2008
ANNUAL REPORT
(cid:129) December 31, 2008
TABLE OF CONTENTS
3 Letter to Shareholders (cid:129) 9 Historical Financial Highlights (cid:129) 11 Subsidiary Profiles
14 Management’s Discussion and Analysis (cid:129) 41 Consolidated Financial Statements
46 Notes to Consolidated Financial Statements (cid:129) 73 Corporate Directory (cid:129) 74 Corporate Information
CI Financial Corp. is a diversified wealth management firm and
Canada’s third-largest investment fund company. Independent and
Canadian-owned, CI provides a comprehensive selection of top-quality
investment products and services. CI has over two million clients and
approximately $78.1 billion in fee-earning assets (at March 31, 2009).
The company operates primarily through subsidiaries CI Investments
Inc., which offers the industry’s broadest selection of investment funds,
Assante Wealth Management (Canada) Ltd., which provides financial
advisory services through a national network of 800 financial advisors,
and Blackmont Capital Inc., a full-service investment dealer. CI is listed
on the Toronto Stock Exchange under the symbol CIX and is a
member of the S&P/TSX Composite Index.
Financial Highlights
(millions of dollars, except unit amounts) As at December 31, 2008 As at December 31, 2007 % change
Assets under management 54,585 69,129 (21)
Fee-earning assets 80,260 105,577 (24)
Units outstanding 292,492,805 281,514,003 4
For the year ended For the year ended
December 31, 2008 December 31, 2007 % change
Average assets under management 60,208 64,958 (7)
Management fees 1,163.8 1,292.7 (10)
Total revenues 1,511.9 1,654.9 (9)
SG&A 332.6 346.7 (4)
Trailer fees 336.1 368.8 (9)
Net income 445.4 625.1 (29)
Earnings per unit 1.60 2.21 (28)
EBITDA* 633.6 737.9 (14)
EBITDA* per unit 2.27 2.61 (13)
Distributions per unit 1.88 2.20 (15)
Average units outstanding 278,657,288 282,214,499 (1)
*EBITDA (Earnings before interest, taxes, depreciation and amortization) is a non-GAAP (generally accepted accounting principles)
earnings measure; however, management believes that most of its unitholders, creditors, other stakeholders and investment
analysts prefer to include the use of this performance measure in analyzing CI’s results. EBITDA is a measure of operating
performance, a facilitator for valuation and a proxy for cash flow.
1
CIX.UN vs S&P/TSX Composite Index Total Return June 1994 = 100
2,711
2,760
2,425
1,468
1,339
979
1,079
923
942
241
215
214
195
244
284
354
395
434
3000
2500
1,562
2000
CIX.UN
1500
1000
291
500
May
‘00
May
‘01
May
‘02
May
‘03
May
‘04
May
‘05
May
‘06
Dec
‘06
Dec
‘07
Dec
‘08
S&P/TSX Composite Index
206
159
May
‘97
289
192
May
‘98
368
175
May
‘99
Fee-earning Assets $billions
105.6
93.4
80.3
82.8
76.7
69.4
26.7
26.8
25.8
33.1
6.5
8.3
9.7
May
‘97
May
‘98
May
‘99
May
‘00
May
‘01
May
‘02
May
‘03
May
‘04
May
‘05
May
‘06
Dec
‘06
Dec
‘07
Dec
‘08
CIX.UN Unit Price and Distributions Per Unit adjusted for stock splits : $
12.83
14.10
12.00
11.90
17.30
16.44
31.03
26.72
28.07
CIX.UN
Unit Price
2.20
14.50
1.88
2.75
0.02
May
‘97
3.84
0.02
May
‘98
4.84
0.025
May
‘99
0.025
0.025
0.06
0.29
0.405
0.675
0.70
1.065
Distributions
Per Unit
May
‘00
May
‘01
May
‘02
May
‘03
May
‘04
May
‘05
May
‘06
Dec
‘06
(seven months)
Dec
‘07
Dec
‘08
0
0
120
100
80
60
40
20
35
30
25
20
15
10
5
0
2
Letter to Shareholders
Dear Shareholders,
There is no use in sugarcoating it – 2008 was the most difficult year CI has ever faced.
The reasons are well known. To put it as briefly as possible, the U.S. credit mess grew into a global crisis that
collapsed some of the world’s largest financial institutions, brought the world economy to a screeching halt
and sent equity markets off a cliff in the last four months of the year.
The MSCI World Index finished the year with a drop of 40%, while the S&P 500 was down 37% (both in
U.S. dollars). After hitting an all-time high in June, the S&P/TSX Composite dropped 40% by the end of the
year. For 2008 as a whole, the Canadian index fell 33%. Global equity markets continued to be volatile in the
first quarter of 2009.
Nevertheless, your company performed well in the face of unfavourable circumstances. We continued to post
respectable earnings, having avoided the pitfalls, such as impaired investments in asset-backed commercial
paper, that affected other financial services companies. Our strong cash flow enabled us to return $1.88 per
unit to our owners over the year. We recorded net sales of $1.7 billion, becoming the only fund company in
Canada to have exceeded $1.2 billion in net sales of long-term funds for five years in a row.
In response to the market volatility, we moved quickly to review all of our expenditures and cut costs in the
third and fourth quarters. The reductions were substantive, and we expect them to result in a savings of
approximately $45 million in fiscal 2009. There were many tough decisions, but our long-standing policy is
to keep our expenses aligned with our assets. This helps to maintain the company’s profitability, and was
prudent in today’s uncertain environment.
There were many developments on other fronts in 2008. We decided the time was right to convert back to a
corporation from an income trust structure, a change that was effective on January 1, 2009. Our units were
converted to shares, and our stock symbol became CIX once again. The makeup of our ownership changed
also, with Sun Life Financial selling its 37% stake in CI to the Bank of Nova Scotia late in the year.
3
The actions we have taken in 2008 have maintained – if not improved – our competitive standing within our
industry. We follow a well-defined strategy at CI that has guided your company through difficult times and led
to excellent long-term growth.
Our Strategy
CI’s strategy consists of a focus on these key elements:
(cid:129) Scale – The achievement of scale allows us to benefit from economies of scale and invest more resources
in technology, administration, product development and sales support. Acquisitions have been a key
component of this strategy.
