United States Securities and Exchange Commission Washington, D.C. 20549 FORM 20-F |_| REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2002 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-13908 AMVESCAP PLC (Exact name of Registrant as specified in its charter) England (Jurisdiction of incorporation or organization) 30 Finsbury Square, London, EC2A 1AG, United Kingdom (Address of principal executive offices) Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered - ------------------- ---------------- American Depositary Shares each New York Stock Exchange representing 2 Ordinary Shares of 25 pence par value per share Ordinary Shares of 25 pence par value per share London Stock Exchange SBF--Paris Bourse New York Stock Exchange(1) Securities registered pursuant to Section 12(g) of the Act: None. Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None. Indicate the number of shares outstanding of each of the issuer's classes of capital or common stock, as of the close of the period covered by the annual report. Outstanding at Class December 31, 2002 - ----- ----------------- Ordinary Shares 794,456,221 (2) 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 |X| NO |_| Indicate by check mark which financial statement item the registrant has elected to follow. |X|Item 17 |_| Item 18 - --------------- (1) Listed not for trading but only in connection with the listing of American Depositary Shares pursuant to requirements of the Securities and Exchange Commission. The Ordinary Shares' primary trading market is the London Stock Exchange. (2) Includes Ordinary Shares represented by outstanding American Depositary Shares.
<TABLE> TABLE OF CONTENTS <S> <C> PART I.........................................................................................................................1 Cautionary Statements Concerning Forward-Looking Statements....................................................................1 Item 1. Identity of Directors, Senior Management and Advisers.................................................................1 Item 2. Offer Statistics and Expected Timetable...............................................................................1 Item 3. Key Information.......................................................................................................2 Selected Financial Data...............................................................................................2 Dividends.............................................................................................................3 Market for Our Securities.............................................................................................4 Exchange Rates........................................................................................................4 Financial Statements and Reports......................................................................................5 Risk Factors..........................................................................................................6 Item 4. Information on the Company............................................................................................8 History and Development of AMVESCAP...................................................................................8 Business Overview.....................................................................................................8 Operating Groups.....................................................................................................10 AIM............................................................................................................10 INVESCO........................................................................................................10 INVESCO Retirement.............................................................................................11 Private Wealth Management......................................................................................12 Our Business Strategy................................................................................................12 Globalization..................................................................................................12 Diverse Product Offerings......................................................................................12 Multiple Distribution Channels.................................................................................12 Alignment of Interests of Employees and Shareholders...........................................................12 Competition..........................................................................................................13 Management Contracts.................................................................................................13 Government Regulations...............................................................................................13 Our Organizational Structure.........................................................................................14 Property.............................................................................................................14 Item 5. Operating and Financial Review and Prospects.........................................................................14 General..............................................................................................................14 Summary of Differences Between U.K. GAAP and U.S. GAAP...............................................................14 Critical Accounting Policies.........................................................................................15 Revenue Recognition............................................................................................15 Goodwill.......................................................................................................15 Investments....................................................................................................15 Deferred sales commissions.....................................................................................15 Exceptional Items..............................................................................................15 Results of Operations................................................................................................16 2002 Compared to 2001................................................................................................18 Assets Under Management........................................................................................18 Operating Results..............................................................................................18 Managed Products...............................................................................................19 INVESCO Institutional..........................................................................................19 INVESCO Global.................................................................................................20 INVESCO Retirement.............................................................................................20 Private Wealth Management......................................................................................20 New Business Expense...........................................................................................21 Corporate......................................................................................................21 Other Income/Expense...........................................................................................21 Taxation.......................................................................................................21 2001 Compared to 2000................................................................................................21 </TABLE> i
<TABLE> <S> <C> Assets Under Management........................................................................................21 Operating Results..............................................................................................21 Managed Products...............................................................................................22 INVESCO Institutional..........................................................................................22 INVESCO Global.................................................................................................23 INVESCO Retirement.............................................................................................23 Private Wealth Management......................................................................................24 New Business Expense...........................................................................................24 Corporate......................................................................................................24 Other Income/Expense...........................................................................................24 Taxation.......................................................................................................24 Liquidity and Capital Resources......................................................................................24 Dividends............................................................................................................25 Item 6. Directors, Senior Management and Employees...........................................................................26 Directors and Senior Management......................................................................................26 Compensation of Directors and Senior Management......................................................................29 Salary, Bonus and Other Benefits...............................................................................30 Option Grants..................................................................................................31 Pension Rights.................................................................................................31 AMVESCAP Global Stock Plan.....................................................................................31 INVESCO Employee Stock Ownership Plan..........................................................................32 AMVESCAP Executive Share Option Schemes........................................................................32 Board Practices......................................................................................................32 Employees............................................................................................................33 Share Ownership......................................................................................................34 Ownership of Ordinary Shares...................................................................................34 Options to Purchase Securities from AMVESCAP...................................................................35 Employee Ownership Opportunities...............................................................................37 Item 7. Major Shareholders and Related Party Transactions....................................................................37 Major Shareholders...................................................................................................37 Related Party Transactions...........................................................................................38 Item 8. Financial Information................................................................................................38 Consolidated Statements and Other Financial Information..............................................................38 Legal Proceedings....................................................................................................38 Dividend Distributions...............................................................................................38 Significant Changes in Financial Information.........................................................................38 Item 9. The Offer and Listing................................................................................................38 Nature of Trading Market and Price History...........................................................................38 Item 10. Additional Information...............................................................................................39 Memorandum and Articles of Association...............................................................................39 Directors......................................................................................................39 Rights attaching to our shares.................................................................................40 Dividends and entitlement in the event of liquidation to any surplus...........................................40 Material Contracts...................................................................................................40 Exchange Controls....................................................................................................44 Taxation.............................................................................................................44 Item 11. Quantitative and Qualitative Disclosures About Market Risk...........................................................46 Item 12. Description of Securities Other than Equity Securities...............................................................46 PART II.......................................................................................................................46 Item 13. Defaults, Dividend Arrearages and Delinquencies......................................................................46 </TABLE> ii
<TABLE> <S> <C> Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.........................................46 Item 15. Controls and Procedures..............................................................................................46 Item 16. [Reserved]...........................................................................................................46 PART III......................................................................................................................46 Item 17. Financial Statements.................................................................................................46 Item 18. Financial Statements.................................................................................................47 Item 19. Exhibits.............................................................................................................47 SIGNATURES....................................................................................................................50 </TABLE> iii
PART I Cautionary Statements Concerning Forward-Looking Statements We believe it is important to communicate our future expectations to our shareholders and to the public. This report includes, and documents incorporated by reference herein and public filings and oral and written statements by us and our management may include, statements that constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of our management and on information available to our management at the time such statements were made. Forward-looking statements include information concerning possible or assumed future results of our operations, earnings, liquidity, cash flow and capital expenditures, industry or market conditions, assets under management, acquisition activities and the effect of completed acquisitions, debt levels and the ability to obtain additional financing or make payments on our debt, regulatory developments, demand for and pricing of our products and other aspects of our business, general economic conditions and statements that, in each case, are preceded by, followed by, or include words such as "believes," "expects," "anticipates," "intends," "plans," "estimates," "may," "could," "should," "would" or similar expressions. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Although we make such statements based on assumptions that we believe to be reasonable, there can be no assurance that actual results will not differ materially from our expectations. Many of the factors that will determine these results are beyond our ability to control or predict. We do not intend to review or revise any particular forward-looking statements made or incorporated by reference in this Form 20-F in light of future events, except as otherwise required by law. We caution investors not to rely unduly on any forward-looking statements. The following important factors, and other important factors described elsewhere in this report or in our other filings with the Securities and Exchange Commission, among others, could cause our results to differ from any results that we may project, forecast or estimate in any such forward-looking statements: (1) variations in demand for our investment products; (2) significant changes in net cash flows into or out of our business; (3) significant fluctuations in the performance of debt and equity markets worldwide; (4) the effect of political or social instability in the countries in which we invest or do business; (5) the effect of terrorist attacks in the countries in which we invest or do business and the escalation of hostilities that could result therefrom; (6) enactment of adverse state, federal or foreign legislation or changes in government policy or regulation (including accounting standards) affecting our operations or the way in which our profits are taxed; (7) war and other hostilities in or involving countries in which we invest or do business; (8) adverse results in litigation; (9) exchange rate fluctuations; (10) the effect of economic conditions and interest rates on a U.K., U.S. or international basis; (11) our ability to compete in the investment management business; (12) the effect of consolidation in the investment management business; (13) limitations or restrictions on access to distribution channels for our products; (14) our ability to attract and retain key personnel; (15) the investment performance of our investment products and our ability to retain our accounts; (16) our ability to acquire and integrate other companies into our operations successfully and the extent to which we can realize anticipated cost savings and synergies from such acquisitions; and (17) the effect of system delays and interruptions on our operations. Item 1. Identity of Directors, Senior Management and Advisers Not applicable. Item 2. Offer Statistics and Expected Timetable Not applicable. 1
Item 3. Key Information Selected Financial Data SELECTED CONSOLIDATED FINANCIAL INFORMATION The following tables present selected consolidated financial information of AMVESCAP as of and for each of the five fiscal years ended December 31, 2002. The financial statement information as of and for each of the years in the five-year period ended December 31, 2002 has been derived from our audited Consolidated Financial Statements. The Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United Kingdom ("U.K. GAAP"), which differ in certain significant respects from accounting principles generally accepted in the United States ("U.S. GAAP"). For a discussion of the principal differences between U.K. GAAP and U.S. GAAP, see "Item 5. Operating and Financial Review and Prospects" and Note 23 to the Consolidated Financial Statements, below. The selected consolidated financial information should be read together with the Consolidated Financial Statements and related notes beginning on page F-1 of this Form 20-F and "Item 5. Operating and Financial Review and Prospects," below. <TABLE> <CAPTION> Year Ended December 31, (1) --------------------------- 2002 (2) 2002 2001 2000 (3) -------- ---- ---- -------- (In thousands, except per share data) <S> <C> <C> <C> <C> Profit and Loss Data: Amounts in accordance with U.K. GAAP: Revenues...................................... $2,165,873 (pound)1,345,263 (pound)1,619,847 (pound)1,628,662 Operating profit before goodwill amortization and exceptional items.......................... 590,749 366,925 523,360 588,911 Operating profit.............................. 238,702 148,262 325,886 480,690 Profit before taxation........................ 164,647 102,265 280,438 446,233 Profit after taxation......................... 27,198 16,893 154,803 300,728 Earnings per share before goodwill amortization and exceptional items: Basic...................................... 27.5p 41.2p 57.5p Diluted.................................... 27.2p 40.0p 54.7p Earnings per share: Basic...................................... 2.1p 19.2p 44.4p Diluted.................................... 2.1p 18.6p 42.3p Amounts in accordance with U.S. GAAP: Net income.................................... 260,604 161,866 80,221 180,710 Earnings per share: Basic.................................... 20.0p 10.0p 26.7p Diluted.................................. 19.8p 9.7p 25.7p <CAPTION> 1999 (3) 1998 (3) -------- -------- <S> <C> <C> Profit and Loss Data: Amounts in accordance with U.K. GAAP: Revenues...................................... (pound)1,072,350 (pound)802,172 Operating profit before goodwill amortization and exceptional items.......................... 352,713 257,316 Operating profit.............................. 315,959 187,495 Profit before taxation........................ 283,042 161,478 Profit after taxation......................... 181,484 99,848 Earnings per share before goodwill amortization and exceptional items: Basic...................................... 34.1p 26.9p Diluted.................................... 32.7p 25.2p Earnings per share: Basic...................................... 28.4p 16.6p Diluted.................................... 27.2p 15.6p Amounts in accordance with U.S. GAAP: Net income.................................... 88,034 44,251 Earnings per share: Basic.................................... 13.8p 7.4p Diluted.................................. 13.2p 7.0p </TABLE> <TABLE> <CAPTION> As of December 31, (1) ---------------------- 2002 (2) 2002 2001 2000 (3) -------- ---- ---- -------- (In thousands) <S> <C> <C> <C> <C> Balance Sheet Data: Amounts in accordance with U.K. GAAP: Net current assets (4)....................... $16,982 (pound)10,548 (pound)163,817 (pound)417,150 Goodwill (4)................................. 4,093,113 2,542,306 2,696,045 2,375,542 Total assets (4)............................. 6,661,579 4,137,627 4,448,895 4,322,679 Current maturities of debt................... 357,563 222,089 125,828 6,839 Long-term debt, excluding current maturities. 958,916 595,600 844,285 960,023 Capital and reserves......................... 3,676,416 2,283,488 2,281,464 2,130,001 Amounts in accordance with U.S. GAAP: Goodwill (4)................................. 5,718,103 3,551,617 3,647,633 3,389,084 Total assets (4)............................. 8,073,311 5,014,479 5,308,748 5,253,384 Capital and reserves......................... 5,165,258 3,208,235 3,112,031 3,018,621 <CAPTION> 1999 (3) 1998 (3) -------- -------- <S> <C> <C> Balance Sheet Data: Amounts in accordance with U.K. GAAP: Net current assets (4)....................... (pound)234,157 (pound)142,375 Goodwill (4)................................. 664,135 711,795 Total assets (4)............................. 1,841,523 1,625,086 Current maturities of debt................... -- 7,195 Long-term debt, excluding current maturities. 659,120 686,010 Capital and reserves......................... 451,384 345,241 Amounts in accordance with U.S. GAAP: Goodwill (4)................................. 1,650,515 1,711,396 Total assets (4)............................. 2,737,487 2,523,470 Capital and reserves......................... 1,337,312 1,255,106 </TABLE> 2
<TABLE> <CAPTION> Year Ended December 31, (1) --------------------------- 2002 (2) 2002 2001 2000 -------- ---- ---- ---- (In thousands) <S> <C> <C> <C> <C> Other Data: Amounts in accordance with U.K. GAAP: Cash provided by operations (4).......................... $686,694 (pound)426,518 (pound)543,233 (pound)675,825 EBITDA (5)............................................... 698,286 433,718 603,418 659,665 Amounts in accordance with U.S. GAAP: EBITDA (5)............................................... 686,097 426,147 604,913 662,422 Dividends per share (pence)................................. 11.5 11 10 </TABLE> <TABLE> <CAPTION> 1999 1998 ---- ---- <S> <C> <C> Other Data: Amounts in accordance with U.K. GAAP: Cash provided by operations (4).......................... (pound)366,047 (pound)159,861 EBITDA (5)............................................... 431,063 309,459 Amounts in accordance with U.S. GAAP: EBITDA (5)............................................... 414,634 281,112 Dividends per share (pence)................................. 9 8 </TABLE> <TABLE> <CAPTION> As of December 31, (1) ---------------------- 2002 2001 2000 1999 1998 ---- ---- ---- ---- ---- (In billions) <S> <C> <C> <C> <C> <C> Total assets under management........................................ $332.6 $397.9 $402.6 $357.4 $275.4 </TABLE> - -------------- (1) Includes financial data attributable to acquired businesses from the respective dates of purchase. See "Item 5: Operating and Financial Review and Prospects," below. (2) For the convenience of the reader, we have translated pounds sterling as of and for the fiscal year ended December 31, 2002 into U.S. dollars using the Noon Buying Rate, which is the noon buying rate in the City of New York for cable transfers in pounds sterling as certified for customs purposes by the Federal Reserve Bank of New York, on December 31, 2002 of $1.61 per (pound)1.00. We did not use Noon Buying Rates in the preparation of our Consolidated Financial Statements. The rates that we used in the preparation of our Consolidated Financial Statements for the fiscal year ended December 31, 2002 were $1.50 per (pound)1.00 for profit and loss statement items, which was the average prevailing exchange rate during the year, and $1.60 per (pound)1.00 for balance sheet items, which was the rate prevailing at December 31, 2002. For a discussion of the effects of currency fluctuations on our combined results of operations and combined financial position, see "Risk Factors" and "Item 5: Operating and Financial Review and Prospects," below. (3) Restated for the impact of adopting FRS 19, "Deferred Tax." The U.K. Accounting Standards Board issued FRS 19, which requires companies to change their method of computing deferred taxes. We adopted this new statement in 2001, including a restatement of prior years' profit and loss account and balance sheet. (4) Certain prior year amounts have been reclassified to conform to the current year presentation of banking and insurance subsidiaries. (5) EBITDA consists of earnings before taxation and exceptional items and excluding interest expense, depreciation and amortization charges. EBITDA is presented because we believe that EBITDA may be useful to investors as an indicator of funds available to us, which may be used to pay dividends, to service debt, to make capital expenditures and for working capital purposes. EBITDA should not be construed as an alternative to operating profit (as determined in accordance with U.K. GAAP or U.S. GAAP) as an indicator of our operating performance, as cash flows from operating activities (as determined in accordance with U.K. GAAP or U.S. GAAP) as a measure of liquidity, or as any other measure of operating performance determined in accordance with U.K. GAAP or U.S. GAAP. Our calculation of EBITDA may not be comparable to similarly titled measures presented by other companies. Dividends Our practice has been to pay an interim dividend and a final dividend in respect of each fiscal year. The interim dividend is generally payable in October of each year by resolution of our Board of Directors, and the final dividend is payable after approval of such dividend by our shareholders at the Annual General Meeting in the year following the fiscal year to which it relates. The declaration, payment and amount of any future dividends will be recommended by our Board of Directors and will depend upon, among other factors, our earnings, financial condition and capital requirements at the time such declaration and payment are considered. See "Item 10. Additional Information," below, for further discussion of our dividend policy and taxes applicable to dividends. See "Item 5. Operating and Financial Review and Prospects," and Note 15 to our Consolidated Financial Statements, below, for a discussion of restrictions on our ability to declare dividends. 3
The following table sets forth the interim, final and total dividends paid per Ordinary Share in respect of each year indicated, translated into U.S. cents per American Depositary Share: <TABLE> <CAPTION> U.S. Cents per American Year Ended Pence per Ordinary Share Depositary Share(1) ------------------------ ------------------- December 31, Interim Final Total Interim Final Total - ------------ ------- ----- ----- ------- ----- ----- <S> <C> <C> <C> <C> <C> <C> 1998 3.00 5.00 8.00 10.11 15.69 25.79 1999 3.50 5.50 9.00 11.55 17.17 28.72 2000 4.00 6.00 10.00 11.55 17.19 28.74 2001 4.50 6.50 11.00 13.32 19.01 32.33 2002 5.00 6.50(2) 11.50(2) 15.69 (3) (3) </TABLE> - -------------- (1) Based on Noon Buying Rates in effect at the respective payment dates, and adjusted to reflect the one-for-two adjustment to the Ordinary Share per American Depositary Share ratio in April 1998, and the change in the Ordinary Share per American Depositary Share ratio from five-for-one to two-for-one on November 8, 2000. (2) Subject to approval of the final dividend by the shareholders at the Annual General Meeting to be held on April 30, 2003. (3) If approved, the final dividend will be paid on May 2, 2003. Therefore, no currency translation can yet be made. Market for Our Securities Our Ordinary Shares are listed for trading on the London Stock Exchange and SBF--Paris Bourse. Our Ordinary Shares also trade under the symbol "AVZ" on the Frankfurt Stock Exchange. Our American Depositary Shares are listed for trading on the New York Stock Exchange under the symbol "AVZ." Each of our American Depositary Shares represents two Ordinary Shares or the right to receive two Ordinary Shares deposited with The Bank of New York (the "Depositary"). The Depositary issues American Depositary Receipts, which may represent any number of American Depositary Shares. We also have Exchangeable Shares and Equity Subordinated Debentures, both of which were issued by one of our subsidiaries and are listed for trading on The Toronto Stock Exchange. Voting rights of holders of Exchangeable Shares and descriptions of Exchangeable Shares and Equity Subordinated Debentures are set forth in "Item 10. Additional Information--Memorandum and Articles of Association--Rights attaching to our shares," below. Our 6.375% Senior Notes due 2003, our 6.600% Senior Notes due 2005 and our 5.900% Senior Notes due 2007 are listed on the Luxembourg Stock Exchange. We have applied to list our 5.375% Senior Notes due 2013 on the Luxembourg Stock Exchange. Exchange Rates We publish our Consolidated Financial Statements in pounds sterling. References in this report to "U.S. dollars," "$" or "cents" are to United States currency and references to "pounds sterling," "(pound)," "pence" or "p" are to United Kingdom currency. A discussion of the effects of currency translations and fluctuations on our results is contained in "Risk Factors" and "Item 5. Operating and Financial Review and Prospects," below. Cash dividends on Ordinary Shares are declared and paid in pounds sterling but are paid at a date subsequent to their declaration. Therefore, holders of our American Depositary Shares are exposed to currency fluctuations from the date of declaration of the dividend to the date when the pounds sterling are converted to U.S. dollars by the Depositary for distribution to holders of American Depositary Shares. Additionally, currency fluctuations will affect the U.S. dollar equivalent of the pounds sterling price of our Ordinary Shares on the London Stock Exchange and, as a result, are likely to affect the market price of the American Depositary Shares on the New York Stock Exchange. 4
The following tables set forth, for the periods and dates indicated, certain information concerning the Noon Buying Rate for pounds sterling expressed in U.S. dollars per (pound)1.00. On March 25, 2003, the Noon Buying Rate was $1.57 per (pound)1.00. These translations are not representations that the pounds sterling amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated or at any other rate. We do not use such rates in the preparation of our Consolidated Financial Statements. EXCHANGE RATES -------------- Year ended December 31, Year end Average(1) High Low - ----------------------- -------- ---------- ---- --- 1998 1.66 1.66 1.71 1.61 1999 1.62 1.62 1.68 1.55 2000 1.49 1.51 1.65 1.40 2001 1.45 1.44 1.50 1.37 2002 1.61 1.50 1.61 1.41 - -------------- (1) The average of the exchange rates on the last trading day of each month during the relevant period. Month High Low ----- ---- --- February 2003 1.65 1.57 January 2003 1.65 1.60 December 2002 1.61 1.56 November 2002 1.59 1.54 October 2002 1.57 1.54 September 2002 1.57 1.53 Financial Statements and Reports This report contains our consolidated balance sheets as of December 31, 2002 and 2001 and consolidated statements of profit and loss, total recognized gains and losses, shareholders' funds and cash flows for the years ended December 31, 2002, 2001 and 2000. The Consolidated Financial Statements and other financial information concerning us included in this Form 20-F and in our annual and semi-annual reports are presented in conformity with U.K. GAAP. U.K. GAAP as applied to us differs in certain important respects from U.S. GAAP. A description of the principal differences between U.K. GAAP and U.S. GAAP and a reconciliation to U.S. GAAP net income and shareholders' equity are contained in the notes to the Consolidated Financial Statements. We furnish the Depositary with annual reports containing a review of operations, audited consolidated financial statements prepared in accordance with U.K. GAAP and an opinion on the Consolidated Financial Statements by our independent auditors. We also furnish the Depositary with semi-annual reports containing unaudited interim consolidated financial information prepared in accordance with U.K. GAAP. The Depositary arranges for the mailing of our reports to all record holders of American Depositary Shares. In addition, we furnish the Depositary with copies of all notices of shareholders' meetings and other reports and communications that are distributed generally to our shareholders, and the Depositary arranges for the mailing of such notices, reports and communications to all record holders of American Depositary Shares. We currently are exempt from the rules under the Securities Exchange Act of 1934, as amended, prescribing the form and content of proxy statements. The financial information concerning us contained in this Form 20-F does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985 (as amended) of Great Britain. Statutory accounts of our company in respect of the financial years ended December 31, 2002, 2001 and 2000 have been delivered to the Registrar of Companies for England and Wales. In respect of each of those statutory accounts, our auditors have given reports which were unqualified and did not contain a statement under Section 237(2)-(3) of the Companies Act. 5
