30 January 1998 FOR IMMEDIATE RELEASE
Proposed acquisition of LGT Asset Management Division and Preliminary Results for the year ended 31 December 1997
The Board of AMVESCAP PLC has entered into an agreement to acquire the Asset Management Division (“GT Global”) of the Liechtenstein Global Trust (“LGT”), which values the business at approximately $1.3 billion (£790 million). A summary of the main points follows:
• At 31 December 1997, GT Global’s funds under management were in excess of $55 billion (£33 billion).
• GT Global manages a range of retail and institutional funds and has been a major player in the global market for almost three decades. It employs 1,300 people in 20 locations worldwide.
• Following the acquisition, AMVESCAP will have funds under management approaching $250 billion (£150 billion), reinforcing its position as one of the largest independent investment management businesses in the world.
• The consideration is to be satisfied with the issue of up to $500 million in AMVESCAP shares at the option of AMVESCAP, with the balance payable in cash.
• The acquisition is conditional on the approval of AMVESCAP shareholders and GT Global US mutual fund shareholders, together with regulatory and other approvals.
At the same time AMVESCAP announces its Preliminary results for the year to 31 December 1997. 1997 Unaudited Preliminary Results
Results for the Year Ended 31 Dec 1997 31 Dec 1996# 31 Dec 1997 31 Dec 1996 Revenues $870.3m $368.5m £530.7m £236.2m
Profit before tax $290.8m $102.9m £177.3m £66.0m
Profit after tax $191.9m $70.2m £117.0m £45.0m
Earnings per share $3.72* $2.76* 22.7p 17.7p
Earnings per share (fully diluted) $3.36* $2.51* 20.5p 16.1p
Highlights
• Profit before tax of £177 million • Earnings per share up 28% • Dividends per share up 17%
• Funds under management of $192 billion (£117 billion) at 31 December, 1997 • AIM results included from 1 March 1997
* Per American Depository Share equivalent to 10 Ordinary Shares
# Pounds sterling for the year ended 31 December 1997 have been translated in to US dollars using $1.64 and $1.645 (1996: $1.56 and $1.692) per £1.00 for profit and loss and balance sheet figures respectively.
Chairman Charles W. Brady said:
“In an increasingly global market place, a firm’s size, scale and strength are more critical than ever and AMVESCAP believes the proposed combination with GT Global will enhance the organisation and its competitive position significantly. Many business synergies exist between the two organisations, including increased product diversification, global brand enhancement, expanded geographic reach and added critical mass.
With a broad, global product line and strong distribution capabilities, the combination of AMVESCAP and GT Global will have the scale and resources to succeed as one of the few truly global investment management groups.”
AMVESCAP is one of the world’s largest individual investment managers, operating under the AIM and INVESCO brand names. AMVESCAP is a holding company offering a broad array of investment products and services to institutions and individuals across all distribution channels. The Company is listed on the London and New York Stock Exchanges with the symbol “AVZ”.
For further information: Charles W Brady, Chairman
Robert F McCullough, Chief Financial Officer
AMVESCAP PLC 0171 626 3434
Angus Maitland
30 January 1998
Proposed acquisition of LGT Asset Management Division and Preliminary Results for the year ended 31 December 1997
INTRODUCTION
The Board of AMVESCAP PLC (“AMVESCAP”) has entered into an agreement to acquire the Asset Management Division (“GT Global”) of the Liechtenstein Global Trust (“LGT”) in a transaction which values the business at approximately $1.3 billion (£790 million). At 31 December 1997, GT Global’s funds under management were in excess of $55 billion (£33 billion). Following the acquisition, AMVESCAP will have funds under management approaching $250 billion (£150 billion), reinforcing its position as one of the largest independent investment management businesses in the world.
The acquisition is conditional on the approval of AMVESCAP shareholders and GT Global’s US mutual fund shareholders. The acquisition is also conditional on regulatory and other approvals and is expected to be completed by the end of May 1998. The Board of AMVESCAP has unanimously approved the transaction.
The consideration is to be satisfied with the issuance of up to $500 million in AMVESCAP shares at the option of AMVESCAP, with the balance payable in cash.
It is intended that the equity portion of the consideration will be placed for the seller through a secondary global offering which is expected to be targeted towards US institutional investors.
