Shares of the Issuing Fund are deemed for all purposes (including the computation of the
amount of, and timing of payment of the related CDSC) to have been acquired at the time when the
exchanged Shares of the Redeeming Fund were acquired (or deemed to have been acquired) by the
holder thereof; (ii) the exchanging shareholder becomes
13
obligated to pay to the Issuing Fund the same CDSC in respect of the Exchange Shares of the
Issuing Fund and on the same terms as such holder was obligated to pay to the Redeeming Fund in
respect of the Shares of the Redeeming Fund so exchanged; (iii) the date upon which such Exchange
Shares of the Issuing Fund received in the Exchange are converted pursuant to the Permitted
Conversion Feature is the same as the date the exchanged Shares of the Redeeming Fund were to be
converted pursuant to the Permitted Conversion Feature of the exchanged Shares;
provided
,
however
, that an Exchange Share issued in respect of a Share of AIM Global Trends Fund
which was issued prior to May 29, 1998 shall have the Permitted Conversion Feature of the Fund
issuing such Exchange Share; (iv) the Maximum Aggregate Sales Charge Allowable in respect of the
Issuing Fund pursuant to the Underwriting Agreement, the Distribution Plan and the Prospectus of
the Issuing Fund is increased on the effective date of the exchange by 6.25% (or the then Maximum
Asset Based Sales Charge payable by the related Company) of the Net Asset Value on such exchange
date of the Shares of the Redeeming Fund being so exchanged;
provided
, that the amount of
such increase shall not exceed the Amortized Maximum Aggregate Sales Charge Allowable of the
Redeeming Fund immediately prior to the exchange; (v) the Amortized Maximum Aggregate Sales Charge
Allowable in respect of the Redeeming Fund is reduced by the same amount as the Maximum Aggregate
Sales Charge Allowable in respect of such Issuing Fund is increased; and (vi) both the redemption
of the Shares of the Redeeming Fund so exchanged and the issuance of the Shares of the Issuing Fund
are effected at the Net Asset Value of such Shares at the date of the exchange without any
reduction for fees or expenses attributable to such exchange.
Permitted Merger
shall mean a transfer of assets, merger or consolidation of two or
more Funds: (i) pursuant to which all of the assets of the participating Funds are transferred to
the surviving Fund, (ii) pursuant to which the surviving Fund assumes substantially all obligations
of the participating Funds, and all of the obligations of the participating Funds in respect of or
relating to the Purchased Receivables, (iii) which is carried out in a manner so that the
Distribution Plan of each of the participating Funds is continued as part of the Distribution Plan
of the surviving Fund without affecting the rights of the Distributor in respect of the Purchased
Receivables relating to the participating Funds, and (iv) which could not otherwise reasonably be
expected to have an Adverse Effect.
Person
shall mean an individual or a corporation (including a business trust),
partnership, trust, incorporated or unincorporated association, cooperative, joint stock company,
limited liability company, government (or an agency or political subdivision thereof) or other
entity of any kind.
Post-Default Rate
shall mean in respect of any amount not paid when due, a rate per
annum during the period commencing on the due date thereof until such amount is paid in full equal
to the Base Rate as in effect from time to time plus two percent (2%).
Prime Rate
shall mean the rate of interest from time to time announced by Citibank
at its Principal Office as its prime commercial lending rate. The Prime Rate is a reference rate
and does not necessarily represent the lowest or best rate actually charged to any customer.
14
Principal Office
shall mean the principal office of Citibank presently located at
399 Park Avenue, New York, New York.
Private Authorizations
shall mean all franchises, permits, licenses, approvals,
consents and other authorizations of all Persons (other than Authorities) including, without
limitation, those with respect to trademarks, service marks, trade names, copyrights, computer
software programs and technical and other know-how.
Proceeds
shall have, with reference to any property or asset, the meaning assigned
to such term under the UCC and, in any event, shall include, but not be limited to, whatever is
received upon the sale, exchange, collection or other disposition of such property or asset and any
and all amounts from time to time paid or payable under or in connection with such property or
asset.
Program Agent
shall mean Citicorp North America, Inc., as agent for the Purchaser
under the Purchase Agreement, the Collection Agency Agreement and the Servicing Agreement, together
with its successors and assigns.
Program Documents
shall mean the Facility Documents, the CDSC arrangements
applicable to the holders of the Shares, and the other agreements, documents and instruments
entered into or delivered by the Seller, the Distributor or any Advisor, in connection therewith,
as the same may from time to time be amended, supplemented, waived or modified.
Program Termination Date
shall mean the earlier of (i) the date upon which all
Shares of all Funds which relate to Purchased Receivables have been redeemed or converted pursuant
to a Permitted Conversion Feature and all amounts owing from the Seller under the Program Documents
have been paid in full, and (ii) the date upon which the Unamortized Gross Purchase Amount in
respect of Purchased Receivables relating to all Funds has been reduced to zero and all amounts
owing from the Seller under the Program Documents have been paid in full. For the avoidance of
doubt, the Seller shall not be required to determine the Unamortized Gross Purchase Amount until
such time as the Seller shall deem it necessary for the purpose of determining whether the Program
Termination Date has occurred.
Prospectus
shall mean with respect to any Fund the prospectus filed with the SEC as
a part of the related Companys Registration Statement on Form N-1A, as amended, and shall include,
without limitation, the Statement of Additional Information included in such Registration
Statement.
Purchase Agreement
shall mean the Third Amended and Restated Purchase and Sale
Agreement dated as of August 18, 2003 among the Seller, the Distributor, the Advisors, the
Purchaser and the Program Agent, as the same may from time to time be amended, supplemented, waived
or modified.
Purchase Date
shall mean with respect to the Receivables relating to any Fund, each
purchase date set forth in the Purchase Notice. In the event that a Purchase Date shall fall upon
a day which is not a Business Day, the Purchase Date shall be the Business Day next following the
date on which the Purchase Date would otherwise have occurred.
15
Purchase Limit
shall mean $100,000,000, or such other amount as shall be agreed upon
in writing by the Program Agent and the Seller;
provided
, that on and after the Termination
Date the Purchase Limit shall be deemed to be zero for all purposes of the Purchase Agreement.
Purchase Notice
shall mean the notice substantially in the form of Exhibit A to the
Purchase Agreement, from the Seller to the Program Agent specifying (i) the Purchase Date, (ii) the
Purchase Price for the Receivables relating to each Fund payable on such Purchase Date, (iii) the
Sale Cutoff Date relating to the Receivables of each Fund, and (iv) the computation of each such
Purchase Price in reasonable detail.
Purchase Period
shall mean with respect to any Purchase Date for Receivables
relating to any Fund the period specified in the Purchase Notice delivered in respect of such
Purchase Date, which shall be the period on or prior to the Sale Cutoff Date for the Receivables
relating to such Fund set forth in such Purchase Notice and after (i) in respect of the initial
Purchase Date for such Receivables, (x) the inception date of such Fund if all of the outstanding
Shares of such Fund were issued on or after May 2, 1995, or (y) the date specified in such Purchase
Notice for such Fund if any outstanding Shares of such Fund where issued prior to May 2, 1995, and
(ii) in respect of any Purchase Date after the initial Purchase Date of such Receivables, the
immediately preceding Sale Cutoff Date for the Receivables relating to such Fund.
Purchase Price
shall mean with respect to the Receivables relating to any Fund to be
purchased on any Purchase Date, an amount equal to the product of (A) the then applicable Purchase
Price Percentage relating to such Fund, and (B) the total Issue Price of the Shares of such Fund
sold during the Purchase Period for such Purchase Date;
provided
,
however
, that in
the event that the Seller has received any amount in respect of the Sales Charges relating to any
Receivables proposed to be purchased hereunder, the Purchase Price for such Receivables shall be
adjusted as agreed to by the Program Agent and the Seller in order to reflect the reduced amount
payable to the Purchaser in respect of such Sales Charges and notwithstanding anything in this
Agreement to the contrary the Purchaser shall have no obligation to purchase any such Receivables
under this Agreement until such reduced Purchase Price has been so agreed upon.
Purchase Price Percentage
shall mean the applicable percentage specified in that
certain letter agreement dated as of August 18, 2003 between the Seller and the Program Agent.
Purchased Receivables
shall mean with respect to any Fund, as of any date, the
Receivables allocated to Purchaser in accordance with the Allocation Procedures.
Purchaser
shall mean Citibank, together with its successors and assigns.
Purchaser Report
shall mean the report in substantially the form of Schedule I to
the Purchase Agreement.
Purchasers Asset Based Sales Charge Portion
shall mean the portion of the Purchased
Receivables constituting Asset Based Sales Charges allocable to the Purchaser pursuant to the
Allocation Procedures.
16
Purchasers Assumed Yield
shall mean as of the date of any determination, an amount
(computed on a daily average basis on the basis of actual days elapsed in a year of 365 days) equal
to the Purchasers Assumed Yield Rate on the Unamortized Aggregate Purchase Price on such date.
Purchasers Assumed Yield Rate
shall mean a rate equal to the Prime Rate plus one
percent (1%) per annum.
Purchasers CDSC Portion
shall mean the portion of Receivables constituting CDSCs
allocable to the Purchaser pursuant to the Allocation Procedures.
Purchasers Investment Earnings
shall have the meaning assigned to such term in
Section 4.3(e) of the Collection Agency Agreement.
Purchasers New Shares
shall have the meaning assigned to such term in the Waiver
Agreement.
Purchasers Portion
shall mean the sum of (i) Purchasers CDSC Portion, (ii)
Purchasers Asset Based Sales Charge Portion, (iii) the Purchasers Investment Earnings, and (iv)
all other amounts (other than the Sellers Portion) to which the Purchaser is entitled under the
Program Documents which are deposited in the Collection Account.
Purchasers Remittance Account
shall mean the account of the Purchaser (Acct. No.
3885-8117, ABA No. 021000089) maintained with Citibank or such other account as the Purchaser shall
designate in writing.
Receivables
shall mean with respect to each Fund, all of the rights under the
related Underwriting Agreement, the related Distribution Plan, the related Prospectus and in
accordance with the applicable Conduct Rules to receive amounts paid or payable in respect of Asset
Based Sales Charges (including interest at the Maximum Interest Allowable) and CDSCs, in each case
in respect of the issuance by such Fund of Shares and in respect of Shares of any other Fund
acquired in any Permitted Free Exchange of shares of the Fund in question, including, without
limitation, any similar amount paid or payable under any replacement Underwriting Agreement,
Distribution Plan, Prospectus or the Conduct Rules, and any continuation payments in respect
thereof paid or payable by the related Company in respect of Shares of such Fund in the event of a
termination of the related Distribution Plan or the related Underwriting Agreement; it being
understood that such term does not include the Service Fee payable pursuant to the related
Underwriting Agreement, the related Distribution Plan, the Prospectus and the Conduct Rules.
Reinvested Share
shall mean, in respect of any Fund, a Share which is issued by such
Fund as a result of the reinvestment of dividends or other distributions, whether ordinary income,
capital gain or exempt-interest dividends or other distributions, of such Fund.
Related Collections
shall mean (i) all amounts paid or payable by the applicable
Company in respect of the Receivables relating to each Fund and by each shareholder of each Fund in
respect of Receivables relating to such Fund (including all CDSCs payable by such shareholders and
withheld from redemption proceeds payable to such shareholders by the
17
applicable Company for payment to the Distributor and excluding Service Fees) and (ii) all
Proceeds of the foregoing, excluding, in the case of (i) and (ii) above, all Collections.
S&P
shall mean Standard & Poors Ratings Services, together with its successors and
assigns.
Sales Charge
shall have the meaning set forth in Section 2830 of the Conduct Rules,
it being understood that such term does not include any Service Fee.
Sale Cutoff Date
shall mean with respect to any Fund, the last date upon which
Shares of such Fund were issued in a transaction taken into account in computing the Purchase Price
paid on any Purchase Date in respect of the Receivables of such Fund.
SEC
shall mean the United States Securities and Exchange Commission or any other
governmental authority of the United States of America at the time administrating the Securities
Act, the Investment Company Act or the Exchange Act.
Secured or Guaranteed Debt
of any Person shall mean at any date, (i) all Debt of
others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such
Person, and (ii) all Debt of others in respect of which such Person has issued a Guarantee.
Securities Act
shall mean the Securities Act of 1933, as amended, and the rules and
regulations of the SEC thereunder, all as from time to time in effect, or any successor law, rules
or regulations, and any reference to any statutory or regulatory provisions shall be deemed to be a
reference to any successor statutory or regulatory provision.
Seed Share
shall mean in respect of a Fund, each Share of such Fund (i) which does
not have a CDSC, but which does not constitute a Free Share, and (ii) which was issued to the
Seller or an Affiliate of the Seller prior to the initial public offering of the Shares of such
Fund.
1
Seller
shall mean A I M Management Group Inc., together with its permitted
successors and assigns.
Sellers Account
shall mean the account of the Seller maintained by Bank One, ABA
No.: 071000013, Acct. No.: 1061803, Ref. A I M Management Group or such other account as the Seller
shall designate in writing to the Program Agent and the Collection Agent.
Sellers Asset Based Sales Charge Portion
shall mean the portion of Receivables
constituting Asset Based Sales Charges allocable to the Seller pursuant to the Allocation
Procedures.
Sellers CDSC Portion
shall mean the portion of Receivables constituting CDSCs
allocable to the Seller pursuant to the Allocation Procedures.
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1
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The documents assume that the Seed Shares will never be
exchanged into another Fund.
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18
Sellers Class A and C CDSC Portion
shall mean the contingent deferred sales charges
payable with respect to Class A and C shares of the Funds held in the name of Merrill Lynch,
Pierce, Fenner & Smith Street Account on records maintained by the Transfer Agent. For the
avoidance of doubt, the Sellers CDSC Portion does not include the Sellers Class A and C CDSC
Portion.
Sellers Investment Earnings
shall have the meaning assigned to such term in Section
4.3(e) of the Collection Agency Agreement.
Sellers Portion
shall mean the sum of (i) Sellers CDSC Portion, (ii) Sellers
Asset Based Sales Charge Portion, and (iii) Sellers Investment Earnings.
Selling Agent
shall mean each Person which acts as direct or indirect distributor,
underwriter, broker, dealer or agent for the Shares of a Fund together with its successors and
assigns.
Selling Agents Agreement
shall mean each agreement pursuant to which a Person
undertakes to act as Selling Agent in respect of the Shares of any Fund, as the same may from time
to time be amended, supplemented, waived or modified.
Service Fee
shall have the meaning set forth in Section 2830(b)(9) of the Conduct
Rules.
Servicer
shall mean A I M Management Group Inc., in its capacity as servicer under
the Servicing Agreement, together with its permitted successors and assigns.
Servicing Agreement
shall mean the Third Amended and Restated Servicing Agreement
dated as of August 18, 2003 among the Purchaser, the Program Agent and the Servicer, as the same
may from time to time be amended, supplemented, waived or modified.
Servicing Fee
shall have the meaning assigned to such term in the Servicing
Agreement.
Shares
shall mean in respect of any Fund, any class of shares of such Fund which are
specified on Schedule II to the Purchase Agreement, as the same may be deemed supplemented pursuant
to Section 2.03 of the Purchase Agreement.