(cid:129) Diversification – CI’s broad and varied lineup of products and services reduces our dependence on any one
sector, product or portfolio manager and ensures that we are well positioned as investors’ needs and
preferences change and evolve. It also supports our relationships with advisors, by providing them with
products designed to meet the needs of most clients.
(cid:129) Distribution – CI has developed multiple channels of distribution through products such as segregated
funds, our participation in third-party investment programs at other financial institutions, our relationship
with the Sun Life Financial advisor network, and our ownership of distributors Assante and Blackmont.
These efforts have made a significant contribution to the growth of our sales and assets.
(cid:129) Operations – Our drive for operational excellence includes the efficient operation of our funds and our
company, and the development of high-quality products, superior service and a well-known brand.
Financial Results
CI finished the year with $80.3 billion in fee-earning assets, a decline of 24% from $105.5 billion at the end
of 2007. Assets under management were $50.8 billion, down 21% from $64.2 billion a year earlier. Average
retail assets under management for 2008 were down just 7%, to $60.2 billion, reflecting the gains in equity
markets in the first half of the year.
This asset decline was painful by any measure. However, it was in line with the Canadian mutual fund
industry, which saw assets under management fall 20% during the year. CI fared better than many other
investment firms, with our strong net sales and our portfolio managers’ performance helping to offset the
market decline. Our market share was stable in 2008. According to research firm Investor Economics, our
market share of mutual fund assets fell slightly from 8.2% to 8.1% as of December 2008, while our share of
segregated fund assets grew from 12.4% to 13.6%.
4
CI’s revenues for the year were $1.51 billion, which is 8.6% less than the previous year’s level of $1.65 billion.
Net income came in at $445.4 million, a decline of 28.7% from $625.1 million in 2007. Per unit, net income
was $1.60 ($1.59 diluted), versus $2.21 ($2.21 diluted) a year earlier.
Factors affecting net income in 2008 included an $11 million writedown of the value of marketable securities
and an $11 million restructuring charge, which largely consisted of severance costs. We succeeded in cutting
overall expenses, achieving a reduction of about $45 million on an annualized basis in 2009 from levels
experienced in the third quarter of 2008. As we said earlier, these expense reductions were necessary to ensure
the company is managed in a cost-effective way. It is important to note, however, that we continue to invest
in the company’s growth through product development and new technology.
Our financial discipline is also driven by the commitment we have made to our fund investors to cap the
funds’ operating expenses. Since September 2005, CI has been paying the operating expenses of the CI and
United Financial mutual funds while charging a fixed administration fee, which averages about 18 basis
points across our fund lineup. The benefits to investors, including lower costs, transparency and
predictability of fees, are even more valuable in today’s environment. At fund companies without a fixed fee,
the operating expenses paid by investors tend to rise when assets are declining. For CI, our low fund
operating costs are a competitive advantage.
In 2008, as an income trust, CI continued to pay significant distributions to unitholders. During the year,
CI generated $583.3 million in cash flow from operating activities and paid distributions of $524.3 million,
or $1.88 per unit. This compares with 2007 distributions of $623.9 million, or $2.20 per unit. CI has
established an extraordinary long-term record of returning cash to its owners. Since going public in 1994,
when CI raised $25 million, CI has returned $2.95 billion to its owners in the form of dividends, distributions
and share buybacks.
With CI’s conversion to a corporation, which we discuss later in this letter, we have adopted a new dividend
policy, which anticipates a quarterly dividend of $0.12 per share in 2009. This policy permits us to preserve
cash to finance growth and potential acquisitions. Along the same lines, we also took the opportunity in
December to issue 15 million units at a price of $14 per unit. The net proceeds of just over $200 million were
used to pay down debt.
Not surprisingly, the events of 2008 had a substantial impact on our unit price, which fell from $28.07 at
December 31, 2007 to $14.50 as of December 31, 2008. Including distributions, the total return for the year
was (43.4%). This compares with declines of 39% in the financial services sub-index of the S&P/TSX
Composite Index and 50% in the capital markets group of the sub-index.
5
Over the longer term, our returns have been much better. Since our initial public offering in June 1994 to
December 31, 2008, CI shares have returned 1,462%, for a compound annual growth rate of 20.8%. Over the
same period, the S&P/TSX Composite Index has returned 191%, or 7.6% annually.
Operating Results
Despite the market turmoil, CI continues to achieve excellent results in key operating areas. We posted net sales
of $1.7 billion and, while this was down from the previous year’s total of $1.9 billion, it was still an impressive
tally given the year’s events. We ranked third in the industry for long-term net sales, with $1.3 billion. As we
said earlier, we are the only fund company in Canada to have surpassed $1.2 billion in long-term net sales for
five consecutive years. This positive sales trend has continued in 2009, with CI having net sales of $179 million
in the first three months of the year.
Our sales success flows from our broad and diverse lineup of funds and the strong performance of our portfolio
managers. We continue to offer the most mutual and segregated funds with the top four and five-star ratings
from Morningstar Canada. As of February 28, 2009, CI Investments had 177 four-star funds and 70 five-star
funds. As of January 31, 2009, the percentage of our assets under management with first or second-quartile
performance was 76% over five years and 79% over 10 years.
In 2008, CI Investments won six Canadian Investment Awards, including Fund Manager of the Year for Gerry
Coleman, head of our Harbour Advisors portfolio management team. This was the second time that he has
won this prestigious award. Mr. Coleman’s Harbour Fund and Harbour Growth & Income Fund were also
winners in their categories. In addition, Eric Bushell, Chief Investment Officer of Signature Global Advisors,
was selected by Investment Executive newspaper as its Fund Manager of the Year.
In 2008, we enhanced our fund lineup with the introduction of several new products, including:
(cid:129) The Cambridge Funds. This family of CI Investments mutual funds is managed by Alan Radlo, a highly
respected and experienced portfolio manager with a dedicated following in the Canadian investment
community. In a very difficult 2008, Mr. Radlo achieved a successful start for the Cambridge funds. They had
$450 million in net sales and his two equity funds recorded first-quartile performance.
(cid:129) Evolution Private Managed Accounts, a new investment program for high net worth investors from United
Financial. Evolution, which offers an innovative combination of features, including strategic asset allocation,
tax efficiency and a high level of customization, has attracted over $110 million in net sales since its launch
in September.
