SEC Company Response from Invesco Ltd. (IVZ) (CIK 0000914208) (IVZ) — Jul 16, 2010
Invesco Ltd. (IVZ) (CIK 0000914208)
Date: July 16, 2010 · CIK: 0000914208 · Accession: 0000914208-10-000318
AI Filing Summary & Sentiment
Letter
Division of Corporation Finance Securities and Exchange Commission FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 2010 DEFINITIVE PROXY STATEMENT ON SCHEDULE 14A FILED ON MARCH 29, 2010 PROSPECTUS SUPPLEMENT FILED ON MAY 20, 2009 FILE NUMBER: 1-13908
Dear Mr. Greene:
This letter sets forth the responses of Invesco Ltd. (the “Company”) to your comment letter, dated June 11, 2010, relating to the Annual Report on Form 10-K for the fiscal year ended December 31, 2009, (the “Form 10-K”) of the Company filed with the Securities and Exchange Commission (the “Commission” or the “SEC”) on February 26, 2010, the Form 10-Q for the period ended March 31, 2010 (the “Form 10-Q”) of the Company filed with the SEC on May 4, 2010, the definitive proxy statement on Schedule 14A filed on March 29, 2010, and the prospectus supplement filed on May 20, 2009.
The Company is filing, via EDGAR, this letter setting forth the Company’s responses to the Commission’s comments regarding the above filings. Enclosed as well are two hard copies of the Company’s response letter. We have included your original questions in italics in addition to providing our responses.
The Company acknowledges that:
n
the Company is responsible for the adequacy and accuracy of the disclosure in its filings;
n
Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and
n
the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
July 16, 2010
Mr. Greene
Page 2
Form 10-K for the Fiscal Year Ended December 31, 2009
General
1.
Where a comment below requests additional disclosures or other revisions to be made, these revisions should be included in your future filings, including your interim filings, if applicable.
Response to Comment 1
The Company respectfully acknowledges the Staff’s comment and will include the noted additional disclosures or other revisions in future filings, including interim filings, where appropriate.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Repurchase of Equity Securities, page 23
2.
Please provide a “Total” figure in your equity repurchases table. See Item 703(a) of Regulation S-K.
Response to Comment 2
In future filings, we will provide a “total” figure in our equity repurchases table.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Investment Capabilities Performance Overview, page 27
July 16, 2010
Mr. Greene
Page 3
3.
Please expand disclosures to provide readers with a meaningful understanding of the performance of each of your significant funds. For each significant fund, please describe the underlying types of investments and overall strategy involved in the fund. Disclose the annualized returns for the periods presented as well as the inception to date returns. Although you are in the best position to determine which funds warrant expanded disclosures, we ask that you consider providing expanded disclosure for each fund that:
·
had, or is expected to have, a material impact on fee income in relation to your consolidated results;
·
comprises a material amount of total AUM;
·
had, or is expected to have, material investments or redemptions in relation to total AUM; or
·
had, or is expected to have, material market appreciation or depreciation in relation to total AUM.
Response to Comment 3
Invesco is an independent global investment manager with operations in 20 countries. As of June 30, 2010, the Company managed $557.7 billion in assets for retail, institutional, and high-net-worth investors around the world. Invesco delivers a comprehensive array of investment products. We offer multiple investment objectives within the various asset classes and products that we manage. Our assets under management (AUM) are highly diversified by client domicile, distribution channel and asset class. As of March 31, 2010, our distribution network had gathered assets of approximately 50% retail, 46% institutional, and 4% private wealth management clients, and 40% of client AUM were outside of the U.S. We service clients in more than 100 countries. We had several thousand funds and separate accounts as of March 31, 2010.