Risk Factors Adverse changes in market conditions and investment performance could result in a reduction in the assets under our management and the shift of client investments toward lower fee accounts, which would reduce the investment management fees we earn and could cause the carrying value of goodwill and certain investment balances on the balance sheet to become impaired. We derive substantially all of our revenues from investment management contracts with clients. Under these contracts, the investment management fee paid to us is typically based on the market value from time to time of assets under management. Accordingly, fluctuations in the prices of securities may have a material effect on our consolidated revenues and profitability. Fees vary with the type of assets being managed, with higher fees earned on actively managed equity and balanced accounts and lower fees earned on fixed income and stable return accounts. Therefore, our revenues may decline if client investments shift to these lower fee accounts. Investment management contracts are generally terminable upon 30 or fewer days' notice. Mutual fund and unit trust investors may generally withdraw their funds at any time without prior notice. Institutional clients may elect to terminate their relationships with us or reduce the aggregate amount of assets under our management, and individual clients may elect to close their accounts or redeem their shares in our mutual funds or shift their funds to other types of accounts with different rate structures for any of a number of reasons, including investment performance, changes in prevailing interest rates and financial market performance. The loss of a significant number of our clients would adversely affect our revenues and profitability. Poor performance relative to other investment management firms tends to result in decreased sales, increased redemptions of fund shares, and the loss of private institutional or individual accounts, with corresponding decreased revenues to us. Failure of our funds to perform well could, therefore, have a material adverse effect on us. The world economy experienced a marked slowdown in 2001 and 2002 that significantly and adversely affected stock prices generally. A continuation or worsening of the current economic slowdown, regardless of the causes, could continue to have an adverse impact on our investment management fees and results of operations, as well as our ability to raise capital and to continue to grow our business. Impairment reviews of the book values of goodwill and investments are performed annually. Should valuations be deemed to be impaired, a write down of the related asset would occur, adversely impacting our results of operations for the period. Our investment management professionals are a vital part of our ability to attract and retain clients, and the loss of a significant portion of those professionals could result in a reduction of our revenues and profitability. Retaining key personnel is important to our ability to attract and retain clients and retail shareholder accounts. The market for investment management professionals is competitive and has grown more so in recent periods as the volatility of the markets has increased and the investment management industry has experienced growth. Our policy has been to provide our investment management professionals with compensation and benefits that we believe to be competitive with other leading investment management firms. However, there can be no assurance that we will be successful in retaining our key personnel, and the loss of a significant portion, either in quality or quantity, of our investment management personnel could reduce the attractiveness of our products to potential and current clients and could, therefore, have a material adverse effect on our revenues and profitability. Competitive pressures may force us to reduce the fees we charge to clients, increase commissions paid to our financial intermediaries or provide more support to those intermediaries, all of which could reduce our profitability. The investment management business is highly competitive, and we compete based on a variety of factors, including investment performance, the range of products offered, brand recognition, business reputation, financing strength, the strength and continuity of institutional management and producer relationships, quality of service, the level of fees charged for services and the level of compensation paid and distribution support offered to financial intermediaries. We and our business units compete in every market in which we operate with a large number of investment management firms, commercial banks, investment banks, broker-dealers, insurance companies and other financial institutions. Some of these institutions have greater capital and other resources, and offer more comprehensive lines of products and services, than we do. The recent trend toward consolidation within the investment management industry has served to increase the strength of a number of our competitors. These strengthened competitors seek to expand their market share in many of the products and services we offer. In addition, there are relatively few barriers to entry by new investment management firms, and the successful efforts of new entrants into our various lines of business around the world, including major banks, insurance companies and other financial 6
institutions, has also resulted in increased competition. Finally, the independent financial intermediaries who distribute certain of our products also distribute numerous competing products, including products sponsored by the firms that employ those financial intermediaries. We operate in a highly regulated industry, and any changes in the regulations governing our business could, for example, reduce the number and types of products we can offer or the management fees we can charge our clients, either of which would decrease our revenues and profitability. As with all investment management companies, our operating groups are heavily regulated in almost all countries in which they conduct business. Laws and regulations applied at the national, state or provincial and local level generally grant governmental agencies and industry self-regulatory authorities broad administrative discretion over our activities and the activities of our business units, including the power to limit or restrict business activities. Possible sanctions include the revocation of licenses to operate certain businesses, the suspension or expulsion from a particular jurisdiction or market of any of our business organizations or their key personnel, and the imposition of fines and censures on our employees or us. It is also possible that laws and regulations governing our operations or particular investment products could be amended or interpreted in a manner that is adverse to us. To the extent that existing regulations are amended or future regulations are adopted that affect the sale, or increase the redemptions, of our products and services or the investment performance of our products, our aggregate assets under management and our revenues could be adversely affected. Our substantial indebtedness could adversely affect our financial position. We have a significant amount of indebtedness. As of December 31, 2002, we had outstanding total debt of (pound)817.7 million, net debt of (pound)652.5 million and shareholders' funds of (pound)2.3 billion. The significant amount of indebtedness we carry could limit our ability to obtain additional financing, if needed, for working capital, capital expenditures, acquisitions, debt service requirements or other purposes, increase our vulnerability to adverse economic and industry conditions, limit our flexibility in planning for, or reacting to, changes in our business or industry, and place us at a competitive disadvantage compared to our competitors that have less debt. Any or all of the above factors could materially adversely affect our financial position. Technology and operating risks could adversely impact our operations. We are dependent on the integrity of our technology, operating systems and premises. Although we have disaster recovery plans in place, we may experience system delays and interruptions as a result of natural disasters, power failures, acts of war, and third party failures, any one or all of which could negatively impact our operations. Since a large part of our operations are denominated in U.S. dollars while our financial results are reported in U.K. pounds sterling, changes in the U.S. dollar to U.K. pounds sterling exchange rate may affect our reported financial results from one period to the next. The majority of our net assets, revenues and expenses, as well as our assets under management, are presently derived from the United States, where the functional currency is the U.S. dollar, while our financial statements are reported in U.K. pounds sterling. As a result, fluctuations in the U.S. dollar to U.K. pounds sterling exchange rate may affect our reported financial results from one period to the next. We do not manage actively our exposure to such effects. Consequently, changes in the U.S. dollar to the U.K. pounds sterling exchange rate could have a material positive or negative impact on our reported financial results. Holders of our American Depositary Shares are exposed to currency fluctuations that will affect the market price of their shares and the amount of cash dividends they will receive. Currency fluctuations will affect the U.S. dollar equivalent of the U.K. pounds sterling price of the Ordinary Shares on the London Stock Exchange and, as a result, are likely to affect the market price of the American Depositary Shares on the New York Stock Exchange. Cash dividends are declared and paid in U.K. pounds sterling but are paid at a date subsequent to their declaration. Therefore, holders of American Depositary Shares are exposed to currency fluctuations from the date of declaration of the dividend to the date when the U.K. pounds sterling are converted to U.S. dollars by the Depositary for distribution to holders of American Depositary Shares. The daily trading volume of our American Depositary Shares on the New York Stock Exchange is limited, which may adversely impact the ability to buy and sell our American Depositary Shares and the trading price of those shares. Although the American Depositary Shares trade on the New York Stock Exchange, the daily trading volume is limited. Our Ordinary Shares are not listed on the New York Stock Exchange, and there is no trading market for the Ordinary Shares in the United States. 7
Item 4. Information on the Company History and Development of AMVESCAP We were incorporated as a U.K. company on December 19, 1935 under the laws of England. Our principal executive offices are located in leased office space at 30 Finsbury Square, London, EC2A 1AG, United Kingdom, and our telephone number is 011-44-207-638-0731. We have a home page on the Internet at http://www.amvescap.com. Information contained in our home page shall not be deemed to be part of this Form 20-F. Effective January 1, 2003, we have realigned several of our business units into two new divisions under our AIM and INVESCO brands. The new AIM division includes our AIM Investments ("AIM") business unit in the U.S. and our AIM Trimark Investments ("AIM Trimark") business unit in Canada. The new INVESCO division includes the INVESCO Funds Group, Inc. ("INVESCO Funds Group") and INVESCO Institutional business units in the U.S. and the INVESCO Global business unit outside of North America. INVESCO Retirement will be renamed AMVESCAP Retirement effective April 1, 2003. We have made no changes to Private Wealth Management as a result of the realignment. During the fiscal years ended December 31, 2002, 2001 and 2000, our capital expenditures were (pound)59.3 million, (pound)79.2 million and (pound)62.5 million, respectively. These expenditures related in each year to technology initiatives, including new platforms from which we maintain our portfolio management systems and fund tracking systems, improvements in computer hardware and software desktop products for employees, new telecommunications products to enhance our internal information flow, and back-up disaster recovery systems. Also, in each year, a portion of these costs was related to leasehold improvements made to the various buildings and workspaces used in our offices. In 2002, we capitalized as leasehold improvements certain costs associated with our move to new headquarters in London, England. In 2001, capital expenditures also included costs incurred to relocate to new facilities in Denver, Colorado. Since December 31, 2002, our capital projects have included continuing technological enhancements to computer hardware and software. These projects have been funded with proceeds from our operating cash flows. During the fiscal years ended December 31, 2002, 2001 and 2000, and since December 31, 2002, our capital divestitures were not significant relative to our total fixed assets. Business Overview We are one of the world's largest independent investment management groups, with $332.6 billion of assets under management at December 31, 2002. We provide our clients with a broad array of domestic, foreign and global investment products, focused primarily on investment management. We have a significant presence in the institutional and retail segments of the investment management industry in North America, Europe and Asia. We operate through various subsidiaries and divisions throughout the world. We are committed to managing assets regionally and believe that our local investment managers provide us with a competitive advantage. We have a team of approximately 780 investment professionals located around the world. In addition, we offer multiple investment styles for the various investment objectives and asset classes of the products we offer. Our products include equity, balanced, fixed income, money market and real estate investment portfolios. Approximately 50% of our assets under management as of December 31, 2002 were invested in equities, and approximately 50% were invested in fixed income and other securities. We use several methods to distribute our products to retail and institutional clients in each of our markets. In North America, we offer load mutual funds, separate account management and "wrap" or managed accounts. Managed accounts offer individuals and smaller institutions comprehensive investment management services under a single-fee structure covering substantially all charges, including investment management, brokerage, custody, record keeping and reporting. Outside of North America, we offer unit trusts and other European and Asian mutual funds, as well as private account management for retail and institutional investors. Our retail and institutional clients are located in more than 100 countries. Our business units work together to provide products and services to our clients. A variety of advisory and sub-advisory arrangements allow our business units to access specific areas of investment management expertise located elsewhere within our company. We believe that our ability to develop and distribute products across businesses via multiple delivery channels allows us to offer our clients a broader range of products and services than most of our competitors. 8
We have organized our operations with a view to maximizing the benefits of a local presence while exploiting the synergies of a global organization. Until December 31, 2002, we were organized into five operating groups. Effective January 1, 2003, we are organized into four operating groups: AIM which manages and distributes (i) the AIM family of 90 load mutual funds in the United States, and (ii) the AIM Trimark family of 80 load mutual funds in Canada, and provides services through managed accounts; INVESCO which manages and distributes portfolios for retail and institutional investors in the United States and outside of North America (primarily Europe and Asia), including the management and distribution of the INVESCO family of 49 load funds in the United States, and provides services through managed accounts; INVESCO Retirement which distributes our investment management products and others by developing, marketing, managing and providing administrative and related services to defined contribution plans, such as 401(k) plans, and related retirement products throughout the world; and Private Wealth Management which provides wealth management services to high net worth individuals and their families as well as asset management services to foundations and endowments in the United States and the United Kingdom. Selected financial and headcount information for each of our operating groups as of and for the year ended December 31, 2002, based on our organizational structure at December 31, 2002 and our new organizational structure effective January 1, 2003, is set forth below. See Note 3 to our Consolidated Financial Statements, below, for a geographical analysis of our total revenues for the fiscal years ended December 31, 2002, 2001 and 2000. See "Item 5: Operating and Financial Review and Prospects," below, for total revenues by operating group for the fiscal years ended December 31, 2002, 2001 and 2000. <TABLE> <CAPTION> AMVESCAP OPERATING STRUCTURE AS OF DECEMBER 31, 2002 (data as of and for the year ended December 31, 2002) Managed INVESCO INVESCO INVESCO Private Products Institutional Global Retirement Wealth -------- ------------- ------ ---------- ------ <S> <C> <C> <C> <C> <C> Revenues (pound)770.3m (pound)199.2m (pound)281.7m (pound)57.6m (pound)34.5m Operating Profit Before Goodwill Amortization and Exceptional Items (pound)322.6m (pound)49.3m (pound)33.9m (pound)4.1m (pound)1.8m Assets Under Management $166.1b $102.9b $55.3b $30.9b (1) $8.3b Headcount 3,775 803 2,121 561 171 ---------------------------------------------------------------------------------------- </TABLE> 9
<TABLE> <CAPTION> AMVESCAP OPERATING STRUCTURE EFFECTIVE JANUARY 1, 2003 (data as of and for the year ended December 31, 2002) AIM INVESCO --------------------------- ---------------------------------------- Private US Canada US UK Europe/Asia Wealth/Retirement ------------- ------------- ------------- ------------- ------------ --------------------- <S> <C> <C> <C> <C> <C> <C> Revenues (pound)488.0m (pound)151.3m (pound)333.5m (pound)195.3m (pound)87.0m (pound)90.3m Operating Profit Before Goodwill Amortization and Exceptional Items (pound)206.6m (pound)77.6m (pound)88.8m (pound)29.7m (pound)2.2m (pound)(5.4)m Assets Under Management $124.4b $22.0b $123.2b $34.0b $21.1b $7.9b Headcount 2,246 918 1,428 1,428 714 770 ------------------------------------------------------------------------------------------ </TABLE> - ------ (1) INVESCO Retirement had $30.9 billion in assets under administration as of December 31, 2002, of which 65% were invested in our products in 2002. Operating Groups AIM Our AIM operating group manages and distributes mutual funds and related products sold to retail and institutional investors within North America that are marketed under the AIM or AIM Trimark brands. The AIM operating group consists of two business units: (i) AIM, and (ii) AIM Trimark, which operates in Canada. These business units offer mutual funds invested in the U.S. and international markets, including funds that target particular market sectors. Each of the two business units of the AIM operating group offers equity, balanced, fixed income and money market funds. The investment strategies used by the business units of the AIM operating group range from aggressive growth to capital appreciation to a combination of growth and income to fixed income. Mutual funds managed by AIM and AIM Trimark are primarily distributed through financial intermediaries. AIM is the largest business unit in the AIM operating group. AIM's bottom-up approach toward equity investing centers on the philosophy that stock prices eventually follow earnings, and companies with superior earnings provide significantly higher returns than companies without such earnings. AIM also provides advisory services to mutual funds managed by companies unaffiliated with us. In addition to sales of funds through financial intermediaries as part of its retail channel, AIM offers funds to pension plans and to insurance companies that use its funds in separate accounts. Customers of AIM's money market funds included eight of the ten largest U.S. banks and 23 of the 25 largest U.S. banks in terms of asset size on June 30, 2002. As investors have sought safety, liquidity and yield during recent periods of market volatility, assets in AIM's money market funds have increased significantly. AIM also has developed a managed account business, which tailors individual, privately managed portfolios to clients' investment needs, and provides retirement products and state-sponsored college savings plans. AIM Trimark investment managers employ a bottom-up stock selection approach. The managers consider themselves "business people buying businesses." The managers evaluate company management, the competitive position of the company within the industry and any proprietary advantage the company possesses. AIM Trimark also provides advisory services to mutual funds managed by companies unaffiliated with us. In addition to sales of funds through financial intermediaries as part of its retail channel, AIM Trimark offers funds to pension plans, insurance companies that use its funds in separate accounts, and banks and other financial institutions that use its funds as part of fund of funds offerings. Some of the funds advised by AIM and AIM Trimark are sub-advised by our other business units that have expertise in the specific markets in which such funds are invested. AIM also provides advisory services to certain AIM Trimark funds and to mutual funds managed by other business units of ours, and AIM Trimark provides advisory services to a mutual fund managed by another business unit of ours. We believe that this structure allows our business units to combine the economies and quality control made possible by centralized professional management with the diversity of investment management style and depth of expertise made possible through an integrated global network of investment advisers. INVESCO Our INVESCO operating group manages portfolios of equity, balanced, fixed income, structured equity, real estate and private capital investments for institutional and retail clients throughout the world and provides services through managed accounts. 10
INVESCO manages portfolios for a number of different types of institutional clients in the United States, including o corporate pension plans; o public and municipal pension plans; o Taft/Hartley pension plans; o insurance companies and banks; and o non-profit organizations. INVESCO employs growth, value-oriented and quantitative approaches to select securities for equity portfolios and uses quantitative and value approaches to select securities for fixed income portfolios that it manages for its institutional clients. INVESCO customizes its product offerings and stock selection approaches to meet the varied investment objectives of our diverse client base. INVESCO's products and services are marketed by a team of marketers organized by client type. INVESCO also distributes retirement services through alliances with other service providers that deliver our investment products to their clients. INVESCO provides advisory or sub-advisory services to funds offered by our other business units. INVESCO, through INVESCO Funds Group, also manages and distributes mutual funds to retail clients in the U.S. that are invested in the U.S. and international markets, including funds that target particular market sectors as well as equity, balanced, fixed income and money market funds. The investment strategies used by INVESCO Funds Group range from aggressive growth to capital appreciation to a combination of growth and income to fixed income. INVESCO Funds Group's equity staff uses a bottom-up, fundamental investment approach to find the most promising growth companies. INVESCO Funds Group looks for growth stocks of companies that are leaders in high growth industries and that have experienced strong returns and cash flow. INVESCO Funds Group traditionally had distributed no-load funds directly to the public and through 401(k) plans. In response to an increase in investor interest in working with financial advisors, INVESCO Funds Group has established an infrastructure dedicated to distributing its funds exclusively through financial intermediaries and selected third-party networks that was implemented for new investors effective April 1, 2002. Some of the funds advised by INVESCO Funds Group are sub-advised by other business units within our company. In turn, INVESCO Funds Group provides advisory services to mutual funds advised by other business units of ours. Outside of North America, INVESCO engages in retail and institutional investment management and related marketing activities through 23 offices located around the world, serving investors located primarily in the U.K., Continental Europe and Asia. INVESCO's main non-U.S. investment offices are located in London, Henley-on-Thames, Paris, Frankfurt, Tokyo, Hong Kong, Melbourne and Taipei. INVESCO provides various services, including management, distribution, administration and shareholder support services, to the following types of clients: o unit trusts and other mutual funds, including offshore mutual funds; o investment trusts (closed-end investment companies); o individual savings accounts (tax-advantaged plans invested in managed investment products for U.K. citizens); o institutional separate accounts with assets invested in Europe, emerging markets and global fixed income securities; and o European and international private investors. Units of INVESCO market investment products through independent brokers, alliances with major financial organizations and direct sales to institutional investors buying for their own accounts. INVESCO tailors its marketing strategy to respond to the relevant competitive environment in each country or region. INVESCO's non-U.S. business units also provide advisory or sub-advisory services to investment products offered by other of our business units. We believe that investing in many of the world's financial markets is one of our strengths. INVESCO both coordinates the construction of global portfolios and markets our global investment management services. INVESCO Retirement INVESCO Retirement gathers investment assets for us by developing, marketing, managing and providing administrative and related services to defined contribution plans, such as 401(k) plans, and related retirement products throughout the world. INVESCO Retirement provides a full range of services to various retirement accounts. Services provided include custodian, record keeping, administration, compliance, and client employee education and communication services. INVESCO Retirement sells its services on a full-service basis and markets our investment products and services to clients who receive administration services from other providers. One unit of INVESCO Retirement is a U.S. national trust bank that provides 11
custody and trust services to retirement accounts, including offering collective trust funds sub-advised by other of our business units or by other parties. INVESCO Retirement also includes a unit that focuses on capturing IRA rollovers, a unit that markets and supports our participation in international defined contribution pension markets, and a unit that develops strategic partnerships with other service providers. Our retirement services are distributed through three primary channels: o a direct sales force calling on plan sponsors and consultants; o broker-dealer distribution channels; and o strategic partnerships with other service providers. INVESCO Retirement will be renamed AMVESCAP Retirement effective April 1, 2003. Private Wealth Management Our Private Wealth Management division was formed in 2001 in connection with our acquisition of Pell Rudman and now operates under the brand name of Atlantic Trust Private Wealth Management. The Private Wealth Management division provides personalized and sophisticated wealth management services to high net worth individuals and their families as well as asset management services to foundations and endowments in the U.S. and the U.K. The division also provides various investment management services to its clients, including asset allocation, trust services, custody and family office services. It primarily obtains clients through referrals from existing clients and a network of attorneys and accountants. Our Business Strategy We have developed a strategy based on elements which we believe are essential to maintaining a significant presence in the global asset management industry--globalization, diverse product offerings and multiple distribution channels. In addition, we believe that an experienced staff of professional employees whose interests are aligned with shareholders is a key factor in our ability to implement our goals. Globalization We believe that the investment management industry will continue to become more global in scope, and that large investment management companies that can locally manage investments for clients in different international markets will be in the strongest position to compete successfully. We have established offices with investment and client service professionals in each of the major world capital markets in order to take advantage of the trend toward globalization. Diverse Product Offerings We believe that our ability to offer a full range of retail and institutional investment products managed locally in a wide variety of investment styles enhances our opportunities for attracting new clients and cross-selling our products to existing clients. Each of our business units markets the products and services offered by our other business units to its local and regional clients to enhance the range of investment management products and services offered to our clients. Our broad product line includes a large and varied number of investment products. We seek to capitalize on the increase in the demand for these products around the world. Multiple Distribution Channels Our extensive distribution network enables us to market our products to retail and institutional clients in more than 100 countries throughout the world. We sell our products directly to investors through 56 offices in 21 countries. We also maintain an extensive distribution network through strategic relationships with a variety of financial intermediaries, including major wire houses, regional broker-dealers, banks and financial planners in North America, and independent brokers and financial advisors, banks and financial organizations in Europe and Asia. We seek to sell our products through available distribution channels and to expand our existing distribution network. Alignment of Interests of Employees and Shareholders We view our experienced management team as a key factor in our growth. Although we are a public company, our management philosophy is entrepreneurial and decentralized, with senior professionals having significant responsibility and autonomy. We believe that our structure allows each operating group to focus on and maximize local investment opportunities, compete more effectively in sales and marketing efforts and operate more efficiently. We also believe that stock ownership by 12
management and other employees is an important means of aligning their interests with those of our shareholders. We have implemented various employee benefit plans to facilitate stock ownership by management and employees. Competition The investment management business is highly competitive, with competition based on a variety of factors, including investment performance, the range of products offered, brand recognition, business reputation, financial strength, the strength and continuity of institutional, management and producer relationships, quality of service, the level of fees charged for services, and the level of commissions and other compensation paid, and distribution support offered, to financial intermediaries. We compete with a large number of investment management firms, commercial banks, investment banks, broker-dealers, insurance companies and other financial institutions. Many of these institutions have greater capital and other resources, and offer more comprehensive lines of products and services, than we do. Competition in the investment management industry has increased as a result of the recent trend toward consolidation. We believe that our multiple channels of distribution enable us to compete effectively in the investment management business. We also believe that, over time, institutional investors will seek to reduce the number of specialist firms managing their assets and that larger firms, with the ability to manage funds in a number of different management styles and in a number of different markets, will have a competitive advantage. We believe that we are well positioned to capitalize on this development. Management Contracts We derive substantially all of our revenues from investment management contracts with clients. Fees vary with the type of assets being managed, with higher fees earned on actively managed equity and balanced accounts and lower fees earned on fixed income and stable return accounts. In addition, investment management contracts are generally terminable upon 30 or fewer days' notice. Mutual fund and unit trust investors generally may withdraw their funds at any time without prior notice. Institutional clients may elect to terminate their relationship with us or reduce the aggregate amount of assets under management, and individual clients may elect to close their accounts or redeem their shares in our mutual funds, or shift their funds to other types of accounts with different rate structures, for any of a number of reasons, including investment performance, changes in prevailing interest rates and financial market performance. Government Regulations As with all investment management companies, our operations and investment products are heavily regulated in almost all countries in which our business units conduct business. Laws and regulations applied at the national, state or provincial and local level generally grant government agencies and industry self-regulatory authorities broad administrative discretion over the activities of our business units, including the power to limit or restrict business activities. Possible sanctions include the revocation of licenses to operate certain businesses, the suspension or expulsion from a particular jurisdiction or market of any of our business organizations or their key personnel, and the imposition of fines and censures on our employees or us. It is also possible that laws and regulations governing our operations or particular investment products could be amended or interpreted in a manner that is adverse to us. We conduct substantial business operations in the U.S. Various of our subsidiaries and/or products and services offered by such subsidiaries are regulated in the U.S. by the U.S. Securities and Exchange Commission, the National Association of Securities Dealers, the National Futures Association, the Commodity Futures Trading Commission and the Office of the Comptroller of the Currency. Federal statutes that regulate the products and services offered by us in the U.S. include the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, the Investment Advisers Act of 1940 and the Employee Retirement Income Security Act of 1974. Various of our business units are regulated in the United Kingdom by the Financial Services Authority. Our operations elsewhere in the world are regulated by similar regulatory organizations. Our principal German and Austrian operations are required by regulations promulgated by the German Federal Financial Supervisory Authority and the Austrian Financial Market Authority, respectively, to have a banking license and thus are also subject to banking regulations. Other regulators who potentially exert a significant impact on our businesses around the world include the Ministry of Finance and the Financial Services Agency in Japan, the Banque de France and Commission des Operations de Bourse in France, the Securities and Futures Commission of Hong Kong, the Belgian Banking and Finance Commission, the Australian Securities & Investments Commission, the Securities and Futures Commission of the Ministry of Finance and the Investment Commission of the Ministry of Economic Affairs of the Republic of China, the Commissione Nazionale per le Societa e la Borsa (CONSOB) in Italy, the Netherlands Authority For the Financial Markets, the Swiss Federal Banking Commission, La Comision Nacional del Mercado de Valores (CNMV) in Spain, the Monetary Authority of Singapore, the Central Bank of Ireland, the Jersey Financial Services 13
Commission, the Pension Fund Supervisions Office (UNFE) in Poland and the Canadian securities administrators. 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. To the extent that existing or future regulations affecting the sale of our products and services or our investment strategies cause or contribute to reduced sales or increased redemptions of our products or impair the investment performance of our products, our aggregate assets under management and revenues might be adversely affected. Our Organizational Structure AMVESCAP is the holding company of our investment management activities, the principal activities of which are asset management and the provision of related financial services. Our significant subsidiaries, all of which are wholly owned subsidiaries, are set forth below: NAME OF COMPANY COUNTRY OF INCORPORATION --------------- ------------------------ AVZ Inc. U.S. AMVESCAP Group Services, Inc. U.S. INVESCO UK Limited England AIM Canada Holdings Inc. Canada INVESCO North American Holdings, Inc. U.S. INVESCO Institutional (N.A.), Inc. U.S. A I M Management Group Inc. U.S. A I M Advisors, Inc. U.S. AMVESCAP Inc. Canada AIM Funds Management, Inc. Canada Property Our principal executive offices are located in leased office space at 30 Finsbury Square, London, EC2A 1AG, United Kingdom. Our North American executive offices are located in leased office space at 1315 Peachtree Street, Atlanta, Georgia 30309. We also lease significant office space at 11 and 12 Greenway Plaza, Houston, Texas 77046 and 4350 South Monaco Street, Denver, Colorado 80237. We generally lease space in the locations where we conduct business, except that we own property at INVESCO Park, Henley-on-Thames, Oxfordshire, RG9 1HH, United Kingdom. We have no material plans to construct, expand or improve facilities. Item 5. Operating and Financial Review and Prospects General This discussion and analysis should be read in conjunction with the selected consolidated financial information and the Consolidated Financial Statements included elsewhere in this Form 20-F. The following discussion contains forward-looking statements relating to our future financial performance, business strategy, financing plans and other future events that involve uncertainties and risks. Our actual results could differ materially from the results anticipated by these forward-looking statements as a result of known and unknown factors that are beyond our ability to control or predict, including, but not limited to, those discussed in "Item 3. Key Information--Risk Factors," and "Cautionary Statements Concerning Forward-Looking Statements," above. We are a leading independent global investment management group, with $332.6 billion of assets under management at December 31, 2002. We operate under the AIM, INVESCO and Atlantic Trust brand names. We offer a broad array of domestic, foreign and global investment products and services to institutions and individuals across many distribution channels. We currently provide services to clients in more than 100 countries, employ 7,581 people in 21 countries and manage more than 1,969 separate institutional accounts and 985 retail funds. Summary of Differences Between U.K. GAAP and U.S. GAAP We prepare our financial statements in accordance with U.K. GAAP, which differs in certain material respects from U.S. GAAP. The principal differences between U.K. GAAP and U.S. GAAP, as applied to us, relate to the capitalization and 14