6
(cid:129) A guaranteed income for life option on our SunWise Elite Plus Segregated Funds, which we offer in
partnership with Sun Life Financial. This option, called the guaranteed minimum withdrawal benefit, allows
an investor in SunWise Elite Plus to receive a guaranteed income for life starting after age 65, a valuable
benefit for investors concerned about the impact of market volatility on their retirement income and the
potential for outliving their savings.
Segregated funds continue to be an exceptional business for CI, with $1.2 billion in net sales in 2008. Today,
they are one of the key drivers of our sales, as the declining markets highlight the value of the funds’ principal
and income guarantees. The guaranteed minimum withdrawal benefit has proven to be popular and is a
distinctive feature that has allowed CI to build on its position as one of the top three companies in this business.
Corporate Conversion
In October, we announced that we would convert back to a corporate structure, ending our two and a half
years as an income trust. Our experience as an income trust was frustrating at times, thanks to government
bumbling and flip-flops. We will not revisit the whole story here, but it became clear in 2008 that the income
trust structure was no longer advantageous for CI.
The federal government’s decision in late 2006 to begin taxing income trusts in 2011 and to impose severe
limits on the growth of existing trusts had created a great deal of uncertainty and made it effectively impossible
for CI to acquire another company of any size. Our conversion to a corporate structure removes this
uncertainty and positions us for continued growth by giving us improved access to the capital markets and
allowing us to pursue acquisitions.
The conversion was approved by our unitholders and the courts, and was completed on January 1, 2009. In
conjunction with the conversion, CI adopted a shareholder rights plan designed to ensure the fair treatment
of shareholders in any transaction involving a change of control.
Sun Life / Scotiabank Transaction
In December, Sun Life completed a transaction in which it sold its 37% stake in CI to Bank of Nova Scotia
for $22 per unit. While this transaction had its share of media coverage, it has not had an impact on CI’s
business. We continue to manage SunWise Elite Plus and other segregated funds in partnership with Sun Life.
Our distribution agreement with Sun Life, under which Sun Life advisors offer CI products, remains in place.
Our relationship with Sun Life has been and continues to be very successful. We welcome Scotiabank as
significant shareholder and partner for CI, and we believe there is the potential for a mutually beneficial
business relationship.
7
Outlook for 2009
In the first quarter of 2009, global equity markets declined sharply amid a worsening economy and continued
concerns that the financial system was not improving in spite of the tens of billions of taxpayer dollars that had
been pumped into banks and other companies. However, in March, stock markets rallied, ahead of a new U.S.
government bailout plan announced late in the month to spend up to $1 trillion buying troubled assets from
the banks and other investors.
Of course, we cannot say if this marks the beginning of a turnaround. As always, we focus on the parts of our
business that we can control. We moved quickly to respond to the dramatic changes that have hit the economy
and our industry, and we continue to build on our competitive advantages. We have a diverse, high-quality
product lineup, including one of the country’s best families of segregated funds, which have additional appeal
in weak markets. Our portfolio managers have turned in an exceptional performance relative to their peers
and the indexes. We continue to have positive net sales, and CI is financially healthy, with strong cash flows.
As one of the top three companies in our industry, we have maintained our market share.
These are extraordinary times, and CI is well placed to take advantage of any acquisition opportunities that
may arise, and we believe that further consolidation in the fund industry is likely. For now, however, your
company is positioned to perform well, even in the current environment, and to thrive whenever a recovery
takes hold.
For these achievements, we thank you, our shareholders, and our employees, our sub-advisors, our clients and
the advisors who partner with the CI family of companies.
William T. Holland Stephen A. MacPhail
Chief Executive Officer President
March 31, 2009
8
Eleven-Year Historical Financial Highlights
(millions of dollars, except per unit amounts)
(millions of dollars, except per unit amounts)
Assets under management, end of year
Administered and other assets
Total fee-earning assets
Net sales of funds
Management fees
Other income
Total revenues
Selling, general and administrative
Trailer fees
Other expenses
Total expenses
Income taxes
Net income before amortization of goodwill
Net income
EBITDA*
Earnings per unit
EBITDA* per unit
Distributions per unit**
Unitholders’ equity, end of year
Units outstanding, end of year**
Year Ended
Dec. 31, 2008
Year Ended
Dec. 31, 2007
Seven Months Ended
Dec. 31, 2006
54,585
25,675
80,260
1,740
1,163.8
348.1
1,511.9
332.6
336.1
417.3
1,086.0
(19.4)
445.4
445.4
633.6
1.60
2.27
1.880
69,129
36,448
105,577
1,898
1,292.7
362.2
1,654.9
346.7
368.8
378.1
1,093.6
(63.8)
625.1
625.1
737.9
2.21
2.61
2.200
64,335
29,079
93,414
437
693.8
111.2
805.0
147.8
193.3
140.3
481.4
(31.1)
354.7
354.7
403.5
1.25
1.42
1.065
1,601.7
292,492,805
1,450.7
281,514,003
1,371.1
280,132,687
*EBITDA (Earnings before interest, taxes, depreciation and amortization) is a non-GAAP (generally accepted accounting principles) earnings measure, however, management believes that most of its unitholders, creditors, other
stakeholders and investment analysts prefer to include the use of this performance measure in analyzing CI’s results. EBITDA is a measure of operating performance, a facilitator for valuation and a proxy for cash flow.
Fee-earning Assets $billions
Net Sales $billions
Operating Profit Margin % of average AUM
6
.
5
0
1
4
.
3
9
3
.
0
8
8
.
2
8
7
.
6
7
4
.
9
6
120
100
80
60
40
20
0
1
.
3
3
7
.
6
2
8
.
6
2
7
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5
2
7
.
9
8
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5
5
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3
4
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1
1
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3
7
.
