Thriving in the new w orld order Martin L. Flanagan President and - PowerPoint PPT Presentation

Thriving in the new w orld order Martin L. Flanagan President and CEO Invesco Ltd. All inform ation as of Sept. 3 0 , 2 0 1 2 , unless otherw ise noted. Please refer to the Appendix for im portant inform ation.

Our discussion today The w orld is changing around us Staying ahead of trends in the US Thriving in the new w orld order 2 MMM-PPT-1 10/ 12

Some of the top in-demand jobs in 2012 … 3 MMM-PPT-1 10/ 12

… didn’t exist in 2005. Source: US Labor Departm ent “Job openings and labor turnover survey,” 2 0 1 1 ; US New s & W orld Report, Oct. 5 , 2 0 1 1

Almost half of the revenue of S&P 500 companies … 5 MMM-PPT-1 10/ 12

… comes from overseas. Source: RBC Capital Markets Research, Capital I Q. Data as of Decem ber 3 1 , 2 0 1 1 . As referenced in businessinsider.com article entitled, “A Breakdow n of W here S&P 5 0 0 Com panies Get Overseas Business”.

72 percent of Apple’s total revenue … 7 MMM-PPT-1 10/ 12

… is derived from products you couldn’t purchase five years ago. Source: Apple earnings reports 2 0 0 7 – 2 0 1 2 ; as of Sept. 3 0 , 2 0 1 2 .

During the course of this presentation … 9 MMM-PPT-1 10/ 12

402 babies will be born in the US Source: U.S. Census Bureau, International Program (International Database) http: / / www.census.gov/ population/ international/ data/ idb/ region.php (Oct. 11, 2012) 1 0 MMM-PPT-1 10/ 12

402 babies 1,644 babies will be born in China Source: U.S. Census Bureau, International Program (International Database) http: / / www.census.gov/ population/ international/ data/ idb/ region.php (Oct. 11, 2012) 1 1 MMM-PPT-1 10/ 12

402 babies 1,644 babies 2,370 babies will be born in India Source: U.S. Census Bureau, International Program (International Database) http: / / www.census.gov/ population/ international/ data/ idb/ region.php (Oct. 11, 2012) 1 2 MMM-PPT-1 10/ 12

4 ,4 1 6 potential new investors 402 babies 1,644 babies 2,370 babies MMM-PPT-1 10/ 12 1 3

Global population has grow n to 7 billion people w orldw ide People, in m illions ( in order of GDP) 1,343 1,205 314 81 63 66 61 206 127 US China India Japan Germany Brazil UK France Italy Sources: Invesco; USA Today; US Census Bureau, Population Division, International Programs Center — data estimate as of July 2012; CIA World Fact Book, Eurostat 1 4 MMM-PPT-1 10/ 12

China’s 2 0 2 0 GDP projection is equal to the com bined GDPs of several countries Thailand Malaysia Sri Lanka Netherlands Israel South Africa Argentina Kazakhstan Korea Colombia Denmark Canada Kenya Saudi Russia Turkey Arabia Indonesia Zambia Poland Belgium Switzerland Australia Egypt Greece Iran Above $1,000bn Argentina Singapore $500bn–$1,000bn Nigeria Spain Venezuela $100bn–$500bn Below $100bn Sudan Sources: HSBC, CEIC, IMF, CIA as of December 2011. Actual results may differ from current projections. 1 5 MMM-PPT-1 10/ 12

Disposable incom e is expected to grow exponentially in developing countries Household disposable incom e m ore than US$ 1 0 ,0 0 0 No. of Households (Millions) 300 China 250 200 150 US India 100 Brazil Japan 50 Russia 0 1991 1996 2001 2006 2011e 2016e 2020e China US India Brazil Japan Russia Sources: Bloomberg L.P., Invesco as of December 2011. Actual results may differ from current expectations. 1 6 MMM-PPT-1 10/ 12

Established m arkets currently have the lion’s share of $ 5 2 trillion global AUM … Total AUM 2011 Estimates US$Billions 25,000 23,207 20,000 15,000 15,374 10,000 5,000 1,446 1,428 1,380 4,390 4,372 379 345 0 Asia United Western Latin Eastern Japan Africa Middle Canada Pacific States Europe America Europe East ex Japan Green color in chart denotes developed economies as defined by the IMF’s World Economic Outlook Report, April 2012. Source: McKinsey & Company Global Banking Pools; Empirical Research Partners, as of August 2012. Note: Includes all institutional and retail AUM. 1 7 MMM-PPT-1 10/ 12