One of the results of this diversification is no one fund or client is material to our operations. Our largest funds have multiple investors, and no one investor is significant to our revenues or AUM. Because no individual investor would have a material impact on fee income in relation to the Company’s consolidated operating results, the Company has determined that it is not meaningful to the reader of its financial statements to include individual fund performance, material investment or redemption, or material market appreciation or depreciation (actual or expected) information specific to any individual fund or investor. In addition, no one fund is significant to our AUM. It should also be noted that we have not received any inquiries from users of our financial statements, or buy-side or sell-side analysts concerning individual funds or products. Additionally, large diversified peer investment managers also do not generally provide individual fund-level information in their disclosures.
We believe that a comparison of investment performance of our funds in the aggregate relative to the performance of peer investment management companies and benchmarks is more
July 16, 2010
Mr. Greene
Page 4
useful information to evaluate if our revenues are at risk due to AUM outflows from client redemptions. As indicated in the Investment Capabilities Performance Overview section of our 2009 Form 10-K, we provide this information for 69%, 68%, and 65% of total Invesco AUM for AUM measured in one-, three-, and five-year peer group rankings, respectively, and for AUM measured versus benchmark on a one-, three-, and five-year basis, our disclosed rankings represent 84%, 82%, and 75% of total Invesco AUM, respectively, as of December 31, 2009. The remaining funds and products were excluded from these disclosures because of limited peer group or benchmark data.
Assets Under Management, page 28
4.
Please disclose the nature of the cash flows that are included in the line items titled long-term inflows and long-term outflows. Also discuss the underlying reasons for movements in these line items.
Response to Comment 4
The Company’s AUM rollforwards from period to period present long-term inflows and outflows separately from the net flows into institutional money market funds. Long-term inflows and the underlying reasons for the movements in this line item include investments from new clients, existing clients adding new accounts/funds or contributions/subscriptions into existing accounts/funds, and new funding commitments into private equity funds. We present net flows into institutional money market funds separately, because shareholders of those funds typically utilize them as short-term funding vehicles, and because their flows are particularly sensitive to short-term interest rate movements.
Long-term outflows and the underlying reasons for the movements in this line item include redemptions resulting from closed client accounts/funds, partial redemptions in continuing client accounts/funds, and reductions in funding commitments into private equity funds.
There are numerous drivers of AUM inflows and outflows, from individual investor decisions to change their investment preferences to fiduciaries making broad asset allocation decisions on behalf of advised clients to reallocate investments within portfolios. The Company therefore offers diversified investment opportunities to provide options for investors and fiduciaries to consider when making investment allocation decisions. We strive to deliver superior investment performance, as this is often a critical factor in investors’ or their advisors’ asset allocation decisions.
We are not a party to these asset allocation decisions, as the Company does not generally have access to the underlying investor’s decision-making process. Therefore, the Company is not in a position to provide meaningful information regarding the drivers of inflows and outflows. We will, however, include in future filings with the Commission enhanced definitions of inflows and outflows.
July 16, 2010
Mr. Greene
Page 5
AUM by Channel, page 29
5.
You present rollforwards of your AUM by Channel from January 1, 2007 to December 31, 2009 for your retail, institutional and private wealth management channels to the prior year results. Please provide a robust discussion regarding the underlying reasons for the changes in components of cash flows, market gains and losses/reinvestment, and foreign currency translation by channel.
Response to Comment 5
Our disclosure of AUM in a rollforward format includes long-term inflows, long-term outflows, net flows in institutional money market funds, market gains and losses/reinvestment, and foreign currency translation. Please refer to our response to comment 4 above for a discussion regarding the long-term inflows and outflows of AUM and the net flows in institutional money market funds. Market gains and losses/reinvestment of AUM includes the net change in AUM resulting from changes in market values of the underlying investments from period to period and reinvestment of client dividends. The foreign currency translation movement in our AUM results from the effect of changes in currency exchange rates from period to period as non-U.S. dollar denominated AUM is translated into U.S. dollars, the reporting currency of the Company.