Significant Affiliates
shall mean (i) any corporation or holding company or similar
entity which after the date hereof owns or controls the majority of the outstanding voting
securities of the Seller or any Advisor, or (ii) any Affiliate of the Seller or any Advisor which
is a subsidiary of the Seller if the Sellers or such Advisors beneficial interest in the total
assets of such subsidiary is equal to or greater than five percent (5%) of the total assets of the
Seller or such Advisor, and in any event in respect of the Seller shall include the Distributor and
the Transfer Agent.
SIPA
shall mean the Securities Investor Protection Act of 1970, as amended from time
to time and the regulations promulgated and the rulings issued thereunder.
19
Specified Sub-transfer Agent
shall have the meaning assigned to such term in the
Irrevocable Payment Instruction.
Sub-transfer Agent
shall mean, in respect of any Fund, the record owner of any
Omnibus Account.
Sub-transfer Agent Report
shall mean in respect of any Sub-transfer Agent, the
monthly and daily reports of such Sub-transfer Agent relating to the Omnibus Shares for which sub
Sub-transfer Agent provides sub-transfer agency functions, including without limitation the ML
Omnibus Redemption Report, the forms of which have each been approved in writing by the Program
Agent.
Take-out Adjustment Amount
shall mean in connection with a Take-out Transaction, the
amount by which the Purchasers capacity to purchase Receivables has been increased as a result of
such Take-out Transaction, as set forth in the related Take-out Notice.
Take-out Notice
shall mean a notice from the Program Agent to the Seller,
substantially in the form attached as Exhibit F to the Purchase Agreement, stating that the
Purchaser has completed a Take-out Transaction and specifying the related Take-out Adjustment
Amount.
Take-out Transaction
shall mean any transaction pursuant to which the Purchaser
(including, without limitation, any Master Trust which obtains such interest directly or indirectly
from the Purchaser) sells or otherwise transfers, participates or causes to be sold, transferred or
participated interests in the Purchased Receivables relating to any Fund (including, without
limitation, the right to receive any portion of any Collections) to any Person, including a Master
Trust which publicly or privately sells debt instruments and/or certificates or other instruments
representing ownership interests in such Master Trust or interests in any Purchased Receivables
relating to any Fund (including, without limitation, any right to receive any portion of any
Collections).
Termination Date
shall mean December 14, 2003 or such later date as shall be agreed
to in writing by the parties to the Purchase Agreement and such earlier date as the Purchase
Agreement shall terminate pursuant to Section 6.01 of the Purchase Agreement.
Transfer Agent
shall mean (i) prior to October 1, 2003, A I M Fund Services, Inc.
and INVESCO Funds Group, Inc., as the case may be, and (ii) on or after October 1, 2003, A I M Fund
Services, Inc., in each case in its capacity as transfer agent for the Funds, together with their
permitted successors and assigns in such capacity.
Transfer Agent Reports
shall mean in respect of any Transfer Agent, the monthly and
daily reports of such Transfer Agent relating to the Non-Omnibus Shares for which such Transfer
Agent provides transfer agency functions, the forms of which have each been approved in writing by
the Program Agent.
Transfer Agents Agreement
shall mean each agreement pursuant to which the Transfer
Agent undertakes to act as transfer agent for any Fund, as the same may from time to time be
amended, supplemented, waived or modified.
20
Transfer Agreement
shall mean the Amended and Restated Distribution Fee Purchase
Agreement dated as of August 18, 2003 between the Distributor and the Seller, as the same may from
time to time be amended, supplemented, waived or modified.
Transferee
shall have the meaning assigned to such term in Section 9.15 of the
Purchase Agreement.
True Sale
shall mean, with respect to any transfer of an asset or property, the sale
of an ownership interest in such asset or property (not the granting of a security interest
therein), within the meaning of all Applicable Law, including, without limitation, the Code and the
Bankruptcy Code, and, without limiting the generality of the foregoing, which is enforceable
against all creditors of the Person making such transfer and all Affiliates of such Person in
accordance with the terms of such transfer, notwithstanding the bankruptcy, insolvency or
reorganization of, or similar proceeding with respect to, or the appointment of a receiver or
conservator of the Person making such transfer or any Affiliate of such Person, and in connection
with any proceeding under the Bankruptcy Code, in respect of which any one or more of the Person
making such transfer or any Affiliate of such Person is the debtor, as such term is used in the
Bankruptcy Code, the Purchased Receivables and the Proceeds thereof will not be deemed the property
of the debtor.
True Sale Opinion
shall mean the opinion of counsel delivered in connection with the
Purchase Agreement which addresses the questions as to whether in a case under Title 11 of the
Bankruptcy Code the conveyances of the Receivables under the Transfer Agreement and under the
Purchase Agreement would each be a true sale and not a secured financing;
provided
,
however
, that the term True Sale Opinion shall be deemed to include a written
confirmation from the counsel which previously delivered a True Sale Opinion that the conclusions
reached in such prior True Sale Opinion continue to be true and correct and may be relied upon as
of the date of such written confirmation.
UCC
shall mean the Uniform Commercial Code, as from time to time in effect in the
applicable jurisdictions.
Unaffiliated Agent
shall mean any Sub-transfer Agent or Transfer Agent which is not
an Affiliate of the Seller, the Distributor or AMVESCAP plc.
Unamortized Aggregate Purchase Price
shall mean, in respect of the Purchased
Receivables as of any date of determination, an amount equal to the aggregate Purchase Prices paid
by the Purchaser under this Agreement in respect of all Purchased Receivables, less the sum of (i)
the portions of the aggregate amounts paid by each Company and on behalf of the holders of Shares
in respect of CDSCs and Asset Based Sales Charges to the Collection Account relating to Purchased
Receivables which have not been conveyed by the Purchaser in connection with a Take-out Transaction
for which a Take-out Notice has been executed and which have been allocated and distributed to
Citibank through such date of determination pursuant to the allocation procedures set forth in the
documentation entered into in connection with a Take-out Transaction which exceeds the accrued and
unpaid Purchasers Assumed Yield, and (ii) the sum of each Take-out Adjustment Amount in respect of
each Take-out Transaction specified in one or
21
more Take-out Notices which have been acknowledged by the Seller and the Distributor and
returned to the Program Agent on or prior to such date of determination.
Unamortized Gross Purchase Amount
shall mean, in respect of the Purchased
Receivables relating to any Fund, as of any date of determination, the Maximum Aggregate Sales
Charge Allowable in respect of Shares relating to such Purchased Receivables, minus the sum of (a)
the aggregate amounts paid by the applicable Company (including amounts paid by the holders of
Shares of such Fund in respect of CDSCs) in respect of Shares of such Fund and deposited in the
Collection Account and applied and distributed to the payment of such Purchased Receivables in
accordance with the terms of the Collection Agency Agreement through such date of determination,
and (b) if such Fund constitutes an AIM GT Fund, the aggregate amounts paid by the applicable
Company (including amounts paid by the holders of Shares of such AIM GT Fund in respect of CDSCs)
on or prior to August 31, 1998 to GT Global, Inc. or the Distributor.
Underwriting Agreement
shall mean with respect to the Shares relating to any Fund,
the agreement between the Distributor and the applicable Company, in respect of Shares of such Fund
and any replacement agreement as may be adopted in the future, pursuant to which the Distributor
has been appointed the principal underwriter in respect of the Shares relating to such Fund.
Waiver Agreement
shall mean the Waiver Agreement dated as of August 18, 2003 among
the Distributor, the Seller, the Purchaser and the Program Agent, as the same may from time to time
be amended, supplemented, waived or modified.
Weighted Average Percentage Decline in the Net Asset Value of Shares of all Funds
in
reference to a period from one Calculation Date (the Reference Date) to a later Calculation Date
shall be determined by (i) determining the negative or positive percentage change in the Net Asset
Value per Share which relates to Purchased Receivables of each Fund from the Reference Date to such
later Calculation Date, (ii) computing the arithmetic sum of the products obtained by multiplying
the percentage change obtained in clause (i) for Shares relating to Purchased Receivables of each
Fund by the Net Asset Value of such Shares of such Fund on such later Calculation Date, and (iii)
if the sum obtained in clause (ii) is negative dividing the sum obtained in clause (ii) by the Net
Asset Value of all Shares which relate to Purchased Receivables of all Funds on such later
Calculation Date and expressing the result as a negative percentage, and if the sum obtained in
clause (iii) is positive the Weighted Average Percentage Decline in the Net Asset Value of Shares
of all Funds shall be zero.
22
EXHIBIT 10.8
INVESCO ESOP
as Amended and Restated
Generally Effective as of February 1, 2005
Table of Contents
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page
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§ 1. AMENDMENT RESTATEMENT AND EFFECTIVE DATE
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1
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§ 2. CONSTRUCTION
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1
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2.1 Controlling Laws
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1
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2.2 Tax Status
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1
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2.3 Headings and References
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1
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2.4 Legal Rights
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1
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2.5 No Employment Rights
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2
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2.6 Definitions
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2
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§ 3. DEFINITIONS
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2
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3.1 Account
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2
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3.2 Acquisition Loan
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2
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3.3 Affiliate
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2
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3.4 AMVESCAP Benefit Plans Committee (or Committee)
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2
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3.5 AMVESCAP Stock
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2
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3.6 AMVESCAP Stock Account
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3
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3.7 AMVESCAP Stock Fund
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3
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3.8 Beneficiary
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3
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3.9 Board
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3
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3.10 Cash Account
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3
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3.11 Code
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3
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3.12 Company
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3
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3.13 Compensation
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3
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3.14 Directed Account
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4
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3.15 Disability
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4
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3.16 Disqualified Person
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4
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3.17 Election Form
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4
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3.18 Eligible Employee
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4
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3.19 Employee
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5
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3.20 Employment Date
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5
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3.21 Entry Date
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5
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3.22 ERISA
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5
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3.23 ESOP Portion of the Plan
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5
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i
Table of Contents
(Continued)
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page
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3.24 Financed Shares
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5
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3.25 Highly Compensated Employee
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5
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3.26 Hour of Service
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6
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3.27 Investment Fund
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6
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3.28 Investment Manager
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6
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3.29 Loan Suspense Account
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6
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3.30 Normal Retirement Age
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6
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3.31 Participant
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6
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3.32 Participating Employer
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7
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3.33 Plan
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7
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3.34 Plan Year
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7
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3.35 Trust
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7
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3.36 Trust Fund
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7
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3.37 Trustee
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7
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3.38 Valuation Date
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7
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3.39 Year of Service
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7
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§ 4. PARTICIPATION REQUIREMENTS
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7
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4.1 Eligibility to Participate
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7
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4.2 Reemployment
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8
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§ 5. CONTRIBUTIONS
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8
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5.1 Money Purchase Pension Contribution and Allocation
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8
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5.2 Stock Bonus Contributions and Allocation
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8
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5.3 USERRA
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9
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5.4 Form and Time of Contribution
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9
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5.5 Freezing of Plan
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9
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|
§ 6. VALUATIONS, ACCOUNT DEBITS AND CREDITS, REPAYMENT OF ACQUISITION LOAN AND RELEASE OF FINANCED
SHARES
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9
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6.1 Fair Market Value
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9
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6.2 Valuation Date Allocation Procedure
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9
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ii
Table of Content
s
(Continued)
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page
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6.3 Repayment of Acquisition Loan
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11
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6.4 Release of Financed Shares
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12
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6.5 Allocation Corrections
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12
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§ 7. VOTING RIGHTS AND TENDER RIGHTS
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12
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7.1 Voting Rights
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12
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7.2 Tender Offer for AMVESCAP Stock
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13
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§ 8. LIMITATION ON ALLOCATION TO
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14
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8.1 General Rule
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14
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8.2 Corrections
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14
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8.3 Coordination Rules
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15
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§ 9. BENEFITS UPON TERMINATION OF EMPLOYMENT
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15
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§ 10. TIME AND FORM OF PAYMENT OF BENEFITS
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15
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10.1 Time of Payment of Account
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15
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10.2 Distribution of AMVESCAP Stock or Cash
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16
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10.3 Small Accounts
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16
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10.4 Participants Right to Put AMVESCAP Stock to the Company and This Plan
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17
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10.5 Eligible Rollover Distribution
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18
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10.6 30-Day Waiver
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19
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10.7 Cash Dividends
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19
|
|
§ 11. BENEFIT PAYMENT RULES
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20
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|
11.1 Election Form
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20
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11.2 Missing Person
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20
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|
11.3 Spendthrift Clause
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20
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|
11.4 Payment to be Made Upon Committees Direction
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21
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11.5 Payment to a Minor or Incompetent
|
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21
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|
11.6 Benefits Supported Only by Trust Fund
|
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21
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|
11.7 Qualified Domestic Relations Order
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21
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11.8 Nonreversion and Exclusive Benefit
|
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22
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|
11.9 No Estoppel of Plan
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22
|
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iii
Table of Contents
(Continued)
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page
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11.10 Mistakes
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23
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§ 12. ADMINISTRATION
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23
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12.1 Named Fiduciary
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23
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12.2 Committee Administrative Powers and Duties
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|
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24
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12.3 Nondiscrimination
|
|
|
25
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|
12.4 Agent for Service of Process
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|
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25
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|
12.5 Reporting and Disclosure
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|
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25
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12.6 Acquisitions
|
|
|
25
|
|
§ 13. TRUSTEE
|
|
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25
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|
13.1 Acceptance of Trust and Limited Duties Thereunder
|
|
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25
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13.2 Legal Title to Plan Assets
|
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25
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|
13.3 Resignation, Removal and Succession of Trustee
|
|
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25
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13.4 Full Investment and General Powers
|
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26
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13.5 Acquisition Loans
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|
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28
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|
13.6 Payment of Benefits
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|
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28
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|
13.7 Trustees Compensation; Plan Expenses and Taxes
|
|
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28
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|
13.8 Annual Accounting of the Trustee
|
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28
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13.9 Records and Statements
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|
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29
|
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13.10 Authority to Act without Bond or Court Approval
|
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29
|
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§ 14. INVESTMENT OF THE TRUST FUND
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29
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14.1 Investment in AMVESCAP Stock
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29
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14.2 General Investments
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29
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|
14.3 Directed Accounts
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30
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|
14.4 Qualified Participant Diversification Election
|
|
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31
|
|
14.5 Trustee to Invest the Trust Fund Unless Otherwise Provided
|
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32
|
|
14.6 Appointment of Investment Manager
|
|
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32
|
|
§ 15. AMENDMENT, TERMINATION, MERGER AND TRANSFER
|
|
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33
|
|
15.1 Amendment
|
|
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33
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15.2 Termination
|
|
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33
|
|
iv
Table of Contents
(Continued)
|
|
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|
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page
|
15.3 Merger or Consolidation or Similar Transaction
|
|
|
34
|
|
15.4 Transfer of Certain Assets
|
|
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34
|
|
§ 16. TOP HEAVY RULES
|
|
|
34
|
|
16.1 Minimum Employer Contribution
|
|
|
34
|
|
16.2 Additional Contribution
|
|
|
34
|
|
16.3 Determination of Top Heavy Status
|
|
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35
|
|
16.4 Limitation on Allocations
|
|
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35
|
|
16.5 Definitions
|
|
|
36
|
|
v
INVESCO ESOP
as
Amended and Restated
Generally Effective as of February 1, 2005
§ 1.