… How ever, China and other em erging m arkets are experiencing the greatest grow th Total AUM Grow th 2011-2014 Estimated CAGR % 14 12 12.3 11.9 11.8 10 8 7.3 7.2 6 6.3 5.8 4 4.3 2.9 2 0 Asia Pacific United Western Latin Eastern Japan Africa Middle Canada ex Japan States Europe America Europe East Green color in chart denotes developed economies as defined by the IMF’s World Economic Outlook Report, April 2012 Source: McKinsey & Company Global Banking Pools; Empirical Research Partners, as of August 2012. Note: Includes all institutional and retail AUM. 1 8 MMM-PPT-1 10/ 12

Sum m ary of significant global trends  US remains the dominant market  Critical to be an established market leader in developed markets  Strong presence in emerging markets a key driver of long-term success 1 9 MMM-PPT-1 10/ 12

Our discussion today The w orld is changing around us Staying ahead of trends in the US Thriving in the new w orld order 2 0 MMM-PPT-1 10/ 12

Key US m arket realities 1 Post-crisis uncertainty and broad structural reform creating instability 2 Risk mitigation driving evolution of asset allocation 3 Aging US population driving need for income solutions 4 Increased market complexity accelerating need for advice 2 1 MMM-PPT-1 10/ 12

1 Post-crisis uncertainty and broad structural reform creating instability Advisors and investors are concerned  Uncertainty around tax policy  Eurozone crisis  Government debt and impending fiscal cliff  Market volatility 2 2 MMM-PPT-1 10/ 12

1 Then and now The Great Depression The Great Recession  Increased legislation  Increased legislation driving financial reform driving financial reform  Government spending to  Government spending to drive employment drive employment  Enduring market volatility  Enduring market volatility  Prolonged investor anxiety  Prolonged investor anxiety 2 3 MMM-PPT-1 10/ 12

1 Then and now The Great Depression The Great Recession  Increased legislation  Increased legislation driving financial reform driving financial reform  Government spending to  Government spending to drive employment drive employment  Enduring market volatility  Enduring market volatility  Prolonged investor anxiety  Prolonged investor anxiety  Globalization  Aging population 2 4 MMM-PPT-1 10/ 12

1 Lack of confidence in peripheral Eurozone countries continues The Collapse of Europe’s Welfare State Exposes its Why adopting the Greece to leave False Hopes — Eurozone set for euro is a trap for Euro Zone on Is America Next deeper recession some nations June 18 August 29 September 6 September 10 (CNBC) (Forbes) (fundweb) (NBC) Merkel tries to Euro crisis down Soros tells Did Europe miss calm uproar over to confidence, not Germany “lead its chance? Eurozone crisis plans currency, says or leave euro” September 11 August 26 German Foreign September 9 (CNN Money) (Economic Times) Minister (Investment Week) August 31 (CNN) 2 5 MMM-PPT-1 10/ 12

1 Total US governm ent debt is approaching 1 0 0 % of GDP Percent of GDP 140 120 100 80 60 40 20 0 2017 1940 1960 1980 2000 Projected Actual Sources: US Office of Management and Budget data through Dec. 31, 2011, Congressional Budget Office’s (CBO) January 2011 baseline budget projections 2 6 MMM-PPT-1 10/ 12

1 The im portance of restoring confidence Percent of GDP 30 Interest 25 Medicare and 20 Medicaid 15 10 Social Security 5 Other Federal Spending 0 1962 1987 2012 2037 2062 2087 Source: Congressional Budget Office (CBO), The Long-Term Budget Outlook, July 2012; extended-baseline scenario 2 7 MMM-PPT-1 10/ 12

1 Uncertainty driving m arket volatility and investor anxiety VI X - CBOE Market Volatility I ndex 70 60 50 40 30 20 10 0 Dec-99 May-01 Oct-02 Mar-04 Aug-05 Jan-07 Jun-08 Nov-09 Apr-11 Sep-12 Source: Bloomberg L.P. , Invesco. Data as of September 30, 2012. VIX is based on real-time option prices, which reflect investors' consensus view of future expected stock market volatility. During periods of financial stress, which are often accompanied by steep market declines, option prices - and VIX - tend to rise. The greater the fear, the higher the VIX level. As investor fear subsides, option prices tend to decline, which in turn causes VIX to decline. It is important to note, however, that past performance does not necessarily indicate future results. 2 8 MMM-PPT-1 10/ 12

1 Post-crisis uncertainty and broad structural reform creating instability How to stay ahead of the trend  Stay invested for the long term  Find low-volatility opportunities  Create risk-balanced portfolios to prepare for various outcomes  Invest in equities for the long term 2 9 MMM-PPT-1 10/ 12

2 Risk m itigation driving evolution of asset allocation  Advisors are focused on managing risk  Increasing allocations to income (equity and fixed)  Alternatives are no longer alternative  Growth of risk parity and world allocation strategies  Blending of mutual funds and ETFs in client portfolios 3 0 MMM-PPT-1 10/ 12