We present AUM rollforwards with these categories of movement by channel, asset class, and client domicile. Channel refers to the distribution channel from which the AUM originated. Institutional AUM originated from individual corporate clients, endowments, foundations, government authorities, universities, or charities. Retail AUM arose from client investments into funds available to the public with shares or units. Private Wealth Management AUM arose from high net worth client investments. Asset classes are descriptive groupings of AUM by common type of underlying investments. Client domicile disclosure groups AUM by the domicile of the underlying clients.
In future filings, we will provide more disclosure regarding the underlying reasons for the changes in the quantifiable components of our AUM rollforwards.
Results of Operations for the Year Ended December 31, 2009, Compared with the Year Ended December 31, 2008
6.
Provide a more comprehensive analysis of the factors that impacted your investment management fees, service and distribution fees, performance fees and other, operating expenses and other income (expense) ensuring that you address specific underlying causes for the change in specific line items. If necessary, you may need to address the changes at the fund level or at least identify and quantify the impact on your results by material changes in funds. In addition, you should discuss any known or anticipated trends that have and/or may continue to impact your results of operations. Your discussion and analysis should provide investors with sufficient information to understand the historical trends and the expectations for the future as seen through the eyes of management. In addressing this comment, specifically address the following:
July 16, 2010
Mr. Greene
Page 6
·
Discuss the extent to which material decreases in revenues are attributable to decreases in average AUM, changes in mix of AUM, foreign exchange movements, market gains and losses, or new funds established. For example, you indicate that the investment management fees decreased due to decreases in average AUM during the year, changes in mix of AUM and foreign exchange movements. Please expand your explanation of this decrease to address whether this may continue in the future, the impact on future revenues and the reasons for the increase in market gains or plans to increase new funds.
·
You indicate on page 11 that your investment management fees vary with the type of assets being managed, with higher fees earned on actively managed equity and balanced accounts, along with real estate and alternative asset products, and lower fees earned on fixed income, money market and stable value accounts. Expand your discussion and analysis to address if and to what extent variations in the type of assets being managed impacted your revenues on a period by period basis.
·
Discuss to the extent material, the reasons for changes in operating expenses. In particular, you indicate that the decrease in employee compensation was due to decreases in variable compensation, including decreases in discretionary and investment performance-based staff bonuses, decreases in base salary costs resulting from decreases in headcount and foreign exchange rate movements. However, you do not discuss the reason for the changes in the factors identified. Please provide more insight into the reasons for the changes in employee compensation.
·
Quantify each factor you cite as impacting your operations. For example, you disclose that general and administrative expenses declined due to several factors including an insurance recovery of $9.5 million, foreign exchange movement, and general disciplined expense management measures, including reduced travel and entertainment and professional services expenses recorded during the year ended December 31, 2009. However you do not quantify the impact attributed to each component other than the insurance recovery.
·
Expand your discussion of other income and expenses to indicate why earnings in your joint venture investments in China declined as well as why there were net losses in certain of your partnership investments.
·
Expand your discussion to discuss the components of net realized gains (losses) and net unrealized gains (losses) of consolidated investment products to include a discussion of your realized gains, realized losses, unrealized gains from changes in fair value of the investments and unrealized losses from changes in fair value of the investments. Provide insight into reasons for changes in these underlying components.
July 16, 2010
Mr. Greene
Page 7
·
Provide a comprehensive discussion of the nature of the non-controlling interest in consolidated entities for each period presented as well as how such amounts are determined. In this regard, specifically address why the losses attributable to non-controlling interest in consolidated entities increased to $113.2 million for the year ended December 31, 2009.
Note that this is not meant to represent an all-inclusive list of where your MD&A should be improved. Improvements should be made at the consolidated level to provide quantification of amounts and further clarification throughout your discussion for a reader’s full understanding of your results of operations. See Item 303(a)(3) of Regulation S-K.
Response to Comment 6
The Company will seek to provide greater detail of the components of the income statement variances.
In future filings with the Commission, the Company will discuss any known or anticipated trends that have and/or may continue to impact our results of operations where we believe that we have identified a trend that could be material to our results of operations in the future. We will do so in light of any historical trends and will provide the future anticipated trend information as seen through the eyes of management.
