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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q
(Mark One)
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2013March 31, 2014
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
Commission file number 1-13908
Invesco Ltd.
(Exact Name of Registrant as Specified in Its Charter)
Bermuda
(State or Other Jurisdiction of
Incorporation or Organization)
 
98-0557567
(I.R.S. Employer
Identification No.)
   
1555 Peachtree Street, N.E., Suite 1800, Atlanta, GA
(Address of Principal Executive Offices)
 
30309
(Zip Code)

 (404) 892-0896
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
(404) 892-0896
(Registrant's telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ
 
Accelerated filer o
 
Non-accelerated filer o(Do not check if a smaller reporting company)
 
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes o No þ
As of OctoberMarch 31, 2013,2014, the most recent practicable date, 443,280,063the number of the company’s common shares par value $0.20 per share, were outstanding.Common Shares outstanding was 432,678,422.

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TABLE OF CONTENTS
We include cross references to captions elsewhere in this Quarterly Report on Form 10-Q, which we refer to as this “Report,” where you can find related additional information. The following table of contents tells you where to find these captions.
  
 Page
TABLE OF CONTENTS 
  
PART I —I. Financial Information
Item 1. Financial Statements (unaudited)
3
Condensed Consolidated Balance Sheets
3
Condensed Consolidated Statements of Income
4
Condensed Consolidated Statements of Comprehensive Income
5
Condensed Consolidated Statements of Cash Flows
6
Condensed Consolidated Statements of Changes in Equity
7
Notes to the Condensed Consolidated Financial Statements
9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
4639
Item 3. Quantitative and Qualitative Disclosures aboutAbout Market Risk
8871
Item 4. Controls and Procedures
8973
  
PART II — Other InformationII. OTHER INFORMATION
Item 1. Legal Proceedings
9074
Item 1A. Risk Factors
90
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
9074
Item 4. Mine Safety Disclosures
9074
Item 5. Other Information
9074
Item 6. Exhibits
9175
Signatures
9276
 EX-10.1EX-31.1
 EX-31.1EX-31.2
 EX-31.2EX-32.1
 EX-32.1EX-32.2
 EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT


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PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

Invesco Ltd.Ltd.
Condensed Consolidated Balance Sheets
(Unaudited)

As ofAs of
$ in millions, except share dataSeptember 30, 2013 December 31, 2012
$ in millions, except per share dataMarch 31, 2014 December 31, 2013
ASSETS 
     
Cash and cash equivalents1,174.5
 835.5
978.7
 1,331.2
Unsettled fund receivables1,003.1
 550.1
1,510.6
 932.4
Accounts receivable475.6
 449.4
530.7
 500.8
Investments705.0
 610.7
868.7
 839.7
Assets of consolidated sponsored investment products (CSIP)94.3
 —
275.8
 108.5
Assets of consolidated investment products (CIP):      
Cash and cash equivalents of CIP445.0
 287.8
780.0
 583.6
Accounts receivable and other assets of CIP62.2
 84.1
183.7
 58.3
Investments of CIP4,514.6
 4,550.6
5,173.7
 4,734.7
Assets held for policyholders1,449.0
 1,153.6
1,342.0
 1,416.0
Prepaid assets111.4
 99.9
101.5
 101.4
Assets held for sale106.7
 —
Other assets107.6
 146.8
187.4
 182.1
Deferred tax asset, net10.9
 38.4
Property and equipment, net336.4
 349.6
342.4
 350.8
Intangible assets, net1,268.6
 1,287.7
1,260.6
 1,263.7
Goodwill6,898.6
 7,048.2
6,810.5
 6,867.3
Total assets18,763.5
 17,492.4
20,346.3
 19,270.5
LIABILITIES      
Accrued compensation and benefits565.5
 609.8
391.3
 676.4
Accounts payable and accrued expenses660.3
 626.4
734.0
 763.1
Liabilities of CIP:      
Debt of CIP4,003.1
 3,899.4
4,762.7
 4,181.7
Other liabilities of CIP251.0
 104.3
621.8
 461.8
Policyholder payables1,449.0
 1,153.6
1,342.0
 1,416.0
Unsettled fund payables993.8
 552.5
1,508.4
 882.0
Long-term debt1,387.6
 1,186.0
1,588.7
 1,588.6
Deferred tax liabilities, net333.8
 311.4
390.0
 323.6
Total liabilities9,644.1
 8,443.4
11,338.9
 10,293.2
Commitments and Contingencies (See Note11)

 

EQUITY   
Commitments and contingencies (See Note 11)

 

TEMPORARY EQUITY   
Redeemable noncontrolling interests in CSIP101.9
 —
PERMANENT EQUITY   
Equity attributable to common shareholders:      
Common shares ($0.20 par value; 1,050.0 million authorized; 490.4 million shares issued as of September 30, 2013 and December 31, 2012)98.1
 98.1
Common shares ($0.20 par value; 1,050.0 million authorized; 490.4 million shares issued as of March 31, 2014 and December 31, 2013)98.1
 98.1
Additional paid-in-capital6,080.1
 6,141.0
6,044.3
 6,100.8
Treasury shares(1,363.5) (1,382.9)(1,768.3) (1,700.4)
Retained earnings3,175.0
 2,801.3
3,451.7
 3,361.9
Retained earnings appropriated for investors in CIP106.3
 128.8
74.0
 104.3
Accumulated other comprehensive income, net of tax434.8
 530.5
379.9
 427.9
Total equity attributable to common shareholders8,530.8
 8,316.8
8,279.7
 8,392.6
Equity attributable to nonredeemable noncontrolling interests in consolidated entities588.6
 732.2
625.8
 584.7
Total equity9,119.4
 9,049.0
Total liabilities and equity18,763.5
 17,492.4
Total permanent equity8,905.5
 8,977.3
Total liabilities, temporary and permanent equity20,346.3
 19,270.5
See accompanying notes.

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Invesco Ltd.Ltd.
Condensed Consolidated Statements of Income
(Unaudited)

Three months ended September 30, Nine months ended September 30,Three months ended March 31,
$ in millions, except per share data2013 2012 2013 20122014 2013
Operating revenues:          
Investment management fees914.4
 790.6
 2,644.5
 2,309.6
965.4
 844.6
Service and distribution fees220.7
 196.0
 642.7
 572.1
238.6
 206.3
Performance fees5.1
 3.0
 47.2
 39.0
31.1
 36.1
Other31.6
 24.3
 85.1
 83.0
34.4
 25.2
Total operating revenues1,171.8
 1,013.9
 3,419.5
 3,003.7
1,269.5
 1,112.2
Operating expenses:          
Employee compensation330.3
 315.2
 995.9
 906.0
362.1
 341.5
Third-party distribution, service and advisory380.9
 326.2
 1,093.0
 958.2
405.4
 346.1
Marketing22.6
 26.3
 68.6
 79.1
23.4
 22.2
Property, office and technology71.9
 66.1
 207.0
 195.0
112.7
 66.5
General and administrative80.1
 66.2
 224.9
 222.7
121.6
 67.5
Transaction and integration—
 3.0
 3.2
 5.6
—
 1.4
Total operating expenses885.8
 803.0
 2,592.6
 2,366.6
1,025.2
 845.2
Operating income286.0
 210.9
 826.9
 637.1
244.3
 267.0
Other income/(expense):          
Equity in earnings of unconsolidated affiliates10.3
 5.2
 25.3
 21.8
10.0
 8.1
Interest and dividend income2.5
 2.5
 6.8
 7.1
2.9
 2.2
Interest expense(9.7) (12.6) (29.4) (39.6)(18.7) (9.7)
Other gains and losses, net2.7
 18.4
 20.8
 29.3
6.6
 17.7
Other income/(loss) of CSIP, net8.2
 —
CIP:          
Interest and dividend income of CIP46.5
 68.7
 147.5
 206.4
48.3
 50.3
Interest expense of CIP(33.5) (41.9) (96.8) (134.4)(30.3) (32.7)
Other gains/(losses) of CIP, net38.2
 (25.2) 15.5
 (69.9)26.5
 (21.1)
Income from continuing operations before income taxes343.0
 226.0
 916.6
 657.8
297.8
 281.8
Income tax provision(92.9) (72.3) (262.7) (205.8)(89.0) (86.3)
Income from continuing operations, net of taxes250.1
 153.7
 653.9
 452.0
208.8
 195.5
Income/(loss) from discontinued operations, net of taxes(1.4) 3.2
 (1.9) 7.3
(2.0) 4.1
Net income248.7
 156.9
 652.0
 459.3
206.8
 199.6
Net (income)/loss attributable to noncontrolling interests in consolidated entities(20.6) 13.7
 0.9
 59.1
(19.0) 22.6
Net income attributable to common shareholders228.1
 170.6
 652.9
 518.4
187.8
 222.2
Earnings per share:          
Basic:          
Earnings per share from continuing operations
$0.51
 
$0.37
 
$1.46
 
$1.13

$0.43
 
$0.49
Earnings per share from discontinued operations—
 
$0.01
 —
 
$0.02

$—
 
$0.01
Basic earnings per share
$0.51
 
$0.38
 
$1.46
 
$1.14

$0.43
 
$0.50
Diluted:          
Earnings per share from continuing operations
$0.51
 
$0.37
 
$1.46
 
$1.12

$0.43
 
$0.49
Earnings per share from discontinued operations—
 
$0.01
 —
 
$0.02

$—
 
$0.01
Diluted earnings per share
$0.51
 
$0.38
 
$1.45
 
$1.14

$0.43
 
$0.49
Dividends declared per share
$0.2250
 
$0.1725
 
$0.6225
 
$0.4675

$0.2250
 
$0.1725

See accompanying notes.


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Invesco Ltd.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
Three months ended September 30, Nine months ended September 30,Three months ended March 31,
$ in millions2013 2012 2013 20122014 2013
Net income248.7
 156.9
 652.0
 459.3
206.8
 199.6
Other comprehensive income/(loss), before tax:          
Currency translation differences on investments in foreign subsidiaries202.7
 171.3
 (94.2) 155.2
(53.2) (209.6)
Actuarial (loss)/gain related to employee benefit plans(5.5) (2.7) 1.3
 (1.6)(0.4) 6.5
Reclassification of amortization of prior service costs/(credit) into employee compensation expense(0.5) (0.5) (1.5) (1.5)
Reclassification of amortization of actuarial (gains)/losses into employee compensation expense0.5
 0.4
 1.9
 1.2
Reclassification of amortization of prior service cost/(credit) into employee compensation expense(0.5) (0.5)
Reclassification of amortization of actuarial (gain)/loss into employee compensation expense0.6
 0.7
Share of other comprehensive income/(loss) of equity method investments(3.5) 1.6
 (5.1) 4.6
4.0
 (0.3)
Unrealized (losses)/gains on available-for-sale investments4.5
 6.2
 8.5
 10.0
4.2
 4.3
Reclassification of net (gains)/losses realized on available-for-sale investments included in other gains and losses, net(1.0) (1.3) (2.4) (1.7)(2.7) (1.4)
Other comprehensive income/(loss), before tax197.2
 175.0
 (91.5) 166.2
(48.0) (200.3)
Income tax related to items of other comprehensive income/(loss):          
Tax benefit/(expense) on foreign currency translation adjustments0.7
 0.1
 (0.4) 0.9
—
 (0.8)
Tax on actuarial (loss)/gain related to employee benefit plans(1.7) (1.8) (3.2) (1.9)0.1
 (1.4)
Reclassification of tax on amortization of prior service costs/(credit) into income tax provision0.1
 0.2
 0.3
 0.3
Reclassification of tax on amortization of actuarial (gains)/losses into income tax provision(0.1) (0.1) (0.4) (0.3)
Reclassification of tax on amortization of prior service cost/(credit) into income tax provision0.1
 0.1
Reclassification of tax on amortization of actuarial (gain)/loss into income tax provision(0.1) (0.2)
Tax on net unrealized (losses)/gains on available-for-sale investments0.2
 2.5
 (0.4) 2.7
0.2
 0.2
Reclassification of tax on net (gains)/losses realized on available-for-sale investments included in income tax provision(0.3) (2.9) (0.6) (2.9)(0.7) (0.3)
Total income tax benefit (expense) related to items of other comprehensive income(1.1) (2.0) (4.7) (1.2)
Total income tax benefit/(expense) related to items of other comprehensive income(0.4) (2.4)
Other comprehensive income/(loss), net of tax196.1
 173.0
 (96.2) 165.0
(48.4) (202.7)
Total comprehensive income/(loss)444.8
 329.9
 555.8
 624.3
158.4
 (3.1)
Comprehensive loss/(income) attributable to noncontrolling interests in consolidated entities(25.8) (11.0) 1.4
 59.0
(18.6) 29.3
Comprehensive income attributable to common shareholders419.0
 318.9
 557.2
 683.3
139.8
 26.2
See accompanying notes.



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Invesco Ltd.Ltd.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Three months ended March 31,
$ in millions2014 2013
Operating activities:   
Net income206.8
 199.6
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:  

Amortization and depreciation23.4
 22.3
Share-based compensation expense36.5
 33.5
(Gain)/loss on disposal of business, property and equipment, net—
 0.4
Other (gains)/losses, net(6.6) (17.7)
Other (gains)/losses of CSIP, net(6.5) —
Other (gains)/losses of CIP, net(26.5) 21.1
Equity in earnings of unconsolidated affiliates(10.0) (8.1)
Dividends from unconsolidated affiliates0.8
 1.0
Changes in operating assets and liabilities:   
(Increase)/decrease in cash held by CIP(196.4) (470.2)
(Increase)/decrease in cash held by CSIP0.3
 —
(Purchase)/sale of trading investments, net7.8
 (13.7)
(Increase)/decrease in receivables(520.9) (606.6)
Increase/(decrease) in payables272.1
 353.8
Net cash provided by/(used in) operating activities(219.2) (484.6)
Investing activities:   
Purchase of property and equipment(21.4) (18.1)
Purchase of available-for-sale investments(1.8) (0.1)
Sale of available-for-sale investments10.3
 23.0
Purchase of investments by CIP(1,325.1) (965.2)
Sale of investments by CIP970.1
 1,205.6
Purchase of investments by CSIP(246.9) —
Sale of investments by CSIP95.3
 —
Purchase of other investments(44.1) (127.9)
Sale of other investments15.3
 25.3
Returns of capital and distributions from unconsolidated partnership investments3.8
 3.8
Net cash provided by/(used in) investing activities(544.5) 146.4
Financing activities:   
Proceeds from exercises of share options1.5
 5.2
Purchases of treasury shares(119.6) (45.0)
Dividends paid(98.0) (77.2)
Excess tax benefits from share-based compensation13.9
 11.7
Overdraft on unsettled fund account(35.7) —
Capital invested into CIP40.1
 3.5
Capital distributed by CIP(48.6) (60.9)
Capital invested into CSIP100.8
 —
Borrowings of debt by CIP715.0
 405.0
Repayments of debt by CIP(161.1) (152.0)
Net borrowings/(repayments) under credit facility—
 328.5
Net cash provided by/(used in) financing activities408.3
 418.8
Increase/(decrease) in cash and cash equivalents(355.4) 80.6
Foreign exchange movement on cash and cash equivalents2.9
 (31.4)
Cash and cash equivalents, beginning of period1,331.2
 835.5
Cash and cash equivalents, end of period978.7
 884.7
Supplemental Cash Flow Information:   
Interest paid(1.4) (2.6)
Interest received1.6
 1.3
Taxes paid(90.2) (41.3)
 Nine months ended September 30,
$ in millions2013 2012
Operating activities:   
Net income652.0
 459.3
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:   
Amortization and depreciation66.0
 72.5
Share-based compensation expense103.0
 102.9
(Gains)/losses on disposal of property and equipment, net0.5
 (0.5)
Purchase of trading investments(10,952.4) (7,573.2)
Sale of trading investments10,954.7
 7,564.6
Other gains and losses, net(20.8) (29.3)
Other (gains)/losses of CIP, net(15.5) 69.9
Tax benefit from share-based compensation62.8
 47.7
Excess tax benefits from share-based compensation(19.4) (13.7)
Equity in earnings of unconsolidated affiliates(25.3) (21.8)
Dividends from unconsolidated affiliates15.6
 14.7
Changes in operating assets and liabilities:   
(Increase)/decrease in cash held by CIP(165.1) (296.0)
(Increase)/decrease in receivables(710.4) 151.9
Increase/(decrease) in payables644.2
 (231.3)
Net cash provided by/(used in) operating activities589.9
 317.7
Investing activities:   
Purchase of property and equipment(67.0) (68.4)
Disposal of property and equipment—
 0.6
Purchase of available-for-sale investments(30.0) (73.9)
Sale of available-for-sale investments23.3
 32.9
Purchase of investments by CIP(3,496.4) (2,338.9)
Sale of investments by CIP3,705.9
 2,484.5
Purchase of investments by CSIP(51.4) —
Sale of investments by CSIP3.5
 —
Purchase of other investments(205.2) (87.7)
Sale of other investments74.3
 63.4
Returns of capital and distributions from unconsolidated partnership investments25.3
 12.2
Acquisition earn-out payments(1.2) (5.6)
Sale of management contracts—
 16.4
Net cash provided by/(used in) investing activities(18.9) 35.5
Financing activities:   
Proceeds from exercises of share options13.0
 17.2
Purchases of treasury shares(120.5) (190.0)
Dividends paid(279.2) (211.5)
Excess tax benefits from share-based compensation19.4
 13.7
Capital invested into CIP13.4
 19.4
Capital distributed by CIP(146.6) (122.0)
Net borrowings/(repayments) of debt of CIP63.5
 255.4
Net borrowings/(repayments) under credit facility201.5
 215.5
Repayments of senior notes—
 (215.1)
Net cash provided by/(used in) financing activities(235.5) (217.4)
Increase/(decrease) in cash and cash equivalents335.5
 135.8
Foreign exchange movement on cash and cash equivalents3.5
 16.9
Cash and cash equivalents, beginning of period835.5
 727.4
Cash and cash equivalents, end of period1,174.5
 880.1
Supplemental Cash Flow Information:   
Interest paid(20.5) (39.0)
Interest received3.6
 3.5
Taxes paid(183.0) (154.4)
See accompanying notes.
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Invesco Ltd.Ltd.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
 Equity Attributable to Common Shareholders     Equity Attributable to Common Shareholders      
$ in millions Common Shares Additional Paid-in-Capital Treasury Shares Retained Earnings Retained Earnings
Appropriated for
Investors in
CIP		 Accumulated Other
Comprehensive Income		 Total Equity
Attributable to Common Shareholders		 Nonredeemable Noncontrolling
Interests in
Consolidated Entities		 Total Equity 
Common Shares
 Additional Paid-in-Capital Treasury Shares Retained Earnings Retained Earnings Appropriated for Investors in CIP Accumulated Other Comprehensive Income Total Equity Attributable to Common Shareholders Nonredeemable Noncontrolling Interests in Consolidated Entities Total Permanent Equity Redeemable Noncontrolling Interests in CSIP/Temporary Equity
December 31, 2012 98.1
 6,141.0
 (1,382.9) 2,801.3
 128.8
 530.5
 8,316.8
 732.2
 9,049.0
 
January 1, 201498.1
 6,100.8
 (1,700.4) 3,361.9
 104.3
 427.9
 8,392.6
 584.7
 8,977.3
 —
Net income —
 —
 —
 652.9
 —
 —
 652.9
 (0.9) 652.0
 —
 —
 —
 187.8
 —
 —
 187.8
 17.1
 204.9
 1.9
Other comprehensive income (loss) —
 —
 —
 —
 —
 (95.7) (95.7) (0.5) (96.2) 
Total comprehensive income (loss)             557.2
 (1.4) 555.8
 
Net income (loss) reclassified to appropriated retained earnings —
 —
 —
 —
 (19.4) —
 (19.4) 19.4
 —
 
Currency translation differences on investments in foreign subsidiaries reclassified to appropriated retained earnings —
 —
 —
 —
 0.5
 —
 0.5
 (0.5) —
 
Deconsolidation of CIP —
 —
 —
 —
 (3.6) —
 (3.6) (27.7) (31.3) 
Other comprehensive income/(loss)—
 —
 —
 —
 —
 (48.0) (48.0) (0.4) (48.4) —
Net income/(loss) reclassified to appropriated retained earnings—
 —
 —
 —
 (30.3) —
 (30.3) 30.3
 —
 —
Change in noncontrolling interests in consolidated entities, net —
 —
 —
 —
 —
 —
 —
 (133.4) (133.4) —
 —
 —
 —
 —
 —
 —
 (5.9) (5.9) 100.0
Dividends —
 —
 —
 (279.2) —
 —
 (279.2) —
 (279.2) —
 —
 —
 (98.0) —
 —
 (98.0) —
 (98.0) —
Employee share plans:                                      
Share-based compensation —
 103.0
 —
 —
 —
 —
 103.0
 —
 103.0
 —
 36.5
 —
 —
 —
 —
 36.5
 —
 36.5
 —
Vested shares —
 (170.2) 170.2
 —
 —
 —
 —
 —
 —
 —
 (105.8) 105.8
 —
 —
 —
 —
 —
 —
 —
Exercise of options —
 (14.2) 27.2
 —
 —
 —
 13.0
 —
 13.0
 —
 (1.1) 2.6
 —
 —
 —
 1.5
 —
 1.5
 —
Settlement of ESPP purchases —
 1.1
 4.0
 —
 —
 —
 5.1
 —
 5.1
 
Tax impact of share-based payment —
 19.4
 —
 —
 —
 —
 19.4
 —
 19.4
 —
 13.9
 —
 —
 —
 —
 13.9
 —
 13.9
 —
Purchase of shares —
 —
 (182.0) —
 —
 —
 (182.0) —
 (182.0) —
 —
 (176.3) —
 —
 —
 (176.3) —
 (176.3) —
September 30, 2013 98.1
 6,080.1
 (1,363.5) 3,175.0
 106.3
 434.8
 8,530.8
 588.6
 9,119.4
 
March 31, 201498.1
 6,044.3
 (1,768.3) 3,451.7
 74.0
 379.9
 8,279.7
 625.8
 8,905.5
 101.9

See accompanying notes.



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Invesco Ltd.



Invesco Ltd.
Condensed Consolidated Statements of Changes in Equity (continued)
(Unaudited)
 Equity Attributable to Common Shareholders     Equity Attributable to Common Shareholders    
$ in millions Common Shares Additional Paid-in-Capital Treasury Shares Retained Earnings Retained Earnings
Appropriated for
Investors in
CIP		 Accumulated Other
Comprehensive Income		 Total Equity
Attributable to Common Shareholders		 Nonredeemable Noncontrolling
Interests in
Consolidated Entities		 Total Equity 
Common Shares
 Additional Paid-in-Capital Treasury Shares Retained Earnings Retained Earnings Appropriated for Investors in CIP Accumulated Other Comprehensive Income Total Equity Attributable to Common Shareholders Nonredeemable Noncontrolling Interests in Consolidated Entities Total Permanent Equity
December 31, 2011 98.1
 6,180.6
 (1,280.4) 2,413.2
 334.3
 373.3
 8,119.1
 1,018.5
 9,137.6
 
January 1, 201398.1
 6,141.0
 (1,382.9) 2,801.3
 128.8
 530.5
 8,316.8
 732.2
 9,049.0
Net income —
 —
 —
 518.4
 —
 —
 518.4
 (59.1) 459.3
 —
 —
 —
 222.2
 —
 —
 222.2
 (22.6) 199.6
Other comprehensive income —
 —
 —
 —
 —
 164.9
 164.9
 0.1
 165.0
 
Total comprehensive income             683.3
 (59.0) 624.3
 
Net income (loss) reclassified to appropriated retained earnings —
 —
 —
 —
 (51.3) —
 (51.3) 51.3
 —
 
Other comprehensive income/(loss)—
 —
 —
 —
 —
 (196.0) (196.0) (6.7) (202.7)
Net income/(loss) reclassified to appropriated retained earnings—
 —
 —
 —
 (21.4) —
 (21.4) 21.4
 —
Currency translation differences on investments in foreign subsidiaries reclassified to appropriated retained earnings —
 —
 —
 —
 (7.0) —
 (7.0) 7.0
 —
 —
 —
 —
 —
 0.3
 —
 0.3
 (0.3) —
Deconsolidation of CIP —
 —
 —
 —
 (116.9) —
 (116.9) —
 (116.9) —
 —
 —
 —
 —
 —
 —
 (27.7) (27.7)
Change in noncontrolling interests in consolidated entities, net —
 —
 —
 —
 —
 —
 —
 (135.5) (135.5) —
 —
 —
 —
 —
 —
 —
 (53.3) (53.3)
Dividends —
 —
 —
 (211.5) —
 —
 (211.5) —
 (211.5) —
 —
 —
 (77.2) —
 —
 (77.2) —
 (77.2)
Employee share plans:                                    
Share-based compensation —
 102.9
 —
 —
 —
 —
 102.9
 —
 102.9
 —
 33.5
 —
 —
 —
 —
 33.5
 —
 33.5
Vested shares —
 (156.9) 156.9
 —
 —
 —
 —
 —
 —
 —
 (155.4) 155.4
 —
 —
 —
 —
 —
 —
Exercise of options —
 (17.7) 34.9
 —
 —
 —
 17.2
 —
 17.2
 —
 (6.5) 11.7
 —
 —
 —
 5.2
 —
 5.2
Tax impact of share-based payment —
 13.7
 —
 —
 —
 —
 13.7
 —
 13.7
 —
 11.7
 —
 —
 —
 —
 11.7
 —
 11.7
Purchase of shares —
 —
 (234.4) —
 —
 —
 (234.4) —
 (234.4) —
 —
 (98.9) —
 —
 —
 (98.9) —
 (98.9)
September 30, 2012 98.1
 6,122.6
 (1,323.0) 2,720.1
 159.1
 538.2
 8,315.1
 882.3
 9,197.4
 
March 31, 201398.1
 6,024.3
 (1,314.7) 2,946.3
 107.7
 334.5
 8,196.2
 643.0
 8,839.2

See accompanying notes.


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Invesco Ltd.
Notes to the Condensed Consolidated Financial Statements
(unaudited)(Unaudited)
1.  ACCOUNTING POLICIES
Corporate Information
Invesco Ltd. (Parent) and all of its consolidated entities (collectively, the company or Invesco) provide retail and institutional clients with an array of global investment management capabilities. The company’scompany operates globally and its sole business is investment management.
Certain disclosures included in the company's annual report are not required to be included on an interim basis in the company's quarterly reports on Forms 10-Q. The company has condensed or omitted the disclosures. Therefore, this Form 10-Q (Report) should be read in conjunction with the company's annual report on Form 10-K for the year ended December 31, 2013.
Basis of Accounting and Consolidation
In the opinion of management, the Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for the fair presentation of the financial condition and results of operations for the interim periods presented. All significant intercompany transactions, balances, revenues and expenses are eliminated in consolidation.
Certain disclosures included in the company’s annual report are not required to be included on an interim basis in the company’s quarterly reports on Forms 10-Q. The company has condensed or omitted these disclosures. Therefore, this Form 10-Q (Report) should be read in conjunction with the company’s annual report on Form 10-K for the year ended December 31, 2012. The company has, however, provided enhanced disclosures of its accounting policies for investments and consolidation in this Report.
Use of Estimates
In preparing the financial statements, company 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 and intangible 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.
Basis of Presentation
Effective September 30, 2013, the company changed the presentation of its Condensed Consolidated Balance Sheets from a classified basis to a non-classified basis. Under the non-classified basis, balances are not separately presented as current or noncurrent. Management believes that this presentation is more meaningful to readers because it aggregates assets and liabilities of the same nature, which is consistent with the manner in which management monitors its financial position. The company's previously classified balance sheets were not utilized to derive any ratios or metrics by which the company is measured. Additionally, the presentation of a non-classified balance sheet reduces the presentation complexities resulting from the classification of consolidated managed funds, which do not present classified balance sheet information in their underlying financial statements. Certain previously reported amounts in the Condensed Consolidated Balance Sheets and notes have been reclassified to conform to the new presentation.
As discussed in Note 15, "Discontinued Operations," the results of Atlantic Trust Private Wealth Management (Atlantic Trust) have been presented as a discontinued operation in the Condensed Consolidated Statements of Income for all periods presented. As a result of this change, certain previously reported amounts in the Condensed Consolidated Financial Statements and notes have been reclassified to conform to the current period presentation.
Investments
The majority of the company’s investment balances relate to balances held in affiliated funds. In the normal course of business, the company invests in various types of affiliated investment products, either as “seed money” or as longer-term investments alongside third-party investors, typically referred to as “co-investments.” Seed money investments are investments held in open-ended Invesco managed funds with the purpose of providing capital to the funds during their development periods to allow the funds to achieve critical mass, establish their track records, and obtain third-party investments. Seed money may also be held for regulatory purposes in certain jurisdictions. Co-investments are often required of the asset manager by third-party investors in closed-ended funds to demonstrate an alignment of the asset manager’s interests with those of the third-party investors. The company also invests in affiliated funds in connection with its deferred compensation plans, whereby certain employees defer portions of their annual bonus into funds.
Investments are categorized in this Report as available-for-sale, trading, equity method, foreign time deposits, and other investments. See Note 3, “Investments” for additional details.

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Available-for-sale investments include seed money, co-investments in affiliated collateralized loan obligations (CLOs), and investments in other debt securities. Available-for-sale investments are measured at fair value. Gains or losses arising from changes in the fair value of available-for-sale investments are recognized in accumulated other comprehensive income, net of tax, until the investment is sold or otherwise disposed of, or until the investment is determined to be other-than-temporarily 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.
Trading investments include investments held to settle the company’s deferred compensation plan liabilities, sponsored UIT product-related equity and debt securities, and other equity securities. Trading investments are securities bought and held principally for the purpose of selling them in the near term. Trading investments are measured at fair value. Gains or losses arising from changes in the fair value of trading investments are included in income.
Equity method investments include investments over which the company is deemed to have significant influence, including corporate joint ventures and non-controlled subsidiaries in which the company's ownership is between 20 and 50 percent, and co-investments in certain managed funds generally structured as partnerships or similar vehicles. Investments in joint ventures are investments jointly controlled by the company and external parties. Co-investments in managed funds structured as partnerships or similar vehicles include private equity, real estate, and fund-of-funds. The equity method of accounting requires that the investment is initially recorded at cost. The carrying amount of the investment is increased or decreased to recognize the company's share of the after-tax profit or loss of the investee after the date of acquisition. The proportionate share of income or loss is included in equity in earnings of unconsolidated affiliates in the Condensed Consolidated Statements of Income, and the proportionate share of other comprehensive income or loss is included in accumulated other comprehensive income in the Condensed Consolidated Balance Sheets.
Seed money and co-investments in managed funds are required to be consolidated by the company if certain criteria are met. Upon consolidation of material balances, the company’s seed money or co-investment balance is eliminated, and the underlying securities of the managed fund are reflected on the company’s Condensed Consolidated Balance Sheets at fair value. These underlying securities are presented in the company’s financial statements as either Consolidated Sponsored Investment Products (CSIP) or Consolidated Investment Products (CIP). See the “Basis of Accounting and Consolidation” below for additional information regarding the consolidation criteria as well as the basis for the distinction between the CSIP and CIP classifications. If the company subsequently determines that it no longer controls the managed funds in which it has invested, the company will deconsolidate the funds. Any remaining holding in the managed funds is then accounted for on the bases described above as available-for-sale or equity method investments, as appropriate.
Basis of Accounting and Consolidationupon consolidation.
The company provides investment management services to, and has transactions with, various private equity funds, real estate funds, fund-of-funds, CLOs,collateralized loan obligations (CLOs), and other investment products sponsored by the company in the normal course of business for the investment of client assets. The company serves as the investment manager, making day-to-day investment decisions concerning the assets of these products. Certain of these entities, typically CLOs and funds that are structured as partnership entities (such as private equity funds, real estate funds, and fund-of-funds), are considered to be variable interest entities (VIEs) if the VIE criteria are met.met, otherwise, they are considered to be voting interest entities (VOEs). A VIE, in the context of the company and its managed funds, is a fund that does not have sufficient equity to finance its operations without additional subordinated financial support, or a fund for which the risks and rewards of ownership are not directly linked to voting interests.

The Condensed Consolidated Financial Statements have been prepared in accordance with U.S. GAAP and consolidate the financial statements of the Parent and all of its controlled subsidiaries. Additionally, the Condensed Consolidated Financial Statements include the consolidation of certain managed funds that meet the definition of a VIE if the company has been deemed to be the primary beneficiary of those funds, any non-VIE general partnership investments where the company is deemed to have control, and other sponsoredmanaged investment products in which the company has a controlling financial interest. 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 or managed fund so as to obtain the majority of the benefits from its activities. The company is generally considered to have a controlling financial interest in a managed fund when it owns a majority of the fund's outstanding shares, which may arise as a result of a seed money investment in a newly launched investment product from the time of initial launch to the time that the fund becomes majority-held by third-party investors.
Investment products that are consolidated are referred to in this Report as either Consolidated Sponsored Investment Products (CSIP), which generally includes consolidated majority-held sponsored investment products, or Consolidated Investment Products (CIP), which includes consolidated nominally-held investment products. ThisThe distinction is important, as it differentiates the company's economic risk associated with each type of consolidated managed fund. The company's economic risk with respect to each investment in a CSIP and a CIP is limited to its equity ownership and any uncollected management

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fees. Gains and losses arising from nominally-held CIP do not have a significant impact on the company's results of operations, liquidity, or capital resources. Gains and losses arising from majority-held CSIP could have a significant impact on the company's results of operations, as the company has greater economic risk associated with its investment. See Note 12, "Consolidated Sponsored Investment Products," and Note 13, "Consolidated Investment Products," for additional information regarding the impact of consolidation of investment products.
Consolidation Accounting. The U.S. GAAP consolidation model in Accounting Standards Codification (ASC) Topic 810, "Consolidation," differs for entities that are considered to be VIEs versus those that do not meet the VIE criteria (and are thus referred to as voting interest entities, or VOEs). Additionally, the consolidation criteria for VIEs differs depending on the structure of the VIE as a result of Accounting Standards Update (ASU) No. 2010-10, "Amendments for Certain Investment Funds." The consolidation models are summarized below:
- For all VIE investment products except CLOs, if the company is deemed to have the majority of rewards/risks of ownership associated with these funds, then the company is deemed to be their primary beneficiary and is required to consolidate these funds. For those private equity funds, real estate funds and fund-of-funds that are determined to be VIEs, the company evaluates the structure of each partnership to determine if it is the primary beneficiary of the fund. This evaluation includes assessing the rights of the limited partners to transfer their economic interests in the investment product. If the limited partners' lack rights to manage their economic interests, they are considered to be de facto agents of the company, resulting in the company determining that it is the primary beneficiary of the investment product.
- For VIE CLOs, if the company is deemed to have the power to direct the activities of the CLO that most significantly impact the CLO's economic performance, and the obligation to absorb losses/right to receive benefits from the CLO that could potentially be significant to the CLO, then the company is deemed to be the CLO's primary beneficiary and is required to consolidate the CLO.
- Non-VIE general partnership investments are deemed to be controlled by the company and are consolidated under a VOE model, 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. The company also consolidates certain non-VIE sponsored investment products in which the company has a controlling interest under a VOE model, which, as discussed above, may arise as a result of a seed investment in a newly launched investment product.
Consolidation Analysis. The company inventories its funds by vehicle type on a quarterly basis. The company assesses modifications to existing funds on an ongoing basis to determine if a significant reconsideration event has occurred. All newly created funds are evaluated for consolidation based upon a variety of factors, including the legal form of the investment vehicle, the management/performance fee structure, and any investment the company may have in the fund. Certain fund vehicle-types, such as CLOs and partnerships are more susceptible to consolidation due to the combination of these factors. The consolidation analysis for these structures includes a detailed review of the terms of the fund's governing documents and a comparison of the significant terms against the consolidation criteria in ASC 810, including a determination of whether the fund is a VIE or a VOE. Seed money and co-investments in managed funds in which the company has determined that it is the primary beneficiary or in which the company has a controlling financial interest are consolidated if the impact of doing so is deemed material. Otherwise, these investments are accounted for as described in the “Investments” accounting policy above.
Consolidation of CLOs. The company has elected the fair value option under ASC Topic 825-10-25 to measure the assets and liabilities of all consolidated CLOs at fair value, as the company has determined that measurement of the notes issued by consolidated CLOs at fair value better correlates with the value of the assets held by consolidated CLOs, which are held to provide the cash flows for the note obligations.
Upon consolidation of the CLOs, the company's and the CLOs' accounting policies are effectively aligned, resulting in the reclassification of the company's gain or loss (representing the changes in the market value of the company's holding in the consolidated CLOs) from other comprehensive income into other gains/losses. The company's gain on its investment in the CLOs (before consolidation) eliminates with the company's share of the offsetting loss on the CLOs' debt. The net income/loss impact during the period of consolidation of these CLOs is therefore completely attributed to other investors in these CLOs, as the company's share has been eliminated through consolidation. The Condensed Consolidated Balance Sheets reflect the consolidation of assets held and debt issued by these CLOs, despite the fact that the assets cannot be used by the company, nor is the company obligated for the debt. The surplus of consolidated CLO assets over consolidated CLO liabilities is reflected in the company's Condensed Consolidated Balance Sheets as retained earnings appropriated for investors in CIP. Current period gains/(losses) attributable to investors in consolidated CLOs are included in (gains)/losses attributable to noncontrolling interests in consolidated entities in the Condensed Consolidated Statements of Income and in the retained earnings appropriated

11
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for investors in CIP in the Condensed Consolidated Balance Sheets, as they are considered noncontrolling interests of the company. Interest income and expense of consolidated CLOs are presented as other income/(expense) in the company's Consolidated Income Statements. See Note 13, “Consolidated Investment Products,” for additional details. In addition, the company's Consolidated Cash Flow Statement reflects the cash flows of these CLOs.
Consolidation of Private Equity, Real Estate, and Fund-of-Funds.The company also consolidates certain private equity and real estate funds that are structured as partnerships in which the company is the general partner receiving a management and/or performance fee. Private equity investments made by the underlying funds consist of direct investments in, or fund investments in other private equity funds that hold direct investments in, equity or debt securities in operating companies that are generally not initially publicly traded. Private equity funds are considered investment companies and are therefore accounted for under ASC Topic 946, “Financial Services - Investment Companies.” The company has retained the specialized industry accounting principles of these investment products in its Consolidated Financial Statements. See Note 13, “Consolidated Investment Products,” for additional details.
Consolidation basis.The financial statements have been prepared primarily on the historical cost basis; however, certain items are presented using other bases such as fair value, where such treatment is required or voluntarily elected. The financial statements of subsidiaries, with the exception of certain consolidated managed funds as discussed above, are prepared for the same reporting period 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. The financial information of the CSIP and CIP is included in the company's consolidated financial statements on a one-month or a one-quarter lag based upon the availability of fund financial information. Noncontrolling interests in consolidated entities and retained earnings appropriated for investors in CIP 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, but of which the company does not own all of the entity's equity. To the extent that noncontrolling interests represent equity which is redeemable or convertible for cash or other assets at the option of the equity holder, as is the case with the CSIP noncontrolling interests, these are deemed to represent temporary equity, and are classified as equity attributable to redeemable noncontrolling interests in CSIPs in the Condensed Consolidated Balance Sheets. Nonredeemable noncontrolling interests are classified as a component of permanent equity.

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Use of Estimates
In preparing the Condensed Consolidated 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 and assumptions made relate to goodwill and intangible impairment, certain investments which are carried at fair value, and taxes. Additionally, estimation is involved when determining investment and debt valuation for certain CIP; however, changes in the fair values of these amounts are largely offset by noncontrolling interests. 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 Condensed Consolidated Financial Statements.
Reclassifications
As discussed in Note 15, "Discontinued Operations," the results of Atlantic Trust Private Wealth Management (Atlantic Trust) have been presented as a discontinued operation in the Condensed Consolidated Statements of Income for all periods presented. As a result of this change, certain previously reported amounts in the Condensed Consolidated Financial Statements and notes have been reclassified to conform to the current period presentation.
Accounting Pronouncements Recently Adopted and Pending Accounting Pronouncements
In February 2013, the FASB issued Accounting Standards Update No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (ASU 2013-02). ASU 2013-02 amends Topic 220 to require an entity to present current period reclassifications out of accumulated other comprehensive income and other amounts of current-period other comprehensive income, separately, for each component of other comprehensive income. ASU 2013-02 also requires an entity to provide information about the effects on net income of significant amounts reclassified out of each component of accumulated other comprehensive income, if those amounts are required under other Topics to be reclassified to net income in their entirety in the same reporting period. The amendments to Topic 220 made by ASU 2013-02 are effective for interim and annual periods beginning on or after December 15, 2012 and are reflected in these financial statements.

Condensed Consolidated Financial Statements.

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2. FAIR VALUE OF ASSETS AND LIABILITIES
The carrying value and fair value of financial instruments isare presented in the below summary table below.table. The fair value of financial instruments held by CSIP and CIP areis presented in Note 12, "Consolidated Sponsored Investment Products,"Products" and Note 13, “Consolidated"Consolidated Investment Products.”Products, respectively.
   March 31, 2014 December 31, 2013
$ in millionsFootnote Reference Carrying Value Fair Value Carrying Value Fair Value
Cash and cash equivalents  978.7
 978.7
 1,331.2
 1,331.2
Available-for-sale investments3 240.0
 240.0
 244.1
 244.1
Trading investments3 249.0
 249.0
 253.0
 253.0
Foreign time deposits *
3 27.7
 27.7
 28.8
 28.8
Assets held for policyholders  1,342.0
 1,342.0
 1,416.0
 1,416.0
Policyholder payables *  (1,342.0) (1,342.0) (1,416.0) (1,416.0)
UIT-related financial instruments sold, not yet purchased  (2.2) (2.2) (1.7) (1.7)
Note payable  (0.3) (0.3) (0.3) (0.3)
Long-term debt *
4 (1,588.7) (1,612.0) (1,588.6) (1,544.7)
 September 30, 2013 December 31, 2012
$ in millionsFootnote Reference Carrying Value Fair Value Carrying Value Fair Value
Cash and cash equivalents  1,174.5
 1,174.5
 835.5
 835.5
Available-for-sale investments3
 134.3
 134.3
 122.1
 122.1
Trading investments3
 242.5
 242.5
 218.7
 218.7
Foreign time deposits*3
 29.6
 29.6
 31.3
 31.3
Assets held for policyholders  1,449.0
 1,449.0
 1,153.6
 1,153.6
Support agreements*11
 —
 —
 (1.0) (1.0)
Policyholder payables  (1,449.0) (1,449.0) (1,153.6) (1,153.6)
Put option contracts
 —
 —
 —
 —
UIT-related financial instruments sold, not yet purchased  (2.0) (2.0) (1.5) (1.5)
Note payable  (1.2) (1.2) (3.4) (3.4)
Long-term debt*4
 (1,387.6) (1,343.1) (1,186.0) (1,204.8)

____________
*These financial instruments are not measured at fair value on a recurring basis. See the indicated footnotes or most recently filed Form 10-K for additional information about the carrying and fair values of these financial instruments. Foreign time deposits are measured at cost plus accrued interest, which approximates fair value, and are accordingly classified as Level 2 securities.

A three-level valuation hierarchy exists for disclosure of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.

An asset or liability's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

There are three types of valuation approaches: a market approach, which uses observable prices and other relevant information that is generated by market transactions involving identical or comparable assets or liabilities; an income approach, which uses valuation techniques to convert future amounts to a single, discounted present value amount; and a cost approach, which is based on the amount that currently would be required to replace the service capacity of an asset.

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.
Cash equivalents
Cash equivalents include cash investments in money market funds and time deposits. Cash investments in money market funds are valued under the market approach through the use of quoted market prices in an active market, which is the net asset value of the underlying funds, and are classified within level 1 of the valuation hierarchy.

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Available-for-sale investments
Available-for-sale investments include amounts seeded into affiliated investment products, investments in affiliated CLOs, and investments in other debt securities. Seed money investments are investments held in Invesco managed funds with the purpose of providing capital to the funds during their development periods. Seed money is valued under the market approach through the use of quoted market prices available in an active market and is classified within level 1 of the valuation hierarchy; there is no modeling or additional information needed to arrive at the fair values of these investments. Investments in CLOsCLO assets are valued based on price quotations provided by an independent third-party pricing source or using an income approach through the use of certain observable and unobservable inputs. At March 31, 2014 and December 31, 2013, investments in CLOs were valued using third-party pricing information. Due to liquidity constraints within the market for CLO products that require the use of unobservable inputs, andthese investments are classified within level 3 of the valuation hierarchy. Other debt securities are valued using a cost valuation technique due to the lack of available cash flow and market data and are accordingly also classified within Levellevel 3 of the valuation hierarchy.
Assets held for policyholders and policyholder payables
Assets held for policyholders represent investments held by one of the company’s subsidiaries, which is an insurance entity that was established to facilitate retirement savings plans in the U.K. The assets held for policyholders are accounted for at fair value pursuant to ASC Topic 944, “Financial Services — Insurance,” and are comprised primarily of affiliated unitized funds. The assets are measured at fair value under the market approach based on the quoted prices of the underlying funds in an active market and are classified within level 1 of the valuation hierarchy. The policyholder payables are indexed to the value of the assets held for policyholders.
Put option contracts
The company has purchased several put option contracts to hedge economically foreign currency risk on the translation of a portion of its pound sterling-denominated earnings into U.S. dollars (purchases of none and $1.8 million in the three and nine months endedSeptember 30, 2013, respectively; purchases of none and $2.5 million in the three and nine months endedSeptember 30, 2012). These were the only contracts entered into during the period to hedge economically foreign currency risk. These contracts provide coverage through March 25, 2014. The economic hedge is predominantly triggered upon the impact of a significant decline in the pound sterling/U.S. dollar foreign exchange rate, which could arise as a result of European economic uncertainty. Open put option contracts are marked-to-market through earnings, which are recorded in the company's Condensed Consolidated Statements of Income in other gains and losses. These derivative contracts are valued using option valuation models and are included in other assets in the company's Condensed Consolidated Balance Sheets. The significant inputs in these models (volatility, forward points and swap curves) are readily available in public markets or can be derived from observable market transactions for substantially the full terms of the contracts and are classified within level 2 of the valuation hierarchy. The company recognized a loss of $1.1 million and $1.8 million in the three and nine months endedSeptember 30, 2013 related to the change in market value of these put option contracts (three and nine months endedSeptember 30, 2012: $1.2 million and $2.4 million, respectively).
Trading investments
Trading investments include investments held to hedge economically against costs the company incurs in connection with certain deferred compensation plans in which the company participates, as well as trading and investing activities in equity and debt securities entered into in its capacity as sponsor of unit investment trusts (UITs).
•Investments related to deferred compensation plans
Investments related to deferred compensation plans are primarily invested in affiliated funds that are held to hedge economically deferred compensation liabilities. Investments related to deferred compensation plans are valued under the market approach through the use of quoted prices in an active market and are classified within level 1 of the valuation hierarchy.
•UIT-related equity and debt securities
The company invests in UIT-related equity and debt securities consisting of investments in corporate stock, UITs, and U.S. state and political subdivision securities. Each is discussed more fully below.
Corporate stockequities
The company temporarily holds investments in corporate stockequities for purposes of creating a UIT. Corporate stocksequities are valued under the market approach through use of quoted prices on an exchange. To the extent these securities are actively traded, valuation adjustments are not applied and they are categorized within level 1 of the valuation hierarchy; otherwise, they are categorized in level 2.
UITs
The company may hold units of its sponsored UITs at period-end for sale in the primary market or secondary market. Equity UITs are valued under the market approach through use of quoted prices on an exchange.

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Fixed income UITs are valued using recently executed transaction prices, market price quotations (where observable), bond spreads, or credit default swap spreads. The spread data used is for the same maturities as the underlying bonds. If the spread data does not reference the issuers, then data that references comparable issuers is used. When observable price quotations are not available, fair value is determined based on cash flow models with yield curves, bond or single name credit default spreads, and recovery rates based on collateral value as key inputs. Depending on the nature of the inputs, these investments are categorized as level 1, 2, or 3.
Municipal securities
Municipal securities are valued using recently executed transaction prices, market price quotations (where observable), bond spreads, or credit default swap spreads. The spread data used is for the same maturities as the underlying bonds. If the spread data does not reference the issuers, then data that references comparable issuers is used. When observable price quotations are not available, fair value is determined based on cash flow models with yield curves, bond or single name credit default spreads, and recovery rates based on collateral value as key inputs. Depending on the nature of the inputs, these investments are categorized as level 1, 2, or 3.
Put option contracts
The company has purchased several put option contracts to hedge economically foreign currency risk on the translation of a portion of its pound sterling-denominated earnings into U.S. dollars (purchases of $1.8 million in the three months ended March 31, 2013). These were the only contracts entered into during the period to hedge economically foreign currency risk and provide coverage through March 25, 2014. The economic hedge is predominantly triggered upon the impact of a significant decline in the pound sterling/U.S. dollar foreign exchange rate, which could arise as a result of European economic uncertainty. Open put option contracts are marked-to-market through earnings, which are recorded in the company's Condensed Consolidated Statements of Income in other gains and losses. These derivative contracts are valued using option valuation models and are included in other assets in the company's Condensed Consolidated Balance Sheets. The significant inputs in these models (volatility, forward points and swap curves) are readily available in public markets or can be derived from observable market transactions for substantially the full terms of the contracts and are classified within level 2 of the valuation hierarchy. The company recognized no gain or loss in the three months ended March 31, 2014 (March 31, 2013: $0.4 million loss) related to the change in market value of these put option contracts.