amortization of goodwill, shares held by share option trusts, and proposed dividend liabilities. See Note 23 to our Consolidated Financial Statements for a reconciliation of operating results from U.K. GAAP to U.S. GAAP. Critical Accounting Policies Our significant accounting policies are disclosed in Note 1 to our Consolidated Financial Statements. These policies address such matters as accounting for goodwill and investments, revenue recognition, taxation, and depreciation methods. Below is a description of certain critical accounting policies. Revenue Recognition We derive our revenues primarily from fees for investment advisory services provided to: o institutional clients; o open-end funds, including U.S. mutual funds and European and Asian unit trusts; o closed-end funds, including U.S. closed-end funds and U.K. investment trusts; o collective accounts, including U.S. trust company collective funds; o high net-worth individuals; and o U.S. "wrap" accounts. In addition, we derive revenues from fees for services, which include distribution, trustee and transfer agent services. We also earn revenues from front-end fees and commissions related to trading activities. While some of our products receive fees based on investment performance, such amounts are immaterial to consolidated revenues and are recorded only when the performance period is completed. Revenues are recorded when they are earned. Goodwill The excess of the cost of companies acquired over the fair value of their net assets is capitalized as an asset and amortized through the profit and loss account over an estimated useful life of 20 years. Prior to 1998, goodwill was charged directly to other reserves. Under US GAAP, goodwill is not subject to systematic amortization but is carried at cost less provision for impairment in value. Goodwill is required to be tested annually for impairment. These impairment tests include quantitative metrics on financial performance such as future cash flows plus accomplishments against the long-term strategic plans in certain areas. As of December 31, 2002, we completed the testing of our goodwill balances, and no impairment charge was necessary. Additional amortization will be taken in the year if goodwill is deemed impaired. Prior to 2002, goodwill was amortized through the profit and loss account over an estimated useful life of 20 years. Investments Investments held as fixed assets are stated at cost less provisions for any permanent impairment in value. Investments held as current assets are stated at the lower of cost or net realizable value. Gains and losses on investments are recorded within Investment Income in the profit and loss account in the period in which they arise. For the year ended December 31, 2002, valuation adjustments of (pound)6.8 million were made to reduce the book value of certain investments to net realizable values. Deferred sales commissions At December 31, 2002, we had a balance of (pound)115.6 million (2001: (pound)169.7 million) in deferred sales commissions included in debtors on the balance sheet. This asset arose as a result of the capitalization of paid sales commissions on sales of AUM containing contingent deferred sales charges and is being amortized over the redemption period of the related funds. We are no longer paying these broker commissions, as we now participate in funding arrangements for the payment of these commissions. See the Liquidity and Capital Resources section below. Exceptional Items Costs that are unusual due either to their size or incidence are categorized as exceptional items in the profit and loss account in the line item to which they relate. During 2002, a charge of (pound)69.2 million (2001: (pound)60.0 million) was recorded in operating expenses related to internal restructuring, staff redundancies, and terminated project initiatives. Substantially all of these costs will be paid by the end of 2003. 15
Results of Operations The following tables summarize operating profit data by operating group before goodwill amortization and exceptional items for the periods indicated: Year Ended December 31, 2002 ----------------------------------------------------------- Operating Revenues Expenses Profit(1) --------------------- ------------------ ------------------ (In thousands) Managed Products (pound)770,313 (pound)(447,748) (pound)322,565 INVESCO Institutional 199,187 (149,853) 49,334 INVESCO Global 281,653 (247,749) 33,904 INVESCO Retirement 57,552 (53,493) 4,059 Private Wealth Management 34,538 (32,742) 1,796 New Business 2,020 (14,068) (12,048) Corporate -- (32,685) (32,685) --------------------- ------------------ ------------------ (pound)1,345,263 (pound)(978,338) (pound)366,925 Year Ended December 31, 2001(2) ----------------------------------------------------------- Operating Revenues Expenses Profit(1) --------------------- ------------------ ------------------ (In thousands) Managed Products (pound)986,234 (pound)(549,763) (pound)436,471 INVESCO Institutional 211,917 (158,365) 53,552 INVESCO Global 340,293 (263,871) 76,422 INVESCO Retirement 58,224 (53,247) 4,977 Private Wealth Management 21,211 (19,972) 1,239 New Business 1,968 (12,179) (10,211) Corporate -- (39,090) (39,090) --------------------- ------------------ ------------------ (pound) 1,619,847 (pound)(1,096,487) (pound)523,360 Year Ended December 31, 2000(2) ----------------------------------------------------------- Operating Revenues Expenses Profit(1) --------------------- ------------------ ------------------ (In thousands) Managed Products (pound)1,064,530 (pound)(551,562) (pound)512,968 INVESCO Institutional 211,377 (157,771) 53,606 INVESCO Global 303,857 (222,075) 81,782 INVESCO Retirement 48,898 (44,941) 3,957 New Business -- (15,422) (15,422) Corporate -- (47,980) (47,980) --------------------- ------------------ ------------------ (pound)1,628,662 (pound)(1,039,751) (pound)588,911 - -------------- (1) Before goodwill amortization and exceptional items. (2) Includes the results of acquired companies from their respective dates of acquisition. 16
Effective January 1, 2003, we have realigned our businesses under the AIM and INVESCO brands. This realignment pulls together like-branded businesses, which will simplify our structure for clients and intermediaries and will provide additional marketing leverage and synergies for AIM and INVESCO. The segmental data and assets under management are presented below in the new management structure, as this format will be used in 2003. Year ended December 31, 2002 (pound)'000 -------------------------------------------- Operating Revenues Expenses Profit(1) -------------------------------------------- AIM U.S. 487,956 (281,350) 206,606 Canada 151,345 (73,702) 77,643 -------------------------------------------- 639,301 (355,052) 284,249 -------------------------------------------- INVESCO U.S. 333,457 (244,614) 88,843 U.K 195,265 (165,555) 29,710 Europe/Asia 86,969 (84,744) 2,225 -------------------------------------------- 615,691 (494,913) 120,778 -------------------------------------------- Private Wealth/Retirement 90,271 (95,688) (5,417) Corporate - (32,685) (32,685) -------------------------------------------- 1,345,263 (978,338) 366,925 - ---------- (1) Before goodwill amortization and exceptional items. The following tables set forth changes in assets under management as of the dates indicated under our prior reporting structure and our new reporting structure effective January 1, 2003. <TABLE> <CAPTION> ASSETS UNDER MANAGEMENT (1) (reporting structure as of December 31, 2002) Managed Products Private -------------------------------- INVESCO INVESCO Wealth Total AIM INVESCO Institutional Global Management (in billions) <S> <C> <C> <C> <C> <C> <C> Assets under management at $357.4 $165.3 $34.4 $106.2 $51.5 $-- December 31, 1999: Market gains/(loss) (32.8) (19.5) (5.5) -- (7.8) -- Acquisitions 34.1 16.7 -- -- 17.4 -- Net new (lost) business 35.4 20.4 13.0 (6.6) 8.6 -- Change in money market 12.9 10.9 1.3 -- 0.7 -- funds Transfers -- -- -- -- -- -- Foreign currency(2) (4.4) (0.6) -- -- (3.8) -- ------------------------------------------------------------------------------------------------------- Assets under management at $402.6 $193.2 $43.2 $99.6 $66.6 $-- December 31, 2000: Market gains/(loss) (49.5) (25.3) (11.5) (3.1) (9.3) (0.3) Acquisitions 32.4 -- -- 17.7 6.7 8.0 Net new (lost) business 1.8 (0.7) 0.4 2.6 (0.5) -- Change in money market 12.3 13.0 (0.7) -- -- -- funds Transfers -- 0.3 -- -- (2.5) 2.2 Foreign currency(2) (1.7) (0.7) -- -- (1.0) -- ------------------------------------------------------------------------------------------------------- Assets under management at $397.9 $179.8 $31.4 $116.8 $60.0 $9.9 December 31, 2001: Market gains/(loss) (50.8) (23.6) (7.9) (8.4) (9.3) (1.6) Acquisitions -- -- -- -- -- -- Net new (lost) business (14.2) (3.7) (3.3) (5.7) (1.3) (0.2) Change in money market (5.8) (6.3) (0.5) -- 1.0 -- funds Transfers -- (0.1) -- 0.1 -- -- Foreign currency(2) 5.5 0.3 -- 0.1 4.9 0.2 ------------------------------------------------------------------------------------------------------- Assets under management at December 31, 2002: $332.6 $146.4 $19.7 $102.9 $55.3 $8.3 ======================================================================================================= </TABLE> 17
ASSETS UNDER MANAGEMENT (reporting structure effective January 1, 2003) <TABLE> <CAPTION> AIM INVESCO ------------------------ ---------------------------------------- Total U.S. Canada U.S. U.K. Europe/Asia PWM/ (in billions) Retirement <S> <C> <C> <C> <C> <C> <C> <C> Dec 31, 2001 $397.9 $157.7 $22.1 $148.8 $38.1 $21.8 $9.4 Market gains/(losses) (50.8) (21.5) (2.1) (16.3) (6.8) (2.5) (1.6) Net new/(lost) business (14.2) (5.4) 1.7 (9.0) (1.3) (0.1) (0.1) Change in money market funds (5.8) (6.4) 0.1 (0.5) 1.2 (0.2) -- Transfers - -- (0.1) 0.1 -- -- -- Foreign currency) 5.5 -- 0.3 0.1 2.8 2.1 0.2 -------------------------------------------------------------------------------------------------------- Dec 31, 2002 $332.6 $124.4 $22.0 $123.2 $34.0 $21.1 $7.9 ======================================================================================================== </TABLE> - ------------- (1) INVESCO Retirement had $30.9 billion, $34.6 billion, and $27.6 billion in assets under administration as of December 31, 2002, 2001 and 2000 respectively. (2) The exchange movement results from different exchange rates being in effect as of the relevant measurement dates for assets denominated in currencies other than U.S. dollars. 2002 Compared to 2001 Assets Under Management Assets under management totaled $332.6 billion ((pound)206.6 billion) at December 31, 2002, compared to $397.9 billion at December 31, 2001. Institutional money market funds, included above, amounted to $57.0 billion at December 31, 2002 compared to $63.6 billion at the end of the prior year. Average assets under management amounted to $365.8 billion for 2002 compared to $395.0 billion for the prior year. The average money market fund levels totaled $59.6 billion for the year ($60.7 billion for 2001). Approximately 50% of the total funds under management were invested in equity securities and 50% were invested in fixed income and other securities at December 31, 2002 (2001: 58% equity/42% fixed). The equity securities were invested in the following disciplines at December 31, 2002: 36% in growth, 38% in core and 26% in value styles. Operating Results The global economic and political climate provided many uncertainties in 2002 which contributed to the volatility of capital markets. The worst down market in over 65 years eroded investor and business confidence. Every major market index reflected significant declines during the year, with the FTSE 100 down by 25%, the S&P 500 by 23%, NASDAQ by 32%, Dow Jones Industrial Average by 17%, and the MSCI by 22%. These corrections adversely impacted our financial results for the year. Profit before tax, goodwill amortization, and exceptional items amounted to (pound)320.9 million in 2002 compared to (pound)477.9 million in 2001, a 33% decline. We completed five acquisitions in 2001 that have been reflected in the financial statements from the respective dates of acquisition. Diluted earnings per share before goodwill amortization and exceptional items amounted to 27.2p (2001: 40.0p) for the year ended December 31, 2002. Revenues arise substantially from management, service and distribution fees generated from assets under management (AUM). Our revenues are therefore materially affected by changes in levels of global capital markets coupled with net sales/redemptions of AUM and the mix of equity to fixed income securities held in our portfolios. The significant volatility of the markets, the general declines in every major market index over the past two years, and a shift in our asset base to a 50%/50% split of equities versus fixed income have impaired our revenues. A continuation of these trends will have an equally important effect on our revenue streams in the future. Revenues amounted to (pound)1,345.3 million compared with (pound)1,619.8 million in 2001. Our operating expenses primarily consist of compensation, technology and marketing expenses. A significant portion of these expenses are variable in nature, which allows us flexibility to adjust costs consistent with revenue streams. Operating expenses before goodwill amortization and exceptional items decreased (pound)118.2 million to (pound)978.3 million (2001: (pound)1,096.5 million) due to strong expense controls, resulting in an operating profit margin of 27.3% for the year (2001: 32.3%). Operating profit before goodwill amortization and exceptional items totaled (pound)366.9 million in 2002 (2001: (pound)523.4 million). 18
The Company announced a cost reduction program in October 2002 to reduce operating expenses by approximately (pound)100 million by the end of 2003. An exceptional charge of (pound)69.2 million was provided ((pound)56.4 million after tax and 6.9p per diluted share) related to these initiatives. Substantially all of these costs will be paid by the end of 2003. Compensation and related expenses amounted to (pound)607.6 million (2001: (pound)652.8 million), 62% of total operating expenses for 2002, verses 60% in 2001. Marketing costs were (pound)91.3 million, or 9% of total operating expenses in 2002, a 30% decline from the 2001 level of (pound)131.2 million. Technology costs were (pound)104.5 million in 2002 (2001: (pound)122.1 million), accounting for 11% of total operating expenses for both years. Headcount levels decreased to 7,581 employees at the end of 2002 from 8,519 at the end of 2001 due to staff reductions through attrition and redundancy initiatives. Headcount levels peaked in August 2001at 8,906 and have fallen every month since then--a reduction of more than 1,300 people, or 15% of our work force. We have significant operations in the U.S. with earnings denominated in U.S. dollars. Accordingly, our results can be materially affected by the U.S. dollar to U.K. pounds sterling exchange rate. It is not our policy to hedge the translation of profit from U.S. subsidiaries; therefore, changes in exchange rates can materially affect our results. The average U.S. dollar to U.K. pounds sterling exchange rate in 2002 was $1.50 per (pound)1.00, compared with $1.43 per (pound)1.00 in 2001. Managed Products The Managed Products group reported revenues of (pound)770.3 million during 2002 compared to (pound)986.2 million for the prior year. A decline in average AUM of 15% coupled with a lower number of shareholder accounts caused the lower revenues. Expense levels were reduced across the board during the year, including a 571 drop in headcount. Operating profits were (pound)322.6 million, compared to (pound)436.5 million in 2001. The group generated approximately $34.9 billion of gross sales in 2002. Market declines of $31.5 billion and net redemptions of $7.0 billion led to a reduction in AUM for the year. AUM amounted to $166.1 billion at December 31, 2002, including $57.0 billion of money market funds. AIM is the seventh largest non-proprietary fund group in the U.S. INVESCO Funds Group ranks as the 53rd largest fund group. Together, we rank as the 12th largest fund complex in the U.S. Managed Products ended the year with approximately 51% of assets in the top half of the Lipper performance rankings, up from 37% at the end of 2001. The Canadian funds led the way with over 84% of their funds in the top half of the performance rankings. AIM has been rebranded as AIM Investments, reflecting the fact that AIM delivers investment solutions through a more diverse line of products and services all under one umbrella. AIM has been recognized in the past principally for investing in equities of US growth companies. Today, AIM's three largest equity funds - AIM Basic Value, AIM Premier Equity, and AIM Constellation - represent distinctly different investment disciplines: Value, Blend, and Growth. INVESCO Funds Group made inroads into the annuities and life products businesses during the year, and continued to build relationships in the advisor channel. Dalbar awarded IFG the Service Excellence Award in 2002 for the eighth consecutive year. AIM Trimark continues as an industry leader in Canada, offering a broad array of mutual fund products. Because of its top fund performance, its $1.7 billion in net sales represented 74% of net sales for the entire Canadian industry. INVESCO Institutional The INVESCO Institutional group reported revenues and operating profits of (pound)199.2 million and (pound)49.3 million in 2002. AUM amounted to $102.9 billion at December 31, 2002. Average AUM for 2002 increased 2% over the prior year and average fee levels remained the same for both periods. This group generated $20.2 billion in gross sales. Market declines totaled $8.4 billion for the year. We lost two low-fee accounts of approximately $4 billion late in 2002 which led to overall net redemptions of $5.7 billion for the year. Headcount was 803 (2001: 868) at the end of the current year. Over 70% of the focus products for this group (representing 90% of AUM) have 3, 5 and 10 year performance records ahead of benchmarks at the end of 2002. Among these, international equities rank in the top quartile and our global equity group ranks high in the second quartile. Structured products also rank in the top half over long time periods. Our real estate group also continues with excellent performance. 19
This group has one of the industry's broadest range of products, including a recently developed global balanced product, and we are attracting non-U.S. institutions to our structured U.S. equity products. The alternative asset products group successfully brought new private equity and secured loan products to the market during a challenging period. With the new operating structure, we will capitalize further on product leverage, broad distribution networks and greater brand awareness. This will benefit both clients and our company. INVESCO Global INVESCO Global's revenues amounted to (pound)281.7 million for 2002 compared to (pound)340.3 million in 2001. Operating profit totaled (pound)33.9 million for the year ended December 31, 2002 versus (pound)76.4 million for the prior year. AUM were $55.3 billion at December 31, 2002. Gross sales for 2002 totaled approximately $29.2 billion; market declines totaled $9.3 billion and net redemptions were $1.3 billion for the year. Revenues were impacted by an 8% decline in AUM coupled with a 7% decline in the average fee realized, both compared to 2001 levels. This decline arose largely in the UK where poor investor sentiment over equity investments is continuing. We captured good retail flows into our Income and Bond funds and 76% of our retail AUM rank in the top two quartiles over 3 years at the end of 2002. In Continental Europe, revenues totaled (pound)48.4 million for the year, a decline of (pound)7.7 from 2001 due to the market declines and lower transaction volumes. AUM at the end of 2002 were $13.4 billion. The year brought $7.5 billion in gross sales and $0.9 billion in net new business. Headcount was 327 at the end of the year (2001: 351). Revenues in Asia Pacific amounted to (pound)38.0 million in 2002 (2001: (pound)42.7 million). AUM at the end of 2002 were $13.3 billion and headcount was 366 (2001: 406) at that date. This business generated $10.8 billion in gross sales and had $0.9 billion in net redemptions in the year. Our average AUM for Europe and Asia were essentially unchanged for the year, demonstrating the resilience of the investor given the bear market conditions and extreme volatility in market levels. We are participating in the development of the asset management industry in mainland China. Together with the acquisitions in Australia and Taiwan, this means that our Asia Pacific business now benefits from established operations in the key regional financial centers, and is well positioned for long-term growth. INVESCO Retirement INVESCO Retirement's assets under administration were $30.9 billion at December 31, 2002. Net sales for the group amounted to $2.5 billion for 2002. This group services 1,400 plans with 624,000 participants at December 31, 2002. This group won new mandates from several new, large companies in the current year and formed new strategic partnerships with two large groups. The client service team has continued its exceptionally high client retention rate of 95%. Through productivity improvements we reduced our cost per participant by 12% from 2001. The Retirement division will be renamed AMVESCAP Retirement, effective April 1, 2003, to reflect its mission of providing state-of-the-art record keeping and administrative services to the defined contribution marketplace, offering both AIM and INVESCO products, along with third-party products, through this distribution channel. The U.K. defined contribution business, which was launched in April 2001, added 42 new clients in the current year, bringing the total to 75. Private Wealth Management The Private Wealth Management (PWM) division provides asset management services to high net worth individuals, families, foundations, and endowments. Revenues and operating profits for the PWM division totaled (pound)34.5 million and (pound)1.8 million for 2002, its first full year of operation. Funds under management were $8.3 billion at December 31, 2002. This group introduced the new "Atlantic Trust" brand early in 2002. To strengthen their presence in the Southeast, a new office was opened in Palm Beach, Florida. Atlantic Trust gained important external recognition in November when Trusts & Estates magazine named them the No. 1 Multi-Family Office. In October 2002, we announced the acquisition of Whitehall Asset Management, which closed in February 2003, adding $1.3 billion of assets under management. 20
New Business Expense New business expense contains costs (primarily staff costs and marketing) associated with the group's efforts in the international defined contribution markets in Europe and Asia. Costs for 2002 were in line with expenses incurred in 2001. Corporate Corporate expenses include staff costs related to corporate employees, as well as continued expenditures in Group-wide initiatives. Costs declined over the prior year due to decreases in staff costs and technology initiatives. Other Income/Expense We generated less interest income than in prior year due to the decline in interest rates. Valuation adjustments of (pound)6.8 million were made during 2002 to reduce the book value of certain investments to net realizable values. These losses were offset by a realized gain due to the sale of various securities held by subsidiaries. Interest expense levels during 2002 were slightly below 2001 levels due to the lower interest-rate environment experienced during the year. Interest on our credit facility is based on LIBOR interest rates. Taxation Our effective tax rate on ordinary profit (before goodwill amortization and exceptional items) was 30.6% in 2002 and 2001. 2001 Compared to 2000 Assets Under Management Assets under management totaled $397.9 billion at December 31, 2001, a decrease of $4.7 billion from December 31, 2000. Net new business amounted to $1.8 billion during the year versus $35.4 billion for the year ended December 31, 2000. The 2001 acquisitions added $32.4 billion of funds under management at dates of acquisition. Average funds under management amounted to $395.0 billion for 2001 compared with $388.5 billion for the prior year. Approximately 58% of the funds under management were invested in equity securities, and 42% were invested in fixed income securities at the end of 2001, a shift from the 67/33 ratio at the end of 2000, resulting in a lower net fee per dollar of asset than in prior years. Total assets are split evenly between institutional, including money market funds ("MMF"), and retail accounts. Gross sales and contributions totaled approximately $98 billion in 2001 versus $127 billion in the prior year. Operating Results The year 2001 presented significant challenges to the global economy, the asset management industry, and to us. Every major market index reflected significant declines during the year, with the FTSE 100 down by 16%, the S&P 500 by 13%, NASDAQ by 21% and the MSCI by 23%. These corrections, compounded by the tragic events of September 11, adversely impacted our financial results for the year. Profit before tax, goodwill amortization, and exceptional items amounted to (pound)477.9 million in 2001, a decrease of (pound)76.6 million (13.8%) from 2000. Diluted earnings per share before goodwill amortization and exceptional items amounted to 40.0p (2000: 54.7p) for the year ended December 31, 2001, a decrease of 26.9%. The U.K. Accounting Standards Board issued FRS 19, "Deferred Tax," which requires companies to change the method of computing deferred taxes. The Company adopted this new statement in 2001, including a restatement of financial statements for prior years. The effect has been to reduce the tax provision and increase net income previously reported for 2000 by (pound)12.2 million (1.7p per diluted share). All revenues substantially arise from management and distribution fees generated from assets under management (AUM). Revenues amounted to (pound)1,619.8 million compared with (pound)1,628.7 million in 2000. Increases in revenues from acquisitions over the prior period were offset by reductions caused by the declines in the market values of assets under management. Operating profit before goodwill amortization and exceptional items totaled (pound)523.4 million in 2001 (2000: (pound)588.9 million), a decrease of (pound)65.5 million. We acquired County, a leading Australian institutional asset manager, in January, 2001. The acquisition of NAM in April 21
added a range of complementary investment styles to the INVESCO Institutional platform. We completed three acquisitions in August: Pell Rudman, the foundation for our private wealth management business; Grand Pacific, a leading Taiwan SITE; and Parkes, a U.K. real estate advisor. Consideration for these purchases amounted to approximately (pound)474.1 million and was satisfied by (pound)327.1 million in cash and the issuance of 5.6 million ordinary shares. These purchases are included in our operating results from their dates of acquisition. Exceptional charges of (pound)60.0 million were provided in 2001 ((pound)39.4 million after tax and 4.8p per diluted share). Integration costs relating to acquisitions amounted to (pound)43.3 million with the remainder relating to internal restructurings, severance charges, and expenses incurred in the design and planning for a new operating facility that was postponed indefinitely. Operating expenses before goodwill amortization and exceptional items increased (pound)56.7 million to (pound)1,096.5 million (2000: (pound)1,039.8 million), due primarily to the current year acquisitions. We implemented strong expense controls during 2001 that resulted in an operating margin of 32.3% (2000: 36.2%). Compensation and related expenses amounted to (pound)652.8 million (2000: (pound)623.5 million), 60% of total operating expenses for both 2001 and 2000. Marketing costs were (pound)131.2 million, or 12% of total operating expenses, in 2001, a 14% decline. Technology costs accounted for 11% of total operating expenses for both 2001 and 2000. Headcount levels increased to 8,519 employees at the end of 2001 from 8,259 at the end of 2000. Acquisitions added approximately 520 new employees, and staff reductions partially offset this through attrition and selective redundancy initiatives. We have significant operations in the U.S. with earnings denominated in U.S. dollars. Accordingly, our results can be materially affected by the U.S. dollar to U.K. pounds sterling exchange rate. It is not our policy to hedge the translation of profit from U.S. subsidiaries; therefore, changes in exchange rates can materially affect our results. The average U.S. dollar to U.K. pounds sterling exchange rate in 2001 was $1.43 per (pound)1.00, compared with $1.51 per (pound)1.00 in 2000. Managed Products The Managed Products group reported revenues of (pound)986.2 million during 2001, a decrease of (pound)78.3 million over the prior year. Operating profits were (pound)436.5 million, a decrease of (pound)76.5 million. The group generated approximately $50.0 billion of gross sales in 2001 and experienced net redemptions of $308 million during the year, as investors shifted away from growth-oriented products to more conservative equity and fixed income products. Institutional MMFs increased by $12.3 billion in 2001, a 44% growth in average assets for the year. Funds under management amounted to $211.2 billion at December 31, 2001, and headcount was 4,346, a decline of 395. AIM's revenues in the U.S. were (pound)626.3 million in 2001, a decline of (pound)135.5 million from 2000. AUM totaled $157.7 billion at year-end. INVESCO Funds Group's revenues amounted to (pound)201.9 million in 2001 (2000: (pound)211.5 million). These revenue declines were due primarily to the sharp declines experienced in the U.S. Markets. Our AUM in Canada amounted to $22.1 billion at the end of the year, and revenues for 2001 amounted to (pound)158.0 million. AIM is the seventh largest non-proprietary fund group in the U.S. INVESCO Funds Group ranks as the 45th largest fund group. Together, we rank as the sixth largest fund complex in the U.S. We also rank as the third largest fund group in Canada, operating under the AIM/Trimark brands. While performance in our U.S. mutual funds dropped from prior year levels, Managed Products ended the year with approximately 37% of assets in the top half of the Lipper performance rankings, down from 43% at the end of 2000. The Canadian funds led the way with over 80% of their funds in the top half of the performance rankings. AIM's product line underwent continued diversification in 2001 with the launch of four new funds. INVESCO Funds Group made inroads into the annuities and life products businesses during the year, adding 34 institutional relationships. AIM Canada continues to offer a broad array of mutual fund products, many of which had important achievements during the year. INVESCO Institutional The INVESCO Institutional group reported revenues and operating profits of (pound)211.9 million and (pound)53.6 million during the year. These results include NAM and Parkes from the dates of acquisition. This group generated approximately $26.6 billion in gross sales during 2001 compared to $20.2 billion in 2000, and net sales of $2.6 billion. Funds under management amounted to $116.8 billion at December 31, 2001. Headcount was 868 (2000: 789) at the end of the current year. Investment performance was mixed for the year. Value products, both domestic and international, had strong results 22
relative to benchmarks. The international team's record over multi-year periods lends itself to strong new business opportunities. Core and growth products had an average year and have attractive long-term numbers. Structured products had a challenging year, but long-term returns remain above average. Fixed income performance kept pace with the benchmarks for the year as a whole. Direct real estate, private equity, and other alternative products had satisfactory results for the year. The new business flow was very strong. We bid for a record amount of assets, won more new business than in any previous year, and closed on a higher percentage of finals than ever before. The pipeline is still quite full, but as ever, much depends on continued strong investment performance. Net new business was positive for 2001, but we continue to suffer outflows in the balanced and large cap value product area. This group has one of the industry's broadest ranges of products, including a recently developed global balanced product, and we are attracting non-U.S. institutions to our structured U.S. equity products. The alternative asset products group successfully brought new private equity and secured loan products to the market during a challenging period. INVESCO Global Revenues for 2001 amounted to (pound)340.3 million, an increase of (pound)36.4 million over the prior year due to the inclusion of the Perpetual results, offset in part by declines in the global capital markets. Operating profit totaled (pound)76.4 million for the year-ended December 31, 2001. The current year's results include County and Grand Pacific from dates of acquisition. AUM were $60.0 billion at December 31, 2001, a decline of $6.6 billion from the end of 2000. Gross sales for 2001 totaled approximately $21.4 billion. The U.K. business had revenues of (pound)212.3 million in 2001, an increase of (pound)60.8 million during the year. Operating profits and margins remained strong in the year on lower revenue levels. This business generated $6.7 billion in gross sales, but $0.4 billion in net redemptions during the year. Redemptions included a $1 billion client that changed ownership during the period. AUM stood at $31.9 billion at the end of 2001. Headcount for the U.K. was 1,227 at the end of 2001 (2000: 1,307). The Perpetual integration had a successful conclusion with the transfer of all administration onto the Henley platform in October. Subsequently, unit trust mergers were completed, reducing the range of onshore funds from 48 to 33. The brand review project was completed with the positioning for INVESCO in the U.K. and the confirmed continuation of the INVESCO PERPETUAL brand across the retail business. Investment performance in key domestic products has remained strong, with major funds producing top quartile performance. In Continental Europe, revenues totaled (pound)56.1 million for the year, a decline of (pound)13.0 million from 2000 due to the market declines and lower transaction volumes. Despite $7.7 billion in gross sales and $0.5 billion in net new business, AUM levels dropped by 15% during the year to $13.4 billion at the end of 2001. Headcount was 351 at the end of the year (2000: 300). Despite a turbulent year in the markets, our business across Continental Europe has retained an effective organization and a strong sales capability. The year illustrated the extent to which distribution channels are the principal determinant of success in Europe. Important deals secured with major bank networks in both France and Italy have led to strong new business in those markets. Revenues in Asia Pacific amounted to (pound)42.7 million in 2001 (2000: (pound)54.4 million), including the County and Grand Pacific acquisitions from the dates of purchase. AUM at end of 2001 were $14.7 billion and headcount was 406 (2000: 262) at that date. This business generated $6.8 billion in gross sales and $0.3 billion in net new business in the year. We are participating, to the extent permitted, in the development of the asset management industry in mainland China. Together with the acquisitions in Australia and Taiwan, this means that our Asia Pacific business now benefits from established operations in the key regional financial centers and is well positioned for long-term growth. INVESCO Retirement INVESCO Retirement's assets under administration and net sales scored record growth during 2001. The group experienced a 25% increase in assets under administration, reaching $34.6 billion at December 31, 2001. Gross sales were $16 billion and net sales were $5.2 billion for INVESCO Retirement's distribution channels in 2001. This group services 630,000 plan participants, up from 381,000 participants at the end of 2000. Approximately 65% of INVESCO Retirement's assets under administration were invested in our funds in 2001, compared to 82% in 2000. The number of plans under administration grew by 165%. INVESCO Retirement was chosen by one of the largest U.S. banks as a strategic partner for its 401(k) business. More 23