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corresp07162010.htm
July 16, 2010
VIA EXPRESS DELIVERY, EDGAR AND FACSIMILE
Mr. Ernest Greene
Division of Corporation Finance
Securities and Exchange Commission
100 F Street N.E., Stop 7010
Washington, D.C. 20549
Invesco Ltd.
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2009
FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 2010
DEFINITIVE PROXY STATEMENT ON SCHEDULE 14A FILED ON MARCH 29, 2010
PROSPECTUS SUPPLEMENT FILED ON MAY 20, 2009
FILE NUMBER: 1-13908
Dear Mr. Greene:
This letter sets forth the responses of Invesco Ltd. (the “Company”) to your comment letter, dated June 11, 2010, relating to the Annual Report on Form 10-K for the fiscal year ended December 31, 2009, (the “Form 10-K”) of the Company filed with the Securities and Exchange Commission (the “Commission” or the “SEC”) on February 26, 2010, the Form 10-Q for the period ended March 31, 2010 (the “Form 10-Q”) of the Company filed with the SEC on May 4, 2010, the definitive proxy statement on Schedule 14A filed on March 29, 2010, and the prospectus supplement filed on May 20, 2009.
The Company is filing, via EDGAR, this letter setting forth the Company’s responses to the Commission’s comments regarding the above filings. Enclosed as well are two hard copies of the Company’s response letter. We have included your original questions in italics in addition to providing our responses.
The Company acknowledges that:
n
the Company is responsible for the adequacy and accuracy of the disclosure in its filings;
n
Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and
n
the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
July 16, 2010
Mr. Greene
Page 2
Form 10-K for the Fiscal Year Ended December 31, 2009
General
1.
Where a comment below requests additional disclosures or other revisions to be made, these revisions should be included in your future filings, including your interim filings, if applicable.
Response to Comment 1
The Company respectfully acknowledges the Staff’s comment and will include the noted additional disclosures or other revisions in future filings, including interim filings, where appropriate.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Repurchase of Equity Securities, page 23
2.
Please provide a “Total” figure in your equity repurchases table. See Item 703(a) of Regulation S-K.
Response to Comment 2
In future filings, we will provide a “total” figure in our equity repurchases table.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Investment Capabilities Performance Overview, page 27
July 16, 2010
Mr. Greene
Page 3
3.
Please expand disclosures to provide readers with a meaningful understanding of the performance of each of your significant funds. For each significant fund, please describe the underlying types of investments and overall strategy involved in the fund. Disclose the annualized returns for the periods presented as well as the inception to date returns. Although you are in the best position to determine which funds warrant expanded disclosures, we ask that you consider providing expanded disclosure for each fund that:
·
had, or is expected to have, a material impact on fee income in relation to your consolidated results;
·
comprises a material amount of total AUM;
·
had, or is expected to have, material investments or redemptions in relation to total AUM; or
·
had, or is expected to have, material market appreciation or depreciation in relation to total AUM.
Response to Comment 3
Invesco is an independent global investment manager with operations in 20 countries. As of June 30, 2010, the Company managed $557.7 billion in assets for retail, institutional, and high-net-worth investors around the world. Invesco delivers a comprehensive array of investment products. We offer multiple investment objectives within the various asset classes and products that we manage. Our assets under management (AUM) are highly diversified by client domicile, distribution channel and asset class. As of March 31, 2010, our distribution network had gathered assets of approximately 50% retail, 46% institutional, and 4% private wealth management clients, and 40% of client AUM were outside of the U.S. We service clients in more than 100 countries. We had several thousand funds and separate accounts as of March 31, 2010.