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Assets held for policyholders
Assets held for policyholders represent investments held by one of the company’s subsidiaries, which is an insurance entity that was established to facilitate retirement savings plans in the U.K. The assets held for policyholders are accounted for at fair value pursuant to ASC Topic 944, “Financial Services — Insurance,” and are comprised primarily of affiliated unitized funds. The assets are measured at fair value under the market approach based on the quoted prices of the underlying funds in an active market and are classified within level 1 of the valuation hierarchy. The policyholder payables are indexed to the value of the assets held for policyholders and are therefore not included in the tables below.
UIT-related financial instruments sold, not yet purchased, and derivative instruments
The company uses U.S. Treasury futures, which are types of derivative financial instruments, to hedge economically fixed income UIT inventory and securities in order to mitigate market risk. Open futures contracts are marked-to-market daily through earnings, which are recorded in the company’s Condensed Consolidated Statements of Income in other revenue, along with the mark-to-market on the underlying trading securities held. Fair values of derivative contracts in an asset position are included in other assets in the company’s Condensed Consolidated Balance Sheets. Fair values of derivative contracts in a liability position are included in other liabilities in the company’s Condensed Consolidated Balance Sheets. These derivative contracts are valued under the market approach through use of quoted prices in an active market and are classified within level 1 of the valuation hierarchy. At September 30, 2013March 31, 2014, there were 42 open futures contracts with a notional value of $0.50.3 million (DecemberMarch 31, 20122013: 10 open futures contracts with a notional value of $1.4 million). Additionally, to hedge economically the market risk associated with equity and debt securities and UITs temporarily held as trading investments, the company will hold short corporate stock,equities, exchange-traded fund,funds, or U.S. treasury security positions. These transactions are recorded as financial instruments sold, not yet purchased and are included in accounts payable and accrued expenses in the company’s Condensed Consolidated Balance Sheets. To the extent these securities are actively traded, valuation adjustments are not applied and they are categorized within level 1 of the valuation hierarchy; otherwise, they are categorized in level 2.
Note payable
The note payable represents a payable associated with Invesco’s acquired ownership interest in two consolidated real estate funds. As the underlying assets in the funds are carried at fair value, management elected the fair value option for the note payable in order to offset the fair value movements recognized from the funds and has recorded the note payable as a level 3 liability. The fair value of the note payable is measured by reference to the value of the company's ownership interest in the equity of the funds, as this is the contractual amount payable at the reporting date.

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The following table presents, for each of the hierarchy levels described above, the carrying value of the company’scompany's assets and liabilities, including major security type for equity and debt securities, which are measured at fair value on the face of the statement of financial positioncompany's Condensed Consolidated Balance Sheet as of September 30, 2013March 31, 2014.:
 As of March 31, 2014
$ in millionsFair Value Measurements 
Quoted Prices in Active Markets for Identical Assets
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
Assets:       
Cash equivalents:       
Money market funds226.2
 226.2
 —
 —
Investments:*       
Available-for-sale:       
Seed money229.4
 229.4
 —
 —
CLOs4.3
 —
 —
 4.3
Other debt securities6.3
 —
 —
 6.3
Trading investments:       
Investments related to deferred compensation plans238.3
 238.3
 —
 —
UIT-related equity and debt securities:       
Corporate equities2.0
 2.0
 —
 —
UITs6.9
 6.9
 —
 —
Municipal securities1.8
 —
 1.8
 —
Assets held for policyholders1,342.0
 1,342.0
 —
 —
Total2,057.2
 2,044.8
 1.8
 10.6
Liabilities:       
UIT-related financial instruments sold, not yet purchased:       
Corporate equities(1.9) (1.9) —
 —
U.S. treasury securities(0.3) (0.3) —
 —
Note payable(0.3) —
 —
 (0.3)
Total(2.5) (2.2) —
 (0.3)

 As of September 30, 2013
$ in millionsFair Value Measurements 
Quoted Prices in
Active Markets for
Identical Assets (Level 1)
 
Significant Other
Observable Inputs (Level 2)
 
Significant
Unobservable Inputs (Level 3)
Assets:       
Cash equivalents:       
Money market funds398.1
 398.1
 —
 —
Investments:*       
Available-for-sale:       
Seed money125.8
 125.8
 —
 —
CLOs2.2
 —
 —
 2.2
Other debt securities6.3
 —
 —
 6.3
Trading investments:       
Investments related to deferred compensation plans239.0
 239.0
 —
 —
UIT-related equity and debt securities:       
Corporate stock2.3
 2.3
 —
 —
UITs1.2
 1.2
 —
 —
Municipal securities—
 —
 —
 —
Assets held for policyholders1,449.0
 1,449.0
 —
 —
Total assets at fair value2,223.9
 2,215.4
 —
 8.5
Liabilities:       
Policyholder payables(1,449.0) (1,449.0) —
 —
UIT-related financial instruments sold, not yet purchased:       
Corporate equities(2.0) (2.0) —
 —
Note payable(1.2) —
 —
 (1.2)
Total liabilities at fair value(1,452.2) (1,451.0) —
 (1.2)

____________
*
Foreign time deposits of $29.627.7 million are excluded from this table. Equity method and other investments of $292.4$341.3 million and $6.2$10.7 million,, respectively, are also excluded from this table. These investments are not measured at fair value, in accordance with applicable accounting standards.

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The following table presents, for each of the hierarchy levels described above, the carrying value of the company’scompany's assets and liabilities, thatincluding major security type for equity and debt securities, which are measured at fair value on the company's Condensed Consolidated Balance Sheet as of December 31, 20122013:
 As of December 31, 2013
$ in millionsFair Value Measurements 
Quoted Prices in Active Markets for Identical Assets
(Level 1)
 Significant Other Observable Inputs
(Level 2)		 Significant Unobservable Inputs
(Level 3)
Assets:       
Cash equivalents:       
Money market funds447.8
 447.8
 —
 —
Investments:*       
Available-for-sale:       
Seed money233.8
 233.8
 —
 —
CLOs4.0
 —
 —
 4.0
Other debt securities6.3
 —
 —
 6.3
Trading investments:       
Investments related to deferred compensation plans249.7
 249.7
 —
 —
UIT-related equity and debt securities:       
Corporate equities2.1
 2.1
 —
 —
UITs1.2
 1.2
 —
 —
Assets held for policyholders1,416.0
 1,416.0
 —
 —
Total2,360.9
 2,350.6
 —
 10.3
Liabilities:       
UIT-related financial instruments sold, not yet purchased:       
Corporate equities(1.7) (1.7) —
 —
Note payable(0.3) —
 —
 (0.3)
Total(2.0) (1.7) —
 (0.3)
:____________
 As of December 31, 2012
$ in millionsFair Value Measurements 
Quoted Prices in
Active Markets for
Identical Assets (Level 1)
 
Significant Other
Observable Inputs (Level 2)
 
Significant
Unobservable Inputs (Level 3)
Assets:       
Cash equivalents:       
Money market funds292.2
 292.2
 —
 —
Investments:*       
Available-for-sale:       
Seed money113.4
 113.4
 —
 —
CLOs2.4
 —
 —
 2.4
Other debt securities6.3
 —
 —
 6.3
Trading investments:
 
 
  
Investments related to deferred compensation plans213.5
 213.5
 —
 —
Other equity securities0.3
 0.3
 —
 —
UIT-related equity and debt securities:       
Corporate stock1.5
 1.5
 —
 —
UITs1.6
 1.6
 —
 —
Municipal securities1.8
 —
 1.8
 —
Assets held for policyholders1,153.6
 1,153.6
 —
 —
Total assets at fair value1,786.6
 1,776.1
 1.8
 8.7
Liabilities:       
Policyholder payables(1,153.6) (1,153.6) —
 —
UIT-related financial instruments sold, not yet purchased:       
Corporate equities(1.5) (1.5) —
 —
Note payable(3.4) —
 —
 (3.4)
Total liabilities at fair value(1,158.5) (1,155.1) —
 (3.4)

*
Foreign time deposits of $31.328.8 million are excluded from this table. Equity method and other investments of $228.2$308.2 million and $10.4$5.6 million,, respectively, are also excluded from this table. These investments are not measured at fair value, in accordance with applicable accounting standards.

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The following table shows a reconciliation of the beginning and ending fair value measurements for level 3 assets and liabilities during the three and nine months endedSeptember 30, 2013March 31, 2014 and September 30, 2012March 31, 2013, which are valued using significant unobservable inputs:
 Three months ended March 31, 2014 Three months ended March 31, 2013
$ in millionsCLOs Other Debt Securities Note Payable CLOs Other Debt Securities Note Payable
Beginning balance4.0
 6.3
 (0.3) 2.4
 6.3
 (3.4)
Purchases—
 —
 —
 —
 —
 —
Returns of capital(0.2) —
 —
 —
 —
 0.7
Net unrealized gains and losses included in other gains and losses*—
 —
 —
 —
 —
 0.1
Net unrealized gains and losses included in accumulated other comprehensive income/(loss)*
0.5
 —
 —
 —
 —
 —
Foreign exchange gains/(losses)—
 —
 —
 —
 —
 0.2
Ending balance4.3
 6.3
 (0.3) 2.4
 6.3
 (2.4)
 Three months ended September 30, 2013 Nine months ended September 30, 2013
$ in millionsCLOs Other Debt Securities Note Payable CLOs Other Debt Securities Note Payable
Beginning balance2.4
 6.3
 (1.2) 2.4
 6.3
 (3.4)
Settlements(0.1) —
 —
 (0.2) —
 1.7
Net unrealized gains and losses included in accumulated other comprehensive income/(loss)*(0.1) —
 —
 —
 —
 —
Net unrealized gains and losses included in earnings*—
 —
 —
 —
 —
 0.1
Foreign exchange gains/(losses)—
 —
 —
 —
 —
 0.4
Ending balance2.2
 6.3
 (1.2) 2.2
 6.3
 (1.2)

 Three months ended September 30, 2012 Nine months ended September 30, 2012
$ in millionsCLOs Other Debt Securities Note Payable CLOs Other Debt Securities Note Payable
Beginning balance2.5
 6.3
 (12.6) —
 —
 (16.8)
Purchases—
 —
 —
 —
 1.7
 —
Settlements—
 —
 1.6
 (0.2) —
 1.6
Deconsolidation of CIPs—
 —
 —
 2.5
 —
 —
Net unrealized gains and losses included in accumulated other comprehensive income/(loss)*—
 —
 —
 0.2
 —
 —
Net unrealized gains and losses included in earnings*—
 —
 —
 —
 —
 3.5
Reclassification—
 —
 —
 —
 4.6
 —
Foreign exchange gains/(losses)—
 —
 (0.3) —
 —
 0.4
Ending balance2.5
 6.3
 (11.3) 2.5
 6.3
 (11.3)

_______________
*
Included in other gains and losses, net in the Condensed Consolidated Statement of Income are $0.1 million in net unrealized gains for the nine months endedSeptember 30, 2013, however there were no net unrealized gains or losses for the three months ended September 30, 2013 (three and nine months endedSeptember 30, 2012: none and $3.5 million net unrealized gains, respectively) attributable to the note payable still held at September 30, 2013. There were $0.1 million net unrealized losses included in accumulated other comprehensive income/(loss) for the three months endedSeptember 30, 2013, however there were no net unrealized gains or losses for the nine months endedSeptember 30, 2013 (three and nine months endedSeptember 30, 2012: none and $0.2 million net unrealized gains, respectively) attributed to the change inThese unrealized gains and losses relatedare attributable to assetsbalances still held at September 30, 2013.
the respective period ends.

Quantitative Information about Level 3 Fair Value Measurements
At September 30, 2013, investments in CLOs were valued using third-party pricing information. Quantitative unobservable inputs for such valuations were not developed or adjusted by the company. The following table shows significant unobservable inputs used in the fair value measurement of level 3 assets and liabilities at December 31, 2012:
Assets and Liabilities *Fair Value at December 31, 2012 ($ in millions)Valuation TechniqueUnobservable InputsRange Weighted Average (by fair value)
CLOs2.4Discounted Cash Flow- EuroAssumed Default Rate1.8% - 5.0%<1yr: 1.8% >1yr: 5.0%
Spread over Euriborn/a3300 bps
Discounted Cash Flow- USDAssumed Default Rate1.1% - 3.0%<1yr: 1.1% >1yr: 3.0%
Spread over Liborn/a1496 bps

18


*
Other debt securities of $6.3 million (at December 31, 2012: $6.3 million) are not included in the table above as they are valued using a cost valuation technique. The note payable of $1.2 million (at December 31, 2012: $3.4 million) is also not included in the table above as its value is linked to the underlying value of consolidated funds. Both items are more fully discussed in the "Available-for-sale investments" and "Note payable" disclosures above.

For CLO Notes, a change in the assumption used for spreads is generally accompanied by a directionally similar change in default rate. Significant increases in any of these inputs in isolation would result in significant decreases in fair value measurements. A directionally-opposite impact would apply for significant decreases in these inputs.

3.  INVESTMENTS
The disclosures below include details of the company’scompany's investments. Investments held by CSIP are detailed in Note 12,, "Consolidated Sponsored Investment Products." Investments held by CIP are detailed in Note 13, “Consolidated"Consolidated Investment Products."
As of
September 30, December 31,
$ in millions2013 2012March 31, 2014 December 31, 2013
Available-for-sale investments:      
Seed money125.8
 113.4
229.4
 233.8
CLOs2.2
 2.4
4.3
 4.0
Other debt securities6.3
 6.3
6.3
 6.3
Trading investments:
     
Investments related to deferred compensation plans239.0
 213.5
238.3
 249.7
UIT-related equity and debt securities3.5
 4.9
10.7
 3.3
Other equity securities—
 0.3
Equity method investments292.4
 228.2
341.3
 308.2
Foreign time deposits29.6
 31.3
27.7
 28.8
Other6.2
 10.4
10.7
 5.6
Total investments705.0
 610.7
868.7
 839.7
In March 2013, the company completed the purchase of a 49% equity interest in Religare Asset Management Limited, a company incorporated in India. The company has applied the equity method of accountingAvailable for its investment. The equity method investment balance above includes the difference between the carrying amount of the investment and its book value.sale investments
The portion of trading gains and losses for the three and nine months endedSeptember 30, 2013 that relates to trading securities still held at September 30, 2013 was a $9.8 million net gain and $23.8 million net gain, respectively (three and nine months endedSeptember 30, 2012: $9.7 million net gain and $16.0 million net gain, respectively).

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Realized gains and losses recognized in the income statementCondensed Consolidated Statements of Income during the yearperiod from investments classified as available-for-sale are as follows:
 For the three months ended September 30, 2013: For the nine months ended September 30, 2013:
$ in millionsProceeds from Sales Gross Realized Gains Gross Realized Losses Proceeds from Sales Gross Realized Gains Gross Realized Losses
Seed money0.2
 1.0
 —
 23.1
 2.7
 (0.3)
CLOs0.1
 —
 —
 0.2
 —
 —
For the three months ended September 30, 2012: For the nine months ended September 30, 2012:For the three months ended March 31, 2014 For the three months ended March 31, 2013
$ in millionsProceeds from Sales Gross Realized Gains Gross Realized Losses Proceeds from Sales Gross Realized Gains Gross Realized LossesProceeds from Sales Gross Realized Gains Gross Realized Losses Proceeds from Sales Gross Realized Gains Gross Realized Losses
Seed money9.1
 1.4
 (0.2) 32.7
 3.2
 (0.7)10.1
 2.8
 (0.1) 22.9
 1.7
 (0.3)
CLOs—
 —
 —
 0.2
 —
 —
0.2
 —
 —
 0.1
 —
 —
Upon the sale of available-for-sale securities, net realized gains of $1.02.7 million and $2.41.4 million were transferred from accumulated other comprehensive income into the Condensed Consolidated Statements of Income during the three andmonths ended March 31, nine months endedSeptember 302014, and 2013, respectively (net realized gains of $1.2 million and $2.5 million were transferred during the three and nine months endedSeptember 30, 2012, respectively).respectively. The specific identification method is used to determine the realized gain or loss on securities sold or otherwise disposed.

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Gross unrealized holding gains and losses recognized in other accumulated comprehensive income from available-for-sale investments are presented in the table below:
 September 30, 2013 December 31, 2012
$ in millionsCost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Fair Value Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Fair Value
Seed money111.8
 14.3
 (0.3) 125.8
 105.5
 8.4
 (0.5) 113.4
CLOs2.2
 —
 —
 2.2
 2.4
 —
 —
 2.4
Other debt securities6.3
 —
 —
 6.3
 6.3
 —
 —
 6.3
 120.3
 14.3
 (0.3) 134.3
 114.2
 8.4
 (0.5) 122.1
Available-for-sale debt securities by maturity, are set out below:
$ in millionsSeptember 30, 2013
One to five years1.7
Five to ten years6.8
Total available-for-sale8.5
 March 31, 2014 December 31, 2013
$ in millionsCost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Fair Value Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Fair Value
Seed money210.3
 19.8
 (0.7) 229.4
 215.7
 19.0
 (0.9) 233.8
CLOs3.6
 0.7
 —
 4.3
 3.8
 0.2
 —
 4.0
Other debt securities6.3
 —
 —
 6.3
 6.3
 —
 —
 6.3
 220.2
 20.5
 (0.7) 240.0
 225.8
 19.2
 (0.9) 244.1
At March 31, 2014, 134 seed money funds (December 31, 2013: 149 seed money funds) included gross unrealized holding losses. The following table provides thea breakdown of available-for-sale investments withthe unrealized losses at losses.September 30, 2013:
 Less Than 12 Months 12 Months or Greater TotalMarch 31, 2014 December 31, 2013
$ in millions Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized LossesFair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses
Seed money (41 funds) 11.6
 (0.2) 0.2
 (0.1) 11.8
 (0.3)
Less than 12 months13.1
 (0.6) 69.0
 (0.8)
12 months or greater0.3
 (0.1) 0.2
 (0.1)
Total13.4
 (0.7) 69.2
 (0.9)
The following table provides the breakdown of available-for-sale investments with unrealized losses at December 31, 2012:
  Less Than 12 Months 12 Months or Greater Total
$ in millions Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses
Seed money (52 funds) 0.2
 —
 11.5
 (0.5) 11.7
 (0.5)

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The company has reviewed investment securities for other-than-temporary impairment (OTTI) in accordance with its accounting policy and has recognized no other-than-temporary impairment charges on available-for-sale investments during the ninethree months endedSeptember 30,March 31, 2014 (three months ended March 31, 2013 (nine months endedSeptember 30, 2012: $0.8 million)none).
The gross unrealized losses of seed money investments at September 30, 2013 were immaterial and were primarily caused by foreign exchange movements. After conducting a review ofcompany reviewed the financial condition and near-term prospects of the underlying securities in the seeded funds as well as the severity and duration of the impairment and concluded that the company does not consider any material portion of its gross unrealized losses on these securities to bedid not represent other-than-temporarily impaired.impairments. 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. During the three months ended March 31, 2014 and 2013, there were no charges to other comprehensive income from other-than-temporary impairment related to non-credit related factors.

At March 31, 2014, $1.7 million available-for-sale debt securities mature in one year through five years, and $8.9 million after five years through ten years.
Trading investments
The portion of trading gains and losses for the three months ended March 31, 2014, that relates to trading securities still held at March 31, 2014, was a $2.8 million net loss (March 31, 2013: $16.5 million net gain).
4.  LONG-TERM LONG-TERM DEBT
The disclosures below include details of the company’s long-termcompany's debt. Debt of CIP is detailed in Note 13, “Consolidated Investment Products."”
 September 30, 2013 December 31, 2012
$ in millionsCarrying Value Fair Value Carrying Value Fair Value
Unsecured Senior Note*:       
   3.125% - due November 30, 2022599.6
 555.1
 599.5
 618.3
Floating rate credit facility expiring June 3, 2016788.0
 788.0
 586.5
 586.5
Long-term debt1,387.6
 1,343.1
 1,186.0
 1,204.8
 March 31, 2014 December 31, 2013
$ in millionsCarrying Value Fair Value Carrying Value Fair Value
Unsecured Senior Notes*:       
$600 million 3.125% - due November 30, 2022599.6
 582.6
 599.6
 551.5
$600 million 4.000% - due January 30, 2024595.8
 608.1
 595.8
 593.2
$400 million 5.375% - due November 30, 2043393.3
 421.3
 393.2
 400.0
Long-term debt1,588.7
 1,612.0
 1,588.6
 1,544.7

____________
*The company’s Senior Note indenture containscompany's senior note indentures contain certain restrictions on mergers or consolidations. Beyond these items, there are no other restrictive covenants in the indenture. The issuer is a 100%-owned finance subsidiary of the Parent, and the Parent has fully and unconditionally guaranteed the securities. 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.indentures.

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The fair market value of the company’s Senior Notecompany's senior notes was determined by market quotes provided by Bloomberg, L.P., which is considered a Level 2 valuation input. In the absence of an active market, the company relies upon the average price quoted by brokers for determining the fair market value of the debt.
Analysis of Borrowings by Maturity:
$ in millionsSeptember 30, 2013March 31, 2014
2016788.0
2022599.6
599.6
2024595.8
2043393.3
Long-term debt1,387.6
1,588.7
The issuer of the senior notes is an indirect 100% owned finance subsidiary of Invesco Ltd. (the Parent), and the Parent fully and unconditionally guaranteed the securities. The requirement of certain subsidiaries of ours to maintain minimum levels of capital 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.
At September 30, 2013March 31, 2014, the outstanding balance on the $1.25 billion capacity credit facility was $788.0 millionzero and the weighted average interest rate on the(December 31, 2013: zero). The credit facility was 1.28%.has a maturity of December 17, 2018. Borrowings under the credit facility will bear interest at (i) LIBOR for specified interest periods or (ii) a floating base rate (based upon the highest of (a) the Bank of America prime rate, (b) the Federal Funds rate plus 0.50% and (c) LIBOR for an interest period of one month plus 1.00%), plus, in either case, an applicable margin determined with reference to the company’shigher of the available credit ratings and specified credit default spreads.of the company or its indirect subsidiary Invesco Finance PLC. Based on credit ratings as of September 30, 2013March 31, 2014 of the company, and such credit default spreads, the applicable margin for LIBOR-based loans was 1.10% and for base rate loans was 0.10%. In addition, the company is required to pay the lenders a facility fee on the aggregate commitments of the lenders (whether or not used) at a rate per annum which is based on the company’shigher of the available credit ratings.ratings of the company or its indirect subsidiary Invesco Finance PLC. Based on credit ratings as of September 30, 2013March 31, 2014, the annual facility fee was equal to 0.15%.

The credit agreement governing the credit facility contains customary restrictive covenants on the company and its subsidiaries. Restrictive covenants in the credit agreement include, but are not limited to: prohibitions on creating, incurring or assuming any liens; entering into certain restrictive merger arrangements; selling, leasing, transferring or otherwise disposing of assets; making a material change in the nature of the business; making material amendments to organic documents; making a significant accounting policy change in certain situations; entering into transactions with affiliates.affiliates; and incurring indebtedness through the subsidiaries. Many of these restrictions are subject to certain minimum thresholds and exceptions. Financial covenants under the credit agreement include: (i) the quarterly maintenance of a debt/EBITDA leverage ratio, as defined in the credit agreement, of not greater than 3.25:1.00 through June

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30, 2014, and not greater than 3.00:1.00 thereafter,, (ii) a coverage ratio (EBITDA, as defined in the credit agreement, divided by agreement/interest payable for the four consecutive fiscal quarters ended before the date of determination) of not less than 4.00:1.00.

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

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

The company maintains approximately $33.527.8 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 commercial reasons. Approximately $11.38.5 million of the letters of credit support office lease obligations.

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5.  SHARE CAPITAL
Movements in theThe number of common shares and common share equivalents issued are represented in the table below:
In millionsSeptember 30, 2013 September 30, 2012Three months ended March 31, 2014 Three months ended March 31, 2013
Common shares issued490.4
 490.4
490.4
 490.4
Less: Treasury shares for which dividend and voting rights do not apply(47.2) (46.4)(57.7) (45.8)
Common shares outstanding443.2
 444.0
432.7
 444.6
During the three and nine months endedSeptember 30, 2013March 31, 2014, the company repurchased zero and 3.83.6 million shares respectively,(three months ended March 31, 2013: 1.6 million shares) in the market at a cost of zero and $120.5$119.6 million, respectively (three and nine (three months endedSeptember 30, 2012: 1.8 March 31, 2013: $45.0 million and 8.1 million shares were repurchased at a cost of $40.0 million, and $190.0 million, respectively) cost). Separately, an aggregate of 2.31.7 million shares were withheld on vesting events during the ninethree months endedSeptember 30, 2013March 31, 2014 to meet employees’employees' withholding tax obligations (nine months endedSeptember 30, 2012March 31, 2013: 1.92.1 million). The fair value of these shares withheld at the respective withholding dates was $61.5$56.7 million during the nine months endedSeptember 30, 2013 (nine months endedSeptember 30, 2012March 31, 2013: $44.4$53.9 million). As ofApproximately September 30, 2013, $346.51,376.8 million remained authorized under the company’scompany's share repurchase plan at March 31, 2014(September 30, 2012March 31, 2013: $542.0422.0 million). See Note 16, "Subsequent Events," for details regarding additional share repurchase authorization.
Total treasury shares at September 30, 2013March 31, 2014 were 57.267.1 million (September 30, 2012March 31, 2013: 56.856.4 million), including 10.09.4 million unvested restricted stock awards (September 30, 2012March 31, 2013: 10.410.6 million) for which dividend and voting rights apply. The closing market price of common shares at September 30, 2013March 31, 2014 was $31.9037.00. The total market value of the company’scompany's 57.267.1 million treasury shares was $1.8$2.5 billion onat September 30, 2013March 31, 2014.

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6.  OTHER COMPREHENSIVE INCOME/(LOSS)

The components of accumulated other comprehensive income/(loss) were as follows:
 For the three months ended September 30, 2013:For the three months ended March 31, 2014
$ in millions Foreign currency translation Employee benefit plans Equity method investments Available-for-sale investments TotalForeign currency translation Employee benefit plans Equity method investments Available-for-sale investments Total
Other comprehensive income/(loss) before tax:                   
Currency translation differences on investments in foreign subsidiaries * 202.7
 —
 —
 —
 202.7
Currency translation differences on investments in foreign subsidiaries(53.2) —
 —
 —
 (53.2)
Actuarial (loss)/gain related to employee benefit plans —
 (5.5) —
 —
 (5.5)—
 (0.4) —
 —
 (0.4)
Reclassification of amortization of prior service costs/(credit) into employee compensation expense —
 (0.5) —
 —
 (0.5)
Reclassification of amortization of actuarial (gains)/losses into employee compensation expense —
 0.5
 —
 —
 0.5
Reclassification of amortization of prior service cost/(credit) into employee compensation expenses—
 (0.5) —
 —
 (0.5)
Reclassification of amortization of actuarial (gain)/loss into employee compensation expenses—
 0.6
 —
 —
 0.6
Share of other comprehensive income/(loss) of equity method investments —
 —
 (3.5) —
 (3.5)—
 —
 4.0
 —
 4.0
Unrealized (losses)/gains on available-for-sale investments —
 —
 —
 4.5
 4.5
Unrealized(losses)/gains on available-for-sale investments—
 —
 —
 4.2
 4.2
Reclassification of net (gains)/losses realized on available-for-sale investments included in other gains and losses, net —
 —
 —
 (1.0) (1.0)—
 —
 —
 (2.7) (2.7)
Other comprehensive income/(loss), before tax 202.7
 (5.5) (3.5) 3.5
 197.2
Other comprehensive income/(loss) before tax(53.2) (0.3) 4.0
 1.5
 (48.0)
Income tax related to items of other comprehensive income/(loss): 
 
 
 
 
         
Tax benefit/(expense) on foreign currency translation differences 0.7
 —
 —
 —
 0.7
Tax on actuarial (loss)/gain related to employee benefit plans —
 (1.7) —
 —
 (1.7)—
 0.1
 —
 —
 0.1
Reclassification of tax on amortization of prior service costs/(credit) into income tax provision —
 0.1
 —
 —
 0.1
Reclassification of tax on amortization of prior service cost/(credit) into income tax provision—
 0.1
 —
 —
 0.1
Reclassification of tax on amortization of actuarial (loss)/gain into income tax provision —
 (0.1) —
 —
 (0.1)—
 (0.1) —
 —
 (0.1)
Tax on net unrealized gains/(losses) on available-for-sale investments —
 —
 —
 0.2
 0.2
—
 —
 —
 0.2
 0.2
Reclassification of tax on net (gains)/losses realized on available-for-sale investments included in income tax provision —
 —
 —
 (0.3) (0.3)
Total income tax benefit/(expense) related to items of other comprehensive income 0.7
 (1.7) —
 (0.1) (1.1)
Reclassification of tax on net (gains)/losses on available-for-sale investments—
 —
 —
 (0.7) (0.7)
Total income tax benefit(expense) related to items of other comprehensive income—
 0.1
 —
 (0.5) (0.4)
Accumulated other comprehensive income/(loss), net of tax: 
 
 
 
 
         
Beginning balance 309.4
 (73.8) 0.5
 7.8
 243.9
492.5
 (77.9) (1.8) 15.1
 427.9
Other comprehensive income/(loss), net of tax 203.4
 (7.2) (3.5) 3.4
 196.1
Other comprehensive (income)/loss attributable to noncontrolling interest (5.2) —
 —
 —
 (5.2)
Other comprehensive income/(loss), net of tax:(53.2) (0.2) 4.0
 1.0
 (48.4)
Other comprehensive (income)/loss attributable to noncontrolling interests0.4
 —
 —
 —
 0.4
Ending balance 507.6
 (81.0) (3.0) 11.2
 434.8
439.7
 (78.1) 2.2
 16.1
 379.9

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 For the three months ended September 30, 2012:For the three months ended March 31, 2013
$ in millions Foreign currency translation Employee benefit plans Equity method investments Available-for-sale investments TotalForeign currency translation Employee benefit plans Equity method investments Available-for-sale investments Total
Other comprehensive income/(loss) before tax:                   
Currency translation differences on investments in foreign subsidiaries * 171.3
 —
 —
 —
 171.3
Currency translation differences on investments in foreign subsidiaries*(209.6) —
 —
 —
 (209.6)
Actuarial (loss)/gain related to employee benefit plans —
 (2.7) —
 —
 (2.7)—
 6.5
 —
 —
 6.5
Reclassification of amortization of prior service costs/(credit) into employee compensation expense —
 (0.5) —
 —
 (0.5)
Reclassification of amortization of actuarial (gains)/losses into employee compensation expense —
 0.4
 —
 —
 0.4
Reclassification of amortization of prior service cost/(credit) into employee compensation expenses—
 (0.5) —
 —
 (0.5)
Reclassification of amortization of actuarial (gain)/loss into employee compensation expenses—
 0.7
 —
 —
 0.7
Share of other comprehensive income/(loss) of equity method investments —
 —
 1.6
 —
 1.6
—
 —
 (0.3) —
 (0.3)
Unrealized gains/(losses) on available-for-sale investments —
 —
 —
 6.2
 6.2
Unrealized(losses)/gains on available-for-sale investments—
 —
 —
 4.3
 4.3
Reclassification of net (gains)/losses realized on available-for-sale investments included in other gains and losses, net —
 —
 —
 (1.3) (1.3)—
 —
 —
 (1.4) (1.4)
Other comprehensive income/(loss), before tax 171.3
 (2.8)
1.6

4.9
 175.0
Other comprehensive income/(loss) before tax(209.6) 6.7
 (0.3) 2.9
 (200.3)
Income tax related to items of other comprehensive income/(loss): 
 
 
 
 
         
Tax benefit/(expense) on foreign currency translation differences 0.1
 —
 —
 —
 0.1
Tax benefit/(expenses) on foreign currency translation differences(0.8) —
 —
 —
 (0.8)
Tax on actuarial (loss)/gain related to employee benefit plans —
 (1.8) —
 —
 (1.8)—
 (1.4) —
 —
 (1.4)
Reclassification of tax on amortization of prior service costs/(credit) into income tax provision —
 0.2
 —
 —
 0.2
Reclassification of tax on amortization of prior service cost/(credit) into income tax provision—
 0.1
 —
 —
 0.1
Reclassification of tax on amortization of actuarial (loss)/gain into income tax provision —
 (0.1) —
 —
 (0.1)—
 (0.2) —
 —
 (0.2)
Tax on net unrealized gains/(losses) on available-for-sale investments —
 —
 —
 2.5
 2.5
—
 —
 —
 0.2
 0.2
Reclassification of tax on net (gains)/losses realized on available-for-sale investments included in income tax provision —
 —
 —
 (2.9) (2.9)
Total income tax benefit/(expense) related to items of other comprehensive income 0.1
 (1.7) —
 (0.4) (2.0)
Reclassification of tax on net (gains)/losses on available-for-sale investments—
 —
 —
 (0.3) (0.3)
Total income tax benefit(expense) related to items of other comprehensive income(0.8) (1.5) —
 (0.1) (2.4)
Accumulated other comprehensive income/(loss), net of tax: 
 
 
 
 
         
Beginning balance 464.5
 (74.1) (1.3) 0.8
 389.9
601.7
 (79.4) 2.1
 6.1
 530.5
Other comprehensive income/(loss), net of tax 171.4
 (4.5) 1.6
 4.5
 173.0
Other comprehensive (income)/loss attributable to noncontrolling interest (24.7) —
 —
 —
 (24.7)
Other comprehensive income/(loss), net of tax:(210.4) 5.2
 (0.3) 2.8
 (202.7)
Other comprehensive (income)/loss attributable to noncontrolling interests6.7
 —
 —
 —
 6.7
Ending balance 611.2
 (78.6) 0.3
 5.3
 538.2
398.0
 (74.2) 1.8
 8.9
 334.5



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  For the nine months ended September 30, 2013:
$ in millions Foreign currency translation Employee benefit plans Equity method investments Available-for-sale investments Total
Other comprehensive income/(loss) before tax:          
Currency translation differences on investments in foreign subsidiaries * (94.2) —
 —
 —
 (94.2)
Actuarial (loss)/gain related to employee benefit plans —
 1.3
 —
 —
 1.3
Reclassification of amortization of prior service costs/(credit) into employee compensation expense —
 (1.5) —
 —
 (1.5)
Reclassification of amortization of actuarial (gains)/losses into employee compensation expense —
 1.9
 —
 —
 1.9
Share of other comprehensive income/(loss) of equity method investments —
 —
 (5.1) —
 (5.1)
Unrealized gains/(losses) on available-for-sale investments —
 —
 —
 8.5
 8.5
Reclassification of net (gains)/losses realized on available-for-sale investments included in other gains and losses, net —
 —
 —
 (2.4) (2.4)
Other comprehensive income/(loss), before tax (94.2) 1.7
 (5.1) 6.1
 (91.5)
Income tax related to items of other comprehensive income/(loss):          
Tax benefit/(expense) on foreign currency translation differences (0.4) —
 —
 —
 (0.4)
Tax on actuarial (loss)/gain related to employee benefit plans —
 (3.2) —
 —
 (3.2)
Reclassification of tax on amortization of prior service costs/(credit) into income tax provision —
 0.3
 —
 —
 0.3
Reclassification of tax on amortization of actuarial (loss)/gain into income tax provision —
 (0.4) —
 —
 (0.4)
Tax on net unrealized gains/(losses) on available-for-sale investments —
 —
 —
 (0.4) (0.4)
Reclassification of tax on net (gains)/losses realized on available-for-sale investments included in income tax provision —
 —
 —
 (0.6) (0.6)
Total income tax benefit/(expense) related to items of other comprehensive income (0.4) (3.3) —
 (1.0) (4.7)
Accumulated other comprehensive income/(loss), net of tax: 
 
 
 
 
Beginning balance 601.7
 (79.4) 2.1
 6.1
 530.5
Other comprehensive income/(loss), net of tax (94.6) (1.6) (5.1) 5.1
 (96.2)
Other comprehensive (income)/loss attributable to noncontrolling interest 0.5
 —
 —
 —
 0.5
Ending balance 507.6
 (81.0) (3.0) 11.2
 434.8


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  For the nine months ended September 30, 2012:
$ in millions Foreign currency translation Employee benefit plans Equity method investments Available-for-sale investments Total
Other comprehensive income/(loss) before tax:          
Currency translation differences on investments in foreign subsidiaries * 155.2
 —
 —
 —
 155.2
Actuarial (loss)/gain related to employee benefit plans —
 (1.6) —
 —
 (1.6)
Reclassification of amortization of prior service costs/(credit) into employee compensation expense —
 (1.5) —
 —
 (1.5)
Reclassification of amortization of actuarial (gains)/losses into employee compensation expense —
 1.2
 —
 —
 1.2
Share of other comprehensive income (loss) of equity method investments —
 —
 4.6
 —
 4.6
Unrealized gains/(losses) on available-for-sale investments —
 —
 —
 10.0
 10.0
Reclassification of net (gains)/losses realized on available-for-sale investments included in other gains and losses, net —
 —
 —
 (1.7) (1.7)
Other comprehensive income/(loss), before tax 155.2
 (1.9) 4.6
 8.3
 166.2
Income tax related to items of other comprehensive income/(loss):          
Tax benefit/(expense) on foreign currency translation differences 0.9
 —
 —
 —
 0.9
Tax on actuarial (loss)/gain related to employee benefit plans —
 (1.9) —
 —
 (1.9)
Reclassification of tax on amortization of prior service costs/(credit) into income tax provision —
 0.3
 —
 —
 0.3
Reclassification of tax on amortization of actuarial (loss)/gain into income tax provision —
 (0.3) —
 —
 (0.3)
Tax on net unrealized gains/(losses) on available-for-sale investments —
 —
 —
 2.7
 2.7
Reclassification of tax on net (gains)/losses realized on available-for-sale investments included in income tax provision —
 —
 —
 (2.9) (2.9)
Total income tax benefit/(expense) related to items of other comprehensive income 0.9
 (1.9) —
 (0.2) (1.2)
Accumulated other comprehensive income/(loss), net of tax:          
Beginning balance 455.2
 (74.8) (4.3) (2.8) 373.3
Other comprehensive income/(loss), net of tax 156.1
 (3.8) 4.6
 8.1
 165.0
Other comprehensive (income)/loss attributable to noncontrolling interest (0.1) —
 —
 —
 (0.1)
Ending balance 611.2
 (78.6) 0.3
 5.3
 538.2

__________________
*
Included in this amount are net gainslosses of $5.2$6.7 million and net losses of $0.5 million for the three andmonths ended nine months endedSeptember 30,March 31, 2013, respectively, related to foreign currency translation adjustments attributable to CIP (three and nine months endedSeptember 30, 2012: net gains of $24.7 million and $0.1 million, respectively).CIP. Of this amount, gross gains of $0.5$0.3 million for the three and nine months endedSeptember 30, 2013 are reclassified from accumulated other comprehensive income into retained earnings appropriated for investors in CIP (three and nine months endedSeptember 30, 2012: gains of $1.5 million and losses of $7.0 million, respectively).CIP.


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7.  SHARE-BASED COMPENSATION
The company issues equity-settled share-based awards to certain employees, which are measured at fair value at the date of grant, in accordance with ASC Topic 718, “Compensation — Stock Compensation.” The fair value determined at the grant date is expensed, based on the company’s estimate of shares that will eventually vest, on a straight-line or accelerated basis over the vesting period. The company recognized total expenses of $103.036.5 million in theand nine months endedSeptember 30, 2013 (nine months endedSeptember 30, 2012: $102.933.5 million) related to equity-settled share-based payment transactions.transactions in the three months ended March 31, 2014 and March 31, 2013, respectively.


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TableCash received from exercise of Contentsshare options granted under share-based compensation arrangements was $1.5 million in the three months ended March 31, 2014 (three months ended March 31, 2013: $5.2 million).

Share Awards
Share awards are broadly classified into two categories: time-vested and performance-vested. Share awards are measured at fair value at the date of grant and are expensed, based on the company's estimate of shares that will eventually vest, on a straightlinestraight-line or accelerated basis over the vesting period.
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 or vest ratably over a defined vesting period of continued employee service upon the company's attainment of certain performance criteria. Time-vested and performance-vested share awards are granted in the form of restricted share awards (RSAs) or restricted share units (RSUs). Performance-vested awards are tied to the achievement of specified levels of adjusted diluted earnings per share and adjusted operating margin. In the event that either targeted financial measure is achieved at or above a vesting threshold for a particular performance measurement period, the portion of the performance-vested award subject to targeted financial measures will vest proportionately between 0% and 100% based upon the higher achieved level for that year.
With respect to time-vested awards, dividends accrue directly to the employee holder of RSAs, and cash payments in lieu of dividends are made to employee holders of certain RSUs. With respect to performance-vested awards, dividends and cash payments in lieu of dividends are deferred and are paid at the same rate as on our shares if and to the extent the award vests.
In May 2011, the company's shareholders approved the 2011 Global Equity Incentive Plan, which authorized the issuance of up to 28 million shares under this plan. In May 2010, the board approved the 2010 Global Equity Incentive Plan (ST), which authorized the issuance of up to 3 million shares under this plan.  Under the terms of the plans, shares are issued only as employment inducement awards in connection with a strategic transaction and, as a result, do not require shareholder approval under the rules of the New York Stock Exchange or otherwise.
Movements on share awards priced in U.S. dollars during the periods ended March 31, are detailed below:
Nine months ended September 30, 2013 Nine months ended September 30, 2012For the three months ended March 31, 2014 For the three months ended March 31, 2013
Millions of shares, except fair valuesTime-Vested Performance- Vested Weighted Average Grant Date Fair Value ($) Time-Vested Performance-Vested Weighted Average Grant Date Fair Value ($)Time- Vested Performance- Vested Weighted Average Grant Date Fair Value ($) Time- Vested Performance- Vested
Unvested at the beginning of period16.5
 0.3
 22.36
 17.3
 —
 20.34
13.9
 0.4
 25.00
 16.5
 0.3
Granted during the period5.2
 0.2
 26.86
 5.5
 0.3
 24.84
4.1
 0.2
 34.30
 5.1
 0.2
Forfeited during the period(0.4) —
 24.46
 (0.3) —
 21.07
—
 —
 —
 (0.1) —
Vested and distributed during the period(6.6) (0.1) 19.93
 (5.6) —
 18.87
(4.9) (0.1) 24.33
 (6.2) (0.1)
Unvested at the end of the period14.7
 0.4
 24.99
 16.9
 0.3
 22.31
13.1
 0.5
 28.32
 15.3
 0.4


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On December 4, 2007, in connection with the redomicile of the company from the U.K. to Bermuda, the company’s primary share listing moved from the London Stock Exchange to the New York Stock Exchange. Movements on share awards priced in Pounds Sterling, which were awarded prior to the move of the company’s primary share listing to the New York Stock Exchange, during the three months ended March 31, are detailed below:
Nine months ended September 30, 2013 Nine months ended September 30, 2012For the three months ended March 31, 2014 For the three months ended March 31, 2013
Millions of shares, except fair valuesTime-Vested 
Weighted Average Grant Date Fair Value
(£ Sterling)
 Time-Vested 
Weighted Average Grant Date Fair Value
(£ Sterling)
Time-Vested Weighted Average Grant Date Fair Value (£ Sterling) Time-Vested
Unvested at the beginning of period0.3
 12.90
 0.6
 11.25
0.1
 12.90
 0.3
Forfeited during the period—
 —
 —
Vested and distributed during the period(0.2) 12.90
 (0.3) 9.66
—
 —
 —
Unvested at the end of the period0.1
 12.90
 0.3
 12.90
0.1
 12.90
 0.3
All share awards outstanding at September 30, 2013March 31, 2014, had a weighted average remaining contractual life of 1.591.95 years. The total fair value of shares that vested during the ninethree months endedSeptember 30, 2013March 31, 2014 was $185.0171.0 million (nine(three months endedSeptember 30, 2012: March 31, 2013: $144.3159.8 million). The weighted average grant date fair value at the date of grant of the U.S. dollar vested and distributed share awards that were granted was $19.9334.30 (three months ended March 31, 2013: $26.81).
At September 30, 2013March 31, 2014, there was $291.2361.0 million of total unrecognized compensation cost related to non-vested share awards; that cost is expected to be recognized over a weighted average period of 3.013.21 years.
Share Options
The company has not granted share option awards since 2005. All share optionoptions awards, therefore, were granted prior to the
December 4, 2007, redomicile from the United Kingdom to Bermuda and re-listing from the London Stock Exchange (where the predecessor company's ordinary shares traded in Pounds Sterling) to the New York Stock Exchange (where the company's common shares now trade in U.S. Dollars). The company maintains its two historical share option plans which have outstanding share options: The 2000 Share Option Plan and the No. 3 Executive Share Option Scheme. All remaining outstanding share option awards were fully vested and were expensed by the company over the applicable vesting periods (the

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latest of which ended prior to December 31, 2008). At the time of their grants, the exercise prices of the share options were denominated in the company’scompany's trading currency, which was the Pound Sterling. The company did not change the accounting for share options at the redomicile/re-listing date, because the share options were not modified at that date. The exercise price remains in Pounds Sterling and was not changed to U.S. Dollars. Therefore, upon exercise of the share options, the Pound Sterling exercise price will be converted into U.S. Dollars using the spot foreign exchange rate in effect on the exercise date. Upon the exercise of share options, the company either issues new shares or can utilize shares held in treasury (see Note 5, “Share Capital”) to satisfy the exercise.
Changes in outstanding share option awards are as follows:
Nine months ended September 30, 2013 Nine months ended September 30, 2012For the three months ended March 31, 2014 For the three months ended March 31, 2013
Millions of shares, except pricesOptions 
Weighted Average
Exercise Price
(£ Sterling)
 Options 
Weighted Average
Exercise Price
(£ Sterling)
Options 
Weighted Average Exercise Price
(£ Sterling)
 Options 
Weighted Average Exercise Price
(£ Sterling)
Outstanding at the beginning of the period2.6
 7.31
 4.5
 7.85
Forfeited during the period—
 —
 (0.1) 14.80
Outstanding at the beginning of period1.1
 7.32
 2.6
 7.31
Exercised during the period(1.0) 7.38
 (1.3) 8.29
(0.1) 7.08
 (0.4) 7.33
Outstanding at the end of the period1.6
 7.26
 3.1
 7.33
1.0
 7.35
 2.2
 7.31
Exercisable at the end of the period1.6
 7.26
 3.1
 7.33
1.0
 7.35
 2.2
 7.31

Employee Stock Purchase Plan (ESPP)
During 2012, the company established a nonqualified, broad-based ESPP for all eligible employees. Employees may purchase shares of our common stock generally in annual intervals at 85% of fair market value. Employee ESPP contributions may not exceed $6,000 per offering period. Upon the plan vesting date, the company either issues new shares or can utilize shares held in treasury (see Note 5, "Share Capital") to satisfy the exercise. For the three months ended March 31, 2014, the company recognized $0.2 million in compensation expense related to the employee stock purchase plan (March 31, 2013: $0.3 million).