AMENDMENT RESTATEMENT AND EFFECTIVE DATE
This Plan is an amendment and restatement of the INVESCO ESOP as last amended and restated
effective as of February 1, 2005. Effective January 1, 2000, the Plan was frozen, all
contributions to the Plan were discontinued and no additional contributions could be made to the
Plan.
This amendment and restatement of the Plan is effective as of February 1, 2005 to incorporate
the prior amendments to the Plan, to change the allocation of fiduciary responsibilities under the
Plan and for certain other purposes.
The provisions of this amendment and restatement of the Plan shall apply only to those
eligible employees who terminate employment with a Participating Employer on or after February 1,
2005 or such later date as may apply for a provision which become effective afterwards. Benefits
payable to or on behalf of a participant who terminates employment prior to February 1, 2005 shall
not be affected by the terms of any Plan amendment adopted after such Participants termination of
employment unless the amendment provides otherwise.
§ 2.
CONSTRUCTION
2.1
Controlling Laws
. This Plan shall be construed and interpreted under the laws of the
State of Georgia to the extent such laws are not preempted by federal law.
2.2
Tax Status
. The Company intends that this Plan and the related Trust satisfy the
requirements for tax exempt status under Code § 401, Code § 501 (a) and related Code sections as an
employee stock ownership plan which in part is a money purchase pension plan and in part is a stock
bonus plan and, further, that the provisions of this Plan and the related Trust be construed and
interpreted to reflect such intention.
2.3
Headings and References
. The headings and subheadings in this Plan have been inserted
for convenience of reference only and are to be ignored in the construction of this Plan. Wherever
appropriate, the plural shall be read as the singular, and the singular as the plural. References
in this Plan to a section (§) shall be to a section in this Plan unless otherwise expressly
indicated. If an amendment to the Code, ERISA or any other federal law renumbers a section of such
statute referred to in this Plan, any such reference to such section in this Plan automatically
shall become a reference to such section as so renumbered.
2.4
Legal Rights
. Except as otherwise expressly set forth in this Plan, no provision of
this Plan or the related Trust is intended to nor shall grant any rights or interests to any
Participants or
any Beneficiary under this Plan or the Trust Fund in addition to those minimum rights or interests
required to be provided under ERISA and the Code.
2.5
No Employment Rights
. This Plan is not a contract of employment and participation in
this Plan shall not give any person the right to be retained in the employ of any Participating
Employer or other Affiliate as an Employee or, upon
.
the termination of such employment,
to have any interest or right in the Trust Fund other than as expressly set forth in this Plan.
2.6
Definitions
. The terms defined in § 3 shall have the meanings set forth in § 3 for
purposes of this Plan. All other terms shall have their common meanings.
§ 3.
DEFINITIONS
3.1
Account
. means the bookkeeping account maintained under this Plan to show as of any
Valuation Date a Participants interest in the Trust Fund attributable to the contributions made on
his or her behalf and the investment gains and losses on such contributions, which account shall
consist of an AMVESCAP Stock Account, a Cash Account and a Directed Account and which account shall
cease to exist when exhausted through distributions or forfeitures made in accordance with this
Plan.
|
|
3.2
|
|
Acquisition Loan
. means a loan (or other extension of credit) used by the Trustee to
finance the acquisition of AMVESCAP Stock.
|
|
3.3
|
|
Affiliate
. means as of any date the Company and
|
(a) any parent, subsidiary or brother-sister corporation which (as of such date) is a member
of a controlled group of corporations (as defined in Code § 414(b)) with the Company,
(b) any trade or business, whether or not incorporated, which (as of such date) is considered
to be under common control (under § 414(c)) with the Company,
(c) any person or organization which (as of such date) is a member of an affiliated service
group (as defined in Code § 414(m)) with the Company, and
(d) any other entity which (as of such date) is required to be aggregated with the Company
under Code § 414(o).
Solely for the purposes of § 8, the term Affiliate means each entity that would be an
Affiliate if the phrase more than 50% is substituted for the phrase at least 80% each place it
appears in Code § 1563(a)(1).
3.4
AMVESCAP Benefit Plans Committee (or Committee)
. means the Committee established
pursuant to § 12.1 which shall have the duties and responsibilities set forth therein.
3.5
AMVESCAP Stock
. means the Ordinary Shares of AMVESCAP PLC or American Depository
Shares, each representing 2 Ordinary Shares, or any securities into which such shares are
converted.
2
3.6
AMVESCAP Stock Account
. means the subaccount maintained for each Participant as part
of his or her Account to reflect his or her undivided interest in the AMVESCAP Stock held in the
Trust Fund.
3.7
AMVESCAP Stock Fund
. Fund means the fund investing in AMVESCAP Stock established
pursuant to § 14 of the Plan.
3.8
Beneficiary
. means (subject to § 3.8(e))
(a) the person or persons so designated in writing by a Participant on a properly completed
Election Form or, if no such designation is made, or if no person so designated survives the
Participant or, if after checking his or her last known mailing address, the whereabouts of the
person so designated is unknown,
(b) the Participants surviving spouse or, if there is no surviving spouse,
(c) the Participants estate, if a personal representative of the Participant has qualified
within 12 months from the date of the Participants death or, if no personal representative has so
qualified,
(d) any heirs-at-law of the Participant as determined by the Committee (using whatever state
laws the Committee deems most appropriate under the circumstances) whose whereabouts are known to
the Company; provided, however
(e) if a Participant has a spouse on his or her date of death and such spouse survives the
Participant, such spouse automatically shall be his or her Beneficiary under this Plan unless (1)
such spouse consents (or has consented) on an Election Form before a notary public to the specific
Beneficiary designation made by the Participant, (2) such spouse had expressly consented on an
Election Form before a notary public to any Beneficiary designations made by the Participant
without any requirement of further spousal consent, (3) such spouses consent is not required under
the Code or ERISA, or (4) the Participant is treated as such under this Plan exclusively as a
result of his or her status as a Beneficiary.
3.9
Board
. means the Board of Directors of the Company.
3.10
Cash Account
. means the subaccount maintained for each Participant as part of his or
her Account to reflect his or her undivided interest in the assets of the Trust Fund other than
AMVESCAP Stock and amounts allocated to the Participants Directed Account.
3.11
Code
. means the Internal Revenue Code of 1986, as amended, or any successor to such
statute.
3.12
Company
. means INVESCO Institutional (N.A.), Inc. (successor to INVESCO Capital
Management, Inc.) and any successor to such corporation.
3.13
Compensation
. means for each Plan Year for each Participant the lesser of
3
(a) $210,000 (as adjusted for cost of living increases in accordance with Code § 401(a)(17)),
or
(b) the total taxable compensation paid to the Participant by a Participating Employer for
such Plan Year which is reportable on Internal Revenue Service Form W-2 as wages, tips, and other
compensation, plus any contributions made on his or her behalf by a Participating Employer to a
plan pursuant to a salary reduction agreement and which are not currently includible in his or her
gross income for such Plan Year under Code § 125, Code § 402(e)(3), Code § 402(h), Code § 408(p)
or, for Plan Years beginning on and after January 1, 2001, Code § 132(f), or
(c) if an Eligible Employee first becomes a Participant during such Plan Year, his or her
Compensation shall be the excess of his or her Compensation for the entire Plan Year (as determined
in § 3.13(b)) over his Compensation which is paid to him or her before the Entry Date as of which
he or she became a Participant.
(d) Notwithstanding anything in this definition to the contrary, there shall be excluded
(within the meaning of § 1.414(s)-1(c)(3) of the regulations under Code § 414(s)) from a
Participants Compensation all reimbursements and other expense allowances, fringe benefits (cash
and noncash), moving expenses, deferred compensation and welfare benefits, even if such items are
includible in his or her gross income.
3.14
Directed Account
. means the sub-account maintained for each Participant as part of
his or her Account to reflect the Participants election to direct the investment of his or her
Account pursuant to § 14.3.
3.15
Disability
. means a Participants incapacity to perform the essential functions of
his or her customary job with an Affiliate because of a medically determinable physical or mental
impairment that can be expected to result in death or to be of a long, continued and indefinite
duration as determined by the Committee in its sole discretion on the basis of uniform standards
consistently applied, which may include analysis of the results of a medical or psychiatric
examination, or other examinations conducted at the insistence of the Committee with respect to
such Participant, or any other available evidence of medical or psychiatric findings reasonably
sufficient to serve as a basis for such a determination.
3.16
Disqualified Person
. a person described in Code § 4975(e)(2).
3.17
Election Form
. means the form or forms provided by or acceptable to the Committee for
making the elections and designations called for under this Plan, and no such form shall be
effective unless properly completed and timely delivered in accordance with the terms of this Plan
and such rules as the Committee shall adopt from time to time.
3.18
Eligible Employee
. means each person who is classified by a Participating Employer on
the Participating Employers payroll and personnel records as an Employee of such Participating
Employer (without regard to whether he or she is classified by any other person as a common law
employee of such Participating Employer) other than an Employee
(a) who is a nonresident alien described in Code § 410(b)(3)(C),
4
(b) who is included in a unit of employees covered by a collective bargaining agreement
between the employee representatives and a Participating Employer which does not provide for
participation in this Plan, or
(c) who is a resident alien assigned by an Affiliate to work in the United States and who
shall accrue deferred compensation benefits with such Affiliate for the period he or she works in
the United States.
3.19
Employee
. means a person (a) who is an employee of an Affiliates or (b) who is a
Leased Employeeof an Affiliate. For this purpose, the words Leased Employee mean any person
(other than a common-law employee of an Affiliate) who pursuant to an agreement between an
Affiliate and any other person has performed services for an Affiliate (or for an Affiliate and
related persons determined within the meaning of Code § 414(n)(6)) on a substantially full-time
basis for a period of at least one year and who has performed such services under primary direction
or control of the Affiliate.
3.20
Employment Date
. means the date on which the Employee first performs an Hour of
Service for an Affiliate.
3.21
Entry Date
. means the first day of each calendar month.
3.22
ERISA
. the Employee Retirement Income Security Act of 1974, as amended, or any
successor statute.
3.23
ESOP Portion of the Plan
. means all components of the Plan other than the Directed
Accounts.
3.24
Financed Shares
. means the AMVESCAP Stock acquired by this Plan with the proceeds of
an Acquisition Loan and which are qualifying employer securities under Code § 4975(e)(8).
3.25
Highly Compensated Employee
. means for each Plan Year each Participant who performs
services for an Affiliate during the Plan Year and:
(a) who is an Employee who is a 5% owner, as defined in Code § 416(1)(1), at any time during
the Plan Year or the preceding year, or
(b) who receives compensation in excess of $95,000 (adjusted for cost-of-living increases in
accordance with Code § 414(q)) for the preceding Plan Year.
For purposes of this § 3.25, compensation means compensation as defined in § 3.13(b) without
regard to the special rule in § 3.13(d).
The determination of which Employees are Highly Compensated Employees shall at all times be made
subject to Code § 414(q) and any related regulations, rulings, notices or revenue procedures. In
determining whether an Employee is a Highly Compensated Employee for any Plan Year, the Company may
use any alternatives and elections authorized under the applicable Internal Revenue Service
regulations, rulings, notices or revenue procedures.
5
3.26
Hour of Service
. means
(a) each hour for which an Employee is paid, or entitled to payment, by an Affiliate for the
performance of duties as an Employee;
(b) each hour for which an Employee is paid, or entitled to payment, by an Affiliate on
account of a period of time during which no duties are performed (regardless of whether the
employment relationship has terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of absence; provided,
(1) such hours shall be calculated and credited in accordance with § 2530.200b-2 of the
Department of Labor regulations (which regulations are incorporated as part of this Plan by
this reference) and
(2) no more than 501 hours shall be credited for any continuous period during which no
duties are performed (whether or not such period covers more than one applicable 12
consecutive month period described in § 3.39); and
(c) each hour for which back pay, irrespective of mitigation of damages, is either awarded or
agreed to by an Affiliate; provided,
(1) such hours shall be credited for the applicable 12 consecutive month period
described in § 3.39 to which the award or agreement pertains rather than the period in which
the award, agreement or payment is made, and
(2) no credit shall be given for any such hour if credit is also given for such hour
under § 3.26(a) or § 3.26(b).
In lieu of actually recording each Hour of Service which is completed by an Employee, such Employee
shall be credited with 95 Hours of Service for each semi-monthly payroll period in which he or she
completes at least one Hour of Service.
3.27
Investment Fund
. means each separate mutual fund, separate account, or other
investment vehicle, which may include a fund, account or investment vehicle sponsored, managed or
advised by the Company or an Affiliate of the Company, that is made available through the Trust
Fund in accordance with § 14.3 for the investment of Directed Accounts.
3.28
Investment Manager
. means a person (other than the Trustee or a named fiduciary) who
satisfies the requirements set forth in ERISA § 3(38).
3.29
Loan Suspense Account
. means the account maintained under this Plan for the purpose
of crediting and holding Financed Shares acquired by this Plan pending the repayment of the related
Acquisition Loan.
3.30
Normal Retirement Age
. means age 59-1/2.
3.31
Participant
. means for any Plan Year
6
(a) each Eligible Employee who has satisfied the service requirement of § 4.1, and
(b) each former Eligible Employee for whom an Account continues to be maintained under this
Plan.
3.32
Participating Employer
. means the Company and each other Affiliate (or specific
office location of such Affiliate) designated as a Participating Employer by the Board from time to
time, which designation shall terminate in accordance with the rules set forth in § 15.2.
3.33
Plan
. means this INVESCO ESOP as set forth in this document and the related Trust,
and all amendments to this document.
3.34
Plan Year
. means the calendar year.
3.35
Trust
. means the trust established as part of this Plan.
3.36
Trust Fund
. means the assets of the Trust.
3.37
Trustee
. means AMVESCAP National Trust Company or any additional or successor Trustee
who accepts an appointment as Trustee.
3.38
Valuation Date
. means December 31 of each Plan Year and each other date designated by
the Committee as a Valuation Date.
3.39
Year of Service
. means for each Employee a 12 consecutive month period during which
an Employee completes not less than 1,000 Hours of Service where
(a) the initial 12 month period shall begin on his or her Employment Date and, if he or she
fails to complete at least 1,000 Hours of Service in such initial 12 consecutive month period,
(b) each subsequent 12 consecutive month period shall be the Plan Year, beginning with the
Plan Year which includes the first anniversary of his or her Employment Date.
§ 4.
PARTICIPATION REQUIREMENTS
4.1
Eligibility to Participate
.
(a)
General Rule
. Each Eligible Employee shall become a Participant in this Plan as
of the later of:
(1) the first Entry Date coincident with or next following his or her completion of one
Year of Service, or
(2) the first Entry Date thereafter on which he or she is an Eligible Employee.
(b)
Grandfather Rule
. Each Eligible Employee who was a Participant in this Plan on
January 31, 2005 shall continue to be a Participant in this Plan on February 1, 2005 if he or she
continues to be an Eligible Employee on such date.
7
4.2
Reemployment
. A former Participant whose employment terminates shall become a
Participant in this Plan immediately upon his or her reemployment as an Eligible Employee. An
Eligible Employee who completes a Year of Service but who terminates employment with a
Participating Employer before the date he or she would have begun to participate in this Plan shall
participate in this Plan immediately upon his or her reemployment as an Eligible Employee. Any
other Eligible Employee whose employment terminates and who is subsequently reemployed shall become
a Participant in accordance with § 4.1.
