2018 Guide to Effective Proxies

6 TH EDITION | GUIDE TO EFFECTIVE PROXIES 268 INVESCO LTD Our chief executiveofficer’s2017 compensation Basedonour financialperformance,ourCompensationCommitteedetermined that Mr. Flanagan’s total incentive compensation shouldbe increased approximately2.5% aspartof the committee’s rigorous and judicious executive compensationdecision makingprocess. The changes to each component ofMr. Flanagan’s compensation are detailed in the table below. 63% of total compensation is awarded in equity, ofwhich50% is comprised of performance shares BaseSalary 6% of pay $790,000 y-o-y change0% AnnualCashBonus 31% of pay $4,268,003 y-o-y change+6% AnnualStockDeferral 13% of pay $1,766,861 y-o-y change+6% Long-TermEquity Award 50% of pay $6,948,000 y-o-y change0% 94% of total compensation is incentive based 1 See note on page43 regarding differences from the summary compensation table. 1 Incentive based compensation consists of annual cash bonus, annual stock deferral award and long-term equity award. Mr. Flanagan’s total incentive compensation was increased by approximately2.5%. 34 PROXY-BRO-1 03-18.indd 34 3/20/18 4:13PM Total of 04 pages in section 33 Performance-based equity Increased amount of equity subject to performance-vesting commencingwith equity awarded for2017. The committee has determined that50% of the combined value of all short- and long-term equity awards to our executive officerswill be performance-based.We believe this enhancement further strengthens the alignment of our executive officers’ compensationwith client and shareholder success. $10MillionCap onCEOCashBonus Placed a$10millionmaximum on theCEO’s cash bonus for2018. This cap is in addition to the previously established cap on theCEO’s total compensation of$25million,with actual pay expected to be below that level. Enhancements to our executive compensation program During2017,we again sought feedback on our executive compensation programs from our largest shareholders. The shareholderswho recently provided feedback did not voice anymaterial concerns and positively acknowledged enhancements made in2016. In response to shareholder feedback and the committee’s review, the committeemade the following enhancements to its executive compensation program: Our strategicobjectives 2017Achievements (continued) Achieve strong investment performance (continued) – A number of our investment teamswere recognized by leadingfinancial publications and the industry, including one publication that named InvescoPerpetual “FundManager of theYear” for the third straight year. – Our InternationalGrowth team in theUS celebrated25 years of out-performance. The fund has consistently outperformed its benchmark100% of the time over all80 quarterlyfive-year rolling periods since inception. Be instrumental to our clients’ success – Continued to build our comprehensive range of active, passive and alternative capabilitieswhile strengthening our scale and relevance in key capabilities: – Completed the acquisition of a leading independent specialist provider of exchange-traded funds (ETFs) based in Europe; and – Announced our intention to acquireGuggenheim Investments’ ETF business,which includes 76 ETFs thatwill strengthen the depth, breadth and diversity of Invesco’s traditional and smart beta ETFs. – Continued to expand our InvescoSolutions team,which brings together the full capabilities of thefirm to provide outcomes that help clientsmeet their investment objectives. Harness the power of our global platform – Further expanded and enhanced our ability to help our advisor clients engagewith their clients and improve their investment experience through Jemstep, our advisor-focused