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8.  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 amounts charged to the Condensed Consolidated Statements of Income for the three andmonths ended nineMarch 31, 2014 of $15.4 million (three months endedMarch 31, 2013: $14.6 million) represent contributions September 30paid or payable to these plans by the company at rates specified in the rules of the plans. As of March 31, 2014, accrued contributions of 2013$7.1 million are $11.3 million and(December 31, 2013: $39.421.8 million, respectively (three and nine months ended September 30, 2012: $11.2 million and $38.2 million, respectively).) for the current year will be 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 and Taiwan. All defined benefit plans are closed to new participants. The company also maintains a post-retirementpostretirement 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 did 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 components of net periodic benefit cost in respect of these defined benefit plans are as follows:
Three months ended September 30, Nine months ended September 30,Retirement Plans Medical Plan
Retirement Plans Medical Plan Retirement Plans Medical PlanFor the three months ended March 31, For the three months ended March 31,
$ in millions2013 2012 2013 2012 2013 2012 2013 20122014 2013 2014 2013
Service cost(1.2) (1.1) —
 (0.1) (3.4) (3.3) (0.2) (0.3)(1.1) (1.1) (0.1) (0.1)
Interest cost(4.9) (4.7) (0.6) (0.6) (14.7) (14.3) (1.6) (1.8)(4.8) (4.9) (0.5) (0.5)
Expected return on plan assets4.3
 4.4
 0.2
 0.1
 13.1
 13.2
 0.4
 0.3
4.6
 4.4
 0.2
 0.1
Amortization of prior service cost—
 —
 0.5
 0.5
 —
 —
 1.5
 1.5
Amortization of net actuarial (loss)/gain(0.5) (0.3) —
 (0.1) (1.7) (0.9) (0.2) (0.3)
Amortization of prior service cost/(credit)—
 —
 0.5
 0.5
Amortization of net actuarial gain/(loss)(0.5) (0.6) (0.1) (0.1)
Net periodic benefit cost(2.3) (1.7) 0.1
 (0.2) (6.7) (5.3) (0.1) (0.6)(1.8) (2.2) —
 (0.1)
The estimated amountamounts of contributions expected to be paid to the retirement plans during 2013 is2014 are $15.9 million, with an additional expected contribution of for retirement plans and $2.32.2 million for the medical plan. Payments made to the plans during the three months ended March 31, 2014 were $4.0 million to the retirement plan and $0.4 million to the medical plan.



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9.  TAXATION
At September 30, 2013March 31, 2014, the total amount of gross unrecognized tax benefits was $16.9$16.7 million as compared to the December 31, 2012,2013 total of $22.616.8 million. The company and its subsidiaries file annual income tax returns in the U.S. federal jurisdiction, various U.S. state and local jurisdictions, and in numerous foreign jurisdictions. A number of years may elapse before an uncertain tax position, for which the company has unrecognized tax benefits, is finally resolved. To the extent that the company has favorable tax settlements, or determines that accrued amounts are no longer needed due to a lapse in the applicable statute of limitations or other reasons, such liabilities, as well as the related interest and penalty, would be reversed as a reduction of income tax expense (net of federal tax effects, if applicable) in the period such determination is made.

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10.  EARNINGS PER SHARE
Basic earnings per share is calculated by dividing net income attributable to common shareholders by the weighted average number of shares outstanding during the period, excluding treasury shares. The weighted average number of shares outstanding during the period also includes participating securities such as unvested time-based restricted stock awards and restricted stock units that pay dividend equivalents. Diluted earnings per share is computed using the treasury stock method, which requires computing share equivalents and dividing net income attributable to common shareholders by the total weighted average number of shares and share equivalents outstanding during the period.
The calculation of earnings per share is as follows:
Three months ended September 30, Nine months ended September 30,Three months ended March 31,
In millions, except per share amounts2013 2012 2013 2012
In millions, except per share data2014 2013
Income from continuing operations, net of taxes
$250.1
 
$153.7
 
$653.9
 
$452.0

$208.8
 
$195.5
Net (income)/loss attributable to noncontrolling interests in consolidated entities(20.6) 13.7
 0.9
 59.1
(19.0) 22.6
Income from continuing operations attributable to Invesco Ltd. for basic and diluted EPS calculations229.5
 167.4
 654.8
 511.1
189.8
 218.1
Income/(loss) from discontinued operations, net of taxes(1.4) 3.2
 (1.9) 7.3
(2.0) 4.1
Net income attributable to common shareholders
$228.1
 
$170.6
 
$652.9
 
$518.4

$187.8
 
$222.2
          
Weighted average shares outstanding - basic447.9
 451.3
 448.3
 453.1
436.8
 447.8
Dilutive effect of share-based awards0.9
 1.5
 1.1
 1.5
0.6
 1.2
Weighted average shares outstanding - diluted448.8
 452.8
 449.4
 454.6
437.4
 449.0
          
Basic earnings per share:          
Earnings per share from continuing operations
$0.51
 
$0.37
 
$1.46
 
$1.13

$0.43
 
$0.49
Earnings per share from discontinued operations—
 
$0.01
 —
 
$0.02

$—
 
$0.01
Basic earnings per share
$0.51
 
$0.38
 
$1.46
 
$1.14

$0.43
 
$0.50
          
Diluted earnings per share:          
Earnings per share from continuing operations
$0.51
 
$0.37
 
$1.46
 
$1.12

$0.43
 
$0.49
Earnings per share from discontinued operations—
 
$0.01
 —
 
$0.02

$—
 
$0.01
Diluted earnings per share
$0.51
 
$0.38
 
$1.45
 
$1.14

$0.43
 
$0.49
       
See Note 7, “Share-based“Share-Based Compensation,” for a summary of share awards outstanding under the company’scompany's share-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.
There were no antidilutive options excluded from the computation of diluted earnings per share in the ninethree months endedSeptember 30, 2013March 31, 2014 (nine(three months endedSeptember 30, 2012March 31, 2013: none). Antidilutive options are those where the options’options' exercise prices are greater than the average market price of the shares.

There were no time-vested share awards that were excluded from the computation of diluted earnings per share during the three months ended March 31, 2014 and 2013, due to their inclusion being anti-dilutive. There were 0.5 million contingently issuable shares excluded from the diluted earnings per share computation during the three months ended March 31, 2014 (three months ended March 31, 2013: 0.4 million), because the necessary performance conditions for the shares to be issuable had not yet been satisfied at the end of the respective period.

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11.  COMMITMENTS AND CONTINGENCIES
Commitments and contingencies may arise in the ordinary course of business.

Off Balance Sheet Commitments
The company has transactions 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 for the investment of client assets.business. Many of the company's investment products are structured as limited partnerships. The company's investment may take the form of the general partner or a limited partner, and thepartner. The entities 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 September 30, 2013March 31, 2014, the company’scompany's undrawn capital and purchase commitments were $151.4189.5 million (December(December 31, 2012:2013: $209.3152.5 million).
During 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 limited types of investors. In June 2013, the agreements were amended to extend the term through June 30, 2014. During October 2013, the agreement related to one of the trusts terminated. Further extensions are likely to the remaining trust. As of September 30, 2013, the total committed support for both trusts was $21.0 million with an internal approval mechanism to increase the maximum possible support to $66.0 million at the option of the company. No payment has been made under the remaining agreement nor has Invesco realized any loss from the support agreement through the date of this Report. Significant investor redemptions out of the trust before the scheduled maturity of the underlying securities or significant credit default issues of the securities held within the trust's portfolio could change the company’s estimation of likelihood of funding. This trust was not consolidated because the company was not deemed to be the primary beneficiary.
The Parent and various company subsidiaries have entered into agreements with financial institutions to guarantee certain obligations of other company subsidiaries. The company would be required to perform under these guarantees in the event of certain defaults. The company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

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Legal and Other Contingencies
In July 2010, various closed-end funds formerly advised by Van Kampen Investments or Morgan Stanley Investment Management had complaints filed against them in New York State Court commencing derivative lawsuits purportedly brought on behalf of the common shareholders of those funds. The funds are nominal defendants in these derivative lawsuits and the defendants also include Van Kampen Investments (acquired by Invesco on June 1, 2010), Morgan Stanley Investment Management and certain officers and trustees of the funds who are or were employees of those firms. Invesco has certain obligations under the applicable acquisition agreement regarding the defense costs and any damages associated with this litigation. The plaintiffs allege breaches of fiduciary duties owed by the non-fund defendants to the funds’ common shareholders related to the funds’ redemption in prior periods of Auction Rate Preferred Securities (ARPS) theretofore issued by the funds. The complaints are similar to other complaints filed against investment advisers, officers and trustees of closed-end funds in other fund complexes which issued and redeemed ARPS. The complaints allege that the advisers, distributors and certain officers and trustees of those funds breached their fiduciary duty by redeeming ARPS at their liquidation value when there was no obligation to do so and when the value of ARPS in the secondary marketplace were significantly below their liquidation value. The complaints also allege that the ARPS redemptions were principally motivated by the fund sponsors’ interests to preserve distribution relationships with brokers and other financial intermediaries who held ARPS after having repurchased them from their own clients. The complaints do not specify alleged damages. Certain other funds included in the acquired business have received demand letters expressing similar allegations. Such demand letters could be precursors to additional similar lawsuits being commenced against those other funds. The Boards of Trustees of the funds established special committees of independent trustees to conduct an inquiry regarding the allegations set forth in the complaints and demand letters. Those evaluations have been completed, and theThe Boards of Trustees of the funds accepted the recommendation of their special litigation committees to (i) reject the demands contained in the demand letters and (ii) to seek dismissal of the related lawsuits. Motions to dismiss were filed on October 4, 2011 and remain pending. A similar suit was filed in Massachusetts in 2013. A motion to dismiss this suit was filed April 1, 2013. The court in the Massachusetts case granted the motion on August 27, 2013; plaintiffs filed a notice of appeal.
Invesco believes the cases and other claims identified above should be dismissed or otherwise will terminate, although there can be no assurance of that result. Invesco intends to defend vigorously any cases which may survive beyond initial motions to dismiss. The company cannot predict with certainty, however, the eventual outcome of such cases and other claims, nor whether they will have a material negative impact on the company. The nature and progression of litigation can make it difficult to predict the impact a particular lawsuit will have on the company. There are many reasons that the company cannot make these assessments, including, among others, one or more of the following: the proceeding is in its early stages; the damages

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sought are unspecified, unsupportable, unexplained or uncertain; the claimant is seeking relief other than compensatory damages; the matter presents novel legal claims or other meaningful legal uncertainties; discovery has not started or is not complete; there are significant facts in dispute; and there are other parties who may share in any ultimate liability.
The company is from time to time involved in litigation relating to other claims arising in the ordinary course of its business. In management’s opinion, adequate accrual has been made as of September 30, 2013March 31, 2014 to provide for any such losses that may arise from matters for which the company could reasonably estimate an amount. Management is of the opinion that the ultimate resolution of such claims will not materially affect the company’s business, financial position, results of operation or liquidity. Furthermore, in management’s opinion, it is not possible to estimate a range of reasonably possible losses with respect to other litigation contingencies.
The investment management industry also is subject to extensive levels of ongoing regulatory oversight and examination. In the United States, United Kingdom, 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 United States, United Kingdom, and other jurisdictions in which the company and its affiliates operate. Any material loss of investor and/or client confidence as a result of such inquiries and/or litigation could result in a significant decline in assets under management, which would have an adverse effect on the company’s future financial results and its ability to grow its business.
Included among these inquiries is an ongoing review byOn April 28, 2014, the Enforcement Division of the U.K. Financial Conduct Authority (“FCA”) of certain(FCA) announced that it had entered into an agreement with the company to settle matters pertaining to the company’s compliance withviolations of certain FCA rules and regulations forduring the period from May 2008 to November 2012. Operating expenses for first quarter include a charge of £18.6 million ($31.1 million) in respect of the penalty under such settlement. This charge, together with settlement-related legal costs of $0.5 million, has been recorded in general and administrative expenses. The company is cooperating fully with the FCA review and believes that its current systems and controls now are adequate and in compliance with applicable rules and regulations. The company is not able at this time to estimate the amount

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Table of any potential fine; however, the company believes that any fine would not have a material adverse effect on its financial position or liquidity.ContentsDRAFT 4/29/14 6:02 PM

In a separate matter, a Canadian subsidiary of the company has received assessments related to various prior taxation periods for goods and services tax on revenue to which management fee rebates had been applied in those periods. The assessments, related interest, and penalty amounts are approximately $20.9 million.$20.6 million. Management believes Canada Revenue Agency's claims are unfounded and that these assessments are unlikely to stand, and accordingly no provision has been recorded in the Condensed Consolidated Financial Statements.


12. CONSOLIDATED SPONSORED INVESTMENT PRODUCTS
During the three and nine months endedSeptember 30, 2013, the company consolidated certain managed funds that meet the CSIP definition in Note 1, "Accounting Policies." The following table presents the balances related to CSIP that wereare included on the Condensed Consolidated Balance Sheets as well as Invesco's net interestinterests in the CSIP at September 30, 2013 (December 31, 2012: none):for each period presented.
$ in millionsSeptember 30, 2013
Investments of CSIP88.6
Other assets of CSIP5.7
Less: Other liabilities of CSIP(0.5)
Less: Equity attributable to nonredeemable noncontrolling interests(7.6)
Invesco's net interests in CSIP86.2
Invesco's net interests as a percentage of investments of CSIP97.3%

$ in millionsMarch 31, 2014 December 31, 2013
Investments of CSIP251.4
 93.2
Cash and cash equivalents of CSIP12.4
 12.7
Accounts receivable and other assets of CSIP12.0
 2.6
Assets of CSIP275.8
 108.5
Other liabilities of CSIP(12.4) (4.7)
Equity attributable to redeemable noncontrolling interests(101.9) —
Equity attributable to nonredeemable noncontrolling interests(13.9) (12.0)
Invesco's net interests in CSIP147.6
 91.8
Invesco's net interests as a percentage of investments of CSIP58.7% 98.5%
The carrying value of investments held by CSIP is also their fair value. The following table presentstables present the fair value hierarchy levels of investments held by CSIP, which are measured at fair value as of September 30, 2013 (as of March 31, 2014, and December 31, 20122013:: none):

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 As of March 31, 2014
$ in millions
Fair
Value
Measurements
 
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Other
Unobservable
Inputs
(Level 3)
Investments:       
Fixed income securities150.7
 59.7
 91.0
 —
Equity securities32.8
 32.8
 —
 —
Investments in fixed income funds*48.4
 48.4
 —
 —
Investments in other private equity funds*19.5
 —
 —
 19.5
Total investments at fair value251.4
 140.9
 91.0
 19.5

As of September 30, 2013As of December 31, 2013
$ in millionsFair Value Measurements Quoted Prices in
Active Markets for
Identical Assets (Level 1)		 Significant Other
Observable Inputs (Level 2)		 Significant
Unobservable Inputs (Level 3)
Fair
Value
Measurements
 
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level2)
 
Significant
Other
Unobservable
Inputs
(Level 3)
Investments:              
Fixed income securities33.7
 2.1
 31.6
 —
43.2
 —
 43.2
 —
Equity securities26.7
 26.2
 0.5
 —
27.8
 27.8
 —
 —
Investments in fixed income fund*15.0
 15.0
 —
 —
Investments in fixed income funds*6.0
 6.0
 —
 —
Investments in other private equity funds*13.2
 —
 —
 13.2
16.2
 —
 —
 16.2
Total investments at fair value88.6
 43.3
 32.1
 13.2
93.2
 33.8
 43.2
 16.2

________________
*Investments in the fixed income fundfunds and other private equity funds are valued using the NAVnet asset value (NAV) as a practical expedient. The NAVs that have been provided are derived from the fair values of the underlying investments as of the consolidation date. Refer to Note 13, "Consolidated Investment Products," for additional discussion regarding the fair value of private equity funds.

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The tabletables below summarizes as of September 30,March 31, 2014 and December 31, 2013, the nature of investments that are valued using the NAV as a practical expedient and any related liquidation restrictions or other factors which may impact the ultimate value realized:
 Fair Value at September 30, 2013 ($ in millions) Total Unfunded Commitments ($ in millions) 
Weighted Average Remaining Term (1)
 Redemption Frequency Redemption Notice Period As of March 31, 2014
Fixed income fund $15.0 
$—
 n/a Monthly 10 days
 
Fair Value
($ in millions)
 Total Unfunded Commitments ($ in millions) 
Weighted Average Remaining Term (1)
 Redemption Frequency Redemption Notice Period
Fixed income funds $48.4 
$—
 n/a Monthly 10 days
Private equity fund of funds $13.2 $34.2 8.5 years 
n/a (2)
 
n/a(2)
 $19.5 $33.4 8.6 years 
n/a (2)
 
n/a(2)
   
   
 As of December 31, 2013
 
Fair Value
($ in millions)
 Total Unfunded Commitments ($ in millions) 
Weighted Average Remaining Term (1)
 Redemption Frequency Redemption Notice Period
Fixed income funds $6.0 
$—
 n/a Monthly 10 days
Private equity fund of funds $16.2 
$35.6
 8.5 years 
n/a (2)
 
n/a (2)

__________________
(1) These investments are expected to be returned through distributions as a result of liquidations of the funds' underlying assets over the weighted average periods indicated.
(2) These investments are not subject to redemption; however, for certain funds, the investors may sell or transfer their interest, which may require approval by the general partner of the underlying funds.
Equity securities are valued under the market approach through use of quoted prices on an exchange. To the extent these securities are actively traded, valuation adjustments are not applied and they are categorized within level 1 of the valuation hierarchy; otherwise, they are categorized in level 2.
Fixed income securities (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Depending on the nature of the inputs, these investments are categorized as level 1, 2, or 3.
The following table shows a reconciliation of the beginning and ending fair value measurements for level 3 assets using significant unobservable inputs for the three and nine months endedSeptember 30, 2013 (three and nineending March 31, 2014 (three months endedSeptember 30, 2012:ending March 31, 2013: none):

 Three months ended September 30, 2013 Nine months ended September 30, 2013
$ in millionsLevel 3 Assets Level 3 Assets
Beginning balance—
 —
Consolidation of CSIP13.2
 13.2
Ending balance13.2
 13.2
 $ in millionsThree months ended March 31, 2014
Beginning balance16.2
Purchases2.2
Sales(0.4)
Gains and losses included in the Condensed Consolidated Statements of Income*1.5
Ending balance19.5
__________________
*Included in other income/(loss) of CSIP, net, in the Consolidated Statement of Income for the three months ended March 31, 2014 are $1.5 million in net unrealized gains attributable to investments still held at March 31, 2014.

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13.  CONSOLIDATED INVESTMENT PRODUCTS
The following table presents the balances related to CIP that wereare included on the Condensed Consolidated Balance Sheets as well as Invesco's net interest in the CIP for each period presented:
presented.
As ofAs of
$ in millionsSeptember 30, 2013 December 31, 2012March 31, 2014 December 31, 2013
Cash and cash equivalents of CIP445.0
 287.8
780.0
 583.6
Investments of CIP4,514.6
 4,550.6
5,173.7
 4,734.7
Accounts receivable and other assets of CIP62.2
 84.1
183.7
 58.3
Less: Debt of CIP(4,003.1) (3,899.4)(4,762.7) (4,181.7)
Less: Other liabilities of CIP(251.0) (104.3)(621.8) (461.8)
Less: Retained earnings (1)
(17.8) (12.5)
Less: Retained earnings appropriated for investors in CIP(106.3) (128.8)(74.0) (104.3)
Less: Accumulated other comprehensive income, net of tax (1)
17.8
 12.7
Less: Equity attributable to nonredeemable noncontrolling interests(578.9) (727.8)(609.7) (570.3)
Invesco's net interests in CIP82.5
 62.2
69.2
 58.7
Invesco's net interests as a percentage of investments of CIP1.83% 1.37%1.3% 1.2%
____________
(1)These amounts reflect the reclassification of the company's gain or loss (representing the changes in the market value of the company's holding in the consolidated CLOs) from other comprehensive income into other gains/losses upon consolidation.

The company’scompany's risk with respect to each investment in CIP is limited to its equity ownership and any uncollected management and performance fees. Therefore, the gains or losses of CIP have not had a significant impact on the company’scompany's net income attributable to common shareholders, liquidity or capital resources. The company has no right to the benefits from, nor does it bear the risks associated with, these investments, beyond the company’scompany's minimal direct investments in, and management and performance fees generated from, the investment products. If the company were to liquidate, these investments would not be available to the general creditors of the company, and as a result, the company does not consider investments held by CIP to be company assets. Additionally, the collateral assets of consolidated collateralized loan obligations (CLOs) are held solely to satisfy the obligations of the CLOs, and the investors in the consolidated CLOs have no recourse to the general credit of the company for the notes issued by the CLOs.
Collateralized Loan Obligations
A significant portion of CIP are CLOs. CLOs are investment vehicles created for the sole purpose of issuing collateralized loan instruments that offer investors the opportunity for returns that vary with the risk level of their investment. The notes issued by the CLOs are backed by diversified collateral asset portfolios consisting primarily of loans or structured debt. For managing the collateral for the CLO entities, the company earns investment management fees, including in some cases subordinated management fees, as well as contingent incentive fees. The company has invested in certain of the entities, generally taking a portion of the unrated, junior subordinated position. The company’s investments in CLOs are generally subordinated to other interests in the entities and entitle the company and other subordinated tranche investors to receive the residual cash flows, if any, from the entities. The company’s subordinated interest can take the form of (1) subordinated notes, (2) income notes or (3) preference/preferred shares. The company has determined that, although the junior tranches have certain characteristics of equity, they should be accounted for and disclosed as debt on the company’s Condensed Consolidated Balance Sheets, as the subordinated and income notes have a stated maturity indicating a date for which they are mandatorily redeemable. The preference shares are also classified as debt, as redemption is required only upon liquidation or termination of the CLO and not of the company.
The company determined that it was the primary beneficiary of certain CLOs, as it has the power to direct the activities of the CLOs that most significantly impact the CLOs’ economic performance, and the obligation to absorb losses/right to receive benefits from the CLOs that could potentially be significant to the CLOs. The primary beneficiary assessment includes an analysis of the rights of the company in its capacity as investment manager. In some CLOs, the company’s role as investment manager provides that the company contractually has the power, as defined in ASC Topic 810, to direct the activities of the CLOs that most significantly impact the CLOs’ economic performance, such as managing the collateral portfolio and its credit risk. In other CLOs, the company determined that it does not have this power in its role as investment manager due to certain rights held by other investors in the products or restrictions that limit the company's ability to manage the collateral portfolio and the CLO's credit risk. Additionally, the primary beneficiary assessment includes an analysis of the company’s rights to receive benefits and obligations to absorb losses associated with its first loss position and management/incentive fees. As part of this analysis, the company uses a quantitative model to corroborate its qualitative assessments. The quantitative model includes an analysis of the expected performance of the CLOs and a comparison of the company’s absorption of this performance relative to the other investors in the CLOs. The company has determined that it could receive significant benefits and/or absorb significant losses from certain CLOs in which it holds a first loss position and has the right to significant fees. It was

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determined that the company’s benefits and losses from certain other CLOs could not be significant, particularly in situations where the company does not hold a first loss position and where the fee interests are based upon a fixed percentage of collateral asset value.
Private equity, real estate and fund-of-funds (partnerships)
For investment products that are structured as partnerships and are determined to be VIEs, including private equity funds, real estate funds and fund-of-funds products, the company evaluates the structure of the partnership to determine if it is the primary beneficiary of the investment product. This evaluation includes assessing the rights of the limited partners to transfer their economic interests in the investment product. If the limited partners lack rights to manage their economic interests, they are considered to be de facto agents of the company, resulting in the company determining that it is the primary beneficiary of the investment product. The company generally takes less than a 1% investment in these entities as the general partner. Non-VIE general partnership investments are deemed to be controlled by the company and are consolidated under a voting interest entity (VOE) model, 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. Interests in unconsolidated private equity funds, real estate funds and fund-of-funds products are classified as equity method investments in the company’s Condensed Consolidated Balance Sheets (see Note 3, "Investments.")
Other investment products
As discussed in Note 11, “Commitments and Contingencies,” at September 30, 2013, contingent support agreements existed for two of the company's investment trusts to enable them to sustain a stable pricing structure, creating variable interests in these VIEs. The company earns management fees from the trusts and has a nominal investment in one of these trusts. The company was not deemed to be the primary beneficiary of these trusts after considering any explicit and implicit variable interests in relation to the total expected gains and losses of the trusts.
At September 30, 2013March 31, 2014, the company’scompany's maximum risk of loss in significant VIEs in which the company is not the primary beneficiary is presented in the table below.
$ in millionsFootnote Reference Carrying Value Company's Maximum Risk of LossFootnote Reference Carrying Value Company's Maximum Risk of Loss
CLO investments3
 2.2
 2.2
3 4.3
 4.3
Partnership and trust investments—
 29.2
 29.2

 16.9
 16.9
Investments in Invesco Mortgage Capital Inc.—
 27.7
 27.7

 28.9
 28.9
Support agreements*11
 —
 21.0
Total    80.1
   50.1

*
As of September 30, 2013, the committed support under these agreements was $21.0 million with an internal approval mechanism to increase the maximum possible support to $66.0 million at the option of the company.
During the ninethree months endedSeptember 30, 2013March 31, 2014, the company invested in and consolidated fourthree new VIEs and one VOE. The table below illustrates the summary balance sheet amounts related to these products at the date ofbefore consolidation into the company. The balances below are reflective of the balances existing at the consolidation date after the initial funding of the investments by the company and unrelated third-party investors. The current period activity for the consolidated funds, including the initial funding and subsequent investment of initial cash balances into underlying investments of CIP, is reflected in the company’s Condensed Consolidated Financial Statements.


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Balance Sheet
information - newly consolidated VIEs/VOEs
$ in millions
Cash and cash equivalents of CIP573.4
Accounts receivable and other assets of CIP15.4
Investments of CIP738.3
Total assets1,327.1
Debt of CIP856.5
Other liabilities of CIP462.0
Total liabilities1,318.5
Equity8.6
Total liabilities and equity1,327.1
  For the three months ended March 31, 2014
$ in millions VIEs VOEs
Cash and cash equivalents of CIP 576.5
 —
Accounts receivable and other assets of CIP 0.5
 9.0
Investments of CIP 538.0
 40.1
Total assets 1,115.0
 49.1
     
Debt of CIP 691.2
 —
Other liabilities of CIP 432.6
 11.8
Total liabilities 1,123.8
 11.8
Total equity (8.8) 37.3
Total liabilities and equity 1,115.0
 49.1

During the three months endedSeptember 30, 2013, theThe company liquidated and deconsolidated a CLO (VIE) and a CLO warehouse (VOE). During the nine months endedSeptember 30, 2013, the company determined it was no longer the primary beneficiary of a private equity fund (VOE) due to a changedid not deconsolidate any products in the ownership of the parent of the general partner of the fund. The amounts deconsolidated from the Condensed Consolidated Balance Sheet are illustrated in the table below. There was no net impact to the Condensed Consolidated Statement of Income for the nine monthsquarter endedSeptember 30, 2013 from the deconsolidation of these investment products.
Balance Sheet
$ in millions
Cash and cash equivalents of CIP7.1
Accounts receivable and other assets of CIP15.2
Investments of CIP76.1
Total assets98.4
Debt25.0
Other liabilities of CIP36.0
Total liabilities61.0
Equity37.4
Total liabilities and equity98.4

March 31, 2014.
The following tables reflect the impact of consolidation of CIPinvestment products into the Condensed Consolidated Balance Sheets as of September 30, 2013March 31, 2014 and December 31, 2012,2013, and the Condensed Consolidated Statements of Income for the three andmonths ended nine months endedSeptember 30March 31, 20132014 and 20122013.
Summary of Balance Sheet Impact of CIP
  As of March 31, 2014
$ in millions CLOs - VIEs Other VIEs VOEs 
Adjustments(1)
 Impact of CIP
Accounts receivable —
 —
 —
 (2.6) (2.6)
Investments —
 —
 —
 (66.6) (66.6)
Cash and cash equivalents of CIP 745.9
 3.7
 37.1
 (6.7) 780.0
Accounts receivable of CIP 172.7
 0.1
 10.9
 —
 183.7
Investments of CIP 4,656.5
 38.2
 562.0
 (83.0) 5,173.7
Total assets 5,575.1
 42.0
 610.0
 (158.9) 6,068.2
Debt of CIP 4,891.0
 —
 —
 (128.3) 4,762.7
Other liabilities of CIP 609.9
 0.7
 14.1
 (2.9) 621.8
Total liabilities 5,500.9
 0.7
 14.1
 (131.2) 5,384.5
Retained earnings 17.8
 —
 —
 —
 17.8
Retained earnings appropriated for investors in CIP 74.0
 —
 —
 —
 74.0
Accumulated other comprehensive income, net of tax (17.6) —
 (0.2) —
 (17.8)
Equity attributable to nonredeemable noncontrolling interests in consolidated entities —
 41.3
 596.1
 (27.7) 609.7
Total liabilities and equity 5,575.1
 42.0
 610.0
 (158.9) 6,068.2
____________
(1)Adjustments include the elimination of intercompany transactions between the company and its CIP, primarily the elimination of the company's equity at risk recorded as investments by the company (before consolidation) against either equity (private equity and real estate partnership funds) or subordinated debt (CLOs) of the funds.

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Summary of Balance Sheet Impact of CIP
  As of December 31, 2013
$ in millions CLOs - VIEs Other VIEs VOEs 
Adjustments(1)
 Impact of CIP
Accounts receivable —
 —
 —
 (3.4) (3.4)
Investments —
 —
 —
 (55.3) (55.3)
Cash and cash equivalents of CIP 542.3
 5.6
 35.7
 —
 583.6
Accounts receivable of CIP 56.3
 0.2
 1.8
 —
 58.3
Investments of CIP 4,237.3
 40.4
 512.2
 (55.2) 4,734.7
Total assets 4,835.9
 46.2
 549.7
 (113.9) 5,317.9
Debt of CIP 4,270.4
 —
 —
 (88.7) 4,181.7
Other liabilities of CIP 461.4
 0.9
 3.0
 (3.5) 461.8
Total liabilities 4,731.8
 0.9
 3.0
 (92.2) 4,643.5
Retained earnings 12.5
 —
 —
 —
 12.5
Retained earnings appropriated for investors in CIP 104.3
 —
 —
 —
 104.3
Accumulated other comprehensive income, net of tax (12.7) —
 —
 —
 (12.7)
Equity attributable to nonredeemable noncontrolling interests in consolidated entities —
 45.3
 546.7
 (21.7) 570.3
Total liabilities and equity 4,835.9
 46.2
 549.7
 (113.9) 5,317.9
____________
(1)Adjustments include the elimination of intercompany transactions between the company and its CIP, primarily the elimination of the company's equity at risk recorded as investments by the company (before consolidation) against either equity (private equity and real estate partnership funds) or subordinated debt (CLOs) of the funds.

$ in millions CLOs-VIEs Other VIEs VOEs 
Adjustments(1)
  Impact of CIP
As of September 30, 2013          
Cash and cash equivalents of CIP 393.6
 1.7
 49.7
 —
 445.0
Accounts receivable and other assets of CIP 59.9
 0.3
 2.0
 —
 62.2
Investments of CIP 4,017.1
 39.8
 511.3
 (53.6) 4,514.6
Adjustments (1)
 —
 —
 —
 (82.5) (82.5)
Total assets 4,470.6
 41.8
 563.0
 (136.1) 4,939.3
Debt of CIP 4,111.8
 —
 —
 (108.7) 4,003.1
Other liabilities of CIP 252.4
 0.6
 2.8
 (4.7) 251.1
Total liabilities 4,364.2
 0.6
 2.8
 (113.4) 4,254.2
Retained earnings appropriated for investors in CIP 106.7
 —
 (0.4) —
 106.3
Other equity attributable to common shareholders (0.3) (0.2) 22.3
 (22.7) (0.9)
Equity attributable to nonredeemable noncontrolling interests in consolidated entities —
 41.4
 538.3
 —
 579.7
Total liabilities and equity 4,470.6
 41.8
 563.0
 (136.1) 4,939.3
31


$ in millions CLOs-VIEs Other VIEs VOEs 
Adjustments(1)
 Impact of CIP
As of December 31, 2012          
Cash and cash equivalents of CIP 211.8
 0.2
 75.8
 —
 287.8
Accounts receivable and other assets of CIP 54.6
 0.2
 29.3
 —
 84.1
Investments of CIP 3,948.0
 35.9
 607.9
 (41.2) 4,550.6
Adjustments (1)
 —
 —
 15.8
 (86.9) (71.1)
Total assets 4,214.4
 36.3
 728.8
 (128.1) 4,851.4
Debt of CIP 3,980.7
 —
 —
 (81.3) 3,899.4
Other liabilities of CIP 105.3
 0.5
 2.9
 (4.4) 104.3
Adjustments (1)
 —
 —
 —
 (8.9) (8.9)
Total liabilities 4,086.0
 0.5
 2.9
 (94.6) 3,994.8
Retained earnings appropriated for investors in CIP 128.8
 —
 —
 —
 128.8
Other equity attributable to common shareholders (0.4) (0.1) 34.0
 (33.5) —
Equity attributable to nonredeemable noncontrolling interests in consolidated entities —
 35.9
 691.9
 —
 727.8
Total liabilities and equity 4,214.4
 36.3
 728.8
 (128.1) 4,851.4



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Summary of Income Statement Impact of CIP
  Three months ended March 31, 2014
$ in millions CLOs - VIEs Other VIEs VOEs 
Adjustments(1)
 Impact of CIP
Total operating revenues —
 —
 —
 (8.4) (8.4)
Total operating expenses 17.9
 0.3
 2.8
 (8.4) 12.6
Operating income (17.9) (0.3) (2.8) —
 (21.0)
Equity in earnings of unconsolidated affiliates —
 —
 —
 (1.2) (1.2)
Interest and dividend income —
 —
 —
 (0.9) (0.9)
Interest and dividend income of CIP 51.9
 —
 —
 (3.6) 48.3
Interest expense of CIP (34.8) —
 —
 4.5
 (30.3)
Other gains/(losses) of CIP, net (29.2) (1.0) 51.6
 5.1
 26.5
Income from continuing operations before income taxes (30.0) (1.3) 48.8
 3.9
 21.4
Income tax provision —
 —
 —
 —
 —
Income from continuing operations, net of income taxes (30.0) (1.3) 48.8
 3.9
 21.4
Income from discontinued operations, net of income taxes —
 —
 —
 —
 —
Net income (30.0) (1.3) 48.8
 3.9
 21.4
Net (income)/loss attributable to noncontrolling interests in consolidated entities 30.3
 1.3
 (47.7) —
 (16.1)
Net income attributable to common shareholders 0.3
 —
 1.1
 3.9
 5.3
 Three months ended March 31, 2013
$ in millions CLOs-VIEs Other VIEs VOEs 
Adjustments(1)
 Impact of CIP CLOs - VIEs Other VIEs VOEs 
Adjustments(1)
 Impact of CIP
Three months ended September 30, 2013          
Total operating revenues —
 —
 —
 (12.0) (12.0) —
 —
 —
 (8.8) (8.8)
Total operating expenses 23.4
 0.3
 1.3
 (12.0) 13.0
 8.5
 0.3
 2.5
 (8.8) 2.5
Operating income (23.4) (0.3) (1.3) —
 (25.0) (8.5) (0.3) (2.5) —
 (11.3)
Equity in earnings of unconsolidated affiliates —
 —
 —
 (2.2) (2.2) —
 —
 —
 (0.4) (0.4)
Interest and dividend income 48.8
 —
 —
 (3.3) 45.5
 —
 —
 —
 (1.9) (1.9)
Other investment income/(losses) 23.4
 1.1
 11.3
 (9.4) 26.4
Interest expense (36.8) —
 —
 3.3
 (33.5)
Interest and dividend income of CIP 53.6
 —
 —
 (3.3) 50.3
Interest expense of CIP (37.9) —
 —
 5.2
 (32.7)
Other gains/ (losses) of CIP, net (28.5) (0.3) 4.7
 3.0
 (21.1)
Income from continuing operations before income taxes 12.0
 0.8
 10.0
 (11.6) 11.2
 (21.3) (0.6) 2.2
 2.6
 (17.1)
Income tax provision —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Income from continuing operations, net of taxes 12.0
 0.8
 10.0
 (11.6) 11.2
Income/(loss) from discontinued operations, net of taxes —
 —
 —
 —
 —
Income from continuing operations, net of income taxes (21.3) (0.6) 2.2
 2.6
 (17.1)
Income from discontinued operations, net of income taxes —
 —
 —
 —
 —
Net income 12.0
 0.8
 10.0
 (11.6) 11.2
 (21.3) (0.6) 2.2
 2.6
 (17.1)
Net (income)/loss attributable to noncontrolling interests in consolidated entities (11.9) (0.8) (7.9) —
 (20.6) 21.4
 0.6
 (1.8) —
 20.2
Net income attributable to common shareholders 0.1
 —
 2.1
 (11.6) (9.4) 0.1
 —
 0.4
 2.6
 3.1



$ in millions CLOs-VIEs Other VIEs VOEs 
Adjustments(1)
 Impact of CIP
Three months ended September 30, 2012          
Total operating revenues —
 —
 —
 (11.5) (11.5)
Total operating expenses 9.9
 0.2
 3.7
 (11.5) 2.3
Operating income (9.9) (0.2) (3.7) —
 (13.8)
Equity in earnings of unconsolidated affiliates —
 —
 —
 (0.5) (0.5)
Interest and dividend income 68.7
 —
 —
 (3.4) 65.3
Other investment income/(losses) (38.5) 1.6
 14.2
 (11.2) (33.9)
Interest expense (45.3) —
 —
 3.4
 (41.9)
Income from continuing operations before income taxes (25.0) 1.4
 10.5
 (11.7) (24.8)
Income tax provision —
 —
 —
 —
 —
Income from continuing operations, net of taxes (25.0) 1.4
 10.5
 (11.7) (24.8)
Income from discontinued operations, net of taxes —
 —
 —
 —
 —
Net income (25.0) 1.4
 10.5
 (11.7) (24.8)
Net (income)/loss attributable to noncontrolling interests in consolidated entities 25.0
 (1.4) (9.9) —
 13.7
Net income attributable to common shareholders —
 —
 0.6
 (11.7) (11.1)


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Summary of Income Statement Impact of CIP (continued)
$ in millions CLOs-VIEs Other VIEs VOEs 
Adjustments(1)
 Impact of CIP
Nine months ended September 30, 2013          
Total operating revenues —
 —
 0.4
 (30.2) (29.8)
Total operating expenses 48.9
 0.8
 5.3
 (30.2) 24.8
Operating income (48.9) (0.8) (4.9) —
 (54.6)
Equity in earnings of unconsolidated affiliates —
 —
 —
 (3.4) (3.4)
Interest and dividend income 155.5
 —
 —
 (12.7) 142.8
Other investment income/(losses) (15.8) 1.3
 28.6
 (10.4) 3.7
Interest expense (109.5) —
 —
 12.7
 (96.8)
Income from continuing operations before income taxes (18.7) 0.5
 23.7
 (13.8) (8.3)
Income tax provision —
 —
 —
 —
 —
Income from continuing operations, net of taxes (18.7) 0.5
 23.7
 (13.8) (8.3)
Income from discontinued operations, net of taxes —
 —
 —
 —
 —
Net income (18.7) 0.5
 23.7
 (13.8) (8.3)
Net (income)/loss attributable to noncontrolling interests in consolidated entities 18.9
 (0.5) (19.9) —
 (1.5)
Net income attributable to common shareholders 0.2
 —
 3.8
 (13.8) (9.8)

$ in millions CLOs-VIEs Other VIEs VOEs 
Adjustments(1)
 Impact of CIP
Nine months ended September 30, 2012          
Total operating revenues —
 —
 —
 (32.4) (32.4)
Total operating expenses 34.0
 0.7
 20.8
 (32.4) 23.1
Operating income (34.0) (0.7) (20.8) —
 (55.5)
Equity in earnings of unconsolidated affiliates —
 —
 —
 0.1
 0.1
Interest and dividend income 206.4
 —
 —
 (10.3) 196.1
Other investment income/(losses) (79.1) 2.5
 11.2
 (13.1) (78.5)
Interest expense (144.7) —
 —
 10.3
 (134.4)
Income from continuing operations before income taxes (51.4) 1.8
 (9.6) (13.0) (72.2)
Income tax provision —
 —
 —
 —
 —
Income from continuing operations, net of taxes (51.4) 1.8
 (9.6) (13.0) (72.2)
Income from discontinued operations, net of taxes —
 —
 —
 —
 —
Net income (51.4) 1.8
 (9.6) (13.0) (72.2)
Net (income)/loss attributable to noncontrolling interests in consolidated entities 51.4
 (1.8) 9.5
 —
 59.1
Net income attributable to common shareholders —
 —
 (0.1) (13.0) (13.1)

____________
(1)Adjustments include the elimination of intercompany transactions between the company and its CIP, primarily the elimination of management fees expensed by the funds and recorded as operating revenues (before consolidation) by the company. These also include the reclassification of the company's gain or loss (representing the changes in the market value of the company's holding in the consolidated CLOs) from other comprehensive income into other gains/losses upon consolidation.


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The carrying valuevalues of investments held and notes issued by CIP isare also their fair value.values. The following table presentstables present the fair value hierarchy levels of investments held and notes issued by CIP, which are measured at fair value as of September 30, 2013March 31, 2014 and December 31, 20122013::
 As of March 31, 2014
$ in millionsFair Value Measurements Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) 
Significant Unobservable Inputs
(Level 3)
Assets:       
CLO collateral assets:       
Bank loans4,429.7
 —
 4,429.7
 —
Bonds132.0
 —
 132.0
 —
Equity securities11.9
 —
 11.9
 —
Private equity fund assets:       
Equity securities117.2
 37.7
 —
 79.5
Debt securities0.8
 —
 —
 0.8
Investments in other private equity funds480.4
 —
 —
 480.4
Debt securities issued by the U.S. Treasury1.7
 1.7
 —
 —
Total assets at fair value5,173.7
 39.4
 4,573.6
 560.7
Liabilities:       
CLO notes(4,762.7) —
 —
 (4,762.7)
Total liabilities at fair value(4,762.7) —
 —
 (4,762.7)
 As of September 30, 2013
$ in millionsFair Value Measurements Quoted Prices in
Active Markets for
Identical Assets (Level 1)		 Significant Other
Observable Inputs (Level 2)		 Significant
Unobservable Inputs (Level 3)
Assets:       
CLO collateral assets:       
Bank loans3,795.1
 —
 3,795.1
 —
Bonds151.0
 —
 151.0
 —
Equity securities17.5
 —
 17.5
 —
Private equity fund assets:
         
Equity securities100.8
 37.4
 4.8
 58.6
Investments in other private equity funds448.2
 —
 —
 448.2
Debt securities issued by the U.S. Treasury2.0
 2.0
 —
 —
Total assets at fair value4,514.6
 39.4
 3,968.4
 506.8
Liabilities:       
CLO notes(4,003.1) —
 —
 (4,003.1)
Total liabilities at fair value(4,003.1) —
 —
 (4,003.1)

As of December 31, 2012As of December 31, 2013
$ in millionsFair Value Measurements Quoted Prices in
Active Markets for
Identical Assets (Level 1)		 Significant Other
Observable Inputs (Level 2)		 Significant
Unobservable Inputs (Level 3)		Fair Value Measurements Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)
Assets:              
CLO collateral assets:              
Bank loans3,709.3
 —
 3,709.3
 —
4,035.8
 —
 4,035.8
 —
Bonds185.4
 —
 185.4
 —
133.1
 —
 133.1
 —
Equity securities12.1
 —
 12.1
 —
14.1
 —
 14.1
 —
Private equity fund assets:
                
Equity securities125.0
 21.0
 9.9
 94.1
106.0
 47.3
 —
 58.7
Investments in other private equity funds503.5
 —
 —
 503.5
442.2
 —
 —
 442.2
Debt securities issued by the U.S. Treasury10.0
 10.0
 —
 —
3.5
 3.5
 —
 —
Real estate investments5.3
 —
 —
 5.3
Total assets at fair value4,550.6
 31.0
 3,916.7
 602.9
4,734.7
 50.8
 4,183.0
 500.9
Liabilities:              
CLO notes(3,899.4) —
 —
 (3,899.4)(4,181.7) —
 —
 (4,181.7)
Total liabilities at fair value(3,899.4) —
 —
 (3,899.4)(4,181.7) —
 —
 (4,181.7)

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The following table shows a reconciliation of the beginning and ending fair value measurements for level 3 assets and liabilities using significant unobservable inputs:
 Three months ended March 31, 2014 Three months ended March 31, 2013
$ in millionsLevel 3 Assets Level 3 Liabilities Level 3 Assets Level 3 Liabilities
Beginning balance500.9
 (4,181.7) 602.9
 (3,899.4)
Purchases42.7
 —
 11.8
 —
Sales(31.5) —
 (62.0) —
Issuances1.8
 (714.1) —
 (405.0)
Settlements—
 161.4
 —
 152.8
Deconsolidation of CIP—
 —
 (18.4) —
Gains and losses included in the Condensed Consolidated Statements of Income*46.8
 (28.3) 1.2
 (69.0)
Foreign exchange—
 —
 (0.4) (0.8)
Ending balance560.7
 (4,762.7) 535.1
 (4,221.4)
 Three months ended September 30, 2013 Nine months ended September 30, 2013
$ in millionsLevel 3 Assets Level 3 Liabilities Level 3 Assets Level 3 Liabilities
Beginning balance508.3
 (4,044.3) 602.9
 (3,899.4)
Purchases8.3
 —
 21.6
 —
Sales(24.5) —
 (115.7) —
Issuances—
 (408.1) 3.8
 (813.1)
Settlements—
 410.9
 —
 768.2
Deconsolidation of CIP—
 —
 (18.4) —
Gains and losses included in the Condensed Consolidated Statements of Income*14.7
 43.7
 19.2
��(54.8)
Transfers to Level 2**—
 —
 (6.1) —
Foreign exchange—
 (5.3) (0.5) (4.0)
Ending balance506.8
 (4,003.1) 506.8
 (4,003.1)

 Three months ended September 30, 2012 Nine months ended September 30, 2012
$ in millionsLevel 3 Assets Level 3 Liabilities Level 3 Assets Level 3 Liabilities
Beginning balance854.6
 (5,069.7) 929.1
 (5,512.9)
Purchases6.2
 —
 6.7
 —
Sales(92.3) —
 (148.0) —
Issuances—
 (433.1) —
 (758.4)
Settlements—
 354.7
 —
 550.5
Deconsolidation of CIP—
 1,550.3
 —
 2,123.7
Gains and losses included in the Condensed Consolidated Statements of Income*23.3
 (121.2) 14.5
 (279.9)
Foreign exchange4.8
 (136.0) (5.7) 22.0
Ending balance796.6
 (3,855.0) 796.6
 (3,855.0)

____________
*
Included in gains and lossesgains/(losses) of CIP, net in the Condensed Consolidated StatementStatements of Income for the three and nine months endedSeptember 30, 2013March 31, 2014 are $6.0$29.6 million in net unrealized gains and $attributable to investments still held at 8.0March 31, 2014 by CIP (three months ended March 31, 2013: $17.0 million in net unrealized losses attributable to investments still held at September 30,March 31, 2013 by CIP (three and nine months endedSeptember 30, 2012: $42.6 million in net unrealized gains and $39.5 million in net unrealized losses attributable to investments still held at September 30, 2012).

