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's discussion and analysis supplements, and should be read in conjunction with, the Consolidated Financial Statements of Invesco Ltd. and its subsidiaries (collectively, the "company" or "Invesco") and the notes thereto contained elsewhere in this Annual Report on Form 10-K.

During 2012 global equity markets produced strong positive returns as evidenced by the returns of the S&P 500 index, which was up over 13%, the Nikkei 225 index, which increased almost 23% in the year and the MSCI Emerging Market index which gained over 15% in 2012. The markets recovered from the significant volatility and negative sentiment experienced during 2011 as fears over the solvency of peripheral European sovereigns and the fiscal situation in the U.S. subsided.

The table below summarizes the year ended December 31 returns based on price appreciation of several major market indices for 2012, 2011, and 2010:

                          Year ended December 31,
Index                    2012       2011       2010
S&P 500                 13.4%       0.0%      12.8%
FTSE 100                 5.8%      (5.6)%      9.0%
Nikkei 225              22.9%      (17.3)%    (3.0%)
MSCI Emerging Markets   15.2%      (20.4)%    16.4%

Throughout 2012, Invesco continued to deliver strong, long-term investment performance, maintained its focus on its clients, and enhanced its profile in the industry.

As a global investment management firm dedicated to delivering investment excellence to our clients, Invesco is committed to further strengthening and enhancing our best-in-class risk management approach. A key factor in Invesco's ability to weather the economic storms of the past three years was our integrated approach to risk management.

Invesco's enterprise risk management (ERM) approach is embedded in its management processes across the organization. Broadly, our approach includes two governance structures - one for investments and another for business risk.

• Investment risk oversight is supported by the Global Performance Measurement and Risk group and the investment teams.

• Business risk oversight is supported by the Corporate Risk Management Committee and related committees.

Our Global Performance Measurement and Risk group provides senior management and the Board with insight into core investment risks, while our Corporate Risk Management Committee facilitates a focus on strategic, operational and other key business risks. Further, business component, functional, and geographic risk management committees maintain an ongoing risk assessment process that provides a bottom-up perspective on the specific risk areas existing in various domains of our business. A key value of a robust enterprise risk management process is facilitating the flow of information and insight across the organization and applying that information to more effectively managing risk. Through this regular and consistent risk communication, the Board has reasonable assurance that all material risks of the company are being addressed and that the company is propagating a risk-aware culture in which effective risk management is sewn into the fabric of the business. As a result of our efforts in this area, S&P has designated our enterprise risk management rating as "strong."

In addition, we benefited from our long-term efforts to ensure a diversified base of assets under management. 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 enables Invesco to withstand different market cycles and take advantage of growth opportunities in various markets and channels.

Presentation of Management'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. The company serves as the investment manager, making day-to-day investment decisions concerning the assets of the products. Certain of these entities are consolidated under variable interest or voting interest entity consolidation guidance. See Part II, Item 8, Financial Statements and Supplementary Data - Note 1, "Accounting Policies" and Note 20, "Consolidated Investment Products," for additional details.

The majority of the company's consolidated investment product 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'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. Additionally, the investors in the CLOs have no recourse to the general credit of the company for the notes issued by the CLOs. The company therefore does not consider this debt to be a company liability.

The impact of consolidation of investment products is so significant to the presentation of the company's financial statements (but not to the underlying financial condition or 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) with the company's non-GAAP presentation. There are four distinct sections within this Management's Discussion and Analysis of Financial Condition and Results of Operations after the Assets Under Management discussion:

• Results of Operations (years ended December 31, 2012 compared to December 31, 2011 compared to December 31, 2010);

• Schedule of Non-GAAP Information;

• Balance Sheet Discussion; and

• Liquidity and Capital Resources.

Each of the financial statement summary sections (Results of Operations, Balance Sheet Discussion, and Liquidity and Capital Resources) begins with a table illustrating the impact of the consolidation of investment products 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 investment products. For example, the impact of consolidated investment products on operating revenues for the year ended December 31, 2012 was $(41.0) million. This indicates that the consolidation of investment products 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 follows each of these sections separately provides discussion of the underlying financial statement activity for the company, before consolidation of investment products, as well as of the financial statement activity of consolidated investment products. 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-operating income/expense 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.