One of the results of this diversification is no one fund or client is material to our operations. Our largest funds have multiple investors, and no one investor is significant to our revenues or AUM. Because no individual investor would have a material impact on fee income in relation to the Company’s consolidated operating results, the Company has determined that it is not meaningful to the reader of its financial statements to include individual fund performance, material investment or redemption, or material market appreciation or depreciation (actual or expected) information specific to any individual fund or investor. In addition, no one fund is significant to our AUM. It should also be noted that we have not received any inquiries from users of our financial statements, or buy-side or sell-side analysts concerning individual funds or products. Additionally, large diversified peer investment managers also do not generally provide individual fund-level information in their disclosures.
We believe that a comparison of investment performance of our funds in the aggregate relative to the performance of peer investment management companies and benchmarks is more
July 16, 2010
Mr. Greene
Page 4
useful information to evaluate if our revenues are at risk due to AUM outflows from client redemptions. As indicated in the Investment Capabilities Performance Overview section of our 2009 Form 10-K, we provide this information for 69%, 68%, and 65% of total Invesco AUM for AUM measured in one-, three-, and five-year peer group rankings, respectively, and for AUM measured versus benchmark on a one-, three-, and five-year basis, our disclosed rankings represent 84%, 82%, and 75% of total Invesco AUM, respectively, as of December 31, 2009. The remaining funds and products were excluded from these disclosures because of limited peer group or benchmark data.
Assets Under Management, page 28
4.
Please disclose the nature of the cash flows that are included in the line items titled long-term inflows and long-term outflows. Also discuss the underlying reasons for movements in these line items.
Response to Comment 4
The Company’s AUM rollforwards from period to period present long-term inflows and outflows separately from the net flows into institutional money market funds. Long-term inflows and the underlying reasons for the movements in this line item include investments from new clients, existing clients adding new accounts/funds or contributions/subscriptions into existing accounts/funds, and new funding commitments into private equity funds. We present net flows into institutional money market funds separately, because shareholders of those funds typically utilize them as short-term funding vehicles, and because their flows are particularly sensitive to short-term interest rate movements.
Long-term outflows and the underlying reasons for the movements in this line item include redemptions resulting from closed client accounts/funds, partial redemptions in continuing client accounts/funds, and reductions in funding commitments into private equity funds.
There are numerous drivers of AUM inflows and outflows, from individual investor decisions to change their investment preferences to fiduciaries making broad asset allocation decisions on behalf of advised clients to reallocate investments within portfolios. The Company therefore offers diversified investment opportunities to provide options for investors and fiduciaries to consider when making investment allocation decisions. We strive to deliver superior investment performance, as this is often a critical factor in investors’ or their advisors’ asset allocation decisions.
We are not a party to these asset allocation decisions, as the Company does not generally have access to the underlying investor’s decision-making process. Therefore, the Company is not in a position to provide meaningful information regarding the drivers of inflows and outflows. We will, however, include in future filings with the Commission enhanced definitions of inflows and outflows.
July 16, 2010
Mr. Greene
Page 5
AUM by Channel, page 29
5.
You present rollforwards of your AUM by Channel from January 1, 2007 to December 31, 2009 for your retail, institutional and private wealth management channels to the prior year results. Please provide a robust discussion regarding the underlying reasons for the changes in components of cash flows, market gains and losses/reinvestment, and foreign currency translation by channel.
Response to Comment 5
Our disclosure of AUM in a rollforward format includes long-term inflows, long-term outflows, net flows in institutional money market funds, market gains and losses/reinvestment, and foreign currency translation. Please refer to our response to comment 4 above for a discussion regarding the long-term inflows and outflows of AUM and the net flows in institutional money market funds. Market gains and losses/reinvestment of AUM includes the net change in AUM resulting from changes in market values of the underlying investments from period to period and reinvestment of client dividends. The foreign currency translation movement in our AUM results from the effect of changes in currency exchange rates from period to period as non-U.S. dollar denominated AUM is translated into U.S. dollars, the reporting currency of the Company.
We present AUM rollforwards with these categories of movement by channel, asset class, and client domicile. Channel refers to the distribution channel from which the AUM originated. Institutional AUM originated from individual corporate clients, endowments, foundations, government authorities, universities, or charities. Retail AUM arose from client investments into funds available to the public with shares or units. Private Wealth Management AUM arose from high net worth client investments. Asset classes are descriptive groupings of AUM by common type of underlying investments. Client domicile disclosure groups AUM by the domicile of the underlying clients.