§ 5.
CONTRIBUTIONS
5.1
Money Purchase Pension Contribution and Allocation
. INVESCO Funds Group, Inc. as a
Participating Employer, shall (subject to all the terms and conditions of this Plan) contribute to
this Plan for each Plan Year an amount equal to 8.5% of the Compensation from INVESCO Funds Group,
Inc. of each Participant (a) who is employed as an Eligible Employee by INVESCO Funds Group, Inc.
on the last day of such Plan Year or (b) who is not so employed exclusively because (1) he or she
was transferred by INVESCO Funds Group, Inc. from: an Eligible Employee status to a status as an
Employee of another Affiliate (and he or she remains an Employee of such Affiliate on the last day
of such Plan Year) or (2) his or her employment as an Eligible Employee by INVESCO Funds Group,
Inc. terminated during such Plan Year as a result of his or her death or Disability or terminated
during such Plan Year on or after he or she reached his or her Normal Retirement Age. The
contribution made under this § 5.1 for each Plan Year shall be allocated as of the last day of such
Plan Year to the Cash Account maintained for each Participant for whom the contribution is made to
the extent that such contribution is made in cash and to his or her AMVESCAP Stock Account to the
extent made in AMVESCAP Stock.
5.2
Stock Bonus Contributions and Allocation
. Each Participating Employer (other than
INVESCO Funds Group, Inc.) shall (subject to all of the terms and conditions of this Plan)
contribute to this Plan for each Plan Year for the benefit of each Participant (a) who is employed
as an Eligible Employee by such Participating Employer on the last of such Plan Year or (b) who is
not so employed exclusively because (1) he or she was transferred by his or her Participating
Employer from Eligible Employee status to a status as an Employee of another Affiliate (and he or
she remains an Employee of such Affiliate on the last day of such Plan Year) or (2) his or her
employment as an Eligible Employee by such Participating Employer terminated during such Plan Year
as a result of his or her death or Disability or terminated during such Plan Year on or after he or
she reached his or her Normal Retirement Age. Each Participating Employer shall have the
discretion to determine the contribution to be made for each Plan Year by such Participating
Employer. The contribution made under this § 5.2 by each Participating Employer for each Plan Year
shall be allocated as of the last day of such Plan Year to the Cash Account maintained for each
Participant for whom the contribution is made to the extent that such contribution is made in cash
and to his or her AMVESCAP Stock Account to the extent made in AMVESCAP Stock, and such allocation
shall be made in the same proportion that the Compensation of each such Participant for such Plan
Year who is employed by such Participating Employer bears to the total of all such Compensation of
all such Participants for such Plan Year.
8
5.3
USERRA
. Notwithstanding anything in this Plan to the contrary, effective December 12,
1994, contributions, benefits and service credit with respect to qualified military service shall
be provided in accordance with Code § 414(u).
5.4
Form and Time of Contribution
. This Plan is designed and intended to invest primarily
in AMVESCAP Stock. Accordingly, contributions under this § 5 may, be made in cash or AMVESCAP
Stock or in any combination of cash and AMVESCAP Stock, as determined by each Participating
Employer. A Participating Employer may make contributions for any Plan Year (to the Trustee) in a
lump sum or in installments at any time during such Plan Year or at any time in the following year
before the due date (after taking any extensions into account) for filing the Participating
Employers federal income tax return for such Plan Year.
5.5
Freezing of Plan
. Effective for Plan Years beginning after December 31, 1999, all
contributions to this Plan shall be discontinued and no further contributions shall be made to this
Plan with respect to Plan Years beginning after December 31, 1999.
§ 6. VALUATIONS, ACCOUNT DEBITS AND CREDITS, REPAYMENT OF
ACQUISITION LOAN AND RELEASE OF
FINANCED SHARES
6.1
Fair Market Value
. The Trustee as of each Valuation Date shall determine the fair
market value of all of the assets of the Trust Fund as of such date. To the extent that AMVESCAP
Stock are not readily tradable on an established securities market within the meaning of Code §
401(a)(28)(C), the value of such AMVESCAP Stock shall be their fair market value on such Valuation
Date as determined by an independent appraisal by a person selected by the Committee and acceptable
to the Trustee who customarily makes such appraisals and meets the requirements of the regulations
under Code § 170(a)(1).
6.2
Valuation Date Allocation Procedure
.
(a)
Committee Action
. As of each Valuation Date, the Committee or the Committees
agent shall make the allocations and other debits and credits to each Participants Account which
are called for under this § 6.2.
(b)
Distribution Debits
. The Committee or the Committees agent as of each Valuation
Date shall debit each Participants Cash Account for any distributions made to or on behalf of such
Participant from his or her Cash Account since the immediately preceding Valuation Date, shall
debit each Participants Directed Account for any distributions made to or on behalf of such
Participant from his or her Directed Account since the immediately preceding Valuation Date, and
shall debit each Participants AMVESCAP Stock Account for any distributions made to or on behalf of
such Participant from his or her AMVESCAP Stock Account since the immediately preceding Valuation
Date.
(c)
Other Debits and Credits
. After the completion of the debits to each
Participants Cash Account, Directed Account and AMVESCAP Stock Account called for as of each
Valuation Date under § 6.2(b), the Committee or the Committees agent as of each Valuation Date
shall
9
(1) Credit to each Participants Cash Account all cash dividends paid since the
immediately preceding Valuation Date on all AMVESCAP Stock credited to such Participants
AMVESCAP Stock Account.
(2) Credit to each Participants Cash Account all cash dividends paid since the
immediately preceding Valuation Date on all other AMVESCAP Stock in the same proportion that
each Participants Cash Account bears to all Cash Accounts,
(3) Credit to each Participants AMVESCAP Stock Account all stock dividends paid since
the immediately preceding Valuation Date on AMVESCAP Stock credited to each Participants
AMVESCAP Stock Account and credit all stock dividends paid on any other AMVESCAP Stock
(other than on Financed Shares) to each Participants AMVESCAP Stock Account in the same
proportion that each Participants AMVESCAP Stock Account bears to all AMVESCAP Stock
Accounts;
(4) Credit all stock dividends paid since the immediately preceding Valuation Date on
all Financed Shares directly to the Loan Suspense Account,
(5) Credit to each Participants Cash Account the proceeds from any sale made since the
immediately preceding Valuation Date of any AMVESCAP Stock which had been credited to such
Participants AMVESCAP Stock Account,
(6) Credit or debit each Participants Directed Account to reflect any investment gains
or losses (whether realized or unrealized) on the amounts allocated to such Directed
Account;
(7) Make such credits or debits to each Participants Cash Account to reflect any
investment gains or losses (whether realized or unrealized) for which no credit or debit is
expressly called for under § 6.2(c)(1) through § 6.2(c)(6) in the same proportion that each
Participants Cash Account bears to all Cash Accounts,
(8) Debit each Participants Cash Account for the interest payments, if any, and the
principal payments, if any, made from such Cash Account since the immediately preceding
Valuation Date in accordance with § 6.3, and
(9) Credit to each Participants AMVESCAP Stock Account any Financed Shares released
for credit to such Participants Account since the immediately preceding Valuation Date in
accordance with § 6.4.
The Committee or the Committees agent shall have the discretion to make the debits and credits
called for in this § 6.2(c) in whatever sequence the Committee deems appropriate under the
circumstances.
(d)
Contribution Credits
. The Committee or the Committees agent as of each Valuation
Date which coincides with the last day of a Plan Year shall credit each Participants Account with
the contribution, if any, made on his or her behalf for such Plan Year in accordance with the rules
set forth in § 5.
10
(e)
Other
. The Committee or the Committees agent shall make such credits or debits
(in addition to those expressly called for in this § 6.2) to any Participants Account, or to each
Participants Account, as the Committee deems necessary or appropriate under the circumstances.
6.3
Repayment of Acquisition Loan
.
(a)
General Rule
. The Committee or the Committees agent as of each Valuation Date
shall debit each Participants Cash Account for the interest and principal payments, if any, made
from the Trust Fund with respect to any Acquisition Loan since the immediately preceding Valuation
Date in accordance with this § 6.3. Any debits for interest payments or principal payment shall be
made separately, and the debits for each such payment shall (subject to § 6.3(b)) be made to each
Participants Cash Account in the same proportion that the balance credited to each such Cash
Account (upon the completion of the debits called for under§ 6.2(b)) bears to the total balance
credited to all such Cash Accounts.
(b)
Negative Cash Account Balance
(1)
Interest or Principal Payments
. If § 6.3(a) calls for a debit to any
Participants Cash Account either for an interest payment or for a principal payment as of
any Valuation Date which would result in a negative Cash Account balance for such
Participant at the completion of all the debits and credits called for under § 6.2 as of
such Valuation Date, such debit shall be made only to the extent that the debit results in a
zero Cash Account balance for such Participant, and the remainder of any such debit shall be
reallocated by the Committee or the Committees agent in one, or more than one step, among
the remaining Cash Accounts in the same proportion that each Cash Account balance (as
determined upon the completion of the debits called for under § 6.2(b)) bears to all such
Cash Account balances until no Participant has a
.
negative Cash Account balance.
(2)
Interest and Principal Payments
. If § 6.3(a) calls for debits to any
Participants Cash Account for both an interest payment and a principal payment (or more
than one such payment) as of any Valuation Date which would result in a negative Cash
Account balance for such Participant at the completion of all the debits and credits called
for under § 6.2 as of such Valuation Date, such debits shall be made only to the extent that
the debits result in a zero Cash Account balance for such Participant, and the remainder of
such debits shall be reallocated in accordance with the procedure described in § 6.3(b)(1).
However, the Committee or the Committees agent as part of such reallocation process shall
pro rate each reallocation of a debit between interest payments and principal payments in
the same ratio that all such interest payments or all such principal payments bear to the
total of all such payments.
(3)
Sufficient Cash Accounts
. This § 6.3(b) shall apply only if the total Cash
Account balances for all Participants is sufficient to eliminate every negative Cash Account
balance for every Participant after the reallocation of the debit or debits called for under
this § 6.3(b).
11
(c)
Repayment Cap
. The interest and principal payments made with respect to an
Acquisition Loan in any Plan Year shall not exceed the excess of (1) the sum of the contributions
made for such Plan Year and all prior Plan Years (together with any earnings on such contributions)
over (2) the interest and principal payments previously made with respect to all Acquisition Loans
in all prior Plan Years.
(d)
Cash Dividends
. Any cash dividends paid with respect to AMVESCAP Stock credited
to a Participants AMVESCAP Stock Account may, at the Committees discretion, be applied under this
§ 6.3 to make interest payments or principal payments, or interest and principal payments.
However, if the Company proposes to claim an income tax deduction for any such dividends, the
Committee or the Committees agent shall apply such dividends to the payment of principal.
6.4
Release of Financed Shares
.
(a)
Loan Principal Payments
.
(1)
General Rule
. Subject to § 6.4(a)(2), Financed Shares shall be released
from the Loan Suspense Account only with reference to principal payments in accordance with
the principal only release rules set forth in the regulations under Code § 4975 and shall be
allocated to each Participants AMVESCAP Stock Account in the same proportion that the
debits made to each Participants Cash Account for the principal payment made under § 6.3
which resulted in the release of such Financed Shares bears to all such debits to all Cash
Accounts.
(2)
Special Rule
. If the Company proposes to claim an income tax deduction for
the dividends described in § 6.3(d), Financed Shares released from the Loan Suspense Account
shall first be allocated to the AMVESCAP Stock Accounts of Participants in accordance with
the requirements for such a deduction under Code § 404(k)(2)(B) and the remainder of such
shares thereafter shall be allocated in accordance with § 6.4(a)(1).
(b)
First In-First Out
. If the Financed Shares held in the Loan Suspense Account were
purchased on different dates, the Committee or the Committees agent shall treat the Financed
Shares released upon each principal payment as released and allocated in the same order as the
date, or dates, as of which such shares were first credited to such Loan Suspense Account.
6.5
Allocation Corrections
. If an error or omission is discovered in any Account, the
Committee or the Committees agent shall as soon as practicable make an adjustment to correct the
error or omission to the extent the Committee deems fair and equitable under the circumstances.
§ 7.
VOTING RIGHTS AND TENDER RIGHTS
7.1
Voting Rights
.
(a)
Voting of Allocated Shares
. If the Employer does not have a registration-type
class of securities within the meaning of Code § 409(e), each Participant shall be entitled to
12
direct the Trustee how to vote whole shares of AMVESCAP Stock credited to the Participants
Account with respect to any corporate matter which, under applicable law, requires the voting of
such AMVESCAP Stock with respect to the approval or disapproval of any corporate merger or
consolidation, recapitalization, reclassification, liquidation, dissolution, sale of substantially
all assets of a trade or business, or such similar transaction as the Secretary of the Treasury may
prescribe in regulations. If the Employer has a registration-type class of securities within the
meaning of Code § 409(e), whole shares of AMVESCAP Stock credited to a Participants Account shall
be voted by the Trustee as such Participant directs in writing from time to time. Any such shares
with respect to which the Participant does not give directions for voting in a timely manner shall
be voted by the Trustee in accordance with § 7.1(b) to the extent permitted by law. Fractional
shares of AMVESCAP Stock credited to Participants Accounts shall be aggregated into whole shares
of AMVESCAP Stock and voted by the Trustee to reflect to the extent possible the voting directions
of the Participants with respect to whole shares of AMVESCAP Stock.
(b)
Voting of Unallocated Shares or Allocated Shares With No Voting Instructions
.
Shares of AMVESCAP Stock held by the Trustee and not yet allocated to Participant Accounts
shall, solely for voting purposes, be treated as allocated to Participant Accounts, and such
allocation shall be made (solely for voting purposes) in the same proportion that each
Participants AMVESCAP Stock Account bears to all AMVESCAP Stock Accounts. All allocated shares
(including unallocated shares treated as allocated under this § 7.1(b)) with respect to which no
voting instructions are received from Participants prior to the close of business on the fifth
business day immediately preceding the date that shares are to be voted shall be voted by the
Trustee in the same proportion as the allocated shares are voted by Participants.
(c)
Obligations of the Company
. The Company shall (in an appropriate time and manner)
furnish the Trustee and Participants with proxy materials, notices and information statements on
which a Participant may give his or her voting instructions, and such instructions shall be treated
as confidential.
7.2
Tender Offer for AMVESCAP Stock
.
(a)
Tender of Allocated Shares
. In the event of a tender offer for Employer.
Securities at a time when AMVESCAP Stock are readily tradeable on an established market, each
Participant who has whole shares of AMVESCAP Stock allocated to his or her Account shall be given
the opportunity to direct the Trustee regarding whether to tender or not to tender the whole shares
of AMVESCAP Stock allocated to his or her Account. The Trustee, as promptly as practicable after a
tender offer for AMVESCAP Stock is made, shall send to each such Participant such materials and
forms for responding as the Trustee deems appropriate. Any form for responding shall prominently
note that a failure by a Participant to return such form within a specified reasonable period of
time shall be deemed a direction to the Trustee not to tender the whole shares of AMVESCAP Stock
allocated to the Account of such Participant. As promptly as practicable after receiving a
Participants response form which directs the Trustee to tender his or her whole shares of AMVESCAP
Stock, the Trustee shall tender such shares; provided, however, that the Trustee shall have the
right to take such other action as required to comply with the terms of any valid order of a court
of competent jurisdiction. After the
13
expiration of the period during which Participants may direct the Trustee to tender shares
under this § 7.2, the Trustee shall determine the total number of whole shares it was directed to
tender, and the total number of whole shares it was directed not to tender (either expressly or by
failure to timely respond). If the majority of the allocated whole shares of AMVESCAP Stock were
directed to be tendered, then the Trustee shall also tender, as promptly as practicable, any
allocated fractional shares which are held in the Trust Fund. However, if the majority of the
allocated whole shares of AMVESCAP Stock were not directed to be tendered, the Trustee shall not
tender any such allocated fractional shares. The Trustee shall take such steps as the Trustee
deems reasonable and appropriate to effect directions from Participants in a confidential manner.