BACKGROUND
AMVESCAP is the holding company of the AIM and INVESCO businesses and is quoted on the London and New York Stock Exchanges. With $192 billion (£117 billion) in assets under management, AMVESCAP is one of the largest independent investment management firms in the world.
INVESCO has a major presence in the institutional investment management and mutual fund businesses in North America, Europe, Hong Kong and Japan, as well as being a leading provider of 401K and defined contribution plan services. INVESCO manages portfolios of equity, balanced, fixed-income, money market and real estate investments for institutional investors, retail investors and high net worth individuals. AIM is one of the
US’s leading investment managers. AIM’s main activity is managing and distributing equity, fixed income and money market mutual funds. AIM is the twelfth largest mutual fund group in the US and the fifth largest non-proprietary manager, with funds distributed through a nationwide network of 146,000 financial consultants.
GT Global manages a range of retail and institutional funds and has been a major player in the global market for almost three decades. It has a reputation for innovation and pioneering product development. It employs 1300 people in 20 locations worldwide. Of its total assets under management, approximately $35 billion are managed in the US, $9 billion in the UK, $6 billion in the Far East and $5 billion in Germany. Around two thirds of GT Global’s assets represent institutional mandates, and one third are retail funds.
SUMMARY FINANCIAL INFORMATION
In the five years to 1996, GT Global’s fee income increased from $235 million (£143 million) to $447 million (£273 million) - an increase of 90%. Over the same period, operating profit rose by 37%, from $57 million (£35 million) to $78 million (£48 million). The net assets of the businesses to be acquired are expected to be minimal.
For the year ended 31 December 1997, GT Global’s unaudited total revenues and operating profit before non-recurring items were approximately $450 million and $100 million respectively.
BENEFITS OF THE ACQUISITION
In an increasingly global marketplace, a firm’s size, scale and strength are more critical than ever and AMVESCAP believes the proposed combination will enhance the organisation and its competitive position significantly. Many business synergies exist between the two organisations, including increased product diversification, global brand enhancement, expanded geographic reach and added critical mass.
Product Diversification
A key component of AMVESCAP’s business philosophy is strength through diversification and seeking to encompass and nurture a wide range of investment styles applied to a broad class of assets. GT Global offers a wide range of
investment products which will enhance AMVESCAP’s product range. For example, Chancellor LGT, the US institutional investment manager, offers a wide range of investment products AMVESCAP does not currently possess – growth equities, alternative assets, high yield fixed income and structured products. The Frankfurt operations provide a series of quantitative products well-tailored to the German market. The North American retail operations provide AMVESCAP with a well known brand name in global, international, Canadian and sector management.
Global Brand Enhancement
The “GT” name is recognised as a leading brand in global products and in several markets including Canada, Germany and Asia Pacific. These are markets which are high strategic priorities for AMVESCAP and in which significant future staffing needs are contemplated. In the US, the combination of AIM and GT Global brands, with their excellent reputations for domestic and international equity investing, will create a very powerful offering in the retail market.
Geographic Reach and Critical Mass
This transaction will add to AMVESCAP’s global network with added territories particularly in Asia and Germany. By pooling resources in Continental Europe and Japan, growth will be accelerated in two of the markets which AMVESCAP views as having the greatest long-term potential. AMVESCAP will provide GT Global with expanded distribution through AIM’s powerful presence in the advisor-assisted market. The combined resources will provide a more robust base from which to grow.
AMVESCAP and GT Global share similar cultural and philosophical values including global ambition, an understanding of the needs of investment professionals, a belief that success in each national marketplace is dependent upon locally-based employees who understand the local culture, and a recognition of the need to allow individual enterprises a significant degree of autonomy.
With a broad product line and strong global distribution capabilities, the combination of AMVESCAP and GT Global will have the scale and resources to succeed as one of the few truly global investment management groups.
ADVISERS
AMVESCAP is being advised by Putnam, Lovell & Thornton and Cazenove & Co. LGT is being advised by Goldman, Sachs & Co.