than 130,000 participants were added through this strategic partnership. INVESCO Retirement also won mandates from several new companies in the current year. The client service team has continued its exceptionally high client retention rate of 95%. The U.K. defined contribution business added 33 new plans since it was launched in April. Working in conjunction with our local offices around the world, INVESCO Retirement imported its expertise to key markets outside the U.S. We also expanded our presence in France, Germany, and Italy; and in Hong Kong, we increased market share within the MPF government-sponsored retirement scheme. Private Wealth Management The Private Wealth Management division was launched with the Pell Rudman acquisition in 2001. Private Wealth Management provides asset management services to high net worth individuals, families, foundations and endowments. Revenues and operating profits totaled (pound)21.2 million and (pound)1.2 million for 2001. AUM totaled $9.9 billion at December 31, 2001. The focus of Private Wealth Management this year has been to complete the Pell Rudman acquisition and to position the division for future growth and market penetration. Initiatives have included: improving the infrastructure and technology areas; creating the new Atlantic Trust brand; and adding new professional staff to the business. We anticipate additional investments in 2002 to open new offices, expand banking capabilities, continue technology development and support of the Atlantic Trust brand. These investments will position the division for significant growth and scale. New Business Expense New business expense contains costs (primarily staff costs and marketing) associated with our efforts in the international defined contribution markets in Europe and Asia. Costs for 2001 were in line with expenses incurred in 2000. Corporate Corporate expenses include staff costs related to corporate employees, as well as continued expenditures in Group-wide initiatives. Costs declined over the prior year due to decreases in staff costs and technology initiatives. Other Income/Expense Investment income declined in 2001 as we implemented more effective cash management processes, thus utilizing excess cash to reduce outstanding debt. Other expenses include losses on unlisted investments and amounts invested in seed money investments. Interest expense increased by (pound)4.3 million during the year because of higher outstanding debt levels (arising from cash used to fund acquisitions), offset in part by lower interest rates on outstanding balances under our credit facility. Taxation Our effective tax rate on ordinary profit (before goodwill amortization and exceptional items) was 30.6% in 2001, compared to 29.7% in 2000. These tax rates reflect our adoption of FRS 19, which allows previously unrecognized deferred tax benefits to be recorded. Liquidity and Capital Resources The ability to generate cash from operations in excess of our capital expenditures and dividend requirements is one of our fundamental financial strengths. Operations continue to be financed from share capital, retained profits, and borrowings. We generated (pound)433.7 million of earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2002. We paid (pound)93.5 million in dividends and (pound)59.3 million for fixed assets expenditures, principally for technology and capital investments. Shareholder funds were (pound)2.3 billion at December 31, 2002. We did not change our financial instruments policies in 2002 and did not hedge any of our operational foreign exchange exposures. As a result, our balance sheet may be impacted by movements in U.S. dollar/sterling exchange rates. This is partially mitigated by our U.S. dollar denominated borrowings. Other than this, we do not actively manage our currency exposures. 24
As of December 31, 2002, we had the following obligations and commitments to make future payments: <TABLE> <CAPTION> Less than (pound)'000 Total 1 year 1-3 Years 3-5 Years Thereafter -------------- ------------ ------------ -------------- -------------- <S> <C> <C> <C> <C> <C> Total Debt 817,689 222,089 249,859 343,849 1,892 Finance Leases 85 85 - - - Operating Leases 313,481 40,918 80,360 46,035 146,168 Acquisition provisions 76,858 38,095 26,503 5,519 6,741 -------------- ------------ ------------ -------------- -------------- Total 1,208,113 301,187 356,722 395,403 154,801 ============== ============ ============ ============== ============== </TABLE> Total debt (including current maturities of (pound)222.1 million) amounted to (pound)817.7 million at December 31, 2002, and net debt was (pound)652.5 million (2001: (pound)837.6 million), excluding cash held as a result of short-term timing differences on customer transactions of (pound)184.7 million. Net debt declined by (pound)185.1 million in 2002. We have received credit ratings of A2, A- and A- from Moody's, Standard and Poor's, and Fitch credit rating agencies. See Notes 15, 19 and 22 to our Consolidated Financial Statements for additional information about our debt. We operate under a five-year $900 million credit facility with a group of international banks, which matures in 2006. On December 31, 2002, (pound)149.9 million ($240.0 million) was drawn under the facility. We also have a $200 million 364-day facility with these banks. The financial covenants under the credit agreement include the quarterly maintenance of a debt/EBITDA ratio of not greater than 3.00:1.00 and an EBITDA/interest ratio of not less than 4.00:1.00. On December 31, 2002, the debt/EBITDA ratio was 2.03 and the EBITDA/interest ratio for the required period was 8.22. Operating leases reflect obligations primarily for leased building space. Acquisition provisions reflect the NAM and Pell Rudman earn-outs and retention arrangements. Earn-out payments are based upon asset retention levels at the payment dates, and may be payable annually through April 2004. Any payment not made will be reversed against the related goodwill balances. Retention payments are due annually for five years following the 2001 acquisitions. Various subsidiaries participate in funding arrangements for the payment of mutual fund share sales commissions. We sell future revenue streams from 12b-1 fees and contingent deferred sales charges at a purchase price equal to a percentage of the price at which each Class B share of the funds is sold. We have financed over $36.9 billion in gross sales of AUM since inception of the program, representing $1.5 billion in commissions. We issued a total of (pound)574.0 million in Equity Subordinated Debentures and (pound)128.9 million in loan notes in 2000 as part of the consideration for our acquisitions during 2000. During 2002, no Equity Subordinated Debentures were converted into Ordinary Shares, and (pound)59.4 million of the Equity Subordinated Debentures remained outstanding at December 31, 2002. The Equity Subordinated Debentures bear interest at 6% per year and mature in 2003. During the fiscal years ended December 31, 2002, 2001 and 2000, our capital expenditures were (pound)59.3 million, (pound)79.2 million and (pound)62.5 million, respectively. These expenditures related in each year to technology initiatives, including new platforms from which we maintain our portfolio management systems and fund tracking systems, improvements in computer hardware and software desktop products for employees, new telecommunications products to enhance our internal information flow, and back-up disaster recovery systems. Also, in each year, a portion of these costs was related to leasehold improvements made to the various buildings and workspaces used in our offices. In 2002, we capitalized as leasehold improvements certain costs associated with our move to new headquarters in London, England. We believe that our cash flow from operations and credit facilities, together with our ability to obtain alternative sources of financing, will enable us to meet debt and other obligations as they come due and anticipated future capital requirements. Dividends Our board of directors has recommended a final dividend of 6.5p per Ordinary Share, resulting in a total dividend of 11.5p in 2002 versus 11.0p in 2001. The total dividend for 2002 represents an increase of 5% over the total dividend for 2001, but the same level as the 2001 final dividend. Under the Companies Act 1985, as amended, of Great Britain, our ability to declare dividends is restricted to the amount of our distributable profits and reserves, which is the current and retained amounts of our profit and loss account, on an unconsolidated basis. At December 31, 2002, the amount available for dividends was (pound)47.6 million after accrual of the 25
recommended final dividend for 2002. Furthermore, the credit facility places certain restrictions on our ability to pay dividends, as described in Note 15 to the Consolidated Financial Statements. These restrictions could impact the ability of our subsidiaries to pay dividends to us and our ability to pay dividends to our shareholders. Such restrictions have not had, and are not expected to have in the future, a material effect on our ability to pay dividends. Item 6. Directors, Senior Management and Employees Directors and Senior Management Our current directors and members of senior management are: <TABLE> <CAPTION> Name Age* Position* ---- ---- --------- <S> <C> <C> Charles W. Brady(a)(c) 67 Executive Chairman, Board of Directors Rex D. Adams(b)(c)(d) 62 Non-Executive Director Sir John Banham(b)(c)(d) 62 Non-Executive Director The Hon. Michael D. Benson(a) 59 Vice Chairman, Board of Directors; Chairman, INVESCO Division Joseph R. Canion(b)(c)(d) 58 Non-Executive Director Michael J. Cemo(a) 57 Director; President, A I M Distributors, Inc. Gary T. Crum(a) 55 Director; President, A I M Capital Management, Inc. Jean-Baptiste Douville de Franssu(a) 39 Chief Executive Officer, INVESCO Continental Europe Robert H. Graham(a) 56 Vice Chairman, Board of Directors; Chairman, AIM Division Robert C. Hain(a) 49 Chief Executive Officer, INVESCO U.K. Hubert L. Harris, Jr.(a) 59 Director; Chief Executive Officer, INVESCO Retirement Donald J. Herrema(a) 50 Chief Executive Officer, Atlantic Trust Private Wealth Management Erick R. Holt(a) 50 General Counsel Denis Kessler(b)(c)(d) 50 Non-Executive Director Andrew Tak Shing Lo(a) 41 Chief Executive Officer, INVESCO Asia Pacific Bevis Longstreth(b)(c)(d) 69 Non-Executive Director Robert F. McCullough(a) 60 Director; Chief Financial Officer James I. Robertson(a) 45 Chief Executive Officer, AMVESCAP Group Services, Inc. John D. Rogers(a) 41 Chief Executive Officer, INVESCO Division Philip A. Taylor(a) 48 Chief Executive Officer, AIM Trimark Investments Stephen K. West(b)(c)(d) 74 Non-Executive Director Mark H. Williamson(a) 51 Chief Executive Officer, AIM Division </TABLE> - -------------- * All ages and positions are as of February 28, 2003. (a) Member of the Executive Board (b) Member of the Audit Committee (c) Member of the Nomination and Board Governance Committee (d) Member of the Remuneration Committee Charles W. Brady 67 Executive Chairman, Board of Directors USA(a)(c) Charles Brady has served as Executive Chairman of the Board of Directors of our company since 1993, Chief Executive Officer of our company since 1992, and as a Director of our company since 1986. He was a founding partner of INVESCO Capital Management Inc., which merged with our predecessor organization in 1988. Mr. Brady began his investment career in 1959 after graduating with a BS from the Georgia Institute of Technology. He also attended the Advanced Management Program at the Harvard Business School. Mr. Brady is a Director of the Atlanta College of Art, a Trustee of the Georgia Tech Foundation and the Carter Library, and a Director of the National Bureau of Asian Research. Rex D. Adams 62 Non-Executive Director USA(b)(c)(d) Rex Adams has served as a Non-Executive Director of our company since November 2001 and is Chairman of the Remuneration Committee. Mr. Adams was dean of the Fuqua School of Business at Duke University from 1996 to 2001 and is currently a professor of business administration at the Fuqua School of Business. He joined Mobil International in London in 1965 and served as Executive Vice President of Administration for Mobil Corporation from 1988 to 1996. Mr. Adams received a BA magna cum laude from Duke University. He was selected as a Rhodes Scholar in 1962 and studied at Merton College, Oxford University. Mr. Adams serves on the Boards of Directors of Alleghany Corporation, PBS, and the Vera Institute of Justice. 26
Sir John Banham 62 Non-Executive Director UK(b)(c)(d) Sir John Banham has served as a Non-Executive Director of our company since 1999 and is Chairman of the Nomination and Board Governance Committee. He is Chairman of Whitbread PLC. Sir John was Director General of the Confederation of British Industry from 1987 to 1992, a Director of both National Power and National Westminster Bank from 1992 to 1998, Chairman of Tarmac PLC from 1994 to 2000, and Chairman of Kingfisher PLC from 1995 to 2001. Sir John is a graduate of Cambridge University and has been awarded honorary doctorates by four leading U.K. universities. The Hon. Michael D. Benson 59 Vice Chairman, Board of Directors; Chairman, INVESCO Division UK(a) Michael Benson has served as Vice Chairman of the Board of Directors of our company since February 2001, a Director of our company since 1994, Chief Executive Officer of INVESCO Global since 1997, and Chief Executive Officer of the Asian region from 1994 to 1997. He began his career in the securities industry in 1963 and held senior positions at Lazard Brothers Ltd., Standard Chartered Bank, and Capital House Investment Management. Joseph R. Canion 58 Non-Executive Director USA(b)(c)(d) Joseph Canion has served as a Non-Executive Director our company since 1997. He was a Director of AIM from 1991 through 1997, when AIM was merged with one of our subsidiaries. Since 1992, Mr. Canion has served as Chairman of Insource Technology Corporation, a business and technology management company based in Houston. He was co-founder and, from 1982 to 1991, Chief Executive Officer, President, and a Director of Compaq Computer Corporation. Michael J. Cemo 57 Director; President, A I M Distributors, Inc. USA(a) Michael Cemo has served as a Director of our company since 1997. He is President of A I M Distributors, Inc., a broker-dealer subsidiary of AIM, and an Executive Vice President of AIM. Mr. Cemo has been in the investment business since 1971 and joined AIM in 1988. He is a member of the Investment Company Institute's sales force marketing committee. Mr. Cemo received a BS from the University of Houston. Gary T. Crum 55 Director; President, A I M Capital Management, Inc. USA(a) Gary Crum has served as a Director of our company since 1997. He is co-founder of AIM and serves as an Executive Vice President of AIM. He is President of A I M Capital Management, Inc., an investment advisory subsidiary of AIM, and is Director of Investments. Mr. Crum has been in the investment business since 1972. He received a BBA from Southern Methodist University and an MBA from the University of Texas at Austin. Jean-Baptiste de Franssu 39 Chief Executive Officer, INVESCO Continental Europe France(a) Jean-Baptiste de Franssu has served as a member of the Executive Board of our company since May 2001 and as Chief Executive Officer of INVESCO Continental Europe since 1999. He joined our company as Managing Director and a Member of the Board of Directors of INVESCO France in 1990. Mr. de Franssu became Managing Director of the Continental European Division in 1996. He has served as a member of the INVESCO Global Management Committee since 1997. Mr. de Franssu is a graduate of the ESC Group in Rheims. He received a BA from Middlesex University in the U.K. and a post-graduate actuarial degree from Pierre et Marie Curie University in Paris. Robert H. Graham 56 Vice Chairman, Board of Directors; Chairman, AIM Division USA(a) Robert Graham became Vice Chairman of the Board of Directors of our company in February 2001. He has served as a Director of our company since 1997 and as Chief Executive Officer of Managed Products from 1997 to January 2001. Mr. Graham is Chairman of the AIM Division, which includes A I M Management Group Inc., a company that he co-founded in 1976. He has been in the investment business since 1972. Mr. Graham received a BS, an MS, and an MBA from the University of Texas at Austin. He has served as a member of the Board of Governors and the Executive Committee of the Investment Company Institute, and as Chairman of the Board of Directors and Executive Committee of the ICI Mutual Insurance Company. Robert C. Hain 49 Chief Executive Officer, INVESCO U.K. Canada(a) Robert Hain has served as a member of the Executive Board of our company since February 2001 and as Chief Executive Officer of INVESCO U.K. since January 2002. He served as President and Chief Executive Officer of AIM Funds Management Inc., our Canadian business, from December 1998 to January 2002. Mr. Hain was Global Head of Private Banking at CIBC from May 1998 to November 1998, partner at Ernst & Young from 1997 to 1998, Executive Vice President at Investors Group from 1993 to 1997, and President of Royal Trust Bank (Switzerland), now Royal Bank of Canada, from 1984 to 1993. He received a BA from the University of Toronto and an M.Litt. from Oxford University. Hubert L. Harris, Jr. 59 Director; Chief Executive Officer, INVESCO Retirement USA(a) Hubert Harris has served as Chief Executive Officer of INVESCO Retirement since January 1998 and as a Director of our company from 1993 to February 1997, and since 1998. He served as Assistant Director of the Office of Management and Budget in Washington, DC, during President Carter's administration and as President and Executive Director of the International Association for Financial Planning. Mr. Harris serves as a Trustee and member of the Executive Committee of the Georgia Tech 27
Foundation. He also serves as Vice President and a member of the Executive Committee of the National Defined Contribution Council. Mr. Harris received a BS from the Georgia Institute of Technology and an MBA from Georgia State University. Donald J. Herrema 50 Chief Executive Officer, Atlantic Trust Private Wealth Management USA(a) Donald Herrema has served as Chairman and Chief Executive Officer of Atlantic Trust Private Wealth Management and as a member of the Executive Board of our company since March 2001. He held several senior positions at Bessemer Trust Company from 1993 to 2001 and became President and Chief Executive Officer of The Bessemer Group Incorporated in 1998. Mr. Herrema began his career at Wells Fargo in 1981 and became President of Wells Fargo Securities in 1991. He received a BA from Whittier College and an MA from the University of Southern California. Mr. Herrema is a Trustee of Whittier College, a former Leaders Council Member of the Institute of Private Investors, and past President of the Bank Securities Association. Erick R. Holt 50 General Counsel USA(a) Erick Holt became General Counsel and a member of our Executive Board of our company in January 2003. He joined our company as Group Compliance Officer in July 1999. Mr. Holt began his career at Bronson, Bronson & McKinnon in San Francisco in 1979. He joined Dean Witter Reynolds in 1984, was named Assistant General Counsel in 1987, and became Director of Compliance in 1989. Mr. Holt joined Citibank in 1996 as Director of Compliance for the Investment Products and Distribution Division. He received an AB cum laude from the University of California and a JD from the University of San Francisco where he was an editor of the law review. He is a member of the International Committee of the Investment Company Institute. Denis Kessler 50 Non-Executive Director France(b)(c)(d) Denis Kessler has served as a Non-Executive Director of our company since March 2002. A noted economist, Mr. Kessler is Executive Vice Chairman of the French Business Confederation (MEDEF), Vice Chairman of the Comite Europeen des Assurances (CEA), Chief Executive Officer of SCOR, and is a member of the Conseil national des Assurances. He is Chairman of the Boards of Directors of SCOR US, SCOR Life US Reinsurance, and SCOR Reinsurance Company Corporate, and serves as a member of the Boards of Directors of Dexia Bank, BNP Paribas, Cetelem, Bollore Group, and Vendome Rome Group. Mr. Kessler received a Diplome from the Paris Business School (HEC) and a Doctorat d'Etat in economics from the University of Paris. Andrew T. S. Lo 41 Chief Executive Officer, INVESCO Asia Pacific China(a) Andrew T. S. Lo has served as a member of the Executive Board of our company since May 2001 and as Chief Executive Officer of INVESCO Asia Pacific since February 2001. He joined our company as Managing Director for INVESCO Asia in 1994. Mr. Lo began his career as Credit Analyst at Chase Manhattan Bank in 1984. He became Vice President of the Investment Management Group at Citicorp in 1988 and was Managing Director of Capital House Asia from 1990 to early 1994. Mr. Lo was Chairman of the Hong Kong Investment Funds Association from 1996 to 1997, a member of the Council to the Stock Exchange of Hong Kong from 1997 to February 2000, and a member of the Advisory Committee to the Securities and Futures Commission in Hong Kong from 1997 to March 2001. He received a BS and an MBA from Babson College in the U.S. Bevis Longstreth 69 Non-Executive Director USA(b)(c)(d) Bevis Longstreth has served as a Non-Executive Director of our company since 1993 and is Chairman of the Audit Committee. Mr. Longstreth is a retired partner of Debevoise & Plimpton, in New York, where he was a partner from 1970 through 1981 and from 1984 through 1997. He was a Commissioner of the Securities and Exchange Commission from 1981 to 1984. Mr. Longstreth is a frequent writer on issues of corporate governance, banking, and securities law, and is the author of Modern Investment Management and the Prudent Man Rule (1986), a book on law reform. He is a graduate of Princeton University and the Harvard Law School. Mr. Longstreth is a Trustee of the College Retirement Equities Fund (CREF). Robert F. McCullough 60 Director; Chief Financial Officer USA(a) Robert McCullough has served as a Director and Chief Financial Officer of our company since 1996. Before joining our company, he was an accountant at Arthur Andersen in New York from 1964 until 1987. Mr. McCullough became a partner of Arthur Andersen in 1973 and managing partner of the Atlanta office in 1987, where he served until 1996. He is a graduate of the University of Texas at Austin and is a Certified Public Accountant. Mr. McCullough is a member of the American Institute of Certified Public Accountants and the Georgia Society of Certified Public Accountants. He is a Director and member of the Audit Committee of Mirant Corporation. James I. Robertson 45 Chief Executive Officer, AMVESCAP Group Services, Inc. UK(a) James Robertson has served as Chief Executive Officer of AMVESCAP Group Services, Inc. since February 2001 and as a member of the Executive Board of our company since March 1999. He joined our company as Director of Finance and Corporate Development for INVESCO Global's European division in 1993 and repeated this role for the Pacific division in 1995. Mr. Robertson became Managing Director, Global Strategic Planning, of our company in 1996. He holds an MA from Cambridge University. He is a member of the Institute of Chartered Accountants of England and Wales. 28
John D. Rogers 41 Chief Executive Officer, INVESCO Division USA(a) John Rogers became Chief Executive Officer of the INVESCO Division in January 2003. He has served as Chief Executive Officer of INVESCO Institutional and as a member of the Executive Board of our company since December 2000. He joined the company as Chief Investment Officer and President of INVESCO's Tokyo office in 1994 and became Chief Executive Officer and Co-Chief Investment Officer of INVESCO Global Asset Management (N.A.), Inc. in 1997. Mr. Rogers received a BA cum laude from Yale University and an MA from Stanford University. He is a Chartered Financial Analyst and a member of the International Society of Financial Analysts. Philip A. Taylor 48 Chief Executive Officer, AIM Trimark Investments Canada(a) Philip Taylor has served as Chief Executive Officer of AIM Trimark Investments since January 2002 and became a member of the Executive Board of our company in January 2003. He joined AIM Funds Management, Inc. in 1999 as Senior Vice President of Operations and Client Services and later became Executive Vice President and Chief Operating Officer. Mr. Taylor was President of Canadian retail broker Investors Group Securities Inc. from 1994 to 1997 and managing partner of Meridian Securities from 1989 to 1994. He held various management positions with Royal Trust, now part of Royal Bank of Canada, from 1982 to 1989. Mr. Taylor received an Honours B. Comm degree from Carleton University and an MBA from the Schulich School of Business at York University. Stephen K. West 74 Non-Executive Director USA(b)(c)(d) Stephen West has served as a Non-Executive Director of our company since 1997. Mr. West was a Director of AIM from 1994 through 1997, when AIM was merged with one of our subsidiaries. From 1964 to 1998 he was a partner of Sullivan & Cromwell, based in New York, and he is presently senior counsel to the firm. Mr. West serves on the Boards of Directors of the Pioneer Funds and the Swiss Helvetia Fund, Inc. He is a graduate of Yale University and the Harvard Law School. Mark H. Williamson 51 Chief Executive Officer, AIM Division USA(a) Mark Williamson became Chief Executive Officer of the AIM Division in January 2003 and has served as a member of the Executive Board of our company since December 1999. He served as Chief Executive Officer of the Managed Products Division from February 2001 to December 2002 and as Chairman and Chief Executive Officer of INVESCO Funds Group Inc. from 1998 to December 2002. Mr. Williamson began his career at Merrill Lynch in 1976. He joined C&S Securities in 1985 and was named Managing Director in 1988. He became Chairman and Chief Executive Officer of NationsBank's mutual funds and brokerage subsidiaries in 1997. Mr. Williamson graduated from the University of Florida. He is a member of the Board of Governors of the Investment Company Institute and the Board of Directors of ICI Mutual Insurance Company. Compensation of Directors and Senior Management Information for Messrs. de Franssu, Hain, Herrema, Lo, Robertson, Rogers, Ward, Williams and Williamson is included in the tables below under the references to other senior management as a group. Mr. Ward resigned as a member of our Executive Board in January 2002, and Mr. Williams resigned as a member of our Executive Board in December 2002. Messrs. Holt and Taylor became members of our Executive Board in January 2003. The other members of our Executive Board also serve as directors of our company and are not included in references to other senior management as a group. 29
Salary, Bonus and Other Benefits The remuneration of our executive chairman, executive directors, other senior management and non-executive directors during the fiscal year ended December 31, 2002 is set forth in the following tables: Salary Bonus(1) Benefits Total ((pound)000) ((pound)000) ((pound)000) ((pound)000) ------------ ------------ ------------ ------------ Executive Chairman: - ------------------------- Charles W. Brady 377 1,785 10 2,172 Executive Directors: - ------------------------- The Hon. Michael D. Benson 357 643 1 1,001 Michael J. Cemo(2) 217 1,124 7 1,348 Gary T. Crum 267 500 13 780 Robert H. Graham 333 714 12 1,059 Hubert L. Harris, Jr. 294 536 8 838 Robert F. McCullough 275 536 5 816 Other Senior Management as a Group (Nine Persons) 2,110 4,035 56 6,201 - ------------------------- Non-Executive Directors: - ------------------------- Rex D. Adams 67 -- -- 67 Sir John Banham 67 -- -- 67 Joseph R. Canion(3) 67 -- -- 67 Denis Kessler 67 -- -- 67 Bevis Longstreth(3) 67 -- -- 67 Stephen K. West 67 -- -- 67 Alexander M. White(4) 67 -- -- 67 - -------------- (1) Approximately 6% of the sums included under Bonus for our executive chairman, executive directors and other senior management was paid into the AMVESCAP Global Stock Plan. (2) Bonus amounts include commissions earned pursuant to approved commission schedules. (3) A portion of the compensation was deferred pursuant to the AMVESCAP Deferred Fees Share Plan. (4) Mr. White died on November 5, 2002. 30
Option Grants We granted the following options to purchase our Ordinary Shares to the following executive directors and other senior management during 2002. We did not grant any options to our non-executive directors during 2002. <TABLE> <CAPTION> Option Exercise Name Number of Shares Price Expiration Date ---- ---------------- ----- --------------- <S> <C> <C> <C> Charles W. Brady 700,000 419.25p November 2012 The Hon. Michael D. Benson 350,000 419.25p November 2012 Michael J. Cemo 350,000 419.25p November 2012 Gary T. Crum 350,000 419.25p November 2012 Robert H. Graham 350,000 419.25p November 2012 Hubert L. Harris, Jr. 350,000 419.25p November 2012 Robert F. McCullough 350,000 419.25p November 2012 Other senior management as a group (nine persons) 1,945,580 419.25p November 2012 </TABLE> Pension Rights Our executive directors and senior management participate in a defined contribution pension scheme. Our non-executive directors do not participate in any pension scheme. Contributions made in respect of executive directors' and other senior management's pension arrangements in 2002 were as follows: (pound)000 ---------- Charles W. Brady 13 The Hon. Michael D. Benson 34 Michael J. Cemo 18 Gary T. Crum 18 Robert H. Graham 19 Hubert L. Harris, Jr. 19 Robert F. McCullough 19 Other senior management as a group (nine persons) 139 AMVESCAP Global Stock Plan We have established the AMVESCAP Global Stock Plan, which is a remuneration plan for key employees, who are designated as "Global Partners," under which a portion of a profit-linked bonus paid annually in respect of each Global Partner is deposited into a discretionary employee benefit trust, which then purchases Ordinary Shares in the open market. The plan trustee is State Street Bank and Trust Company. The Ordinary Shares purchased by the trust are allocated within the trust to participants and, provided they retain their position with us for a period of three years from the date of the bonus, such allocated shares will be distributed to the participants upon vesting unless they have made an election to defer distribution. Approximately (pound)23 million was paid into the AMVESCAP Global Stock Plan for the year ended December 31, 2002. The AMVESCAP Global Stock Plan owned approximately 19 million Ordinary Shares on February 28, 2003. On such date, our executive directors and other senior management had interests in the Ordinary Shares held by the AMVESCAP Global Stock Plan as set forth in the table below. Name Interest - ---- -------- Charles W. Brady 734,903 The Hon. Michael D. Benson 140,415 Michael J. Cemo 119,889 Gary T. Crum 154,104 Robert H. Graham 270,068 Hubert L. Harris, Jr. 207,964 Robert F. McCullough 162,651 Other senior management as a group (nine persons) 613,631 31
We also have established a long-term incentive plan as part of the AMVESCAP Global Stock Plan to retain and motivate 47 key executives, representing the next generation of management. Our directors are not participants in this plan. The plan provides for the allocation of 25.5 million Ordinary Shares to those key executives. Awards range from 250,000 to 1,500,000 Ordinary Shares per person and vest in equal one-third installments starting on the fifth anniversary and ending on the seventh anniversary of the grant date. The plan is funded by Ordinary Shares purchased from time to time in the open market. The Ordinary Shares will be distributed to the participants as they vest. As of February 28, 2003, no member of senior management had vested interests in the long-term incentive plan. INVESCO Employee Stock Ownership Plan The INVESCO Employee Stock Ownership Plan (the "ESOP") was established for employees of certain of our U.S. subsidiaries. Participating subsidiaries made stock bonus contributions to the ESOP comprising cash and/or our securities in respect of their employees who participate in the ESOP. Accounts were established in respect of each participant's allocation of contributions to the ESOP, which were held by the trustee in accordance with the terms of the ESOP. Certain members of the Board and senior management participate in the ESOP. The ESOP was closed to further activity effective January 1, 2000. As of February 28, 2003, our executive directors and other senior management had the following interests in Ordinary Shares held by the ESOP: Name Interest - ---- -------- Charles W. Brady 92,229 Hubert L. Harris, Jr. 85,211 Robert F. McCullough 12,684 Other senior management as a group (nine persons) 43,502 AMVESCAP Executive Share Option Schemes Our executive directors and qualifying employees of our participating subsidiaries are eligible to be nominated for participation in various of our option plans (the "AMVESCAP Executive Share Option Schemes"). Options under the AMVESCAP Executive Share Option Schemes entitle the holder to acquire Ordinary Shares at a certain price. Options generally remain exercisable between the third and tenth anniversaries of the date of the grant. The AMVESCAP Executive Share Option Schemes contain limits upon the participation by each individual. Board Practices Non-executive Directors. Non-executive directors do not have formal fixed term contracts; however, under our Articles of Association all directors are required to retire by rotation, and one third of our Board of Directors (the "Board") is required to seek re-election each year. Re-election is subject to shareholders' approval. Because Mr. West is over the age of 70 years, he is required to seek re-election each year. Mr. West is the only non-executive director seeking re-election in 2003. Assuming the current composition of the Board does not change, in addition to Mr. West, Mr. Canion will be required to seek re-election in 2004, and Messrs. Adams, Banham, Kessler and Longstreth will be required to seek re-election in 2005. Executive Directors. Executive directors are employed under continuing contracts of employment that can be terminated by either party under notice provisions of up to a maximum of twelve months. Executive directors' compensation arrangements are determined by the Remuneration Committee, which consists solely of non-executive directors. Mr. Benson is the only executive director seeking re-election in 2003. Messrs. Cemo and Crum will not be seeking re-election in 2003 and will retire with effect from the conclusion of the Annual General Meeting to be held on April 30, 2003. Assuming the current composition of the Board does not change, Messrs. Graham and McCullough will be required to seek re-election in 2004, and Messrs. Brady and Harris will be required to seek re-election in 2005. Executive Board. The Board has appointed an Executive Board to oversee and supervise the business and strategy of the executive management of the company as a whole and to approve and coordinate the activities of management committees for our four operating groups. As of February 28, 2003, the Executive Board consisted of Messrs. Benson, Brady, Cemo, Crum, de Franssu, Graham, Hain, Harris, Herrema, Holt, Lo, McCullough, Robertson, Rogers, Taylor and Williamson. Membership of the Executive Board may vary with the approval and consent of the Board. Members of the Executive Board serve until they resign from the Executive Board or the Board decides to change the membership of the Executive Board. 32
Remuneration Committee. The Remuneration Committee consists solely of independent non-executive directors. Mr. Adams chairs the Remuneration Committee. The Remuneration Committee determines the remuneration of the Executive Chairman and the executive directors and the allocation of share options and the sums available for distribution in respect of a bonus paid annually to each Global Partner. The Board as a whole determines the remuneration of the non-executive directors. A firm of independent remuneration consultants is engaged to review executive compensation as it relates to a peer group of comparable companies and the industry in general. In determining the sums available for the payment of incentives through the AMVESCAP Global Stock Plan, the Remuneration Committee takes into account the returns provided to our shareholders and our performance. In determining an individual's compensation, the Remuneration Committee considers the individual's performance measured against, among other factors, the achievement of personal and Board objectives and targets, including growth in earnings per share versus peer companies, achievement of long-term performance standards and goals, and other individual goals. Options are awarded on a merit basis, including our performance during the year. The remuneration policies implemented by the Remuneration Committee comply with the Best Practice Provisions of the Combined Code annexed to the Listing Rules of the London Stock Exchange. The Remuneration Committee met two times in 2002. Audit Committee. The Audit Committee consists solely of independent non-executive directors. Mr. Longstreth chairs the Audit Committee. The Audit Committee has written terms of reference. The Audit Committee is responsible for accounting and financial controls being in place, ensuring that auditing processes are properly coordinated and work effectively, reviewing the scope and results of the audit and its cost effectiveness, and ensuring the independence and objectivity of the auditors, including the nature and amount of non-audit work supplied by the auditors. The Audit Committee has direct access to our auditors. The Audit Committee receives periodic reports from management and our auditors on the system of internal controls and significant financial reporting issues. Our compliance function regularly reports on significant regulatory compliance matters. The Audit Committee met eight times in 2002. Nomination and Board Governance Committee. The Nomination and Board Governance Committee consists of all of the non-executive directors and the Executive Chairman. Sir John Banham chairs the Nomination and Board of Governance Committee. The Nomination and Board Governance Committee is responsible for the structure and composition of the Board and for matters of Board governance and effectiveness. The Nomination and Board Governance Committee carries out a formal selection process of candidates when necessary, and makes recommendations to the Board regarding appointments. The Nomination and Board Governance Committee met two times in 2002. Employees As of December 31, 2002, we employed 7,581 people, of which approximately 70% were located in North America. See "Item 4. Information on the Company--Business Overview," above, for a breakdown of headcount by operating group as of December 31, 2002. As of December 31, 2001 and 2000, we employed 8,519 and 8,259 people, respectively. The decrease in headcount during 2002 was due to reductions in force we made during that year, and the increase in headcount during 2001 was due to acquisitions we made during the year. None of our employees is covered under collective bargaining agreements. 33