In future filings, we will provide more disclosure regarding the underlying reasons for the changes in the quantifiable components of our AUM rollforwards.
Results of Operations for the Year Ended December 31, 2009, Compared with the Year Ended December 31, 2008
6.
Provide a more comprehensive analysis of the factors that impacted your investment management fees, service and distribution fees, performance fees and other, operating expenses and other income (expense) ensuring that you address specific underlying causes for the change in specific line items. If necessary, you may need to address the changes at the fund level or at least identify and quantify the impact on your results by material changes in funds. In addition, you should discuss any known or anticipated trends that have and/or may continue to impact your results of operations. Your discussion and analysis should provide investors with sufficient information to understand the historical trends and the expectations for the future as seen through the eyes of management. In addressing this comment, specifically address the following:
July 16, 2010
Mr. Greene
Page 6
·
Discuss the extent to which material decreases in revenues are attributable to decreases in average AUM, changes in mix of AUM, foreign exchange movements, market gains and losses, or new funds established. For example, you indicate that the investment management fees decreased due to decreases in average AUM during the year, changes in mix of AUM and foreign exchange movements. Please expand your explanation of this decrease to address whether this may continue in the future, the impact on future revenues and the reasons for the increase in market gains or plans to increase new funds.
·
You indicate on page 11 that your investment management fees vary with the type of assets being managed, with higher fees earned on actively managed equity and balanced accounts, along with real estate and alternative asset products, and lower fees earned on fixed income, money market and stable value accounts. Expand your discussion and analysis to address if and to what extent variations in the type of assets being managed impacted your revenues on a period by period basis.
·
Discuss to the extent material, the reasons for changes in operating expenses. In particular, you indicate that the decrease in employee compensation was due to decreases in variable compensation, including decreases in discretionary and investment performance-based staff bonuses, decreases in base salary costs resulting from decreases in headcount and foreign exchange rate movements. However, you do not discuss the reason for the changes in the factors identified. Please provide more insight into the reasons for the changes in employee compensation.
·
Quantify each factor you cite as impacting your operations. For example, you disclose that general and administrative expenses declined due to several factors including an insurance recovery of $9.5 million, foreign exchange movement, and general disciplined expense management measures, including reduced travel and entertainment and professional services expenses recorded during the year ended December 31, 2009. However you do not quantify the impact attributed to each component other than the insurance recovery.
·
Expand your discussion of other income and expenses to indicate why earnings in your joint venture investments in China declined as well as why there were net losses in certain of your partnership investments.
·
Expand your discussion to discuss the components of net realized gains (losses) and net unrealized gains (losses) of consolidated investment products to include a discussion of your realized gains, realized losses, unrealized gains from changes in fair value of the investments and unrealized losses from changes in fair value of the investments. Provide insight into reasons for changes in these underlying components.
July 16, 2010
Mr. Greene
Page 7
·
Provide a comprehensive discussion of the nature of the non-controlling interest in consolidated entities for each period presented as well as how such amounts are determined. In this regard, specifically address why the losses attributable to non-controlling interest in consolidated entities increased to $113.2 million for the year ended December 31, 2009.
Note that this is not meant to represent an all-inclusive list of where your MD&A should be improved. Improvements should be made at the consolidated level to provide quantification of amounts and further clarification throughout your discussion for a reader’s full understanding of your results of operations. See Item 303(a)(3) of Regulation S-K.
Response to Comment 6
The Company will seek to provide greater detail of the components of the income statement variances.
In future filings with the Commission, the Company will discuss any known or anticipated trends that have and/or may continue to impact our results of operations where we believe that we have identified a trend that could be material to our results of operations in the future. We will do so in light of any historical trends and will provide the future anticipated trend information as seen through the eyes of management.