Further details of the transaction will be sent to shareholders in due course. 1997 PRELIMINARY RESULTS
AMVESCAP also announces its Preliminary Results for the year to end 31 December 1997.
a. Financial Review
Commenting on the results, Charles Brady, Executive Chairman said:
“AMVESCAP’s pre-tax profits for the year were £177 million compared to £66 million for the prior year. Revenues amounted to £531 million compared to £236 million in 1996. AIM’s results have been included in the Group from 1st March 1997 and the Group results for 1997 include revenues of £257 million and pre-tax profits of £120 million relating to AIM.
Earnings per share increased to 22.7p (1996: 17.7p), a 28% increase. Fully diluted earnings per share increased by 27% to 20.5p (1996: 16.1p). Operating margins rose to 35.1% from 27.2% in 1996, a 29% improvement and the fifth consecutive year of improvements in AMVESCAP’s operating margins.
The strength of sterling adversely impacted the translation of our results for 1997 when compared to 1996 as our operations are conducted primarily in US dollars. Operating profits for the year 1997 were approximately £9 million less than would have been reported using prevailing exchange rates for 1996.
Funds under management reached $192.2 billion at the end of 1997 (1996: $94.5 billion) and increase of 103% over the prior year.
The Board has recommended a final dividend of 4.5p to be paid as a foreign income dividend, bringing our total dividend for 1997 to 7.0p (1996: 6p), an increase of 17% over the prior year. AMVESCAP has paid 34% of its net profits in dividends for each of the past two years and has increased its total dividend payout to £39.4 million, an increase of £22.4 million over 1996.
b. The Year in Review
Our merger with AIM Management Group Inc (AIM), one of the largest, fastest growing mutual fund groups in the US, was completed on 28 February 1997. This merger clearly was the most important event of the year for AMVESCAP.
The transition period following the merger of INVESCO and AIM was efficiently completed and excellent relationships have been created throughout the organisation at all levels around the world. In August 1997, the INVESCO Advisor
Funds, distributed through financial intermediaries, were successfully transferred to AIM and re-branded as the AIM Advisor Funds.
The opportunities to create new revenue streams through this combination continue to be implemented and the potential for our Company is very exciting. We have created many new opportunities for clients and our employees and look forward to this continuing into 1998.
The merger has transformed the Company, making it one of the largest independent investment companies in the world. It has created an entity which has enhanced shareholder value by providing access to one of the most successful broker distribution networks in the US, offering a broader range of investment products and enhancing our position in the US defined contribution marketplace. Two very successful management teams have been combined, providing the financial resources and strong cash flows to enhance our expansion and development. We are well positioned to move into the 21st century as a leader in the global investment management business.
The global asset management industry has concluded an exceptional year. The financial results for 1997 set new records for income, pre-tax profits and earnings per share and the investment community has acknowledged the successful implementation of our business strategies through an increase in share value of more than 100% during the course of 1997.
c. Outlook
As we approach the first anniversary of our merger with AIM, we can be proud to say that the integration of our two businesses and cultures has gone extremely well. The merger was based on revenue synergies rather than cost savings. The milestones set to bring the two companies and management teams together have been successfully accomplished within targeted time frames. We believe the opportunities for our industry are exceptional and we feel that our Company has the resources necessary to continue to be a major force in the global fund management business. We are focused on creating value for our shareholders.
We have come through an exceptional period. Our success could not have been accomplished without the support and dedication of our employees and the guidance and counsel of our Board of Directors. I am grateful for the many contributions that each group has made during the year.”
AMVESCAP PLC
Group Profit and Loss Account (in thousands)
For the year ended 31 December
1997† 1996† 1997 1996 REVENUES, including £257.4m from acquisitions in 1997 $870,281 $368,527 £530,659 £236,235 Operating expenses (565,100) (268,283) (344,573) (171,976) OPERATING PROFIT, including £128.3 million from acquisitions in 1997 305,181 100,244 186,086 64,259 Investment income 15,186 6,731 9,260 4,315 Interest expense (29,606) (4,045) (18,053) (2,593)
Profit before taxation 290,761 102,930 177,293 65,981
Taxation (98,858) (32,738) (60,279) (20,986)
Profit after taxation 191,903 70,192 117,014 44,995 Dividends (64,718) (26,445) (39,462) (16,952) Retained profit $127,185 $43,747 £77,552 £28,043 EARNINGS PER ORDINARY SHARE - basic - fully diluted $3.72* $3.36* $2.76* $2.51* 22.7p 20.5p 17.7p 16.1p
† Pounds sterling for the year ended 31 December, 1997 have been translated into US dollars using $1.64 (1996: $1.56) per £1.00.