Share Ownership Ownership of Ordinary Shares The following table discloses, as of February 28, 2003 (unless otherwise indicated), holdings of Ordinary Shares by our directors and senior management: ------------------------------------------------ Ordinary Percent of Outstanding Shares(1) Ordinary Shares ------------------------------------------------ Charles W. Brady(2) 4,372,534 * Rex D. Adams 14,000 * Sir John Banham 7,500 * The Hon. Michael D. Benson(2) 74,722 * Joseph R. Canion(3) 2,000 * Michael J. Cemo(2)(4) 6,791,389 * Gary T. Crum(2)(5) 29,505,821 3.71% Jean-Baptiste de Franssu(2) * * Robert H. Graham(2)(6) 29,938,221 3.77% Robert C. Hain(2) * * Hubert L. Harris, Jr.(2) 284,067 * Donald J. Herrema(2) * * Denis Kessler(7) 2,200 * Andrew Tak Shing Lo(2) * * Bevis Longstreth(3)(8) 70,440 * Robert F. McCullough(2) 13,815 * James I. Robertson(2) * * John D. Rogers(2) * * Hugh R. Ward(2)(9) * * Stephen K. West 209,439 * Alexander M. White(10) 120,000 * Neil Williams(2)(11) * * Mark H. Williamson(2) * * - -------------- * Less than 1%. Beneficial ownership is determined in accordance with the rules and regulations of the Securities and Exchange Commission. (1) Ordinary Shares include shares held as American Depositary Shares but does not include options to purchase Ordinary Shares held by such individuals. For information regarding ownership of stock options, see "Options to Purchase Securities from AMVESCAP," below. (2) Excludes (a) interests of Messrs. Brady, Benson, Cemo, Crum, de Franssu, Graham, Hain, Harris, Herrema, Lo, McCullough, Robertson, Rogers, Ward, Williams and Williamson in the AMVESCAP Global Stock Plan as set forth in the section entitled "AMVESCAP Global Stock Plan," above, and in the AMVESCAP Executive Share Option Schemes as set forth in the section entitled "Options to Purchase Securities from AMVESCAP," below; and (b) interests of Messrs. Brady, Harris, McCullough, Robertson, Rogers and Williamson in Ordinary Shares held in the ESOP, as set forth in the section entitled "INVESCO Employee Stock Ownership Plan," above. (3) Excludes interests in 10,649 and 35,754 Ordinary Shares held by Messrs. Canion and Longstreth, respectively, pursuant to the AMVESCAP Deferred Fees Share Plan. (4) Includes 250,000 Ordinary Shares owned by a non-profit corporation of which Mr. Cemo serves as an executive officer, as to which Mr. Cemo disclaims beneficial ownership. (5) Includes (a) 350,000 Ordinary Shares owned by a non-profit corporation of which Mr. Crum serves as president, (b) 7,567,809 Ordinary Shares owned by a limited partnership with a limited liability corporation as its general partner of which Mr. Crum serves as chief executive officer, and (c) 201,577 Ordinary Shares owned by a trust of which Mr. Crum is co-trustee, as to all of which Mr. Crum disclaims beneficial ownership. 34
(6) Includes (a) 29,368,653 Ordinary Shares owned by a limited partnership of which Mr. Graham is the managing general partner, and (b) 138,165 Ordinary Shares owned by a limited partnership with a trust as its general partner of which Mr. Graham serves as trustee. (7) Mr. Kessler became a director of our company in March 2002. (8) Represents shares held by a limited partnership of which Mr. Longstreth is a general partner. (9) Information as of January 2002, the month Mr. Ward resigned as a member of our Executive Board. (10) Information as of November 5, 2002, the date of Mr. White's death. (11) Information as of December 2002, the month Mr. Williams resigned as a member of our Executive Board. Options to Purchase Securities from AMVESCAP All outstanding options to purchase our shares have been issued under the AMVESCAP Executive Share Option Schemes and various AIM option plans. The table below is a summary of outstanding options to acquire Ordinary Shares held by our executive directors and senior management as of February 28, 2003. As of February 28, 2003, none of our non-executive directors had outstanding options to acquire Ordinary Shares: - -------------------------------------------------------------------------------- Option Name Number of Shares Exercise Price Expiration Date - -------------------------------------------------------------------------------- Charles W. Brady 500,000 244.0p November 2006 100,000 422.5p November 2007 250,000 432.0p December 2008 500,000 660.0p December 2009 200,000 1100.0p November 2010 300,000 950.0p December 2011 700,000 419.25p November 2012 - -------------------------------------------------------------------------------- The Hon. Michael D. Benson 100,000 422.5p November 2007 200,000 432.0p December 2008 200,000 660.0p December 2009 100,000 1100.0p November 2010 150,000 950.0p December 2011 350,000 419.25p November 2012 - -------------------------------------------------------------------------------- Michael J. Cemo 100,000 422.5p November 2007 100,000 432.0p December 2008 200,000 660.0p December 2009 100,000 1100.0p November 2010 150,000 950.0p December 2011 350,000 419.25p November 2012 - -------------------------------------------------------------------------------- Gary T. Crum 100,000 422.5p November 2007 100,000 432.0p December 2008 150,000 660.0p December 2009 100,000 1100.0p November 2010 150,000 950.0p December 2011 350,000 419.25p November 2012 - -------------------------------------------------------------------------------- Jean-Baptiste Douville de Franssu 200,000 244.0p November 2006 50,000 422.5p November 2007 25,000 416.0p October 2008 25,000 660.0p December 2009 45,000 1100.0p November 2010 150,000 950.0p December 2011 245,000 419.25p November 2012 - -------------------------------------------------------------------------------- 35
- -------------------------------------------------------------------------------- Option Name Number of Shares Exercise Price Expiration Date - -------------------------------------------------------------------------------- Robert H. Graham 100,000 422.5p November 2007 200,000 432.0p December 2008 250,000 660.0p December 2009 100,000 1100.0p November 2010 150,000 950.0p December 2011 350,000 419.25p November 2012 - -------------------------------------------------------------------------------- Robert C. Hain 133,735 452.0p December 2008 75,000 660.0p December 2009 100,000 1100.0p November 2010 150,000 950.0p December 2011 300,000 419.25p November 2012 - -------------------------------------------------------------------------------- Hubert L. Harris, Jr. 25,000 242.0p April 2006 400,000 244.0p November 2006 100,000 422.5p November 2007 100,000 432.0p December 2008 150,000 660.0p December 2009 100,000 1100.0p November 2010 150,000 950.0p December 2011 350,000 419.25p November 2012 - -------------------------------------------------------------------------------- Donald J. Herrema 58,080 1168.0p March 2011 150,000 950.0p December 2011 258,080 419.25p November 2012 - -------------------------------------------------------------------------------- Andrew Tak Shing Lo 200,000 244.0p November2006 50,000 422.5p November 2007 25,000 416.0p October 2008 25,000 660.0p December 2009 42,500 1100.0p November 2010 150,000 950.0p December 2011 242,500 419.25p November 2012 - -------------------------------------------------------------------------------- Robert F. McCullough 200,000 242.0p April 2006 400,000 244.0p November 2006 100,000 422.5p November 2007 100,000 432.0p December 2008 150,000 660.0p December 2009 100,000 1100.0p November 2010 150,000 950.0p December 2011 350,000 419.25p November 2012 - -------------------------------------------------------------------------------- James I. Robertson 200,000 244.0p November 2006 50,000 422.5p November 2007 75,000 416.0p October 2008 150,000 660.0p December 2009 100,000 1,100.0p November 2010 150,000 950.0p December 2011 300,000 419.25p November 2012 - -------------------------------------------------------------------------------- John D. Rogers 200,000 244.0p November 2006 50,000 422.5p November 2007 25,000 416.0p October 2008 25,000 660.0p December 2009 100,000 1,100.0p November 2010 150,000 950.0p December 2011 300,000 419.25p November 2012 - -------------------------------------------------------------------------------- Hugh R. Ward(1) 25,000 660.0p December 2009 45,000 1,100.0p November 2010 - -------------------------------------------------------------------------------- Neil Williams(2) 126,800 480.0p September 2009 100,000 1,100.0p November 2010 150,000 950.0p December 2011 36
- -------------------------------------------------------------------------------- Option Name Number of Shares Exercise Price Expiration Date - -------------------------------------------------------------------------------- Mark H. Williamson 100,000 416.0p October 2008 100,000 660.0p December 2009 100,000 1,100.0p November 2010 150,000 950.0p December 2011 300,000 419.25p November 2012 - -------------- (1) Mr. Ward resigned as a member of our Executive Board in January 2002. (2) Mr. Williams resigned as a member of our Executive Board in December 2002. Employee Ownership Opportunities We operate various Sharesave option plans that allow employees to set aside part of their salary each month as savings for the exercise of options to purchase our stock at the end of the option period. Additionally, certain of our employees receive contingent rights to receive Ordinary Shares pursuant to the various plans described above and other stock plans. Item 7. Major Shareholders and Related Party Transactions Major Shareholders The following table discloses, as of February 28, 2003, the number of Ordinary Shares owned by each person, other than our current directors and senior management, whom we know to be a beneficial owner of 3% or more of our outstanding Ordinary Shares: --------------------------------------------------------------- Shares Beneficially Owned and Percentage of Class(1) --------------------------------------------------------------- Percent of Outstanding Ordinary Shares(2) Ordinary Shares --------------------------------------------------------------- Charles T. Bauer 31,311,412 3.94% AIC Limited(3) 42,853,254 5.28% Barclays plc 24,162,563 3.04% - -------------- (1) Beneficial ownership is determined in accordance with the rules and regulations of the Securities and Exchange Commission. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, Ordinary Shares into which Exchangeable Shares beneficially owned by such person are exchangeable are deemed outstanding. These shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person. (2) Ordinary Shares include shares held as American Depositary Shares. (3) Holdings of AIC Limited include 25,631,806 Ordinary Shares deemed to be beneficially owned by AIC Limited by virtue of its management of a number of mutual funds that hold Ordinary Shares or ADSs as a portfolio investment and 17,221,448 Exchangeable Shares (constituting 49.35% of outstanding Exchangeable Shares) deemed to be beneficially owned by AIC Limited by virtue of its management of a number of its mutual funds that hold Exchangeable Shares as a portfolio investment. Mr. Bauer's holdings of Ordinary Shares decreased during the period from January 1, 1999 through December 31, 2002 from approximately 9.00% to 3.94% as a result of sales and charitable gifts, as well as increases in the number of outstanding Ordinary Shares. Major shareholders do not have different voting rights from owners of less than 3% of our Ordinary Shares. A total of 794,458,435 Ordinary Shares were issued and outstanding on February 28, 2003, of which 34,150,035 Ordinary Shares were held of record by holders in the U.S. (excluding shares held in American Depositary Receipt form) and 17,656,022 Ordinary Shares were represented by American Depositary Shares evidenced by American Depositary Receipts issued by the Depositary. On February 28, 2003, the number of holders of record of the Ordinary Shares was 16,352, the number of holders of record of Ordinary Shares in the U.S. was 106 and the number of registered holders of the American Depositary Shares was 53. Because certain of these Ordinary Shares and American Depositary Shares were held by brokers or other nominees, the number of holders of record or registered holders in the U.S. is not representative of the number of beneficial holders or of the residence of the beneficial holders. We are not directly or indirectly owned or controlled by any other corporations, foreign governments or other persons. We are not aware of any arrangement the operation of which might result in a change in the control of the company. 37
Related Party Transactions None. Item 8. Financial Information Consolidated Statements and Other Financial Information See "Item 17. Financial Statements" for our Consolidated Financial Statements. Legal Proceedings In the normal course of business, we are subject to various legal proceedings; however, in management's opinion, there are no legal proceedings pending against us or any of our subsidiaries that would have a material adverse effect on our consolidated financial position, results of operations, or liquidity. Dividend Distributions For information on our policy regarding dividend distributions, see "Item 3. Key Information--Dividends," above, and "Item 10. Additional Information," below. Significant Changes in Financial Information No significant change in our financial information has occurred since the date of our annual financial statements included in this Form 20-F. Item 9. The Offer and Listing Nature of Trading Market and Price History The following table sets forth, for the periods indicated, the high and low reported sale prices for the Ordinary Shares on the London Stock Exchange, based on its Daily Price Official List, and the high and low reported sale prices for the American Depositary Shares on the New York Stock Exchange at the closing of each trading day. The Ordinary Shares are listed on the London Stock Exchange and the SBF--Paris Bourse, are traded on the Frankfurt Stock Exchange, and are reported under the symbol "AVZ" on all three exchanges. The American Depositary Shares are listed and traded on the New York Stock Exchange under the symbol "AVZ." Each American Depositary Share represents two Ordinary Shares. <TABLE> <CAPTION> Ordinary Shares American Depositary Shares(1) --------------- ----------------------------- High Low High Low ---- --- ---- --- <S> <C> <C> <C> <C> <C> February 2003 360.00p 265.00p $11.91 $8.65 January 2003 433.50p 312.50p $13.54 $10.78 December 2002 504.50p 372.50p $15.05 $12.21 November 2002 478.00p 375.00p $14.88 $12.43 October 2002 412.00p 239.00p $13.04 $7.98 September 2002 435.00p 290.75p $12.89 $9.42 </TABLE> <TABLE> <CAPTION> Ordinary Shares American Depositary Shares(1) --------------- ----------------------------- High Low High Low ---- --- ---- --- <S> <C> <C> <C> <C> <C> Fourth Quarter 2002 504.50p 239.00p $15.05 $7.98 Third Quarter 2002 550.00p 290.75p $16.39 $9.42 Second Quarter 2002 987.00p 480.00p $27.65 $15.90 First Quarter 2002 1,120.00p 788.00p $31.10 $23.32 Fourth Quarter 2001 1,107.50p 683.00p $30.35 $20.97 Third Quarter 2001 1,270.00p 530.00p $35.50 $17.90 Second Quarter 2001 1,392.00p 960.00p $39.10 $28.25 First Quarter 2001 1,620.00p 847.00p $47.25 $26.00 </TABLE> 38
<TABLE> <CAPTION> Ordinary Shares American Depositary Shares(1) --------------- ----------------------------- High Low High Low ---- --- ---- --- <S> <C> <C> <C> <C> 2002 1,120.00p 239.00p $31.10 $7.98 2001 1,620.00p 530.00p $47.25 $17.90 2000 1,750.00p 590.00p $50.60 $20.75 1999 745.00p 425.00p $23.10 $14.40 1998 775.00p 246.50p $24.90 $8.63 </TABLE> - -------------- (1) American Depositary Share prices have been adjusted to reflect the change in the Ordinary Share per American Depositary Share ratio to one American Depositary Share per two Ordinary Shares effected on November 8, 2000 and the previous change in the Ordinary Share per American Depositary Share ratio to one American Depositary Share per five Ordinary Shares effected in April 1998. Item 10. Additional Information Memorandum and Articles of Association Our Memorandum of Association provides that our principal objects are, among other things, to carry on the business of an investment holding company and to subscribe for, purchase or otherwise acquire and hold shares, debentures or other securities of any other company or body corporate and to acquire and undertake the whole or any part of the business, property and liabilities of any company or body corporate carrying on any business and to sell or deal in or otherwise dispose of any shares, debentures or other securities or property including any business or undertaking of any other company or any other assets or liabilities. Our objects are set out in full in clause 4 of our Memorandum of Association. Our Memorandum of Association, all material agreements discussed in this Form 20-F and all documents filed as exhibits to this Form 20-F are available for inspection at our registered office at 30 Finsbury Square, London, EC2A 1AG, United Kingdom. The following discussion summarizes our Articles of Association and should be read in conjunction with the Articles of Association, which are filed as an exhibit to this Form 20-F. Our Articles of Association contain, among other things, provisions to the following effect: Directors At every annual general meeting one third of the directors will retire from office but will be eligible for re-election. We calculate the directors' retirement schedules prior to each annual general meeting based on director retirements during the past 12 months and the date each director was last elected. Other than as provided below, a director cannot vote in respect of any arrangement in which he has any material interest other than by virtue of his interest in our securities. A director will not be counted in the quorum at the meeting in relation to the resolution on which he is not permitted to vote. A director can vote on resolutions concerning (i) debt obligations incurred by him for us, (ii) securities offerings in which he is interested as an underwriting participant, (iii) proposals relating to a company in which he is interested provided he beneficially owns less than 1% of such company, (iv) proposals relating to certain retirement benefit plans and certain employee share participation plans and (v) the purchase and maintenance of insurance. A director cannot vote or be counted in the quorum on any resolution regarding his appointment as an office-holder including fixing or varying the terms of his appointment or termination. Remuneration of non-executive directors is determined by the Board as a whole. Remuneration of executive directors is determined by the Remuneration Committee, which is composed solely of independent non-executive directors. Generally, the Board may exercise the power to borrow or raise money as it deems necessary for our purposes, subject to an aggregate limit of the greater of (pound)150 million or a sum equal to three times the adjusted share capital of AMVESCAP PLC as it appears on our latest audited consolidated balance sheets. This limit may be varied by action of our shareholders in general meeting. Although directors may serve on the Board beyond their 70th birthday, any director over the age of 70 years who is seeking re-election will be required to do so on an annual basis. Directors are not required to hold shares of our stock as a qualification for office. 39
Rights attaching to our shares Subject to the provisions of the Companies Act of 1985 (the "U.K. Act"), the Board may determine when to hold the annual general meeting, and may call extraordinary meetings when it thinks appropriate. Extraordinary meetings may also be convened by requisitionists. Unless the Board otherwise determines, a shareholder may not be present or vote at a meeting in respect of his shares, and will not be counted in the quorum for such meeting, if he owes any amount to us for the purchase of his shares. If a shareholder does not comply within the specified time period with a request made by us under section 212 of the U.K. Act to disclose the nature of his interest in our shares, the directors may suspend the shareholder's right to attend meetings or vote his shares. Subject to any special voting rights, and if all shares owned have been fully paid for, every shareholder (or shareholder on a poll) who is present in person or by proxy has one vote for every four Ordinary Shares. On a poll, every shareholder who is present in person or by proxy has one vote for every (pound)1 in the aggregate paid up in respect of the nominal amount of Ordinary Shares. The special voting share, par value 25 pence, that we issued in connection with the issuance of Exchangeable Shares by one of our subsidiaries (the "Special Voting Share"), has one vote in addition to any votes that may be cast by holders of Exchangeable Shares (other than us). On a poll, the holder of the Special Voting Share has one vote for every four Exchangeable Shares that have been voted by holders of such Exchangeable Shares (other than us). A holder of Exchangeable Shares other than us can instruct the holder of the Special Voting Share to appoint that person as proxy to attend meetings on behalf of his own interests in the Exchangeable Shares. The special rights and privileges of shareholders may be changed upon shareholder vote, but will not be affected by the issuance of additional shares of the same class. We may not issue any special voting shares in addition to the Special Voting Share without the approval of the holder of such share. When no Exchangeable Shares are outstanding (other than those held by us) and no Equity Subordinated Debentures are outstanding, the Special Voting Share will automatically be redeemed and cancelled. Otherwise, the Special Voting Share is not subject to redemption by us or by the holder of such share. There are currently no restrictions under our Memorandum and Articles of Association or under English law that limit the rights of non-resident or foreign owners to freely hold, vote and transfer Ordinary Shares in the same manner as U.K. residents or nationals. Dividends and entitlement in the event of liquidation to any surplus The Board may pay shareholders such annual and interim dividends as appear to be justified by our profits. Before recommending dividends, the Board can set aside sums as a reserve for special purposes. The Board can deduct from any dividend payable to any shareholder sums payable by him to us. The dividend payable by us will not bear interest. If dividends remain unclaimed for one year after being declared, we can utilize the dividend money until claimed. All dividends unclaimed for a period of 12 years after having been declared will be forfeited and revert to us. Every dividend shall be paid to shareholders of record on the record date. The Special Voting Share does not carry any right to receive dividends or distributions. On a winding up of our company, the liquidator may, with the approval of the contributories, divide the our assets among the contributories, setting such value as he deems fair on any property to be divided, provided that the holder of the Special Voting Share must receive 25 pence before any distribution is made on the Ordinary Shares. After payment of such amount, the holder of the Special Voting Share is not entitled to participate in any further distribution of our assets. Restrictions on our ability to declare and pay dividends are described in "Item 5. Operating and Financial Review and Prospects," above, and in Note 15 to our Consolidated Financial Statements, below. Material Contracts The contracts described below (not being contracts entered into in the ordinary course of business) have been entered into by us and/or our subsidiaries since January 1, 2001 and, as of the date of this document, contain provisions under which we or one or more of our subsidiaries have an obligation or entitlement which is or may be material to us. This discussion should be read in conjunction with the agreements described below, each of which is filed as an exhibit to this Form 20-F or incorporated herein by reference. (i) Agreements relating to the acquisition of National Asset Management Corporation: (a) Merger Agreement, dated as of February 28, 2001, among National Asset Management Corporation, the Sellers 40
listed therein, the Option Holder listed therein, AMVESCAP and AVZ, Inc. (the "NAM Merger Agreement") - The NAM Merger Agreement specifies the terms of the merger of National Asset Management Corporation into AVZ, Inc., a direct, wholly owned subsidiary of ours. Pursuant to the NAM Merger Agreement, the shareholders of National Asset Management Corporation received an up front payment of $200 million paid in equal amounts of cash and Ordinary Shares valued as provided under the NAM Merger Agreement. The NAM Merger Agreement also provides that the shareholders of National Asset Management Corporation will receive contingent earn out payments of up to $75 million (based on achieving certain compound annual revenue growth rates over the next three years) and retention payments payable over five years totaling $25 million. Pursuant to the NAM Merger Agreement, the vesting of all outstanding options to purchase shares of National Asset Management was accelerated, and the optionholders exercised their options in full prior to the date of closing of the merger transaction and were treated as shareholders of National Asset Management Corporation for purposes of merger consideration. (ii) Agreements relating to the acquisition of Pell Rudman & Co., Inc. and Rothschild/Pell Rudman, Inc.: (a) Stock Purchase Agreement, dated as of April 26, 2001, by and among Old Mutual, PLC, Old Mutual Holdings (U.S.), Inc., United Asset Management Holdings, Inc., AMVESCAP and INVESCO North American Holdings, Inc. (the "Pell Rudman Stock Purchase Agreement") - The Pell Rudman Stock Purchase Agreement specifies the terms pursuant to which INVESCO North American Holdings, Inc., an indirect wholly owned subsidiary of ours, purchased all of the common stock of Pell Rudman & Co., Inc. and Rothschild/Pell Rudman, Inc. on August 2, 2001. On that date, the sellers of the common stock received consideration of (pound)122.8 million. Under the Pell Rudman Stock Purchase Agreement, the sellers will receive additional consideration for the common stock (the "Additional Consideration") no later than sixty days following each of August 2, 2002 and August 2, 2003. The Additional Consideration is determined based on certain revenue and billing metrics calculated as of each of those dates, except that in no event shall the Additional Consideration paid to the sellers exceed (pound)19.0 million. (iii) Agreements relating to our revolving credit facilities: (a) Five Year Credit Agreement, dated as of June 18, 2001, by and between AMVESCAP, the banks, financial institutions and other institutional lenders listed on the signature pages thereof, the co-agents listed on the signature pages thereof, Citibank, N.A., Bank of America, N.A. and HSBC Bank plc, as co-syndication agents for the Lenders (as that term is defined therein), and Bank of America, N.A., as funding agent - The Five Year Credit Agreement sets forth the terms under which the Lenders provide us a revolving credit facility in the initial principal amount of up to $900 million. The credit facility terminates on June 18, 2006, unless that date is extended by agreement of the parties or the credit facility is earlier terminated due to an event of default by us under the Five Year Credit Agreement that remains uncured after the expiration of an applicable cure period, if any. Under the Five Year Credit Agreement, we are required to pay a facility fee to each Lender on the aggregate amount of such Lender's commitment in a percentage per annum ranging from 0.100% to 0.300%, depending upon our financial performance, as well as agents' fees as agreed from time to time. Interest on advances is based on a base rate per annum, computed from time to time, of the greater of Bank of America's prime rate or 0.5% per annum above the Federal Funds Rate, plus a margin for certain eurocurrency rate advances of a percentage per annum ranging from 0.400% to 0.700%, depending upon our financial performance. The Five Year Credit Agreement contains standard terms and conditions for facilities of this type, including making advances contingent on the veracity of representations and warranties made by us and the non-occurrence of events of default under the Five Year Credit Agreement, and requiring us to comply with certain affirmative and negative covenants with respect to, among others, the granting of material liens on our property and the property of our subsidiaries, the making of material loans by us, mergers, consolidations and sales of substantially all of the assets of us or our subsidiaries, payment of dividends and maintenance of financial covenants. Under the Five Year Credit Agreement, advances are contingent on the execution and delivery of a guaranty of our obligations under the Five Year Credit Agreement by certain of our subsidiaries, which guaranty is described below. (b) Guaranty, dated June 18, 2001, made by INVESCO, Inc., INVESCO North American Holdings, Inc., A I M Management Group Inc. and A I M Advisors, Inc. with respect to our obligations under the Five Year Credit Agreement (the "Five Year Guaranty") - The Five Year Guaranty sets forth the terms under which the various subsidiaries of ours named in the Five Year Guaranty agree to unconditionally and irrevocably guarantee the payment, when due, of our obligations under the Five Year Credit Agreement. The Five Year Guaranty contains terms and conditions standard to guaranties of this type. (c) 364-Day Credit Agreement, dated as of June 18, 2001, by and between AMVESCAP, the banks, financial institutions and other institutional lenders listed on the signature pages thereof, the co-agents listed on the 41
signature pages thereof, Citibank, N.A., Bank of America, N.A. and HSBC Bank plc, as co-syndication agents for the Lenders (as that term is defined therein), and Bank of America, N.A., as funding agent - The 364-Day Credit Agreement sets forth the terms under which the Lenders provide us a revolving credit facility in an initial principal amount of up to $200 million. The credit facility terminates on June 17, 2002, unless that date is extended by agreement of the parties or the credit facility is earlier terminated due to an event of default by us under the 364-Day Credit Agreement that remains uncured after the expiration of an applicable cure period, if any. Under the 364-Day Credit Agreement, we are required to pay a facility fee to each Lender on the aggregate amount of such Lender's commitment in a percentage per annum ranging from 0.085% to 0.200%, depending upon our financial performance, as well as agents' fees as agreed from time to time. Interest on advances is based on a base rate per annum, computed from time to time, of the greater of Bank of America's prime rate or 0.5% per annum above the Federal Funds Rate, plus a margin for certain eurocurrency rate advances of a percentage per annum ranging from 0.415% to 0.800%, depending upon our financial performance. The 364-Day Credit Agreement contains standard terms and conditions for facilities of this type that mirror those in the Five Year Credit Agreement. Under the 364-Day Credit Agreement, advances are contingent on the execution and delivery of a guaranty of our obligations under the 364-Day Credit Agreement by certain of our subsidiaries, which guaranty is described below. The 364-Day Credit Agreement was extended for an additional 364 days on June 17, 2003 by agreement of the parties. (d) Guaranty, dated June 18, 2001, made by INVESCO, Inc., INVESCO North American Holdings, Inc., A I M Management Group Inc. and A I M Advisors, Inc. with respect to our obligations under the 364- Day Credit Agreement (the "364-Day Guaranty") - The 364-Day Guaranty sets forth the terms under which the various subsidiaries of ours named in the 364-Day Guaranty agree to unconditionally and irrevocably guarantee the payment, when due, of our obligations under the 364-Day Credit Agreement. The 364-Day Guaranty contains terms and conditions standard to guaranties of this type. (iv) Agreements relating to the issuance of our 5.90% Senior Notes due 2007 (the "2007 Senior Notes"): (a) Indenture, dated as of December 17, 2001, among AMVESCAP PLC, A I M Advisors, Inc., A I M Management Group Inc., INVESCO Institutional (N.A.), Inc. and INVESCO North American Holdings, Inc. and SunTrust Bank. (the "2007 Senior Notes Indenture") - The 2007 Senior Notes Indenture sets forth the terms pursuant to which we created and issued the 2007 Senior Notes, in the aggregate principal amount of $300 million, to the initial purchasers of the 2007 Senior Notes (the "2007 Senior Notes Initial Purchasers"). Interest accrues on the 2007 Senior Notes at the rate of 5.90% per year, which is to be paid on January 15 and July 15 of each year beginning on July 15, 2002, and the 2007 Senior Notes have a maturity date of January 15, 2007. Under the Indenture, we can issue additional notes with the same ranking, interest rate, maturity date, redemption rights and other terms as the 2007 Senior Notes. Pursuant to the 2007 Senior Notes Indenture, A I M Advisors, Inc., A I M Management Group Inc., INVESCO Institutional (N.A.), Inc. and INVESCO North American Holdings, Inc. (the "2007 Senior Notes Guarantors") agree unconditionally and irrevocably to guarantee the payment of principal and interest on the 2007 Senior Notes. The 2007 Senior Notes Indenture provides that we may redeem some or all of the 2007 Senior Notes at any time at a redemption price calculated under the terms of the 2007 Senior Notes Indenture. Under the 2007 Senior Notes Indenture, we may be required to pay additional amounts to the holders of the 2007 Senior Notes if, due to tax law changes or our failure to list or maintain the listing of the 2007 Senior Notes on a stock exchange recognized under the tax laws of the United Kingdom, we are required to withhold or deduct withholding taxes on payments made to the holders of the 2007 Senior Notes, except that, if either of such events occurs, we have certain rights of redemption under the 2007 Senior Notes Indenture. The 2007 Senior Notes Indenture also includes provisions limiting our and the 2007 Senior Notes Guarantors' rights to engage in a merger, consolidation or sale of substantially all of our or their assets and provides us with certain rights of defeasance and covenant defeasance. (b) Registration Rights Agreement, dated as of December 12, 2001, by and between AMVESCAP PLC, A I M Management Group Inc., A I M Advisors, Inc., INVESCO Institutional (N.A.), Inc., INVESCO American Holdings, Inc. and Salomon Smith Barney Inc., for themselves and as representative of the Initial Purchasers (the "2007 Senior Notes Registration Rights Agreement") - The 2007 Senior Notes Registration Rights Agreement requires us to file with the Securities and Exchange Commission, no later than April 15, 2002, a registration statement with respect to a new issue of notes identical in all material respects to the 2007 Senior Notes (the "2007 Exchange Notes"), and use best efforts to cause the registration statement to be declared effective not later than June 15, 2002. Once the registration statement has been declared effective, we are required to give holders of the 2007 Senior Notes who are not our affiliates (or who are otherwise prevented by the Securities Act of 1933 (the "Securities Act") and applicable staff interpretations thereunder from doing so) the opportunity to exchange the 2007 Senior Notes for the 2007 42