1
9
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1
7
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4
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6
5
4
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0.9
0.8
0.7
0.6
0.5
May
‘99
May
‘00
May
‘01
May
‘02
May
‘03
May
‘04
May
‘05
May
‘06
Dec
‘06
Dec
‘07
Dec
‘08
May
‘99
May
‘00
May
‘01
May
‘02
May
‘03
May
‘04
May
‘05
May
‘06
Dec
‘07
Dec
‘08
Dec
‘06
(seven
months)
May
‘99
May
‘00
May
‘01
May
‘02
May
‘03
May
‘04
May
‘05
May
‘06
Dec
‘07
Dec
‘08
Dec
‘06
(seven
months)
9
Years Ended May 31
2006
56,905
25,915
82,820
3,111
1,110.0
213.4
1,323.4
353.6
291.0
204.2
848.8
165.6
309.0
309.0
577.4
1.08
2.02
0.700
2005
49,243
27,504
76,747
1,734
994.6
200.5
1,195.1
328.1
250.7
168.4
747.2
163.2
284.7
284.7
529.5
0.97
1.81
0.680
2004
49,310
20,102
69,412
920
820.7
133.7
954.4
256.8
197.8
108.1
562.7
170.7
221.0
221.0
442.2
0.82
1.65
0.410
2003
32,257
827
33,084
(596)
595.8
72.7
668.5
203.3
147.4
197.8
548.5
49.0
71.0
71.0
297.4
0.32
1.32
0.290
2002
24,876
837
25,713
481
446.5
66.3
512.8
119.8
97.8
236.4
454.0
22.0
36.8
(61.4)
265.5
(0.35)
1.51
0.060
2001
25,817
1,017
26,834
3,468
538.0
72.9
610.9
141.2
115.6
229.7
486.5
34.3
90.1
11.5
319.9
0.06
1.75
0.025
2000
25,503
1,175
26,678
5,843
384.0
67.5
451.5
111.9
79.1
152.4
343.4
51.3
56.8
(2.1)
236.9
(0.01)
1.38
0.025
1999
9,511
189
9,700
1,369
186.1
17.8
203.9
66.4
37.0
79.3
182.7
12.4
8.8
8.7
91.2
0.06
0.64
0.025
1,545.0
285,680,519
1,472.8
286,643,091
1,533.9
295,199,027
632.7
235,525,648
56.8
170,785,428
260.8
180,684,728
292.1
182,829,928
126.6
144,220,460
**Adjusted for two-for-one stock splits in April 1998, January 2000 and November 2000.
Total Revenues $millions
Income Before Amortization of Goodwill
$millions
EBITDA* Per Unit $
9
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1800
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May
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‘01
May
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May
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May
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May
‘05
May
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Dec
‘07
Dec
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Dec
‘06
(seven
months)
May
‘99
May
‘00
May
‘01
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(seven
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May
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May
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May
‘05
May
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Dec
‘07
Dec
‘08
Dec
‘06
(seven
months)
1 0
Subsidiary Profiles
CI Investments Inc.
CI Investments is one of Canada’s largest investment management companies, with $43.7 billion in assets
under management as of March 31, 2009 on behalf of two million Canadians. We are known for our
comprehensive and high-quality selection of investment products and services, operational excellence and
efficiency, and a broad lineup of leading portfolio management teams. CI Investments has demonstrated a
record of innovation and an ability to adapt to meet the changing demands of the marketplace and its clients.
We partner with independent financial advisors and third-party institutions in the distribution of our products
and services, which include mutual funds, segregated funds, managed solutions, structured products and
alternative investments. Our well-known brands include CI, Harbour, Signature, Synergy, Cambridge,
Lakeview, Portfolio Series, Portfolio Select Series, and SunWise Elite Plus.
CI’s strength is founded on the expertise and experience of its portfolio managers. Our managers, a mix of in-
house teams and sub-advisors, represent the full spectrum of investment disciplines, from value to growth. Our
in-house investment managers include: Signature Global Advisors, led by Eric Bushell; Harbour Advisors, led
by Gerry Coleman; and Cambridge Advisors, led by Alan Radlo. CI and its managers have been recognized
through 25 Canadian Investment Awards over the past eight years, including the prestigious Analysts’ Choice
Investment Fund Company of the Year in 2006 and 2007, and Fund Manager of the Year for Mr. Coleman
in 2008.
1 1
Assante Wealth Management (Canada) Limited
Assante Wealth Management is a leading provider of fully integrated wealth management solutions for
affluent Canadians. With 800 advisors in over 300 locations, our independent advisory network is one of the
largest in the country. We serve over 300,000 clients across Canada, administering over $17.7 billion in assets
as of March 31, 2009.
The success of Assante is closely linked to our advisors and the strong partnership we have developed with
them. Our advisors provide comprehensive wealth management solutions, and we support them by providing
an industry-leading suite of products and services – including access to investment analysts, portfolio
managers, tax lawyers, accountants, estate planning and insurance specialists, and wealth planners.
Our services are offered through Assante Capital Management, an investment dealer, and Assante Financial
Management, a mutual fund dealer, which together operate under the brand name Assante Wealth
Management. Stonegate Private Counsel provides wealth planning and inter-generational financial services
to high net worth individuals and families.
Assante has a close operating relationship with United Financial Corporation, an asset management
company that offers its investment solutions exclusively through Assante advisors. United Financial
manages $5.8 billion in the investment programs Private Client Managed Portfolios, Evolution Private
Managed Accounts, Optima Strategy, Institutional Managed Portfolios and Artisan Portfolios. Our in-house
investment consulting experts are responsible for maintaining these programs and retaining the best
available portfolio managers.
1 2
Blackmont Capital Inc.
Blackmont Capital is a full-service investment dealer determined to set a new benchmark in investment
excellence. To meet this goal, we have assembled a team of the country’s leading professionals in wealth
management and capital markets.
Our capital markets division delivers quality independent research, experienced equity sales coverage and
specialized trade execution for institutional investors. It also serves the investment banking sector, offering
capital raising and financial advisory services for corporate clients. Our wealth management division supports
approximately 160 investment advisors, who have the flexibility and resources to create custom solutions for
clients with products ranging from equities and fixed-income to insurance and estate solutions. Blackmont
administers $6.2 billion in assets as of March 31, 2009.
Blackmont’s professionals are united by a commitment to our cornerstone values of entrepreneurial spirit,
boutique service, continuous improvement and performance drive.
1 3
MANAGEMENT’S DISCUSSION AND ANALYSIS
1 4
Management’s Discussion and Analysis
This Management’s Discussion and Analysis (“MD&A”) dated February 18, 2009 presents an analysis of the
financial position of CI Financial Income Fund and its subsidiaries (“CI”) as at December 31, 2008, compared
with December 31, 2007, and the results of operations for the quarter ended and year ended December 31,
2008, compared with the quarter and year ended December 31, 2007.
Financial information, except where noted otherwise, is presented in accordance with Canadian generally
accepted accounting principles (“GAAP”) and amounts are expressed in Canadian dollars. The principal
subsidiaries referenced herein include CI Investments Inc. (“CI Investments”), United Financial Corporation
(“United”), Assante Wealth Management (Canada) Ltd. (“AWM”) and Blackmont Capital Inc. (“Blackmont”).