AMVESCAP PLC
Group Balance Sheet (in thousands)
31 Dec 1997† 31 Dec 1996† 31 Dec 1997 31 Dec 1996 FIXED ASSETS - Tangible assets $77,038 $34,546 £46,832 £20,417 - Investments 142,664 118,760 86,726 70,189 219,702 153,306 133,558 90,606 Current Assets 482,441 473,384 293,277 279,778 CREDITORS: Amounts
falling due within one year
Convertible unsecured
loan stock - (202,011) - (119,392)
Senior and convertible
unsecured loan notes (42,755) - (25,991) -
Loans and other creditors
(319,179) (172,327) (194,030) (101,848) Net current assets 120,507 99,046 73,256 58,538 Total assets less current
liabilities 340,209 252,352 206,814 149,144
CREDITORS: Amounts
falling due after one year (344,088) (54,721) (209,172) (32,341)
Provisions for liabilities and
charges (31,530) (7,514) (19,167) (4,441) $(35,409) $190,117 £(21,525) £112,362
Capital and reserves
Called up share capital $244,774 $114,799 £148,799 £67,848 Share premium account 258,087 56,148 156,892 33,184 Profit and loss account 352,718 231,577 214,418 136,866
855,579 402,524 520,109 237,898 Other reserves (890,988) (212,407) (541,634) (125,536) Shareholders’ funds $(35,409) $(190,117 £(21,525) £112,362
† Pounds sterling at 31 December, 1997 have been translated into US dollars using $1.645 (1996: $1.692) per £1.00.
AMVESCAP PLC
Business Group Operating Profits (in thousands)
For the year ended 31 Dec 1997
Revenues Expenses Profit
Managed Products - AIM £257,389 £(129,133) £128,256 - INVESCO 95,269 (69,781) 25,488 352,658 (198,914) 153,744 US Institutional 99,939 (54,275) 45,664 INVESCO Global 77,793 (70,533) 7,260 530,390 (323,722) 206,668 Corporate 269 (20,851) (20,582) £530,659 £(344,573) £186,086
For the year ended 31 Dec 1996 Revenues Expenses Profit
Managed Products - AIM £- £- £- - INVESCO 83,496 (55,891) 27,605 83,496 (55,891) 27,605 US Institutional 90,529 (44,371) 46,158 INVESCO Global 62,135 (57,863) 4,272 236,160 (158,125) 78,035 Corporate 75 (13,851) (13,776) £236,235 £(171,976) £64,259
NOTES
1. The merger with AIM Management Group Inc (AIM) was completed on 28 February 1997. Pursuant to the merger agreement, the Company acquired all of the issued and outstanding shares of capital stock of AIM and issued 252.3 million new Ordinary Shares of the Company’s stock. Additionally, a further 5 million new Ordinary Shares have been issued and a further 32.5 million will be issued in future periods in respect of vested and invested AIM options. The balance of the consideration of approximately £345 million was paid in cash from the net proceeds of the rights offering completed in February 1997 and from amounts drawn under the Company’s five-year credit facility.
The results of AIM Management Group Inc have been included from 1 March 1997. The transaction has been accounted as an acquisition and the net goodwill after statutory merger relief has been written off to reserves, resulting in a deficit in capital and reserves at 31 December 1997.
The following proforma information assumes the AIM merger was completed on 1 January with the issue of 252.3 million new Ordinary Shares, cash consideration of £345 million, the completion of the rights issue and other adjustments relating to the merger.
Year ended 31 Dec
1997 1996 £’000 £’000 Revenue 572,710 466,086 Operating profit 200,728 163,596 Pre-tax profit 189,028 147,020 Net income 124,643 95,563
2. The taxation charge, which is based on the profits for the year, is made up as follows: 1997 1996 £’000 £’000 UK Corporation tax at 31.5 per cent (1996: 33 per cent) 4,271 2,887 Tax credits attributable to franked investment income 135 55
ACT recoverable (476) (2,047)
Overseas taxation 56,349 20,091
3. Earnings per ordinary share are calculated on the profit for the financial period of £117.0 million (1996: £45.0 million). The weighted average number of ordinary shares in issue during the period was 516.3 million (1996: 254.8 million).