Exchange Notes. In certain cases, including a change in the law or applicable interpretations thereof, we will be required, in lieu of filing a registration statement with respect to the 2007 Exchange Notes, to file, and to use best efforts to cause to be declared effective, a shelf registration statement covering resales of the 2007 Senior Notes. We also have agreed to use best efforts to cause such shelf registration to remain effective until the 2007 Senior Notes are available for sale without restrictions imposed by the Securities Act. If we default on our obligations under the 2007 Senior Notes Registration Rights Agreement, following the expiration of any applicable cure period, if any, additional amounts shall accrue daily on the 2007 Senior Notes at the rate of 0.25% per year until the default is cured. The additional amounts will be payable in cash at the time interest payments are made to the holders under the terms of the 2007 Senior Notes Indenture. (c) Guarantee, dated December 17, 2001, made by A I M Management Group Inc., A I M Advisors, Inc., INVESCO Institutional (N.A.), Inc. and INVESCO North American Holdings, Inc. (the "2007 Senior Notes Guarantee") The 2007 Senior Notes Guarantee sets forth the terms under which the parties executing the 2007 Senior Notes Guarantee agree to unconditionally guarantee to the holders of the 2007 Senior Notes the payment of principal and interest on the 2007 Senior Notes when due. (v) Agreements relating to the issuance of our 5.375% Senior Notes due 2013 (the "2013 Senior Notes") (a) Indenture, dated as of February 27, 2003, among AMVESCAP PLC, A I M Advisors, Inc., A I M Management Group Inc., INVESCO Institutional (N.A.), Inc. and INVESCO North American Holdings, Inc. and SunTrust Bank. (the "2013 Senior Notes Indenture") - The 2013 Senior Notes Indenture sets forth the terms pursuant to which we created and issued the 2013 Senior Notes, in the aggregate principal amount of $350 million, to the initial purchasers of the 2013 Senior Notes (the "2013 Senior Notes Initial Purchasers"). Interest accrues on the 2013 Senior Notes at the rate of 5.375% per year, which is to be paid on February 27 and August 27 of each year beginning on August 27, 2003, and the 2013 Senior Notes have a maturity date of February 27, 2013. Under the 2013 Senior Notes Indenture, we can issue additional notes with the same ranking, interest rate, maturity date, redemption rights and other terms as the 2013 Senior Notes. Pursuant to the 2013 Senior Notes Indenture, A I M Advisors, Inc., A I M Management Group Inc., INVESCO Institutional (N.A.), Inc. and INVESCO North American Holdings, Inc. (the "2013 Senior Notes Guarantors") agree unconditionally and irrevocably to guarantee the payment of principal and interest on the 2013 Senior Notes. The 2013 Senior Notes Indenture provides that we may redeem some or all of the 2013 Senior Notes at any time at a redemption price calculated under the terms of the 2013 Senior Notes Indenture. Under the 2013 Senior Notes Indenture, we may be required to pay additional amounts to the holders of the 2013 Senior Notes if, due to tax law changes or our failure to list or maintain the listing of the 2013 Senior Notes on a stock exchange recognized under the tax laws of the United Kingdom, we are required to withhold or deduct withholding taxes on payments made to the holders of the 2013 Senior Notes, except that, if either of such events occurs, we have certain rights of redemption under the 2013 Senior Notes Indenture. The 2013 Senior Notes Indenture also includes provisions limiting our and the 2013 Senior Notes Guarantors' rights to engage in a merger, consolidation or sale of substantially all of our or their assets and provides us with certain rights of defeasance and covenant defeasance. (b) Registration Rights Agreement, dated as of February 27, 2003, by and between AMVESCAP PLC, A I M Management Group Inc., A I M Advisors, Inc., INVESCO Institutional (N.A.), Inc., INVESCO American Holdings, Inc. and Salomon Smith Barney Inc., for themselves and as representative of the Initial Purchasers (the "2013 Senior Notes Registration Rights Agreement") - The 2013 Senior Notes Registration Rights Agreement requires us to file with the Securities and Exchange Commission, no later than May 28, 2003, a registration statement with respect to a new issue of notes identical in all material respects to the 2013 Senior Notes (the "2013 Exchange Notes"), and use best efforts to cause the registration statement to be declared effective not later than July 27, 2003. Once the registration statement has been declared effective, we are required to give holders of the 2013 Senior Notes who are not our affiliates (or who are otherwise prevented by the Securities Act of 1933 (the "Securities Act") and applicable staff interpretations thereunder from doing so) the opportunity to exchange the 2013 Senior Notes for the 2013 Exchange Notes. In certain cases, including a change in the law or applicable interpretations thereof, we will be required, in lieu of filing a registration statement with respect to the 2013 Exchange Notes, to file, and to use best efforts to cause to be declared effective, a shelf registration statement covering resales of the 2013 Senior Notes. We also have agreed to use best efforts to cause such shelf registration to remain effective until the 2013 Senior Notes are available for sale without restrictions imposed by the Securities Act. If we default on our obligations under the 2013 Senior Notes Registration Rights Agreement, following the expiration of any applicable cure period, if any, additional amounts shall accrue daily on the 2013 Senior Notes at the rate of 0.25% per year until the default is cured. The additional amounts will be payable in cash at the time interest payments are made to the holders under the terms of the 2013 Senior Notes Indenture. 43
(c) Guarantee, dated February 27, 2003, made by A I M Management Group Inc., A I M Advisors, Inc., INVESCO Institutional (N.A.), Inc. and INVESCO North American Holdings, Inc. (the "2013 Senior Notes Guarantee") The 2013 Senior Notes Guarantee sets forth the terms under which the parties executing the 2013 Senior Notes Guarantee agree to unconditionally guarantee to the holders of the 2013 Senior Notes the payment of principal and interest on the 2013 Senior Notes when due. Exchange Controls There are currently no U.K. or U.S. foreign exchange control restrictions on the import or export of capital, on the payment of dividends or other payments to holders of Ordinary Shares or on the conduct of our operations. Taxation This section summarizes the principal U.S. and U.K. tax consequences to U.S. Holders (defined below) that own our Ordinary Shares or American Depositary Shares. Except where noted otherwise in this section, tax consequences apply equally to U.S. Holders that own Ordinary Shares and U.S. Holders that own American Depositary Shares. "U.S. Holders" is used in this section to refer to (i) U.S. citizens, (ii) U.S. residents, (iii) U.S. corporations, (iv) U.S. partnerships and (v) U.S. citizens that are resident outside the U.S. and the U.K. and are subject to U.S. taxation on worldwide income regardless of its source. "U.S. Holders" does not include (i) U.S. citizens that are resident or ordinarily resident in the U.K., (ii) U.S. citizens or residents that have a permanent establishment or fixed base of business in the U.K. or (iii) U.S. corporations that hold 10% or more of our voting stock. The Convention Between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains, as in effect on the date hereof, is referred to in this Form 20-F as the "U.S./U.K. Income Tax Treaty." The Convention Between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Estates of Deceased Persons and on Gifts, as in effect on the date hereof, is referred to in this Form 20-F as the "U.S./U.K. Estate Tax Treaty." U.S. Holders who own our Ordinary Shares or American Depositary Shares generally receive the same U.S. tax treatment as if they owned shares of a U.S. company. The following chart summarizes the major differences between the tax treatment for a U.S. Holder that owns shares of a U.S. company and a U.S. Holder that owns shares of a U.K. company: <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------------ Transaction U.S. Company U.K. Company - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> Purchase of shares No U.S. tax ramifications No U.S. or U.K. tax ramifications; U.K. stamp duty or stamp duty reserve tax may be applicable(1). - ------------------------------------------------------------------------------------------------------------------------------------ Ownership of shares Entire dividend taxable in U.S.; no No U.K. withholding tax on dividends received(3); (dividends) withholding tax on dividends received(2) dividend received plus tax credit is taxable in U.S.(2)(3); U.S.foreign tax credit may be claimed(4). - ------------------------------------------------------------------------------------------------------------------------------------ Disposition of shares Gain on sale of shares is taxable in Gain on sale of shares is taxable in U.S.(5); U.S. rules U.S.(5); U.S. rules would treat gain as short- or long-term depending on holding period; no U.K. capital in nature; capital gain is either tax to a U.S. Holder(5); U.K. stamp duty or stamp duty short- or long-term depending on holding reserve tax may be applicable(1). period - ------------------------------------------------------------------------------------------------------------------------------------ Other transfers U.S. estate and gift rules apply U.K. inheritance tax would not apply to individuals that (estate or gift) are domiciled in the U.S. or are not considered to be a U.K. national(both determinations made under the U.S./U.K. Estate Tax Treaty)(6); U.S. estate and gift rules apply; treaty provisions provide for a tax credit if U.S. Holder is subject to tax in U.S. and U.K.(6); U.K. stamp duty or stamp duty reserve tax may be applicable(1). - ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (1) If an owner of Ordinary Shares transfers his shares to another person through the use of a transfer document (i.e., a bill of sale) executed in or brought to the U.K., the purchaser usually pays the stamp duty at a rate of 0.5%. When Ordinary Shares are transferred without the use of a transfer document, stamp duty does not apply. Instead, the purchaser normally pays Stamp Duty Reserve Tax ("SDRT") at a rate of 0.5% of the purchase price. If stamp duty is charged on the transfer, SDRT may be refunded. 44
If Ordinary Shares are transferred to the Depositary under the Amended and Restated Deposit Agreement, dated as of November 8, 2000, among us, the Depositary, and the holders of American Depositary Receipts issued pursuant to such agreement (the "Depositary Agreement"), the Depositary will charge the U.S. Holder who purchases the American Depositary Receipts representing those shares for the stamp duty or SDRT owed at a rate of 1.5%. No SDRT will be payable on an agreement to transfer American Depositary Receipts, nor will U.K. stamp duty be payable on transfer of the American Depositary Receipts, provided that the instrument of transfer is executed outside the U.K. and subsequently remains at all times outside the U.K. If the Depositary transfers the underlying Ordinary Shares to a U.S. Holder who owned American Depositary Shares representing such Ordinary Shares, such U.S. Holder will pay duty at a rate of (pound)5 per transfer. If the Depositary transfers the underlying Ordinary Shares to a purchaser from a U.S. Holder who owned American Depositary Shares representing such Ordinary Shares, such purchaser will pay duty at a rate of 0.5% of the purchase price. (2) A distribution is a dividend for U.S. income tax purposes if it is paid out of either current or accumulated earnings and profits of a company (as determined under U.S. federal income tax rules). These rules would apply to a U.S. Holder that receives a distribution from either a U.S. company or a U.K. company. The U.K. does not have a withholding tax in respect of dividends. (3) If a claim for credit under the U.S./U.K. Income Tax Treaty is made, the aggregate of the dividend and the accompanying tax credit shall be treated as income for U.S. purposes. If no claim for credit is made, only the dividend amount is treated as income for U.S. purposes, and as a result no credit may be taken. (4) U.S. Holders may reduce their U.S. tax liability by making a claim under the U.S./U.K. Income Tax Treaty for a foreign (non-U.S.) tax credit for the accompanying tax credit amount. The procedures for claiming a credit are outlined in Revenue Procedure 2000-13, 2000-6 I.R.B. 515. A U.S. Holder's ability to claim a foreign tax credit may be limited by his particular situation. (5) The U.S./U.K. Income Tax Treaty states that capital gains arising from the disposition of Ordinary Shares and American Depositary Shares are taxed in accordance with the provisions of domestic law. Under both U.S. and U.K. domestic law, capital gains are sourced to the seller's country of residence. (6) The U.S./U.K. Estate Tax Treaty generally provides for the tax paid in the U.K. to be credited against tax paid in the U.S. or for tax paid in the U.S. to be credited against tax payable in the U.K. based on priority rules set out in that Treaty. The above discussion is based on current U.S. and U.K. laws and current interpretations of these laws in effect as of the date of filing of this Annual Report on Form 20-F. The laws and/or the interpretation of these laws are subject to change and any changes may be made retroactively to include transactions that occurred in an earlier year. On July 24, 2001, a new treaty was signed between the U.S. and the U.K. (the "New U.S./U.K. Income Tax Treaty") that was intended to replace the U.S./U.K. Income Tax Treaty. The New U.S./U.K. Income Tax Treaty has been ratified by the legislatures of the U.S. and the U.K.; however, as of the date of this Annual Report on Form 20-F, the New U.S./U.K. Income Tax Treaty has not entered into force because there has not been a formal exchange of instruments of ratification by the U.S. and the U.K. It is not anticipated that the New U.S./U.K. Income Tax Treaty will alter the U.S. and U.K. tax consequences to U.S. Holders described above. In addition, the above discussion relies on representations of the Depositary and assumes that the terms and conditions of the Deposit Agreement will be followed. THIS SUMMARY DOES NOT ADDRESS THE LAWS OF ANY STATE OR LOCALITY OR ANY GOVERNMENT (OTHER THAN THE U.K. AND U.S.). FURTHERMORE, THIS SUMMARY DOES NOT ADDRESS THE TAX CONSEQUENCES TO ANY TAXPAYERS THAT ARE NOT U.S. HOLDERS (AS DEFINED ABOVE). THE INFORMATION PROVIDED ABOVE IS INTENDED TO BE A GENERAL DISCUSSION AND SHOULD NOT BE CONSIDERED TO BE DIRECTED TO ANY PARTICULAR SHAREHOLDER. SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE U.K. AND U.S. FEDERAL, STATE AND LOCAL AND ANY OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ORDINARY SHARES OR AMERICAN DEPOSITARY SHARES WITH PARTICULAR REFERENCE TO THEIR SPECIFIC CIRCUMSTANCES. 45
Item 11. Quantitative and Qualitative Disclosures About Market Risk We do not hedge, through the use of derivative or other financial instruments, the translation of our profits from overseas subsidiaries or other interest rate or foreign exchange exposures. Therefore, significant changes in exchange rates or interest rates can materially affect our results of operations, particularly since a majority of our business and debt is denominated in U.S. dollars. We hold or issue financial instruments primarily to finance our operations but also for client trading purposes in a limited number of subsidiary operations. The main risks arising from our processing of customer transactions primarily arise as a result of our holding securities in our own investment vehicles to facilitate their orderly management. The risks associated with these securities are interest rate risk, foreign currency risk and counterparty risk. These risks are managed in accordance with limits established by our management and applicable regulations. Trading in financial instruments for customer related transactions only occurs in our German and Austrian subsidiaries, which conduct treasury operations for their clients. This activity involves both the acceptance and placement of client deposits and loans and the execution of clients' foreign currency and interest rate derivative contracts. Interest rate, liquidity and currency risks arising from these transactions are actively managed to minimize any residual exposure to us. At December 31, 2002, 81% of our borrowings had an interest rate that was fixed for an average period of 2.2 years. The remainder of our borrowings had a floating rate. See Note 22 to our Consolidated Financial Statements for quantitative disclosures about market risk. Item 12. Description of Securities Other than Equity Securities Not applicable. PART II Item 13. Defaults, Dividend Arrearages and Delinquencies We have not had any material defaults in the payment of amounts owed or any other material defaults relating to our indebtedness, we are not delinquent in the payment of any dividends, and we have not experienced any other material delinquencies. Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds No material modifications to the rights of security holders have occurred. Item 15. Controls and Procedures As of a date within 90 days prior to the filing date of this Form 20-F, our Executive Chairman and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-14(c) under the Exchange Act). Based on that evaluation, they have concluded that, as of the evaluation date, our disclosure controls and procedures are reasonably designed to alert them on a timely basis to material information relating to us (including our consolidated subsidiaries) required to be included in our reports filed or submitted under the Exchange Act. Since the evaluation date referenced above, there have been no significant changes in our internal controls or in other factors that could significantly affect these controls. Item 16. [Reserved] Not applicable. PART III Item 17. Financial Statements Our Consolidated Financial Statements are set forth beginning at page F-1 of this Form 20-F. 46
Item 18. Financial Statements Not applicable. Item 19. Exhibits Exhibits: - --------- 1.1 Memorandum of Association of AMVESCAP, incorporating amendments up to and including July 20, 2000, incorporated by reference to exhibit 1.1 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2001, filed with the Securities and Exchange Commission on April 4, 2002. 1.2 Articles of Association of AMVESCAP, adopted on July 20, 2000, as amended on April 26, 2002, incorporated by reference to exhibit 4.2 to AMVESCAP's Registration Statement on Form S-8 (file no. 333-103609), filed with the Securities and Exchange Commission on March 5, 2003. 2.1 Form of Certificate for Ordinary Shares of AMVESCAP, incorporated by reference to exhibit 4.5 to AMVESCAP's Registration Statement on Form F-3/F-1 (file nos. 33-5990 and 33-5990-01), filed with the Securities and Exchange Commission on November 21, 1996. 2.2 Form of Certificate for American Depositary Shares, representing two Ordinary Shares, incorporated by reference to exhibit 2.2 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2000, filed with the Securities and Exchange Commission on May 17, 2001. 2.3 Amended and Restated Deposit Agreement, dated as of November 8, 2000, among AMVESCAP, The Bank of New York and the holders of American Depositary Receipts issued thereunder, incorporated by reference to exhibit 2.3 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2000, filed with the Securities and Exchange Commission on May 17, 2001. 2.4 Indenture, dated as of December 16, 1996, among LGT Asset Management, Inc., LGT Bank in Liechtenstein Aktiengesellschaft, and Citibank, N.A., incorporated by reference to exhibit 3.28 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 1998, filed with the Securities and Exchange Commission on March 30, 1999. 2.5 First Supplemental Indenture, dated as of December 31, 1999, among INVESCO, Inc., LGT Bank in Lichetenstein Aktiengesellschaft, and Citibank, N.A., incorporated by reference to exhibit 4.19 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2000, filed with the Securities and Exchange Commission on May 17, 2001. 2.6 Loan Agreement, dated December 14, 1995, between LGT BIL Ltd. and Bank in Liechtenstein Aktiengesellschaft, incorporated by reference to exhibit 3.29 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 1998, filed with the Securities and Exchange Commission on March 30, 1999. 2.7 Indenture, dated as of May 7, 1998, for AMVESCAP's Senior Notes due 2003 and 2005, among AMVESCAP, A I M Management Group, Inc., A I M Advisors, Inc., INVESCO, Inc., INVESCO North American Holdings, Inc. and INVESCO Capital Management, Inc., as initial securities guarantors, and SunTrust Bank, Atlanta, as trustee, incorporated by reference to exhibit 4.1 to AMVESCAP's Registration Statement on Form F-4 (file no. 333-8954) filed with the Securities and Exchange Commission on June 15, 1998. 2.8 Indenture, dated August 1, 2000, among AMVESCAP Inc., AMVESCAP and CIBC Mellon Trust Company, incorporated by reference to exhibit 4.26 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2000, filed with the Securities and Exchange Commission on May 17, 2001. 2.9 Five Year Credit Agreement, dated as of June 18, 2001, by and between AMVESCAP, the banks, financial institutions and other institutional lenders listed on the signature pages thereof, the co-agents listed on the signature pages thereof, Citibank, N.A., Bank of America, N.A. and HSBC Bank plc, as co-syndication agents for the Lenders (as that term is defined therein), and Bank of America, N.A., as funding agent, incorporated by reference to exhibit 2.10 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2001, filed with the Securities and Exchange Commission on April 4, 2002. 47
2.10 Instrument, dated August 31, 2001, constituting (pound)4,500,000 Five Per Cent Fixed Rate Unsecured Loan Notes, incorporated by reference to exhibit 2.11 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2001, filed with the Securities and Exchange Commission on April 4, 2002. 2.11 Indenture, dated as of December 17, 2001, for AMVESCAP's 5.90% Senior Notes Due 2007 among AMVESCAP PLC, A I M Advisors, Inc., A I M Management Group Inc., INVESCO Institutional (N.A.), Inc. and INVESCO North American Holdings, Inc. and SunTrust Bank, incorporated by reference to exhibit 2.12 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2001, filed with the Securities and Exchange Commission on April 4, 2002. 2.12 Indenture, dated as of February 27, 2003, among AMVESCAP PLC, A I M Advisors, Inc., A I M Management Group Inc., INVESCO Institutional (N.A.), Inc. and INVESCO North American Holdings, Inc. and SunTrust Bank. 4.1 Registration Rights Agreement, dated as of February 28, 1997, by and among AMVESCAP and the former shareholders of A I M Management Group, Inc. named therein, incorporated by reference to exhibit 2.11 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 1996, filed with the Securities and Exchange Commission on May 6, 1997. 4.2 Indemnification Agreement, dated as of February 28, 1997, by and among AMVESCAP, Charles T. Bauer, Robert H. Graham, Gary T. Crum and certain related persons named therein, incorporated by reference to exhibit 2.6 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 1996, filed with the Securities and Exchange Commission on May 6, 1997. 4.3 Second Amended and Restated Purchase and Sale Agreement dated as of December 14, 2000, among A I M Management Group Inc., Citibank, N.A. and Citicorp North America, Inc., incorporated by reference to exhibit 4.17 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2000, filed with the Securities and Exchange Commission on May 17, 2001. 4.4 Amendment No. 4 to Facility Documents dated as of August 24, 2001 among A I M Management Group Inc., A I M Advisors, Inc., A I M Distributors, Inc., Citibank, N.A., Bankers Trust Company and Citicorp North America, Inc., incorporated by reference to exhibit 4.4 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2001, filed with the Securities and Exchange Commission on April 4, 2002. 4.5 AMVESCAP Deferred Fees Share Plan, incorporated by reference to exhibit 4.22 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2000, filed with the Securities and Exchange Commission on May 17, 2001. 4.6 Amended and Restated Merger Agreement, dated as of May 9, 2000, between AMVESCAP and Trimark, incorporated by reference to exhibit 4.23 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2000, filed with the Securities and Exchange Commission on May 17, 2001. 4.7 Support Agreement, dated as of August 1, 2000, between AMVESCAP, AVZ Callco Inc., and AMVESCAP Inc., incorporated by reference to exhibit 4.24 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2000, filed with the Securities and Exchange Commission on May 17, 2001. 4.8 Voting and Exchange Trust Agreement, dated as of August 1, 2000, between AMVESCAP, AMVESCAP Inc. and CIBC Mellon Trust Company, incorporated by reference to exhibit 4.25 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2000, filed with the Securities and Exchange Commission on May 17, 2001. 4.9 Final Offer Document, dated October 19, 2000, for Cash and Share Offer by Schroder Salomon Smith Barney on behalf of AMVESCAP PLC to acquire all of the issued share capital of Perpetual plc, incorporated by reference to AMVESCAP's Report of Foreign Private Issuer filed on Form 6-K, filed with the Securities and Exchange Commission on November 6, 2000. 4.10 Merger Agreement, dated as of February 28, 2001, among National Asset Management Corporation, the Sellers listed therein, the Option Holder listed therein, AMVESCAP and AVZ, Inc., incorporated by reference to exhibit 4.28 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2000, filed with the Securities and Exchange Commission on May 17, 2001. 48
4.11 Stock Purchase Agreement, dated as of April 26, 2001, by and among Old Mutual, PLC, Old Mutual Holdings (U.S.), Inc., United Asset Management Holdings, Inc., AMVESCAP and INVESCO North American Holdings, Inc, incorporated by reference to exhibit 4.11 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2001, filed with the Securities and Exchange Commission on April 4, 2002. 4.12 Amendment No. 1 to Stock Purchase Agreement, dated as of August 2, 2001, by and among Old Mutual, PLC, Old Mutual Holdings (U.S.), Inc., United Asset Management Holdings, Inc., AMVESCAP and INVESCO North American Holdings, Inc., incorporated by reference to exhibit 4.12 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2001, filed with the Securities and Exchange Commission on April 4, 2002 4.13 Guaranty, dated June 18, 2001, made by INVESCO, Inc., INVESCO North American Holdings, Inc., A I M Management Group Inc. and A I M Advisors, Inc. with respect to AMVESCAP's obligations under the Five Year Credit Agreement, incorporated by reference to exhibit 4.13 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2001, filed with the Securities and Exchange Commission on April 4, 2002. 4.14 364-Day Credit Agreement, dated as of June 18, 2001, by and between AMVESCAP, the banks, financial institutions and other institutional lenders listed on the signature pages thereof, the co-agents listed on the signature pages thereof, Citibank, N.A., Bank of America, N.A. and HSBC Bank plc, as co-syndication agents for the Lenders (as that term is defined therein), and Bank of America, N.A., as funding agent, incorporated by reference to exhibit 4.14 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2001, filed with the Securities and Exchange Commission on April 4, 2002. 4.15 Guaranty, dated June 18, 2001, made by INVESCO, Inc., INVESCO North American Holdings, Inc., A I M Management Group Inc. and A I M Advisors, Inc. with respect to AMVESCAP's obligations under the 364-Day Credit Agreement, incorporated by reference to exhibit 4.15 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2001, filed with the Securities and Exchange Commission on April 4, 2002. 4.16 Registration Rights Agreement, dated as of December 12, 2001, by and between AMVESCAP PLC, A I M Management Group Inc., A I M Advisors, Inc., INVESCO Institutional (N.A.), Inc., INVESCO North American Holdings, Inc. and Salomon Smith Barney Inc., for themselves and as representative for the Initial Purchasers, incorporated by reference to exhibit 4.16 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2001, filed with the Securities and Exchange Commission on April 4, 2002. 4.17 Guarantee, dated December 17, 2001, made by A I M Management Group Inc., A I M Advisors, Inc., INVESCO Institutional (N.A.), Inc. and INVESCO North American Holdings, Inc., incorporated by reference to exhibit 4.17 to AMVESCAP's Annual Report on Form 20-F for the year ended December 31, 2001, filed with the Securities and Exchange Commission on April 4, 2002. 4.18 AMVESCAP Global Stock Plan, Amended and Restated Effective as of December 1, 2002. 4.19 Registration Rights Agreement, dated as of February 27, 2003, by and between AMVESCAP PLC, A I M Management Group Inc., A I M Advisors, Inc., INVESCO Institutional (N.A.), Inc., INVESCO American Holdings, Inc. and Salomon Smith Barney Inc., for themselves and as representative of the Initial Purchasers. 4.20 Guarantee, dated February 27, 2003, made by A I M Management Group Inc., A I M Advisors, Inc., INVESCO Institutional (N.A.), Inc. and INVESCO North American Holdings, Inc. 8 Information on Significant Subsidiaries, incorporated by reference to the chart and description of business in Item 4 of this Annual Report on Form 20-F. 10.1 Consent of Ernst & Young LLP. 10.2 Certification of Charles W. Brady Pursuant to 18 U.S.C. 1850, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 10.3 Certification of Robert F. McCullough Pursuant to 18 U.S.C. 1850, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 49
SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf on March 27, 2003. AMVESCAP PLC /s/ Robert F. McCullough ---------------------------------- Robert F. McCullough Chief Financial Officer 50
CERTIFICATION I, Charles W. Brady, the Executive Chairman of AMVESCAP PLC, certify that: 1. I have reviewed this annual report on Form 20-F of AMVESCAP PLC; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c. presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 27, 2003 /s/ Charles W. Brady - -------------------------------- Charles W. Brady Executive Chairman 51
CERTIFICATION I, Robert F. McCullough, the Chief Financial Officer of AMVESCAP PLC, certify that: 1. I have reviewed this annual report on Form 20-F of AMVESCAP PLC; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c. presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 27, 2003 /s/ Robert F. McCullough - -------------------------------- Robert F. McCullough Chief Financial Officer 52
AMVESCAP PLC AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS <TABLE> <CAPTION> <S> <C> Page ---- Report of Independent Auditors........................................................................................... F-2 Report of Prior Period Independent Auditors.............................................................................. F-3 Consolidated Statements of Income for the Years Ended December 31, 2002, 2001 and 2000................................... F-4 Consolidated Statements of Total Recognized Gains and Losses for the Years Ended December 31, 2002, 2001 and 2000........ F-4 Consolidated Balance Sheets as of December 31, 2002 and 2001............................................................. F-5 Consolidated Shareholders' Funds for the Years Ended December 31, 2002, 2001 and 2000.................................... F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2001 and 2000............................... F-7 Notes to the Consolidated Financial Statements........................................................................... F-8 </TABLE> F-1
REPORT OF INDEPENDENT AUDITORS To The Directors of AMVESCAP PLC: We have audited the accompanying consolidated balance sheet of AMVESCAP PLC as of December 31, 2002 and the related consolidated statements of income, total recognized gains and losses, shareholders' funds, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The consolidated financial statements of AMVESCAP PLC for the years ended December 31, 2001 and 2000, were audited by other auditors whose report dated March 8, 2002, expressed an unqualified opinion on those financial statements. We conducted our audit in accordance with United Kingdom auditing standards and auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of AMVESCAP PLC at December 31, 2002 and the consolidated results of its operations and its consolidated cash flows for the year then ended in conformity with accounting principles generally accepted in the United Kingdom, which differ in certain respects from those generally accepted in the United States (see Note 23 of Notes to the Consolidated Financial Statements). As discussed above, the financial statements of AMVESCAP PLC as of December 31, 2001 and for each of the two years in the period then ended were audited by other auditors who have ceased operations. As described in Note 1, amounts relating to the banking and insurance activities have been reclassified in the consolidated balance sheet in fixed assets, current assets and creditors and in the consolidated cash flows statements. In addition, as described in Note 1, amounts relating to share premium and other reserves have been reclassified in the consolidated balance sheet and consolidated shareholders' funds to conform to section 131 of the Companies Act 1985 of Great Britain. Our procedures included testing the mathematical accuracy of the reclassifications. In our opinion, such adjustments are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2001 and 2000 financial statements of the Company other than with respect to such adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2001 and 2000 financial statements taken as a whole. /s/ Ernst & Young LLP London, England February 28, 2003 F-2
REPORT OF INDEPENDENT AUDITORS: ARTHUR ANDERSEN The following report was issued by Arthur Andersen on March 8, 2002 to AMVESCAP PLC and is included in our Annual Report on Form 20-F in respect of the years ended December 31, 2001 and 2000, which was filed with the US Securities and Exchange Commission on April 4, 2002. Arthur Andersen ceased trading on August 31, 2002 and hence it is not possible to obtain a re-signed opinion. To AMVESCAP PLC: We have audited the accompanying consolidated balance sheets of AMVESCAP PLC and subsidiaries as of December 31, 2001 and 2000 and the related consolidated statements of profit and loss, total recognized gains and losses, shareholders' funds, and cash flows for each of the three years in the period ended December 31, 2001. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of AMVESCAP PLC and subsidiaries as of December 31, 2001 and 2000 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United Kingdom. Certain accounting practices of the Company used in preparing the accompanying consolidated financial statements conform with generally accepted accounting principles in the United Kingdom but vary in certain respects from the accounting principles generally accepted in the United States. A description of these differences and the adjustments required to conform consolidated shareholders' equity as of December 31, 2001 and 2000 and the consolidated net income for each of the three years in the period ended December 31, 2001 to accounting principles generally accepted in the United States are set forth in Note 23 to the consolidated financial statements. /s/ Arthur Andersen Chartered Accountants and Registered Auditors 180 Strand, London, WC2R 1BL March 8, 2002 F-3
CONSOLIDATED STATEMENTS OF INCOME for the year ended December 31 <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------- 2002 2001 2000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Revenues 1,345,263 1,619,847 1,628,662 Expenses: Operating (978,338) (1,096,487) (1,039,751) Exceptional (note 2) (69,248) (59,997) (51,804) Goodwill amortization (149,415) (56,417) (137,477) - ------------------------------------------------------------------------------------------------------------------------------- Operating profit 148,262 325,886 480,690 Investment income (note 4) 6,561 10,433 17,147 Interest expense (note 5) (52,558) (55,881) (51,604) - ------------------------------------------------------------------------------------------------------------------------------- Profit before taxation 102,265 280,438 446,233 Taxation (note 7) (85,372) (125,635) (145,505) - ------------------------------------------------------------------------------------------------------------------------------- Profit for the financial year 16,893 154,803 300,728 Dividends (note 8) (93,479) (89,260) (75,827) - ------------------------------------------------------------------------------------------------------------------------------- Retained profit for the year (76,586) 65,543 224,901 - ------------------------------------------------------------------------------------------------------------------------------- Earnings per share before goodwill amortization and exceptional items (note 9): -basic 27.5p 41.2p 57.5p -diluted 27.2p 40.0p 54.7p Earnings per share: -basic 2.1p 19.2p 44.4p -diluted 2.1p 18.6p 42.3p =============================================================================================================================== </TABLE> CONSOLIDATED STATEMENTS OF TOTAL RECOGNIZED GAINS AND LOSSES for the year ended December 31 <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------- 2002 2001 2000 (pound)'000 (pound)'000 (pound)'000 - ----------------------------------------------------------------------- ------------------- ----------------- ------------------ <S> <C> <C> <C> Profit for the financial year 16,893 154,803 300,728 Currency translation differences on investments in overseas subsidiaries 55,861 (12,941) (45,979) - ------------------------------------------------------------------------------------------------------------------------------- Total recognized gains and losses for the year 72,754 141,862 254,749 Prior year FRS 19 adjustment -- 26,921 -- - ------------------------------------------------------------------------------------------------------------------------------- Total recognized gains and losses 72,754 168,783 254,749 =============================================================================================================================== </TABLE> The accompanying notes form part of these financial statements. F-4