(b)
Tender of Unallocated Shares
. In the event of a tender offer for AMVESCAP Stock,
shares of AMVESCAP Stock not allocated to a Participants Account shall, solely for purposes of
responding to a tender offer, be treated by the Trustee as allocated to Participants Accounts in
accordance with the procedures described in § 7.1(b) and shall be tendered or not tendered
accordingly.
§ 8. LIMITATION ON ALLOCATION TO
PARTICIPANTS ACCOUNTS
8.1
General Rule
. For purposes of Code § 415, the Plan Year shall be the limitation
year, and effective for Plan Years beginning on or after January 1, 2005, the Participating
Employer contributions allocated to a Participants Account for any Plan Year shall not exceed the
lesser of:
(a) 100% of the Participants compensation for such Plan Year, or
(b) $42,000.
A Participants compensation for purposes of this § 8 means for any Plan Year the total taxable
compensation paid to him or her by the Affiliates for such Plan Year and which is reportable on
Internal Revenue Service Form W-2 as wages, tips and other compensation and effective as of January
1, 1998, plus all contributions made on his or her behalf by an Affiliate to a plan pursuant to a
salary reduction agreement that are not currently included in his or her income for such Plan Year
under Code § 125, Code § 402(e)(3) or Code § 402(h). Finally, contributions made by a
Participating Employer to pay interest on an Acquisition Loan shall not be taken into account as
Participating Employer contributions under this § 8 to the extent such payments are not required to
be treated as annual additions under Code § 415.
For limitation years beginning on and after January 1, 2001, for purposes of applying the
limitations described in this § 8, compensation paid or made available during such limitation
years shall include elective amounts that are not includible in the gross income of the employee by
reason of Code § 132(f).
8.2
Corrections
. If the contributions that would otherwise be credited to a Participants
Account would exceed the limitations set forth in § 8.1 for any Plan Year, such excess amount shall
be transferred to a suspense account (which shall not be subject to adjustment for any investment
gains or losses under § 6.2), and amounts credited to such suspense account thereafter shall be
applied as follows:
14
(a) for any Participant who is an Eligible Employee at the end of the Plan Year, such suspense
account shall be applied to offset the Participating Employer contribution under § 5 for such
Participant in the following Plan Year (and succeeding Plan Years if necessary), and
(b) for any Participant who is not an Eligible Employee at the end of the Plan Year, such
suspense account shall be applied to offset the Participating Employer contributions under § 5 for
all remaining Participants in the following Plan Year (and succeeding Plan Years if necessary).
No additional Participating Employer contributions shall be made under § 5 while there is a balance
credited to such suspense account if the allocation of the amount in such suspense account would be
precluded under Code § 415.
8.3
Coordination Rules
.
(a)
Other Defined Contribution Plan
. If a contribution is made for a Plan Year by or
for a Participant under this Plan and any other defined contribution plan (as defined in Code
§ 414(1)) maintained by any Affiliate, any adjustment required to satisfy the requirements of Code
§ 415 for such Plan Year shall be made in such other plan to the extent of the contributions made
under such other plan and thereafter shall be made (to the extent, if any, then required to satisfy
such requirements) under this Plan.
(b)
Defined Benefit Plan
. Effective for Plan Years beginning prior to January 1,
2000, if a defined benefit plan (as defined in Code § 414(j)) is adopted or maintained by any
Affiliate under which a benefit is accrued on behalf of a Participant, any adjustment required to
satisfy the requirements of Code § 415 as a result of his or her participation in such plan and in
this Plan shall be made exclusively in such other plan.
(c)
Welfare Plans
. Contributions allocated to an individual medical benefit account
described in Code § 415(1) and contributions credited under a welfare benefit fund maintained by
any Affiliate for any year to a reserve for post-retirement medical benefits for a Participant who
is a key employee within the meaning of Code § 416(i) shall be treated as a contribution made on
his or her behalf under this Plan when, and to the extent, required under Code § 415 or Code §
419A(d).
§ 9.
BENEFITS UPON TERMINATION OF EMPLOYMENT
A Participants Account shall be completely nonforfeitable at all times, and the Company upon
a Participants termination of employment as an Employee shall direct the Trustee to pay such
Participants Account balance at the time and in the form provided under § 10.
§ 10.
TIME AND FORM OF PAYMENT OF BENEFITS
10.1
Time of Payment of Account
.
(a)
General
. Subject to the consent requirement described in this § 10.1, the
Committee shall direct the Trustee to distribute a Participants entire Account in one payment as
soon as practicable after the Valuation Date next following the Participants termination of
15
employment as an Employee. Such distribution in any event shall be made no later than the
60th day following the close of the Plan Year in which the latest of the following events occur:
(1) the Participant reaches Normal Retirement Age or (2) the Participant terminates employment as
an Employee. A Participant must consent in writing to any distribution required under this § 10.1
if the Participant has not reached his or her required distribution date as described in § 10.1(c).
However, the Participant may defer payment until his or her death or until the required beginning
date described in § 10.1(c), whichever comes first. A Participant shall be deemed to have
deferred his or her distribution until the required beginning date unless he or she requests an
earlier distribution.
(b)
Deceased Participant
. A deceased Participants Account shall be distributed to
his or her Beneficiary, and such distribution shall (regardless of any request to the contrary made
by the Beneficiary) be made no later than December 31 of the calendar year which includes the fifth
anniversary of the date of the Participants death.
(c)
Required Beginning Date
. In accordance with the provisions of Code § 401(a)(9)
and the regulations issued thereunder and notwithstanding any other provisions of the Plan,
distributions of a Participants Account shall commence not later than April 1 of the calendar year
that follows:
(1) For a Participant who is a 5% owner (as defined in Code § 416(1)(1)), the calendar
year in which the Participant reaches age 70-1/2, and
(2) For each other Participant, the later of the calendar year in which the Participant
(i) reaches age 70-1/2, or (ii) retires.
(d)
Withdrawals
. A Participant who remains an Employee after reaching his or her
Normal Requirement Age shall have the right (while he or she remains an Employee) to request in
writing a withdrawal of all or any portion of his or her Account, but no more than once in any Plan
Year. The Committee shall grant his or her request subject to the Participant satisfying the
consent provisions under this § 10.1.
10.2
Distribution of AMVESCAP Stock or Cash
. The distribution of a Participants Account
pursuant to § 10.1 shall be made in the form of (a) whole shares of AMVESCAP Stock credited to the
Participants AMVESCAP Stock Account and cash in lieu of any fractional share, and (b) cash with
respect to the Participants Directed Account and Cash Account. Cash paid in lieu of a fractional
share of an AMVESCAP Stock shall be based on the value of a whole share as of the date of the
distribution.
10.3
Small Accounts
. Notwithstanding § 10.1 and § 10.2, effective July 1, 2002, a
Participants entire Account shall be distributed in a single sum to such Participant (or to the
Participants Beneficiary in the event of the Participants death) as soon as administratively
practicable following the Valuation Date coincident with or next following the Participants
termination of employment as an Employee (or, if later, as soon as administratively practicable
following the effective date of this § 10.3) if the value of his or her Account is $5,000 or less
as of the date of the distribution. Such single sum shall be paid in cash with respect to the
Participants Directed Account and Cash Account. Such single sum shall be paid in cash with
16
respect to the Participants AMVESCAP Stock Account unless the Participant or Beneficiary requests
distribution of the Participants AMVESCAP Stock Account in whole shares of AMVESCAP Stock (plus
cash in lieu of any fractional share of AMVESCAP Stock) in accordance with the rules established by
the Committee for this purpose.
10.4
Participants Right to Put AMVESCAP Stock to the Company and This Plan
.
(a)
General
. Any Participant (or his or her Beneficiary) who receives a distribution
of AMVESCAP Stock from this Plan at a time when such AMVESCAP Stock are not readily tradeable on an
established securities market shall have a put option on such AMVESCAP Stock in accordance with
Code § 409(h), giving him or her the right to have the Company or this Plan purchase such AMVESCAP
Stock. The put option
.
shall be exercisable by the Participant (or his or her
Beneficiary) during the following two election periods by giving notice in writing to the Company:
(1) the first option period shall be the 60-day period commencing on the date of
distribution of the shares of AMVESCAP Stock; and
(2) the second option period shall be the 60-day period commencing on the date the fair
market value of the AMVESCAP Stock is determined (and the Participant or Beneficiary is
notified of such determination) for the valuation next following the date on which such
shares of AMVESCAP Stock are distributed, provided that such second option period shall
begin in the Plan Year next following the Plan Year in which such AMVESCAP Stock are
distributed.
This Plan may be given the opportunity to purchase shares of AMVESCAP Stock tendered to the Company
under the put option as described in § 10.4(c). Except to the extent otherwise required by law,
this § 10.4 shall not apply at any time that AMVESCAP Stock are readily tradeable on an established
market.
(b)
Price and Payment
. The price at which the put option is exercisable is the fair
market value of the AMVESCAP Stock as of the date of the transaction. Payment for the AMVESCAP
Stock put to the Company or the Plan shall be made in one cash payment.
(c)
Right of Plan
. The Trustee for this Plan has the option to assume the rights and
obligations of the Company under the put option in this § 10.4 at the time the put option is
exercised.
(d)
Continuation of Rights
. The provisions of this § 10.4 with respect to any
AMVESCAP Stock acquired by this Plan in a leveraged transaction, are not terminable and shall
continue if the loan is repaid or if this Plan ceases to be an ESOP, except to the extent such
rights have terminated in accordance with other terms of this Plan. Except as otherwise provided in
this Plan, any AMVESCAP Stock acquired in a leveraged transaction shall not be subject to any put,
call, or other option or buy-sell or similar arrangement while held by and when distributed from
this Plan, regardless of whether this Plan is then an ESOP. The protections set forth in the
preceding sentence shall be non-terminable.
17
(e)
Securities Laws Restrictions on Resales
. If any shares of AMVESCAP Stock acquired
by this Plan have not been registered under either applicable state or federal securities laws but
have been issued and acquired pursuant to applicable exemptions under such laws, then any such
AMVESCAP Stock distributed to Participants may only be sold by the Participant upon registration
under such securities laws or pursuant to an available exemption thereunder. The shares of
AMVESCAP Stock held and distributed by this Plan may be appropriately legended to reflect the
restrictions on sale in the securities laws.
10.5
Eligible Rollover Distribution
.
(a)
General
. Notwithstanding any provision of this Plan to the contrary that would
otherwise limit a Distributees election under this § 10.5, a Distributee (as defined in
§ 10.5(b)(3)) may elect, at the time and in the manner prescribed by the Committee, to have any
portion of an Eligible Rollover Distribution (as defined in § 10.5(b)(1)) paid directly to an
Eligible Retirement Plan (as defined in § 10.5(b)(2)) specified by the Distributee in a Direct
Rollover (as defined in § 10.5(b)(4)).
(b)
Definitions
.
(1)
Eligible Rollover Distribution
. An Eligible Rollover Distribution is any
distribution of all or any portion of the balance to the credit of the Distributee, except
that an Eligible Rollover Distribution does not include any distribution that is one of a
series of substantially equal periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the Distributee or the joint lives (or joint life
expectancies) of the Distributee and the Distributees designated beneficiary, or for a
specified period of 10 years or more; any distribution to the extent such distribution is
required under Code § 401(a)(9); and any hardship distribution described in
Code § 401(k)(2)(B)(i)(IV), or any amount distributed on account of hardship. A portion of
a distribution shall not fail to be an Eligible Rollover Distribution merely because the
portion consists of after-tax employee contributions that are not includible in gross income
(determined without regard to the exclusion for net unrealized appreciation with respect to
AMVESCAP Stock). However, such portion may be transferred only to an individual retirement
account or annuity described in Code § 408(a) of (b) or to a qualified defined contribution
plan described in Code § 401(a) or 403(a) that agrees to separately account for amounts so
transferred, including separately accounting for the portion of such distribution that is
includible in gross income and the portion of such distribution that is not so includible.
(2)
Eligible Retirement Plan
. An Eligible Retirement Plan is an individual
retirement account described in Code § 408(a); an individual retirement annuity described in
Code § 408(b); an annuity plan described in Code § 403(a); an annuity contract described in
Code § 403(b); a qualified trust described in Code § 401(a); or an eligible plan under Code
§ 457 which is maintained by a state, political subdivision of a state, or any agency or
instrumentality of a state or political subdivision of a state and which agrees to
separately account for amounts transferred into such a plan from this Plan.
18
(3)
Distributee
. A Distributee includes an Employee or former Employee. In
addition, the Employees or former Employees surviving spouse and the Employees or former
Employees spouse or former spouse who is the alternate payee under a qualified domestic
relations order, as defined in Code § 414(p), are Distributees with regard to the interest
of the spouse or former spouse.
(4)
Direct Rollover
. A Direct Rollover is a payment by this Plan to the
Eligible Retirement Plan specified by the Distributee.
10.6
30-Day Waiver
. If a distribution is one to which Code § 401(a)(11) and § 417 do not
apply, such distribution may commence less than 30 days after the notice required under § 1.411
(a)-(11)(c) of the Income Tax Regulations is given, provided that:
(a) the Committee informs the Participant in such notice that the Participant has the right to
a period of at least 30 days after receiving the notice to consider the decision of whether or not
to elect a distribution (and, if applicable, a particular distribution option), and
(b) the Participant, after receiving such notice, affirmatively elects a distribution.
10.7
Cash Dividends
.
(a) The Committee may offer Participants (or a class of Participants) the right to elect to
(i) receive payment of cash dividends paid on AMVESCAP Stock allocated to the Participants
Account, which payment shall be made either by the Plan no more than 90 days following the close of
the Plan Year in which the dividends are paid or directly by the Company, or (ii) have cash
dividends paid on AMVESCAP Stock allocated to the Participants Account paid to the Plan and
reinvested in AMVESCAP Stock. To the extent a Participant elects (or is deemed to elect)
reinvestment of such cash dividends in AMVESCAP Stock, the Trustee shall apply such cash dividends
to purchase shares of AMVESCAP Stock and shall allocate the shares of AMVESCAP Stock so purchased
to the Participants AMVESCAP Stock Account. The election shall be made on such forms and in such
manner as may be determined by the Committee.