technology solution.Announced partnershipswith a number of large enterprises using our Jemstep digital advice capability.Continued to drive savings through our business optimization program,which deliveredmore than$40million in annualized run-rate expense savings as of the end of2017. The savingswill be reinvested in initiatives that enhance our ability tomeet client needs and key growth initiatives for future years (e.g., factor-based investing, institutional and our expansion inChina). Perpetuate a high- performance organization – Further strengthenedour investment anddistribution teams throughnewhires andour efforts to attract,develop,motivate and retain thebest talent in the industry. – Conductedourbi-annual employeeopinion survey, inwhich Invesco’s employee engagement scoreshave exceededotherglobalfinancial servicesfirmnorms every survey since the inception of the survey in2006.Keydriversof Invesco’s employee engagement are (1) empowerment/ involvement, (2) ethics and valuesof thefirm and (3) thefirm’s strategy anddirection. PROXY-BRO-1 03-18.indd 33 3/20/18 4:13PM 32 2017Financial performance (year-over-year change) Annual adjusted operating income 1 Annual adjusted operatingmargin 1 Annual adjusted diluted EPS 1 Long-TermOrganic GrowthRate 2 $1.5 billion (+12.8%) 39.4% (+0.7 percentage points) $2.70 (+21.1%) 1.7% (-0.9 percentage points) 1The adjusted financialmeasures are allnon-GAAP financialmeasures.See the information inAppendixBof thisProxyStatement regardingNon-GAAP financialmeasures. 2Annualized long-termorganicgrowth rate is calculatedusing long-termnet flowsdividedbyopening long-termAUM for theperiod.Long-termAUM excludes institutionalmoney market andnon-management fee earningAUM. Our strategicobjectives 2017 achievements – a strong focus on delivering better outcomes to clients and strengthening our competitive position Achieve strong investment performance Percent of our activelymanaged assets in the top half of our peer group.SeeAppendixA for important disclosures regardingAUM ranking. 57% 1-Year 64% 3-Year 85% 5-Year 7 43% 36% 25% • Assets top half of peer group • Assets bottom half of peer group – Further strengthened our investment culture,which enabled us to deliver strong, long- term investment performance to our clients across the globe:64% and75% ofmeasured activelymanaged ranked assets in the top half of peer groups on a three- andfive-year basis, respectively. Executive Summary Our2017 highlights Invesco continued tomake progress against ourmulti-year strategic objectives (outlined below),which enabled us to deliver strong, long-term investment performance to clients, further advance our competitive position and deliver solid returns to shareholders.We achieved nine consecutive years of positive, long-term net flows and record adjusted diluted earnings-per-share.We also took advantage of opportunities in themarket and further invested in our capabilities, our global platform and our people inways that strengthened our business and further differentiated us in themarketplace to help ensure our long-term success. After a review of the company’s financial performance, ourCompensation Committee determined that the company-wide incentive pool should be slightly increased for2017.After reviewing key outcomes in the context of ourmulti- year strategic objectives and annual operating plan, the committee, as part of its rigorous and judicious executive compensation decision-making, determined that our chief executive officer’s total incentive compensation should be increased by approximately2.5%. We continued to successfully execute our strategic objectives for the benefit of clients and shareholders We focus on four keymulti-year strategic objectives that are designed tomaintain our focus onmeeting client needs and strengthen our business over time for the benefit of shareholders. In2017wemade significant progress against our strategic objectives and enhanced our ability to deliver strong outcomes to clientswhile further positioning the firm for long-term success. 