The Asset Management segment of the business includes the operating results and financial position of CI
Investments, United, and KBSH Capital Management Inc. (“KBSH”). The Asset Administration segment
includes the operating results and financial position of Blackmont and AWM and its subsidiaries, including
Assante Capital Management Ltd. (“ACM”) and Assante Financial Management Ltd. (“AFM”).
This MD&A contains forward-looking statements with respect to future financial performance, strategy and
business conditions. These statements are based on current expectations, estimates about the markets in which
we operate and management’s beliefs and assumptions regarding these markets. These statements are subject
to risks and uncertainties, which may prove to be inaccurate. Therefore actual results may differ materially from
current expectations and those expressed or implied by CI. Factors that may cause such differences include,
but are not limited to, general economic and market conditions including interest and foreign exchange rates,
global financial markets, legislative and regulatory changes, industry competition, technological developments
and catastrophic events. For a more complete discussion of the risk factors that may impact actual results, please
refer to the “Risk Factors” section of this MD&A and to the “Risk Factors” section of CI’s Annual Information
Form (“AIF) dated February 29, 2008 and subsequently filed AIFs, which are available at www.sedar.com. The
reader is cautioned against undue reliance on these forward-looking statements.
This MD&A includes several non-GAAP financial measures that do not have any standardized meaning
prescribed by GAAP and may not be comparable to similar measures presented by other companies. However,
management believes that most unitholders, creditors, other stakeholders and investment analysts prefer to
include the use of these financial measures in analyzing CI’s results. These non-GAAP measures and
reconciliations to GAAP, where necessary, are shown as highlighted footnotes to the discussion throughout
the document.
1 5
S E L E C T E D A N N U A L I N F O R M AT I O N
F I S C A L Y E A R S E N D I N G
(millions, except per unit amounts)
Total revenue
Total expenses
Income before income taxes
Income taxes
Net income
Earnings per unit
Distributions paid per unit
Total assets
Total long-term debt
Units outstanding
Average units outstanding
Year ended
December 31, 2008
$1,511.9
1,086.0
$425.9
(19.4)
$445.4
Year ended Twelve months ended
December 31, 2006
$1,365.6
861.0
504.6
32.7
$471.9
December 31, 2007
$1,654.9
1,093.6
561.3
(63.8)
$625.1
$1.60
$1.88
$3,594.5
$999.4
292.493
278.658
$2.21
$2.20
$3,626.5
$927.9
281.514
282.214
$1.66
$1.425
$2,739.4
$576.1
280.133
284.232
S U M M A R Y O F Q U A R T E R LY R E S U LT S
(millions of dollars, except per unit amounts)
2008 2007
INCOME STATEMENT DATA
Management fees
Administration fees
Other revenues
Total revenues
Selling, general
and administrative
Trailer fees
Investment dealer fees
Amortization of deferred
sales commissions
Interest expense
Other expenses
Total expenses
Income before income taxes
Income taxes
Net income
Q4
243.3
58.7
22.4
324.4
79.8
70.7
35.5
37.7
11.1
14.7
249.5
74.9
21.7
53.2
Q3
302.7
60.0
18.4
381.1
80.3
88.1
40.2
36.5
10.7
25.5
281.3
99.8
(18.3)
118.1
Q2
316.9
72.8
19.0
408.7
94.7
91.4
46.4
35.0
12.9
9.0
289.4
119.3
(15.4)
134.7
Q1
301.0
74.4
22.3
397.7
77.8
85.9
47.4
33.4
11.8
9.5
265.8
131.9
(7.5)
139.4
Q4
322.2
81.3
23.6
427.1
92.4
93.8
51.8
32.1
11.4
9.4
290.9
136.2
(51.5)
187.7
Q3
326.3
75.6
15.9
417.8
88.5
92.9
49.5
30.9
10.6
7.7
280.1
137.7
(6.0)
143.7
Q2
329.7
94.6
16.7
441.0
92.4
93.1
56.0
29.4
10.0
9.8
290.7
Q1
314.6
40.8
13.6
369.0
73.4
89.0
31.9
27.4
7.6
2.6
231.9
150.3
(1.3)
151.6
137.1
(5.0)
142.1
Earnings per unit
0.19
0.42
0.48
0.50
0.66
0.50
0.54
0.51
Distributions paid per unit
0.34
0.51
0.49
0.54
0.57
0.55
0.54
0.54
1 6
Overview
CI is a diversified wealth management firm and one of Canada’s largest independent investment fund
companies. CI also became one of the country’s largest income trusts in June 2006. In October 2008, CI
announced that it would convert back to a corporate structure and on January 1, 2009 effected that conversion.
Reporting provided herein as at December 31, 2008 still refers to units, unitholders and distributions; whereas
from January 1, 2009 references will be to shares, shareholders and dividends.
The principal business of CI is the management, marketing, distribution and administration of mutual funds,
segregated funds, structured products and other fee-earning investment products for Canadian investors. They
are distributed primarily through brokers, independent financial planners and insurance advisors, including
ACM, AFM and Blackmont financial advisors. CI operates through two business segments, Asset Management
and Asset Administration. The Asset Management segment provides the majority of CI’s income and derives
its revenue principally from the fees earned on the management of several families of mutual, segregated,
pooled and closed-end funds, structured products and discretionary accounts. The Asset Administration
segment derives its revenues principally from commissions and fees earned on the sale of mutual funds and
other financial products, the underwriting of securities transactions, principal trading and ongoing service
to clients.
On April 4, 2007, CI acquired control of Rockwater Capital Corporation (“Rockwater”) and its subsidiaries,
including Blackmont, a full-service investment dealer, KBSH, an investment counselling firm, and Lakeview
Asset Management, a mutual fund company. On September 1, 2007, Rockwater was amalgamated with
Blackmont and continued as Blackmont.
The current economic downturn and market volatility have significantly impacted CI’s revenues, as the assets
on which CI earns fees have declined sharply. Some expenses, such as trailer fees and investment advisor fees,
are directly variable with assets under management and have fallen in step with revenues; however, most of CI’s
expenses are fixed in nature. CI took a restructuring charge in the third quarter and by trimming its workforce
and by reducing discretionary expenses was able to mitigate some of the effect on net income.