(b) In addition to, or as an alternative to, the election in (a) above, the Committee, with
respect to Participants (or a class of Participants):
(1) may direct the Trustee to make cash payment to a Participant of cash dividends paid
on AMVESCAP Stock allocated to the Participants Account not later than 90 days following
the close of the Plan Year in which such cash dividends are paid;
(2) may arrange for the Company to make payment directly to a Participant of cash
dividends paid on AMVESCAP Stock allocated to the Participants Account; or
(3) may direct the Trustee to apply cash dividends paid on AMVESCAP Stock allocated to
a Participants Account to purchase shares of AMVESCAP Stock and to allocate the shares of
AMVESCAP Stock so purchased to the Participants AMVESCAP Stock Account.
19
(c) The Committee shall operate the Plan in accordance with the alternatives set out in
subsections (a) and (b) above in accordance with procedures established by the Committee for this
purpose and shall be entitled to change such procedures from time to time in its discretion. The
Committee may provide one alternative for Participants who are active Employees and another
alternative for Participants who are not active Employees.
(d) Effective with respect to cash dividends paid prior to May 1, 2002 on AMVESCAP Stock held
under the Plan, the Trustee at the direction of the Committee shall distribute in cash to each
Participant all, or any part of, the cash dividends paid on AMVESCAP Stock which are allocated to a
Participants Cash Account as of any Valuation Date in a Plan Year no later than 90 days after the
end of such Plan Year in accordance with Code § 404(k)(2) if the Committee in its discretion
decides to seek an income tax deduction for such dividends with respect to such Plan Year.
§ 11.
BENEFIT PAYMENT RULES
11.1
Election Form
. Subject to § 10.1, the Committee may require as a condition to the
payment of any benefit under this Plan that a claim for such benefit be filed with the Committee on
the related Election Form, and all such claims (and any other claims by a Participant, former
Participant or Beneficiary) shall be processed in accordance with the claims procedure set forth in
the summary plan description for this Plan. Any payment to a Participant or Beneficiary or to
their legal representative, or heirs at law, made in accordance with the provisions of this Plan
shall be in full satisfaction of all claims under this Plan against the Trustee and the Affiliates.
11.2
Missing Person
. In the event that an Account becomes payable under this Plan to a
Participant or to a Beneficiary and the Committee is unable to locate the Participant or
Beneficiary after sending written notice to his or her last known mailing address and to the United
States Social Security Administration, such Participant or Beneficiary shall be
presumed
dead and such Account shall become a forfeiture on the third anniversary of the date such Account
first became payable under this Plan or on the date this Plan terminates, whichever comes first.
However, the amount of such forfeiture shall be paid to such missing Participant or Beneficiary in
the event that such person files a claim for such benefit-while this Plan remains in effect and
demonstrates to the satisfaction of the Committee that such person in fact is such missing
Participant or Beneficiary. Any amounts forfeited under this § 11.2 shall be applied to offset the
Participating Employer contributions under § 5.
11.3
Spendthrift Clause
. Except to the extent permitted by law and subject to the
following paragraph and to §11.7, no Account, benefit, payment or distribution under this Plan or
the Trust shall be subject to attachment, garnishment, levy (other than a federal tax levy),
execution or any claim or legal process of any creditor of a Participant or Beneficiary, and no
Participant or Beneficiary shall have any right to alienate, commute, anticipate or assign all or
any part of his or her Account, benefit, payment or distribution under this Plan or the Trust.
The foregoing provision shall not apply in the case of (i) a qualified domestic relations order (as
set forth in §11.7) which is determined by the Plan to meet the requirements of Code § 414(p); or
(ii) the Participants liability to the Plan due to: (A) the Participants conviction of a crime
involving the Plan, (B) a judgment, consent order or decree in action for violation of fiduciary
20
standards, or (C) a settlement involving the Department of Labor or Pension Benefit Guaranty
Corporation.
11.4
Payment to be Made Upon Committees Direction
. No disbursement from this Plan shall
be made by the Trustee for purposes of the payment of any Plan benefit except on the written
direction of the Committee, and the Trustee shall have no duty or obligation whatsoever to inquire
as to the accuracy of such direction or its propriety in light of the provisions of this Plan,
ERISA or the Code. Upon written direction (which may be a continuing direction) from the Company
as to the name of any person to whom money is to be paid from this Plan, when such payment is to be
made and the amount of such payment, and consistent with income tax withholding requirements, the
Trustee shall draw checks in the name of the person designated by the Committee and deliver such
checks in such manner and in such amounts and at such times as the Committee shall direct, or the
Trustee shall make an electronic transfer to the checking account of such person designated by the
Committee in such amounts and at such times as the Committee shall direct. If the Trustee deems it
necessary to withhold any distribution pending compliance with legal requirements with respect to
probate of wills, appointment of personal representatives, payment or provision for estate or
inheritance taxes, or for death duties or otherwise, the Trustee shall notify the Committee and
shall thereafter take no action pending receipt of the Committees instructions to distribute and
an agreement from the Committee, in a form satisfactory to the Trustee, protecting it from any
liability arising out of noncompliance with such requirements.
11.5
Payment to a Minor or Incompetent
. The Committee may in its discretion direct, and
the Trustee shall make payment on such direction, that Plan payments be made (a) directly to an
incompetent or disabled person, whether because of minority or mental or physical disability,
(b) to the guardian or to the person having custody of such person if a court of competent
jurisdiction has appointed such guardian or custodian, or (c) to any person designated or
authorized under any state statute to receive such payments on behalf of such incompetent or
disabled person without further liability either on the part of the Committee, the Company, the
Participating Employers or the Trustee for the amount of such payment to the person on whose
account such payment was made.
11.6
Benefits Supported Only by Trust Fund
. Any person having any claim for any benefit
under this Plan shall look solely to the assets of the Trust Fund for the satisfaction of such
claim. In no event shall the Committee, the Company, other Affiliates or the Trustee, or any of
their employees, officers, members of their board of directors or agents, be liable in their
individual capacities to any person whomsoever for the payment of benefits under this Plan.
11.7
Qualified Domestic Relations Order
. In accordance with uniform and nondiscriminatory
procedures established by the Committee from time to time, the Committee upon the receipt of a
domestic relations order which seeks to require the distribution of a Participants Account in
whole or in part to an alternate payee (as that term is defined in Code § 414(p)(8)) shall
(a) promptly notify the Participant and such alternate payee of the receipt of such order
and of the procedure which the Committee shall follow to determine whether such order constitutes a
qualified domestic relations order within the meaning of Code § 414(p),
21
(b) determine whether such order constitutes a qualified domestic relations order, notify
the Participant and the alternate payee of the results of such determination and, if the
Committee determines that such order does constitute a qualified domestic relations order,
(c) transfer such amounts, if any, as the Committee determines necessary or appropriate from
the Participants Account to a special Account for such alternate payee, and
(d) distribute to such alternate payee such special Account when the Committee deems such
distribution is called for under the terms of such order.
The determinations and the distribution made by, or at the direction of, the Committee under this
§ 11.7 shall be final and binding on the Participant and on all other persons interested in such
order, and the Committee shall have the power to make such distributions at any time (without
regard to whether the Participant is eligible for a distribution) and to establish such rules
regarding the investment of a special Account pending such a distribution as the Committee deems
administratively convenient.
An alternate payee shall have the right to designate a Beneficiary for the payment of his or her
special Account in the event of his or her death before his or her special Account is paid to him
or her under the same rules as a Participant who has no spouse and, if an alternate payee dies
without designating a Beneficiary, such special Account shall be paid as if his or her designated
Beneficiary had predeceased him or her.
11.8
Nonreversion and Exclusive Benefit
. No part of the Trust Fund shall ever be used for
or be diverted to purposes other than for the exclusive benefit of Participants and Beneficiaries
except that
(a) any amounts remaining in a Code § 415 suspense account established under § 8 which cannot
be allocated under Code § 415 upon the termination of this Plan shall be returned to the
Participating Employers upon such termination;
(b) a contribution which is made by a Participating Employer by a mistake of fact shall be
refunded to such Participating Employer within one year after the payment of such contribution; and
(c) a contribution to the extent disallowed (within the meaning of ERISA § 403(c)(2)(C)) as a
federal income tax deduction shall be refunded to such Participating Employer within one year after
the disallowance of such deduction, all such contributions being made expressly on the condition
that such contributions are deductible in full for federal income tax purposes in the year for
which the contribution is made.
11.9
No Estoppel of Plan
. No person is entitled to any benefit under this Plan except and
to the extent expressly provided under this Plan. The fact that payments have been made from this
Plan in connection with any claim for benefits under this Plan does not (a) establish the validity
of the claim, (b) provide any right to have such benefits continue for any period of time, or
(c) prevent this Plan from recovering the benefits paid to the extent that the Committee determines
that there was no right to payment of the benefits under this Plan. Thus, if a benefit is paid
under this Plan and it is thereafter determined by the Committee that such benefit should
22
not have been paid (whether or not attributable to an error by the Participant, a Participating
Employer, or any other person), then the Committee may take such action as the Committee deems
necessary or appropriate to remedy such situation, including without limitation by (1) deducting
the amount of any overpayment theretofore made to or on behalf of such Participant from any
succeeding payments to or on behalf of such Participant under this Plan or from any amounts due or
owing to such Participant by the Company or any Affiliate or under any other plan, program or
arrangement benefiting the Employees or former Employees of the Company or any Affiliate, or (2)
otherwise recovering such overpayment from whoever has benefited from it.
If the Committee determines that an underpayment of benefits has been made, the Committee
shall take such action as it deems necessary or appropriate to remedy such situation. However, in
no event shall interest be paid on the amount of any underpayment other than the investment gains
(or losses) credited to the Participants Account pending payment.
11.10
Mistakes
. If a mistake is made in favor of a Participant or a Beneficiary in
crediting contributions or investment gains or losses to an Account or in the payment of an
Account, the Committee or the Trustee (acting at the Companys direction and on behalf of this
Plan) shall take such action against the Participant or Beneficiary to remedy such mistake and to
make this Plan whole as the Committee deems proper and appropriate under the circumstances, and any
mistake made in favor of this Plan shall promptly be corrected by (or at the direction of) the
Committee.
§ 12.
ADMINISTRATION
12.1
Named Fiduciary
. The Committee shall be the named fiduciary of the Plan and shall
be responsible for the (i) control, management and administration of the Plan; (ii) establishing
the Plans investment policy; (iii) selection and monitoring of the Investment Funds available to
Participants in the Plan; (iv) monitoring to the extent provided in § 14.2 of the AMVESCAP Stock
Fund; and (v) assuring compliance of the Plan with ERISAs fiduciary rules, including ERISA
§ 404(c). The Committee shall have and perform the responsibilities of the Plan Administrator under
the Plan (as defined in ERISA). The Committee shall consist of the following individuals:
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Hubert Harris (CEO, INVESCO North America)
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Bob McCullough (Former CFO and Senior Partner, AMVESCAP)
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Don Hawk (Director of Corporate Resources, AIM)
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Jon May (Director of Human Resources, INVESCO North America)
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Brad Jones (Managing Director, Business Development, Atlantic Trust)
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The Committee may from time to time establish rules and procedures for its operation as the
Committee may deem necessary or appropriate. The Committee as the named fiduciary may appoint or
employ person to assist in performing its duties with respect to the Plan and may appoint or employ
any other agents it deems advisable, including legal counsel, actuaries,
23
consultants, investment managers, auditors, bookkeepers and recordkeepers to serve at the
Committees direction.
12.2
Committee Administrative Powers and Duties
.
(a)
General
. The Committee shall have the exclusive responsibility and complete
discretionary authority to control the operation, management and administration of this Plan, with
all powers necessary to enable it properly to carry out such responsibilities, including (but not
limited to) the power to construe this Plan, to determine eligibility for benefits and to resolve
all interpretative, equitable or other questions that arise under this Plan. All disbursements by
the Trustee shall be made upon, and in accordance with, the written instructions of the Committee.
The decisions of the Committee on all matters within the scope of its authority shall be final and
binding upon each other Participating Employer and Participants and Beneficiaries.
(b)
Liquidity Requirements
. The Committee shall determine anticipated liquidity
requirements to meet projected benefit payments for each Plan Year and, if any adjustment from
previous annual liquidity requirements is appropriate, notice of the adjusted requirement shall be
communicated as soon as practicable to the Trustee in writing so that Trust Fund investment
policies may be appropriately coordinated with Plan needs.
(c)
Records
. All acts and determinations of the Committee shall be duly recorded by
the person so designated by the Committee to maintain such records (or under his or her
supervision) and all such records, together with such other documents as may be necessary for the
administration of this Plan, shall be preserved in the custody of such person.
(d)
Appointment of Others
. The Committee may appoint such additional persons as
agents or advisors to perform such functions as it may deem necessary and helpful to the effective
performance of its duties in the administration of this Plan. The compensation of such agents or
advisors shall be fixed by the Committee within limits set by the Board and shall be paid by the
Trust Fund, unless the Company elects in writing to pay such compensation.
(e)
Information from Others
. The Committee, the Company, the other Participating
Employers, and the Trustee shall be entitled to rely upon all information and data contained in any
certificate or report or other material prepared by any actuary, accountant, attorney or other
consultant or advisor selected by the Committee to perform services on behalf of this Plan. The
Committee, officers and employees of the Company and the other Participating Employers shall be
indemnified and held harmless by the Company (to the extent permissible under applicable law) for
any costs, expenses, losses, liabilities or assessments arising out of any action taken or omitted
by them in good faith in reliance upon the advice or opinion of any such person selected by the
Company to perform services for this Plan and all action so taken or omitted shall be conclusive
upon each of them and upon all other persons interested in this Plan. Finally, the Trustee shall
be indemnified and held harmless by the Company (to the extent permissible under applicable law)
for any costs, expenses, losses, liabilities or assessments arising out of any action taken or
omitted by them in good faith upon the advice or opinion of any actuary, accountant, attorney or
other consultant or adviser selected by the Company to perform services on behalf of this Plan.
The Company shall be entitled to defend or maintain any suit or litigation arising under the Plan
with respect to the Committee and may employ its own counsel.
24
12.3
Nondiscrimination
. The Committee shall administer this Plan in a manner which it
deems fair, reasonable and equitable under the circumstances and, further, shall have the power to
adopt such administrative or other rules as the Committee in its discretion deems appropriate for
any persons affected by circumstances such as a sale, acquisition, merger, reorganization, facility
closing, layoff, work force reduction or other similar event or transaction; provided, however, the
Committee shall not permit any discrimination under any such circumstances in favor of Highly
Compensated Employees which would be prohibited under Code § 401(a).
12.4
Agent for Service of Process
. The agent for service of process for this Plan shall be
the person currently listed in the summary plan description for this Plan as the agent for service
of process for this Plan.
12.5
Reporting and Disclosure
. The Company shall be the Committee for purposes of
satisfying any applicable requirement now or hereinafter imposed through federal or state
legislation to report and disclose to any federal or state department or agency, or to any
Participant or Beneficiary, any information respecting the establishment or maintenance of this
Plan.
12.6
Acquisitions
. In the event the Company or an Affiliate acquires any organization or
entity or all or any part of the assets of any organization or entity, the Committee shall have the
power to adopt in writing such administrative rules (on an acquisition by acquisition basis) which
will treat the service of any affected Employee with such organization or entity before such
acquisition as if he or she had completed such service with an Affiliate if such affected Employee
was employed by such organization or entity immediately before such acquisition and he or she
became an Employee as a result of such acquisition. The Committee shall treat all similarly
situated affected Employees the same and shall not permit any discrimination under any
circumstances in favor of any Highly Compensated Employees that would be prohibited under Code §
401(a)(4).