The fully diluted earnings per share are based on earnings of £123.4 million (1996: £49.0 million) and shares of 600.8 million (1996: 305.1 million). The adjustment to earnings reflects the saving of interest on the convertible loan note and assumes that the proceeds on the exercise of options and repayment of loans by the Employee Share Option Trust were invested in 2½ per cent Consolidated Stock. The 1997 fully-diluted earnings per share includes adjustments of 42.5 million shares for the Employee Share Option Trust, 14.6 million shares for the Convertible Unsecured Loan Note and 27.4 million shares for outstanding options.
The weighted average number of shares for periods before 26 February 1997 have been adjusted to compensate for the effects of the rights issue.
4. Dividends for 1997 and 1996 were as follows:
1997 1996
£’000 £’000
Interim paid: 2.5p per share (1996: 2p) 13,952 4,962 Final proposed: 4.5p per share (1996: 4p) 25,510 11,990
39,462 16,952
Subject to shareholders’ approval at the Annual General Meeting on 7 May 1998, the final dividend in respect of 1997 will be paid on 6 July 1998 to shareholders on the register at the close of business on 3 April 1998.
5. The financial information set out above does not constitute the Company’s statutory accounts for the years ended 31 December 1997 or 1996. Statutory accounts for 1996 have been reported on by the Company’s Auditors and delivered to the Registrar of Companies. The report of the Auditors was unqualified and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985.
AMVESCAP PLC Funds Under Management
(in billions)
Managed Products
Total AIM* INVESCO US Inst INVESCO
Global 31 December, 1996 $156.8 $62.3 $19.5 $59.2 $15.8
Market gains 24.1 8.2 4.1 11.3 0.5
Net new (lost)
business 12.0 11.3 0.5 (2.0) 2.2 Transfer - 1.3 (1.3) (0.6) 0.6 Foreign currency (0.7) - - - (0.7) 31 December 1997 $192.2 $83.1 $22.8 $67.9 $18.4 31 December 1997 † £116.8 £50.5 £13.8 £41.3 £11.2 31 Dec 1997 31 Dec 1996* CLIENT CATEGORY: Institutional $71.3 $63.0 Open-end funds 104.9 19.0 Closed-end funds 2.1 2.2
Private clients and wrap accounts 8.0 5.7
Collective accounts 5.9 4.6 $192.2 $94.5 INVESTED IN: Equities $126.5 $58.9 Fixed income 64.1 34.3 Real property 1.6 1.3 $192.2 $94.5
* AIM became part of the Group on 28 February 1997, at which date its funds under management were $67.2 billion.
† Translated at $1.645 per £1.00.
Funds under management are based on the assets gathered in each group, some of which are managed by other business groups. Open-end funds include unit trusts, closed-end funds include investment trusts.
AMVESCAP PLC
Reconciliation to US Accounting Principles (in thousands)
The following is a summary of material adjustments to profit and shareholders’ funds which would be required if US Generally Accepted Accounting Principles (“US GAAP”) had been applied instead of UK Generally Accepted Accounting Principles (“UK GAAP”). The most significant differences relate to the treatment of goodwill, employee stock ownership plans and intangibles, and the treatment of deferred income taxes. Goodwill and other tangible assets are amortised over their estimated useful lives, which vary between 7 and 35 years. Goodwill arising from the AIM merger is being amortised over 25 years.
31 Dec
1997 31 1996* Dec Net profit under UK GAAP £117,014 £44,995
US GAAP ADJUSTMENTS:
Pension costs 1,082 306
Goodwill and other intangibles (44,496) (13,592)
Taxation (4,647) (657)
Net income under the US GAAP £68,953 £31,052 Net income per share under US GAAP (basic) 13p 13p Net income per share under US GAAP (fully diluted) 12p 10p
31 Dec
1997
31 Dec 1996 Shareholders’ funds under UK GAAP (£21,525) £112,362
US GAAP ADJUSTMENTS:
Pension costs 5,298 4,216
Goodwill and other intangibles 1,079,307 99,807
Deferred taxation (4,764) (10,050)
Deferred earn-out payments 383 2,532
Employee stock ownership plans (5,772) (7,166)
Treasury stock (87,475) (73,809)
Dividends 25,510 11,990