Summary Operating Information

Summary operating information for 2012, 2011 and 2010 is presented in the table
below.
$ in millions, other than per share amounts,
percentages and AUM                                    Year ended December 31,
U.S. GAAP Financial Measures Summary              2012           2011           2010
Operating revenues                              $4,177.0       $4,092.2       $3,487.7
Operating income                                  $871.5         $898.1         $589.9
Operating margin                                    20.9 %         21.9 %         16.9 %
Net income attributable to common
shareholders                                      $677.1         $729.7         $465.7
Diluted EPS                                        $1.49          $1.57          $1.01
Debt/equity ratio including consolidated
investment products (%)                             56.2 %         74.4 %         76.7 %

Non-GAAP Financial Measures Summary
Net revenues(1)                                 $2,959.0       $2,898.4       $2,521.1
Adjusted operating income(2)                    $1,045.1       $1,068.9         $897.7
Adjusted operating margin(2)                        35.3 %         36.9 %         35.6 %
Adjusted net income attributable to common
shareholders(3)                                   $776.7         $781.6         $639.7
Adjusted diluted EPS(3)                            $1.71          $1.68          $1.38
Debt/equity ratio excluding consolidated
investment products(%)(4)                           14.5 %         16.5 %         16.9 %

Assets Under Management
Ending AUM (billions)                             $687.7         $625.3         $616.5
Average AUM (billions)                            $664.4         $634.3         $532.3

(1) Net revenues is a non-GAAP financial measure. See Item 6. "Selected Financial Data," footnote 1, for the definition of this measure. See "Schedule of Non-GAAP Information" for the reconciliation of operating revenues to net revenues.

(2) Adjusted operating income and adjusted operating margin are non-GAAP financial measures. See Item 6. "Selected Financial Data," footnote 2, for the definition of these measures. See "Schedule of Non-GAAP Information" for the reconciliation of operating income to adjusted operating income.

(3) Adjusted net income attributable to common shareholders and adjusted diluted EPS are non-GAAP financial measures. See Item 6. "Selected Financial Data," footnote 3, for the definition of these measures. See "Schedule of Non-GAAP Information" for the reconciliation of net income to adjusted net income.

(4) The debt-to-equity ratio excluding consolidated investment products is a non-GAAP financial measure. See the "Liquidity and Capital Resources" section for a recalculation of this ratio and other important disclosures.

Investment Capabilities Performance Overview

Invesco's first strategic priority is to achieve strong investment performance over the long-term for our clients. Long-term performance in our equities capabilities, as measured by the percentage of AUM ahead of benchmark and ahead of peer median, is generally strong with some pockets of outstanding performance. Within our equity asset class, U.K. and Global Ex U.S. and Emerging Markets have had strong relative performance, with 87% or more of assets beating their peer group and benchmark over three- and five-year periods. U.S. Value funds reflect strong performance with 99% and 94%, respectively, of assets beating benchmarks and peers on a five-year basis. Within our fixed income asset class, Stable Value products have achieved 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
Equities     U.S. Core                 22 %        29 %        82 %          37 %          40 %          60 %
             U.S. Growth               35 %        29 %        24 %          30 %          25 %          62 %
             U.S. Value                53 %        55 %        99 %          74 %          73 %          94 %
             Sector                    63 %        65 %        58 %          43 %          29 %          39 %
             U.K.                      11 %        99 %        98 %           9 %          98 %          94 %
             Canadian                 100 %        56 %        81 %         100 %          52 %          56 %
             Asian                     49 %        45 %        46 %          37 %          44 %          44 %
             Continental European      70 %        70 %        94 %          45 %          58 %          58 %
             Global                    59 %        80 %        88 %          62 %          73 %          60 %
             Global Ex U.S. and
             Emerging Markets          25 %        88 %        99 %          15 %          87 %          90 %

Other        Alternatives              51 %        60 %        68 %          73 %          54 %           6 %
             Balanced                  47 %        45 %        77 %          97 %          83 %          95 %

Fixed Income Money Market              60 %        33 %        72 %          97 %          96 %          93 %
             U.S. Fixed Income         64 %        90 %        58 %          81 %          81 %          77 %
             Global Fixed Income       86 %        62 %        89 %          91 %          41 %          86 %
             Stable Value             100 %       100 %       100 %         100 %         100 %         100 %

Note: AUM measured in the one-, three-, and five-year peer group rankings represents 59%, 59%, and 56% of total Invesco AUM, respectively, and AUM measured versus benchmark on a one-, three-, and five-year basis represents 72%, 71%, and 67% of total Invesco AUM, respectively, as of December 31, 2012. Peer group rankings are sourced from a widely-used third party ranking agency in each fund's market (Lipper, Morningstar, IMA, Russell, Mercer, eVestment Alliance, SITCA) and 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 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-funds with component funds managed by Invesco, stable value building block funds and CLOs. Certain funds and products were excluded from the analysis because of limited benchmark or peer group data. Had these been available, results may have been different. These results are preliminary and subject to revision. Performance assumes the reinvestment of dividends. Past performance is not indicative of future results and may not reflect an investor's experience.