CONSOLIDATED BALANCE SHEETS December 31 <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------------ 2002 2001 (pound)'000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Fixed assets Goodwill (note 10) 2,542,306 2,696,045 Investments (note 11) 248,408 224,282 Tangible assets (note 12) 197,060 213,579 - ------------------------------------------------------------------------------------------------------------------------------------ 2,987,774 3,133,906 Current assets Debtors (note 13) 725,547 882,516 Investments (note 11) 69,195 81,495 Cash 355,111 350,978 - ------------------------------------------------------------------------------------------------------------------------------------ 1,149,853 1,314,989 Current liabilities (note 14) Current maturities of long-term debt (222,089) (125,828) Creditors (917,216) (1,025,344) - ------------------------------------------------------------------------------------------------------------------------------------ (1,139,305) (1,151,172) Net current assets 10,548 163,817 Total assets less current liabilities 2,998,322 3,297,723 Long-term debt (note 15) (595,600) (844,285) Provisions for liabilities and charges (note 16) (119,234) (171,974) - ------------------------------------------------------------------------------------------------------------------------------------ Net assets 2,283,488 2,281,464 ==================================================================================================================================== Capital and reserves Called up share capital (note 20) 198,614 196,037 Share premium account 619,250 552,524 Exchangeable shares (note 20) 383,105 433,597 Profit and loss account 609,298 685,884 Other reserves 473,221 413,422 - ------------------------------------------------------------------------------------------------------------------------------------ Shareholders' funds, equity interests 2,283,488 2,281,464 ==================================================================================================================================== </TABLE> The accompanying notes form part of these financial statements. F-5
CONSOLIDATED SHAREHOLDERS' FUNDS Movements in shareholders' funds comprise: <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------------ Called up Profit share Exchangeable Share Other and loss capital shares premium reserves account Total (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> January 1, 2000 168,617 -- 215,664 (328,337) 395,440 451,384 Profit for the financial year -- -- -- -- 300,728 300,728 Dividends -- -- -- -- (75,827) (75,827) Exercise of options 1,940 -- 26,197 (11,673) -- 16,464 Trimark acquisition 1,266 232,034 -- 53,700 -- 287,000 Conversion of exchangeable shares into ordinary shares 5,919 (260,308) 254,389 -- -- -- Conversion of Equity Subordinated Debentures -- 505,427 -- -- -- 505,427 Perpetual acquisition 15,017 -- -- 675,787 -- 690,804 Currency translation differences on investments in overseas subsidiaries -- -- -- (45,979) -- (45,979) - ------------------------------------------------------------------------------------------------------------------------------------ December 31, 2000 192,759 477,153 496,250 343,498 620,341 2,130,001 Profit for the financial year -- -- -- -- 154,803 154,803 Dividends -- -- -- -- (89,260) (89,260) Exercise of options 851 -- 12,964 (2,160) -- 11,655 NAM acquisition 1,396 -- -- 74,672 -- 76,068 Conversion of exchangeable shares into ordinary shares 1,031 (44,341) 43,310 -- -- -- Conversion of Equity Subordinated Debentures -- 785 -- -- -- 785 Adjustment to goodwill -- -- -- 10,353 -- 10,353 Currency translation differences on investments in overseas subsidiaries -- -- -- (12,941) -- (12,941) - ------------------------------------------------------------------------------------------------------------------------------------ December 31, 2001 196,037 433,597 552,524 413,422 685,884 2,281,464 Profit for the financial year -- -- -- -- 16,893 16,893 Dividends -- -- -- -- (93,479) (93,479) Exercise of options 1,297 -- 17,384 (2,820) -- 15,861 Acquisition earn-outs 130 -- -- 6,758 -- 6,888 Conversion of exchangeable shares into ordinary shares 1,150 (50,492) 49,342 -- -- -- Currency translation differences on investments in overseas subsidiaries -- -- -- 55,861 -- 55,861 - ------------------------------------------------------------------------------------------------------------------------------------ December 31, 2002 198,614 383,105 619,250 473,221 609,298 2,283,488 ==================================================================================================================================== </TABLE> The accompanying notes form part of these financial statements. F-6
CONSOLIDATED CASH FLOW STATEMENTS for the year ended December 31 <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------------ 2002 2001 2000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> Net cash inflow from operating activities (note 17) 426,518 543,233 675,825 Returns on investments and servicing of finance Interest and dividends received 7,033 11,996 14,745 Interest paid (48,591) (57,592) (40,859) - ------------------------------------------------------------------------------------------------------------------------------------ (41,558) (45,596) (26,114) Taxation (105,557) (166,573) (115,758) Capital expenditure and financial investment Purchase of tangible fixed assets, net of sales (54,584) (71,542) (61,972) Purchase of fixed asset investments, net (37,322) (8,640) (17,851) - ------------------------------------------------------------------------------------------------------------------------------------ (91,906) (80,182) (79,823) Acquisitions, net of cash, cash equivalents and bank overdraft acquired -- (311,441) (182,595) Dividends paid (93,531) (84,365) (63,558) - ------------------------------------------------------------------------------------------------------------------------------------ Cash inflow/(outflow) before the use of cash equivalents and financing 93,966 (144,924) 207,977 Financing Issues of ordinary share capital 15,861 11,655 16,464 Credit facility, net 57,455 (185,890) 51,401 Issuance of Senior Notes -- 206,939 -- Repayment of loans (127,620) (17,669) (312) - ------------------------------------------------------------------------------------------------------------------------------------ (54,304) 15,035 67,553 Change in cash equivalents (39,579) 96,560 (120,328) - ------------------------------------------------------------------------------------------------------------------------------------ Increase/(decrease) in cash 83 (33,329) 155,202 ==================================================================================================================================== Reconciliation to increase/(decrease) in cash at bank and in hand Increase/(decrease) in cash 83 (33,329) 155,202 Change in bank overdrafts (5,656) 2,040 8,253 Change in cash equivalents 39,579 (96,560) 120,328 Foreign exchange movement on cash and cash equivalents (29,873) (6,532) 11,844 - ------------------------------------------------------------------------------------------------------------------------------------ Increase/(decrease) in cash at bank and in hand 4,133 (134,381) 295,627 ==================================================================================================================================== </TABLE> The accompanying notes form part of these financial statements. F-7
ACCOUNTING POLICIES AND NOTES TO THE FINANCIAL STATEMENTS 1. Accounting Policies (a) Basis of accounting and consolidation The financial statements consolidate the financial statements of AMVESCAP PLC and all of its subsidiaries. The financial statements have been prepared on a historic cost convention as modified to include certain insurance assets at market value. The Companies Act 1985 requirements have been adapted in respect of exchangeable shares. See Note 20. Certain prior year balance sheet accounts have been reclassified to conform to the current year presentation of the Group's banking and insurance subsidiaries. Counsel has advised that the Company is required to follow the provisions of S131 of the Companies Act 1985 to use merger relief in recording the acquisitions completed for shares in prior years. Previously, the Company had followed the established practice that this treatment was not mandatory. Accordingly, the capital and reserves arising on these acquisitions have been restated with the result that (pound)1,067,355,000 has been treated as credited to merger reserve from the time of acquisition of each of these companies rather than being credited to the share premium account. This adjustment has no effect on earnings for any of the years affected by the adjustments. (b) Goodwill The excess of the cost of companies acquired, over the fair value of their net assets is capitalized as an asset and amortized through the profit and loss account over an estimated useful life of 20 years. Prior to 1998, goodwill was charged directly to other reserves. Additional amortization is taken in the year if goodwill is deemed impaired. (c) Revenue Revenue, which is recorded when earned, represents management, distribution, transfer agent, trading and other fees. (d) Deferred Sales Commissions Amounts paid to brokers and dealers for sales of certain mutual funds that have a contingent deferred sales charge are capitalized and amortized over a period not to exceed the redemption period of the related fund. (e) Tangible Fixed Assets and Depreciation Depreciation is provided on fixed assets at rates calculated to write off the cost, less estimated residual value, of each asset evenly over its expected useful life: leasehold improvements over the lease term; computers and other various equipment, between three and seven years. (f) Investments Investments held as fixed assets, including partnership investments, are stated at cost less provisions for any impairment in value. Investments held as current assets are stated at the lower of cost or net realizable value. Gains and losses on investments are recorded within Investment Income in the profit and loss account in the period in which they arise. (g) Leases Rentals under operating leases are charged evenly to the profit and loss account over the lease term. (h) Taxation Corporation tax payable is provided on taxable profits at the current rate. Deferred taxation is provided on timing differences, calculated at the rate at which it is estimated that tax will be payable. Deferred tax assets are recognized when it is deemed more likely than not that there will be taxable profits in the future to offset these amounts. F-8
(i) Foreign Currencies Assets and liabilities of overseas subsidiaries are translated at the rates of exchange ruling at the balance sheet date. Profit and loss account figures are translated at the weighted average rates for the year. Exchange differences arising on the translation of overseas subsidiaries' accounts are taken directly to reserves. Exchange differences on foreign currency borrowings, to the extent that they are used to finance or provide a hedge against Company equity investments in foreign enterprises, are taken directly to reserves. All other translation and transaction exchange differences (which are not material) are taken to the profit and loss account. (j) Pensions For defined contribution schemes, pension contributions payable in respect of the accounting period are charged to the profit and loss account. For defined benefit schemes, which are immaterial, pension contributions are charged systematically to the profit and loss account over the expected service lives of employees. Variations from the regular cost are allocated to the profit and loss account over the average remaining service lives of employees. 2. Exceptional Items The consolidated profit and loss account includes exceptional charges in 2002, 2001, and 2000 as follows: <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------------ 2002 2001 2000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> Acquisitions -- 43,310 43,804 Redundancy and reorganizations 44,544 9,993 8,000 Project costs 12,882 -- -- Leases and other 11,822 6,694 -- - ------------------------------------------------------------------------------------------------------------------------------------ Total exceptional items 69,248 59,997 51,804 - ------------------------------------------------------------------------------------------------------------------------------------ Total exceptional items net of tax 56,416 39,390 32,637 ==================================================================================================================================== </TABLE> The restructuring charges include costs associated with redundancy programs and expenses associated with internal reorganizations. Project costs include charges for systems and other terminated initiatives. The leases and other provisions relate to moves to new office facilities, office closures and the write-off of other fixed assets. In 2001 and 2000, exceptional costs include staff retention payments and expenses associated with combining systems and other business processes related to the reorganization, restructuring, and integration of businesses acquired. 3. Segmental Information Geographical analysis of the Group's business, which is principally investment management, is as follows: <TABLE> <CAPTION> Revenues Profit after exceptional items - ------------------------------------------------------------------------------------------------------------------------------------ 2002 2001 2000 2002 2001 2000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 ----------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> U.K. 203,900 250,962 179,765 (6,973) 60,435 14,541 U.S. 902,928 1,110,751 1,231,407 234,813 338,345 469,759 Canada 151,346 158,018 93,378 79,563 72,184 21,152 Europe/Asia 87,089 100,116 124,112 (9,726) (7,601) 31,655 - ------------------------------------------------------------------------------------------------------------------------------------ 1,345,263 1,619,847 1,628,662 297,677 463,363 537,107 Goodwill amortization (149,415) (137,477) (56,417) Net interest expense (45,997) (45,448) (34,457) - ------------------------------------------------------------------------------------------------------------------------------------ Profit before taxation 102,265 280,438 446,233 ==================================================================================================================================== </TABLE> F-9
<TABLE> <CAPTION> Net assets - ------------------------------------------------------------------------------------------------------------------------------------ 2002 2001 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> U.K. 121,630 101,922 U.S. 202,363 225,586 Canada 12,242 33,844 Europe/Asia 57,423 61,624 - ------------------------------------------------------------------------------------------------------------------------------------ 393,658 422,976 Goodwill 2,542,306 2,696,045 Net debt (652,476) (837,557) - ------------------------------------------------------------------------------------------------------------------------------------ Net assets 2,283,488 2,281,464 ==================================================================================================================================== </TABLE> The U.S. dollar profits have been translated into sterling at an average rate of 1.50 (2001: 1.43, 2000: 1.51). Revenue reflects the geographical segments from which services are provided. Auditor's remuneration was(pound)1,833,000 in 2002 (2001:(pound)1,698,000, 2000: (pound)1,361,000) for audit work and(pound)639,000 in 2002 (2001:(pound)2,281,000, 2000:(pound)1,295,000) for non-audit work. Total operating expenses in 2002 were(pound)1,197,001,000 (2001:(pound)1,293,961,000, 2000:(pound)1,147,972,000). 4. Investment Income <TABLE> <CAPTION> 2002 2001 2000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> Interest receivable 7,549 12,295 15,361 Income/(loss) from listed investments 3,218 (24) 900 (Loss)/income from unlisted investments (4,206) (1,838) 886 - ------------------------------------------------------------------------------------------------------------------------------------ 6,561 10,433 17,147 ==================================================================================================================================== </TABLE> 5. Interest Expense <TABLE> <CAPTION> 2002 2001 2000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> Senior notes 40,086 30,014 27,695 Credit facility 4,286 12,024 14,900 ESDs 3,763 4,002 6,286 Other 4,423 9,841 2,723 - ------------------------------------------------------------------------------------------------------------------------------------ 52,558 55,881 51,604 ==================================================================================================================================== </TABLE> 6. Directors and Employees <TABLE> <CAPTION> 2002 2001 2000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> Wages and salaries 444,153 478,687 452,751 Social security costs 30,310 34,072 29,267 Other pension costs 44,851 45,713 33,696 - ------------------------------------------------------------------------------------------------------------------------------------ 519,314 558,472 515,714 ==================================================================================================================================== </TABLE> The average number of employees of the Company during the year was 8,080 (2001: 8,617). Of these totals, 5,642 (2001: 6,072) were employed in North America and the remainder were employed in Europe and the Pacific. F-10
7. Taxation <TABLE> <CAPTION> 2002 2001 2000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> Current Tax U.K. corporation income tax for period 7,926 58,574 36,864 Double taxation relief (1,372) (33,302) (19,952) - ------------------------------------------------------------------------------------------------------------------------------------ 6,554 25,272 16,912 Foreign income tax for the period 84,959 104,566 141,227 Adjustments in respect of prior periods 2,330 -- 6,183 - ------------------------------------------------------------------------------------------------------------------------------------ 87,289 104,566 147,410 Total current tax 93,843 129,838 164,322 - ------------------------------------------------------------------------------------------------------------------------------------ Deferred Tax Origination and reversal of timing differences (8,471) 38 (18,817) Effect of decreased tax rate on opening liability -- (4,241) -- - ------------------------------------------------------------------------------------------------------------------------------------ Total deferred tax (8,471) (4,203) (18,817) Total tax on profit on ordinary activities 85,372 125,635 145,505 ==================================================================================================================================== </TABLE> <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------------ 2002 2001 2000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> Profit before tax 102,265 280,438 446,233 Tax on Group profit on ordinary activities at standard U.K. corporation tax rate of 30% 30,680 84,132 133,870 Effects of: Non-deductible amortization - U.K. 39,604 48,166 16,102 Foreign exchange gain/(loss) 3,709 1,364 (3,900) Tax on overseas earnings 1,109 (5,419) 9,074 Deferred tax movement 8,471 4,203 6,619 Adjustments in respect of prior periods 2,330 -- 6,183 Exceptional items 7,940 (2,608) (3,626) - ------------------------------------------------------------------------------------------------------------------------------------ Group current tax charge for the period 93,843 129,838 164,322 ==================================================================================================================================== </TABLE> Factors That May Affect Future Tax Charges The Group's overseas tax rates are higher than those in the U.K. primarily because the profits earned in the United States are taxed at a rate of approximately 38%, and the profits earned in Canada are taxed at a rate of 37.5%. The Group expects a reduction in future overseas tax rates following the announcement in 2000 that the rate of tax in Canada will decrease to 30% by 2005. Losses accumulating in several countries have not been recognized for the purposes of deferred tax on the basis that it is currently thought unlikely that they will be utilized within three years. Components of Deferred Tax <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------------ 2002 2001 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> Deferred compensation arrangements 37,525 35,529 Exceptional items 15,468 21,403 Tax losses carried forward 4,632 7,530 Fixed assets depreciation 1,958 4,542 Amortization (4,837) (4,154) Investments 5,362 5,392 Health, benefits, and rent accruals 8,517 5,621 Accrued interest and other 8,828 9,979 - ------------------------------------------------------------------------------------------------------------------------------------ Deferred tax assets - debtors 77,453 85,842 Deferred tax liabilities - provisions (38,438) (54,160) - ------------------------------------------------------------------------------------------------------------------------------------ Net deferred tax 39,015 31,682 ==================================================================================================================================== </TABLE> Movements on net deferred tax compromise a deferred tax benefit of (pound)8,471,000 net of foreign exchange of (pound)1,138,000. F-11
8. Dividends <TABLE> <CAPTION> 2002 2001 2000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> Interim paid, 5.0p per share (2001: 4.5p, 2000: 4.0p) 40,823 36,552 28,014 Final proposed, 6.5p per share (2001: 6.5p, 2000: 6.0p) 52,656 52,708 47,813 - ------------------------------------------------------------------------------------------------------------------------------------ 93,479 89,260 75,827 ==================================================================================================================================== </TABLE> The trustees of the Employee Share Option Trust waived dividends amounting to(pound)1,806,000 in 2002 (2001:(pound)1,644,000, 2000: (pound)2,317,000). 9. Earnings per share Basic earnings per share is based on the weighted average number of ordinary and exchangeable shares outstanding during the respective periods. Diluted earnings per share takes into account the effect of dilutive potential ordinary and exchangeable shares outstanding during the period. The calculation of earnings per share is as follows: <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------------ Profit after Number of taxation shares Per share 2002 (pound)'000 '000 amount - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> Basic earnings per share 16,893 810,042 2.1p =============== Dilutive effect of options -- 9,476 - ------------------------------------------------------------------------------------------------------------------------------------ Diluted earnings per share 16,893 819,518 2.1p ==================================================================================================================================== 2001 - ------------------------------------------------------------------------------------------------------------------------------------ Basic earnings per share 154,803 805,061 19.2p =============== Dilutive effect of options -- 24,922 - ------------------------------------------------------------------------------------------------------------------------------------ Diluted earnings per share 154,803 829,983 18.6p ==================================================================================================================================== 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Basic earnings per share 300,728 678,006 44.4p =============== Dilutive effect of options -- 33,763 Conversion of ESDs 4,093 8,997 - ------------------------------------------------------------------------------------------------------------------------------------ Diluted earnings per share 304,821 720,766 42.3p ==================================================================================================================================== </TABLE> Profit before goodwill amortization and exceptional items is a more appropriate basis for the calculation of earnings per share since this represents a more consistent measure of the year-by-year performance of the business; therefore, the calculation below is presented on that basis. <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------------ Profit before goodwill 2002 amortization and exceptional Number of items shares Per share (pound)'000 '000 amount - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> Basic earnings per share 222,724 810,042 27.5p =============== Dilutive effect of options -- 9,476 - ------------------------------------------------------------------------------------------------------------------------------------ Diluted earnings per share 222,724 819,518 27.2p ==================================================================================================================================== 2001 - ------------------------------------------------------------------------------------------------------------------------------------ Basic earnings per share 331,670 805,061 41.2p =============== Dilutive effect of options -- 24,922 - ------------------------------------------------------------------------------------------------------------------------------------ Diluted earnings per share 331,670 829,983 40.0p ==================================================================================================================================== 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Basic earnings per share 389,782 678,006 57.5p =============== Dilutive effect of options -- 33,763 Conversion of ESDs 4,093 8,997 - ------------------------------------------------------------------------------------------------------------------------------------ Diluted earnings per share 393,875 720,766 54.7p ==================================================================================================================================== </TABLE> F-12
10. Goodwill <TABLE> <CAPTION> Net Cost Amortization book value (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> January 1, 2001 2,489,932 (114,390) 2,375,542 Acquisitions 458,064 -- 458,064 Provided during the year -- (137,477) (137,477) Exchange adjustment (84) -- (84) - ------------------------------------------------------------------------------------------------------------------------------------ December 31, 2001 2,947,912 (251,867) 2,696,045 Provided during the year -- (149,415) (149,415) Other adjustments (4,563) -- (4,563) Foreign exchange 239 -- 239 - ------------------------------------------------------------------------------------------------------------------------------------ December 31, 2002 2,943,588 (401,282) 2,542,306 ==================================================================================================================================== </TABLE> Prior to 1998, goodwill has been written off as follows: <TABLE> <CAPTION> (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> To other reserves 1,173,986 To cancellation of share premium account 44,468 To profit and loss account 73,600 - ------------------------------------------------------------------------------------------------------------------------------------ 1,292,054 ==================================================================================================================================== </TABLE> 11. Investments Investments Held as Fixed Assets <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------------ Shares of Other AMVESCAP PLC investments Total (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> Cost January 1, 2001 90,170 122,200 212,370 Foreign exchange -- 1,950 1,950 Arising from acquisitions -- 625 625 Additions 50,482 33,765 84,247 Disposals (41,045) (28,377) (69,422) - ------------------------------------------------------------------------------------------------------------------------------------ December 31, 2001 99,607 130,163 229,770 Foreign exchange -- (8,252) (8,252) Additions 44,852 34,893 79,745 Disposals -- (41,837) (41,837) - ------------------------------------------------------------------------------------------------------------------------------------ December 31, 2002 144,459 114,967 259,426 ==================================================================================================================================== Provisions against investments January 1, 2001 (2,027) (1,506) (3,533) Net change -- (1,955) (1,955) - ------------------------------------------------------------------------------------------------------------------------------------ December 31, 2001 (2,027) (3,461) (5,488) Net change -- (5,530) (5,530) - ------------------------------------------------------------------------------------------------------------------------------------ December 31, 2002 (2,027) (8,991) (11,018) ==================================================================================================================================== Net book value January 1, 2001 88,143 120,694 208,837 December 31, 2001 97,580 126,702 224,282 December 31, 2002 142,432 105,976 248,408 ==================================================================================================================================== </TABLE> Shares of AMVESCAP PLC include the holdings of the Employee Share Option Trust ("ESOT") and comprise 19,263,615 ordinary shares. The options vest after three years from the date of grant and lapse after 10 years. On December 31, 2002, there were options over these securities at exercise prices between 160p and 1680p. The market price of the ordinary shares at the end of 2002 was 398p. Other investments consist of investments in various Group mutual funds, unit trusts, partnership interests, investments in collateralized loan and bond obligations, investments on behalf of deferred compensation plans, and treasury securities. F-13
Investments Held as Current Assets Current asset investments include listed investments of(pound)62,631,000 (2001:(pound)68,808,000) and unlisted investments of(pound)6,564,000 (2001: (pound)12,687,000). 12. Tangible Assets Tangible assets are comprised of land, buildings, technology and other equipment. <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------------ Technology and other equipment Land and buildings Total (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> Cost January 1, 2001 332,983 58,923 391,906 Foreign exchange 2,368 (20) 2,348 Additions 81,983 83 82,066 Arising from acquisitions 4,145 3,824 7,969 Disposals (24,745) (7,222) (31,967) - ------------------------------------------------------------------------------------------------------------------------------------ December 31, 2001 396,734 55,588 452,322 Foreign exchange (1,208) (369) (1,577) Additions 59,057 202 59,259 Disposals (31,663) (224) (31,887) - ------------------------------------------------------------------------------------------------------------------------------------ December 31, 2002 422,920 55,197 478,117 ==================================================================================================================================== Accumulated depreciation January 1, 2001 (188,454) (111) (188,565) Exchange adjustment 451 (23) 428 Provided during the year (68,991) (634) (69,625) Disposals 18,798 221 19,019 - ------------------------------------------------------------------------------------------------------------------------------------ December 31, 2001 (238,196) (547) (238,743) Foreign exchange (8,345) 2 (8,343) Provided during the year (59,317) (915) (60,232) Disposals 26,261 -- 26,261 - ------------------------------------------------------------------------------------------------------------------------------------ December 31, 2002 (279,597) (1,460) (281,057) ==================================================================================================================================== Net book value January 1, 2001 144,529 58,812 203,341 December 31, 2001 158,538 55,041 213,579 December 31, 2002 143,323 53,737 197,060 ==================================================================================================================================== </TABLE> 13. Debtors <TABLE> <CAPTION> 2002 2001 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> Policyholder debtors 154,778 134,296 Deferred sales commissions 115,558 169,664 Customer and counterparty debtors 106,811 179,223 Unsettled fund debtors 96,520 124,397 Trade debtors 88,482 118,376 Deferred taxation 77,453 85,842 Other debtors 62,474 41,710 Prepayments 23,471 29,008 - ------------------------------------------------------------------------------------------------------------------------------------ 725,547 882,516 ==================================================================================================================================== </TABLE> Substantially all deferred taxes will reverse after one year. F-14
14. Current Liabilities <TABLE> <CAPTION> 2002 2001 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> Accruals and other 296,001 253,138 Customer and counterparty creditors 245,368 349,560 Current maturities of long-term debt 222,089 125,828 Policyholder creditors 154,761 134,296 Unsettled fund creditors 99,196 136,375 Proposed dividend 52,656 52,708 Corporation tax payable 41,451 50,691 Trade creditors 22,626 38,014 Bank overdraft 5,157 10,562 - ------------------------------------------------------------------------------------------------------------------------------------ 1,139,305 1,151,172 ==================================================================================================================================== </TABLE> 15. Long-Term Debt <TABLE> <CAPTION> 2002 2001 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> Senior notes - U.S.$250 million due 2003 at 6.375%, U.S.$400 million due 2005 at 6.6%, and U.S.$300 million due 2007 at 5.9% 593,416 655,308 U.S.$900 million credit facility due 2006 149,916 106,919 ESDs - C$147.8 million due 2003 at 6% 59,366 64,733 Loan Notes due 2005 -- 125,828 DM20 million fixed notes due 2003 at 6.75% 6,561 6,336 Senior notes - U.S.$10 million due 2006 at 6.875% 6,538 7,304 Loan Notes due 2009 at 5% 1,892 3,685 - ------------------------------------------------------------------------------------------------------------------------------------ Total debt 817,689 970,113 Less: current maturities of long-term debt (222,089) (125,828) - ------------------------------------------------------------------------------------------------------------------------------------ Total long-term debt 595,600 844,285 ==================================================================================================================================== </TABLE> The credit facility provides for borrowings of various maturities and contains certain conditions including a restriction to declare and pay cash dividends in excess of 60% of cumulative consolidated net profit arising after December 31, 2000. The Company also has an unused 364-day revolving $200 million credit facility available. Interest is payable on both facilities based upon LIBOR rates in existence at the time of each borrowing. The financial covenants under the credit agreement include the quarterly maintenance of a debt/EBITDA ratio of not greater than 3.00:1.00 and a coverage ratio of not less than 4.00:1.00 (EBITDA/interest payable for the four consecutive fiscal quarters ended before the date of determination). The ESDs are issued by a subsidiary of the Company, bear interest at 6% per year (payable semi-annually), and are convertible at any time at the option of the holder into exchangeable shares until August 1, 2003. During 2002, no ESDs were converted into exchangeable shares or settled in cash (2001: (pound)0.8 million ESDs were converted into 0.06 million exchangeable shares, and (pound)13,142 in ESDs were settled in cash). Maturities of long-term debt are as follows: (pound)222,089,000 in 2003, (pound)nil in 2004, (pound)249,859,000 in 2005, (pound)156,454,000 in 2006, (pound)187,395,000 in 2007 and (pound)1,892,000 due thereafter. F-15