As central banks move to combat the weakening economy by cutting interest rates and as bond yields tumble,
CI has benefited from reduced funding costs. Ten-year treasury rates dropped from 4.0% early in 2008 to 2.7%
by year end. Similarly, 30-day bankers’ acceptances, which CI primarily uses to fund its debt, declined from
4.5% to 1.5% over the same period. These declines in interest rates have reduced CI’s expected interest expense
significantly and the issuance of over $200 million in equity just before year-end reduced CI’s debt as well.
In the face of this economic uncertainty, CI’s funds have continued to sell well. CI’s funds generally have had
good relative performance although there are questions as to the appetite for investment funds during times of
such extreme market volatility. CI also offers a wide range of segregated funds, which provide safety of capital
over a 10 year period, and these have proven to continue to be attractive to investors. Gross sales of funds in the
fourth quarter were comparable to those of the prior year and this trend of steady sales has continued.
1 7
Fee-Earning Assets and Sales
Total fee-earning assets, which include CI mutual and segregated funds, United funds, structured products,
institutional managed assets at KBSH and Altrinsic Global Advisors (collectively, assets under management or
AUM), AWM assets under administration, Blackmont assets under administration and other fee-earning assets
at December 31, 2008 were $80.3 billion, a decrease of 24% from $105.5 billion at December 31, 2007. As
shown in the following chart, these assets are represented by $50.4 billion in retail managed funds, $0.4 billion
in structured products, $3.8 billion in institutional managed assets at KBSH and Altrinsic Global Advisors,
$18.4 billion in AWM assets under administration, $6.2 billion in Blackmont assets under administration and
$1.1 billion in other fee-earning assets.
F E E - E A R N I N G A S S E T S
A S AT D E C E M B E R 3 1
(in billions) 2008 2007 % change
Retail managed funds $50.4 $63.6 (21)
Structured products 0.4 0.6 (33)
Total retail assets under management $50.8 $64.2 (21)
Institutional managed assets 3.8 4.9 (22)
Total assets under management $54.6 $69.1 (21)
AWM assets under administration 18.4 25.7 (28)
Blackmont assets under administration 6.2 9.1 (32)
Total assets under administration* $24.6 $34.8 (29)
CI other fee-earning assets 1.1 1.6 (31)
Total fee-earning assets $80.3 $105.5 (24)
*Includes $8.3 billion and $11.1 billion in assets managed by CI Investments and United in 2008 and 2007, respectively.
Retail assets under management form the majority of CI’s fee-earning assets and provide most of its revenue and
net income. The change in assets under management during the past two years is detailed in the table below.
(in billions) 2008 2007
Retail assets under management at January 1 $64.2 $62.7
Gross sales 11.6 11.4
Redemptions 9.9 9.5
Net sales $1.7 $1.9
Acquired assets – 0.4
Market performance (15.1) (0.8)
Retail assets under management at December 31 $50.8 $64.2
1 8
The table that follows sets out the levels and change in CI’s average retail assets under management and the
gross and net sales for the relevant periods. As most of CI’s revenue and expenses are based on assets throughout
the year, average asset levels are critical to the analysis of CI’s financial results. The change in CI’s 2008 average
retail assets from 2007 is the result of negative market performance partially offset by positive net sales. Negative
market performance was the result of the significant declines in equity markets around the world in 2008.
While this is representative of a sharp downturn in the economic cycle, the full extent or duration of the decline
in assets under management cannot be predicted.
Quarter ended Quarter ended Year ended Year ended
(in billions) December 31, 2008 December 31, 2007 December 31, 2008 December 31, 2007
Average retail assets under management $50.380 $64.485 $60.208 $64.958
Change from prior period (22%) (7%)
Gross sales $2.5 $2.6 $11.6 $11.4
Net sales ($0.1) $0.3 $1.7 $1.9
Industry net redemptions of mutual funds reported by the Investment Funds Institute of Canada (“IFIC”) were
$9.9 billion for the three months ended December 31, 2008, down $16.6 billion from net sales of $6.7 billion
in the same period last year. For the year ended December 31, 2008, IFIC reported net redemptions of long-
term funds of $14.2 billion, compared with net sales of $27.0 billion for the same period in 2007. Total industry
assets as reported by IFIC at December 31, 2008 of $507.0 billion were down 20% from $636.8 at
December 31, 2007. Sales and assets reported by IFIC are helpful as indicators of trends affecting a significant
portion of CI’s business. It should be noted that IFIC figures do not include CI, as CI does not report this
information to IFIC.
Results of Operations
CI reported net income of $445.4 million ($1.60 per unit) for the year ended December 31, 2008, a decrease
of 29% from the $625.1 million ($2.21 per unit) reported in the year ended December 31, 2007.
The results of operations include amounts recorded for equity-based compensation expense, which varies from
period to period based on CI’s unit price, the extent of vesting during the period and the price at which options
were exercised during the period. Earnings for the year ended December 31, 2008 were increased by an equity-
based compensation expense recovery of $20.5 million ($13.7 million after tax), versus an expense of $12.1
million ($7.7 million after tax) in the year ended December 31, 2007.
CI also adjusted the value of its marketable securities by $11.0 million ($9.2 million after tax) during 2008, took
an $11.0 million ($7.3 million after tax) restructuring charge and accelerated the vesting of certain employees’
deferred equity units, which resulted in additional amortization of $3.3 million ($2.2 million after tax) in 2008.
In 2007, there were no adjustments to marketable securities, restructuring charges or acceleration of deferred
equity unit amortization.
Net income adjusted for the above items totalled $450.4 million ($1.62 per unit) for the year ended December 31,
2008, a decrease of 29% from the $632.8 million ($2.24 per unit) for the year ended December 31, 2007.
1 9
Net income of $53.2 million for the quarter ended December 31, 2008 was 72% lower than the $187.7 million
reported for the quarter ended December 31, 2007. On a per unit basis, CI earned $0.19 in the quarter ended
December 31, 2008, down from $0.66 reported for the comparative period last year.
In the quarter ended December 31, 2008, the value of marketable securities was adjusted by $6.0 million
($5.0 million after tax) and the amortization of deferred equity units was accelerated by $3.3 million ($2.2
after tax).
The impact of equity-based compensation expense was a recovery of $0.9 million ($0.6 million after tax) in the
fourth quarter of 2008, while for the quarter ended December 31, 2007, earnings were decreased by an equity-
based compensation expense of $4.8 million ($3.0 million after tax).