Assets Under Management

The company's rolling presentation of AUM from period to period (on the following pages) illustrates 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 use them as short-term funding vehicles and because their flows are particularly sensitive to short-term interest rate movements.

The discussion below includes presentation of AUM as Passive and Active. Passive AUM includes ETFs, UITs, non-fee earning leverage, foreign exchange overlays and other passive mandates. Active AUM is total AUM less Passive AUM.

There are numerous drivers of AUM inflows and outflows, including individual investor decisions to change investment preferences, fiduciaries making broad asset allocation decisions on behalf of advised clients and reallocation of investments within portfolios. 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, including their risk appetite or liquidity needs. Therefore, the company is not in a position to provide meaningful information regarding the drivers of inflows and outflows.

AUM at December 31, 2012 were $687.7 billion (December 31, 2011: $625.3 billion; December 31, 2010: $616.5 billion). During the year ended December 31, 2012, net long-term inflows increased AUM by $12.4 billion, while positive market movements increased AUM by $48.8 billion. We experienced net inflows in institutional money market funds of $0.1 billion, increases in AUM of $2.8 billion due to changes in foreign exchange rates, and net outflows from dispositions of $1.7 billion during the year ended December 31, 2012. During the year ended December 31, 2011, net inflows increased AUM by $19.2 billion and negative market movements decreased AUM by $15.3 billion. We experienced net inflows in institutional money market funds of $5.3 billion, offset by decreases in AUM of $0.4 billion due to changes in foreign exchange rates during the year ended December 31, 2011. During the year ended December 31, 2010, net inflows increased AUM by $5.5 billion and positive market movements increased AUM by $43.9 billion. We experienced net outflows in institutional money market funds of $15.5 billion and increases in AUM of $1.6 billion due to changes in foreign exchange rates during the year ended December 31, 2010. Acquisitions added $121.5 billion of AUM in 2010, including $114.6 billion of AUM added at June 1, 2010 with the acquisition of Morgan Stanley's retail asset management business, including Van Kampen Investments (the "acquired business" or the "acquisition"). Average AUM during the year ended December 31, 2012 were $664.4 billion, compared to $634.3 billion for the year ended December 31, 2011 and $532.3 billion for the year ended December 31, 2010.

Net inflows during the year ended December 31, 2012 included net long-term inflows of passive AUM of $11.1 billion and active net long-term inflows of $1.3 billion. Net flows were driven by net inflows into both our retail and institutional distribution channels of $10.4 billion and $0.3 billion, respectively, primarily in the fixed income and balanced asset classes, while our equity asset class experienced net outflows of $9.3 billion. Net inflows during the year ended December 31, 2011 included net long-term inflows of passive AUM of $17.5 billion and active net long-term AUM inflows of $1.7 billion. Net flows in 2011 were driven by positive net inflows of $9.1 billion into our retail and $8.9 billion into institutional distribution channels, primarily in the fixed asset class, while our equity asset class experienced net outflows of $7.9 billion.

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. As discussed in the "Executive Overview" section of this Management's Discussion and Analysis, global equity markets produced strong returns during the year ended December 31, 2012, contrasting with overall declines experienced in the year ending December 31, 2011. Of the $48.8 billion increase in AUM resulting from market gains during the year ended December 31, 2012, $33.3 billion of this increase was due to the change in value 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. Of the total decrease in AUM resulting from market losses during the year ended December 31, 2011, $14.8 billion was due to the change in value of our equity asset class, decreasing in line with equity markets globally. Of the $43.9 billion increase in AUM resulting from market increases during the year ended December 31, 2010, $33.4 billion of this increase was due to the change in value of our equity asset class, in line with increases in the S&P 500 and the FTSE 100 indices of 12.8% and 9.0%, respectively, during that period.