§ 13.
TRUSTEE
13.1
Acceptance of Trust and Limited Duties Thereunder
. The Trustee accepts the Trust
which is part of this Plan. However, the Trustee shall have no duty to collect any contributions
from Participating Employers or to interpret this Plan or see that the Trust Fund is sufficient to
pay Plan benefits.
13.2
Legal Title to Plan Assets
. Legal title to Plan assets and all income, dividends,
accretions and appreciation attributable to the Trust Fund is vested in the Trustee, and no
Participant, Beneficiary or other person has any legal or equitable right to or interest in the
Trust Fund or benefits except as provided by this Plan or by applicable law.
13.3
Resignation, Removal and Succession of Trustee
.
(a)
Trustee Resignation
. The Trustee may resign at any time by delivering to the
Company, at least 30 days before its effective date, a written notice of the Trustees resignation.
25
(b)
Trustee Removal
. The Company may remove the Trustee by delivery to such Trustee
at the Trustees last known address, at least 30 days before its effective date, a written notice
of the Trustees removal.
(c)
Successor Trustee
. Upon the resignation or removal of any Trustee, a successor
shall be appointed by the Committee. Such successor, upon accepting the Trustees appointment in
writing and delivering such acceptance to the Committee shall, without further act, become vested
with all the estate, rights, powers, discretions, and duties of the new Trustees predecessor.
Until a successor is appointed, the old Trustee has full authority to act under the terms of this
Plan. The resigning or removed Trustee, upon receipt of direction by the Committee, shall execute
all documents and do all acts necessary to vest the title of record in any successor Trustee.
Whenever a Trustee ceases to serve, such Trustee shall within a reasonable time thereafter (unless
excused from this requirement by the Company) furnish the Company a written accounting with respect
to the portion of the Plan Year during which such Trustee served as Trustee. No successor Trustee
shall be personally liable for any act or failure to act of any predecessor Trustee.
13.4
Full Investment and General Powers
. The Trustee shall have all rights, powers,
privileges and immunities necessary or desirable and permissible under ERISA for the performance of
the Trustees duties as Trustee, and shall have full discretion and authority with regard to the
investment of the Trust Fund, including with respect to the purchase and sale of AMVESCAP Stock and
with respect to the voting or tender of AMVESCAP Stock as provided in and subject to the
limitations provided in § 7, but excluding with respect to any portion of the Trust Fund under the
direction of an Investment Manager (pursuant to ERISA § 403(a)(2)) or with respect to any portion
of the Trust Fund subject to direction by the Committee (pursuant to ERISA § 403(a)(1)) as provided
in § 14. The Trustee shall coordinate its investment policy with Plan financial needs as
communicated to it by the Committee. Subject to the foregoing, the Trustee is authorized and
empowered:
(a) To invest any part or all of the Trust Fund in any common or preferred stocks, open-end or
closed-end mutual funds, put and call options traded on a national exchange, United States
retirement plan bonds, corporate bonds, debentures, convertible debentures, commercial paper, U.S.
Treasury bills, U.S. Treasury notes and other direct or indirect obligations of the United States
Government or its agencies, improved or unimproved real estate situated in the United States,
limited partnerships, insurance contracts, group annuity contracts, mortgages, notes or other
property of any kind, real or personal, and to buy or sell options on common stock on a nationally
recognized options exchange with or without holding the underlying common stock, all without
restriction as to that class of investments which are defined as legal investments for trust
estates under any present or future laws other than ERISA, and, except as otherwise required by
ERISA, without regard to the proportion that one investment bears to the entire Trust Fund;
(b) To pool all or any part of the Trust Fund under a master trust or other pooled investment
arrangement with assets belonging to any other qualified employee pension plan, to commingle such
assets and. make joint or common investments and carry joint accounts on behalf of this Plan and
such other plan or plans, allocating shares or interests in such investments
26
or accounts or any pooled assets of the two or more plans in accordance with their respective
interests;
(c) To invest all or any portion of the Trust Fund in any group trust fund which at the time
of the investment provides for the pooling of the assets of plans qualified under Code § 401(a);
provided that (1) this authorization applies solely to a group trust fund exempt from taxation
under Code § 501 (a) and the trust agreement of which satisfies the requirements of Revenue Ruling
81-100 or its successor; (2) the provisions of the group trust fund agreement, as amended from time
to time, are by this reference incorporated in this Plan; and (3) the provisions of the group trust
fund shall govern any investment of the Trust Fund in that fund;
(d) To retain in cash so much of the Trust Fund as it may deem advisable to satisfy liquidity
needs of this Plan and to deposit cash into a bank account at reasonable interest, including, if a
bank is acting as Trustee, specific authority to invest in any type of deposit of the Trustee at a
reasonable rate of interest or in a common trust fund (the provisions of which govern the
investment of such assets and which this Plan incorporates by this reference) as described in Code
§ 584 which the Trustee (or the Trustees affiliate as defined in Code § 1504) maintains
exclusively for the collective investment of money contributed by the bank (or the affiliate) in
its capacity as Trustee and which conforms to
.
the rules of the Comptroller of the
Currency;
(e) To manage, sell, contract to sell, grant options to purchase, convey, exchange, transfer,
abandon, improve, repair, insure, lease for any term even though commencing in the future or
extending beyond the term of this Plan, and otherwise deal with all property, real or personal, in
such manner, for such considerations and on such terms and conditions as the Trustee shall decide;
(f) To borrow money, to assume indebtedness, extend mortgages and encumber by mortgage or
pledge;
(g) To compromise, contest, arbitrate or abandon claims and demands, in its discretion;
(h) To have with respect to this Plan all of the rights of an individual owner, including the
power to give proxies, to participate in any voting trusts, mergers; consolidations or
liquidations, and to exercise or sell stock subscriptions or conversion rights;
(i) To enter into a lease for oil, gas and other mineral purposes and to create mineral
severances by grant or reservation; to pool or unitize interests in oil, gas and other minerals;
and to enter into operating agreements and to execute division and transfer orders;
(j) To register any AMVESCAP Stock or other property held by it as part of the Trust Fund
hereunder in its own name or in the name of its nominees, with or without the addition of words
indicating that such securities are held in a fiduciary capacity, and to hold any securities in
bearer form; but the books and records of the Trustee shall at all times reflect that all such
investments are part of this Plan;
27
(k) To retain any funds or property subject to any dispute without liability for the payment
of interest, and to decline to make payment or delivery of the funds or property until final
adjudication is made by a court of competent jurisdiction;
(l) To file all tax returns required of the Trustee;
(m) To begin, maintain or defend any litigation necessary in connection with the
administration of this Plan, except that the Trustee shall not be obligated or required to do so
unless indemnified to its satisfaction;
(n) To make any other investments the Trustee may deem proper under the circumstances,
including up to 100% of the Trust Fund in AMVESCAP Stock;
(o) With the Committees approval, to utilize a custodian to maintain custody of all or a
portion of the Trust Fund;
(p) To perform any and all other acts in its judgment necessary or appropriate for the proper
and advantageous management, investment and distribution of the Trust.
13.5
Acquisition Loans
. The Company may direct the Trustee to incur Acquisition Loans from
time to time to finance the acquisition of AMVESCAP Stock or to repay a prior Acquisition Loan, and
to issue its promissory note as Trustee, and the Trustee shall follow any such direction.
13.6
Payment of Benefits
. At the direction of the Committee, the Trustee shall, from time
to time, in accordance with the terms of this Plan, make payments from the Trust Fund to
Participants and Beneficiaries.
13.7
Trustees Compensation; Plan Expenses and Taxes
. The Trustee shall be paid such
reasonable compensation as shall from time to time be agreed by the Committee and Trustee. An
individual serving as Trustee who already receives full-time pay from the Company or Participating
Employer shall not receive any additional compensation from this Plan. In addition, the Trustee
shall be reimbursed for any reasonable expenses, including reasonable counsel fees incurred by the
Trustee as Trustee. Such compensation and expenses and all taxes that may be levied or assessed
against the Trust Fund or the income of the Trust Fund shall be paid from the Trust Fund unless
paid or advanced by the Company. No fee or expense paid directly or indirectly by the Committee
shall be deemed to be a contribution.
13.8
Annual Accounting of the Trustee
. Within a reasonable period of time after the later
of the last day of the Plan Year or receipt of the final contribution for such Plan Year from all
Participating Employers, the Trustee shall furnish the Committee a written annual accounting with
respect to the Plan Year showing the condition of the Trust Fund, including the investment
performance, Trust Fund assets held at the end of the Plan Year and all investments, receipts,
payments and other transactions effected by the Trustee during the Plan Year, and such other
information as the Trustee or the Committee deems appropriate. Such accounting shall be conclusive
on all persons except as to any act or transaction as to which the Committee or other person files
with the Trustee written objections within 90 days after receipt of the accounting, or such longer
time as
-
may be prescribed by ERISA; provided, however, that nothing in this § 13.8
28
shall deprive the Trustee of its right to have its accounts judicially settled if the Trustee so
reasonably desires.
13.9
Records and Statements
. The Trustees Plan and Trust Fund records shall be open to
inspection by the Committee at all reasonable times and may be audited from time to time by any
person or persons as the Committee may specify in writing. The Trustee shall furnish the Company
such information relating to the Trust Fund as the Committee reasonably deems necessary.
13.10
Authority to Act without Bond or Court Approval
. To the extent permitted by law, the
Trustee need not make or file any inventory or appraisal with, or give any bond, or be a surety to
any officer, court, or tribunal, nor secure any order of court for the exercise of any power
granted the Trustee under this Plan. The Trustee may exercise its judgment in all matters and at
all times without court approval of its actions and decisions; provided, however, that if any
application to or proceeding or action in the courts is made, only the Committee and the Trustee
shall be necessary parties, and no Participant or other person having an interest in this Plan
shall be entitled to any notice or service of process. Any judgment entered in the proceeding or
action shall be conclusive on all persons claiming an interest in Plan benefits.
§ 14.
INVESTMENT OF THE TRUST FUND
14.1
Investment in AMVESCAP Stock
. The ESOP Portion of the Plan is designed to be an
employee stock ownership plan as defined in Code § 4975(e)(7) and regulations thereunder. As a
result, the ESOP Portion of the Plan shall be invested primarily in employer securities.
Accordingly, as directed in writing by the Committee, the Trustee may invest up to 100% of the ESOP
Portion of the Plan in AMVESCAP Stock. The Committee shall direct the Trustee in writing (which
may be a continuing direction) as to all purchases and sales of AMVESCAP Stock. The Trustee may
suspend purchases of AMVESCAP Stock in circumstances in which such suspension is necessary to
comply with any applicable law or applicable stock exchange rule or regulation, in which event such
purchases shall be made or resumed as or when the Trustee reasonably determines that such purchases
are permitted under applicable law or such rules and regulations. The Trustee shall account for
the cost or other basis of all AMVESCAP Stock held in the Trust Fund in accordance with §
1.402(a)-1(b)(2)(ii) of the income tax regulations under the Code.
14.2
General Investments
. The Committee may direct the Trustee in writing from time to
time (which may be a continuing direction) to invest the ESOP Portion of the Plan in such
investments other than AMVESCAP Stock as the Company shall specify in its direction. The Trustee
has no duty to question any such Committee investment direction and has no responsibility for any
disparity between the investment performance of the portion of the Trust Fund managed by the
Trustee as compared to Committee-directed investments. Committee-directed investments shall be made
by the Trustee as soon as administratively feasible after the Trustee has received the Committees
direction. If the Trustee in its reasonable discretion deems itself unable properly to comply with
or administer a Committee-directed investment, the Trustee shall notify the Committee as soon as
administratively feasible.
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14.3
Directed Accounts
. This § 14.3 is effective October 1, 2002, or as soon as
administratively practicable thereafter.
(a) A Participant may elect at any time to transfer amounts from his or her AMVESCAP Stock
Account to his or her Directed Account by delivering to the Committee a completed Election Form.
To the extent a Participant has elected such a transfer, the Trustee shall liquidate the
applicable portion of the Participants AMVESCAP Stock Account pursuant to the procedures
prescribed by the Committee for this purpose and transfer the proceeds thereof to the Participants
Directed Account. The amounts in a Participants Directed Account shall be subject to the
investment direction of the Participant in accordance with the provisions of § 14.3(b) below. At
no time may a Participant elect to transfer amounts from his or her Directed Account to his or her
AMVESCAP Stock Account.
(b) Direction by a Participant of the investment of his Directed Account shall be made in
accordance with this subsection. The Committee shall communicate a Participants investment
directions to the Trustee who shall invest amounts credited to the Participants Directed Account
in accordance with the Participants directions. A Participants Directed Account shall not share
in general Trust Fund earnings, but it shall be charged or credited as appropriate with the net
earnings, gains, losses and expenses as well as any appreciation or depreciation in market value
attributable to such Directed Account.
(1) The Committee shall determine the number and investment characteristics for the Investment
Funds under the Plan from time to time. Subject to subsection (4) below, each Participant or
Beneficiary shall have the right to make an election at any time as to how his or her Directed
Account as of any Valuation Date shall be invested among the Investment Funds available under this
Plan in accordance with the procedures set forth in subsection (2) below. The Trustee shall use
the Trustees best efforts to see that each Participant and Beneficiary is provided such
information and rights to exercise control over his or her Directed Account as required to satisfy
all of the conditions of ERISA § 404(c) (within the meaning of the regulations under ERISA §
404(c)) and to make each election by a Participant or Beneficiary subject to the relief provided
under ERISA § 404(c). Any such investment election by the Participant or Beneficiary shall remain
in effect until a subsequent election becomes effective or until such election is rendered null and
void by the operation of the Plan.
(2) Each Participant or Beneficiary shall communicate any investment election under this §
14.3(b) to the Trustee (or its designated agent) pursuant to a voice activated response system
maintained by the Trustee or in such other method as may be established by the Committee. The
Committee shall communicate in writing to Participants and Beneficiaries the procedures and the
necessary information for accessing such system. A Participant or Beneficiary shall receive
written confirmation of any election made through such voice activated response system from the
Trustee within a reasonable period after the Trustee effects such election. The Trustee shall
comply with any investment election made pursuant to the voice activated response system. The
Committee shall have the right in implementing this Plan and in making any changes in Investment
Funds to freeze all or a part of the elections otherwise available under this Plan for whatever
period the Committee deems necessary or appropriate to implement this Plan or any such changes.
30
(3) As determined by the Committee, administrative expenses incurred to effect the investment
elections made by a Participant or Beneficiary under this § 14.3(b) shall be charged to the
Directed Account of such Participant.
(4) The Committee may establish limits on what percentage of a Participants Directed Account
may be invested in any Investment Fund and shall communicate any such limitations in writing to
Participants and Beneficiaries from time to time.
14.4
Qualified Participant Diversification Election
.
(a)
General
. Each Qualified Participant (as defined in this § 14) may direct the
Trustee (on the Election Form provided for this purpose) as to the investment of 25% of the value
of the Participants Account (the Diversification Benefit) within 90 days after the end of each
Plan Year during the Participants Qualified Election Period (as defined in paragraph § 14.4(c)(3))
(to the extent the amount of such direction exceeds the amount to which a prior direction under
this § 14.4 applies). For the last Plan Year in the Participants Qualified Election Period, the
Trustee shall substitute 50% for 25% in the immediately preceding sentence. The Qualified
Participant must make his or her direction to the Trustee in writing, the direction may be
effective no later than 180 days after the close of the Plan Year to which the direction applies,
and the direction must specify which, if any, of the investment options the Participant selects.