**
During nine months ended September 30, 2013, $6.1 million of equity securities held by consolidated private equity funds were transferred from Level 3 to Level 2 due to the public offering of securities in the underlying companies with legal lock-up restrictions in place. For transfers to public offerings, the company's policy is to use the fair value of the transferred security on the offering date.
Unforeseen events might occur that would subsequently change the fair values of the investments and debt of CIP, but such changes would be inconsequential to the company due to its minimal investments in these products. Any gains or losses resulting from valuation changes in the investments and debt of CIP are substantially offset by resulting changes in gains and losses attributable to noncontrolling interests in consolidated entities and therefore do not have a material effect on the financial condition, operating results (including earnings per share), liquidity or capital resources of the company's common shareholders.
Fair value of consolidated CLOs
The company elected the fair value option for collateral assets held and notes issued by its consolidated CLOs to eliminate the measurement and recognition inconsistency that would otherwise arise from measuring assets and liabilities and recognizing the related gains and losses on different accounting bases.
The collateral assets held by consolidated CLOs are primarily invested in senior secured bank loans, bonds, and equity securities. Bank loan investments, which comprise the majority of consolidated CLO portfolio collateral, are senior secured corporate loans from a variety of industries, including but not limited to the aerospace and defense, broadcasting, technology, utilities, household products, healthcare, oil and gas, and finance industries. Bank loan investments mature at various dates between 20132014 and 2023,, pay interest at Libor or Euribor plus a spread of up to 14.0%12.1%, and typically range in S&P credit rating categories from BBB down to unrated. InterestInterest income on bank loans and bonds is recognized based on the unpaid principal balance and stated interest rate of these investments on an accrual basis. At September 30, 2013March 31, 2014, the fair value exceeded the unpaid principal balance

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exceeded the fair value of the senior secured bank loans and bonds by approximately $58.41.0 million (December(December 31, 2012: $121.6 million excess)2013: the unpaid principal balance exceeded the fair value of the senior secured bank loans by approximately $6.3 million). Approximately 1.1%0.5% of the collateral assets are in default as of September 30, 2013March 31, 2014 (December(December 31, 2012: less than 1.8%2013: 0.8% of the collateral assets were in default). CLO investments are valued based on price quotations provided by independent third-partythird party pricing sources. These third party sources aggregate indicative price quotations daily to provide the company with a price for the CLO investments. The company has developed internal controls to review the reasonableness and completeness of thesesthese price quotations on a daily basis. If necessary, price quotations are challenged through the third-party pricing source price challenge process. For the ninethree months endedSeptember 30, March 31, 2014 and the year ended December 31, 2013,, there were no price quotation challenges by the company.
In addition, the company's internal valuation committee conducts an annual due diligence review of all independent third-party pricing sources to review the provider's valuation methodology as well as ensure internal controls exist over the valuation of the CLO investments. In the event that the third-party pricing source is unable to price an investment, other relevant factors, data and information are considered, including: i) information relating to the market for the investment, including price quotations for and trading in the investment, interest in similar investments, the market environment, investor attitudes towards

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the investment and interests in similar investments; ii) the characteristics of and fundamental analytical data relating to the investment, including, for senior secured corporate loans, the cost, size, current interest rate, period until next interest rate reset, maturity and base lending rate, the terms and conditions of the senior secured corporate loan and any related agreements, and the position of the senior secured corporate loan in the borrower’sborrower's debt structure; iii) the nature, adequacy and value of the senior secured corporate loan’sloan's collateral, including the CLO’sCLO's rights, remedies and interests with respect to the collateral; iv) for senior secured corporate loans, the creditworthiness of the borrower, based on an evaluation of its financial condition, financial statements and information about the business, cash flows, capital structure and future prospects; v) the reputation and financial condition of the agent and any intermediate participants in the senior secured corporate loan; and vi) general economic and market conditions affecting the fair value of the senior secured corporate loan.
Notes issued by consolidated CLOs mature at various dates between 2015 and 20252026 and have a weighted average maturity of 9.09.5 years. The notes are issued in various tranches with different risk profiles. The interest rates are generally variable rates based on Libor or Euribor plus a pre-defined spread, which varies from 0.21% for the more senior tranches to 7.10% for the more subordinated tranches. Interest expense on notes issued by consolidated CLOs is accrued based on the stated rate and outstanding par of the issued notes. At September 30, 2013March 31, 2014, the outstanding balance on the notes issued by consolidated CLOs exceeds their fair value by approximately $0.2 billion (December(December 31, 2012:2013: $0.30.2 billion excess). The investors in this debt are not affiliated with the company and have no recourse to the general credit of the company for this debt.Notes issued by CLOs are recorded at fair value using an income approach.approach, driven by cash flows expected to be received from the portfolio collateral assets. Fair value is determined using current information, notably market yields and projected cash flows of collateral assets which are impacted bybased on forecasted default and recovery rates.rates that a market participant would use in determining the current fair value of the notes, taking into account the overall credit quality of the issuers and the company's past experience in managing similar securities. Market yields, default rates and recovery rates used in the company’scompany's estimate of fair value vary based on the nature of the investments in the underlying collateral pools. In periods of rising market yields, default rates and lower debt recovery rates, the fair value, and therefore the carrying value, of the notes may be adversely affected. The current liquidity constraints within the market for CLO products require the use of certain unobservable inputs for CLO valuation. Once the undiscounted cash flows of the collateral assets have been determined, the company applies appropriate discount rates that a market participant would use to determine the discounted cash flow valuation of the notes.
Certain CLOs with Euro-denominated debt that were deconsolidated as of August 30, 2012 entered into swap agreements with various counterparties to hedge economically interest rate and foreign exchange risk related to CLO collateral assets with non-Euro interest rates and currencies. These swap agreements were not designated as qualifying as hedging instruments. These derivative contracts were valued under an income approach using forecasted interest rates and were classified within level 2 of the valuation hierarchy. As of September 30, 2013, there were no open swap agreements (December 31, 2012; there were no open swap agreements). For the three and nine months endedSeptember 30, 2012, $3.8 million and $10.5 million, respectively was recorded as losses in gains/ (losses) of CIP related to swap agreements.
Fair value of consolidated private equity funds
Consolidated private equity funds are generally structured as partnerships. Generally, the investment strategy of underlying holdings in these partnershipsis to seek capital appreciation through direct investments in public or private companies with compelling business models or ideas or through investments in partnershipspartnership investments that also invest in similar private or public companies. Various strategies may be used. Companies targeted could be distressed organizations, targets of leveraged buyouts or fledgling companies in need of venture capital. Investees of theseInvestors in CIP generally may not redeem their investment until the partnership liquidates. Generally, the partnerships have a life that rangeranges from seven to twelve years unless dissolved earlier. The general partner may extend the partnership term up to a specified period of time as stated in the Partnership Agreement. Some partnerships allow the limited partners to cause an earlier termination upon the occurrence of certain events as specified in the Partnership Agreement.
For private equity partnerships, fair value is determined by reviewing each investment for the sale of additional securities of an issuer to sophisticated investors or for investee financial conditions and fundamentals. Publicly traded portfolio investments

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are carried at market value as determined by their most recent quoted sale, or if there is no recent sale, at their most recent bid price. For these investments held by CIP, level 1 classification indicates that fair values have been determined using unadjusted quoted prices in active markets for identical assets that the partnership has the ability to access. Level 2 classification may indicate that fair values have been determined using quoted prices in active markets but give effect to certain lock-up restrictions surrounding the holding period of the underlying investments.
The fair value of level 3 investments held by CIP are derived from inputs that are unobservable and which reflect the limited partnerships’partnerships' own determinations about the assumptions that market participants would use in pricing the investments, including assumptions about risk. These inputs are developed based on the partnership’spartnership's own data, which is adjusted if information indicates that market participants would use different assumptions. The partnerships which invest directly into private equity portfolio companies (direct private equity funds) take into account various market conditions, subsequent rounds of financing, liquidity, financial condition, purchase multiples paid in other comparable third-party transactions, the price of securities of other companies comparable to the portfolio company, and operating results and other financial data of the portfolio company, as applicable.
The partnerships which invest into other private equity funds (funds-of-funds) take into account information received from those underlying funds, including their reported net asset values and evidence as to their fair value approach, including consistency of their fair value application. These investments do not trade in active markets and represent illiquid long-term

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investments that generally require future capital commitments. The partnerships’partnerships' reported share of the underlying net asset values of the underlying funds is used as a practical expedient, as allowed by ASC Topic 820, in arriving at fair value.
Unforeseen events might occur that would subsequently change the fair values of these investments, but such changes would
be inconsequential to the company due to its minimal investments in these products (and the large offsetting noncontrolling interests resulting from their consolidation). Any gains or losses resulting from valuation changes in these investments are substantially offset by resulting changes in gains and losses attributable to noncontrolling interests in consolidated entities and therefore do not have a material effect on the financial condition, operating results (including earnings per share), liquidity or capital resources of the company's common shareholders.
Fair value of consolidated real estate funds
As of the date of this Report, the company's consolidated real estate funds are in liquidation; the funds had disposed of their investments in the first half of 2013. The following discussion relates to the prior period consolidation of real estate funds.
Consolidated real estate funds are structured as limited liability companies. These limited liability companies invest in other real estate funds, and these investments are carried at fair value and presented as investments in CIP. The net asset value of the underlying funds, which primarily consists of the real estate investment value and mortgage loans, is adjusted to fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Real estate fund assets are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. Due to the illiquid nature of investments made in real estate companies, all of the real estate assets are classified as level 3. The real estate investment vehicles use one or more valuation techniques (e.g., the market approach, the income approach, or the cost approach) for which sufficient and reliable data is available to value investments classified within level 3. The income approach generally consists of the net present value of estimated future cash flows, adjusted as appropriate for liquidity, credit, market and/or other risk factors.
The inputs used by the real estate funds in estimating the value of level 3 investments include the original transaction price, recent transactions in the same or similar instruments, as well as completed or pending third-party transactions in the underlying investment or comparable investments. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability. Other inputs used include discount rates, cap rates and income and expense assumptions. The fair value measurement of level 3 investments does not include transaction costs and acquisition fees that may have been capitalized as part of the investment’s cost basis. Due to the lack of observable inputs, the assumptions used may significantly impact the resulting fair value and therefore the real estate funds’ results of operations.

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Quantitative Information about Level 3 Fair Value Measurements

The following table showstables show significant unobservable inputs used in the fair value measurement of level 3 assets and liabilities:liabilities at March 31, 2014 and December 31, 2013:
Assets and Liabilities * Fair Value at September 30,March 31, 2014 ($ in millions)Valuation TechniqueUnobservable InputsRangeWeighted Average (by fair value)
Private Equity Funds --Equity Securities79.5Market ComparableRevenue Multiple1 - 5x3.2x
Discount25% - 36%30.9%
CLO Notes(4,762.7)Discounted Cash Flow- USDAssumed Default Rate***1% - 2%<1yr: 1.2% >1yr: 2.0%
Spread over Libor **120 - 821bps212 bps
Assets and Liabilities *Fair Value at December 31, 2013 ($ in millions) Valuation Technique Unobservable Inputs Range Weighted Average (by fair value)
Private Equity Funds --Equity Securities 58.658.7 Market Comparable Revenue Multiple 1 - 5x 3.0x
      Discount 24% - 50%n/a 28.2%24.0%
CLO Notes (4,003.1)Discounted Cash Flow- EuroAssumed Default Rate4.7% - 5%<1yr: 4.7% >1yr: 5.0%
Spread over Euribor **150 - 1080 bps294
(4,181.7) Discounted Cash Flow- USD Assumed Default Rate*** 1% - 3%2% <1yr: 1.6%1.4% >1yr: 3.0%2.0%
      Spread over Libor ** 128123 - 882 bps864bps 202208 bps

Assets and Liabilities *Fair Value at December 31, 2012 ($ in millions)Valuation TechniqueUnobservable InputsRangeWeighted Average (by fair value)
Private Equity Funds --Equity Securities94.1Market ComparableRevenue Multiple1 - 4x1.9x
Discount15% - 50%27.5%
Real Estate Investments5.3Discounted Cash FlowIn-Place Rent RatesJPY 218 - JPY 397 per sq ftJPY 231 - JPY 384 per sq ft
Market Rent RatesJPY 333 - JPY 417 per sq ftJPY 348 - JPY 379 per sq ft
Revenue Growth Raten/a2.18%
Discount Rate6.75% - 7.00%6.86%
Exit Capitalization Rate7.00% - 7.25%7.11%
Stabilized Occupancy Raten/a95%
Expense Growth Raten/a1.0%
CLO Notes(3,899.4)Discounted Cash Flow- EuroAssumed Default Rate3% - 5%<1yr: 3.3% >1yr: 5.0%
Spread over Euribor **325 - 1920 bps563 bps
Discounted Cash Flow- USDAssumed Default Rate***1% - 3%<1yr: 1.1% >1yr: 3.0%
Spread over Libor **130 - 1632 bps323 bps


____________
*
Certain equity securities held by consolidated private equity funds are valued using recent private market transactions (September 30,transactions(March 31, 2014: $13.3 million; December 31, 2013: $5.75.8 million;) and third party appraisals (March 31, 2014: $3.8 million; December 31, 2012: $50.0 million)2013: none). At September 30, 2013,March 31, 2014, certain tranches of the consolidated CLOs are valued using third-partythird party pricing information. Quantitative unobservable inputs for such valuations were not developed or adjusted by the company. Investments in other private equity funds as of September 30, 2013March 31, 2014 of $448.2$480.4 million (as of December 31, 2012: $503.5 million)2013: $442.2 million) are also excluded from the table above as they are valued using the NAV practical expedient. The NAVs that have been provided are derived from the fair values of the underlying investments as of the consolidation date.
**Lower spreads relate to the more senior tranches in the CLO note structure; higher spreads relate to the less senior tranches.
***Assumed default rates listed in the table above apply to CLOs established prior to 2012. A default rate of 1.4% was assumed for CLOs established after January 1, 2012.
*** Assumed default rates listed in the table above apply to CLOs established prior to 2012. A default rate of 1.4% was assumed for CLOs established in 2012 and thereafter.


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The table below summarizes as of September 30,March 31, 2014 and December 31, 2013, the nature of investments that are valued using the NAV as a practical expedient and any related liquidation restrictions or other factors which may impact the ultimate value realized:
 Fair Value at September 30, 2013 ($ in millions) Total Unfunded Commitments 
Weighted Average Remaining Term (2)
 March 31, 2014 December 31, 2013
in millions, except term data Fair Value Total Unfunded Commitments 
Weighted Average Remaining Term (2)
 Fair Value Total Unfunded Commitments 
Weighted Average Remaining Term (2)
Private equity fund of funds (1)
 $434.5 $120.2 2.9 years $436.5 $112.6 1.9 years 
$426.3
 
$71.6
 2.6 years
Private equity funds (1)
 $13.7 $74.0 7.8 years $43.9 $195.4 9.6 years 
$15.9
 
$80.6
 8.5 years
(1)These investments are not subject to redemption; however, for certain funds, the investors may sell or transfer their interest, which may require approval by the general partner of the underlying funds.
(2)These investments are expected to be returned through distributions as a result of liquidations of the funds' underlying assets over the weighted average periods indicated.

  Fair Value at December 31, 2012 ($ in millions) Total Unfunded Commitments 
Weighted Average Remaining Term (2)
Private equity fund of funds (1)
 $498.9 $127.5 2.7 years
Private equity funds (1)
 $4.6 $5.0 1.0 years
36


(1) These investments are not subject to redemption; however, for certain funds, the investors may sell or transfer their interest, which may require approval by the general partnerTable of the underlying funds.ContentsDRAFT 4/29/14 6:02 PM
(2) These investments are expected to be returned through distributions as a result of liquidations of the funds' underlying assets over the weighted average periods indicated.

The following narrative will indicate the sensitivity of inputs illustrating the impact of significant increases to the inputs. A directionally-oppositeAn opposite impact would applyresult for significant decreases in these inputs:
For investments held by consolidated private equity funds, significant increases in discounts in isolation would result in significantly lower fair value measurements, while significant increases in revenue multiple assumptions in isolation would result in significantly higher fair value measurements. An increase in discount assumptions would result in a directionally opposite change in the assumptions for revenue multiple resulting in lower fair value measurements.
For real estate investments, a change in the revenue growth rate generally would be accompanied by a directionally-similar change in the assumptions for in-place and market rent rates and stabilized occupancy rates. Significant increases in any of the unobservable inputs for in-place and market rent rates and stabilized occupancy rates in isolation would result in significantly higher fair values. An increase in these assumptions would result in a directionally-opposite change in the assumptions for discount rate, exit capitalization rate, and expense growth rate. Significant increases in the assumptions for discount rate, exit capitalization rate, and expense growth rate in isolation would result in significantly lower fair value measurements.
For CLO Notes,notes, a change in the assumption used for spreads is generally accompanied by a directionally similar change in default rate. Significant increases in any of these inputs in isolation would result in a significantly lower fair value measurements.

14. RELATED PARTIES

Certain managed funds are deemed to be affiliated entities under the related party definition in ASC 850, "Related Party Disclosures." Additionally, related parties include those defined in the company's proxy statement.

 Three months ended March 31,
$ in millions2014 2013
Affiliated operating revenues:   
Investment management fees856.3
 746.0
Service and distribution fees235.4
 201.7
Performance fees25.9
 31.5
Other33.0
 25.1
Total affiliated operating revenues1,150.6
 1,004.3
 Three months ended September 30, Nine months ended September 30,
$ in millions2013 2012 2013 2012
Affiliated operating revenues:       
Investment management fees811.3
 697.1
 2,343.1
 2,030.4
Service and distribution fees216.7
 181.6
 630.0
 557.4
Performance fees3.6
 2.0
 37.6
 33.9
Other26.1
 23.6
 78.9
 76.7
Total affiliated operating revenues1,057.7
 904.3
 3,089.6
 2,698.4


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As of
$ in millionsSeptember 30, 2013 December 31, 2012March 31, 2014 December 31, 2013
Affiliated asset balances:      
Cash equivalents319.6
 223.2
Cash and cash equivalents226.2
 447.8
Unsettled fund receivables377.5
 131.5
364.7
 315.5
Accounts receivable300.1
 258.3
323.0
 298.5
Investments648.4
 562.8
817.6
 789.8
Assets held for policyholders1,448.7
 1,153.2
1,341.6
 1,415.7
Assets held for sale4.5
 —
Other assets9.2
 32.7
21.6
 5.4
Affiliated asset balances3,108.0
 2,361.7
Total affiliated asset balances3,094.7
 3,272.7
      
Affiliated liability balances:      
Accrued compensation and benefits149.5
 234.3
124.9
 151.6
Accounts payable and accrued expenses19.0
 21.5
19.9
 19.5
Unsettled fund payables428.6
 266.0
895.0
 389.9
Affiliated liability balances597.1
 521.8
Total affiliated liability balances1,039.8
 561.0

15. 15. DISCONTINUED OPERATIONS
On April 11,December 31, 2013, the company entered into a definitive agreement to sellcompleted the sale of Atlantic Trust to the Canadian Imperial Bank of Commerce (CIBC) for a base purchase price of $210 million less certain working capital and cash funding requirements, which are estimated to be approximatelyrequirements. $30 million. The sale is expected to close in the fourth quarter of 2013. Assets and liabilities related to Atlantic Trust are classified as held for sale in the Condensed Consolidated Balance Sheet as at September 30, 2013, as the requirements for held for sale treatment and discontinued operations reporting were met as of this date. The results of Atlantic Trust, together with expenses and the gain associated with the sale, are reflected as discontinued operations in the Condensed Consolidated Statements of Income and are therefore excluded from the continuing operations of Invesco. Comparative periods shown in the Condensed Consolidated Statements of Income have been adjusted to conform with this presentation.
The assets and liabilities classified as held for sale are as follows at September 30, 2013:

As of
$ in millionsSeptember 30, 2013
Assets
Receivables and other assets17.3
Property and equipment, net14.5
Intangible assets, net2.2
Goodwill70.1
Total assets held for sale*104.1
Liabilities
Accrued expenses1.6
Total liabilities held for sale1.6
* Total assets held for sale in the Condensed Consolidated Balance Sheet includes an asset with net book value of $2.6 million as of September 30, 2013 that meets held for sale criteria and is unrelated to the Atlantic Trust business.37


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The components of income from discontinued operations, net of tax, were as follows for the three and nine months ended, September 30, 2013 March 31, 2014 and 2012,2013, respectively.
 Three months ended September 30, Nine months ended September 30,
$ in millions2013 2012 2013 2012
Operating revenue31.9
 27.5
 92.9
 80.4
Operating expenses(34.1) (22.4) (95.9) (68.8)
Income (loss) from discontinued operations before income taxes(2.2) 5.1
 (3.0) 11.6
Income tax (provision)/benefit0.8
 (1.9) 1.1
 (4.3)
Income (loss) from discontinued operations, net of tax(1.4) 3.2
 (1.9) 7.3
 Three months ended March 31,
$ in millions2014 2013
Income (loss) from discontinued operations before income taxes(3.2) 6.4
Income tax (provision) benefit1.2
 (2.3)
Income (loss) from discontinued operations, net of taxes(2.0) 4.1

During the three and nine months endedSeptember 30, 2013, the company incurred costs of $10.1 million before tax ($6.5 million after tax) and $24.0 million before tax ($15.3 million after tax), respectively, related to the pending transaction, as well as costs related to unauthorized personal transactions of a former employee of Atlantic Trust.

16.  SUBSEQUENT EVENTS
On October 11, 2013,April 28, 2014, the company's boardEnforcement Division of directors authorizedthe U.K. Financial Conduct Authority (FCA) announced that it had entered into an additional $1.5 billionagreement with the company to settle matters pertaining to violations of certain FCA rules and regulations during the period from May 2008 to November 2012. Operating expenses for first quarter include a charge of £18.6 million ($31.1 million) in respect of the existing share repurchase programpenalty under such settlement. This charge, together with no stated expiration date.
settlement-related legal costs of $0.5 million, has been recorded in general and administrative expenses.
On October 31, 2013May 1, 2014, the company announceddeclared a thirdfirst quarter2013 2014 dividend of $0.22525.0 cents per share, payable on December 9, 2013June 6, 2014, to shareholders of record at the close of business on November 19, 2013May 16, 2014, with an ex-dividend date of May 14, 2014.November 15, 2013.

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Item 2.Management’s  Management's Discussion and Analysis of Financial Condition andResults of Operations

Forward-Looking Statements
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Condensed Consolidated Financial Statements and related Notes thereto, which appear elsewhere in this Report. Except for the historical financial information, this Report may include statements that constitute “forward-looking statements” under the United States securities laws. Forward-looking statements include information concerning future results of our operations, expenses, earnings, liquidity, cash flow and capital expenditures, industry or market conditions, assets under management, acquisitions and divestitures, debt and our ability to obtain additional financing or make payments, regulatory developments, demand for and pricing of our products and other aspects of our business or general economic conditions. In addition, words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “projects,” “forecasts,” and future or conditional verbs such as “will,” “may,” “could,” “should,” and “would” as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements.
Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. 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 and urge you to carefully consider the risks described in this Report and our most recent Form 10-K and subsequent Forms 10-Q, filed with the Securities and Exchange Commission.
You may obtain these reports from the SEC’s website at www.sec.gov. We expressly disclaim any obligation to update the information in any public disclosure if any forward-looking statement later turns out to be inaccurate.
References
In this Report, 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.
Executive Overview
The following executive overview summarizes the significant trends affecting our results of operations and financial condition for the periods presented. This overview and the remainder of this management’smanagement's discussion and analysis supplements and should be read in conjunction with the Condensed Consolidated Financial Statements of Invesco Ltd. and its subsidiaries (collectively, the “company” or “Invesco”) and the notes thereto contained elsewhere in this Report.

46
TableDuring the three months ended March 31, 2014, returns from global equity markets were mixed as investors digested a number of Contents

Invesco is a leading independent global investment manager with offices in more than 20 countries. As of September 30, 2013, the firm managed $745.5 billion in assets for investors around the world. By delivering the combined power of our distinctive worldwide investment management capabilities, Invesco provides a comprehensive array of enduring solutions for our clients. We have a significant presenceevents including geopolitical uncertainty in the institutionalUkraine, sluggish economic data from the U.S., and retail segments of the investment management industrya continued decline in North America, U.K., Europe and Asia-Pacific, serving clients in more than 100 countries.
During the third quarter, global financial markets continued their move into record territory. Although markets started the quarter with declines, the decision bymonetary easing from the Federal Reserve not to slow downin the asset purchase program resultedU.S. Disappointing economic data in the U.S., coupled with a risk-on environment which saw equity markets rise. However, the Fed-related gains were soon tempered as market participants shifted focus to the potential shut downcontinued $10 billion per month reduction of the U.S. government. During the quarter, theFederal Reserve’s asset-purchase program weighed on global equities. The S&P 500 index gained 4.7%in the U.S. reached an all-time high during the quarter, but could not sustain the strong gains and ended up only 1.3% for the period. Equity indices in the U.K., the FTSE 100 index gained 4.0%, while the Nikkei 225Japan and MSCI emerging market indices gained 5.7% and 5.0% respectively. In thenine months endedSeptember 30, 2013, developed markets maintained strong returns, building on momentum from 2012, while emerging markets all declined 6.4%during the quarter. The slowing of the equity markets was positive for bond markets, however, as the Barclays U.S. Aggregate Bond Index rose 1.8%.
The table below summarizes the returns based on price appreciation/(depreciation) of several major market indices for the three and nine monthsperiods ended September 30March 31, 20132014 and 20122013:
 Three months ended September 30, Nine months ended September 30, Three months ended March 31,
Index 2013 2012 2013 2012
Equity Index 2014 2013
S&P 500 4.7% 5.8 % 17.9 % 14.6% 1.3% 10.0%
FTSE 100 4.0% 3.1 % 9.6 % 3.1% (2.2)% 8.7%
Nikkei 225 5.7% (1.5)% 39.1 % 4.9% (9.0)% 19.3%
MSCI Emerging Markets 5.0% 7.0 % (6.4)% 4.9% (0.8)% (1.9)%
Bond Index 
Barclays U.S. Aggregate Bond 1.8% (0.1)%
A significant portion of our business and assets under management (AUM) is based outside of the U.S. The strengthening or weakening of the U.S. dollar against other currencies, primarily the Pound Sterling, Canadian dollar, Yen and Euro, will impact our reported revenues and expenses from period to period. Additionally, our revenues are directly influenced by the level and composition of our AUM. Therefore, movements in global capital market levels, net new business inflows (or

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outflows) and changes in the mix of investment products between asset classes and geographies may materially affect our revenues from period to period.
Over
Invesco benefits from the past eight years, we have focusedlong-term efforts to ensure a diversified base of AUM. One of Invesco's core strengths, and a key differentiator for the company within the industry, is our broad diversification across client domiciles, asset classes and distribution channels. Our geographical diversification recognizes growth opportunities in different parts of the world. This broad diversification mitigates the impact on our multi-year strategyInvesco of different market cycles and enables the company to further growtake advantage of growth opportunities in various markets and strengthen our business. Our commitment to investment excellence enables us to deliver strong, long-term investment performance to our clients. We have worked to enhance the depth and breadth of our investment capabilities and made successful strategic acquisitions that further expanded our capabilities. We also worked to further enhance the effectiveness of our global platform.channels.
The depth, breadthinvestment management industry is subject to extensive levels of ongoing regulatory oversight and strengthexamination. In the United States, United Kingdom, 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. On April 28, 2014, the U.K. Financial Conduct Authority (FCA) announced a penalty of our business£18.6 million ($31.1 million) related to the settlement of an enforcement proceeding pertaining to the company's compliance with certain FCA rules and regulations for the period from May 2008 to November 2012. This charge, together with settlement-related legal costs of $0.5 million, reduced diluted earnings per share by $0.07 for the quarter ended March 31, 2014. The company believes its current systems and controls now are adequate and in compliance with applicable rules and regulations.
Regulators in various jurisdictions have put usproposed or are exploring changes to the manner in a positionwhich fund distributers are compensated for the services they provide.  The U.K. FCA has implemented its Retail Distribution Review (“RDR”), which is expected to evolve our capital management priorities. As it has beenreshape the manner in which retail investment funds are sold in the past,U.K. by changing how retail clients pay for investment advice given in respect of all retail investment products.  Invesco has prepared for the RDR implementation by offering investment funds to U.K. investors which are priced at a key priorityreduced gross management fee, but which in turn do not result in the payment by the company of a distribution fee to the intermediary.  These changes are not expected to have a significant impact on net revenues as investors move into these offerings.  In the U.S., the SEC has previously proposed and may repropose significant changes to Rule 12b-1.  Other countries have announced similar distribution fee reviews.
Retaining highly skilled technical and management personnel is important to reinvest in our business in ways that enhance our ability to deliver strong investment performance to our clients. In addition, dividends are now featured more prominently among our priorities,attract and retain clients and retail shareholder accounts. Our policy has been to provide our investment management professionals with a more committed levelsupportive professional working environment and 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 return to our shareholders. We will also continue our program of repurchasing shares. Furthermore, as we have said inkey individuals or significant investment management personnel can reduce the past, our goal is to achieve a cash buffer of approximately $1 billion in excess of regulatory requirements. These priorities reflect our confidence in our ability to grow our business organically by meeting client needs and to further strengthen our capital position over time. Our capital priorities are further discussed in the "Liquidity and Capital Resources" and "Dividends" sections of this Management's Discussion and Analysis.
The company announced on April 11, 2013 that it had entered into a definitive agreement to sell Atlantic Trust Private Wealth Management (Atlantic Trust) to CIBC. As discussed above, our strategic focus continues to be to meet our clients' needs across the globe by delivering investment capabilities managed by our own investment teams and leveraging a common global platform. This pending transaction offers compelling advantages for the clients of Atlantic Trust, as CIBC has committed to growing and investing in Atlantic Trust's business and brand. The transaction also offers compelling advantages to the shareholders of Invesco, including improved allocation of capital, resources to support future growthattractiveness of our core investment management business,products to potential and immediate expansion ofcurrent clients. On April 29, 2014, the company's net operating margin. We anticipate the disposition will result in a run-rate reduction of approximately $115 million of annualized net revenue, $85 million of annualized adjusted operating expenses, and 5 cents of adjusted diluted EPS. Under the terms of the transaction, CIBC has announced that it plans to acquire Atlantic Trust for $210 million, less certain working capital and cash funding requirements, which are estimated to be approximately $30 million, in an all-cash transaction that is expected to close, subject to regulatory approval, in the fourth quarter of 2013. It is our intention to use the proceeds to repurchase outstanding shares, which will partially offset the adjusted EPS dilution.
Assets and liabilities related to Atlantic Trust are classified as held for sale in the balance sheet as at September 30, 2013. The results of Atlantic Trust, together with expenses associated with the sale, are reflected as discontinued operations in the income statement and are therefore excluded from the continuing operations of Invesco. Comparative periods shown in the

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income statement have been adjusted to conform with this presentation. Similarly, total AUM excludes the AUM of Atlantic Trust with comparative periods adjusted to a consistent basis.
On October 15, 2013 the company announced that the Headformer head of U.K. Equities, Neil Woodford, will be leavingleft the Company. Between the announcement of Mr. Woodford's departure on October 15, 2013, and March 31, 2014, U.K. equity income AUM experienced net outflows of $8.2 billion. In addition, during April 29, 2014. Mr. Woodford will remain responsible for all funds for which he is2014 the named manager through a transition period duringcompany experienced an outflow in the six months prior to his departure. At the endU.K. of the transition,approximately $13 billion. The company executed its succession planning strategy, and effective March 6, 2014, Mark Barnett will succeed Mr. Woodford as Head of U.K. Equities. As of September 30, 2013 Mr. Woodford wasbecame the named lead manager for the Invesco Perpetual High Income Fund and the Invesco Perpetual Income Fund, previously managed by Mr. Woodford. Our total AUM in EMEA at March 31, 2014 were $178.3 billion. Excluding the net outflows from U.K. Equity AUM totaling $48.5equity income, EMEA long term net inflows for the first quarter of 2014 were $6.5 billion.

One of the company's strategic objectives is to harness the power of our global platform by improving effectiveness and efficiency, and allocating our resources to the opportunities that will best benefit clients and our business. Consistent with this objective, during the first quarter an initiative was undertaken to align the company's location footprint to reflect current and future business needs. This resulted in the company recording business optimization initiative charges of $43.0 million that include $35.8 million associated with vacating leased properties and $7.2 million of staff severance. These charges reduced first quarter diluted earnings per share by $0.08.
Presentation of Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations

The company provides investment management services to, and has transactions with, various private equity, real estate, fund-of-funds, collateralized loan obligation products (CLOs), and other investment entities sponsored by the company for the investment of client assets in the normal course of business for the investment of client assets.business. The company serves as the investment manager, making day-to-day investment decisions concerning the assets of the products.

Investment products that are consolidated are referred to in this Report as either Consolidated Sponsored Investment Products (CSIP), which generally includes consolidated majority-held sponsored investment products, or Consolidated Investment Products (CIP), which includes consolidated nominally-held investment products. This distinction is important, as it differentiates the company's economic risk associated with each type of consolidated managed fund. The company's economic risk with respect to each investment in a CSIP and a CIP is limited to its equity ownership and any uncollected management
fees. Gains and losses arising from nominally-held CIP do not have a significant impact on the company's results of operations, liquidity, or capital resources. Gains and losses arising from majority-held CSIP could have a significant impact on the company's results of operations, as the company has greater economic risk associated with its investment. See Part I, Item 1, Financial Statements, - Note 1 "Accounting Policies," Note 12, "Consolidated Sponsored Investment Products," and Note 13, "Consolidated Investment Products," for additional information regarding the impact of the consolidation of investment products.managed funds.
The majority of the company’scompany's CIP balances are CLO-related. The collateral assets of the CLOs are held solely to satisfy the obligations of the CLOs. The company has no right to the benefits from, nor does it bear the risks associated with, the collateral assets held by the CLOs, beyond the company’scompany's minimal direct investments in, and management and performance fees generated from, the CLOs. If the company were to liquidate, the collateral assets would not be available to the general creditors of the company, and as a result, the company does not consider them to be company assets. Conversely, ifLikewise, the CLOs were to liquidate, their investors wouldin the CLOs have no recourse to the general credit of the company.company for the notes issued by the CLOs. The company therefore does not consider this debt to be a company liability.
The impact of CIP is so significant to the presentation of the company’s financial statementsCondensed Consolidated Financial Statements (but not to the company's underlying financial condition or net income attributable to common shareholders)results of operations of the company) that the company has elected to deconsolidate these products in its non-GAAP disclosures. The following discussion therefore combines the results presented under U.S. generally accepted accounting principles (GAAP)(U.S. GAAP) with the company’s non-GAAP presentation. There are four distinct sections within thisThis Management’s Discussion and Analysis of Financial Condition and Results of Operations contains four distinct sections, which follow after the Assets Under Management discussion:
Results of Operations (for the(three months ended three and nine months endedSeptember 30, 2013March 31, 2014 compared with theto three months ended three and nine months endedSeptember 30, 2012March 31, 2013);
Schedule of Non-GAAP Information;
Balance Sheet Discussion; and
Liquidity and Capital Resources.
Each of the financial statementCondensed Consolidated Financial Statement summary sections (Results of Operations, Balance Sheet Discussion, and Liquidity and Capital Resources) begins with a table illustrating the impact of CIP relative to the company's consolidated totals. The impact is illustrated by a column which shows the dollar-value change in the consolidated figures, as caused by the consolidation of CIP. For example, the impact of CIP on operating revenues for the three and nine months endedSeptember 30, 2013March 31, 2014 was a reduction of $12.0 million and $29.8 million, respectively.$8.4 million. This indicates that their consolidation reduced consolidated revenues by this amount, reflecting the elimination upon their consolidation of the operating revenues earned by Invesco for managing these investment products.
The narrative that followsin each of these sections separately provides discussion of the underlying financial statement activity for the company, before consolidation of CIP, as well as of the financial statement activity of CIP. Additionally, wherever a non-GAAP measure is referenced, a disclosure will follow in the narrative or in the note referring the reader to the Schedule of Non-GAAP Information, where additional details regarding the use of the non-GAAP measure by the company are disclosed, along with reconciliations of the most directly comparable U.S. GAAP measures to the non-GAAP measures. To further enhance the readability of the Results of Operations section, separate tables for each of the revenue, expense, and non-operatingother income and expenses (non-operating income/expenseexpense) sections of the income statement introduce the narrative that follows, providing a section-by-section review of the company’s income statements for the periods presented.

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Summary Operating Information
Summary operating information is presented in the table below:
 Three months ended September 30, Nine months ended September 30,
In millions, other than per share amounts, operating margins, ratios and AUM2013 2012 2013 2012
U.S. GAAP Financial Measures Summary       
Operating revenues(5)

$1,171.8
 
$1,013.9
 
$3,419.5
 
$3,003.7
Operating income(5)

$286.0
 
$210.9
 
$826.9
 
$637.1
Operating margin(5)
24.4% 20.8% 24.2% 21.2%
Net income attributable to common shareholders
$228.1
 
$170.6
 
$652.9
 
$518.4
Diluted EPS
$0.51
 
$0.38
 
$1.45
 
$1.14
Debt/equity ratio including consolidated investment products (CIP) (%)59.1% 55.9% 59.1% 55.9%
        
Non-GAAP Financial Measures Summary       
Net revenues(1)

$816.4
 
$708.2
 
$2,394.7
 
$2,105.4
Adjusted operating income(2)

$328.1
 
$244.3
 
$944.9
 
$753.9
Adjusted operating margin(2)
40.2% 34.5% 39.5% 35.8%
Adjusted net income attributable to common shareholders(3)

$246.0
 
$182.7
 
$695.2
 
$559.2
Adjusted diluted EPS(3)

$0.55
 
$0.40
 
$1.55
 
$1.23
Debt/equity ratio excluding CIP(%)(4)
16.5% 15.7% 16.5% 15.7%
        
Assets Under Management       
Ending AUM (billions)(5)

$745.5
 
$663.0
 
$745.5
 
$663.0
Average AUM (billions)(5)

$729.4
 
$648.5
 
$713.6
 
$640.4
$ in millions, other than per share amounts, operating margins, ratios and AUMThree months ended March 31,
U.S. GAAP Financial Measures Summary (1)
2014 2013
Operating revenues1,269.5
 1,112.2
Operating income244.3
 267.0
Operating margin19.2% 24.0%
Net income attributable to common shareholders187.8
 222.2
Diluted EPS0.43
 0.49
Debt/equity ratio including CIP (%)71.3% 64.9%
    
Non-GAAP Financial Measures Summary   
Net revenues (2)
887.8
 788.0
Adjusted operating income (3)
363.0
 306.2
Adjusted operating margin (3)
40.9% 38.9%
Adjusted net income attributable to common shareholders (4)
261.6
 225.5
Adjusted diluted EPS (4)
0.60
 0.50
Debt/equity ratio excluding CIP (%) (5)
19.3% 18.7%
    
Assets Under Management (1)
   
Ending AUM (billions)787.3
 707.7
Average AUM (billions)779.6
 691.6

_________
(1)On December 31, 2013, the company completed the sale of Atlantic Trust. The company has adopted a discontinued operations presentation for the disposed business. Amounts presented represent continuing operations and exclude Atlantic Trust, with the exception of net income attributable to common shareholders and diluted earnings per share. Prior period amounts have been reclassified to conform with this presentation.
(2)Net revenues is a non-GAAP financial measure. Net revenues are operating revenues less third-party distribution, service and advisory expenses (adjusted for third party distribution expense related to the European infrastructure initiative), plus our proportional share of the net revenues of our joint venture investments, less third-party distribution, service and advisory expenses, plus management and performance fees earned from CIP, less other revenuesrevenue recorded by CIP.CIP, plus other reconciling items. See “Schedule"Schedule of Non-GAAP Information”Information," for the reconciliation of operating revenues to net revenues.
(2)(3)Adjusted operating income and adjusted operating margin are non-GAAP financial measures. Adjusted operating margin is adjusted operating income divided by net revenues. Adjusted operating income includes operating income plus our proportional share of the operating income of our joint venture investments, transaction and integration charges,the operating income impact of the consolidation of investment products, acquisition/disposition-related items, amortization of intangibles,adjustments, compensation expense related to market valuation changes in deferred compensation plans, the operating income impact of the CIP, European infrastructure expenses and other reconciling items. See “Schedule"Schedule of Non-GAAP Information”Information," for the reconciliation of operating income to adjusted operating income.
(3)(4)Adjusted net income attributable to common shareholders and adjusted diluted EPS are non-GAAP financial measures. Adjusted net income attributable to common shareholders is net income attributable to common shareholders adjusted to add back transaction and integration charges, acquisition, amortization of intangibles, and the tax cash flow benefits resulting from tax amortization of goodwill and indefinite-lived intangible assets. Adjusted net income attributable to common shareholders excludesexclude the net income of CIP, andadd back acquisition/disposition related adjustments, the net income impact of deferred compensation plans European infrastructure expenses, discontinued operations and other reconciling items. Adjustments made to net income attributable to common shareholders are tax-effected in arriving at adjusted net income attributable to common shareholders. By calculation, adjusted diluted EPS is adjusted net income attributable to common shareholders divided by the weighted average number of shares outstanding (for diluted shares outstanding.EPS). See “Schedule"Schedule of Non-GAAP Information”Information," for the reconciliation of net income attributable to common shareholders to adjusted net income.income attributable to common shareholders.
(4)(5)The debt-to-equity ratio excluding CIP is a non-GAAP financial measure. See the "Liquidity and Capital Resources" section for a recalculation of this ratio and other important disclosures.
(5)The company has adopted a discontinued operations presentation for the Atlantic Trust business as of June 30, 2013. Amounts presented represent continuing operations and exclude Atlantic Trust. Prior period amounts have been reclassified to conform with this presentation.


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Investment Capabilities Performance Overview
Invesco's first strategic priority is to achieve strong investment performance over the long-term for our clients. Long-termThe table below presents the one-, three- and five-year performance inof our equities capabilities, asactively managed investment products measured by the percentage of AUM ahead of benchmark and aheadAUM in the top half of peer median, is generally strong with some pockets of outstanding performance. Within our equity asset class, U.K., Continental European,group.(1)
 Benchmark Comparison Peer Group Comparison
 % of AUM Ahead of Benchmark % of AUM In Top Half of Peer Group
 1yr3yr5yr 1yr3yr5yr
Equities       
U.S. Core33%42%16% 35%37%9%
U.S. Growth95%30%38% 95%25%87%
U.S. Value80%57%57% 80%98%79%
Sector Funds77%35%91% 35%16%15%
U.K.99%100%98% 43%98%13%
Canadian66%100%97% 63%96%57%
Asian87%85%87% 81%75%72%
Continental European94%100%100% 86%92%100%
Global85%94%84% 86%89%74%
Global Ex U.S. and Emerging Markets78%99%99% 80%97%96%
Fixed Income       
Money Market65%65%60% 96%96%97%
U.S. Fixed Income70%87%90% 72%93%86%
Global Fixed Income79%94%97% 76%84%82%
Stable Value100%100%100% 100%24%24%
Other       
Alternatives69%71%47% 44%55%23%
Balanced50%72%61% 62%98%97%

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and Global Ex U.S. and Emerging Markets funds have had very strong relative performance, with 93% or more of assets beating their peer group and benchmark over three- and five-year periods. Balanced funds also reflect strong long-term performance with 98% and 96% of assets beating benchmarks and peers, respectively, on a five-year basis. Within our fixed income asset class, Stable Value products have continued to achieve excellent long-term performance with 100% of AUM ahead of benchmarks and peers on a one-, three-, and five-year basis.
  Benchmark Comparison Peer Group Comparison
  % of AUM Ahead of Benchmark % of AUM In Top Half of Peer Group
  1yr 3yr 5yr 1yr 3yr 5yr
EquitiesU.S. Core73% 50% 29% 65% 49% 39%
 U.S. Growth94% 28% 41% 87% 28% 87%
 U.S. Value79% 79% 80% 77% 79% 80%
 Sector76% 71% 94% 51% 23% 46%
 U.K.98% 99% 98% 48% 98% 98%
 Canadian100% 100% 100% 100% 76% 73%
 Asian79% 68% 68% 57% 58% 67%
 Continental European65% 100% 100% 87% 96% 93%
 Global73% 91% 81% 73% 84% 64%
 Global Ex U.S. and Emerging Markets20% 97% 97% 17% 94% 97%
OtherAlternatives58% 46% 50% 64% 59% 29%
 Balanced42% 75% 98% 60% 99% 96%
Money MarketMoney Market53% 59% 72% 98% 96% 97%
Fixed IncomeU.S. Fixed Income56% 70% 84% 67% 73% 88%
 Global Fixed Income75% 81% 88% 82% 82% 74%
 Stable Value100% 100% 100% 100% 100% 100%

_____________________________
Note:(1)
AUM measured in the one-, three-, and five-year peer group rankings represents 61%60%, 61%60%, and 57% of total Invesco AUM, respectively, and AUM measured versus benchmark on a one-, three-, and five-year basis represents 72%, 71%, and 68%67% of total Invesco AUM, respectively, as of September 30, 2013March 31, 2014. Peer group rankings are sourced from a widely-used third party ranking agency in each fund’sfund's market (Lipper, Morningstar, IMA, Russell, Mercer, eVestment Alliance, SITCA, Value Research) and are asset-weighted in USD. Rankings are as of prior quarter-end for most institutional products and preceding month-end for Australian retail funds due to their late release by third parties. Rankings for the most representative fund in each GIPSGlobal Investment Performance Standard (GIPS) composite are applied to all products within each GIPS composite. Excludes passive products, closed-end funds, private equity limited partnerships, non-discretionary direct real estate, unit investment trusts fund of fundsfund-of-funds with component funds managed by Invesco, stable value building block funds and CLOs. Atlantic Trust results are excluded due to its upcoming disposition. Certain funds and products were excluded from the analysis because of limited benchmark or peer group data. Had these been available, results may have been different. These results are preliminary and subject to revision. Performance assumes the reinvestment of dividends. Past performance is not indicative of future results and may not reflect an investor’sinvestor's experience.
As of March 31, 2014, 73%, 81% and 68% of ranked actively managed assets performed in the top half of peer groups on a one-year, three-year and five-year basis respectively. The U.K., Asian, Continental European and Global Ex U.S. and Emerging Markets equities have had strong relative performance, with 85% or more of assets beating their benchmark over three- and five-year periods. Additionally, Continental European and Global Ex U.S. and Emerging Markets reflect strong performance with 100% and 96%, respectively, of assets beating peers on a five-year basis. Our balanced asset class reflects strong peer group comparison with 97% or more in the top half on both the three- and five-year basis. Within our fixed income asset class, Stable Value products have achieved excellent long-term performance with 100% of AUM ahead of benchmark on a one-, three- and five-year basis.

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Assets Under Management movements for the three months endedSeptember 30, 2013 compared with the three months endedSeptember 30, 2012
The following presentation and discussion below includes presentation of AUM asincludes Passive and Active.Active AUM. Passive AUM includesinclude ETFs, UITs, non-fee earning leverage, foreign exchange overlaysleveraged fund balances upon which we do not earn a fee, and other passive mandates. Active AUM isare total AUM less Passive AUM.
The AUM tables and the discussion below refer to AUM as long-term and short-term. Short-term AUM includesinclude institutional money market and Invesco PowerShares QQQ AUM. Long-term AUM isare total AUM less short-term AUM. As previously announced, the company has entered into an agreement to sell Atlantic Trust, which is being accounted for as discontinued operations in our results. The AUM for Atlantic Trust are excluded from all periods presented.
AUM at September 30, 2013 were $745.5 billion (June 30, 2013: $705.6 billion; September 30, 2012: $663.0 billion). During the three months endedSeptember 30, 2013, we experienced total net inflows of $9.1 billion with net long-term inflows of $5.0 billion. Net inflows of short-term AUM included institutional money market funds of $3.3 billion and net inflows from the Invesco PowerShares QQQ fund of $0.8 billion. Market movements increased AUM by $22.4 billion, and AUM increased$8.4 billion due to changes in foreign exchange rates during the three months endedSeptember 30, 2013. During the three months endedSeptember 30, 2012, we experienced total net inflows of $11.4 billion, of which $8.5 billion was from long-term net inflows, $2.3 billion was from net inflows in institutional money market funds and $0.6 billion was from net inflows from the Invesco PowerShares QQQ fund. Market movements increased AUM by $21.4 billion, and AUM increased$4.3 billion due

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to changes in foreign exchange rates during the three months endedSeptember 30, 2012. Average AUM during the three months endedSeptember 30, 2013, were $729.4 billion compared to $648.5 billion for the three months ended September 30, 2012.
Long-term net inflows during the three months endedSeptember 30, 2013 were $5.0 billion and included net long-term inflows of passive AUM of $0.2 billion. Total net long-term flows include inflows from our retail distribution channel of $6.5 billion, offset by outflows from our institutional channel of $1.5 billion. We experienced net long-term inflows in our alternatives asset class of $1.4 billion, balanced funds of $0.2 billion and equity funds of $4.6 billion. These inflows were partially offset by net long-term outflows of $1.1 billion in our fixed income funds and $0.1 billion in retail money market funds.
The $22.4 billionincrease in AUM resulting from market gains during the three months endedSeptember 30, 2013 included increases in the market value of our equity asset of $20.7 billion, balanced fund assets of $2.3 billion and retail money market assets of $0.2 billion. These market valuation gains were partially offset by a decrease of $0.7 billion in the value of our fixed income asset class, with the alternative asset class also experiencing market losses of $0.1 billion. Of the $21.4 billionincrease in AUM resulting from market gains during the three months endedSeptember 30, 2012, $14.8 billion of this increase was due to the change in value of our equity asset class.
The impact of the change in foreign exchange rates in the three months endedSeptember 30, 2013, was driven primarily by the strengthening of the Pound Sterling, the Canadian Dollar, the Japanese Yen and the Euro relative to the U.S. Dollar, which was reflected in the translation of our Sterling-based, Canadian Dollar-based, Japanese Yen-based and Euro-based AUM into U.S. Dollars. The impact of the change in foreign exchange rates in the three months endedSeptember 30, 2012, was also driven by the strengthening of the Pound Sterling, the Canadian Dollar, the Japanese Yen and the Euro relative to the U.S. Dollar.
The table below illustrates the spot foreign exchange rates for translation into the U.S. Dollar, the reporting currency of the company, at September 30, 2013 and 2012, as compared with the rates that existed at June 30, 2013 and 2012:
 September 30, 2013 June 30, 2013 September 30, 2012 June 30, 2012
Pound Sterling ($ per £)1.619
 1.518
 1.615
 1.569
Canadian Dollar (CAD per $)1.029
 1.054
 0.984
 1.019
Japan (¥ per $)98.120
 99.320
 77.800
 79.820
Euro ($ per €)1.353
 1.300
 1.287
 1.269

Net revenue yield increased1.1 basis points to 44.8 basis points in the three months endedSeptember 30, 2013, from the three months endedSeptember 30, 2012 level of 43.7 basis points. The increase in net revenue yield was largely driven by improved equity markets and growth in the equity asset class. Net revenue yield before performance fees increased to 44.3 in the three months endedSeptember 30, 2013, from the three months endedSeptember 30, 2012 level of 43.5 basis points due to same factors.
Gross revenue yield on AUM increased1.8 basis points to 64.6 basis points in the three months endedSeptember 30, 2013, from the three months endedSeptember 30, 2012, level of 62.8 basis points. Management does not consider gross revenue yield, the most comparable U.S. GAAP-based measure to net revenue yield, to be a meaningful effective fee rate measure. See footnote 1 to the table below for additional information.