16. Provisions for Liabilities and Charges <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------------ Deferred taxes Acquisitions Other Total (pound)'000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> January 1, 2001 34,365 20,688 3,006 58,059 Cash paid -- (1,364) (1,882) (3,246) Adjustment to AIM Goodwill -- (10,353) -- (10,353) Acquisitions and other adjustments -- 105,738 1,854 107,592 Movement on deferred taxes 20,615 -- -- 20,615 Foreign exchange (820) 127 -- (693) - ------------------------------------------------------------------------------------------------------------------------------------ December 31, 2001 54,160 114,836 2,978 171,974 Cash paid -- (20,689) (424) (21,113) Shares issued -- (6,888) -- (6,888) Reversal of deferred tax liabilities (11,186) -- -- (11,186) Other adjustments -- (456) 1,384 928 Foreign exchange (4,536) (9,945) -- (14,481) - ------------------------------------------------------------------------------------------------------------------------------------ December 31, 2002 38,438 76,858 3,938 119,234 ==================================================================================================================================== </TABLE> Acquisition provisions consist of $64.5 million remaining on the earn-out related to the NAM acquisition, $42.7 million earn-out related to the Pell Rudman acquisition, and the related retention bonus agreements under both acquisitions. The deferred tax provision of (pound)38.4 million arises from contingent deferred sales commissions. 17. Reconciliation of Operating Profit to Net Cash Inflow from Operating Activities <TABLE> <CAPTION> 2002 2001 2000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> Operating profit 148,262 325,886 480,690 Exceptional items 63,600 16,331 32,736 Depreciation 60,232 69,625 53,607 Amortization 149,415 137,477 56,417 Decrease/(increase) in debtors 103,872 195,738 (22,751) (Decrease)/increase in creditors (114,428) (242,570) 80,298 Other 15,565 40,746 (5,172) - ------------------------------------------------------------------------------------------------------------------------------------ Net cash inflow from operating activities 426,518 543,233 675,825 ==================================================================================================================================== </TABLE> 18. Reconciliation of Net Cash Flow to Movement in Net Debt <TABLE> <CAPTION> 2002 2001 2000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> Increase/(decrease) in cash 83 (33,329) 155,202 Cash outflow/(inflow) from client cash 5,622 (6,286) (160,478) Cash inflow/(outflow) from cash equivalents 39,579 (96,560) 120,328 Cash outflow/(inflow) from lease financing 445 420 (515) Cash outflow/(inflow) from bank loans 70,165 (3,380) (51,401) - ------------------------------------------------------------------------------------------------------------------------------------ Change in net debt resulting from cash flows 115,894 (139,135) 63,136 - ------------------------------------------------------------------------------------------------------------------------------------ Debt and finance leases 75 (4,249) (195,946) Translation difference 69,112 (2,274) (46,474) - ------------------------------------------------------------------------------------------------------------------------------------ Change in net debt resulting from non-cash changes and translation 69,187 (6,523) (242,420) - ------------------------------------------------------------------------------------------------------------------------------------ Movement in net debt in the year 185,081 (145,658) (179,284) Net debt beginning of the year (837,557) (691,899) (512,615) - ------------------------------------------------------------------------------------------------------------------------------------ Net debt end of the year (652,476) (837,557) (691,899) ==================================================================================================================================== </TABLE> F-16
19. Analysis of Net Debt <TABLE> <CAPTION> Non-cash January 1, changes and December 31, 2002 Cash flow translation 2002 2002 (pound)'000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Net cash: Cash at bank and in hand 350,978 34,006 (29,873) 355,111 Less: cash equivalents (94,620) (39,579) 8,621 (125,578) Bank overdrafts (10,562) 5,656 (251) (5,157) - ------------------------------------------------------------------------------------------------------------------------------------ 245,796 83 (21,503) 224,376 Client cash (207,310) 5,622 17,032 (184,656) - ------------------------------------------------------------------------------------------------------------------------------------ 38,486 5,705 (4,471) 39,720 Cash equivalents 94,620 39,579 (8,621) 125,578 Debt due within one year (125,828) 125,828 (222,089) (222,089) Debt due after more than one year (844,285) (55,663) 304,348 (595,600) Finance leases (550) 445 20 (85) - ------------------------------------------------------------------------------------------------------------------------------------ Total (837,557) 115,894 (69,187) (652,476) ==================================================================================================================================== </TABLE> <TABLE> <CAPTION> Non-cash January 1, changes and December 31, 2001 Cash flow translation 2001 2001 (pound)'000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Net cash: Cash at bank and in hand 485,359 (127,849) (6,532) 350,978 Less: cash equivalents (197,919) 96,560 6,739 (94,620) Bank overdrafts (8,453) (2,040) (69) (10,562) - ------------------------------------------------------------------------------------------------------------------------------------ 278,987 (33,329) 138 245,796 Client cash (200,934) (6,286) (90) (207,310) - ------------------------------------------------------------------------------------------------------------------------------------ 78,053 (39,615) 48 38,486 Cash equivalents 197,919 (96,560) (6,739) 94,620 Debt due within one year (6,839) 12,942 (131,931) (125,828) Debt due after more than one year (960,023) (16,322) 132,060 (844,285) Finance leases (1,009) 420 39 (550) - ------------------------------------------------------------------------------------------------------------------------------------ Total (691,899) (139,135) (6,523) (837,557) ==================================================================================================================================== </TABLE> <TABLE> <CAPTION> Non-cash January 1, changes and December 31, 2000 Cash flow translation 2000 2000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Net cash: Cash at bank and in hand, including acquisitions of(pound)118.5m 189,732 283,783 11,844 485,359 Less: cash equivalents, including acquisitions of(pound)154.7m (63,389) (120,328) (14,202) (197,919) Bank overdrafts, including acquisitions of(pound)5.9m -- (8,253) (200) (8,453) - ------------------------------------------------------------------------------------------------------------------------------------ 126,343 155,202 (2,558) 278,987 Client cash (41,533) (160,478) 1,077 (200,934) - ------------------------------------------------------------------------------------------------------------------------------------ 84,810 (5,276) (1,481) 78,053 Cash equivalents 63,389 120,328 14,202 197,919 Debt due within one year -- -- (6,839) (6,839) Debt due after more than one year (659,120) (51,401) (249,502) (960,023) Finance leases (1,694) (515) 1,200 (1,009) - ------------------------------------------------------------------------------------------------------------------------------------ Total (512,615) 63,136 (242,420) (691,899) ==================================================================================================================================== </TABLE> F-17
20. Called up Share Capital and Exchangeable Shares Ordinary Shares <TABLE> <CAPTION> Number 2002 Number 2001 `000 (pound)'000 `000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Authorized ordinary shares of 25p each 1,050,000 262,500 1,050,000 262,500 - ------------------------------------------------------------------------------------------------------------------------------------ Allotted, called up and fully paid ordinary shares of 25p each 794,456 198,614 784,147 196,037 ==================================================================================================================================== </TABLE> <TABLE> <CAPTION> Number 2000 `000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> Authorized ordinary shares of 25p each 1,050,000 262,500 - ------------------------------------------------------------------------------------------------------------------------------------ Allotted, called up and fully paid ordinary shares of 25p each 771,038 192,759 ==================================================================================================================================== </TABLE> During the year the Company has issued 5,188,000 ordinary shares as a result of options exercised and 520,000 ordinary shares as a result of acquisition earn-outs. As of December 31, 2002, ordinary shares are reserved for the following purposes: <TABLE> <CAPTION> Last Shares Prices expiry date - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> Options arising from acquisitions 2,912,161 25p - 1396p Feb 2010 Conversion of ESDs 6,107,296 -- Aug 2003 Conversion of exchangeable shares 34,899,085 -- Dec 2009 Subscription agreement (options) with the Employee Share Option Trust 49,626,760 160p - 1680p Nov 2012 Options granted under the AMVESCAP 2000 Share Option Plan 62,416,713 419.25p - 1440p Nov 2012 Options granted under Sharesave Schemes 5,746,777 268p - 1048p May 2006 ==================================================================================================================================== </TABLE> Exchangeable Shares The exchangeable shares issued by a subsidiary of the Company are exchangeable into ordinary shares of the Company on a one-for-one basis at any time at the request of the holder. They have, as nearly as practicable, the economic equivalence of the Company's ordinary shares, including the same voting and dividend rights as the ordinary shares. The Company can redeem all outstanding exchangeable shares for ordinary shares after December 31, 2009, or earlier if the total exchangeable shares fall below 5 million. The exchangeable shares are included as part of share capital in the consolidated balance sheet to present a true and fair view of the consolidated Group's capital structure, which differs from the Companies Act 1985 requirements (to reflect these amounts as minority interests), as they will become and are equivalent to ordinary shares. Movements in exchangeable shares comprise: Number - -------------------------------------------------------------------------------- Issued August 1, 2000 21,377,158 Converted into ordinary shares (23,674,300) Converted from ESDs 45,856,643 - -------------------------------------------------------------------------------- December 31, 2000 43,559,501 Converted into ordinary shares (4,125,367) Converted from ESDs 64,521 - -------------------------------------------------------------------------------- December 31, 2001 39,498,655 Converted into ordinary shares (4,599,570) - -------------------------------------------------------------------------------- December 31, 2002 34,899,085 ================================================================================ F-18
21. Commitments and Contingencies The Group operates a number of retirement schemes throughout the world. All are defined contribution schemes with the exception of immaterial schemes operating for employees in the U.K., U.S., Germany, and Austria which are defined benefit schemes. The U.K. and U.S. plans are closed to new participants. The assets of the defined benefit schemes are held in separate trustee administered funds. The pension costs and provisions of these schemes are assessed in accordance with the advice of professionally qualified actuaries. As of December 31, 2002, all plans are funded, with the exception of the German and Austrian schemes, which are unfunded in accordance with local practice. The costs amounted to (pound)8,448,000 (2001: (pound)6,256,000) for the defined benefit schemes and (pound)36,403,000 (2001: (pound)39,457,000) for the defined contribution schemes. The Group's annual commitments under non-cancelable operating leases are as follows: <TABLE> <CAPTION> Land and buildings Other - ------------------------------------------------------------------------------------------------------------------------------------ 2002 2001 2002 2001 Operating leases which expire: (pound)'000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Within one year 9,467 2,186 221 202 Within two to five years inclusive 10,761 16,567 1,968 3,373 In more than five years 18,498 16,173 3 14 - ------------------------------------------------------------------------------------------------------------------------------------ 38,726 34,926 2,192 3,589 ==================================================================================================================================== </TABLE> Guarantees and contingencies may arise in the ordinary course of business. In the normal course of business, the Group is subject to various litigation matters; however, in management's opinion, there are no legal proceedings pending against the Company, which would have a material adverse effect on its financial position, results of operations, or liquidity. 22. Financial Instruments The interest rate profile of the financial liabilities of the Group on December 31 was: <TABLE> <CAPTION> 2002 - ------------------------------------------------------------------------------------------------------------------------------------ Fixed rate financial liabilities -------------------------------- Weighted Weighted average period average for which Total Floating rate Fixed rate interest rate rate is fixed Currency (pound)'000 (pound)'000 (pound)'000 (%) (years) - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> U.S. dollar 749,904 149,949 599,955 6.3 2.4 Sterling 1,947 55 1,892 5.0 6.7 Euro 11,629 5,068 6,561 6.8 1.0 Canadian dollar 59,366 -- 59,366 6.0 0.6 Japanese yen 85 -- 85 2.6 0.8 - ------------------------------------------------------------------------------------------------------------------------------------ 822,931 155,072 667,859 6.3 2.2 ==================================================================================================================================== </TABLE> <TABLE> <CAPTION> 2001 - ------------------------------------------------------------------------------------------------------------------------------------ Fixed rate financial liabilities -------------------------------- Weighted Weighted average period average for which Total Floating rate Fixed rate interest rate rate is fixed Currency (pound)'000 (pound)'000 (pound)'000 (%) (years) - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> U.S. dollar 779,930 117,093 662,837 6.3 3.4 Sterling 129,561 125,876 3,685 5.0 7.7 Euro 6,525 189 6,336 6.8 2.0 Canadian dollar 64,733 -- 64,733 6.0 1.6 Japanese yen 475 150 325 2.0 1.5 - ------------------------------------------------------------------------------------------------------------------------------------ 981,224 243,308 737,916 6.3 3.2 ==================================================================================================================================== </TABLE> F-19
The Group held the following financial assets as of December 31: <TABLE> <CAPTION> 2002 2001 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> Cash deposits: U.S. dollar 181,790 175,917 Sterling 48,925 52,229 Canadian dollar 96,468 94,764 Euro 13,094 17,044 Other 14,834 11,024 Investments: U.S. dollar 65,379 67,868 Sterling 23,920 18,679 Canadian dollar 9,631 14,470 Euro fixed interest deposits 49,125 46,978 U.S. dollar treasury bills 8,233 9,883 Canadian dollar fixed interest deposits 8,818 29,145 Other 10,065 21,174 - ------------------------------------------------------------------------------------------------------------------------------------ Total 530,282 559,175 ==================================================================================================================================== </TABLE> The cash deposits comprise deposits placed primarily in money market accounts and 7-day deposits. The average interest rate on the euro fixed interest deposits is 3.1% for 2002 (2001: 3.5%), and average time for which the rate is fixed is 0.1 years (2001: 0.1 years). Certain of the Euro fixed interest investments are pledged for the facilitation of customer and counterparty transactions specific to the banking side of the Group's business. The average interest rate on the U.S. dollar treasury bills is 5.4% (2001: 5.3%), and the average time for which the rate is fixed is 2.0 years (2001: 2.5 years). The average interest rate on the Canadian dollar fixed interest securities is 5.9% (2001: 6.6%), and the average time for which the rate is fixed is 1.1 years (2001: 5.5 years). The Group has excluded debtors and creditors from its financial instrument disclosures. The majority of these amounts mature within three months, and there is no material interest rate gap on these amounts. 23. Reconciliation to U.S. Accounting Principles The Group prepares its consolidated accounts in accordance with generally accepted accounting principles ("GAAP") in the United Kingdom, which differ in certain material respects from U.S. GAAP. The following is a summary of material adjustments to profit and shareholders' funds which would be required if U.S. Generally Accepted Accounting Principles ("U.S. GAAP") had been applied instead of U.K. Generally Accepted Accounting Principles ("U.K. GAAP"). <TABLE> <CAPTION> 2002 2001 2000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> Profit for the financial year (U.K. GAAP) 16,893 154,803 300,728 Acquisition accounting (a) 137,790 (35,538) (65,451) Redundancy and reorganizations 11,961 -- -- Taxation (b) (5,198) (40,539) (57,325) Other (e) 420 1,495 2,758 - ------------------------------------------------------------------------------------------------------------------------------------ Net income (U.S. GAAP) 161,866 80,221 180,710 - ------------------------------------------------------------------------------------------------------------------------------------ Earnings per share (U.S. GAAP): -basic 20.0p 10.0p 26.7p -diluted 19.8p 9.7p 25.7p ==================================================================================================================================== </TABLE> F-20
<TABLE> <CAPTION> 2002 2001 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> Shareholders' funds (U.K. GAAP) 2,283,488 2,281,464 Acquisition accounting (a) 1,034,168 984,436 Redundancy and reorganizations 11,961 -- Treasury stock (c) (162,104) (186,134) Dividends (d) 52,656 52,708 Other (b,e) (11,934) (20,443) - ------------------------------------------------------------------------------------------------------------------------------------ Shareholders' equity (U.S. GAAP) 3,208,235 3,112,031 ==================================================================================================================================== </TABLE> (a) Acquisition Accounting Under U.K. GAAP, goodwill arising on acquisitions prior to 1998 has been eliminated directly against reserves. Goodwill arising in 1998 and after is capitalized and amortized over a period of 20 years. Integration-related amounts were expensed directly to the profit and loss account. U.S. GAAP requires that goodwill and indefinite-lived intangible assets be carried at cost less provision for impairment in value. Definite-lived intangible assets are amortized over their estimated useful lives. The integration costs were either capitalized as goodwill or expensed to the profit and loss account in the year paid. No goodwill amortization was recorded in 2002. Prior to 2002, goodwill was being amortized to the profit and loss account over an estimated useful life of 20 years. Had there been no amortization of goodwill in these prior periods, (pound)200.2 million and (pound)121.9 million in goodwill amortization would have been added back to US GAAP net earnings in 2001 and 2000, resulting in earnings per diluted share of 33.8p and 42.6p, respectively. (b) Taxation The taxation adjustment primarily relates to differences in the financial statement treatments of stock option deductions under U.K. and U.S. GAAP. Under U.K. GAAP, current tax expense is reduced by the tax benefit of the stock option deduction. Under U.S. GAAP, the tax benefit is written off directly to equity. In addition, certain exceptional costs are not included in U.S. GAAP book income until incurred and therefore the associated tax benefit has been removed from the U.S. GAAP tax expense. The differences in the recognition of deferred tax assets under U.K. and U.S. GAAP are limited to certain intangibles that are treated as deferred tax items for U.S. GAAP that are permanent items under U.K. GAAP. In addition, certain exceptional costs are not included in U.S. GAAP book income until incurred and therefore the associated deferred tax asset has been removed from the U.S. GAAP balance sheet. (c) Treasury Stock Under U.K. GAAP, shares held by the ESOT are reflected as investments. Under U.S. GAAP, shares held by the ESOT are reflected as treasury stock. (d) Dividends Under U.K. GAAP, dividends proposed after the end of an accounting period are deducted in arriving at retained earnings for that period. Under U.S. GAAP, dividends are not recorded until formally approved. (e) Other Other adjustments include accounting differences relating to interval fund amortization and investment valuation. F-21
U.S. GAAP cash flow information Under U.K. GAAP, the statement of Cash Flows details the movement in cash from year to year, inclusive of the movement in bank overdrafts and exclusive of the movement in cash equivalents. Under U.S. GAAP, the movement in bank overdrafts is classified as a financing activity, and the movement in cash equivalents is included as part of total cash flow. In addition, the classification of cash flow information within the U.K. GAAP Statement of Cash Flows differs from the required format of a cash flow statement under U.S. GAAP. The captions break out from operating cash flows the returns on investment and servicing of finance and taxation amounts, from investing the amounts paid for acquisitions, and from financing the amounts paid for dividends. Cash flow information is presented below according to the U.S. GAAP required formats. <TABLE> <CAPTION> 2002 2001 2000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> Cash inflow from operating activities 279,403 331,064 533,953 Cash outflow from investing activities (91,906) (391,623) (262,418) Cash (outflow)/inflow from financing activities (153,491) (67,290) 12,248 Foreign exchange movement on cash and cash equivalents (29,873) (6,532) 11,844 - ------------------------------------------------------------------------------------------------------------------------------------ Increase/(decrease) in cash and cash equivalents 4,133 (134,381) 295,627 - ------------------------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents, beginning of year 350,978 485,359 189,732 - ------------------------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents, end of year 355,111 350,978 485,359 ==================================================================================================================================== </TABLE> 24. Guarantor Condensed Consolidating Financial Statements The 6.375% senior notes due 2003 and 6.6% senior notes due 2005, which were issued in connection with the GT Global acquisition, and which have an aggregate principal amount of $650 million, and the 5.9% senior notes due 2007, which have an aggregate principal amount of $300 million, are fully and unconditionally guaranteed as to payment of principal, interest and any other amounts due thereon by the following wholly owned subsidiaries: AIM Management Group, Inc., AIM Advisors, Inc., INVESCO North American Holdings, Inc., and INVESCO Institutional (N.A.), Inc. (the "Guarantors"). Presented below are condensed consolidating financial statements of the Company for the years ended December 31, 2002, 2001, and 2000. Condensed Consolidating Balance Sheet and Reconciliation of Shareholders' Funds from U.K. to U.S. GAAP <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------------ 2002 Consolidated Guarantor Non-guarantor AMVESCAP PLC elimination Consolidated subsidiaries subsidiaries parent company entries total (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> Fixed assets 773,650 3,981,114 2,198,115 (3,965,105) 2,987,774 Current assets 60,627 1,086,339 2,887 -- 1,149,853 Current liabilities (89,560) (832,738) (217,007) -- (1,139,305) Intercompany balances (99,645) (439,538) 539,183 -- -- Long-term liabilities 17,258 (109,297) (622,795) -- (714,834) - ------------------------------------------------------------------------------------------------------------------------------------ Net assets 662,330 3,685,880 1,900,383 (3,965,105) 2,283,488 ==================================================================================================================================== Capital and reserves Called up share capital 2,580 529,944 198,614 (532,524) 198,614 Share premium account 752,352 2,273,716 619,250 (3,026,068) 619,250 Exchangeable shares -- 383,105 -- -- 383,105 Profit and loss account 310,820 321,164 609,298 (631,984) 609,298 Other reserves (403,422) 177,951 473,221 225,471 473,221 - ------------------------------------------------------------------------------------------------------------------------------------ Shareholders' funds under UK GAAP 622,330 3,685,880 1,900,383 (3,965,105) 2,283,488 ==================================================================================================================================== US GAAP adjustments: Acquisition accounting 731,221 554,856 1,034,168 (1,034,168) 1,034,168 Redundancy and reorganizations 7,709 11,302 11,961 (11,961) 11,961 Treasury stock -- -- (162,104) -- (162,104) Dividends -- 2,268 50,388 -- 52,656 Other (4,685) (7,249) (11,934) 11,934 (11,934) - ------------------------------------------------------------------------------------------------------------------------------------ Shareholders' equity under US GAAP 1,356,575 4,247,057 2,822,862 (4,999,300) 3,208,235 ==================================================================================================================================== </TABLE> F-22
<TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------------ 2001 Consolidated Guarantor Non-guarantor AMVESCAP PLC elimination Consolidated subsidiaries subsidiaries parent company entries total (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> Fixed assets 920,524 4,204,473 2,608,896 (4,599,987) 3,133,906 Current assets 91,818 1,211,951 11,220 -- 1,314,989 Current liabilities (110,023) (865,011) (176,138) -- (1,151,172) Intercompany balances (197,468) (25,567) 223,035 -- -- Long-term liabilities 21,002 (218,115) (819,146) -- (1,016,259) - ------------------------------------------------------------------------------------------------------------------------------------ Net assets 725,853 4,307,731 1,847,867 (4,599,987) 2,281,464 ==================================================================================================================================== Capital and reserves Called up share capital 2,849 802,594 196,037 (805,443) 196,037 Share premium account 830,814 1,628,791 1,619,879 (2,459,605) 1,619,879 Exchangeable shares -- 433,597 -- -- 433,597 Profit and loss account 371,264 630,699 685,884 (1,001,963) 685,884 Other reserves (479,074) 812,050 (653,933) (332,976) (653,933) - ------------------------------------------------------------------------------------------------------------------------------------ Shareholders' funds under UK GAAP 725,853 4,307,731 1,847,867 (4,599,987) 2,281,464 ==================================================================================================================================== US GAAP adjustments: Acquisition accounting 948,335 527,336 (167,185) (324,050) 984,436 Treasury stock -- -- (186,134) -- (186,134) Dividends -- 2,568 50,140 -- 52,708 Other (11,429) (9,014) (20,443) 20,443 (20,443) - ------------------------------------------------------------------------------------------------------------------------------------ Shareholders' equity under US GAAP 1,662,759 4,828,621 1,524,245 (4,903,594) 3,112,031 ==================================================================================================================================== </TABLE> Condensed Consolidating Statements of Income and Reconciliations of Net income from U.K. to U.S. GAAP <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------------ 2002 Consolidated Guarantor Non-guarantor AMVESCAP PLC elimination Consolidated subsidiaries subsidiaries parent company entries total (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> Revenues 514,420 830,843 -- -- 1,345,263 Operating expenses (360,042) (842,062) 5,103 -- (1,197,001) - ------------------------------------------------------------------------------------------------------------------------------------ Operating profit 154,378 (11,219) 5,103 -- 148,262 Other net income/(expense) (25,073) 6,796 (27,720) -- (45,997) - ------------------------------------------------------------------------------------------------------------------------------------ Profit before taxation 129,305 (4,423) (22,617) -- 102,265 Taxation (36,733) (48,123) (516) -- (85,372) - ------------------------------------------------------------------------------------------------------------------------------------ Profit before share of profits of subsidiaries 92,572 (52,546) (23,133) -- 16,893 Share of profits of Subsidiaries 24,816 92,572 40,026 (157,414) -- - ------------------------------------------------------------------------------------------------------------------------------------ Net income under UK GAAP, (equity method) 117,388 40,026 16,893 (157,414) 16,893 US GAAP adjustments: Acquisition accounting (11,625) 149,415 137,790 137,790 Redundancy and reorganizations 7,709 11,302 11,961 11,961 Taxation (4,358) (840) (5,198) (5,198) Other 2,913 (2,493) 420 420 - ------------------------------------------------------------------------------------------------------------------------------------ Net income under US GAAP 112,027 197,410 161,866 161,866 ==================================================================================================================================== </TABLE> F-23
<TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------------ 2001 Consolidated Guarantor Non-guarantor AMVESCAP PLC elimination Consolidated subsidiaries subsidiaries parent company entries total (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> Revenues 635,169 984,678 -- -- 1,619,847 Operating expenses (355,920) (739,252) (1,315) -- (1,096,487) - ------------------------------------------------------------------------------------------------------------------------------------ Operating profit 279,249 245,426 (1,315) -- 523,360 Other net income/(expense) (100,156) (132,179) (10,587) -- (242,922) - ------------------------------------------------------------------------------------------------------------------------------------ Profit before taxation 179,093 113,247 (11,902) -- 280,438 Taxation (42,918) (77,488) (5,229) -- (125,635) - ------------------------------------------------------------------------------------------------------------------------------------ Profit before share of profits of subsidiaries 136,175 35,759 (17,131) -- 154,803 Share of profits of Subsidiaries 76,223 136,175 171,934 (384,332) -- - ------------------------------------------------------------------------------------------------------------------------------------ Net income under UK GAAP, (equity method) 212,398 171,934 154,803 (384,332) 154,803 US GAAP adjustments: Acquisition accounting 8,935 (44,473) (35,538) (35,538) Taxation (24,063) (16,476) (40,539) (40,539) Other 1,495 -- 1,495 1,495 - ------------------------------------------------------------------------------------------------------------------------------------ Net income under US GAAP 198,765 110,985 80,221 80,221 ==================================================================================================================================== </TABLE> <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------------ 2000 Consolidated Guarantor Non-guarantor AMVESCAP PLC elimination Consolidated subsidiaries subsidiaries parent company entries total (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> Revenues 747,903 880,759 -- -- 1,628,662 Operating expenses (375,037) (666,119) 1,405 -- (1,039,751) - ------------------------------------------------------------------------------------------------------------------------------------ Operating profit 372,866 214,640 1,405 -- 588,911 Other net income/(expense) (70,594) (80,605) 8,521 -- (142,678) - ------------------------------------------------------------------------------------------------------------------------------------ Profit before taxation 302,272 134,035 9,926 -- 446,233 Taxation (84,202) (57,205) (4,098) -- (145,505) - ------------------------------------------------------------------------------------------------------------------------------------ Profit before share of profits of subsidiaries 218,070 76,830 5,828 -- 300,728 Share of profits of Subsidiaries 94,105 218,070 294,900 (607,075) -- - ------------------------------------------------------------------------------------------------------------------------------------ Net income under UK GAAP, (equity method) 312,175 294,900 300,728 (607,075) 300,728 US GAAP adjustments: Acquisition accounting (7,974) (57,477) (65,451) (65,451) Taxation (41,355) (15,970) (57,325) (57,325) Other 2,758 -- 2,758 2,758 - ------------------------------------------------------------------------------------------------------------------------------------ Net income under US GAAP 265,604 221,453 180,710 180,710 ==================================================================================================================================== </TABLE> F-24
Condensed Consolidating Statement of Cash Flows and U.S. GAAP Cash Flow Information <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------------ 2002 Consolidated Guarantor Non-guarantor AMVESCAP PLC elimination Consolidated subsidiaries subsidiaries parent company entries total (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> Net cash inflow from operating activities 147,493 206,004 73,021 -- 426,518 Net cash (outflow)/inflow from returns on investments and servicing of finance 68,384 154,579 107,929 (372,450) (41,558) Taxation (33,525) (77,770) 5,738 -- (105,557) Net cash (outflow)/inflow from capital expenditure and financial investment (31,906) (9,616) (50,384) -- (91,906) Dividends paid (150,068) (227,013) (88,900) 372,450 (93,531) Net cash (outflow)/inflow from financing (75) (1,718) (52,511) -- (54,304) Change in cash equivalents 366 (43,040) 3,095 -- (39,579) - ------------------------------------------------------------------------------------------------------------------------------------ (Decrease)/increase in cash 669 1,426 (2,012) -- 83 ==================================================================================================================================== U.S. GAAP cash flow information: Cash inflow from operating activities 182,352 282,813 186,688 (372,450) 279,403 Cash outflow from investing activities (31,906) (9,616) (50,384) -- (91,906) Cash (outflow)/inflow from financing activities (150,143) (234,387) (141,411) 372,450 (153,491) ==================================================================================================================================== </TABLE> <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------------ 2001 Consolidated Guarantor Non-guarantor AMVESCAP PLC Elimination Consolidated subsidiaries subsidiaries parent company entries total (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> Net cash inflow/(outflow) from operating activities 355,584 266,937 (79,288) -- 543,233 Net cash (outflow)/inflow from returns on investments and servicing of finance (34,688) 188,048 108,084 (307,040) (45,596) Taxation (105,319) (56,773) (4,481) -- (166,573) Net cash (outflow)/inflow from capital expenditure and financial investment (17,054) (57,692) (5,436) -- (80,182) Acquisitions -- -- (311,441) (311,441) Dividends paid (188,286) (120,550) (82,569) 307,040 (84,365) Net cash (outflow)/inflow from financing (5,217) (320,785) 341,037 -- 15,035 Change in cash equivalents (4,349) 62,949 37,960 -- 96,560 - ------------------------------------------------------------------------------------------------------------------------------------ Increase/(decrease) in cash 671 (37,866) 3,866 -- (33,329) ==================================================================================================================================== U.S. GAAP cash flow information: Cash inflow from operating activities 215,577 398,212 24,315 (307,040) 331,064 Cash outflow from investing activities (17,054) (57,692) (316,877) -- (391,623) Cash (outflow)/inflow from financing activities (193,503) (439,295) (258,468) 307,040 (67,290) ==================================================================================================================================== </TABLE> F-25
<TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------------ 2000 Consolidated Guarantor Non-guarantor AMVESCAP PLC elimination Consolidated subsidiaries subsidiaries parent company entries total (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> Net cash inflow from operating activities 306,422 255,709 113,694 -- 675,825 Net cash (outflow)/inflow from returns on investments and servicing of finance (42,705) 132,019 82,736 (198,164) (26,114) Taxation (123,907) (2,300) 10,449 -- (115,758) Net cash (outflow)/inflow from capital expenditure and financial investment (37,593) (49,377) 7,147 -- (79,823) Acquisitions -- -- (182,595) -- (182,595) Dividends paid (128,688) (69,476) (63,558) 198,164 (63,558) Net cash (outflow)/inflow from financing (275) (37) 67,865 -- 67,553 Change in cash equivalents 20,664 (99,930) (41,062) -- (120,328) - ------------------------------------------------------------------------------------------------------------------------------------ (Decrease)/increase in cash (6,082) 166,608 (5,324) -- 155,202 ==================================================================================================================================== U.S. GAAP cash flow information: Cash inflow from operating activities 139,810 385,428 206,879 (198,164) 533,953 Cash outflow from investing activities (37,593) (49,377) (175,448) -- (262,418) Cash (outflow)/inflow from financing activities (128,963) (61,260) 4,307 198,164 12,248 ==================================================================================================================================== </TABLE>