(b)
Investment Options
. A Qualified Participant under this § 14.4 may choose one of
the following investment options:
(1) the distribution of the portion of his or her Diversification Benefit covered by
the election, subject to the provisions of this Plan applicable to a distribution of
AMVESCAP Stock, including any put option requirements; or
(2) the direct transfer of the portion of his or her Diversification Benefit covered by
the election to the Qualified Participants Directed Account pursuant to § 14.3 above (or,
prior to August 1, 2002, to the AMVESCAP Money Purchase Plan, but only if such transferee
plan permits participant directed investments and does not invest in AMVESCAP Stock to a
substantial degree).
The Trustee shall make such distribution or plan transfer no later than 90 days after the last day
of the period during which the Qualified Participant may make the election.
(c)
Definitions
. For purposes of this § 14.4, the following definitions apply:
(1)
Qualified Participant
. Qualified Participant means a Participant who has
reached age 55 and who has completed at least ten Years of Participation in this Plan.
(2)
Year of Participation
. Year of Participation means a Plan Year in which
the Participant was eligible for an allocation of Participating Employer contributions,
irrespective of whether the Participating Employer actually contributed to this Plan for
that Plan Year.
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(3)
Qualified Election Period
. Qualified Election Period means the six Plan
Year period beginning with the Plan Year in which the Participant first becomes a Qualified
Participant.
14.5
Trustee to Invest the Trust Fund Unless Otherwise Provided
. The Trustee shall have
the exclusive power and duty to invest the Trust Fund, except with respect to Plan assets under the
control of an Investment Manager or with respect to Plan assets subject to direction of investment
by the Committee, as provided in this § 14. The Trustee may appoint a subsidiary of the Trustee to
manage (including the power to acquire and dispose of) the Trust Fund held by the Trustee, to such
extent and upon such terms as the Trustee deems best, provided: (a) such manager is registered as
an investment adviser under the Investment Advisers Act of 1940; (b) such manager acknowledges in
writing to the Trustee at the time of such appointment that such manager is a fiduciary with
respect to this Plan; and, (c) the Trustee remains responsible for the actions of such investment
manager to the same extent as if such actions were performed by the Trustee.
14.6
Appointment of Investment Manager
.
(a)
Committee Appointment
. The Committee may, in its discretion, appoint in writing a
person, or more than one person, who may be an Affiliate of the Company and who either (i) is
registered as an investment advisor under the Investment Advisers Act of 1940 (the Act), (ii) is
a bank, as defined in the Act, or (iii) is an insurance company which, within the meaning of ERISA
§ 3(38), is qualified to manage, acquire and dispose of the assets of an employee benefit plan
under the laws of more than one state, as an Investment Manager for all or a specified portion of
the Trust Fund as designated by the Committee (the Managers Account). Upon the effective date
of his or her appointment as Investment Manager, such person shall have the sole responsibility and
duty and the sole power to manage and direct the investment of the Managers Account. The
Committee may terminate the appointment of any person as an Investment Manager or may cause a part
or all of the Trust Fund to be added to or deleted from any Managers Account.
(b)
Agreement with Investment Manager
. The appointment of a person as an Investment
Manager shall not become effective until the date such person delivers to the Trustee and the
Committee a written statement or contract which:
(1) acknowledges that such person is a fiduciary within the meaning of ERISA § 3(2)(a)
and has assumed sole responsibility for the management of such Managers Account; and
(2) certifies that such person either is registered as an investment advisor under the
Act, is a bank as defined in the Act, or is an insurance company which, within the meaning
of ERISA § 3(38) is qualified under the laws of more than one state to manage, acquire and
dispose of the assets of an employee benefit plan, whichever is appropriate;
(3) if requested by the Committee or the Trustee, sets forth a list of the names and
signatures of individuals who are authorized to act on behalf of the Investment
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Manager in connection with the management of the Managers Account, which list may be
amended from time to time by delivering a new list to the Trustee and the Committee and
which list may be relied upon by them; and
(4) addresses such other issues as the Committee deems appropriate under the
circumstances.
(c)
Exercise of Power
. The Investment Manager may exercise his or her power through
written directions to the Trustee or, at his or her option, may communicate such directions orally
and as soon as practicable thereafter confirm them in writing, providing all directions, written or
oral, shall be communicated by or, as applicable, signed, by one of the individuals whose name and
signature appear on the list described in § 14.4(b)(3) or may exercise such power through such
other reasonable and proper procedure as agreed upon by the Investment Manager and the Trustee.
§ 15.
AMENDMENT, TERMINATION, MERGER AND TRANSFER
15.1
Amendment
. The Company shall have the right at any time and from time to time to
amend this Plan in any respect, retroactively or prospectively, by action of its Board or by action
of any committee to which the Board may delegate authority to amend the Plan (or, prior to August
1, 2002, by action of the Companys Chief Executive Officer or his or her delegate), provided that
no amendment shall be made which would (a) divert any of the assets of the Trust Fund to any
purpose other than the exclusive benefit of Participants and Beneficiaries or (b) eliminate or
reduce an optional form of benefit except to the extent permissible under Code § 411(d)(6) or (c)
increase the duties and responsibilities of the Trustee without the Trustees consent, except if
necessary to cause this Plan and related Trust to be exempt from income taxes under the Code. Any
amendment adopted by the Company shall be binding on each other Participating Employer as if
adopted by each such Participating Employer.
15.2
Termination
. The Company reserves the right to terminate or to partially terminate
this Plan or to declare a discontinuance of contributions to this Plan at any time by action of its
Board. The Company reserves the right to terminate the participation in this Plan by any
Participating Employer at any time by action of its Board, and a Participating Employers
participation in this Plan automatically shall terminate if (and at such time as) its status as an
Affiliate terminates for any reason whatsoever (other than through a merger or consolidation into
another Participating Employer). However, a Participating Employers termination of participation
in this Plan shall not be deemed to be a termination or partial termination of this Plan except to
the extent required by the Code. If there is a termination or partial termination of this Plan or
a declaration of a discontinuance of contributions to this Plan, the Accounts of all affected
Participants who are Employees as of the effective date of such termination, partial termination or
declaration shall continue to be fully vested.
In the case of any such termination, partial termination, or declaration, the Committee shall cause
all unallocated amounts to be allocated to the appropriate Accounts of the affected Participants
and Beneficiaries and shall direct the Trustee to distribute such Accounts to such Participants and
Beneficiaries in accordance with uniform rules established by the Committee.
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15.3
Merger or Consolidation or Similar Transaction
. In the case of any merger or
consolidation of this Plan with, or transfer of assets or liabilities of this Plan to, any other
employee benefit plan, each person for whom an Account is maintained shall be entitled to receive a
benefit from such plan, if it is then terminated, which is equal to or greater than the benefit he
or she would have been entitled to receive immediately before the merger, consolidation or
transfer, if this Plan had been terminated.
15.4
Transfer of Certain Assets
. Effective as of January 1, 1997, Participants PRIMCO
Accounts and INVESCO Management & Research (IM&R) accounts and accounts attributable to rollover
contributions and pre-1989 profit sharing contributions made under this Plan as of December 31,
1996 (as described in § 1) were transferred to the trustee of the INVESCO Capital Management, Inc.
Money Purchase Pension Plan. Upon such transfer, the INVESCO Capital Management, Inc. Money
Purchase Pension Plan assumed all assets and liabilities of this Plan attributable to such
accounts, and any benefits under this Plan with respect to such accounts shall thereafter be paid
pursuant to the terms and provisions of the INVESCO Capital Management, Inc. Money Purchase Pension
Plan.
§ 16.
TOP HEAVY RULES
16.1
Minimum Employer Contribution
. If this Plan is top heavy in any Plan Year, a minimum
contribution (subject to the provisions of this § 16) of 3% of Compensation shall be made for each
Non-Key Employee who is a Participant employed by a Participating Employer on the last-day of the
Plan Year without regard to the number of Hours of Service he or she completed during the Plan
Year, unless the contribution rate for the Key Employee with the highest contribution rate is less
than 3% of Compensation, in which event the minimum contribution for such Non-Key Employees shall
equal the highest contribution rate received by a Key Employee. The term contribution rate means
the Participating Employer contributions allocated to the Participants Account for the Plan Year
divided by his or her Compensation for the Plan Year. For purposes of determining the contribution
rate for a Key Employee, the Committee shall consider contributions made to any plan pursuant to a
salary reduction agreement or similar arrangement as Participating Employer contributions. To
determine the contribution rate for both Key Employees and Non-Key Employees, the Committee shall
consider all qualified top-heavy defined contribution plans maintained by the Company as a single
plan. Notwithstanding any contrary provisions of this § 16, the minimum contribution for a Non-Key
Employee who also participates in a defined benefit pension plan maintained by the Company which
does not provide the Non-Key Employee a minimum benefit is 5% of Compensation.
16.2
Additional Contribution
. If the contribution rate for the Plan Year with respect to a
Non-Key Employee described in § 16.1 is less than the minimum contribution, the Committee shall
increase its contribution for such Non-Key Employee to the extent necessary so that such Non-Key
Employees contribution rate for the Plan Year shall equal the minimum contribution. The Committee
shall allocate the additional contribution to the Account of the Non-Key Employee for whom the
Participating Employer makes the contribution. If the Participating Employer contributes to a
profit sharing plan and a money purchase pension plan, the Participating Employer shall make the
additional contribution required by this § 16.2 only to the money purchase pension plan.
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16.3
Determination of Top Heavy Status
. This Plan is top heavy for a Plan Year if the
top-heavy ratio as of the Determination Date exceeds 60%. The top heavy ratio is a fraction, the
numerator of which is the sum of the Account balances of Key Employees as of the Determination
Date, the contributions due as of the Determination Date, and distributions made within the
one-year period (for Plan Years beginning before January 1, 2002, five-year period) ending on the
Determination Date, and the denominator of which is a similar sum determined for all Employees. In
the case of a distribution made for a reason other than separation from service, death or
disability, the previous sentence shall be applied by substituting five-year period for one-year
period. The Committee shall calculate the top heavy ratio by disregarding (a) the Account balance
of any Non-Key Employee who was formerly a Key Employee and (b) the Account balance (including
distributions, if any, of the Account balance) of an individual who has not received credit for at
least one Hour of Service with the Company during the one-year period (for Plan Years beginning
before January 1, 2002, five-year period) ending on the Determination Date. The Committee shall
calculate the top-heavy ratio, including the extent to which it must take into account
distributions, rollovers and transfers, in accordance with Code § 416 and the regulations under
Code § 416.
If the Company maintains other qualified plans (including a simplified employee pension plan),
this Plan is top heavy only if it is a part of the Required Aggregation Group and the top heavy
ratio for both the Required Aggregation Group and the Permissive Aggregation Group exceeds 60%.
The Committee shall calculate the top-heavy ratio in the same manner as required by the first
paragraph of this § 16.3, taking into account all plans within the Required or Permissive
Aggregation Group. To the extent the Committee must take into account distributions to a
Participant, the Committee shall include distributions from a terminated plan which would have been
part of the Required Aggregation Group if it were in existence on the Determination Date. The
Committee shall calculate the present value of the Account balance or accrued benefits and the
other amounts the Committee must take into account under defined benefit plans or simplified
employee pension plans included within the group in accordance with the terms of those plans, Code
§ 416 and the regulations under Code § 416. If an aggregated plan does not have a valuation date
coinciding with the Determination Date, the Committee shall value the accrued benefits in the
aggregated plan as of the most recent valuation date falling within the twelve-month period ending
on the Determination Date (except as Code § 416 and the regulations under Code § 416 require
otherwise for the first and second year of a defined benefit plan). The Committee shall calculate
the top-heavy ratio with reference to the Determination Dates that fall within the same calendar
year.
16.4
Limitation on Allocations
. If, during any Plan Year beginning prior to January 1,
2000, this Plan is top heavy, the Company shall apply the annual additions limitations under Code
§ 415 to a Participant by substituting 100% for 125% each place it appears in Code § 415. This
§ 16.4 shall not apply if:
(a) The contribution rate for a Non-Key employee who participates only in the defined
contribution plan(s) would satisfy § 16.1 if the Committee substituted 4% for 3%;
(b) A Non-Key Employee who participates in the top heavy defined benefit plan(s) receives an
extra minimum contribution or benefit which satisfies Code § 416(h)(2); and
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(c) The top-heavy ratio does not exceed 90%.
16.5
Definitions
. For purposes of applying the provisions of this § 16:
(a)
Key Employee
. Key Employee shall mean, as of any Determination Date, any Eligible
Employee or former Eligible Employee (or Beneficiary of such Employee) who, at any time during the
Plan Year which includes the Determination Date, is (1) an officer (having annual Compensation in
excess of $135,000 (as adjusted under Code § 416(i)(1) for Plan Years beginning after December 31,
2005 ) or, for Plan Years beginning prior to January 1, 2002, having annual Compensation in excess
of 50% of the limitation under Code 415(b)(1)(a) in effect for such Plan Year) of the Company, (2)
a more than 5% owner of the Company, or (3) a more than 1 % owner of the Company who has annual
Compensation of more than $150,000. The constructive ownership rules of Code § 318 shall apply to
determine ownership in the Company. The Committee shall make the determination of who is a Key
Employee in accordance with Code § 416(i)(1) and the regulations and other guidance of general
applicability under Code § 416.
(b)
Non-Key Employee
. Non-Key Employee is an Employee who does not meet the
definition of Key Employee.
(c)
Compensation
. Compensation shall mean Compensation as defined in § 8.
(d)
Required Aggregation Group
. Required Aggregation Group means:
(1) Each qualified plan of the Company in which at least one Key Employee participates
at any time during the five year period ending on the Determination Date; and
(2) Any other qualified plan of the Company which enables a plan described in (1) to
meet the requirements of Code § 401(a)(4) and Code § 410.
(e)
Permissive Aggregation Group
. Permissive Aggregation Group is the Required
Aggregation Group plus any other qualified plans maintained by the Company but only if such group
would satisfy in the aggregate the requirements of Code § 401(a)(4) and Code § 410. The Committee
shall determine which plan to take into account in determining the Permissive Aggregation Group.
(f)
Company
. Company means all the members of a controlled group of corporations (as
defined in Code § 414(b)), a commonly controlled group of trades or businesses (whether or not
incorporated) (as defined in Code § 414(c)), or an affiliated service group (as defined in Code §
414(m)), of which the Company is a part. However, the Company shall not aggregate ownership
interests in more than one member of a related group to determine whether an individual is a Key
Employee because of his or her ownership interest in the
.
Company.
(g)
Determination Date
. Determination Date for any Plan Year is the last day of the
preceding Plan Year.
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IN WITNESS WHEREOF, the Company and the Trustee have caused this amended and restated INVESCO
ESOP to be executed, sealed and attested by their duly authorized officers.
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[Corporate Seal]
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INVESCO INSTITUTIONAL (N.A.), INC.
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Attested by:
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By:
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Title:
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[Corporate Seal]
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AMVESCAP NATIONAL TRUST COMPANY, as
Trustee
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Attested by:
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Date:
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