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Changes in AUM were as follows(3)(1):
2013 20122014 2013
$ in billionsTotal AUM Active Passive Total AUM Active PassiveTotal AUM Active Passive Total AUM Active Passive
June 30705.6
 581.9
 123.7
 627.6
 520.0
 107.6
January 1778.7
 639.0
 139.7
 667.4
 553.4
 114.0
Long-term inflows41.8
 33.1
 8.7
 34.0
 25.2
 8.8
50.2
 41.6
 8.6
 47.6
 34.1
 13.5
Long-term outflows(36.8) (28.3) (8.5) (25.5) (21.9) (3.6)(43.7) (38.4) (5.3) (33.3) (26.2) (7.1)
Long-term net flows5.0
 4.8
 0.2
 8.5
 3.3
 5.2
6.5
 3.2
 3.3
 14.3
 7.9
 6.4
Net flows in Invesco PowerShares QQQ fund0.8
 —
 0.8
 0.6
 —
 0.6
Net flows in Invesco Powershares QQQ fund(1.3) —
 (1.3) (0.4) —
 (0.4)
Net flows in institutional money market funds3.3
 3.3
 —
 2.3
 2.3
 —
(6.1) (6.1) —
 4.8
 4.8
 —
Total net flows9.1
 8.1
 1.0
 11.4
 5.6
 5.8
(0.9) (2.9) 2.0
 18.7
 12.7
 6.0
Market gains and (losses)/reinvestment22.4
 17.5
 4.9
 21.4
 17.0
 4.4
Acquisitions/(dispositions), net—
 —
 —
 (1.7) (1.7) —
Market gains and losses/reinvestment9.4
 8.2
 1.2
 30.6
 27.2
 3.4
Foreign currency translation8.4
 8.4
 —
 4.3
 4.2
 0.1
0.1
 0.1
 —
 (9.0) (8.7) (0.3)
September 30745.5
 615.9
 129.6
 663.0
 545.1
 117.9
           
March 31787.3
 644.4
 142.9
 707.7
 584.6
 123.1
Average AUM           
Average long-term AUM616.2
 526.6
 89.6
 545.6
 466.8
 78.8
659.7
 564.5
 95.2
 586.0
 498.4
 87.6
Average short-term AUM113.2
 76.1
 37.1
 102.9
 68.1
 34.8
119.9
 74.5
 45.4
 105.6
 73.1
 32.5
Average AUM729.4
 602.7
 126.7
 648.5
 534.9
 113.6
779.6
 639.0
 140.6
 691.6
 571.5
 120.1
           
Gross revenue yield on AUM(1)
64.6bps 75.8bps 11.8bps 62.8bps 74.2bps 9.5bps
Gross revenue yield on AUM before performance fees(1)
64.3bps 75.4bps 11.8bps 62.6bps 74.0bps 9.5bps
Net revenue yield on AUM(2)
44.8bps 51.7bps 11.8bps 43.7bps 51.0bps 9.5bps
Net revenue yield on AUM before performance fees(2)
44.3bps 51.1bps 11.8bps 43.5bps 50.7bps 9.5bps
Revenue yield           
Gross revenue yield on AUM (2)
65.6
 77.3
 12.7
 64.6
 76.0
 10.7
Gross revenue yield on AUM before performance fees (2)
64.0
 75.3
 12.7
 62.5
 73.5
 10.7
Net revenue yield on AUM (3)
45.6
 52.8
 12.7
 45.6
 52.9
 10.7
Net revenue yield on AUM before performance fees (3)
43.8
 50.7
 12.7
 43.3
 50.2
 10.7
(1)On December 31, 2013, the company completed the sale of Atlantic Trust. All AUM amounts quoted in the tables exclude the AUM of the discontinued operations, Atlantic Trust. As of March 31, 2013, the excluded Atlantic Trust total AUM were $21.6 billion ($20.3 billion at December 31, 2012) with $21.2 billion in balanced at March 31, 2013 ($18.5 billion at December 31, 2012) and $0.4 billion in equity at March 31, 2013 ($1.8 billion at December 31, 2012).
(2)Gross revenue yield on AUM is equal to annualized U.S. GAAP total operating revenues divided by average AUM, excluding joint venture (JV) AUM. Management does not considerOur share of the average AUM in the three months ended March 31, 2014 for our JVs in China was $5.1 billion (March 31, 2013: $3.3 billion). It is appropriate to exclude the average AUM of our JVs for purposes of computing gross revenue yield on AUM, because the most comparablerevenues resulting from these AUM are not presented in our operating revenues. Under U.S. GAAP-based measure toGAAP, our share of the net income of the JVs is recorded as equity in earnings of unconsolidated affiliates on our Condensed Consolidated Statements of Income. Additionally, the numerator of the gross revenue yield to be a meaningfulmeasure, operating revenues, excludes the management fees earned from CIP; however, the denominator of the measure includes the AUM of these investment products. Therefore, the gross revenue yield measure is not considered representative of the company's true effective fee rate measure. The differences between the numerators of the gross and net revenue yield calculations are due to the reconciling items between the U.S. GAAP operating revenue (gross revenue) amount and the non-GAAP measure of net revenue. See “Schedule of Non-GAAP Information” for a reconciliation of operating revenues (gross revenues) to net revenues.from AUM.
The difference in the denominators of the gross and net revenue yield calculations is due to the JV average AUM, which is excluded in the calculation of gross revenue yield. It is appropriate to exclude the average AUM of our JVs for purposes of computing gross revenue yield on AUM, because the revenues resulting from these AUM are not presented in our operating revenues. Under U.S. GAAP, our share of the net income of the JVs is recorded as equity in earnings of unconsolidated affiliates on our Condensed Consolidated Statements of Income. Our share of the average AUM in the three months endedSeptember 30, 2013, for our JVs in China was $4.0 billion (three months endedSeptember 30, 2012: $2.9 billion).
(2)(3)Net revenue yield on AUM is equal to annualized net revenues divided by average AUM. See “Schedule of Non-GAAP Information” for a reconciliation of operating revenues to net revenues.

Flows
AUM at March 31, 2014 were $787.3 billion (March 31, 2013: $707.7 billion). During the three months ended March 31, 2014, long-term net inflows increased AUM by $6.5 billion. We experienced net outflows in institutional money market funds of $6.1 billion and net outflows in Invesco PowerShares QQQ fund of $1.3 billion during the three months ended March 31, 2014. During the three months ended March 31, 2013, net long-term inflows increased AUM by $14.3 billion. We experienced net inflows in institutional money market funds of $4.8 billion and net outflows of Invesco PowerShares QQQ fund of $0.4 billion during the three months ended March 31, 2013.

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Net inflows during the three months ended March 31, 2014 included net long-term inflows of passive AUM of $3.3 billion and active net long-term inflows of $3.2 billion. Net flows were driven by net inflows into our retail distribution channel of $7.6 billion, primarily in the fixed income, alternative and equity asset classes. During the first quarter, U.K. equity income AUM experienced net outflows of $3.4 billion. See "Executive Overview" for further discussion. Excluding the net outflows from U.K. equity income, EMEA long term net inflows for the first quarter of 2014 were $6.5 billion, driven by strong sales in Continental Europe.
Net inflows during the three months ended March 31, 2013 included net long-term inflows of passive AUM of $6.4 billion and active inflows of $7.9 billion. Net flows in 2013 were driven by net inflows of $10.3 billion into our retail distribution channel, primarily in the fixed income and balanced asset classes, while our money market asset class experienced net outflows of $0.2 billion.
In April 2014, the company experienced an outflow in the U.K. of approximately $13 billion.
Average AUM during the three months ended March 31, 2014 were $779.6 billion, compared to $691.6 billion for the three months ended March 31, 2013.
Market Returns
During the three months ended March 31, 2014, positive market movement increased AUM by $9.4 billion, with $5.0 billion attributed to our equity asset class. Our fixed income, alternatives and balanced asset classes were also positively impacted by the change in market valuations during the period. During the three months ended March 31, 2013, market gains increased AUM by $30.6 billion and included $27.3 billion in positive market movement of our equity asset class. Our fixed income, balanced, and alternatives asset classes were also positively impacted by the change in market valuations during the period.
Foreign Exchange Rates
The table below illustrates the spot foreign exchange rates used for translation of non-U.S. Dollar denominated AUM into U.S. Dollars:
Foreign Exchange RatesMarch 31, 2014 December 31, 2013 March 31, 2013 December 31, 2012
Pound Sterling ($ per £)1.667
 1.655
 1.520
 1.625
Canadian Dollar (CAD per $)1.104
 1.063
 1.018
 0.996
Japan (¥ per $)102.980
 105.080
 94.160
 85.520
Euro ($ per Euro)1.378
 1.378
 1.282
 1.319
During the three months ended March 31, 2014, we experienced increases in AUM of $0.1 billion due to changes in foreign exchange rates. Changes in foreign exchange rates in the three months ended March 31, 2014 were driven primarily by the the strengthening of the Japanese Yen relative to the U.S. Dollar, which was reflected in the translation of our Yen-based AUM into U.S. Dollars and the strengthening of the Pound Sterling relative to the U.S. Dollar, which was reflected in the translation of our Pound Sterling-based AUM into U.S. Dollars, largely offset by the weakening of the Canadian Dollar relative to the U.S. Dollar, which was reflected in the translation of Canadian Dollar-based AUM into U.S. Dollars.
In the three months ended March 31, 2013, AUM decreased by $9.0 billion due to foreign exchange rate changes impacted by the weakening of the Pound Sterling, the Euro, the Canadian Dollar and the Japanese Yen relative to the U.S. Dollar, which was reflected in the translation of our Sterling-based, Euro-based, Canadian Dollar-based and Japanese Yen-based AUM into U.S. Dollars.
Revenue Yield
Net revenue yield on AUM was 45.6 basis points in both the three months ended March 31, 2014 and the three months ended March 31, 2013. Excluding performance fees, the net revenue yield increased 0.5 basis points to 43.8 basis points in the three months ended March 31, 2014 from the three months ended March 31, 2013 level of 43.3 basis points.
Changes in our AUM mix significantly impact our net revenue yield. For example, on an asset class basis, our equity and balanced AUM generally earn a higher net revenue rate than money market and fixed income AUM. The combination of average equity and average balanced AUM increased from 51.6% in the three months ended March 31, 2013 to 56.0% of total average AUM in the three months ended March 31, 2014. The comparable averages for money market and fixed income AUM both reduced. This change in asset class mix correlates with the increase in net revenue yield on AUM before performance fees in the three months ended March 31, 2014 when compared to the three months ended March 31, 2013.

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The tables that follow analyze AUM into active and passive style. Passive AUM generally earn a lower effective fee rate than active asset classes. At March 31, 2014, passive AUM were $142.9 billion, representing 18.2% of total AUM at that date; whereas at March 31, 2013, passive AUM were $123.1 billion, representing 17.4% of our total AUM at that date. In the three months ended March 31, 2014, the net revenue yield on passive AUM was 12.7 basis points compared to 10.7 basis points in the three months ended March 31, 2013, an increase of 2.0 basis points, due to changes in mix of passive AUM including sales of the PowerShares ETFs. The increase in the average yield from passive AUM in the three months ended March 31, 2014 when compared to the three months ended March 31, 2013 has offset any reduction in total net revenue yield normally associated with the higher level of passive AUM as a percentage of total AUM.
The increase in passive AUM includes the movements in the Powershares QQQ Nasdaq-100 index tracking fund. The Powershares QQQ fund AUM increased to $44.2 billion at March 31, 2014 compared to $32.3 billion at March 31, 2013. The revenue yield for Invesco on this product is less than 1 basis point, reimbursing Invesco for the portfolio trading services provided to the fund, and flows into and out of this product therefore have a significant impact on the overall net revenue yield and are a significant factor in the year-over-year yield changes.
Gross revenue yield on AUM increased 1.0 basis points to 65.6 basis points in the three months ended March 31, 2014 from the three months ended March 31, 2013 level of 64.6 basis points. Management does not consider gross revenue yield, the most comparable U.S. GAAP-based measure to net revenue yield, to be a meaningful effective fee rate measure for the reasons outlined in footnote 2 to the Changes in AUM table above. See “Schedule of Non-GAAP Information” for a reconciliation of operating revenues (gross revenues) to net revenues.
Changes in our AUM by channel, asset class, and client domicile, and average AUM by asset class, are presented below:
Total AUM by Channel (1,2)
$ in billionsTotal Retail Institutional
December 31, 2013778.7
 519.6
 259.1
Long-term inflows50.2
 39.6
 10.6
Long-term outflows(43.7) (32.0) (11.7)
Long-term net flows6.5
 7.6
 (1.1)
Net flows in Invesco PowerShares QQQ fund(1.3) (1.3) —
Net flows in institutional money market funds(6.1) —
 (6.1)
Total net flows(0.9) 6.3
 (7.2)
Market gains and losses/reinvestment9.4
 8.8
 0.6
Foreign currency translation0.1
 (0.1) 0.2
March 31, 2014787.3
 534.6
 252.7
      
December 31, 2012667.4
 425.8
 241.6
Long-term inflows47.6
 36.2
 11.4
Long-term outflows(33.3) (25.9) (7.4)
Long-term net flows14.3
 10.3
 4.0
Net flows in Invesco PowerShares QQQ fund(0.4) (0.4) —
Net flows in institutional money market funds4.8
 —
 4.8
Total net flows18.7
 9.9
 8.8
Market gains and losses/reinvestment30.6
 26.1
 4.5
Foreign currency translation(9.0) (7.0) (2.0)
March 31, 2013707.7
 454.8
 252.9
____________
See accompanying notes immediately following these AUM tables.

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Passive AUM by Channel (2)
$ in billionsTotal Retail Institutional
December 31, 2013139.7
 118.2
 21.5
Long-term inflows8.6
 7.9
 0.7
Long-term outflows(5.3) (4.5) (0.8)
Long-term net flows3.3
 3.4
 (0.1)
Net flows in Invesco PowerShares QQQ fund(1.3) (1.3) —
Total net flows2.0
 2.1
 (0.1)
Market gains and losses/reinvestment1.2
 1.2
 —
Foreign currency translation—
 —
 —
March 31, 2014142.9
 121.5
 21.4
      
December 31, 2012114.0
 91.2
 22.8
Long-term inflows13.5
 10.3
 3.2
Long-term outflows(7.1) (5.7) (1.4)
Long-term net flows6.4
 4.6
 1.8
Net flows in Invesco PowerShares QQQ fund(0.4) (0.4) —
Total net flows6.0
 4.2
 1.8
Market gains and losses/reinvestment3.4
 3.1
 0.3
Foreign currency translation(0.3) —
 (0.3)
March 31, 2013123.1
 98.5
 24.6
____________
See accompanying notes immediately following these AUM tables.

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Total AUM by Asset Class (1,3)
$ in billionsTotal Equity Fixed Income Balanced Money Market 
Alternatives(4)
December 31, 2013778.7
 383.1
 171.7
 53.3
 82.7
 87.9
Long-term inflows50.2
 27.4
 9.6
 5.0
 0.8
 7.4
Long-term outflows(43.7) (26.2) (6.7) (4.4) (1.0) (5.4)
Long-term net flows6.5
 1.2
 2.9
 0.6
 (0.2) 2.0
Net flows in Invesco PowerShares QQQ fund(1.3) (1.3) —
 —
 —
 —
Net flows in institutional money market funds(6.1) —
 —
 —
 (6.1) —
Total net flows(0.9) (0.1) 2.9
 0.6
 (6.3) 2.0
Market gains and losses/reinvestment9.4
 5.0
 2.3
 0.8
 (0.3) 1.6
Foreign currency translation0.1
 —
 0.1
 (0.1) —
 0.1
March 31, 2014787.3
 388.0
 177.0
 54.6
 76.1
(5) 
91.6
Average AUM779.6
 383.2
 174.5
 53.6
 79.0
 89.3
% of total average AUM100.0% 49.2% 22.4% 6.9% 10.1% 11.5%
            
December 31, 2012667.4
 295.6
 171.9
 43.6
 73.3
 83.0
Long-term inflows47.6
 18.6
 14.1
 7.0
 0.6
 7.3
Long-term outflows(33.3) (16.2) (9.1) (2.0) (0.8) (5.2)
Long-term net flows14.3
 2.4
 5.0
 5.0
 (0.2) 2.1
Net flows in Invesco PowerShares QQQ fund(0.4) (0.4) —
 —
 —
 —
Net flows in institutional money market funds4.8
 —
 —
 —
 4.8
 —
Total net flows18.7
 2.0
 5.0
 5.0
 4.6
 2.1
Market gains and losses/reinvestment30.6
 27.3
 0.3
 1.9
 (0.1) 1.2
Foreign currency translation(9.0) (5.8) (1.3) (1.2) —
 (0.7)
March 31, 2013707.7
 319.1
 175.9
 49.3
 77.8
 85.6
Average AUM691.6
 310.0
 173.9
 47.2
 76.8
 83.7
% of total average AUM100.0% 44.8% 25.1% 6.8% 11.1% 12.1%
____________
See accompanying notes immediately following these AUM tables.

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Passive AUM by Asset Class (3)
$ in billionsTotal Equity Fixed Income Balanced Money Market 
Alternatives(4)
December 31, 2013139.7
 85.6
 39.5
 —
 —
 14.6
Long-term inflows8.6
 5.4
 2.2
 —
 —
 1.0
Long-term outflows(5.3) (3.2) (1.2) —
 —
 (0.9)
Long-term net flows3.3
 2.2
 1.0
 —
 —
 0.1
Net flows in Invesco PowerShares QQQ fund(1.3) (1.3) —
 —
 —
 —
Total net flows2.0
 0.9
 1.0
 —
 —
 0.1
Market gains and losses/reinvestment1.2
 0.5
 0.4
 —
 —
 0.3
March 31, 2014142.9
 87.0
 40.9
 —
 —
 15.0
Average AUM140.6
 86.4
 40.2
 —
 —
 14.0
% of total average AUM100.0% 61.5% 28.6% —% —% 10.0%
            
December 31, 2012114.0
 55.5
 39.0
 

 

 19.5
Long-term inflows13.5
 6.3
 5.7
 —
 —
 1.5
Long-term outflows(7.1) (3.2) (2.4) —
 —
 (1.5)
Long-term net flows6.4
 3.1
 3.3
 —
 —
 —
Net flows in Invesco PowerShares QQQ fund(0.4) (0.4) —
 —
 —
 —
Total net flows6.0
 2.7
 3.3
 —
 —
 —
Market gains and losses/reinvestment3.4
 3.8
 (0.4) —
 —
 —
Foreign currency translation(0.3) —
 —
 —
 —
 (0.3)
March 31, 2013123.1
 62.0
 41.9
 —
 —
 19.2
Average AUM120.1
 59.8
 41.9
 —
 —
 18.4
% of total average AUM100.0% 49.8% 34.9% —% —% 15.3%
____________
See accompanying notes immediately following these AUM tables.

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Total AUM by Client Domicile (1,6)
$ in billionsTotal U.S. Canada U.K. Continental Europe Asia
December 31, 2013778.7
 521.3
 27.1
 114.8
 60.9
 54.6
Long-term inflows50.2
 24.7
 1.1
 5.1
 11.3
 8.0
Long-term outflows(43.7) (21.1) (1.2) (6.9) (6.5) (8.0)
Long-term net flows6.5
 3.6
 (0.1) (1.8) 4.8
 —
Net flows in Invesco PowerShares QQQ fund(1.3) (1.3) —
 —
 —
 —
Net flows in institutional money market funds(6.1) (3.4) (0.1) 0.5
 (3.1) —
Total net flows(0.9) (1.1) (0.2) (1.3) 1.7
 —
Market gains and losses/reinvestment9.4
 5.9
 1.2
 1.6
 0.8
 (0.1)
Foreign currency translation0.1
 —
 (1.0) 0.8
 —
 0.3
March 31, 2014787.3
 526.1
 27.1
 115.9
 63.4
 54.8
            
December 31, 2012667.4
 452.5
 25.2
 101.9
 38.8
 49.0
Long-term inflows47.6
 30.1
 1.2
 3.7
 8.9
 3.7
Long-term outflows(33.3) (20.1) (1.3) (4.3) (3.9) (3.7)
Long-term net flows14.3
 10.0
 (0.1) (0.6) 5.0
 —
Net flows in Invesco PowerShares QQQ fund(0.4) (0.4) —
 —
 —
 —
Net flows in institutional money market funds4.8
 4.6
 —
 0.2
 —
 —
Total net flows18.7
 14.2
 (0.1) (0.4) 5.0
 —
Market gains and losses/reinvestment30.6
 15.7
 1.5
 9.5
 0.9
 3.0
Foreign currency translation(9.0) —
 (0.6) (6.4) (0.4) (1.6)
March 31, 2013707.7
 482.4
 26.0
 104.6
 44.3
 50.4
____________
See accompanying notes immediately following these AUM tables.

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Passive AUM by Client Domicile (6)
$ in billionsTotal U.S. Canada U.K. Continental Europe Asia
December 31, 2013139.7
 135.2
 0.1
 —
 1.8
 2.6
Long-term inflows8.6
 8.5
 —
 —
 0.1
 —
Long-term outflows(5.3) (5.1) —
 —
 (0.1) (0.1)
Long-term net flows3.3
 3.4
 —
 —
 —
 (0.1)
Net flows in Invesco PowerShares QQQ fund(1.3) (1.3) —
 —
 —
 —
Total net flows2.0
 2.1
 —
 —
 —
 (0.1)
Market gains and losses/reinvestment1.2
 1.2
 —
 —
 —
 —
March 31, 2014142.9
 138.5
 0.1
 —
 1.8
 2.5
            
December 31, 2012114.0
 107.8
 0.1
 —
 1.1
 5.0
Long-term inflows13.5
 13.3
 —
 —
 0.2
 —
Long-term outflows(7.1) (6.9) —
 —
 (0.1) (0.1)
Long-term net flows6.4
 6.4
 —
 —
 0.1
 (0.1)
Net flows in Invesco PowerShares QQQ fund(0.4) (0.4) —
 —
 —
 —
Total net flows6.0
 6.0
 —
 —
 0.1
 (0.1)
Market gains and losses/reinvestment3.4
 3.1
 —
 —
 —
 0.3
Foreign currency translation(0.3) —
 —
 —
 —
 (0.3)
March 31, 2013123.1
 116.9
 0.1
 —
 1.2
 4.9
____________
(3)(1)
On December 31, 2013, the company completed the sale of Atlantic Trust. All AUM amounts quoted in the tables presented exclude the AUM of the discontinued operation, Atlantic Trust. As at September 30,of March 31, 2013,, the excluded Atlantic Trust total AUM were $22.8$21.6 billion ($21.7 ($20.3 billion at June 30, 2013; $20.0December 31, 2012) with $21.2 billion at September 30, 2012; $19.0 billion at June 30, 2012) with $22.3 billion in balanced ($21.2at March 31, 2013 ($18.5 billion at June 30, 2013; $18.3December 31, 2012) and $0.4 billion at September 30, 2012; $18.0 billion at June 30, 2012) and $0.5 billion in equity ($0.5at March 31, 2013 ($1.8 billion at June 30, 2013; $1.7 billion at September 30, 2012; $1.0 billion at June 30, 2012)December 31, 2012).


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Our AUM by channel, by asset class, and by client domicile were as follows:
Total AUM by Channel(1,6)
$ in billionsTotal Retail Institutional
June 30, 2013 AUM705.6
 457.7
 247.9
Long-term inflows41.8
 35.5
 6.3
Long-term outflows(36.8) (29.0) (7.8)
Long-term net flows5.0
 6.5
 (1.5)
Net flows in Invesco PowerShares QQQ fund0.8
 0.8
 —
Net flows in institutional money market funds3.3
 —
 3.3
Total net flows9.1
 7.3
 1.8
Market gains and (losses)/reinvestment22.4
 19.6
 2.8
Acquisitions/dispositions, net—
 —
 —
Foreign currency translation8.4
 7.4
 1.0
September 30, 2013 AUM745.5
 492.0
 253.5
      
June 30, 2012 AUM627.6
 396.8
 230.8
Long-term inflows34.0
 26.0
 8.0
Long-term outflows(25.5) (20.3) (5.2)
Long-term net flows8.5
 5.7
 2.8
Net flows in Invesco PowerShares QQQ fund0.6
 0.6
 —
Net flows in institutional money market funds2.3
 —
 2.3
Total net flows11.4
 6.3
 5.1
Market gains and (losses)/reinvestment21.4
 16.8
 4.6
Acquisitions/dispositions, net(1.7) —
 (1.7)
Foreign currency translation4.3
 3.5
 0.8
September 30, 2012 AUM663.0
 423.4
 239.6
Passive AUM by Channel(1)
$ in billionsTotal Retail Institutional
June 30, 2013 AUM123.7
 100.0
 23.7
Long-term inflows8.7
 8.7
 —
Long-term outflows(8.5) (6.0) (2.5)
Long-term net flows0.2
 2.7
 (2.5)
Net flows in Invesco PowerShares QQQ fund0.8
 0.8
��—
Net flows in institutional money market funds—
 —
 —
Total net flows1.0
 3.5
 (2.5)
Market gains and (losses)/reinvestment4.9
 4.8
 0.1
Foreign currency translation—
 —
 —
September 30, 2013 AUM129.6
 108.3
 21.3
      
June 30, 2012 AUM107.6
 86.9
 20.7
Long-term inflows8.8
 6.3
 2.5
Long-term outflows(3.6) (3.5) (0.1)
Long-term net flows5.2
 2.8
 2.4
Net flows in Invesco PowerShares QQQ fund0.6
 0.6
 —
Net flows in institutional money market funds—
 —
 —
Total net flows5.8
 3.4
 2.4
Market gains and (losses)/reinvestment4.4
 4.4
 —
Foreign currency translation0.1
 —
 0.1
September 30, 2012 AUM117.9
 94.7
 23.2
See accompanying notes immediately following these tables.


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Total AUM by Asset Class(2,6)
$ in billionsTotal Equity Fixed Income Balanced Money Market 
Alternatives(3)
June 30, 2013 AUM705.6
 321.4
 173.1
 49.7
 77.8
 83.6
Long-term inflows41.8
 22.8
 8.4
 3.7
 1.0
 5.9
Long-term outflows(36.8) (18.2) (9.5) (3.5) (1.1) (4.5)
Long-term net flows5.0
 4.6
 (1.1) 0.2
 (0.1) 1.4
Net flows in Invesco PowerShares QQQ fund0.8
 0.8
 —
 —
 —
 —
Net flows in institutional money market funds3.3
 —
 —
 —
 3.3
 —
Total net flows9.1
 5.4
 (1.1) 0.2
 3.2
 1.4
Market gains and (losses)/reinvestment22.4
 20.7
 (0.7) 2.3
 0.2
 (0.1)
Acquisitions/dispositions, net—
 —
 —
 —
 —
 —
Foreign currency translation8.4
 5.7
 1.1
 1.3
 (0.1) 0.4
September 30, 2013 AUM745.5
 353.2
 172.4
 53.5
 81.1
(4)85.3
Average AUM729.4
 341.0
 171.6
 52.2
 80.4
 84.2
            
June 30, 2012 AUM627.6
 282.8
 155.6
 33.5
 71.0
 84.7
Long-term inflows34.0
 12.0
 11.7
 5.3
 0.7
 4.3
Long-term outflows(25.5) (14.1) (4.5) (1.2) (0.9) (4.8)
Long-term net flows8.5
 (2.1) 7.2
 4.1
 (0.2) (0.5)
Net flows in Invesco PowerShares QQQ fund0.6
 0.6
 —
 —
 —
 —
Net flows in institutional money market funds2.3
 —
 —
 —
 2.3
 —
Total net flows11.4
 (1.5) 7.2
 4.1
 2.1
 (0.5)
Market gains and (losses)/reinvestment21.4
 14.8
 3.6
 1.4
 0.1
 1.5
Acquisitions/dispositions, net(1.7) —
 —
 —
 —
 (1.7)
Foreign currency translation4.3
 2.8
 0.6
 0.6
 —
 0.3
September 30, 2012 AUM663.0
 298.9
 167.0
 39.6
 73.2
 84.3
Average AUM648.5
 292.8
 162.5
 37.3
 72.3
 83.7
Passive AUM by Asset Class(2)
$ in billionsTotal Equity Fixed Income Balanced Money Market 
Alternatives(3)
June 30, 2013 AUM123.7
 65.7
 42.5
 —
 —
 15.5
Long-term inflows8.7
 6.0
 1.6
 —
 —
 1.1
Long-term outflows(8.5) (3.6) (3.9) —
 —
 (1.0)
Long-term net flows0.2
 2.4
 (2.3) —
 —
 0.1
Net flows in Invesco PowerShares QQQ fund0.8
 0.8
 —
 —
 —
 —
Net flows in institutional money market funds—
 —
 —
 —
 —
 —
Total net flows1.0
 3.2
 (2.3) —
 —
 0.1
Market gains and (losses)/reinvestment4.9
 5.2
 (0.6) —
 —
 0.3
Foreign currency translation—
 —
 —
 —
 —
 —
September 30, 2013 AUM129.6
 74.1
 39.6
 —
 —
 15.9
Average AUM126.7
 71.2
 40.2
 —
 —
 15.3
            
June 30, 2012 AUM107.6
 54.6
 33.9
 —
 —
 19.1
Long-term inflows8.8
 3.4
 3.9
 —
 —
 1.5
Long-term outflows(3.6) (2.4) (0.5) —
 —
 (0.7)
Long-term net flows5.2
 1.0
 3.4
 —
 —
 0.8
Net flows in Invesco PowerShares QQQ fund0.6
 0.6
 —
 —
 —
 —
Net flows in institutional money market funds—
 —
 —
 —
 —
 —
Total net flows5.8
 1.6
 3.4
 —
 —
 0.8
Market gains and (losses)/reinvestment4.4
 3.0
 0.3
 —
 —
 1.1
Foreign currency translation0.1
 —
 —
 —
 —
 0.1
September 30, 2012 AUM117.9
 59.2
 37.6
 —
 —
 21.1
Average AUM113.6
 57.8
 36.4
 —
 —
 19.4
See accompanying notes immediately following these tables.

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Total AUM by Client Domicile(5,6)
$ in billionsTotal U.S. Canada U.K. Continental Europe Asia
June 30, 2013 AUM705.6
 481.5
 24.8
 104.3
 46.4
 48.6
Long-term inflows41.8
 25.7
 0.8
 4.0
 6.4
 4.9
Long-term outflows(36.8) (23.7) (1.0) (4.3) (4.2) (3.6)
Long-term net flows5.0
 2.0
 (0.2) (0.3) 2.2
 1.3
Net flows in Invesco PowerShares QQQ fund0.8
 0.8
 —
 —
 —
 —
Net flows in institutional money market funds3.3
 3.4
 0.1
 (0.2) —
 —
Total net flows9.1
 6.2
 (0.1) (0.5) 2.2
 1.3
Market gains and (losses)/reinvestment22.4
 14.7
 1.1
 2.7
 2.5
 1.4
Foreign currency translation8.4
 0.1
 0.6
 6.6
 0.5
 0.6
September 30, 2013 AUM745.5
 502.5
 26.4
 113.1
 51.6
 51.9
            
June 30, 2012 AUM627.6
 428.3
 23.5
 92.8
 34.4
 48.6
Long-term inflows34.0
 22.6
 0.8
 3.4
 4.6
 2.6
Long-term outflows(25.5) (13.5) (1.1) (3.7) (3.0) (4.2)
Long-term net flows8.5
 9.1
 (0.3) (0.3) 1.6
 (1.6)
Net flows in Invesco PowerShares QQQ fund0.6
 0.6
 —
 —
 —
 —
Net flows in institutional money market funds2.3
 2.4
 0.1
 (0.1) (0.1) —
Total net flows11.4
 12.1
 (0.2) (0.4) 1.5
 (1.6)
Market gains and (losses)/reinvestment21.4
 14.1
 0.8
 4.5
 1.3
 0.7
Acquisitions/dispositions, net(1.7) —
 —
 —
 (1.7) —
Foreign currency translation4.3
 —
 0.9
 2.7
 0.1
 0.6
September 30, 2012 AUM663.0
 454.5
 25.0
 99.6
 35.6
 48.3
Passive AUM by Client Domicile(5)
$ in billionsTotal U.S. Canada U.K. Continental Europe Asia
June 30, 2013 AUM123.7
 119.7
 0.1
 —
 1.3
 2.6
Long-term inflows8.7
 8.6
 —
 —
 0.1
 —
Long-term outflows(8.5) (8.4) —
 —
 (0.1) —
Long-term net flows0.2
 0.2
 —
 —
 —
 —
Net flows in Invesco PowerShares QQQ fund0.8
 0.8
 —
 —
 —
 —
Net flows in institutional money market funds—
 —
 —
 —
 —
 —
Total net flows1.0
 1.0
 —
 —
 —
 —
Market gains and (losses)/reinvestment4.9
 4.7
 —
 —
 0.1
 0.1
Foreign currency translation—
 —
 —
 —
 —
 —
September 30, 2013 AUM129.6
 125.4
 0.1
 —
 1.4
 2.7
            
June 30, 2012 AUM107.6
 100.7
 —
 —
 1.4
 5.5
Long-term inflows8.8
 8.5
 —
 —
 —
 0.3
Long-term outflows(3.6) (3.3) —
 —
 (0.2) (0.1)
Long-term net flows5.2
 5.2
 —
 —
 (0.2) 0.2
Net flows in Invesco PowerShares QQQ fund0.6
 0.6
 —
 —
 —
 —
Net flows in institutional money market funds—
 —
 —
 —
 —
 —
Total net flows5.8
 5.8
 —
 —
 (0.2) 0.2
Market gains and (losses)/reinvestment4.4
 4.3
 —
 —
 0.1
 —
Foreign currency translation0.1
 —
 —
 —
 —
 0.1
September 30, 2012 AUM117.9
 110.8
 —
 —
 1.3
 5.8
See accompanying notes to these AUM tables on the following page.

55
Table of Contents


(1)(2)Channel refers to the internal distribution channel from which the AUM originated. Retail AUM represents AUM distributed by the company's retail sales team. Institutional AUM represents AUM distributed by our institutional sales team. This aggregation is viewed as a proxy for presenting AUM in the retail and institutional markets in which the company operates.
(2)(3)Asset classes are descriptive groupings of AUM by common type of underlying investments.
(3)(4)The alternatives
There have been no significant changes to the managed objectives under the Alternatives asset class, includes absolute return, real estate, commodities, currencies, financial structures, Global Macro, REITS, private capital, and Risk Parity.
(4)
Ending money market AUM includeswhich are disclosed in our most recent Form 10-K for the year ended $76.8 billionDecember 31, 2013 in institutional money market AUM and $4.3 billion in retail money market AUM..
(5)Ending Money Market AUM includes $72.1 billion in institutional money market AUM and $4.0 billion in retail money market AUM.
(6)Client domicile disclosure groups AUM by the domicile of the underlying clients.

(6)
All AUM amounts quoted in the tables exclude the AUM of the discontinued operation, Atlantic Trust. As at September 30, 2013, the excluded Atlantic Trust total AUM were $22.8 billion ($21.7 billion at June 30, 2013; $20.0 billion at September 30, 2012; $19.0 billion at June 30, 2012) with $22.3 billion in balanced ($21.2 billion at June 30, 2013; $18.3 billion at September 30, 2012; $18.0 billion at June 30, 2012) and $0.5 billion in equity ($0.5 billion at June 30, 2013; $1.7 billion at September 30, 2012; $1.0 billion at June 30, 2012).


Results of Operations for the three months endedSeptember 30, 2013March 31, 2014 compared withto the three months endedSeptember 30, 2012
March 31, 2013

To assist in the comparisons, the discussion that follows will separate the impact of CIP from the overall consolidated results of operations. The impact is illustrated in the tables immediately below by a column which shows the dollar-value change in the consolidated figures, as caused by the consolidation of CIP. For example, the impact of CIP on total operating revenues for the three months ended March 31, 2014 was a reduction of $8.4 million. This indicates that the consolidation of CIP reduced consolidated revenues by $8.4 million, reflecting the elimination upon consolidation of the operating revenues earned by Invesco for managing these investment products. The discussion below includes the use of non-GAAP financial measures. See “Schedule of Non-GAAP Information” for additional details and reconciliations of the most directly comparable U.S. GAAP measures to the non-GAAP measures.

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Summary of Income Statement Impact of CIP
 Three months ended September 30,Three months ended March 31,
 2013 20122014 2013
$ in millions Impact of CIP Invesco Ltd. Consolidated Impact of CIP Invesco Ltd. ConsolidatedImpact of CIP Invesco Ltd. Consolidated Impact of CIP Invesco Ltd. Consolidated
Total operating revenues (12.0) 1,171.8
 (11.5) 1,013.9
(8.4) 1,269.5
 (8.8) 1,112.2
Total operating expenses 13.0
 885.8
 2.3
 803.0
12.6
 1,025.2
 2.5
 845.2
Operating income (25.0) 286.0
 (13.8) 210.9
(21.0) 244.3
 (11.3) 267.0
Equity in earnings of unconsolidated affiliates (2.2) 10.3
 (0.5) 5.2
(1.2) 10.0
 (0.4) 8.1
Interest and dividend income 45.5
 49.0
 65.3
 71.2
(0.9) 2.9
 (1.9) 2.2
Other investment income/(losses) 26.4
 40.9
 (33.9) (6.8)
Interest expense (33.5) (43.2) (41.9) (54.5)—
 (18.7) —
 (9.7)
Income from continuing operations before income taxes 11.2
 343.0
 (24.8) 226.0
Other gains and losses, net—
 6.6
 —
 17.7
Other income/(loss) of CSIP, net—
 8.2
 —
 —
Interest and dividend income of CIP48.3
 48.3
 50.3
 50.3
Interest expense of CIP(30.3) (30.3) (32.7) (32.7)
Other gains/(losses) of CIP, net26.5
 26.5
 (21.1) (21.1)
Income from continuing operations before taxes21.4
 297.8
 (17.1) 281.8
Income tax provision —
 (92.9) —
 (72.3)—
 (89.0) —
 (86.3)
Income from continuing operations, net of taxes 11.2
 250.1
 (24.8) 153.7
21.4
 208.8
 (17.1) 195.5
Income from discontinued operations, net of taxes —
 (1.4) ��
 3.2
Income/(loss) from discontinued operations, net of taxes—
 (2.0) —
 4.1
Net income 11.2
 248.7
 (24.8) 156.9
21.4
 206.8
 (17.1) 199.6
Net (income)/loss attributable to noncontrolling interests in consolidated entities (20.6) (20.6) 13.7
 13.7
(16.1) (19.0) 20.2
 22.6
Net income attributable to common shareholders (9.4) 228.1
 (11.1) 170.6
5.3
 187.8
 3.1
 222.2

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Operating Revenues and Net Revenues
The main categories of revenues, and the dollar and percentage change between the periods, wereare as follows:
 Three months ended September 30,
$ in millions2013 2012 $ Change % Change
Investment management fees914.4
 790.6
 123.8
 15.7 %
Service and distribution fees220.7
 196.0
 24.7
 12.6 %
Performance fees5.1
 3.0
 2.1
 70.0 %
Other31.6
 24.3
 7.3
 30.0 %
Total operating revenues1,171.8
 1,013.9
 157.9
 15.6 %
Third-party distribution, service and advisory expenses(380.9) (326.2) (54.7) 16.8 %
Proportional share of revenues, net of third-party distribution expenses, from joint venture investments13.5
 9.0
 4.5
 50.0 %
Management fees earned from CIP8.6
 11.1
 (2.5) (22.5)%
Performance fees earned from CIP3.4
 0.4
 3.0
 N/A
Net revenues816.4
 708.2
 108.2
 15.3 %

A significant portion of our business and AUM is based outside of the U.S. The strengthening or weakening of the U.S. dollar against other currencies, primarily the Pound Sterling, Canadian Dollar, Euro and Japanese Yen will impact our reported revenues and expenses from period to period. The income statements of foreign currency subsidiaries are translated into U.S. dollars, the reporting currency of the company, using average foreign exchange rates. The impact of foreign exchange rate movements decreased operating revenues by $13.6 million, equivalent to 1.2% of total operating revenue, during the three months endedSeptember 30, 2013 when compared to the three months endedSeptember 30, 2012. Additionally, our revenues are directly influenced by the level and composition of our AUM. Therefore, movements in global capital market levels, net new business inflows (or outflows) and changes in the mix of investment products between asset classes and geographies may materially affect our revenues from period to period. As outlined in the Executive Overview section above, the returns from global capital markets were positive in the three months endedSeptember 30, 2013 with net market increases in developed markets during the quarter. We experienced a net increase in AUM of $39.9 billion during the three months endedSeptember 30, 2013, with higher average AUM levels than both the prior quarter as well as the same period last year. Net revenue yield, as discussed in the "Assets Under Management" section, increased during the three months endedSeptember 30, 2013 to 44.8 basis points, as compared to 43.7 basis points in the three months endedSeptember 30, 2012. The increase in during the current quarter was driven by changes in AUM mix, with a larger proportion of AUM in higher-yield equity funds and balanced funds (47.4% and 7.2% respectively) as of September 30, 2013 as compared to the September 30, 2012 (45.1% and 6.0% respectively). Excluding performance fees, net revenue yield increased in the third quarter of 2013 to 44.3 basis points from 43.5 basis points in the third quarter of 2012.

     Variance
 Three months ended March 31, 2014 vs 2013
$ in millions2014 2013 $ Change % Change
Investment management fees965.4
 844.6
 120.8
 14.3 %
Service and distribution fees238.6
 206.3
 32.3
 15.7 %
Performance fees31.1
 36.1
 (5.0) (13.9)%
Other34.4
 25.2
 9.2
 36.5 %
Total operating revenues1,269.5
 1,112.2
 157.3
 14.1 %
Third-party distribution, service and advisory expenses(405.4) (346.1) (59.3) 17.1 %
Proportional share of revenues, net of third-party distribution expenses, from joint venture investments15.3
 10.4
 4.9
 47.1 %
CIP8.4
 8.8
 (0.4) (4.5)%
Other reconciling items—
 2.7
 (2.7) (100.0)%
Net revenues887.8
 788.0
 99.8
 12.7 %
Operating revenues increased by $157.9 million (15.6%)14.1% in the three months ended September 30, 2013March 31, 2014 to $1,171.81,269.5 million (three(three months endedSeptember 30, 2012March 31, 2013: $1,013.91,112.2 million). Net revenues increased by $108.2 million (15.3%)12.7% in the three months endedSeptember 30, 2013March 31, 2014 to $816.4$887.8 million (three (three months endedSeptember 30, 2012March 31, 2013: $708.2 million)$788.0 million). Net revenues are operating revenues less third-party distribution, service and advisory expenses, plus our proportional share of net revenues from joint venture arrangements, plus management and performance fees earned from, less other revenues recorded by, CIP.CIP, plus other reconciling items. See “Schedule“ Schedule of Non-GAAP Information” for additional important disclosures regarding the use of net revenues.
Investment management fees
Investment management fees increased by $123.8 million (15.7%) in the three months endedSeptember 30, 2013 to $914.4 million (three months endedSeptember 30, 2012: $790.6 million). This compares to a 12.5%increase in average AUM and a 12.9%increase in average long-term AUM. See the company’s disclosures regarding the changes in AUM and revenue during the three months endedSeptember 30, 2013 in the “Assets Under Management” section above for additional information regarding the movements in AUM. Management fee yield (annualized management fee revenues divided by average AUM, excluding joint venture AUM) increased to 50.4 basis points in the third quarter of 2013 from 49.0 basis points in the third quarter of 2012. As discussed in previous quarters, management fees were reduced commencing in June 2011 due to acquisition integration-related U.S. mutual fund mergers. Although the waivers began to lapse in mid-2012, they negatively impacted revenues in the third quarter of 2012. The impact of foreign exchange rate movements decreased investment management fees by $12.4 million during the three months endedSeptember 30, 2013, compared to the three months endedSeptember 30, 2012.

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Service and distribution fees
In the DRAFT 4/29/14 6:02 PMthree months endedSeptember 30, 2013, service and distribution fees increased by $24.7 million (12.6%) to $220.7 million (three months endedSeptember 30, 2012: $196.0 million). The increase in service and distribution fees reflects the overall increase in AUM during the period, and is made up of increases in distribution and redemption fees of $9.5 million, administration and custodial fees of $14.0 million and transfer agent fees of $2.2 million, offset by a decrease in foreign exchange rate movements of $1.0 million.
Performance fees
Of our $745.5 billion in AUM at September 30, 2013, approximately $44.4 billion, or 6.0%, have the potential to earn performance fees. In the three months endedSeptember 30, 2013 recognized performance fees were $5.1 million, an increase of $2.1 million from the comparative period (three months endedSeptember 30, 2012: $3.0 million). The performance fees generated in the three months endedSeptember 30, 2013 arose primarily from products managed by the UK group ($2.9 million), Continental Europe group ($1.0 million) and Asia Pacific group ($0.6 million). The performance fees generated in the three months endedSeptember 30, 2012 arose primarily from products managed by the Asia Pacific group ($0.9 million) and the UK group ($1.9 million). Foreign exchange rate movements decreased performance fees by $0.1 million during the three months endedSeptember 30, 2013, compared to the three months endedSeptember 30, 2012.
Other revenues
In the three months endedSeptember 30, 2013, other revenues increased by $7.3 million (30.0%) to $31.6 million (three months endedSeptember 30, 2012: $24.3 million). The increase in other revenues was driven by an increase in real estate acquisition and disposition fees of $5.9 million, increases in UIT revenues and transaction commissions of $1.5 million, and mutual fund front end fees of $0.3 million, offset by other net decreases of $0.3 million in other revenues during the period.
Third-party distribution, service and advisory expenses
Third-party distribution, service and advisory expenses increased by $54.7 million (16.8%) in the three months endedSeptember 30, 2013 to $380.9 million (three months endedSeptember 30, 2012: $326.2 million). The increase in third-party distribution, service and advisory expenses is closely linked to the increase in investment management fees and service and distribution fees over this period. The increased expenses include increases in renewal and external commissions of $38.6 million, distribution fees of $19.3 million, and external transfer agency fees of $1.6 million, offset by decreases in sub-advisory fees of $0.5 million and foreign exchange rate movements of $4.3 million during the three months endedSeptember 30, 2013, compared to the three months endedSeptember 30, 2012.
Proportional share of revenues, net of third-party distribution expenses, from joint venture investments
Management believes that our proportional share of revenues, net of third-party distribution expenses, from joint venture arrangements should be added to operating revenues to arrive at net revenues, as it is important to evaluate the contribution to the business that our joint venture arrangements are making. See “Schedule of Non-GAAP Information” for additional disclosures regarding the use of net revenues.
Our proportional share of revenues, net of third-party distribution expenses increased by $4.5 million (50.0%) to $13.5 million in the three months endedSeptember 30, 2013 (three months endedSeptember 30, 2012: $9.0 million). Our share of the Invesco Great Wall joint venture’s average AUM in the three months endedSeptember 30, 2013 was $4.0 billion (three months endedSeptember 30, 2012: $2.9 billion).
Management and performance fees earned from CIP
Management believes that the consolidation of investment products may impact a reader’s analysis of our underlying results of operations and could result in investor confusion or the production of information about the company by analysts or external credit rating agencies that is not reflective of the underlying results of operations and financial condition of the company. Accordingly, management believes that it is appropriate to adjust operating revenues for the impact of CIP in calculating net revenues. As management, performance fees and other revenues earned by Invesco from the consolidated products are eliminated upon consolidation of the investment products, management believes that it is appropriate to add these operating revenues back in the calculation of net revenues. Such fees were $12.0 million in the three months endedSeptember 30, 2013 (three months endedSeptember 30, 2012: $11.5 million). See “Schedule of Non-GAAP Information” for additional disclosures regarding the use of net revenues.