Adjusted for these items, net income was $59.8 million ($0.22 per unit) for the quarter ended December 31,
2008, down 69% from $190.7 million ($0.67 per unit) for the quarter ended December 31, 2007.
CI incurred an income tax expense of $21.7 million in the quarter ended December 31, 2008, compared with
an income tax recovery of $51.5 million in the quarter ended December 31, 2007. In 2007, future income tax
rates were reduced and CI booked an increase to its future tax assets of $36.4 million. In 2008, CI’s tax shelter
related to its income trust structure was discontinued during the fourth quarter and it reported a non-cash future
tax expense of $19.3 million.
CI’s pre-tax operating earnings, as set out below, adjust for the impact of equity-based compensation and gains
on or adjustments to marketable securities. Redemption fees and the amortization of deferred sales
commissions and fund contracts are also deducted to remove the impact of back-end financed assets under
management.
Pre-Tax Operating Earnings
CI uses pre-tax operating earnings to assess its underlying profitability. CI defines pre-tax operating earnings as income before income taxes less
redemption fee revenue, performance fees and investment gains, plus amortization of deferred sales commissions (“DSC”) and fund contracts, equity-based
compensation expense, restructuring costs and adjustments to marketable securities, and accelerated DEU amortization.
Quarter ended Quarter ended Year ended Year ended
(in millions, except per unit amounts) December 31, 2008 December 31, 2007 December 31, 2008 December 31, 2007
Income before income taxes
Less:
Redemption fees
Performance fees
Gain on marketable securities
Add:
Amortization of DSC and fund contracts
Equity-based compensation expense
Restructuring costs and adjustment to
marketable securities
Accelerated DEU amortization
Pre-tax operating earnings
per unit
$74.9
$136.2
$425.9
$561.3
9.4
2.8
–
38.8
(0.9)
6.0
3.3
$109.9
$0.40
7.6
2.9
$1.4
33.1
4.8
–
–
$162.2
$0.57
36.0
3.5
–
147.2
(20.5)
22.0
3.3
$538.4
$1.93
31.5
2.9
$1.7
123.5
12.1
–
–
$660.8
$2.34
2 0
Redemption fee revenue increased to $9.4 million in the fourth quarter from $7.6 million in the comparative
period last year, and to $36.0 million for the year ended December 31, 2008 from $31.5 million for the year
ended December 31, 2007. Redemption fees increased due to higher levels of redemptions at a higher average
fee rate.
Amortization of deferred sales commissions and fund contracts increased to $38.8 million in the quarter ended
December 31, 2008 from $33.1 million in the quarter ended December 31, 2007. As well, amortization over
the 12 month period increased to $147.2 million from $123.5 million as a result of higher spending on deferred
sales commissions, which has grown consistently since 2003.
Pre-tax operating earnings were down $52.3 million to $109.9 million for the quarter ended December 31,
2008, compared with the same period in 2007. For the year ended December 31, 2008, CI’s pre-tax operating
earnings per unit were $1.93, a decrease of 18% from $2.34 for the year ended December 31, 2007.
As shown in the table below, EBITDA decreased to $128.2 million in the quarter ended December 31, 2008
from $184.2 million in the quarter ended December 31, 2007. EBITDA for the year ended December 31, 2008
was $633.6 million, a decrease of 14% from $737.9 million for the year ended December 31, 2007.
After adjusting for the items discussed earlier (equity-based compensation, the acceleration of deferred equity
unit amortization and the adjustment to marketable securities), EBITDA per unit for the fourth quarter of 2008
was $0.49, down 27% from $0.67 for the same period in 2007.
The decrease in both EBITDA and pre-tax operating earnings is primarily a result of the decline in average
retail managed assets and CI’s operating margin.
Interest expenses of $46.6 million were recorded for the year ended December 31, 2008, compared with $39.6
million for the year ended December 31, 2007. This increase in interest expenses reflects higher average debt
EBITDA
CI uses EBITDA (earnings before interest, taxes, depreciation and amortization) to assess its underlying profitability prior to the impact of its financing
structure, income taxes and the amortization of deferred sales commissions, fund contracts and capital assets. This also permits comparisons of companies
within the industry, before any distortion caused by different financing methods, levels of taxation and mix of business between front-end and back-end
sales commission assets under management. EBITDA is a measure of operating performance, a facilitator for valuation and a proxy for cash flow.
Quarter ended Quarter ended Year ended Year ended
(in millions, except per unit amounts) December 31, 2008 December 31, 2007 December 31, 2008 December 31, 2007
Net income $53.2 $187.7 $445.4 $625.1
Add (deduct):
Interest expense 11.2 11.4 46.6 39.6
Income tax expense (recovery) 21.7 (51.5) (19.4) (63.8)
Amortization of DSC and fund contracts 38.8 33.1 147.2 123.5
Amortization of other items 3.3 3.5 13.8 13.5
EBITDA $128.2 $184.2 $633.6 $737.9
per unit $0.46 $0.65 $2.27 $2.61
EBITDA margin (as a % of revenue) 40% 43% 42% 45%
2 1
levels, as discussed under “Liquidity and Capital Resources.” CI’s average debt level increased primarily due to
unit buybacks and was reduced substantially in December when CI issued 15,000,000 units. Debt is generally
used to fund growth in the company and to repurchase unit capital. EBITDA provides information on the results
of operations prior to the impact on interest expense of such capital structure decisions and financing activities.
Asset Management Segment
The Asset Management segment of the business is CI’s principal business segment and includes the operating
results and financial position of CI Investments, United, and KBSH.
Results of Operations
The table that follows presents the operating results for the Asset Management segment:
Quarter ended Quarter ended Year ended Year ended
(in billions) December 31, 2008 December 31, 2007 December 31, 2008 December 31, 2007
Management fees
Other revenue
Total revenue
Selling, general and administrative
Trailer fees
Amortization of deferred sales
commissions and fund contracts
Other expenses
Total expenses
Income before income taxes and non-segmented items
$243.3
14.0
$257.3
49.4
73.5
39.2
4.9
$167.0
$90.3
$322.2
19.3
$341.5
63.2
97.5
33.3
7.9
$201.9
$139.6
$1,163.8
48.3
$1,212.1
199.2
350.3
148.5
21.5
$719.5
$492.6
$1,292.7
55.6
$1,348.3
242.1
384.0
124.2
18.7
$769.0
$579.3
Income before income taxes and interest expense for CI’s principal segment was $90.3 million for the quarter
ended December 31, 2008, a decrease of 35% from $139.6 million in the same period in 2007. For the year
ended December 31, 2008, income before income taxes and interest expense for the Asset Management
segment was $492.6 million, a decrease of 15% compared with $579.3 million for the year ended
December 31, 2007. The decrease was primarily a result of lower revenues caused by lower average retail assets
under management.