32 PROXY-BRO-1 03-18.indd 32 3/20/18 4:13PM JOHNSON & JOHNSON Performanceagainst ourLong-Term StrategicGoals • ExcellenceinExecution: We exceeded ourobjectivesthattrackelementsweneed toexecutetounleashadditionalgrowthopportunities.We: • Madestrategicacquisitionstoenhanceourfuturegrowth , includingActelionLtd. andAbbottMedicalOpticsInc. • AchievedourEnterpriseStandardsandProductivityannualsavingsgoal. • Metorexceededallourqualitygoals. • LeadingwithPurpose: We met ourobjectivesthatmeasureourorganizational health,diversity,andreputation.We: • Strengthenedourleadershiptalentpipeline,advanceddiversity,andexceeded ouremployeeengagementbenchmarks. • Maintainedourhighreputationalstanding,ranking#17amongFortune’sMost AdmiredCompaniesandplacing#1inthepharmaceuticalindustryforthe5 th consecutiveyear. Performanceby Business • Pharmaceuticals exceededitsoperationalsalesgrowth,operationalincome,and cashflowgoals.In2017,it: • AdvancedourinnovationpipelinewiththeapprovalofTREMFYA ® fortreatment ofmoderatetosevereplaquepsoriasis,andcompletedtheacquisitionofActelion Ltd. • Maximizedthevalueofourin-marketbrandsthroughlineextensionapprovals, including:SIMPONI ® ,STELARA ® ,XARELTO ® ,DARZALEX ® andIMBRUVICA ® . • Consumer exceededitscashflowgoal,metitsoperationalincomegoal , anddidnot meetitsoperationalsalesgrowthgoal.In2017,it: • Maintainedmarketshareagainstourcompetitorsin4ofour6coreplatforms, despitecategoryslowdowns. • AdvancedoureCommercecapabilities . • MedicalDevices metitscashflowgoalanddidnotmeetitsoperationalsalesand incomegoals.In2017,it: • Increasedmarketsharein3ofour6keyproductplatforms. • Exceededouroperationalsalesgrowthgoalandgainedmarketshareinour VisionCarebusiness. • Managedourproductportfolio:acquiringMegadyneMedicalProducts,Inc. (energy)andNeuraviLimited(neurovascular);integratingAbbottMedicalOptics Inc.;anddivestingtheCodmanNeurosurgerybusiness. 2018ProxyStatement-45 Total of 04 pages in section 2017 COMPANY PERFORMANCE Wedeliveredsolidperformancein2017.Welargelymetorexceededourcombinedfinancialandstrategicgoals.Thiswas drivenbystrongperformanceinourPharmaceuticalbusiness.Wemadegoodprogressonmanyimportantstrategic initiativesthatwillbenefitourcompanyinfutureyears. Wesummarizethecompany'sperformanceagainstfinancialandstrategicgoalsbelow.Wealsosummarizethe performanceofeachofourbusinesses.Wesetourgoalsbasedonourlong-termstrategicobjectives,ourproductportfolio andpipeline,andcompetitivebenchmarking. 2018ProxyStatement-44 Performanceagainst our2017Financial Goals Wemetorexceededallourfinancialgoalsin2017.We: • Met ouroperationalsalesgrowthgoal. • Met ouradjustedoperationalearningspershare(EPS)growthgoal. • Exceeded ourfreecashflowgoal. Ourannualgoalsaresetconsistentwithourlong-termstrategicobjectivesofgrowingsales fasterthanourcompetitorsandearningsfasterthansales.OursalesgrowthandEPS resultsdonotincludetheimpactofourActelionLtd.acquisitionsinceitwasnotincludedin thegoals. Note:Operationalsalesgrowth,adjustedoperationalEPSgrowth,andfreecashflowarenon-GAAP measures.Seepage46fordetails. Performanceagainst ourLong-Term StrategicGoals Wemadegoodprogressonourstrategicobjectives.Weexceededonsome,fellshort onothers,andmadeimportantstrategicmovesthatwillbenefitourcompanyinfuture years. • CreatingValuethroughInnovation: We partiallymet ourobjectivesthatmeasure thehealthofourprioritybusinessplatformsacrossall3businesses.We: • Gainedorheldsharein12of15keyproductplatformsandexceededsales growthtargetsin6of15ofthem. • Achieved100%ofourpriorityinnovationmilestones. • Advancedourrobustpipelinebylaunchingkeynewproductsandlineextensions acrossour3businesses. • Investedmorethan$10billioninresearch&developmentin2017.Webelieve thatsustaininginvestmentsininnovationisthemostimportantaspectofour strategy. • GlobalReachwithLocalFocus: We didnotmeet ourobjectivesthatmeasurethe healthofourbusinessinregionsofferingsignificantgrowthopportunities.We: • FellshortofourMedicalDevicesandConsumersalesgoalsandPharmaceutical BRIC-market(Brazil,Russia,India,andChina)salesgoal . • ExceededoursalesgoalsinourPharmaceuticalbusinessindevelopedmarkets andnon-BRICemergingmarketswhichdrovetheachievementofourcompany- widegrowthgoal. Result:$17.8 Result:$17.8 $0 $18 Result:6.5% Result:4.0% 0% 7% OperationalSalesGrowth AdjustedOperationalEPSGrowth FreeCashFlow ($Billions) Goal:4.0%-5.0% Goal:4.8%-7.0% Goal:$14.8-$15.6 7% 0% 2017 Performance and Compensation 2018ProxyStatement-43 2017 SUMMARY OurCredo Whenweassessperformance,wereviewnotonlywhatresultswereachievedbutalsohowthey wereachievedandwhethertheywereachievedconsistentwiththevaluesembodiedinOurCredo. In2017,weupheldourCredovaluesbyfocusingontheneedsandwell-beingof:ourpatients, consumers,andhealthcareprofessionalswhouseourproducts;ouremployees;thecommunities inwhichweliveandwork;andourshareholders. Company Performance Wedeliveredsolidperformancein2017.Welargelymetorexceededourcombinedfinancialand strategicgoals.ThiswasdrivenbystrongperformanceinourPharmaceuticalbusiness.Wemade goodprogressonmanyimportantstrategicinitiativesthatwillbenefitourcompanyinfutureyears. FinancialGoal Goal Results Met ouroperationalsalesgrowthgoal 4.0%-5.0% 4.0% Met ouradjustedoperationalEPSgrowthgoal 4.8%-7.0% 6.5% Exceeded ourfreecashflowgoal($Billions) $14.8-$15.6 $17.8 Note:Operationalsalesgrowth,adjustedoperationalEPSgrowth,andfreecashflowarenon-GAAPmeasures. Seepage46fordetails.OursalesgrowthandEPSresultsdonotincludetheimpactofourActelionLtd. acquisitionsinceitwasnotincludedinthegoals. Wesummarizeourperformanceagainstourfinancialandstrategicgoalsandtheperformanceof eachofourbusinessesonpages44to46. Compensation Decisionsfor 2017 TheBoardbelievesthecompanylargelymetorexceededitscombinedfinancialandstrategic goals.ItrecognizedMr.Gorsky’s2017performancebyawardinghimanannualperformancebonus at110%oftargetandlong-termincentivesat115%oftarget.Afterreviewingmarketdataandother factors,theBoardadjustedMr.Gorsky’ssalaryrateby3.1%to$1,650,000(effectiveFebruary26, 2018). 2017Amount ($) Percentof Target (%) SalaryEarned $1,600,000 AnnualPerformanceBonus 3,080,000 110% Long-TermIncentiveAwards 14,352,000 115% TotalDirectCompensation $19,032,000 WedescribetheperformanceandcompensationofourChairman/CEOonpage47andournamed executiveofficersonpages48to51. Updateon Performance ShareUnit Awardsvs.Goals Our2015-2017PerformanceShareUnits(PSU)paidoutat136.0%oftargetdrivenprimarilybyour 3-yearTotalShareholderReturn(TSR)exceedingourcompetitorsandEPSperformanceexceeding ourgoals. WedescribethePSUsearnedunderallthreeofourPSUgrantsthatwereactivein2017onpages 52to54. Shareholder Outreach OurLeadDirectorandmanagementdiscussedourexecutivecompensationprogramwithour shareholders.Ourshareholderscontinuedtostronglysupportourprogram.Our“SayonPay”vote hasbeen93%ormoreinfavorsince2013.Seepage55formoredetail. Compensation ProgramChanges In2017,weincreasedtheweightofourPSUsto60%forour2018long-termincentivegrantbased on:shareholderfeedback,competitivedata,andourobjectiveofincreasingthefocusonlong-term performance.Theweightingis:60%PSUs,30%options,and10%RSUs.Seepage55formore detail.