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Operating Expenses
The main categories of operating expenses, and the dollar and percentage changes between periods, are as follows:
 Three months ended September 30,
$ in millions2013 2012 $ Change % Change
Employee compensation330.3
 315.2
 15.1
 4.8 %
Third-party distribution, service and advisory380.9
 326.2
 54.7
 16.8 %
Marketing22.6
 26.3
 (3.7) (14.1)%
Property, office and technology71.9
 66.1
 5.8
 8.8 %
General and administrative80.1
 66.2
 13.9
 21.0 %
Transaction and integration—
 3.0
 (3.0) (100.0)%
Total operating expenses885.8
 803.0
 82.8
 10.3 %

The table below sets forth these cost categories as a percentage of total operating expenses and operating revenues, which we believe provides useful information as to the relative significance of each type of expense:
   % of Total % of   % of Total % of
Three months ended:September 30, Operating Operating September 30, Operating Operating
$ in millions2013 Expenses Revenues 2012 Expenses Revenues
Employee compensation330.3
 37.3% 28.2% 315.2
 39.3% 31.1%
Third-party distribution, service and advisory380.9
 43.0% 32.5% 326.2
 40.6% 32.2%
Marketing22.6
 2.6% 1.9% 26.3
 3.3% 2.6%
Property, office and technology71.9
 8.1% 6.1% 66.1
 8.2% 6.5%
General and administrative80.1
 9.0% 6.8% 66.2
 8.2% 6.5%
Transaction and integration—
 —% —% 3.0
 0.4% 0.3%
Total operating expenses885.8
 100.0% 75.5% 803.0
 100.0% 79.2%

During the three months endedSeptember 30, 2013, operating expenses increased by $82.8 million (10.3%) to $885.8 million (three months endedSeptember 30, 2012$803.0 million). The impact of foreign exchange rate movements decreased operating expenses by $11.7 million, equivalent to 1.3% of total operating expenses, during the three months endedSeptember 30, 2013 as compared to the three months endedSeptember 30, 2012.
Employee Compensation
Employee compensation increased$15.1 million (4.8%) to $330.3 million in the three months endedSeptember 30, 2013 (three months endedSeptember 30, 2012: $315.2 million). The impact of foreign exchange rate movements decreased employee compensation expense by $4.7 million during the three months endedSeptember 30, 2013 compared to the three months endedSeptember 30, 2012. After allowing for foreign exchange rate changes, the increase in employee compensation was $19.8 million.
Direct compensation increased $20.0 million and includes increases in base salaries and variable costs as well as deferred and share-based compensation during the three months endedSeptember 30, 2013 when compared to the three months endedSeptember 30, 2012.

As of September 30, 2013, on a continuing operations basis, the company had 5,864 employees, compared to 5,861 employees as of September 30, 2012. The company had 6,115 employees as of September 30, 2013, compared to 6,101 employees as of September 30, 2012 including employees of the Atlantic Trust business.
Third-Party Distribution, Service and Advisory Expenses
Third-party distribution, service and advisory expenses are discussed above in the operating and net revenues section.
Marketing
Marketing expenses decreased by $3.7 million (14.1%) in the three months endedSeptember 30, 2013 to $22.6 million (three months endedSeptember 30, 2012: $26.3 million). The impact of foreign exchange rate movements decreased marketing expense by $0.2 million during the three months endedSeptember 30, 2013 compared to the three months endedSeptember 30, 2012. After allowing for foreign exchange rate changes, the decrease in marketing expenses was $3.5 million.

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The decrease in marketing expenses in the three months endedSeptember 30, 2013 includes decreases in advertising expense of $2.3 million, a reduction in travel expenses of $0.7 million, and corporate sponsorships and other costs of $0.5 million when compared to the same period in 2012.
Property, Office and Technology
Property, office and technology expenses increased by $5.8 million (8.8%) to $71.9 million in the three months endedSeptember 30, 2013 (three months endedSeptember 30, 2012: $66.1 million). The impact of foreign exchange rate movements decreased property, office and technology expenses by $1.0 million during the three months endedSeptember 30, 2013 as compared to the three months endedSeptember 30, 2012. After allowing for foreign exchange rate movements, the increase was $6.8 million.
Technology and communications expenses increased $6.4 million compared to the three months endedSeptember 30, 2012, primarily due to increases in technology expenses associated with outsourced administration expenses connected to the outsourcing of our European transfer agency, as well as continued investment in fixed income systems. Property and office expenses decreased $0.6 million over the comparable 2012 period, due to lower rent expense.
General and Administrative
General and administrative expenses increased by $13.9 million (21.0%) to $80.1 million in the three months endedSeptember 30, 2013 (three months endedSeptember 30, 2012: $66.2 million). The impact of foreign exchange rate movements decreased general and administrative expenses by $1.5 million during the three months endedSeptember 30, 2013. After allowing for foreign exchange rate changes, the decrease in general and administrative expenses was $15.4 million.
The increase in general administration expenses is primarily related to an increase of $8.9 million in legal and fund launch costs of our CIP and a $5.4 million increase in legal and professional services costs mainly driven by increased regulatory activity in the U.K. to develop the compliance and risk management support functions across Europe and costs associated with new product development in the third quarter of 2013. Other net increases in general and administrative costs were $1.1 million.
Transaction and integration
The company incurred no transaction and integration charges during the three months endedSeptember 30, 2013 (three months endedSeptember 30, 2012: $3.0 million). Transaction and integration expenses during the three months endedSeptember 30, 2012 related to fund mergers and included professional services and shareholder communications costs.
Operating Income, Adjusted Operating Income, Operating Margin and Adjusted Operating Margin
Operating income increased by $75.1 million (35.6%) to $286.0 million in the three months endedSeptember 30, 2013 (three months endedSeptember 30, 2012: $210.9 million). Operating margin (operating income divided by operating revenues), increased from 20.8% in the three months endedSeptember 30, 2012 to 24.4% in the three months endedSeptember 30, 2013. The increase in operating income and margin resulted from a higher relative increase in operating revenues (15.6%) than in operating expenses (10.3%). Adjusted operating income increased by $83.8 million (34.3%) to $328.1 million in the three months endedSeptember 30, 2013 from $244.3 million in the three months endedSeptember 30, 2012. Adjusted operating margin increased to 40.2% in the three months endedSeptember 30, 2013 from 34.5% in the three months endedSeptember 30, 2012. See “Schedule of Non-GAAP Information” for definitions of these measures and a reconciliation of operating revenues to net revenues, a reconciliation of operating income to adjusted operating income and additional important disclosures regarding net revenues, adjusted operating income and adjusted operating margin.
Other Income and Expenses
The main categories of other income and expenses, and the dollar and percentage changes between periods are as follows:
 Three months ended September 30,
$ in millions2013 2012 $ Change % Change
Equity in earnings of unconsolidated affiliates10.3
 5.2
 5.1
 98.1 %
Interest and dividend income2.5
 2.5
 —
 — %
Interest expense(9.7) (12.6) 2.9
 23.0 %
Other gains and losses, net2.7
 18.4
 (15.7) (85.3)%
Other income and expenses of CIP:       
Interest and dividend income of CIP46.5
 68.7
 (22.2) (32.3)%
Interest expense of CIP(33.5) (41.9) 8.4
 20.0 %
Other gains/(losses) of CIP38.2
 (25.2) 63.4
 N/A
Total other income and expenses57.0
 15.1
 41.9
 N/A

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Equity in earnings of unconsolidated affiliates
Equity in earnings of unconsolidated affiliates increased by $5.1 million in the three months endedSeptember 30, 2013 compared to three months endedSeptember 30, 2012. The increase in equity in earnings is impacted by an increase of $5.0 million in our share of the market-driven valuation changes in the underlying holdings of certain partnership investment and a net increase of $0.1 million in the joint venture investments in China from the comparative period.
Interest and dividend income and interest expense
Interest and dividend income remained flat in the three months endedSeptember 30, 2013 (three months endedSeptember 30, 2012: $2.5 million).
Interest expense decreased by $2.9 million (23.0%) to $9.7 million in the three months endedSeptember 30, 2013 (three months endedSeptember 30, 2012: $12.6 million) reflecting the changes made in the fourth quarter of 2012 to long-term financing arrangements.
Other gains and losses, net
Other gains and losses, net were a net gain of $2.7 million in the three months endedSeptember 30, 2013 as compared to a net gain of $18.4 million in the three months endedSeptember 30, 2012. Included in other gains and losses for the third quarter of 2013 is a net gain of $9.2 million resulting from the appreciation of investments held for our deferred compensation plans (three months endedSeptember 30, 2012: $9.7 million net gain) and net gains from seed and other investments of $1.0 million (three months endedSeptember 30, 2012: $1.3 million net realized gains). These gains are offset by a realized loss of $6.6 million on the liquidation of a co-investment and sale of other securities (three months endedSeptember 30, 2012: none) and a net loss of $1.1 million related to the mark-to-market foreign exchange put option contracts intended to provide protection against the impact of a significant decline in the pound sterling/U.S dollar foreign exchange rate (three months endedSeptember 30, 2012: $1.4 million loss). In the three months endedSeptember 30, 2013, we had net gains on foreign exchange activities on inter-group loans of $0.6 million (three months endedSeptember 30, 2012: $0.5 million in net foreign exchange gain). The three months endedSeptember 30, 2012 saw a net gain on the sale of CLO management contracts of $8.3 million.
Non-operating income and expense of CIP
In the three months endedSeptember 30, 2013, interest income of CIP decreased by $22.2 million (32.3%) to $46.5 million (three months endedSeptember 30, 2012: $68.7 million) primarily due to the impact of the third quarter 2012 sale of our management agreements and equity interests in certain CLOs. Interest expense of CIP decreased by $8.4 million (20.0%) to $33.5 million (three months endedSeptember 30, 2012: $41.9 million), also primarily due to the impact of the third quarter 2012 sale of our management agreements and equity interests in certain CLOs. See Part I, Item 1, Financial Statements - Note 13, "Consolidated Investment Products," for additional information regarding the impact of the CLO deconsolidation during the period.
Included in other gains/(losses) of CIP, net, are realized and unrealized gains and losses on the underlying investments and debt of CIP. In the three months endedSeptember 30, 2013, other gains/(losses) of CIP were a net gain of $38.2 million, as compared to a net loss of $25.2 million in the three months endedSeptember 30, 2012. The net gain in the 2013 period is primarily due to gains associated with the decrease in market value of the long-term debt of CLOs exceeding losses associated with CLO investments. The net loss in the 2012 period was primarily due to losses associated with the increase in market value of the long-term debt of CLOs exceeding gains associated with private equity and CLO investments.
Net impact of CIP and related noncontrolling interests in noncontrolling entities
As illustrated in the Summary of Income Statement Impact of CIP for the three months endedSeptember 30, 2013 and 2012 at the beginning of this Results of Operations section, the consolidation of CIP during the three months endedSeptember 30, 2013 resulted in an increase to net income of $11.2 million before attribution to noncontrolling interests. The income attributed to noncontrolling interests during the period was $20.6 million, resulting in a net decrease in net income of the company of $9.4 million. The consolidation of CIP during the three months endedSeptember 30, 2012 resulted in a $24.8 milliondecrease to net income before attribution to noncontrolling interests. This net loss is offset by noncontrolling interests of $13.7 million, resulting in a net decrease in net income of the company of $11.1 million.
CIP are taxed at the investor level and not at the product entity level; therefore, there is no tax provision reflected in the net impact of CIP.
Noncontrolling interests in consolidated entities represent the profit or loss amounts attributed to third party investors in CIP. Movements in amounts attributable to noncontrolling interests in consolidated entities on the company’s Consolidated Statements of Income generally offset the gains and losses, interest income and interest expense of CIP.

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Additionally, CIP represent approximately 1% of the company's AUM. Therefore, the net gains or losses of CIP is not indicative of the performance of the company's aggregate AUM.
Income Tax Expense
The company's 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 company's subsidiaries. The majority of our profits are earned in the U.S., the U.K., and Canada.
The enacted U.K. statutory tax rate, for U.S. GAAP purposes, was 23% as of September 30, 2013. The 2013 U.K. Budget received Royal Assent during the third quarter ended September 30, 2013 to further reduce the rate to 21% (previously 22%) from April 1, 2014 and 20% (previously 21%) from April 1, 2015. As of September 30, 2013, the Canadian federal and provincial statutory tax rate was 26.5%. The U.S. federal statutory tax rate was 35%.
Our effective tax rate on continuing operations decreased to 27.1% for the three months endedSeptember 30, 2013 (three months endedSeptember 30, 2012: 32.0%). The inclusion of activity from non-controlling interests in consolidated entities decreased our effective tax rate by 1.7% in 2013 and increased our effective tax rate by 1.8% in 2012. The three months ended September 30, 2012 rate reflects an unfavorable impact from the gain on sale of CLO management contracts in the quarter.
Income from discontinued operations, net of taxes
On April 11, 2013, the company entered into a definitive agreement to sell Atlantic Trust to CIBC. The components of income from discontinued operations are included in Part I, Item I, Note 15, “Discontinued Operations,” for the three months endedSeptember 30, 2013 and 2012.


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Assets Under Management movements for the nine months endedSeptember 30, 2013 compared with the nine months endedSeptember 30, 2012
AUM at September 30, 2013, were $745.5 billion (September 30, 2012: $663.0 billion). During the nine months endedSeptember 30, 2013, we experienced total net inflows of $29.2 billion, of which $20.7 billion was from long-term net inflows, $7.4 billion was from net inflows in institutional money market funds, and net inflows from the Invesco PowerShares QQQ fund of $1.1 billion. Market movements increased AUM by $51.6 billion, while AUM decreased $2.7 billion due to changes in foreign exchange rates during the nine months endedSeptember 30, 2013. During the nine months endedSeptember 30, 2012, we experienced total net inflows of $10.4 billion, of which $7.7 billion was from long-term net inflows. We experienced no change in institutional money market funds and net inflows of $2.7 billion from the Invesco PowerShares QQQ fund. Market movements increased AUM by $43.1 billion, while AUM increased $3.9 billion due to changes in foreign exchange rates during the nine months endedSeptember 30, 2012. Average AUM during the nine months endedSeptember 30, 2013, were $713.6 billion compared to $640.4 billion for the nine months endedSeptember 30, 2012.
Long-term net inflows during the nine months endedSeptember 30, 2013 were $20.7 billion and included net long-term inflows of active AUM of $12.8 billion. Total net long-term flows include inflows from our retail distribution channel of $21.7 billion and outflows from our institutional channel of $1.0 billion. We experienced net long-term inflows in our balanced asset class of $7.3 billion, equity asset class of $5.5 billion, fixed income of $4.0 billion, alternatives of $3.6 billion and $0.3 billion in our retail money market funds. Long-term net inflows during the nine months endedSeptember 30, 2012 were $7.7 billion. Long-term inflows of passive AUM of $9.3 billion were offset by net long-term outflows of active AUM of $1.6 billion. Total net long-term flows included inflows from our retail channel of $8.3 billion, offset by outflows from our institutional distribution channel of $0.6 billion. We experienced net long-term inflows from our balanced asset class of $9.1 billion and fixed income of $9.7 billion, offset by outflows in our equity asset class of $7.4 billion, alternatives of $3.1 billion, and money market funds of $0.6 billion.
The $51.6 billionincrease in AUM resulting from market gains during the nine months endedSeptember 30, 2013 included a $52.3 billionincrease in the market value of our equity asset class. This increase was partially offset by losses of $3.1 billion in our fixed income asset class. Of the $43.1 billion increase in AUM resulting from market gains during the nine months endedSeptember 30, 2012, $30.4 billion of this increase was due to the change in value of our equity asset class.
The impact of the change in foreign exchange rates in the nine months endedSeptember 30, 2013, was driven primarily by the strengthening of the Euro, relative to the U.S. Dollar, offset by the weakening of the Pound Sterling, Canadian Dollar and Japanese Yen, which was reflected in the translation of our Euro-based, Sterling-based, Canadian Dollar-based and Japanese Yen-based AUM into U.S. Dollars. The impact of the change in foreign exchange rates in the nine months endedSeptember 30, 2012, was driven by the strengthening of the Pound Sterling and Canadian Dollar relative to the U.S. Dollar, offset by the weakening of the Euro and Japanese Yen, which was reflected in the translation of our Sterling-based, Euro-based, Canadian Dollar-based and Japanese Yen-based AUM into U.S. Dollars.
The table below illustrates the spot foreign exchange rates for translation into the U.S. Dollar, the reporting currency of the company, at September 30, 2013 and 2012, as compared with the rates that existed at December 31,2012 and 2011:
 September 30, 2013 December 31, 2012 September 30, 2012 December 31, 2011
Pound Sterling ($ per £)1.619
 1.625
 1.615
 1.555
Canadian Dollar (CAD per $)1.029
 0.996
 0.984
 1.018
Japan (¥ per $)98.120
 86.520
 77.800
 76.900
Euro ($ per €)1.353
 1.319
 1.287
 1.299

Net revenue yield increased 0.9 basis points to 44.7 basis points in the nine months endedSeptember 30, 2013, from the nine months endedSeptember 30, 2012 level of 43.8 basis points. The increase in net revenue yield was largely driven by changes in the mix of our AUM and higher performance fees in the nine months endedSeptember 30, 2013, from the nine months endedSeptember 30, 2012. Net revenue yield before performance fees increased to 43.7 basis point in the nine months endedSeptember 30, 2013, from the nine months endedSeptember 30, 2012 level of 43.0 basis points, the increase reflecting the AUM mix change as equity markets improved and we experienced growth in the balanced asset class.
Gross revenue yield on AUM increased1.4 basis points to 64.2 basis points in the nine months endedSeptember 30, 2013, from the nine months endedSeptember 30, 2012, level of 62.8 basis points. Management does not consider gross revenue yield, the most comparable U.S. GAAP-based measure to net revenue yield, to be a meaningful effective fee rate measure. See footnote 1 to the table below for additional information.

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Changes in AUM were as follows(3):
 2013 2012
$ in billionsTotal AUM Active Passive Total AUM Active Passive
December 31667.4
 553.4
 114.0
 607.3
 511.0
 96.3
Long-term inflows133.8
 99.8
 34.0
 97.5
 74.5
 23.0
Long-term outflows(113.1) (87.0) (26.1) (89.8) (76.1) (13.7)
Long-term net flows20.7
 12.8
 7.9
 7.7
 (1.6) 9.3
Net flows in Invesco PowerShares QQQ fund1.1
 —
 1.1
 2.7
 —
 2.7
Net flows in institutional money market funds7.4
 7.4
 —
 —
 —
 —
Total net flows29.2
 20.2
 9.0
 10.4
 (1.6) 12.0
Market gains and (losses)/reinvestment51.6
 44.3
 7.3
 43.1
 33.5
 9.6
Acquisitions/(dispositions), net—
 —
 —
 (1.7) (1.7) —
Foreign currency translation(2.7) (2.0) (0.7) 3.9
 3.9
 —
September 30745.5
 615.9
 129.6
 663.0
 545.1
 117.9
            
Average long-term AUM603.7
 514.0
 89.7
 538.3
 462.4
 75.9
Average short-term AUM109.9
 75.4
 34.5
 102.1
 68.8
 33.3
Average AUM713.6
 589.4
 124.2
 640.4
 531.2
 109.2
            
Gross revenue yield on AUM(1)
64.2bps 75.4bps 11.4bps 62.8bps 73.9bps 9.1bps
Gross revenue yield on AUM before performance fees(1)
63.3bps 74.4bps 11.4bps 62.0bps 73.0bps 9.1bps
Net revenue yield on AUM(2)
44.7bps 51.8bps 11.4bps 43.8bps 51.0bps 9.1bps
Net revenue yield on AUM before performance fees(2)
43.7bps 50.5bps 11.4bps 43.0bps 50.0bps 9.1bps

(1)Gross revenue yield on AUM is equal to annualized U.S. GAAP total operating revenues divided by average AUM, excluding joint venture (JV) AUM. Management does not consider gross revenue yield, the most comparable U.S. GAAP-based measure to net revenue yield, to be a meaningful effective fee rate measure. The differences between the numerators of the gross and net revenue yield calculations are due to the reconciling items between the U.S. GAAP operating revenue (gross revenue) amount and the non-GAAP measure of net revenue. See “Schedule of Non-GAAP Information” for a reconciliation of operating revenues (gross revenues) to net revenues.
The difference in the denominators of the gross and net revenue yield calculations is due to the JV average AUM, which is excluded in the calculation of gross revenue yield. It is appropriate to exclude the average AUM of our JVs for purposes of computing gross revenue yield on AUM, because the revenues resulting from these AUM are not presented in our operating revenues. Under U.S. GAAP, our share of the net income of the JVs is recorded as equity in earnings of unconsolidated affiliates on our Condensed Consolidated Statements of Income. Our share of the average AUM in the nine months endedSeptember 30, 2013, for our JVs in China was $3.7 billion (nine months endedSeptember 30, 2012: $3.0 billion).
(2)Net revenue yield on AUM is equal to annualized net revenues divided by average AUM. See “Schedule of Non-GAAP Information” for a reconciliation of operating revenues to net revenues.
(3)
All AUM amounts quoted in the tables exclude the AUM of the discontinued operation, Atlantic Trust. As at September 30, 2013, the excluded Atlantic Trust total AUM were $22.8 billion ($20.3 billion at December 31, 2012; $20.0 billion at September 30, 2012; $18.0 billion at December 31, 2011) with $22.3 billion in balanced ($18.5 billion at December 31, 2012; $18.3 billion at September 30, 2012; $17.4 billion at December 31, 2011) and $0.5 billion in equity ($1.8 billion at December 31, 2012; $1.7 billion at September 30, 2012; $0.6 billion at December 31, 2011).


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Our AUM by channel, by asset class, and by client domicile were as follows:
Total AUM by Channel(1,6)
$ in billionsTotal Retail Institutional
December 31, 2012 AUM667.4
 425.8
 241.6
Long-term inflows133.8
 109.4
 24.4
Long-term outflows(113.1) (87.7) (25.4)
Long-term net flows20.7
 21.7
 (1.0)
Net flows in Invesco PowerShares QQQ fund1.1
 1.1
 —
Net flows in institutional money market funds7.4
 —
 7.4
Total net flows29.2
 22.8
 6.4
Market gains and (losses)/reinvestment51.6
 44.1
 7.5
Foreign currency translation(2.7) (0.7) (2.0)
September 30, 2013 AUM745.5
 492.0
 253.5
      
December 31, 2011 AUM607.3
 374.0
 233.3
Long-term inflows97.5
 77.2
 20.3
Long-term outflows(89.8) (68.9) (20.9)
Long-term net flows7.7
 8.3
 (0.6)
Net flows in Invesco PowerShares QQQ fund2.7
 2.7
 —
Net flows in institutional money market funds—
 —
 —
Total net flows10.4
 11.0
 (0.6)
Market gains and (losses)/reinvestment43.1
 34.5
 8.6
Acquisitions/(dispositions), net(1.7) —
 (1.7)
Foreign currency translation3.9
 3.9
 —
September 30, 2012 AUM663.0
 423.4
 239.6
Passive AUM by Channel(1)
$ in billionsTotal Retail Institutional
December 31, 2012 AUM114.0
 91.2
 22.8
Long-term inflows34.0
 29.1
 4.9
Long-term outflows(26.1) (19.9) (6.2)
Long-term net flows7.9
 9.2
 (1.3)
Net flows in Invesco PowerShares QQQ fund1.1
 1.1
 —
Net flows in institutional money market funds—
 —
 —
Total net flows9.0
 10.3
 (1.3)
Market gains and (losses)/reinvestment7.3
 6.8
 0.5
Foreign currency translation(0.7) —
 (0.7)
September 30, 2013 AUM129.6
 108.3
 21.3
      
December 31, 2011 AUM96.3
 76.9
 19.4
Long-term inflows23.0
 18.4
 4.6
Long-term outflows(13.7) (12.8) (0.9)
Long-term net flows9.3
 5.6
 3.7
Net flows in Invesco PowerShares QQQ fund2.7
 2.7
 —
Net flows in institutional money market funds—
 —
 —
Total net flows12.0
 8.3
 3.7
Market gains and (losses)/reinvestment9.6
 9.5
 0.1
Foreign currency translation—
 —
 —
September 30, 2012 AUM117.9
 94.7
 23.2

See accompanying notes immediately following these tables.


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Total AUM by Asset Class(2,6)
$ in billionsTotal Equity Fixed Income Balanced Money Market 
Alternatives(3)
December 31, 2012 AUM667.4
 295.6
 171.9
 43.6
 73.3
 83.0
Long-term inflows133.8
 62.3
 32.1
 16.3
 2.9
 20.2
Long-term outflows(113.1) (56.8) (28.1) (9.0) (2.6) (16.6)
Long-term net flows20.7
 5.5
 4.0
 7.3
 0.3
 3.6
Net flows in Invesco PowerShares QQQ fund1.1
 1.1
 —
 —
 —
 ���
Net flows in institutional money market funds7.4
 —
 —
 —
 7.4
 —
Total net flows29.2
 6.6
 4.0
 7.3
 7.7
 3.6
Market gains and (losses)/reinvestment51.6
 52.3
 (3.1) 2.7
 0.2
 (0.5)
Foreign currency translation(2.7) (1.3) (0.4) (0.1) (0.1) (0.8)
September 30, 2013 AUM745.5
 353.2
 172.4
 53.5
 81.1
(4) 
85.3
Average AUM713.6
 325.2
 174.3
 50.2
 79.5
 84.4
            
December 31, 2011 AUM607.3
 270.4
 149.0
 27.2
 74.0
 86.7
Long-term inflows97.5
 39.3
 29.4
 13.2
 2.1
 13.5
Long-term outflows(89.8) (46.7) (19.7) (4.1) (2.7) (16.6)
Long-term net flows7.7
 (7.4) 9.7
 9.1
 (0.6) (3.1)
Net flows in Invesco PowerShares QQQ fund2.7
 2.7
 —
 —
 —
 —
Net flows in institutional money market funds—
 —
 —
 —
 —
 —
Total net flows10.4
 (4.7) 9.7
 9.1
 (0.6) (3.1)
Market gains and (losses)/reinvestment43.1
 30.4
 7.7
 2.7
 (0.2) 2.5
Acquisitions/(dispositions), net(1.7) —
 —
 —
 —
 (1.7)
Foreign currency translation3.9
 2.8
 0.6
 0.6
 —
 (0.1)
September 30, 2012 AUM663.0
 298.9
 167.0
 39.6
 73.2
 84.3
Average AUM640.4
 291.6
 156.8
 33.2
 73.2
 85.8

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Passive AUM by Asset Class(2)
$ in billionsTotal Equity Fixed Income Balanced Money Market 
Alternatives(3)
December 31, 2012 AUM114.0
 55.5
 39.0
 —
 —
 19.5
Long-term inflows34.0
 19.1
 11.3
 —
 —
 3.6
Long-term outflows(26.1) (11.6) (8.5) —
 —
 (6.0)
Long-term net flows7.9
 7.5
 2.8
 —
 —
 (2.4)
Net flows in Invesco PowerShares QQQ fund1.1
 1.1
 —
 —
 —
 —
Net flows in institutional money market funds—
 —
 —
 —
 —
 —
Total net flows9.0
 8.6
 2.8
 —
 —
 (2.4)
Market gains and (losses)/reinvestment7.3
 10.0
 (2.2) —
 —
 (0.5)
Foreign currency translation(0.7) —
 —
 —
 —
 (0.7)
September 30, 2013 AUM129.6
 74.1
 39.6
 —
 —
 15.9
Average AUM124.2
 65.5
 41.9
 —
 —
 16.8
            
December 31, 2011 AUM96.3
 45.6
 30.0
 —
 —
 20.7
Long-term inflows23.0
 10.4
 8.7
 —
 —
 3.9
Long-term outflows(13.7) (7.6) (1.7) —
 —
 (4.4)
Long-term net flows9.3
 2.8
 7.0
 —
 —
 (0.5)
Net flows in Invesco PowerShares QQQ fund2.7
 2.7
 —
 —
 —
 —
Net flows in institutional money market funds—
 —
 —
 —
 —
 —
Total net flows12.0
 5.5
 7.0
 —
 —
 (0.5)
Market gains and (losses)/reinvestment9.6
 8.1
 0.6
 —
 —
 0.9
Foreign currency translation—
 —
 —
 —
 —
 —
September 30, 2012 AUM117.9
 59.2
 37.6
 —
 —
 21.1
Average AUM109.2
 55.5
 33.6
 —
 —
 20.1

See accompanying notes immediately following these tables.

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Total AUM by Client Domicile(5,6)
$ in billionsTotal U.S. Canada U.K. Continental Europe Asia
December 31, 2012 AUM667.4
 452.5
 25.2
 101.9
 38.8
 49.0
Long-term inflows133.8
 81.4
 2.9
 12.1
 22.8
 14.6
Long-term outflows(113.1) (69.7) (3.6) (13.6) (13.1) (13.1)
Long-term net flows20.7
 11.7
 (0.7) (1.5) 9.7
 1.5
Net flows in Invesco PowerShares QQQ fund1.1
 1.1
 —
 —
 —
 —
Net flows in institutional money market funds7.4
 7.6
 0.1
 0.1
 (0.1) (0.3)
Total net flows29.2
 20.4
 (0.6) (1.4) 9.6
 1.2
Market gains and (losses)/reinvestment51.6
 29.4
 2.7
 12.5
 3.0
 4.0
Foreign currency translation(2.7) 0.2
 (0.9) 0.1
 0.2
 (2.3)
September 30, 2013 AUM745.5
 502.5
 26.4
 113.1
 51.6
 51.9
            
December 31, 2011 AUM607.3
 412.0
 23.4
 89.8
 32.0
 50.1
Long-term inflows97.5
 61.0
 2.5
 10.1
 14.8
 9.1
Long-term outflows(89.8) (51.1) (3.7) (11.8) (11.0) (12.2)
Long-term net flows7.7
 9.9
 (1.2) (1.7) 3.8
 (3.1)
Net flows in Invesco PowerShares QQQ fund2.7
 2.7
 —
 —
 —
 —
Net flows in institutional money market funds—
 0.2
 0.2
 —
 —
 (0.4)
Total net flows10.4
 12.8
 (1.0) (1.7) 3.8
 (3.5)
Market gains and (losses)/reinvestment43.1
 29.8
 1.7
 8.5
 1.4
 1.7
Acquisitions/(dispositions), net(1.7) —
 —
 —
 (1.7) —
Foreign currency translation3.9
 (0.1) 0.9
 3.0
 0.1
 —
September 30, 2012 AUM663.0
 454.5
 25.0
 99.6
 35.6
 48.3
Passive AUM by Client Domicile(5)
$ in billionsTotal U.S. Canada U.K. Continental Europe Asia
December 31, 2012 AUM114.0
 107.8
 0.1
 —
 1.1
 5.0
Long-term inflows34.0
 33.4
 —
 —
 0.5
 0.1
Long-term outflows(26.1) (23.6) —
 —
 (0.3) (2.2)
Long-term net flows7.9
 9.8
 —
 —
 0.2
 (2.1)
Net flows in Invesco PowerShares QQQ fund1.1
 1.1
 —
 —
 —
 —
Net flows in institutional money market funds—
 —
 —
 —
 —
 —
Total net flows9.0
 10.9
 —
 —
 0.2
 (2.1)
Market gains and (losses)/reinvestment7.3
 6.7
 —
 —
 0.1
 0.5
Foreign currency translation(0.7) —
 —
 —
 —
 (0.7)
September 30, 2013 AUM129.6
 125.4
 0.1
 —
 1.4
 2.7
            
December 31, 2011 AUM96.3
 89.6
 —
 —
 1.3
 5.4
Long-term inflows23.0
 22.4
 —
 —
 0.2
 0.4
Long-term outflows(13.7) (13.2) —
 —
 (0.4) (0.1)
Long-term net flows9.3
 9.2
 —
 —
 (0.2) 0.3
Net flows in Invesco PowerShares QQQ fund2.7
 2.7
 —
 —
 —
 —
Net flows in institutional money market funds—
 —
 —
 —
 —
 —
Total net flows12.0
 11.9
 —
 —
 (0.2) 0.3
Market gains and (losses)/reinvestment9.6
 9.3
 —
 —
 0.2
 0.1
Foreign currency translation—
 —
 —
 —
 —
 —
September 30, 2012 AUM117.9
 110.8
 —
 —
 1.3
 5.8
See accompanying notes to these AUM tables on the following page.

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(1)Channel refers to the internal distribution channel from which the AUM originated. Retail AUM represents AUM distributed by the company's retail sales team. Institutional AUM represents AUM distributed by our institutional sales team.
(2)Asset classes are descriptive groupings of AUM by common type of underlying investments.
(3)The alternatives asset class includes absolute return, real estate, commodities, currencies, financial structures, Global Macro, REITS, private capital, and Risk Parity.
(4)
Ending money market AUM includes $76.8 billion in institutional money market AUM and $4.3 billion in retail money market AUM.
(5)Client domicile disclosure groups AUM by the domicile of the underlying clients.

(6)
All AUM amounts quoted in the tables exclude the AUM of the discontinued operation, Atlantic Trust. As at September 30, 2013, the excluded Atlantic Trust total AUM were $22.8 billion ($20.3 billion at December 31, 2012; $20.0 billion at September 30, 2012; $18.0 billion at December 31, 2011) with $22.3 billion in balanced ($18.5 billion at December 31, 2012; $18.3 billion at September 30, 2012; $17.4 billion at December 31, 2011) and $0.5 billion in equity ($1.8 billion at December 31, 2012; $1.7 billion at September 30, 2012; $0.6 billion at December 31, 2011).


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Results of Operations for the nine months endedSeptember 30, 2013 compared with the nine months endedSeptember 30, 2012

To assist in the comparisons, the discussion that follows will separate the impact of CIP from the overall consolidated results of operations. The discussion includes the use of non-GAAP financial measures. See “Schedule of Non-GAAP Information” for additional details and reconciliations of the most directly comparable U.S. GAAP measures to the non-GAAP measures.
Summary of Income Statement Impact of CIP
  Nine months ended September 30,
  2013 2012
$ in millions  Impact of CIP Invesco Ltd. Consolidated  Impact of CIP Invesco Ltd. Consolidated
Total operating revenues (29.8) 3,419.5
 (32.4) 3,003.7
Total operating expenses 24.8
 2,592.6
 23.1
 2,366.6
Operating income (54.6) 826.9
 (55.5) 637.1
Equity in earnings of unconsolidated affiliates (3.4) 25.3
 0.1
 21.8
Interest and dividend income 142.8
 154.3
 196.1
 213.5
Other investment income/(losses) 3.7
 36.3
 (78.5) (40.6)
Interest expense (96.8) (126.2) (134.4) (174.0)
Income from continuing operations before income taxes (8.3) 916.6
 (72.2) 657.8
Income tax provision —
 (262.7) —
 (205.8)
Income from continuing operations (8.3) 653.9
 (72.2) 452.0
Income from discontinued operations, net of taxes —
 (1.9) —
 7.3
Net income (8.3) 652.0
 (72.2) 459.3
Net (income)/loss attributable to noncontrolling interests in consolidated entities (1.5) 0.9
 59.1
 59.1
Net income attributable to common shareholders (9.8) 652.9
 (13.1) 518.4
Operating Revenues and Net Revenues
The main categories of revenues, and the dollar and percentage change between the periods, were as follows:
 Nine months ended September 30,
$ in millions2013 2012 $ Change % Change
Investment management fees2,644.5
 2,309.6
 334.9
 14.5 %
Service and distribution fees642.7
 572.1
 70.6
 12.3 %
Performance fees47.2
 39.0
 8.2
 21.0 %
Other85.1
 83.0
 2.1
 2.5 %
Total operating revenues3,419.5
 3,003.7
 415.8
 13.8 %
Third-party distribution, service and advisory expenses(1,093.0) (958.2) (134.8) 14.1 %
Third party distribution expense related to European infrastructure initiative2.7
 —
 2.7
 N/A
Proportional share of revenues, net of third-party distribution expenses, from joint venture investments35.7
 27.5
 8.2
 29.8 %
Management fees earned from CIP21.3
 31.2
 (9.9) (31.7)%
Performance fees earned from CIP8.9
 1.2
 7.7
 N/A
Other revenues recorded by CIP(0.4) —
 (0.4) N/A
Net revenues2,394.7
 2,105.4
 289.3
 13.7 %


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A significant portion of our business and AUM is based outside of the U.S. The strengthening or weakening of the U.S. dollar against other currencies, primarily the Pound Sterling, Canadian Dollar, Euro and Japanese Yen will impact our reported revenues and expenses from period to period. The income statements of foreign currency subsidiaries are translated into U.S. dollars, the reporting currency of the company, using average foreign exchange rates. The impact of foreign exchange rate movements decreasedincreased operating revenues by $42.714.7 million, equivalent to 1.2% of total operating revenue,revenues, during the ninethree months endedSeptember 30, 2013March 31, 2014 when compared to the ninethree months endedSeptember 30, 2012March 31, 2013. Additionally, our revenues are directly influenced by the level and composition of our AUM. Therefore, movements in global capital market levels, net new business inflows (or outflows) and changes in the mix of investment products between asset classes and geographies may materially affect our revenues from period to period. The returns from most global capital markets increased in the nine months endedSeptember 30, 2013. These market value increases, combined with net new business inflows, contributed to a net increase in AUM of $78.1 billion during the nine months endedSeptember 30, 2013. Net revenue yield, asAs discussed in the "Assets Under Management" section, increased during the nine months endedSeptember 30, 2013 to 44.7 basis points, as compared to 43.8 basis points during the nine months endedSeptember 30, 2012. The increase in 2013 was driven by changes in AUM mix, with a larger proportion of AUM in higher-yield equity funds and balanced funds (47.4% and 7.2% respectively) at September 30, 2013 compared to September 30, 2012 (45.1% and 6.0% respectively). Excluding performance fees, net revenue yield increasedExecutive Overview, returns from capital markets were mixed in the firstthree months ended nine monthsMarch 31, 2014 of 2013 to 43.7 basis points, compared to 43.0 basis points in the same period in 2012.

Operating revenues increased by $415.8 million (13.8%) in the nine months endedSeptember 30, 2013 to $3,419.5 million (nine months endedSeptember 30, 2012: $3,003.7 million). Net revenues increased by $289.3 million (13.7%) in the nine months endedSeptember 30, 2013 to $2,394.7 million (nine months endedSeptember 30, 2012: $2,105.4 million). Net revenues are operating revenues less third-party distribution, service and advisory expenses (adjusted for third party distribution expense related to the European infrastructure initiative), plus our proportional share of net revenues from joint venture arrangements, plus management and performance fees earned from, less other revenues recorded by, CIP. See “Schedule of Non-GAAP Information” for additional important disclosures regarding the use of net revenues.
Investment management feesManagement Fees
Investment management fees increased by $334.9$120.8 million (14.5% (14.3%) in the ninethree months endedSeptember 30, 2013March 31, 2014, to $2,644.5965.4 million (nine(three months endedSeptember 30, 2012March 31, 2013: $2,309.6844.6 million). This compares to an 11.4%a 12.7% increase in average AUM and a 12.1%12.6% increase in average long-term AUM. As discussed above, the net revenue yield is higher in the three months ended March 31, 2014 when compared to the three months ended March 31, 2013 due to changes in the composition of our AUM. See the company’scompany's disclosures regarding the changes in AUM and revenue yields during the ninethree months endedSeptember 30, 2013March 31, 2014 in the “Assets Under Management” section above for additional information regarding the movements in AUM. Management fee yield (annualized management fee revenues divided by average AUM, excluding joint venture AUM) increased to 49.7 basis points during the nine months endedSeptember 30, 2013 from 48.3 basis points for the same period in 2012. As discussed in previous quarters, management fees were reduced commencing in June 2011 due to acquisition integration-related U.S. mutual fund mergers, and these waivers negatively impacted management fees earned in the nine months endedSeptember 30, 2012. The waivers began to lapse in mid-2012, which increased revenue during the nine months endedSeptember 30, 2013 as compared to the same period in 2012. The impact of foreign exchange rate movements decreasedincreased investment management fees by $37.011.6 million during the ninethree months endedSeptember 30, 2013,March 31, 2014 as compared to the ninethree months endedSeptember 30, 2012March 31, 2013.
Service and distribution feesDistribution Fees
In the ninethree months endedSeptember 30, 2013March 31, 2014, service and distribution fees increased by $70.6$32.3 million (12.3% (15.7%) to $642.7238.6 million (nine(three months endedSeptember 30, 2012March 31, 2013: $572.1206.3 million). The increase due primarily to increases in servicetransfer agency fees of $13.4 million, administration and distributioncustodial fees reflects the overall increase in AUM during the periodof $12.5 million and is made up of increases in distribution and redemption fees of $31.6 million, administration and custodial fees$5.3 million. The impact of$34.7 million and transfer agent fees of $7.2 million, offset by a decrease in foreign exchange rate movements ofincreased service and distribution fees by $1.1 million during the three months ended $2.9 millionMarch 31, 2014. The fee increases in 2014 are attributable to the increases in average AUM and revenue yields, as well as a new recurring asset-based service fee that began in 2014.
Performance feesFees
Of our $787.3 billion in AUM at March 31, 2014, approximately $48.6 billion or 6.2%, could potentially earn performance fees.
In the ninethree months endedSeptember 30, 2013 recognizedMarch 31, 2014, performance fees weredecreased by $5.0 million (13.9%) to $47.231.1 million, when compared to the performance fees in three months ended an increaseMarch 31, 2013 of $8.236.1 million from the comparative period (nine months endedSeptember 30, 2012: $39.0 million). The performance fees generated in the nine months endedSeptember 30, 20132014 arose primarily due to products managed by the the U.K. groupinvestment teams ($35.0 million), Asia Pacific group ($5.1 million), bank loan product group ($4.027.6 million) and Continental Europe groupthe Global Quantitative Equity team ($2.72.3 million).
During the three months ended March 31, 2014, U.K. performance fees included $8.0 million from Edinburgh Investment Trust PLC (three months ended March 31, 2013: $17.5 million). TheFuture management fees receivable from the Trust will not include a performance fees generated infee component.
Other Revenues
In the ninethree months endedSeptember 30, 2012March 31, 2014, other revenues increased by $9.2 million (36.5%) to $34.4 million arose primarily due to products managed by the bank loan product group ($15.0 million), the U.K. group ($12.0 million), the European real estate group ($7.8 million), and the Asia Pacific group ($3.3 million)(three months ended March 31, 2013: $25.2 million). ForeignThe impact of foreign exchange rate movements decreased performance fees byincreased other revenues $2.00.3 million during the ninethree months endedSeptember 30, 2013,March 31, 2014 as compared to the ninethree months endedSeptember 30, 2012March 31, 2013.