Foreign exchange rate movements in our AUM result from the effect of changes in foreign 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. The impact of the change in foreign exchange rates in the year ended December 31, 2012 was driven primarily by 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, the strengthening of the Canadian Dollar relative to the U.S. Dollar, which was reflected in the translation of our Canadian Dollar-based AUM into U.S. Dollars, and the strengthening of the Euro relative to the U.S. Dollar, which was reflected in the translation

of our Euro-based AUM into U.S. Dollars. This was partly offset by the weakening 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. The impact of the change in foreign exchange rates in the year ended December 31, 2011 was driven primarily by the strengthening of the Japanese Yen relative to the U.S. Dollar, partially offset by the weakening of the Pound Sterling, Canadian Dollar and Euro relative to the U.S. Dollar. The impact of the change in foreign exchange rates at December 31, 2010 was driven by the strengthening of the Canadian Dollar and Japanese Yen relative to the U.S. Dollar, offset by the weakening of the Pound Sterling and the Euro.

The table below illustrates the spot foreign exchange rates for translation into the U.S. Dollar, the reporting currency of the company, at December 31, 2012, 2011, and 2010:

                            December 31, 2012    December 31, 2011    December 31, 2010
Pound Sterling ($ per £)          1.625                1.555                1.565
Canadian Dollar (CAD per $)       0.996                1.018                0.994
Japan (¥ per $)                  86.520               76.950               81.080
Euro ($ per Euro)                 1.319                1.299                1.342

Net revenue yield on AUM decreased 1.2 basis points to 44.5 basis points in the year ended December 31, 2012 from the year ended December 31, 2011 level of 45.7 basis points. Excluding performance fees, the net revenue yield decreased 1.5 basis points to 43.6 basis points in the year ended December 31, 2012 from the year ended December 31, 2011 level of 45.1 basis points. Changes in our AUM mix significantly impact our net revenue yield. For example, on an asset class basis, our equity AUM generally earn a higher net revenue rate than money market AUM. The tables that follow also analyze AUM into active and passive style. Passive AUM generally earn a lower effective fee rate than active asset classes. At December 31, 2012, passive AUM were $114.0 billion, representing 16.6% of total AUM at that date; whereas at December 31, 2011, passive AUM were $96.3 billion, representing 15.4% of our total AUM at that date. In the year ended December 31, 2012, the net revenue yield on passive AUM was 9.3 basis points compared to 10.8 basis points in the year ended December 31, 2011, a reduction of 1.5 basis points. The net revenue yield (before performance fees) on active AUM has been more stable, reducing from 50.8 basis points in the year ended December 31, 2011 to 50.4 basis points in the year ended December 31, 2012. The higher proportion of passive AUM combined with the lower yield earned by passive AUM resulted in the majority of the overall yield reduction experienced in 2012 when compared to 2011. The increase in passive AUM includes the movements in the Powershares QQQ Nasdaq-100 index tracking fund. The Powershares QQQ fund AUM increased to $30.4 billion at December 31, 2012 compared to $25.6 billion at December 31, 2011, an increase in passive AUM of $4.8 billion. 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-on-year yield reduction.

Although net revenue yield reduced on a year-on-year basis, this trend reversed during the second half of 2012 due to improving equity markets as well as net inflows in the balanced asset class, including strong net AUM flows in our Continental European business. The balanced asset class includes the Invesco Balanced Risk Allocation strategy range of products. AUM for this strategy reached $18.7 billion as at December 31, 2012 compared to $5.2 billion at December 31, 2011, an increase of $13.5 billion during the year. These active AUM inflows assisted in stabilizing the active and passive AUM mix and contributed to a net revenue yield before performance fees of 44.4 basis points in the final quarter of 2012 compared to the 43.6 basis points recorded for the year ended December 31, 2012.

Gross revenue yield on AUM decreased 1.7 basis points to 63.2 basis points in the year ended December 31, 2012 from the year ended December 31, 2011 level of 64.9 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. The numerator of the gross revenue yield measure, operating revenues, excludes the management fees earned from consolidated investment products; 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 from AUM. See "Schedule of Non-GAAP Information" for a reconciliation of operating revenues (gross revenues) to net revenues.

Changes in AUM were as follows:

$ in billions              Total AUM      Active      Passive       Total AUM      Active      Passive       Total AUM      Active      Passive
. . .