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Other revenues
In After allowing for foreign exchange rate changes, the nine months endedSeptember 30, 2013, other revenues increased by $2.1 million (2.5%) to $85.1 million (nine months endedSeptember 30, 2012: $83.0 million). The increase in other revenues was driven by$8.9 million. The increase in other revenues during the three months ended March 31, 2014 compared to the three months ended March 31, 2013 include increases in mutual fundfunds front end fees of $3.7$6.1 million, and higher UIT revenues of $2.2 million, and increases in other revenues of $2.0 million. These increases were offset by decreases in real estate acquisition and disposition fees of $5.0$1.4 million,, transaction commissions of $0.3 million generated by our private equity group, and foreign exchange movementsother revenues of $0.8 million during the period.$1.1 million. The increase in front end fees relates to increased sales activity in Continental Europe.
Third-party distribution, serviceThird-Party Distribution, Service and advisory expensesAdvisory Expenses
Third-party distribution, service and advisory expenses increased by $134.8$59.3 million (14.1% (17.1%) in the ninethree months endedSeptember 30, 2013March 31, 2014 to $1,093.0405.4 million (nine(three months endedSeptember 30, 2012March 31, 2013: $958.2346.1 million). The impact of foreign exchange rate movements increased third-party distribution, service and advisory expenses by $4.3 million during the three months ended

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March 31, 2014 as compared to the three months ended March 31, 2013. After allowing for foreign exchange rate changes, the increase in third-party distribution, service and advisory expenses was $55.0 million. The increase includes increases in renewal commissions of $23.3 million, distribution fees of $17.8 million, external commissions of $6.8 million, transfer agent fees of $6.2 million, sub advisory fees of $0.6 million and administration fees of $0.3 million. The overall increase is closely linked toreflective of the increase in investmenthigher related retail management fees, and service and distribution fees over this period. The increased expenses include increasesand front-end load fees (recorded in renewal and external commissions of $91.1 million, distribution fees of $47.6 million, external commissions and transfer agency fees of $9.7 million and administration and custodial fees of $0.8 million. The increases in third-party distribution, service and advisory expenses were offset by a decrease due to foreign exchange rate movements of $13.4 million and sub-advisory fees of $1.0 million during the nine months endedSeptember 30, 2013, compared to the nine months endedSeptember 30, 2012other revenues).
Proportional share of revenues, net of third-party distribution expenses, from jointventure investments
Management believes that the addition of our proportional share of revenues, net of third-party distribution expenses, from joint venture arrangements should be added to operating revenues to arrive at net revenues, as it is important to evaluate the contribution to the business that our joint venture arrangements are making. See “Schedule of Non-GAAP Information” for additional disclosures regarding the use of net revenues. The company's most significant joint venture arrangement is our 49% investment in Invesco Great Wall Fund Management Company Limited (the “Invesco Great Wall” joint venture).
Our proportional share of revenues, net of third-party distribution expenses, from joint venture investments increased by $8.2$4.9 million (29.8% (47.1%) to $15.3 million for the three months ended $35.7 millionMarch 31, 2014 in the(three months ended nine months endedSeptember 30,March 31, 2013 (nine months endedSeptember 30, 2012: $27.5 million)$10.4 million). OurThe increase moved in line with our share of the Invesco Great Wall joint venture’sventure's average AUM infor the ninethree months endedSeptember 30,March 31, 2014, which was $5.1 billion compared to $3.3 billion at the three months ended March 31, 2013 was $3.7 billion (nine months endedSeptember 30, 2012: $3.0 billion).
Management, performance fees, and other revenuefees earned from CIP
Management believes that the consolidation of investment products may impact a reader’sreader's analysis of our underlying results of operations and could result in investor confusion or the production of information about the company by analysts or external credit rating agencies that is not reflective of the underlying results of operations and financial condition of the company. Accordingly, management believes that it is appropriate to adjust operating revenues for the impact of CIP in calculating net revenues. As management fees,and performance fees and other revenue earned by Invesco from the consolidated products are eliminated upon consolidation of the investment products, management believes that it is appropriate to add these operating revenues back in the calculation of net revenues. Such fees were $29.8 million in the nine months endedSeptember 30, 2013 (nine months endedSeptember 30, 2012: $32.4 million). See “Schedule of Non-GAAP Information” for additional disclosures regarding the use of net revenues.
The elimination of management and performance fees earned from CIP decreased by $0.4 million to $8.4 million in the three months ended March 31, 2014 (three months ended March 31, 2013: $8.8 million). The decrease is primarily due to the impact of funds deconsolidated during the three months ended March 31, 2013. Once the funds are deconsolidated, the management and performance fees are no longer eliminated and are reflected in the respective revenue line items in the Condensed Consolidated Statements of Income.
Operating Expenses
The main categories of operating expenses, and the dollar and percentage changes between periods, are as follows:
    Variance
Nine months ended September 30,Three months ended March 31, 2014 vs 2013
$ in millions2013 2012 $ Change % Change2014 2013 $ Change % Change
Employee compensation995.9
 906.0
 89.9
 9.9 %362.1
 341.5
 20.6
 6.0 %
Third-party distribution, service and advisory1,093.0
 958.2
 134.8
 14.1 %405.4
 346.1
 59.3
 17.1 %
Marketing68.6
 79.1
 (10.5) (13.3)%23.4
 22.2
 1.2
 5.4 %
Property, office and technology207.0
 195.0
 12.0
 6.2 %112.7
 66.5
 46.2
 69.5 %
General and administrative224.9
 222.7
 2.2
 1.0 %121.6
 67.5
 54.1
 80.1 %
Transaction and integration3.2
 5.6
 (2.4) (42.9)%—
 1.4
 (1.4) (100.0)%
Total operating expenses2,592.6
 2,366.6
 226.0
 9.5 %1,025.2
 845.2
 180.0
 21.3 %

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The table below sets forth these costexpense categories as a percentage of total operating expenses and operating revenues, which we believe provides useful information as to the relative significance of each type of expense:
expense.
  % of Total % of   % of Total % of
Nine months ended:September 30, Operating Operating September 30, Operating Operating
$ in millions2013 Expenses Revenues 2012 Expenses RevenuesThree months ended March 31, 2014 % of Total Operating Expenses % of Operating Revenues Three months ended March 31, 2013 % of Total Operating Expenses % of Operating Revenues
Employee compensation995.9
 38.4% 29.1% 906.0
 38.3% 30.2%362.1
 35.3% 28.5% 341.5
 40.4% 30.7%
Third-party distribution, service and advisory1,093.0
 42.2% 32.0% 958.2
 40.5% 31.9%405.4
 39.5% 31.9% 346.1
 40.9% 31.1%
Marketing68.6
 2.6% 2.0% 79.1
 3.3% 2.6%23.4
 2.3% 1.8% 22.2
 2.6% 2.0%
Property, office and technology207.0
 8.0% 6.1% 195.0
 8.2% 6.5%112.7
 11.0% 8.9% 66.5
 7.9% 6.0%
General and administrative224.9
 8.7% 6.6% 222.7
 9.5% 7.4%121.6
 11.9% 9.6% 67.5
 8.0% 6.1%
Transaction and integration3.2
 0.1% 0.1% 5.6
 0.2% 0.2%—
 —% —% 1.4
 0.2% 0.1%
Total operating expenses2,592.6
 100.0% 75.9% 2,366.6
 100.0% 78.8%1,025.2
 100.0% 80.7% 845.2
 100.0% 76.0%
During the ninethree months endedSeptember 30, 2013March 31, 2014, operating expenses increased by $226.0$180.0 million (9.5% (21.3%) to $2,592.61,025.2 million (nine(three months endedSeptember 30, 2012March 31, 2013: $845.2 million). Excluding transaction and integration, all expense categories increased in 2014 when compared to 2013. The impact of foreign exchange rate movements increased operating expenses by $2,366.67.7 million, or 0.8% of total operating expenses, during the three months ended March 31, 2014 as compared to the three months ended March 31, 2013.
Employee Compensation
Employee compensation increased $20.6 million (6.0%) to $362.1 million in the three months ended March 31, 2014 (three months ended March 31, 2013: $341.5 million). The impact of foreign exchange rate movements decreased operating expensesincreased employee compensation by $35.11.9 million equivalent to 1.4% of total operating expenses, during the ninethree months endedSeptember 30, 2013March 31, 2014 as compared to the ninethree months endedSeptember 30, 2012.
Employee Compensation
Employee compensation increased$89.9 million (9.9%) to $995.9 million in the nine months endedSeptember 30,March 31, 2013 (nine months endedSeptember 30, 2012: $906.0 million). The impact of foreign exchange rate movements decreased employee compensation expense by $14.5 million during the nine months endedSeptember 30, 2013 compared to the nine months endedSeptember 30, 2012. After allowing for foreign exchange rate changes, the increase in employee compensation was $104.4 million.$18.7 million.
Direct compensation increased $93.3$17.1 million, and primarily due to improved company performance. The increase includes increases inhigher annual cash bonus expenses of $11.6 million, base salaries and variableof $4.2 million, share-based costs of $85.4$3.8 million, including and other direct compensation expense of $2.3 million. The increases were partially offset by decreases in sales commissions of $3.1 million and bonuses linked to performance fee revenues, deferred compensation costsrevenue of $5.9$1.7 million and share-based costs of $2.0 million during the ninethree months endedSeptember 30, 2013March 31, 2014 when compared to the ninethree months endedSeptember 30, 2012March 31, 2013. Direct
Other employee compensation was also increased by $10.7$1.6 million due to higher sales commissions and includes an increase in staff relocation costs during the ninethree months endedSeptember 30, 2013March 31, 2014 as compared to the ninethree months endedSeptember 30, 2012March 31, 2013. Staff benefits
Both direct and other relatedcompensation include costs increasedassociated with staff severance, including the acceleration of share-based costs. The three months ended $11.1 millionMarch 31, 2014 due primarily to higher payroll taxesincludes total severance costs of $7.2 million associated with a business optimization initiative undertaken during the period.
Headcount at $6.8 millionMarch 31, 2014 was 6,005 (at March 31, 2013, relocation costs of $3.6 million and other staff benefits of $0.7 million during the nine months endedSeptember 30, 2013 compared to the nine months endedSeptember 30, 2012on a continuing operations basis: 5,894).
Third-Party Distribution, Service and Advisory Expenses
Third-party distribution, service and advisory expenses are discussed above in the operating and net revenues section.
Marketing
Marketing expenses decreasedincreased by $10.5$1.2 million (13.3% (5.4%) in the ninethree months endedSeptember 30, 2013March 31, 2014 to $68.623.4 million (nine(three months endedSeptember 30, 2012March 31, 2013: $79.122.2 million). TheExcluding the impact of foreign exchange rate movements decreased marketing expense byof $0.70.1 million during, the nine months endedSeptember 30, 2013 compared to the nine months endedSeptember 30, 2012. After allowing for foreign exchange rate changes, the decreaseincrease in marketing expenses was $1.1 million during the three months ended $9.8 millionMarch 31, 2014 as compared to the three months ended March 31, 2013.
The decreaseincrease during the three months ended March 31, 2014 includes increases in marketing expenses includes decreases in advertising and corporate sponsorship expenses of $5.7 million related to lower retail advertising activity, sales literature and research of $1.6 million, travel expenses of $1.5$0.7 million,, client event expenses of $0.6 million and decreases in other marketing costs of $0.2 million partially offset by a decrease in advertising expenses of $1.0 million compared to the same period in 2012.$0.4 million.
Property, Office and Technology
Property, office and technology expenses costs increased by $12.0$46.2 million (6.2% (69.5%) to $207.0112.7 million in the ninethree months endedSeptember 30, 2013March 31, 2014 (nine(three months endedSeptember 30, 2012March 31, 2013: $195.066.5 million). The impact of foreign exchange rate movements

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increased property, office and technology expenses by $3.10.5 million during the ninethree months endedSeptember 30, 2013March 31, 2014 as compared to the ninethree months endedSeptember 30, 2012March 31, 2013. After allowing for foreign exchange rate movements, the increase was $45.7 million.$15.1
Property and office costs increased $38.6 million. compared to the same period in 2013, due primarily to charges of $35.8 million associated with vacating leased properties in connection with a business optimization initiative undertaken during the period. Other increases in property and office costs include $1.6 million in operating service and property management fees, other property costs of $1.0 million and property lease expense of $0.2 million.
Technology and communications expenses increased $16.4$7.1 million compared to over the nine months endedSeptember 30, 2012,comparable 2013 period primarily due to increases in technology expenses associated with increased administration expenses connected with the outsourcing of our European transfer agency, as well as continued investment in fixed income systems. The increase in technologydepreciation and maintenance of $1.8 million and increased outsourced administration costs was offsetof $5.3 million driven by a decrease in property and office expenses of increased European sales activity.$1.3 million over the comparable 2012 period, due primarily to a decrease of $2.2 million in rent expense, offset by net increases in other office expenses of $0.9 million.

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General and Administrative
General and administrative expenses increased by $2.2$54.1 million (1.0% (80.1%) to $224.9121.6 million in the ninethree months endedSeptember 30, 2013March 31, 2014 (nine(three months endedSeptember 30, 2012March 31, 2013: $222.767.5 million). The impact of foreign exchange rate movements decreasedincreased general and administrative expenses by $3.4$0.9 million during the ninethree months endedSeptember 30,March 31, 2014 as compared to the three months ended March 31, 2013. After allowing for foreign exchange rate changes,movements, the increase in general and administrative expenses was $5.6 million.$53.2 million.
The increase in general and administrative costsexpense is primarily due to higher professional services, contractoran FCA penalty of £18.6 million ($31.1 million) and related legal costs of $14.9$0.5 million, including increased regulatory activity in the U.K., costs to develop the compliance (see Part I, Item 1. Financial Statements, Note 11, "Commitments and risk management support functions across Europe and costs associated with new product development.Contingencies"). Other increases include $3.3$11.8 million of mutual fund expenses due in part to a $5.3 millionfund reimbursement settlement cost associated with historical management fees in the first quarter of travel expenses,2014 and $2.8to a $2.5 million legal settlement credit in the first quarter of VAT taxes. These2013. The remaining increase of $9.8 million include increases are offset by a decrease of $13.4 million related to lower legal and fundin product launch costs of our CIP and a decrease of $2.0 million of other general and administrative costs including amortization of intangibles in the nine months endedSeptember 30, 2013.costs.
Transaction and integration
TransactionThere were no transaction and integration charges were $3.2 millionin the ninethree months endedSeptember 30,March 31, 2014 (three months ended March 31, 2013 (nine months endedSeptember 30, 2012:$5.61.4 million). Transaction and integration expenses during the ninethree months endedSeptember 30, 2013 and 2012March 31, 2013 relate to fund mergers and include professional services and shareholder communications costs. These costs ceased in the first half of 2013.
Operating Income, Adjusted Operating Income, Operating Margin and Adjusted Operating Margin
Operating income increaseddecreased by $189.8$22.7 million (29.8% (8.5%) to $826.9244.3 million in the ninethree months endedSeptember 30, 2013March 31, 2014 (nine(three months endedSeptember 30, 2012March 31, 2013: $637.1267.0 million). Operating margin (operating income divided by operating revenues), decreased to 19.2% in the three months ended increasedMarch 31, 2014 from 21.2%24.0% in the ninethree months endedSeptember 30, 2012 to 24.2% in the nine months endedSeptember 30,March 31, 2013. The increasedecrease in operating income and margin resulted from a higherlower relative increase in operating revenues (13.8%(14.1%) than in operating expenses (9.5%(21.3%). during the period. Adjusted operating income increased by $191.0$56.8 million (25.3% (18.5%) to $944.9$363.0 million in the ninethree months endedSeptember 30, 2013March 31, 2014 from $753.9$306.2 million in the ninethree months endedSeptember 30, 2012March 31, 2013. Adjusted operating margin increased to 39.5%40.9% in the ninethree months endedSeptember 30, 2013March 31, 2014 from 35.8%38.9% in the ninethree months endedSeptember 30, 2012March 31, 2013. See “Schedule of Non-GAAP Information” for definitions of these measures and a reconciliation of operating revenues to net revenues, a reconciliation of operating income to adjusted operating income and additional important disclosures regarding net revenues, adjusted operating income and adjusted operating margin.

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Other Income and Expenses
The main categories of other income and expenses, and the dollar and percentage changes between periods are as follows:
    Variance
Nine months ended September 30,Three months ended March 31, 2014 vs 2013
$ in millions2013 2012 $ Change % Change2014 2013 $ Change % Change
Equity in earnings of unconsolidated affiliates25.3
 21.8
 3.5
 16.1 %10.0
 8.1
 1.9
 23.5 %
Interest and dividend income6.8
 7.1
 (0.3) (4.2)%2.9
 2.2
 0.7
 31.8 %
Interest expense(29.4) (39.6) 10.2
 (25.8)%(18.7) (9.7) (9.0) 92.8 %
Other gains and losses, net20.8
 29.3
 (8.5) (29.0)%6.6
 17.7
 (11.1) (62.7)%
Other income/(loss) of CSIP, net8.2
 —
 8.2
 N/A
Other income and expenses of CIP:           

 

Interest and dividend income of CIP147.5
 206.4
 (58.9) (28.5)%48.3
 50.3
 (2.0) (4.0)%
Interest expense of CIP(96.8) (134.4) 37.6
 (28.0)%(30.3) (32.7) 2.4
 (7.3)%
Other gains/(losses) of CIP, net15.5
 (69.9) 85.4
 N/A
26.5
 (21.1) 47.6
 (225.6)%
Total other income and expenses89.7
 20.7
 69.0
 N/A
53.5
 14.8
 38.7
 261.5 %
Equity in earnings of unconsolidated affiliates
Equity in earnings of unconsolidated affiliates increased by $3.5$1.9 million (16.1% (23.5%) to $25.310.0 million in the ninethree months endedSeptember 30, 2013March 31, 2014 (nine(three months endedSeptember 30, 2012March 31, 2013: $21.88.1 million). The increase in equity in earnings is impacted by ancomprised of a $3.3 million increase in our share of $3.3earnings of our joint venture investments in China, $3.0 million in net increases in our share of the market-driven valuation changeschange in the underlying holdings of certainour private equity partnership investment and aninvestments, $0.1 million increase in earnings from our real estate partnership investments, partially offset by decreases of $0.3the same nature of $3.5 million in the joint venture investments from the comparative period.our investment in Invesco Mortgage Capital Inc. and $1.0 million in certain other partnerships.
Interest and dividend income and interest expense
Interest and dividend income decreasedincreased by $0.7 million (31.8%) to $0.32.9 million in the three months ended March 31, 2014 (three months ended March 31, 2013: $2.2 million).
Interest expense increased by $9.0 million (4.2%92.8%) to $6.818.7 million in the ninethree months endedSeptember 30, 2013March 31, 2014 (nine(three months endedSeptember 30, 2012March 31, 2013: $7.19.7 million).

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Interest expense decreased by $10.2 million (25.8%) primarily due to$29.4 million in the nine months endedSeptember 30, 2013 (nine months endedSeptember 30, 2012: $39.6 million) reflecting the changes in long-term financing arrangements made induring the fourth quarter of 2012 to long-term financing arrangements.2013 which increased the overall borrowing costs versus the comparative period.
Other gains and losses, net
Other gains and losses, net were a net gain of $20.86.6 million in the ninethree months endedSeptember 30, 2013March 31, 2014 as compared to a net gain of $29.317.7 million in the ninethree months endedSeptember 30, 2012March 31, 2013. Included inwithin other gains and losses, fornet in the ninethree months endedSeptember 30, 2013March 31, 2014 is a net gain of $27.8$3.9 million resulting from the appreciation of investments held for our deferred compensation plans (nine(three months endedSeptember 30, 2012March 31, 2013: $18.0 million net gain) and net realized gains from available-for-sale and other investments of $2.7 million (three months ended $17.4March 31, 2013: $1.7 million net gain). The three months ended March 31, 2013 net gain). These gains are offset byalso included a net loss of $4.3 million on the liquidation of a co-investment and the sale of other securities (nine months endedSeptember 30, 2012: $2.8 million net realized gains), and a loss of $1.7$0.4 million related to the mark-to-market of foreign exchange put option contracts intended to provide protection against the impact of a significant decline in the pound sterling/U.S. dollarPound Sterling/U.S Dollar foreign exchange rate (nine months endedSeptember 30, 2012: loss of $2.4 million). In the nine months endedSeptember 30, 2013, we incurred $1.0and $1.6 million in net foreign exchange losses on inter-groupthe revaluation of intercompany foreign currency denominated loans (nine months endedSeptember 30, 2012: gainsinto the various functional currencies of $0.5 million). The nineour subsidiaries.
Other income/(loss) of CSIP
In the three months ended September 30, 2012 also include aMarch 31, 2014, other income/(loss) of CSIP, net gaintotaled $8.2 million in income and consists of $8.3$1.7 million related toof interest and dividend income and other gains/(losses) of $6.5 million on investment holdings. CSIP products were initially consolidated in the salethird quarter of CLO management contracts.2013. See Part I, Item 1, Financial Statements - Notes 1, "Accounting Policies" and 12, “Consolidated Sponsored Investment Products,” for additional details.

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Non-operating income and expense of CIP
In the nine months endedSeptember 30, 2013, interestInterest income of CIP decreasedresults from interest generated by $58.9 million (28.5%)the collateral assets held by consolidated CLOs, which is used to $147.5 million (nine months endedSeptember 30, 2012: $206.4 million) primarily duesatisfy the interest expenses of the notes issued by the consolidated CLOs and other CLO operating expense requirements, including the payment of the management and performance fees to the impact of the third quarter 2012 sale of our management agreements and equity interests in certain CLOs. Interest expense of CIP decreased by $37.6 million (28.0%) to $96.8 million (nine months endedSeptember 30, 2012: $134.4 million), also primarily due to the impact of the third quarter 2012 sale of our management agreements and equity interests in certain CLOs.company as investment manager. See Part I, Item 1, Financial Statements - Note 13, "Consolidated“Consolidated Investment Products,"” for additional information regardingdetails.
In the three months ended March 31, 2014, interest and dividend income of CIP decreased by $2.0 million (4.0%) to $48.3 million (three months ended March 31, 2013: $50.3 million) primarily due to the impact of deconsolidated CLOs. Interest expense of CIP decreased by $2.4 million (7.3%) to $30.3 million (three months ended March 31, 2013: $32.7 million),also primarily due to the CLO deconsolidation during the period.impact of deconsolidated CLOs.
Included in other gains/(losses) of CIP, net, are realized and unrealized gains and losses on the underlying investments and debt of CIP. In the ninethree months endedSeptember 30, 2013March 31, 2014, other gains and losses of CIP were a net gain of $15.526.5 million, as compared to a net loss of $69.921.1 million in the ninethree months endedSeptember 30, 2012March 31, 2013. The net gain in the 20132014 period is primarily due to gains associated with an increase in market value of CLO and private equity and CLO investments exceeding losses associated with the increase in market value of the long-term debt of CLOs. The net loss in the 2012 period was primarily due to losses associated with real estate investments and increases in the market value long-term debt of CLOs that more than offset gains in the market value of investments held by CLOs.
Net impact of CIP and related noncontrolling interests in noncontrollingconsolidated entities
As illustrated in the Summary of Income Statement Impact of CIP for the nine months endedSeptember 30, 2013 and 2012table at the beginning of this Results of Operations section, the consolidation of CIPinvestment products during the ninethree months endedSeptember 30, 2013March 31, 2014 resulted in a decreasean increase to net income of $8.321.4 million before attribution to noncontrolling interests. The income attributed toInvesco invests in only a portion of these products, and as a result this net gain is offset by noncontrolling interests wasof $1.516.1 million, resulting in a net decreaseincrease in net income of the company of $9.85.3 million.
The consolidation of CIPinvestment products during the ninethree months endedSeptember 30, 2012March 31, 2013 resulted in a $72.2 milliondecrease to net income of $17.1 million before attribution to noncontrolling interests. This net loss is offset by noncontrolling interests of $59.1$20.2 million,, resulting in a net decreaseincrease in net income of the company of $13.1$3.1 million.
Noncontrolling interests in consolidated entities represent the profit or loss amounts attributed to third party investors in CIP. Movements in amounts attributable to noncontrolling interests in consolidated entities on the company's Condensed Consolidated Statements of Income generally offset the gains and losses, interest income and interest expense of CIP.
Additionally, CIP represent less than 1% of the company's AUM. Therefore, the net gains or losses of CIP are not indicative of the performance of the company's aggregate assets under management.
CIP are taxed at the investor level and not at the product level; therefore, there is no tax provision reflected in the net impact of CIP.
Income Tax Expense
The company's 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 company's subsidiaries. The majority of our profits are earned in the U.S., the U.K., and Canada.
The enacted U.K. statutory tax rate, for US GAAP purposes, was 23% as of March 31, 2014 and 21% effective April 1, 2014. The 2013 UK Finance Bill, enacted for US GAAP purposes on July 17, 2013 further reduces the rate to 20% (previously 21%) from April 1, 2015. As of March 31, 2014, the Canadian federal and provincial statutory tax rate was 26.5%. The U.S. federal statutory tax rate was 35%.
Our effective tax rate on continuing operations decreased to 28.7%29.9% for the ninethree months endedSeptember 30, 2013March 31, 2014 (nine(three months endedSeptember 30, 2012March 31, 2013: 31.3%30.6%) due to a smaller impact from losses in non-controlling interests in consolidated entities in the period.. The nine months ended September 30, 2012 rate also reflects an unfavorable impact from the gain on saleinclusion of CLO management contracts during the quarter. Net lossesgains from non-controlling interests in consolidated entities increaseddecreased our effective tax rate by 2.0% in 2014 where the inclusion of losses increased our rate by 2.3% in 2013. 2014 included a 0.1%0.9% rate increase as result of tax legislation changes in 2013New York and 2.6% in 2012.a 3.2% rate increase as a result of the FCA penalty referenced above. The remainder of the rate movement was primarily due to changes in the mix of pre-tax income.

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Income from Discontinued Operations
On December 31, 2013, the company completed the sale of Atlantic Trust. The operating results and the gain associated with the sale are reflected as discontinued operations netin the Condensed Consolidated Statements of taxes
The componentsIncome and are therefore excluded from the continuing operations of income from discontinued operations are includedInvesco. Comparative periods shown in the Condensed Consolidated Statements of Income have been adjusted to conform with this presentation. See Part I, Item I,1. Financial Statements, Note 15, “Discontinued Operations,” for the "Discontinued Operations."nine months endedSeptember 30, 2013 and 2012.


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Schedule of Non-GAAP Information
We are presenting the following non-GAAP performance measures: net revenuerevenues (and by calculation, net revenue yield on AUM), adjusted operating income (and by calculation, adjusted operating margin), adjusted net income attributable to common shareholders (and by calculation, adjusted diluted earnings per share (EPS)). We believe these non-GAAP measures provide greater transparency into our business on an ongoing operations basis and allow more appropriate comparisons with industry peers. Management uses these performance measures to evaluate the business, and they are consistent with internal management reporting. The most directly comparable U.S. GAAP measures are operating revenues (and by calculation, gross revenue yield on AUM), operating income (and by calculation, operating margin), and net income attributable to common shareholders (and by calculation, diluted EPS). Each of these measures is discussed more fully below.
These non-GAAP measures 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. Additional reconciling items may be added in the future to these non-GAAP measures if deemed appropriate. The Schedule of Non-GAAP Information contained in the company’s most recent annual report on Form 10-K contains expanded definitions oftax effect related to reconciling items from U.S. GAAPthat are presented net of tax have been calculated based on the tax rate attributable to non-GAAP information, including the reasons why management believes thatjurisdiction to which the presentation of our non-GAAP measures provides useful information to investors.transaction relates.
The following are reconciliations of operating revenues, operating income (and by calculation, operating margin), and net income attributable to common shareholders (and by calculation, diluted EPS) on a U.S. GAAP basis to net revenues, adjusted operating income (and by calculation, adjusted operating margin), and adjusted net income attributable to common shareholders (and by calculation, adjusted diluted EPS). Notes to the reconciliations follow the tables.
Reconciliation of Operating revenues to Net revenues:
 Three months ended March 31,
$ in millions2014 2013
Operating revenues, U.S. GAAP basis1,269.5
 1,112.2
Proportional share of revenues, net of third-party distribution expenses, from joint venture investments (1)
15.3
 10.4
Third party distribution, service and advisory expenses (2)
(405.4) (346.1)
CIP (3)
8.4
 8.8
Other reconciling items (6)
—
 2.7
Net revenues887.8
 788.0
Reconciliation of Operating income to Adjusted operating income:
 Three months ended March 31,
$ in millions2014 2013
Operating income, U.S. GAAP basis244.3
 267.0
Proportional share of revenues, net of third-party distribution expenses, from joint venture investments (1)
9.6
 3.9
CIP (3)
21.0
 11.3
Acquisition/disposition related adjustments (4)
3.8
 7.8
Compensation expense related to market valuation changes in deferred compensation plans (5)
4.4
 7.5
Other reconciling items (6)
79.9
 8.7
Adjusted operating income363.0
 306.2
    
Operating margin*19.2% 24.0%
Adjusted operating margin**40.9% 38.9%

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Reconciliation of Net income attributable to common shareholders to Adjusted net income attributable to common shareholders:
 Three months ended March 31,
In millions, except per share data2014 2013
Net income attributable to common shareholders, U.S. GAAP basis187.8
 222.2
CIP, eliminated upon consolidation (3)
(5.3) (3.1)
Acquisition/disposition related adjustments, net of tax (4)
10.9
 8.2
Deferred compensation plan market valuation changes and dividend income less compensation expense, net of tax (5)
(0.3) (8.5)
Other reconciling items, net of tax (6)
68.5
 6.7
Adjusted net income attributable to common shareholders261.6
 225.5
    
Average shares outstanding - diluted437.4
 449.0
Diluted EPS
$0.43
 
$0.49
Adjusted diluted EPS***
$0.60
 
$0.50
 Three months ended September 30, Nine months ended September 30,
$ in millions, except per share data2013 2012 2013 2012
Operating revenues, U.S. GAAP basis1,171.8
 1,013.9
 3,419.5
 3,003.7
Third-party distribution, service and advisory expenses(1)
(380.9) (326.2) (1,093.0) (958.2)
Third-party distribution expense related to the European infrastructure initiative (6)
—
 —
 2.7
 —
Proportional share of net revenues from joint venture arrangements(2)
13.5
 9.0
 35.7
 27.5
Management fees earned from CIP eliminated upon consolidation(3)
8.6
 11.1
 21.3
 31.2
Performance fees earned from CIP eliminated upon consolidation(3)
3.4
 0.4
 8.9
 1.2
Other revenues recorded by CIP(3)
—
 —
 (0.4) —
Net revenues816.4
 708.2
 2,394.7
 2,105.4
Operating income, U.S. GAAP basis286.0
 210.9
 826.9
 637.1
Proportional share of operating income from joint venture investments(2)
6.3
 3.6
 16.7
 11.6
Transaction and integration charges(4)
—
 3.0
 3.2
 5.6
Other acquisition related items(4)
—
 —
 2.4
 —
Amortization of other intangibles(4)
3.8
 4.3
 11.6
 21.6
Change in contingent consideration estimates(4)
—
 —
 —
 (2.3)
Compensation expense related to market valuation changes in deferred compensation plans(5)
6.5
 4.7
 17.0
 11.0
CIP(3)
25.0
 13.8
 54.6
 55.4
Third-party distribution expense related to the European infrastructure initiative (6)
—
 —
 2.7
 —
Other reconciling items(7)
0.5
 4.0
 9.8
 13.9
Adjusted operating income328.1
 244.3
 944.9
 753.9
Operating margin*24.4% 20.8% 24.2% 21.2%
Adjusted operating margin**40.2% 34.5% 39.5% 35.8%
Net income attributable to common shareholders, U.S. GAAP basis228.1
 170.6
 652.9
 518.4
Transaction and integration charges, net of tax(4)
—
 1.9
 2.0
 3.5
Other acquisition related items(4)
—
 —
 2.4
 —
Amortization of other intangibles, net of tax(4)
3.4
 3.9
 10.4
 19.4
Change in contingent consideration estimates(4)
—
 —
 —
 (2.3)
Deferred compensation plan market valuation changes and dividend income less compensation expense, net of tax(5)
(2.5) (4.5) (10.0) (7.2)
Deferred income taxes on intangible assets(4)
5.4
 5.1
 16.1
 15.1
CIP(3)
9.4
 11.1
 9.8
 13.1
Gain on sale of management contracts, net of tax(6)
—
 (5.8) —
 (5.8)
Third-party distribution expense related to the European infrastructure initiative, net of tax (6)
—
 —
 2.1
 —
Other reconciling items(7)
0.8
 3.6
 7.6
 12.3
Discontinued operations, net of tax(4)
1.4
 (3.2) 1.9
 (7.3)
Adjusted net income attributable to common shareholders246.0
 182.7
 695.2
 559.2
Average shares outstanding — diluted448.8
 452.8
 449.4
 454.6
Diluted EPS
$0.51
 
$0.38
 
$1.45
 
$1.14
Adjusted diluted EPS***
$0.55
 
$0.40
 
$1.55
 
$1.23

___________________________
*Operating margin is equal to operating income divided by operating revenues.
**Adjusted operating margin is equal to adjusted operating income divided by net revenues.
***Adjusted diluted EPS is equal to adjusted net income attributable to common shareholders divided by the weighted average shares outstanding amount used in the calculation of diluted EPS.

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(1)Proportional share of net revenues and operating income from joint venture investments
The company's two joint venture investments in China are proportionately consolidated in the company's non-GAAP measures. Enhancing our operations in China is one effort that we believe could improve our competitive position over time. Accordingly, we believe that it is appropriate to evaluate the contribution of our joint venture investments to the operations of the business.
(2)Third-party distribution, service and advisory expenses
Third-party distribution, service and advisory expenses include renewal commissions, management fee rebates and distribution costs (12b-1 and marketing support) paid to brokers and independent financial advisors.advisors, and other service and administrative fees paid to third parties. While the terms used for these types of expenseexpenses vary by geography, they are all expense items that are closely linked to the value of AUM and the revenue earned by Invesco from AUM. Since the company has been deemed to be the principal in the third-party arrangements, the company must reflect these expenses gross of operating revenues under U.S. GAAP.
Management believes that the deduction of third-party distribution, service and advisory expenses from operating revenues in the computation of net revenues (and by calculation, net revenue yield on AUM) and the related computation of adjusted operating income (and by calculation, adjusted operating margin) appropriately reflects the nature of these expenses as revenue-sharing activities, as these costs are passed through to external parties who perform functions on behalf of, and distribute, the company’s managed funds. Further, these expenses vary extensively by geography due to the differences in distribution channels. The net presentation assists in identifying the revenue contribution generated by the business, removing distortions caused by the differing distribution channel fees and allowing for a fair comparison with U.S. peer investment managers and within Invesco’s own investment units. Additionally, management evaluates net revenue yield on AUM, which is equal to net revenues divided by average AUM during the reporting period. This financial measure is an indicator of the basis point net revenues we receive for each dollar of AUM we manage and is useful when evaluating the company’s performance relative to industry competitors and within the company for capital allocation purposes.

(2)    Proportional share
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The company's two China joint venture investments are proportionally consolidated in the company's non-GAAP measures. Enhancing our operations in China is one effort that we believe could improve our competitive position over time. Accordingly, we believe that it is appropriate to evaluate the contribution of our joint venture investments to the operations of the business.
(3)    CIP

(3)CIP
See Part I, Item 1, Financial Statements, Note 13, - “Consolidated Investment Products” for a detailed analysis of the impact to the company’s Condensed Consolidated Financial Statements from the consolidation of investment products.CIP. The reconciling items add back the management and performance fees earned by Invesco from the consolidated products and remove the revenues and expenses recorded by the consolidated products that have been included in the U.S. GAAP Condensed Consolidated Statements of Income. Additionally, before
Management believes that the consolidation of investment products may impact a reader's analysis of our underlying results of operations and could result in investor confusion or the company's interestproduction of information about the company by analysts or external credit rating agencies that is accountednot reflective of the underlying results of operations and financial condition of the company. Accordingly, management believes that it is appropriate to adjust operating revenues, operating income and net income for as equity method (private equitythe impact of CIP in calculating the respective net revenues, adjusted operating income and real estate partnership funds) or available-for-sale (CLOs) investments.adjusted net income.
(4)     CIP Revenue:Acquisition-related reconciling items and discontinued operations
Acquisition-related
 Three months ended March 31,
$ in millions, except per share data2014 2013
Management fees earned from CIP, eliminated upon consolidation5.9
 6.3
Performance fees earned from CIP, eliminated upon consolidation2.5
 2.5
CIP related adjustments in arriving at net revenues8.4
 8.8
(4)Acquisition/disposition related adjustments
Acquisition/disposition related adjustments include transaction and integration expenses, and intangible asset amortization, employee severance expenses associated with the cessation of activities related to acquired assets, anda previous acquisition, tax cash flow benefits resulting from tax amortization of goodwill and indefinite-lived intangible assets. They also include employee severance expense associated withassets, and all related tax effects.
While finite-lived intangible assets are amortized under U.S. GAAP, there is no amortization charge on goodwill and indefinite-lived intangibles. In certain qualifying situations, these can be amortized for tax purposes, generally over a 15-year period, as is the cessation of activities related to a previous acquisition. These charges reflect the legal, regulatory, advisory, valuation, integration-related employee incentive awards and other professional or consulting fees, general and administrative costs, including travel costs related to the transaction and the costs of temporary staff involved in executing business combinations, and the post closing costs of integrating acquired businesses into the company’s existing operations including incremental costs associated with achieving synergy savings. Additionally, acquisition-related reconciling items include changes in estimates of acquisition earn-out liabilities booked from prior acquisitions, which is offsetcase in the period by increased amortizationU.S. These cash flows (in the form of reduced taxes payable) represent tax benefits that are not included in the Condensed Consolidated Statements of Income absent an impairment charge or the disposal of the related business. The company receives these cash flow benefits but does not anticipate a sale or impairment of these assets in the foreseeable future, and therefore the deferred tax liability recognized under U.S. GAAP is not expected to be used either through a credit in the write-offCondensed Consolidated Statements of related management contract intangible assets.Income or through settlement of tax obligations.

TheIn addition, the results of the discontinued operations of Atlantic Trust have been excluded in arriving at adjusted net income attributable to common shareholders, which is the basis of calculating adjusted diluted EPS. Accordingly, the company's non-GAAP financial measures reflect only the continuing business of Invesco. Management believes this presentation assists in evaluating the ongoing business performance and aids comparability with peer companies that may not have similar discontinued operations.
(5)Transaction and integration expenses reflect the legal, regulatory, advisory, valuation, integration-related employee incentive awards and other professional or consulting fees, general and administrative costs, including travel costs related to transactions and the costs of temporary staff involved in executing the transaction, and the post-closing costs of integrating the acquired business into the company’s existing operations, including incremental costs associated with achieving synergy savings. Additionally, transaction and integration expenses include legal costs related to the defense of legal challenges to auction rate preferred securities redemptions with respect to various closed-end funds included in a prior acquisition. See Part I, Item 1, Financial Statements, Note Market movement on deferred compensation plan liabilities11 - “Commitments and Contingencies” for additional information related to this matter.
Management believes it is useful to investors and other users of our Condensed Consolidated Financial Statements to adjust for these acquisition/disposition related adjustments in arriving at adjusted operating income, adjusted operating margin and adjusted diluted EPS, as this will aid comparability of our results period to period, and aid comparability with peer companies that may not have similar acquisition and disposition related charges.

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See table below for a reconciliation of acquisition/disposition related items:
 Three months ended March 31,
$ in millions2014 2013
Acquisition/disposition related:   
Intangible amortization expense3.8
 4.0
Employee compensation expense—
 2.4
Transaction and integration expense—
 1.4
Adjustments to operating income3.8
 7.8
Taxation:   
Taxation on amortization(0.4) (0.4)
Deferred taxation5.5
 5.4
Taxation on transaction and integration—
 (0.5)
(Income)/loss from discontinued operations, net of taxes2.0
 (4.1)
Adjustments to net income attributable to common shareholders10.9
 8.2
(5)Market movement on deferred compensation plan liabilities
Certain deferred compensation plan awards involve a return to the employee linked to the appreciation (depreciation) of specified investments, typically the funds managed by the employee. Invesco hedges economically the exposure to market movements by holding these investments on its balance sheet. U.S. GAAP requires the appreciation (depreciation) in the compensation liability to be expensed over the award vesting period in proportion to the vested amount of the award as part of compensation expense. The full value of the investment appreciation

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(depreciation) is immediately recorded below operating income in other gains and losses. This creates a timing difference between the recognition of the compensation expense and the investment gain or loss impacting net income attributable to common shareholders and diluted EPS which will reverse over the life of the award and net to zero at the end of the multi-year vesting period. During periods of high market volatility these timing differences impact compensation expense, operating income and operating margin in a manner which, over the life of the award, will ultimately be offset by gains and losses recorded below operating income on the Condensed Consolidated Statements of Income. The non-GAAP measures exclude the mismatch created by differing U.S. GAAP treatments of the market movement on the liability and the investments.
Since these plans are hedged economically, management believes it is useful to reflect the offset ultimately achieved from hedging the investment market exposure in the calculation of adjusted operating income (and by calculation, adjusted operating margin) and adjusted net income attributable to common shareholders (and by calculation, adjusted diluted EPS), to produce results that will be more comparable period to period. The related fund shares will have been purchased on or around the date of grant, eliminating any ultimate cash impact from market movements that occur over the vesting period.
Additionally, dividend income from investments held to hedge economically deferred compensation plans is recorded as dividend income and as compensation expense on the company’s Condensed Consolidated Statements of Income on the record dates. This dividend income is passed through to the employee participants in the plan and is not retained by the company. The non-GAAP measures exclude this dividend income and related compensation expense.

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(6)Third party distribution expense related to the European infrastructure initiativeOther reconciling items
As partEach of these other reconciling items has been adjusted from U.S. GAAP to arrive at the company's non-GAAP financial measures for the reasons either outlined in the paragraphs above, due to the unique character and magnitude of the outsourcingreconciling item, or because the item represents a continuation of the U.K. transfer agency, as discussed belowa reconciling item adjusted from U.S. GAAP in footnote 7, "Other reconciling items," operational process changes resulted in an accounting adjustment recognizing additional distribution expense of $2.7 million ($2.1 million, net of tax) in the nine months endedSeptember 30, 2013. This additional expense is attributable to periodsa prior to 2013.period.
(7)    Other reconciling items
  Three months ended March 31,
$ in millions 2014 2013
Other non-GAAP adjustments:    
Third party distribution, service and advisory expenses - European infrastructure initiative (a)
 —
 2.7
Adjustments to net revenues: —
 2.7
Business optimization charges: (b)
    
Employee compensation 7.2
 —
Property, office and technology 35.8
 —
Regulatory charge (c)
 31.1
 —
Legal fees for regulatory charge (c)
 0.5
 —
Fund reimbursement settlement costs (d)
 5.3
 —
European infrastructure initiative (a)
 —
 3.0
U.K. FSCS levy true-up (e)
 —
 3.0
Adjustments to operating income: 79.9
 8.7
Foreign exchange hedge amortization (f)
 (0.2) (0.2)
Taxation:    
Taxation on European infrastructure initiative (a)
 —
 (1.1)
Taxation on business optimization charges (b)
 (9.0) —
Taxation on regulatory charges (c)
 (0.1) —
Taxation on fund reimbursement settlement costs (d)
 (2.1) —
Taxation on U.K. FSCS levy true-up (e)
 —
 (0.7)
Adjustments to net income attributable to common shareholders 68.5
 6.7
a.
European infrastructure transformational initiative: The company has outsourced its European transfer agency and is makingmade certain structural changes to product and distribution platforms. Expenses incurredThis initiative was completed in 2013.
b.Business optimization: Operating expenses for first quarter include property related charges of $35.8 million associated with vacating leased properties as part of a business optimization initiative undertaken during the period. Employee compensation expenses also includes severance costs of $7.2 million related to the European infrastructure activities are excludedinitiative.
c.Operating expenses for first quarter include a charge of £18.6 million ($31.1 million) in arriving atrespect of the non-GAAP financial information. Forpenalty under the threesettlement of an enforcement proceeding reached with the U.K. Financial Conduct Authority (FCA) pertaining to the company's compliance with certain FCA rules and nine months endedSeptember 30, 2013, this adjustment is an increaseregulations for the period from May 2008 to November 2012. This charge, together with settlement-related legal costs of $0.3$0.5 million, and a decrease of $1.0 million, respectively, in compensation expenses (three and nine months endedSeptember 30, 2012: decrease of $1.3 million and $3.6 million, respectively); decreases of $0.7 million and $3.5 million, respectively, has been recorded in general and administrative costs, primarily related to professional contractor services and mutual fund costs (three months and nine months endedSeptember 30, 2012: $1.4 million and $5.2 million, respectively); zero and a decrease of $0.2 million, respectively, in marketing costs (three and nine months endedSeptember 30, 2012: decreases of $0.6 million and $1.5 million, respectively); and decreases of $0.1 million and $2.1 million of property, office and technology costs, respectively (three and nine months endedSeptember 30, 2012: $0.7 million and $3.5 million, respectively). The company's income tax provision included a tax credit of $0.1 million and $1.3 million in the three and nine months endedSeptember 30, 2013, respectively, relating to these adjustments (three and nine months endedSeptember 30, 2012: $0.7 million and $2.7 million, respectively).expenses.
Included within other gains and losses, net is a loss of $1.1 million and $1.8 million, respectively, for the three and nine months endedSeptember 30, 2013 (three and nine months endedSeptember 30, 2012: $0.4 million and $1.4 million, respectively) related to the mark-to-market of foreign exchange put option contracts intended to provide protection against the impact of a significant decline in the pound sterling/U.S dollar foreign exchange rate. During the first quarter of 2013, the company purchased new contracts for a total of $1.8 million to extend the existing coverage to March 25, 2014. The adjustment from U.S. GAAP to non-GAAP earnings is a credit of $0.5 million and a charge of $0.4 million, respectively, for the three and nine months endedSeptember 30, 2013 that removes the impact of market volatility (three and nine months endedSeptember 30, 2012: $0.4 million and $1.4 million credit, respectively). Therefore, the company's non-GAAP results include only the amortization of the cost of the contracts during the contract period. The company recorded a $0.1 million tax charge for the three months ended and $0.1 million tax credit for the nine months endedSeptember 30, 2013 (three and nine months endedSeptember 30, 2012: $0.1 million and $0.3 million charges, respectively), relating to this non-GAAP adjustment.
d.
General and administrative expenses for the first quarter include a $5.3 million fund reimbursement settlement cost associated with historical management fees.
e.Included within general and administrative expenses for the three and nine months endedSeptember 30, March 31, 2013 is was a charge of zero and $3.0 million, respectively (three and nine months endedSeptember 30, 2012: none) relating to the true up of a prior year levy from the U.K. Financial Services Compensation Scheme. Assessments were levied upon all Financial Services Authority (FSA)-registered investment management companies in proportion
f.Included within other gains and losses, net is the mark-to-market of foreign exchange put option contracts intended to their “eligible income” (as defined byprovide protection against the FSA, now split into the Financial Conduct Authority and the Prudential Regulation Authorityimpact of a significant decline in the U.K.)Pound Sterling/U.S. Dollar foreign exchange rate. These contracts provide coverage through March 25, 2014. The adjustment from U.S. GAAP to cover claims resulting from failuresnon-GAAP earnings removes the impact of non-affiliated investment firms. Themarket volatility; therefore, the company's income tax provision included tax benefitsnon-GAAP results include only the amortization of $0.7 million in the nine months endedSeptember 30, 2013 relating to this charge.cost of the contracts during the contract period.
Management believes that the exclusion of these items, due to their unique character and magnitude, from net income provides useful information to investors, as this view is consistent with how management evaluates the performance of

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the business. Exclusion of these items will aid in comparability of our results from period to period and the comparability of our results with those of peer investment managers. 


80

Balance Sheet Discussion
A summary of the balance sheet impact of CIP is presented below. The impact is illustrated in the tables immediately below by a column which shows the dollar-value change in the consolidated figures, as caused by the consolidation of CIP. For example, the impact of CIP on accounts receivable and investments at March 31, 2014 were reductions of $2.6 million and $66.6 million, respectively. This indicates that the consolidation of CIP reduced accounts receivable and investments by these amounts, reflecting the elimination upon consolidation of the underlying net interests in CIP held by the company.

  September 30, 2013 December 31, 2012 September 30, 2012
$ in millions Impact of CIP Consolidated Total Impact of CIP Consolidated Total Impact of CIP Consolidated Total
ASSETS            
Cash and cash equivalents —
 1,174.5
 —
 835.5
 —
 880.1
Unsettled fund receivables —
 1,003.1
 —
 550.1
 —
 596.0
Accounts receivable (4.7) 475.6
 (4.4) 449.4
 (5.4) 406.1
Investments (77.8) 705.0
 (66.6) 610.7
 (110.2) 587.7
Assets of consolidated sponsored investment products —
 94.3
 —
 —
 —
 —
Assets of CIP:            
Cash and cash equivalents of CIP 445.0
 445.0
 287.8
 287.8
 552.7
 552.7
Accounts receivable and other assets of CIP 62.2
 62.2
 84.1
 84.1
 58.3
 58.3
Investments of CIP 4,514.6
 4,514.6
 4,550.6
 4,550.6
 4,717.9
 4,717.9
Assets held for policyholders —
 1,449.0
 —
 1,153.6
 —
 1,139.3
Prepaid assets —
 111.4
 —
 99.9
 —
 103.8
Assets held for sale —
 106.7
 —
 —
 —
 —
Other assets —
 107.6
 —
 146.8
 —
 127.0
Deferred tax asset, net —
 10.9
 —
 38.4
 —
 26.5
Property and equipment, net —
 336.4
 —
 349.6
 —
 329.9
Intangible assets, net —
 1,268.6
 —
 1,287.7
 —
 1,295.8
Goodwill —
 6,898.6
 —
 7,048.2
 —
 7,039.9
Total assets 4,939.3
 18,763.5
 4,851.5
 17,492.4
 5,213.3
 17,861.0
LIABILITIES            
Accrued compensation and benefits —
 565.5
 —
 609.8
 —
 495.4
Accounts payable and accrued expenses —
 660.3
 (8.9) 626.4
 (8.8) 647.3
Liabilities of CIP:            
Debt of CIP 4,003.1
 4,003.1
 3,899.4
 3,899.4
 3,855.0
 3,855.0
Other liabilities of CIP 251.0
 251.0
 104.3
 104.3
 329.8
 329.8
Policyholder payables —
 1,449.0
 —
 1,153.6
 —
 1,139.3
Unsettled fund payables —
 993.8
 —
 552.5
 —
 598.2
Long-term debt —
 1,387.6
 —
 1,186.0
 —
 1,285.1
Deferred tax liabilities, net —
 333.8
 —
 311.4
 —
 313.5
Total liabilities 4,254.1
 9,644.1
 3,994.8
 8,443.4
 4,176.0
 8,663.6
EQUITY    
        
Equity attributable to common shareholders:    
        
Common shares —
 98.1
 —
 98.1
 —
 98.1
Additional paid-in-capital —
 6,080.1
 —
 6,141.0
 —
 6,122.6
Treasury shares —
 (1,363.5) —
 (1,382.9) —
 (1,323.0)
Retained earnings 11.3
 3,175.0
 21.2
 2,801.3
 18.9
 2,720.1
Retained earnings appropriated for investors in CIP 106.3
 106.3
 128.8
 128.8
 159.1
 159.1
Accumulated other comprehensive income, net of tax (11.2) 434.8
 (20.9) 530.5
 (18.4) 538.2
Total equity attributable to common shareholders 106.4
 8,530.8
 129.1
 8,316.8
 159.6
 8,315.1
Equity attributable to nonredeemable noncontrolling interests in consolidated entities 578.8
 588.6
 727.6
 732.2
 877.7
 882.3
Total equity 685.2
 9,119.4
 856.7
 9,049.0
 1,037.3
 9,197.4
Total liabilities and equity 4,939.3
 18,763.5
 4,851.5
 17,492.4
 5,213.3
 17,861.0

The majority of the company’s CIP are CLO-related. The collateral assets of the CLOs are held solely to satisfy the obligations of the CLOs. The company has no right to the benefits from, nor does it bear the risks associated with, the collateral assets held by the CLOs, beyond the company’s minimal direct investments in, and management fees generated from, CLOs. If the company were to liquidate, the collateral assets would not be available to the general creditors of the company, and as a result, the company does not consider them to be company assets. Likewise, if the CLOs were to liquidate, their investors would have no recourse to the general credit of the company. The company therefore does not consider this debt to be a company liability. As demonstrated by the balance sheet data that follows in this section and in the "Liquidity and Capital Resources" section, inclusion of the long-term debt of consolidated investment products within liquidity measures, such as debt-to-equity measures, causes the company to appear far more indebted than is the case.

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Summary of Balance Sheet Impact of CIP
The company’s Condensed Consolidated Statement of Changes in Equity in Part I, Item 1, “Financial Statements,” contains a detailed analysis of the changes in balance sheet equity line items. The following discussion presents a comparative analysis of significant balance sheet assets
  March 31, 2014 December 31, 2013 March 31, 2013
$ in millions Impact of CIP Consolidated Total Impact of CIP Consolidated Total Impact of CIP Consolidated Total
ASSETS            
Cash and cash equivalents —
 978.7
 —
 1,331.2
 —
 884.7
Unsettled fund receivables —
 1,510.6
 —
 932.4
 —
 941.8
Accounts receivable (2.6) 530.7
 (3.4) 500.8
 (4.3) 517.1
Investments (66.6) 868.7
 (55.3) 839.7
 (67.4) 721.6
Assets of CSIP —
 275.8
 —
 108.5
 —
 —
Assets of CIP:            
Cash and cash equivalents of CIP 780.0
 780.0
 583.6
 583.6
 764.3
 764.3
Accounts receivable of CIP 183.7
 183.7
 58.3
 58.3
 61.5
 61.5
Investments of CIP 5,173.7
 5,173.7
 4,734.7
 4,734.7
 4,661.2
 4,661.2
Assets held for policyholders —
 1,342.0
 —
 1,416.0
 —
 1,205.3
Prepaid assets —
 101.5
 —
 101.4
 —
 107.4
Other assets —
 187.4
 —
 182.1
 —
 162.2
Property and equipment, net —
 342.4
 —
 350.8
 —
 337.2
Intangible assets, net —
 1,260.6
 —
 1,263.7
 —
 1,278.5
Goodwill —
 6,810.5
 —
 6,867.3
 —
 6,891.7
Total assets 6,068.2
 20,346.3
 5,317.9
 19,270.5
 5,415.3
 18,534.5
LIABILITIES            
Accrued compensation and benefits —
 391.3
 —
 676.4
 —
 385.2
Accounts payable and accrued expenses —
 734.0
 —
 763.1
 (0.5) 634.6
Liabilities of CIP:            
Debt of CIP 4,762.7
 4,762.7
 4,181.7
 4,181.7
 4,221.4
 4,221.4
Other liabilities of CIP 621.8
 621.8
 461.8
 461.8
 445.8
 445.8
Policyholder payables —
 1,342.0
 —
 1,416.0
 —
 1,205.3
Unsettled fund payables —
 1,508.4
 —
 882.0
 —
 941.7
Long-term debt —
 1,588.7
 —
 1,588.6
 —
 1,514.5
Deferred tax liabilities, net —
 390.0
 —
 323.6
 —
 346.8
Total liabilities 5,384.5
 11,338.9
 4,643.5
 10,293.2
 4,666.7
 9,695.3
TEMPORARY EQUITY            
Redeemable noncontrolling interests in CSIP —
 101.9
 —
 —
 —
 —
PERMANENT EQUITY            
Equity attributable to common shareholders:            
Common shares —
 98.1
 —
 98.1
 —
 98.1
Additional paid-in-capital —
 6,044.3
 —
 6,100.8
 —
 6,024.3
Treasury shares —
 (1,768.3) —
 (1,700.4) —
 (1,314.7)
Retained earnings 17.8
 3,451.7
 12.5
 3,361.9
 24.3
 2,946.3
Retained earnings appropriated for investors in CIP 74.0
 74.0
 104.3
 104.3
 107.7
 107.7
Accumulated other comprehensive income, net of tax (17.8) 379.9
 (12.7) 427.9
 (24.2) 334.5
Total equity attributable to common shareholders 74.0
 8,279.7
 104.1
 8,392.6
 107.8
 8,196.2
Equity attributable to nonredeemable noncontrolling interests in consolidated entities 609.7
 625.8
 570.3
 584.7
 640.8
 643.0
Total permanent equity 683.7
 8,905.5
 674.4
 8,977.3
 748.6
 8,839.2
Total liabilities, temporary and permanent equity 6,068.2
 20,346.3
 5,317.9
 19,270.5
 5,415.3
 18,534.5
Cash and liabilities.cash equivalents
Cash and cash equivalents
decreased by $352.5 million from $1,331.2 million at December 31, 2013 to $978.7 million at March 31, 2014. See “Liquidity“Cash Flows” in the following section within this Management's Discussion and Capital Resources — Cash Flows Discussion”Analysis for details ofadditional discussion regarding the movements in cash flows during the company’s cash and cash equivalents balances in the periods presented.periods.

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Unsettled fund receivables and payables
Unsettled fund receivables increased by $453.0578.2 million from $550.1932.4 million at December 31, 2013 to $1,510.6 million at DecemberMarch 31, 2012 to $1,003.1 million at September 30, 20132014, due primarily to higher transaction activity between funds and investors in late March2014when compared to late December 20122013 in our UITs, together with U.K. and offshorecross-border funds. In the company's capacity as sponsor of UITs, the company records receivables from brokers, dealers, and clearing organizations for unsettled sell trades of securities and UITs in addition to receivables from customers for unsettled sell trades of UITs. In our U.K. and offshore activities,cross-border operations, unsettled fund receivables are created by the normal settlement periods on transactions initiated by certain clients. The presentation of the unsettled fund receivables and substantially offsetting payables ($993.81,508.4 million at September 30, 2013upMarch 31, 2014 up from $552.5882.0 million at December 31, 2012)2013) at trade date reflects the legal relationship between the underlying investor and the company.
Investments
As of September 30, 2013March 31, 2014, we had $705.0$868.7 million in investments.total investments (December 31, 2013: $839.7 million). Included in investments are $125.8229.4 million of seed money investments in affiliated funds used to seed funds as we launch new products, and $239.0238.3 million of investments related to assets held for deferred compensation plans, which are also held primarily in affiliated funds. Seed investments increaseddecreased by $12.4$4.4 million during the ninethree months ended September 30, 2013March 31, 2014, due primarily to seed money redemptions that were partially offset by the funding of seed money investments and positive market activity which were partially offset by seed money redemptions.activity. Investments held to hedge deferred compensation awards increaseddecreased by $25.511.4 million during the nine month period,, primarily attributabledue to positive market activity. redemptions of investments in affiliated funds to hedge economically employee plan awards.
Included ininvestments are $292.4341.3 million in equity method investments in our Chinese and Indian joint ventures and in certain of the company’s private equity partnerships, real estate partnerships and other co-investments (December(December 31, 2012:2013: $228.2308.2 million). The increase of $64.233.1 million in equity method investments iswas primarily driven by an $87.8increase of $25.7 million increase in our joint venturepartnership investments during the period as a result of the first quarter purchase of a 49% interest in Religare Asset Management Company Limited, additional capital contributed to one of our China joint ventures and current year earnings of $14.6 million. The increases in our joint venture investments were offset by dividends received of $14.1 million and the negative impact of foreign exchange rate movement of $12.1 million, primarily attributed to the decline of the value of the Indian rupee against the U.S. dollar. Equity method investments also increased $29.2 million due to capital calls in co-investments of $23.7 million, including $21.2$20.9 million into real estate funds $7.2and, $6.3 million due to earnings and valuation adjustments and $5.5$0.3 million due to the de-consolidation of a fund previously consolidated under ASC 810, triggered by the loss of control of the fund.positive foreign exchange movement. The increases in partnership investments were offset by distributions and capital returns of $26.9$4.6 million during the period. The remaining increase in equity method investments is due to a $7.4 million increase in our joint venture investments resulting from $6.8 million of current period negativeretained earnings and an increase of $0.6 million due to foreign exchange rate movementmovement.
Assets of CSIP
Assets of Consolidated Sponsored Investment Products (CSIP) consist of cash, investments and other assets of consolidated majority-held sponsored investment products. At March 31, 2014, CSIP assets include $251.4 million in investments December 31, 2013: $93.2 million), $12.4 million in cash and cash equivalents (December 31, 2013: $12.7 million), and $12.0 million in accounts receivable and other assets (December 31, 2013: $2.6 million). The increase in CSIP investments is primarily driven by new invested cash in the consolidationunderlying funds and reflects the deployment of two of our partnership funds.invested cash into fund investments. See Part I, Item 1, Financial Statements, Note 1, "Accounting Policies," and Note 12, "Consolidated Sponsored Investment Products," for additional information.
Assets held for policyholders and policyholder payables
One of our subsidiaries, Invesco Perpetual Life Limited, is an insurance 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 increasedecrease in the balance of assets held for policyholders and the offsetting policyholder payablesthese accounts from $1,153.61,416.0 million at December 31, 2013, to $1,342.0 million at DecemberMarch 31, 20122014, to $1,449.0 million at September 30, 2013was driven bythe result of an increasedecrease in the market values of these assets and liabilities, partlypartially offset by a decrease due to foreign exchange movement.movements.
Intangible assets, net
Intangible assets reflect a net decrease of $19.13.1 million from $1,287.71,263.7 million at December 31, 2013, to $1,260.6 million at DecemberMarch 31, 2012, to $1,268.6 million at September 30, 2013. The decrease in intangible assets is due to amortization of $13.2 million, foreign currency translation of $3.7 million and the reclassification of $2.2 million of intangible assets to held for sale assets resulting from the pending sale of Atlantic Trust.
Goodwill
Goodwill decreased by $149.6 million from $7,048.2 million at December 31, 2012, to $6,898.6 million at September 30, 20132014. The decrease in intangible assets, net is due to the impactamortization of $3.8 million, partially offset by negative foreign currency translationexchange movements of $79.5 million and to the reclassification of $70.1 million of goodwill to held for sale assets resulting from the pending sale of Atlantic Trust.$0.7 million.
Long-term debtGoodwill
Our long-term debt wasGoodwill decreased from $1,387.66,867.3 million at December 31, 2013, to $6,810.5 million at September 30, 2013March 31, 2014 (December 31, 2012: $1,186.0 million). The increase during the nine months ended September 30, 2013decrease is due to the net draw on the credit facilityforeign exchange movements of $201.5 million used to assist in funding$56.8 million. The company's annual bonus payments, related employer payroll taxes, payroll taxes on annual share award vestings, annual pension
goodwill impairment review is performed as of October 1 of each year.

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Long-term debt
contributions together with open market treasury share purchases, seed money funding and the purchaseLong-term debt increased from $1,588.6 million at December 31, 2013, to $1,588.7 million at March 31, 2014, an increase of a 49% interest in Religare Asset Management Company Limited.$
0.1 million

.
Liquidity and Capital Resources
Our capital structure, together with available cash balances, cash flows generated from operations, existing capacity under our credit facility proceeds from public offering of our shares and further capital market activities, if necessary, should provide us with sufficient resources to meet present and future cash needs, including operating, debt and other obligations as they come due and anticipated future capital requirements. The company's 3.125% senior notes, which have a carrying value of $599.6 million at September 30, 2013, mature on November 30, 2022.
As discussed in the "Executive Overview" of this Management's Discussion and Analysis, ourOur capital management priorities have evolved with the growth and success of our business and include:
- •reinvestment in the business;
- •moderate annual growth of dividends (further(as further discussed in the "Dividends" section below);
- •share repurchase; and
- •establishment of an approximate $1 billion cash buffer in excess of regulatory requirements.
During the three months ended March 31, 2014 we repurchased 3.6 million common shares the open market at a cost of $119.6 million.
These priorities are executed in a manner consistent with our desire to maintain a strong, investment-grade credit rating.
During As of the nine months endedSeptember 30, 2013 there were 3.8 million common shares purchased in the market atdate of this Report, Invesco held credit ratings of A-/Positive and A3/Stable from Standard & Poor's Ratings Services ("S&P") and Moody's respectively. Furthermore, S&P considers our risk management to be strong. S&P rates companies' enterprise risk management capabilities on a costscale of $120.5 million. There were no shares purchased during the three months endedSeptember 30, 2013.
Fair, Adequate, Strong, and Excellent. Our ability to continue to access the capital markets in a timely manner depends on a number of factors, including our Moody’s and Standard & Poor’s credit ratings, of A3/Stable and A-/Positive, respectively, the condition of the global economy, investors’ willingness to purchase our securities, interest rates, credit spreads and the valuation levels of equity markets. If we are unable to access capital markets in a timely manner, our business could be adversely impacted.
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. A sub-group of Invesco subsidiaries, including all of our regulated EU subsidiaries, is subject to consolidated capital requirements under applicable European Union (EU) directives, and capital is maintained within this sub-group to satisfy these regulations. These requirements mandate the retention of liquid resources in those jurisdictions, which we meet in part by holding cash and cash equivalents. 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.consequences. At September 30, 2013,March 31, 2014, the European sub-group had cash and cash equivalent balances of $813.4$735.9 million (December (December 31, 2012: $528.3 million), much of which is used to satisfy these regulatory requirements.2013: $632.3 million). We are in compliance with all regulatory minimum net capital requirements. As of September 30, 2013,March 31, 2014, the company's minimum regulatory capital requirement was $294.8$280.9 million. The total amount of non-U.S. cash and cash equivalents was $956.8$821.7 million at September 30, 2013 (DecemberMarch 31, 2012: $662.9 million)2014 (December 31, 2013: $740.5 million).
In addition, the company is required to hold cash deposits with clearing organizations or to otherwise segregate cash to maintain compliance with federal and other regulations in connection with its UIT broker dealer entity. At September 30, 2013,March 31, 2014, these cash deposits totaled $11.3$11.3 million (December (December 31, 2012: $11.3 million)2013: $11.3 million).
The consolidation of $4.55.6 billion and $4.14.9 billion of total assets and long-term debt of certain CLO products as of September 30, 2013March 31, 2014, respectively, did not impact the company’s liquidity and capital resources. The collateral assets of the CLOs are held solely to satisfy the obligations of the CLOs. The company has no right to the benefits from, nor does it bear the risks associated with, the collateral assets held by the CLOs, beyond the company’s minimal direct investments in, and management fees generated from, these products, which are eliminated upon consolidation. If the company were to liquidate, the collateral assets would not be available to the general creditors of the company, and as a result, the company does not consider them to be company assets. Conversely,Likewise, if the CLOs were to liquidate, their investors would have no recourse to the general credit of the company. The company therefore does not consider this debt to be an obligation of the company. See Part I, Item 1, “FinancialFinancial Statements —- Note 13, “Consolidated Investment Products,” for additional details.


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Selected balance sheet information is reflected in the table below:
 
Excluding CIP (Non-GAAP) (1)
 Including CIP (U.S. GAAP)
$ in millionsMarch 31, 2014 December 31, 2013 March 31, 2013 March 31, 2014 December 31, 2013 March 31, 2013
Cash and cash equivalents978.7
 1,331.2
 884.7
 978.7
 1,331.2
 884.7
Investments of CIP—
 —
 —
 5,173.7
 4,734.7
 4,661.2
Total assets (1)
14,278.1
 13,952.6
 13,119.2
 20,346.3
 19,270.5
 18,534.5
            
Long-term debt1,588.7
 1,588.6
 1,514.5
 1,588.7
 1,588.6
 1,514.5
Long-term debt of CIP—
 —
 —
 4,762.7
 4,181.7
 4,221.4
Long-term debt / Long-term debt plus CIP debt1,588.7
 1,588.6
 1,514.5
 6,351.4
 5,770.3
 5,735.9
            
Total liabilities (1)
5,954.4
 5,649.7
 5,028.6
 11,338.9
 10,293.2
 9,695.3
            
Total permanent equity (1)
8,221.8
 8,302.9
 8,090.6
 8,905.5
 8,977.3
 8,839.2
            
Debt/Equity % (1,2)
19.3% 19.1% 18.7% 71.3% 64.3% 64.9%
  
Excluding CIP (Non-GAAP)(1)
 Including CIP (U.S. GAAP)
  September 30, 2013 December 31, 2012 September 30, 2012 September 30, 2013 December 31, 2012 September 30, 2012
$ in millions            
Cash and cash equivalents 1,174.5
 835.5
 880.1
 1,174.5
 835.5
 880.1
Investments of CIP —
 —
 —
 4,514.6
 4,550.6
 4,717.9
Total assets(1)
 13,824.2
 12,640.9
 12,647.7
 18,763.5
 17,492.4
 17,861.0
             
Long-term debt 1,387.6
 1,186.0
 1,285.1
 1,387.6
 1,186.0
 1,285.1
Debt of CIP —
 —
 —
 4,003.1
 3,899.4
 3,855.0
Long-term debt / Long-term debt plus CIP debt 1,387.6
 1,186.0
 1,285.1
 5,390.7
 5,085.4
 5,140.1
             
Total liabilities(1)
 5,390.0
 4,448.6
 4,487.6
 9,644.1
 8,443.4
 8,663.6
             
Total equity(1)
 8,434.2
 8,192.3
 8,160.1
 9,119.4
 9,049.0
 9,197.4
             
Debt/Equity % (1) (2)
 16.5% 14.5% 15.7% 59.1% 56.2% 55.9%

____________
(1)
The balance sheet line items excluding CIP are non-GAAP financial measures. To calculate total assets excluding CIP at September 30, 2013,March 31, 2014, use U.S. GAAP total assets of $18,763.5$20,346.3 million (December (December 31, 2012: $17,492.4 million; September 30, 2012: $17,861.0 million)2013: $19,270.5 million; March 31, 2013: $18,534.5 million) and subtract total assets of CIP of $4,939.3$6,068.2 million (December (December 31, 2012: $4,851.5 million; September 30, 2012: $5,213.3 million)2013: $5,317.9 million; March 31, 2013: $5,415.3 million). To calculate total liabilities excluding CIP at September 30, 2013,March 31, 2014, use U.S. GAAP total liabilities of $9,644.1$11,338.9 million (December (December 31, 2012: $8,443.4 million; September 30, 2012: $8,663.6 million)2013: $10,293.2 million; March 31, 2013: $9,695.3 million) and subtract total liabilities of CIP of $4,254.1$5,384.5 million (December (December 31, 2012: $3,994.82013: $4,643.5 million,; September 30, 2012: $4,176.0 million) March 31, 2013: $4,666.7 million). To calculate total permanent equity excluding CIP at September 30, 2013,March 31, 2014, use U.S. GAAP total permanent equity of $9,119.4$8,905.5 million (December (December 31, 2012: $9,049.0 million; September 30, 2012: $9,197.4 million)2013: $8,977.3 million; March 31, 2013: $8,839.2 million) and subtract total permanent equity of CIP of $685.2$683.7 million (December (December 31, 2012: $856.7 million; September 30, 2012: $1,037.3 million)2013: $674.4 million; March 31, 2013: $748.6 million). See the "Balance Sheet Discussion" section for a fully expanded balance sheet illustrating the impact of consolidation of investment products for September 30, 2013, March 31, 2014, December 31, 20122013 and September 30, 2012.
March 31, 2013.
(2)The debt-to-equity ratio excluding CIP is a non-GAAP financial measure. The debt-to-equity ratio is calculated as long-term debt divided by total permanent equity for the balance sheet excluding CIP and long-term debt plus long-term debt of CIP divided by total permanent equity for the balance sheet including CIP. Management believes that it is important to illustrate for users of our financial statementsCondensed Consolidated Financial Statements that calculating a balance sheet measure, such as the debt-to-equity ratio, including the impact of CIP causes the company to appear far more indebted than is the case. As disclosed above, the debt of CIP is not the company's debt, nor do the noteholders of the CIP debt have any recourse to the company.


Cash Flows Discussion
The ability to consistently generate free cash flow from operations in excess of dividend payments, share repurchases, capital expenditures, and dividend paymentsongoing operating expenses is one of our company’scompany's 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, investments in certain new investment products, capital expenditures, purchasesacquisitions, purchase of our shares in the open marketsmarket and acquisitions.investments in certain new investment products.
Cash flows of CIP which are discussed(discussed in Part I, Item 1, Financial Statements —- Note 13, “Consolidated Investment Products,"Products”) are reflected in Invesco’sInvesco's cash provided by/(by or used in)in operating activities, provided by/(used in) investing activities and provided by/(used in) financing activities. Cash held by CIP is not available for general use by Invesco, nor is Invesco cash available for general use by its CIP. Accordingly, the table below presents the consolidated total cash flows of the company and separately presents the impact to the cash flows from CIP. The impact is illustrated in the tables immediately below by a column which shows the dollar-value change in the consolidated figures, as caused by the consolidation of CIP. For example, the impact of CIP on net cash provided by/(used in) operating activities for the three months ended March 31, 2014 reflects a use of cash of $195.7 million; however, this was not a use of the company's corporate cash balances. Excluding the impact of CIP, cash used in operations was $23.5 million during the three months ending March 31, 2014. Also as illustrated in the table below, the sum of the operating, investing and financing cash flows of CIP offsets to a zero impact to the company's change in cash and cash equivalent balances from period to period. The

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cash flows of CIP do not form part of the company’s cash flow management processes, nor do they form part of the company’s significant liquidity evaluations and decisions for the reasons noted. The discussion that follows the table will focusfocuses on the company’s cash flows.


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Summary of Cash Flow Statement Impact of CIP
 Nine months ended September 30, 2013 Nine months ended September 30, 2012Three months ended March 31, 2014 Three months ended March 31, 2013
$ in millions Impact of CIP 
Invesco Ltd.
Consolidated
 Impact of CIP Invesco Ltd.
Consolidated		 Impact of CIP Invesco Ltd. Consolidated  Impact of CIP Invesco Ltd. Consolidated
Operating activities:               
Net income (8.3) 652.0
 (72.2) 459.3
21.4
 206.8
 (17.1) 199.6
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:               
Amortization and depreciation —
 66.0
 —
 72.5
—
 23.4
 —
 22.3
Share-based compensation expense —
 103.0
 —
 102.9
—
 36.5
 —
 33.5
(Gains)/losses on disposals of property and equipment, net —
 0.5
 —
 (0.5)
Purchase of trading investments —
 (10,952.4) —
 (7,573.2)
Sale of trading investments —
 10,954.7
 —
 7,564.6
Other gains and losses, net 11.8
 (20.8) 8.7
 (29.3)
Other losses/(gains) of CIP, net (15.5) (15.5) 69.9
 69.9
Other losses/(gains) of CSIP, net —
 
 —
 —
Tax benefit from share-based compensation —
 62.8
 —
 47.7
Excess tax benefits from share-based compensation —
 (19.4) —
 (13.7)
(Gain)/loss on disposal of business, property and equipment, net—
 —
 —
 0.4
Other (gains)/losses, net—
 (6.6) —
 (17.7)
Other (gains)/losses of CSIP, net—
 (6.5) —
 —
Other (gains)/losses of CIP, net(26.5) (26.5) 21.1
 21.1
Equity in earnings of unconsolidated affiliates 3.4
 (25.3) (0.1) (21.8)1.2
 (10.0) 0.4
 (8.1)
Dividends from unconsolidated affiliates —
 15.6
 —
 14.7
—
 0.8
 —
 1.0
Changes in operating assets and liabilities:               
Decrease/(increase) in cash held by CIP (165.1) (165.1) (296.0) (296.0)
Decrease/(increase) in receivables 20.6
 (710.4) 23.8
 151.9
(Decrease)/increase in payables (0.1) 644.2
 (21.9) (231.3)
(Increase)/decrease in cash held by CIP(196.4) (196.4) (470.2) (470.2)
(Increase)/decrease in cash held by CSIP—
 0.3
 —
 —
(Purchase)/sale of trading investments, net—
 7.8
 —
 (13.7)
(Increase)/decrease in receivables(0.5) (520.9) (1.4) (606.6)
Increase/(decrease) in payables5.1
 272.1
 28.1
 353.8
Net cash provided by/(used in) operating activities (153.2) 589.9
 (287.8) 317.7
(195.7) (219.2) (439.1) (484.6)
        
Investing activities:               
Purchase of property and equipment —
 (67.0) —
 (68.4)—
 (21.4) —
 (18.1)
Disposal of property and equipment —
 —
 —
 0.6
Purchase of available-for-sale investments 61.8
 (30.0) 11.0
 (73.9)32.2
 (1.8) 5.6
 (0.1)
Sale of available-for-sale investments (48.6) 23.3
 (13.4) 32.9
(26.5) 10.3
 (1.8) 23.0
Purchase of investments by CIP (3,496.4) (3,496.4) (2,338.9) (2,338.9)(1,325.1) (1,325.1) (965.2) (965.2)
Sale of investments by CIP 3,705.9
 3,705.9
 2,484.5
 2,484.5
970.1
 970.1
 1,205.6
 1,205.6
Purchase of investments by CSIP —
 (51.4) —
 —
—
 (246.9) —
 —
Sale of investments by CSIP —
 3.5
 —
 —
—
 95.3
 —
 —
Purchase of other investments 0.2
 (205.2) 0.5
 (87.7)—
 (44.1) —
 (127.9)
Sale of other investments —
 74.3
 —
 63.4
—
 15.3
 —
 25.3
Returns of capital and distributions from equity method investments —
 25.3
 (8.7) 12.2
Acquisition earn-out payments —
 (1.2) —
 (5.6)
Sale of management contracts —
 —
 —
 16.4
Returns of capital and distributions from unconsolidated partnership investments(0.4) 3.8
 (0.7) 3.8
Net cash provided by/(used in) investing activities 222.9
 (18.9) 135.0
 35.5
(349.7) (544.5) 243.5
 146.4
Financing activities:       
Proceeds from exercises of share options—
 1.5
 —
 5.2
Purchases of treasury shares—
 (119.6) —
 (45.0)
Dividends paid—
 (98.0) —
 (77.2)
Excess tax benefits from share-based compensation—
 13.9
 —
 11.7
Overdraft on unsettled fund account—
 (35.7) —
 —
Capital invested into CIP40.1
 40.1
 3.5
 3.5
Capital distributed by CIP(48.6) (48.6) (60.9) (60.9)
Capital invested into CSIP—
 100.8
 —
 —
Borrowings of debt by CIP715.0
 715.0
 405.0
 405.0
Repayments of debt by CIP(161.1) (161.1) (152.0) (152.0)
Net borrowings/(repayments) under credit facility—
 —
 —
 328.5
Net cash provided by/(used in) financing activities545.4
 408.3
 195.6
 418.8
Increase/(decrease) in cash and cash equivalents—
 (355.4) —
 80.6
Foreign exchange movement on cash and cash equivalents—
 2.9
 —
 (31.4)
Cash and cash equivalents, beginning of period—
 1,331.2
 —
 835.5
Cash and cash equivalents, end of period—
 978.7
 —
 884.7
Operating Activities
Operating cash flows include the receipt of investment management and other fees generated from AUM, offset by operating expenses and changes in operating assets and liabilities. Although some receipts and payments are seasonal, particularly bonus payments, in general, after allowing for the change in cash held by CIP, our operating cash flows move in the same direction as our operating income.

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  Nine months ended September 30, 2013 Nine months ended September 30, 2012
$ in millions Impact of CIP 
Invesco Ltd.
Consolidated
 Impact of CIP Invesco Ltd.
Consolidated
Financing activities:        
Proceeds from exercises of share options —
 13.0
 —
 17.2
Purchases of treasury shares —
 (120.5) —
 (190.0)
Dividends paid —
 (279.2) —
 (211.5)
Excess tax benefits from share-based compensation —
 19.4
 —
 13.7
Capital invested into CIP 13.4
 13.4
 19.4
 19.4
Capital distributed by CIP (146.6) (146.6) (122.0) (122.0)
Net borrowings/(repayments) of debt of CIP 63.5
 63.5
 255.4
 255.4
Net borrowings/(repayments) under credit facility —
 201.5
 —
 215.5
Repayments of senior notes —
 —
 —
 (215.1)
Net cash provided by/(used in) financing activities (69.7) (235.5) 152.8
 (217.4)
(Decrease)/increase in cash and cash equivalents —
 335.5
 —
 135.8
Foreign exchange movement on cash and cash equivalents —
 3.5
 —
 16.9
Cash and cash equivalents, beginning of period —
 835.5
 —
 727.4
Cash and cash equivalents, end of period —
 1,174.5
 —
 880.1

Operating Activities
During the ninethree months endedSeptember 30, 2013, March 31, 2014, cash provided byused in operating activities increased$272.2decreased $265.4 million to $589.9$219.2 million from $317.7$484.6 million during the ninethree months endedSeptember 30, 2012. March 31, 2013. As shown in the tabletables above, the impact of CIP to cash used in operating activities was $153.2$195.7 million of cash used during the ninethree months endedSeptember 30, 2013 March 31, 2014 compared to $287.8$439.1 million of cash used induring the ninethree months endedSeptember 30, 2012. The sum of the operating, investing and financing cash flows of CIP offsets to a zero impact to the company’s change in cash and cash equivalent balances from period to period. March 31, 2013. Excluding the impact of CIP, cash generatedused by operations was $743.1$23.5 million in during the ninethree months endedSeptember 30, 2013 March 31, 2014 compared to cash generated by operations of $605.5$45.5 million in during the ninethree months endedSeptember 30, 2012. March 31, 2013.
The $743.1$23.5 million of in cash generated byused in operations during the ninethree months endedSeptember 30, 2013 March 31, 2014 included net proceeds of trading investments of $2.3$362.3 million and the use of $382.8 million of cash to pay the 2013 annual staff bonuses,bonus, related payroll taxes, payroll taxes on annual share award vesting, and annual retirement plan contributions. Similarly, the $605.5The $45.5 million of cash generated by operations inused during the ninethree months endedSeptember 30, 2012 March 31, 2013 included net purchases$334.0 million of trading investments of $8.6 million and the use of $373.2 million of cash used to pay the 2012 annual staff bonuses,bonus, related payroll taxes, payroll taxes on annual share award vesting, and annual retirement plan contributions. Excluding
The operating income for the net purchasesthree months ended March 31, 2014 included several non-cash expenses such as a charge of trading investments, cash to pay annual staff bonus£18.6 million ($31.1 million) in respect of the FCA penalty and impact of CIP, net cash provided by other$43.0 million in charges associated with a business optimization initiative undertaken during the quarter. These charges result in a difference between the operating activities of $1,123.6 million (nine months endedSeptember 30, 2012: $987.3 million net cash provided) represents net income, as adjusted for other non-cash items,results and the changesoperating cash flows for the three months ended March 31, 2014 and are a factor in the improved operating cash flows when compared to the three months ended March 31, 2013, contrasting with the reduction in operating assets and liabilities. The cash provided by operating activities forincome across the nine months endedSeptember 30, 2012 also included a $45.0 million cash receipt related to a legal settlement accrued in 2011.same period.
Investing Activities
Net cash used in investing activities totaled $18.9$544.5 million for the ninethree months endedSeptember 30, 2013March 31, 2014 (nine(the three months endedSeptember 30, 2012: March 31, 2013: net cash provided of $35.5 million)generated $146.4 million). As shown in the tabletables above, the impact of CIP on investing activities, including investment purchases, sales and returns of capital, was $222.9$349.7 millioncontributed (nine used (the three months endedSeptember 30, 2012: $135.0 March 31, 2013: $243.5 millioncontributed) contributed). Excluding the impact of these consolidated investment productCIP cash flows, net cash used in investing activities was $241.8$194.8 million (nine (the three months endedSeptember 30, 2012: March 31, 2013: net cash used in investing activities of $99.5 million)$97.1 million).
DuringFor the ninethree months endedSeptember 30, 2013March 31, 2014, excluding the impact of CIP, the company purchased available-for-sale investments and other investments of $297.2 million (nine months endedSeptember 30, 2012: $173.1 million) and had capital expenditures of $67.0 million (nine months endedSeptember 30, 2012: $68.4 million). These cash outflows were partly offset byinflows include collected proceeds of $171.5$124.7 million from sales and returns of capital of investments in the nine(the three months endedSeptember 30, 2013 (nine March 31, 2013: $52.1 million), offset by purchases of available-for-sale investments, other investments and CSIP investments of $292.8 million (the three months endedSeptember 30, 2012: $130.6 million) March 31, 2013: $128.0 million).
During the three months endedSeptember 30, 2013, the impact of CSIP on investing activities was purchases of investments of $51.4 millionMarch 31, 2014 and salesthe company had capital expenditures of investment products of $3.5$21.4 million for a net impact of $47.9 million cash used during the quarter (nine (the three months endedSeptember 30, 2013, none) March 31, 2013: $18.1 million).

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Our capital expenditures related principally in each yearperiod to technology initiatives, including enhancements to platforms from which we maintain our portfolio management systems and fund accounting systems, improvements in computer hardware and software desktop products for employees, new telecommunications products to enhance our internal information flow, and back-up disaster recovery systems. Also, in each year,period, a portion of these costs relaterelated to leasehold improvements made to the various buildings and workspaces used byin our offices.
During the nine months endedSeptember 30, 2013, net acquisition payments were $1.2 million, compared to $5.6 million during the nine months endedSeptember 30, 2012. The sale of CLO management contracts contributed $16.4 million during the nine months ended September 30, 2012. These projects have been funded with proceeds from our operating cash flows.
Financing Activities
Net cash used inprovided by financing activities totaled $235.5$408.3 million for the ninethree months endedSeptember 30, 2013March 31, 2014 (nine(the three months endedSeptember 30, 2012: $217.4 million March 31, 2013: net cash used)provided of $418.8 million). As shown in the tabletables above, the impact of CIP on financing activities usedprovided cash of $69.7$545.4 million (nine (the three months endedSeptember 30, 2012: provided$152.8 million) March 31, 2013: cash contributed of $195.6 million). Excluding the impact of the CIP, financing activities used cash of $165.8$137.1 million in the ninethree months endedSeptember 30, 2013March 31, 2014 (nine(the three months endedSeptember 30, 2012: $370.2 million net March 31, 2013: cash used)provided of $223.2 million).
Other financingFinancing cash flowsoutflows during the ninethree months endedSeptember 30, 2013March 31, 2014 included $201.5$98.0 million net borrowings from the credit facility (nine months endedSeptember 30, 2012: $215.5 millionborrowed), $279.2 million of dividend payments for the dividends declared in January April and July (nine(the three months endedSeptember 30, 2012: March 31, 2013: dividends paid of $211.5 million),$77.2 million) and the purchase of treasury shares through market transactions totaling $120.5$119.6 million (nine (the three months ended March 31, 2013: $45.0 million).September 30, 2012: $190.0 million),
Other financing cash inflows include cash received from the exercise of options of $13.0$1.5 million (nine (the three months endedSeptember 30, 2012: $17.2 million) March 31, 2013: $5.2 million) and excess tax benefits cash inflows from share-based compensation of $19.4$13.9 million (nine (the three months endedSeptember 30, 2012: $13.7 million) March 31, 2013: $11.7 million). Other financing cash flows during the nineThe three months endedSeptember 30, 2012 March 31, 2013 also included a $215.1 million repaymentnet cash inflows from net borrowings under the credit facility of senior notes.

$328.5 million.
Dividends
Invesco declares and pays dividends on a quarterly basis in arrears. On July 31, 2013,May 1, 2014, the company’s Board of Directorscompany declared a first quarter second quarter2014 2013 cash dividend of 22.525.0 cents per share to holders of common shares, which waswill be paid on SeptemberJune 6, 2013,2014, to shareholders of record as of August 21, 2013. On October 31, 2013May 16, 2014, the company announced a third quarter2013 cash dividend of 22.5 cents per share which will be paid on December 9, 2013, to shareholders of record at the close of business on November 19, 2013, with an ex-dividend date of November 15, 2013.May 14, 2014.

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.
Share Repurchase Plan
There were no shares repurchased duringDuring the three months ended September 30, 2013. During the nine months endedSeptember 30, 2013March 31, 2014, the company repurchased 3.83.6 million common shares in the market at a cost of $120.5119.6 million (three and nine(three months endedSeptember 30, 2012March 31, 2013: 1.81.6 million and 8.1 millionshares were repurchased at a cost of $40.0 million and $190.0 million, respectively), leaving $346.5 million authorized at September 30, 2013 (September 30, 2012: $542.0 million ).
$45.0 million). Separately, an aggregate of 2.31.7 million shares were withheld on vesting events during the ninethree months endedSeptember 30, 2013,March 31, 2014 to meet employees’employees' withholding tax obligations (nine(three months endedSeptember 30, 2012March 31, 2013: 1.92.1 million). The fair value of these shares withheld at the respective withholding dates was $61.556.7 million (nine(three months endedSeptember 30, 2012March 31, 2013: $44.453.9 million). Approximately $1,376.8 million remained authorized under the company's share repurchase plan at March 31, 2014 (March 31, 2013: $422.0 million).

On October 11, 2013, the company's board of directors authorized an additional $1.5 billion for the existing share repurchase program with no stated expiration date.
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Long-term debt
Our total indebtednesslong-term debt at September 30, 2013March 31, 2014 was $$1,387.61,588.7 million ((December 31, 2013: $December 31, 2012 is $1,186.01,588.6 million) and was comprised of the following:
$ in millionsSeptember 30, 2013 December 31, 2012
Unsecured Senior Notes:   
3.125% — due November 30, 2022599.6
 599.5
Floating rate credit facility expiring June 3, 2016788.0
 586.5
Long-term debt1,387.6
 1,186.0

$ in millionsMarch 31, 2014 December 31, 2013
Unsecured Senior Notes*:   
$600 million 3.125% - due November 30, 2022599.6
 599.6
$600 million 4.000% - due January 30, 2024595.8
 595.8
$400 million 5.375% - due November 30, 2043393.3
 393.2
Long-term debt1,588.7
 1,588.6
For the ninethree months endedSeptember 30, 2013March 31, 2014, the company’scompany's weighted average cost of debt was 2.08%4.00% (nine(three months endedSeptember 30, 2012March 31, 2013: 3.18%2.11%). Long-term debt
increased to $1,387.6 million at September 30, 2013 from $1,186.0 million at December 31, 2012, as theThe company's $1.25 billion unsecured credit facility borrowings increased during the period. The increase in the credit facility balance

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during the period reflects the funding annual bonus payments, related employer payroll taxes, payroll taxesexpires on annual share award vestings, annual pension contributions together with open market treasury share purchases, seed money funding and the purchase of a 49% interest in Religare Asset Management Company Limited.
December 17, 2018. Financial covenants under the credit agreement include: (i) the quarterly maintenance of a debt/EBITDA leverage ratio, as defined in the credit agreement, of not greater than 3.25:3.25:1.00, through June 30, 2014, and not greater than 3.00:1.00 thereafter and (ii) a coverage ratio (EBITDA, as defined in the credit agreement, divided by agreement/interest payable for the four consecutive fiscal quarters ended before the date of determination) of not less than 4.00:1.00.4.00:1.00. As of September 30, 2013March 31, 2014, we were in compliance with our financial covenants. At September 30, 2013March 31, 2014, our leverage ratio was 1.021.03:1.00 (December(December 31, 2012: 0.99:2013: 1.05:1.00), and our interest coverage ratio was 33.1629.28:1.00 (December(December 31, 2012: 23.61:2013: 35.49:1.00).
The September 30, 2013March 31, 2014, coverage ratio calculations are as follows:
$ millionsTotal Q1 2014 Q4 2013 Q3 2013 Q2 2013
Net income attributable to common shareholders905.9
 187.8
 287.4
 228.1
 202.6
Net (income)/loss attributable to common shareholders arising from CIP6.5
 (5.3) (1.1) 9.4
 3.5
Tax expense372.5
 87.8
 111.7
 92.1
 80.9
Amortization/depreciation/impairment101.2
 23.4
 34.1
 21.8
 21.9
Interest expense53.6
 18.7
 15.2
 9.7
 10.0
Share-based compensation expense136.1
 36.5
 30.1
 33.6
 35.9
Unrealized gains and losses from investments, net*
(6.3) (0.3) (3.7) (3.7) 1.4
EBITDA**
1,569.5
 348.6
 473.7
 391.0
 356.2
Adjusted debt**

$1,616.5
        
Leverage ratio (Debt/EBITDA - maximum 3.25:1.00)1.03
        
Interest coverage (EBITDA/Interest Expense - minimum 4.00:1.00)29.28
        
$ millionsTotal Q3 2013 Q2 2013 Q1 2013 Q4 2012
Net income attributable to common shareholders811.6
 228.1
 202.6
 222.2
 158.7
Net (income)/loss attributable to CIP7.4
 9.4
 3.5
 (3.1) (2.4)
Tax expense323.7
 92.1
 80.9
 88.6
 62.1
Amortization/depreciation88.5
 21.8
 21.9
 22.3
 22.5
Interest expense42.1
 9.7
 10.0
 9.7
 12.7
Share-based compensation expense136.5
 33.6
 35.9
 33.5
 33.5
Unrealized (gains) and losses from investments, net*(13.9) (3.7) 1.4
 (11.4) (0.2)
EBITDA**1,395.9
 391.0
 356.2
 361.8
 286.9
Adjusted debt**
$1,421.1
        
Leverage ratio (Debt/EBITDA — maximum 3.25:1.00)1.02
        
Interest coverage (EBITDA/Interest Expense — minimum 4.00:1.00)33.16
        

____________
*Adjustments for unrealized gains and losses from investments, as defined in our credit facility, may also include non-cash gains and losses on investments to the extent that they do not represent anticipated future cash receipts or expenditures.
**
EBITDA and Adjusted debt are non-GAAP financial measures; however management does not use these measures for anything other than these debt covenant calculations. The calculation of EBITDA above (a reconciliation from net income attributable to common shareholders) is defined by our credit agreement, and therefore net income attributable to common shareholders is the most appropriate GAAP measure from which to reconcile to EBITDA. The calculation of adjustedAdjusted debt is defined in our credit facility and equals long-termtotal debt of $1,387.61,588.7 million plus $33.527.8 million in letters of credit.
The discussion that follows identifies risks associated with the company's liquidity and capital resources. The Executive Overview of this Management's Discussion and Analysis of Financial Condition and Results of Operations section contains a broader discussion of the company's overall approach to risk management.

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Credit and Liquidity Risk
Capital management involves the management of the company's 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 Part I, Item 3, “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 in its own institutional money market products, as well as with external high credit-quality financial institutions. 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 March 31, 2014, our maximum exposure to credit risk related to our cash and cash equivalent balances is $978.7 million. See Item 1, Financial Statements - Note 14, “Related Parties,” for information regarding cash and cash equivalents invested in affiliated money market funds.
Certain subsidiaries of the company accept deposits and place deposits with other institutions on behalf of our customers. As of March 31, 2014, our exposure to credit risk related to these transactions is $2.9 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 $1,588.7 million in total 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 assets that we manage may be negatively impacted when inflationary expectations result in a rising interest rate environment. Declines in the values of these AUM could lead to reduced revenues as management fees are generally calculated based upon the size of AUM.
Off Balance Sheet Commitments
See Part I, Item 1, Financial Statements - Note 11, “Commitments and Contingencies - Off Balance Sheet Commitments,” for more information regarding undrawn capital commitments and support agreements.
Contractual Obligations
We have future obligations under various contracts relating to debt and interest payments, financing and operating leases, long-term defined benefit pension and post-retirement medical plans, and acquisition contracts. During the ninethree months endedSeptember 30, 2013March 31, 2014, there were no material changes to the company's contractual obligations.

Critical Accounting Policies and Estimates
There have been no significant changes to the accounting policies that we believe are the most critical to an understanding of our results of operations and financial condition, which are disclosed in our most recent Form 10-K for the year ended December 31, 20122013.
Recent Accounting Standards
See Part I, Item 1, Financial Statements —- Note 1, "Accounting“Accounting Policies —- Accounting Pronouncements Recently Adopted and Pending Accounting Pronouncements.”

Item 3.Quantitative and Qualitative Disclosures About Market Risk

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In the normal course of its business, the company is primarily exposed to market risk in the form of AUM market price risk, securities market risk, interest rate risk, and foreign exchange rate risk. There have not been any material changes to the company's exposures to market risks during the period ended March 31, 2014 that would require an update to the disclosures provided in the most recent Form 10-K.
AUM Market Price Risk
The company’scompany's investment management revenues are comprised of fees based on a percentage of the value of AUM. Declines in the market prices of equity orand fixed income security market pricessecurities, commodities and derivatives, or other similar financial instruments held in client portfolios could cause revenues to decline because of lower investment management fees by:
Causing the value of AUM to decrease,decrease.
Causing the returns realized on AUM to decrease (impacting performance fees),.
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,serve.
Causing clients to rebalance assets away from investments that the company manages into investments that the company does not manage, and/ormanage.
Causing clients to reallocate 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.
Securities Market Risk
The company has investments in sponsoredmanaged investment products that invest in a variety of asset classes. Investments are generally made to establish a track record for a new fund or investment vehicle or to hedge economically exposure to certain deferred compensation plans. The company’scompany's exposure to market risk from financial instruments measured at fair value arises from its investments. An increase or decrease of 20% in the fair value of investments exposed to market risk is not material to the operating results of the company.
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 September 30, 2013,March 31, 2014, the interest rates on 43.2%100.0% of the company’scompany's borrowings were fixed for a weighted average period of 9.2 years. Borrowings under the credit facility, which represent 56.8% of the company’s borrowings, have floating interest rates. A 1% change in the level of interest rates on current debt levels would change annualized interest expense by $7.9 million but would not have a material impact on the ability of14.3 years, and the company to continue to servicehad a zero balance on its indebtedness.floating rate credit facility.
Foreign Exchange Rate Risk
The company has transactional currency exposures that occur when any of the company’s subsidiaries receivesreceive or payspay cash in a currency different from its functional currency. Such exposure arises from sales or purchases by operating subsidiaries in currencies other than the subsidiaries’ functional currencies. These exposures are not actively managed.
The company also has certain investments in foreign operations, whose net assets and results of operations are exposed to foreign currency translation risk when translated into U.S. dollars upon consolidation into Invesco Ltd. The company generally does not hedge these exposures; however, induring 2012, the company began purchasing put option contracts to hedge economically hedge foreign currency risk on the translation of its pound sterling-denominated earnings into U.S. dollars.  The economic hedge is predominantly triggered upon the impact of a significant decline in the pound sterling/U.S. dollar foreign exchange rate, which could arise as a result of European economic uncertainty.  See Part I, Item 1,1. Financial Statements, -- Note 2,, “Fair "Fair Value of Assets and Liabilities - Put Option Contracts,” for additional details.information.

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The company is exposed to foreign currencyexchange revaluation into the income statementCondensed Consolidated Statements of Income on monetary assets and liabilities that are held by subsidiaries in different functional currencies than the subsidiaries’subsidiaries' functional currencies. Net foreign currencyexchange revaluation lossesgains were $0.5$0.4 million for nine months endedSeptember 30, 2013 and $1.3in 2014 (2013: $0.9 million losses for the comparable prior year period,of losses), and are included in general and administrative expenses and other gains and losses, net on the Condensed Consolidated Statements of Income. We continue to monitor our exposure to foreign currencyexchange revaluation.

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Item 4.Controls and Procedures
Our management is responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that information the company is required to disclose in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in the reports that the company files or submits under the Exchange Act is accumulated and

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communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
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 September 30, 2013.March 31, 2014. 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.
We have evaluated any change in our internal control over financial reporting that occurred during the three months endedSeptember 30, 2013 March 31, 2014 and have concluded that there was no change that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


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PART II. OTHER INFORMATION

Item 1.Legal Proceedings
See Part I, Item 1,I, Note 11,, “Commitments "Commitments and Contingencies” - Legal Proceedings," for information regarding legal proceedings.

Item 1A.Risk Factors
The company has had no significant changes in its risk factors from those previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 20122013.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Repurchases of Equity Securities
The following table sets forth information regarding purchases of our common shares by us and any affiliated purchases during the three months endedSeptember 30, 2013: March 31, 2014:
Month
Total Number of Shares Purchased(1)
 Average Price Paid Per Share 
Total Number of Shares
Purchased as Part of
Publicly Announced Plans or Programs(2)
 
Maximum Number at end of period (or Approximate
Dollar Value) of Shares
that May Yet Be Purchased
Under the Plans
or Programs(2) (millions)
July 1-31, 20133,999
 
$32.66
 —
 
$346.5
August 1-31, 201314,033
 
$32.58
 —
 
$346.5
September 1-30, 20135,275
 
$30.41
 —
 
$346.5
Total23,307
   —
  
Month
Total Number of Shares Purchased(1)
 Average Price Paid Per Share 
Total Number of Shares
Purchased as Part of
Publicly Announced Plans or Programs(2)
 
Maximum Number at end of period (or Approximate
Dollar Value) of Shares
that May Yet Be Purchased
Under the Plans
or Programs(2) (millions)
January 1-31, 201413,273
 $35.79
 —
 1,496.5
February 1-28, 20144,611,230
 $33.59
 2,995,500
 1,396.5
March 1-31, 2014650,840
 $34.62
 570,000
 1,376.8
Total5,275,343
   3,565,500
  

(1)
An aggregate of 23,3071,709,843 shares were surrendered to us by Invesco employees to satisfy tax withholding obligations or loan repayments in connection with the vesting of equity awards.
(2)
On April 23, 2008, our board of directors authorized a share repurchase authorization of up to $1.5 billion of our common shares with no stated expiration date. As of September 30, 2013, $346.5 million remained authorized under this plan. On October 11, 2013, the company's board of directors authorized an additional $1.5 billion for the existing share repurchase program with no stated expiration date.
As of March 31, 2014, $1,376.8 million remained authorized under this plan

Item 4.Mine Safety Disclosures
Not applicable.

applicable
Item 5.Other Information

Not applicable.


None

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Item 6.Exhibits
Exhibit Index
(Note: References herein to “AMVESCAP,” or “AMVESCAP PLC” are to the predecessor registrant to Invesco Ltd.)
3.1Memorandum of Association of Invesco Ltd., incorporating amendments up to and including December 4, 2007, incorporated by reference to exhibit 3.1 to Invesco’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 12, 2007
3.2Amended and Restated Bye-Laws of Invesco Ltd., incorporating amendments up to and including December 4, 2007, incorporated by reference to exhibit 3.2 to Invesco’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 12, 2007
10.1Amendment to Employment Arrangement between James I. Robertson and Invesco Ltd., dated October 28, 2013
31.1Certification of Martin L. Flanagan pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2Certification of Loren M. Starr pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1Certification 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
32.2Certification 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
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.LABXBRL Taxonomy Extension Definition Linkbase Document
101.LAB101.PREXBRL Taxonomy Extension Labels Linkbase Document
101.PRE101.DEFXBRL Taxonomy Extension Presentation Linkbase Document
101.DEFXBRL Definition Linkbase Document


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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this reportReport to be signed on its behalf by the undersigned, thereunto duly authorized.

 INVESCO LTD.
November 6, 2013May 1, 2014/s/ MARTIN L. FLANAGAN
 Martin L. Flanagan 
 President and Chief Executive Officer 
  
November 6, 2013May 1, 2014/s/ LOREN M. STARR
 Loren M. Starr 
 Senior Managing Director and Chief Financial Officer 

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