Revenues
Revenues from management fees were $243.3 million for the quarter ended December 31, 2008, a decrease of
$78.9 million or 24% from the quarter ended December 31, 2007. Management fee revenue for the year ended
December 31, 2008 was $1,163.8 million, a decrease of 10% compared with the year ended December 31,
2007. The decrease was mainly attributable to lower average retail assets under management, which were 22%
and 7% lower for the quarter and year ended December 31, 2008, respectively, compared with the same periods
in 2007. This decrease in assets is due to the significant declines in equity markets around the world in 2008.
As a percentage of average retail assets under management, management fees were 1.921% and 1.933% for the
quarter and year ended December 31, 2008, down from 1.982% and 1.990% in the respective quarter and year
ended December 31, 2007.
2 2
Average management fee rates have decreased as a result of a change in the mix between equity and bond and
money market funds. This change in asset mix is a result of the greater market depreciation in equity funds
compared to bond and money market funds and investor preference for lower-risk investment products. As well,
there is a continuing trend towards a higher proportion of CI’s assets being Class F and Class I funds, which
have lower management fees. Class F funds pay no trailer fees to advisors, who typically charge their clients a
flat or asset-based fee. Class I funds have reduced management fees for institutional clients with large holdings.
At December 31, 2008, there was $600.1 million and $5.7 billion in Class F and Class I funds, respectively,
making up a combined 12.4% of retail assets under management. At December 31, 2007, the combined
Class F and Class I funds were 12.1% of retail assets under management, with $737.8 million in Class F funds
and $7.0 billion in Class I funds.
For the quarter ended December 31, 2008, other revenue was $14.0 million, decreasing from $19.3 million for
the quarter ended December 31, 2007. Other revenue for the year ended December 31, 2008, was
$48.3 million, down from $55.6 million for the year ended December 31, 2007. The largest component of
other revenue is redemption fees. Redemption fees were $9.4 million and $36.0 million for the respective three
months and year ended December 31, 2008. In comparison, redemption fees were $7.6 million and
$31.5 million for the three months and year ended December 31, 2007, respectively. The increase in
redemption fees over the comparative periods is a result of higher levels of redemptions.
Also included in other revenue are fees from KBSH. Included in the quarter ended December 31, 2008 is
$1.9 million from KBSH compared with $3.0 million from KBSH in the same period in 2007. KBSH
contributed $10.2 million to other revenue for the year ended December 31, 2008 compared with $8.7 million
for the prior year.
Expenses
Selling, general and administrative (“SG&A”) expenses for the Asset Management segment were $49.4 million
for the quarter ended December 31, 2008, a decrease of 22% from $63.2 million for the comparative period
last year. For the year ended December 31, 2008, SG&A expenses were $199.2 million, a decrease of 18% from
$242.1 million for the year ended December 31, 2007. Included in SG&A are expenses relating to CI’s equity-
based compensation plan. For the respective quarter and year ended December 31, 2008, an equity-based
compensation expense recovery of $1.1 million and $22.1 million was recorded, compared with an expense of
$4.8 million and $12.1 million for the respective quarter and year ended December 31, 2007. Also included in
SG&A expenses is a $3.3 million charge for accelerated DEU amortization for the quarter and year ended
December 31, 2008, which is related to CI’s equity-based compensation.
At December 31, 2007, based on the price per CI trust unit of $28.07, the potential payment on all vested
equity-based compensation outstanding, plus a proportion of unvested amounts, was $27.2 million. Based on
the price per CI trust unit at December 31, 2008 of $14.50, the equity-based compensation liability decreased
by $27.1 million to $0.1 million, representing the remaining in-the-money options. Though CI acknowledges
that the equity-based compensation expense is clearly a cost of business that is tied to the performance of CI’s
trust unit price, the financial results presented hereinafter both include and exclude the expense to aid the
reader in conducting a comparative analysis.
2 3
SG&A expenses net of the amount related to equity-based compensation (“net SG&A”) were $47.1 million for
the quarter ended December 31, 2008 and $58.4 million for the quarter ended December 31, 2007. For the
year ended December 31, 2008, net SG&A expenses were $218.0 million, compared to $230.0 million for the
year ended December 31, 2007. The decrease from the prior year is a result of management’s actions to control
expenses during the year’s market volatility.
As a percentage of average retail assets under management, net SG&A expenses were 0.372% and 0.362% for
the quarter and year ended December 31, 2008, respectively. This compares with 0.359% for the quarter ended
December 31, 2007 and 0.354% for the year ended December 31, 2007. The ratios increased from the prior
year as a result of the larger drop in average retail assets under management compared to the decrease in SG&A
expenses for the quarter and for the year ended December 31, 2008.
Trailer fees decreased from $97.5 million for the quarter ended December 31, 2007 to $73.5 million for the
quarter ended December 31, 2008. Net of intersegment amounts, this expense decreased from $93.8 million
for the quarter ended December 31, 2007 to $70.7 million for the quarter ended December 31, 2008. Trailer
fees decreased from $384.0 million in the year ended December 31, 2007 to $350.3 million for the year ended
December 31, 2008. Net of intersegment amounts, this expense decreased from $368.8 million for the year
ended December 31, 2007 to $336.1 million for the year ended December 31, 2008.
For the quarter ended December 31, 2008, CI’s operating profit margin on the Asset Management segment, as
a percentage of average retail assets under management and adjusted for equity-based compensation expense,
was 0.990%, down from 1.046% for the same period last year. Similarly, for the year ended December 31, 2008,
CI’s operating profit margin was 1.013%, down from 1.068% for the year ended December 31, 2007. This was
primarily a result of lower weighted average management fees as discussed above.
CI’s margins have been in a gradual downward trend. Increasing competition and changes in the product
platforms through which an increasing amount of funds are sold have pushed management fee rates lower. In
recent years, an increasing proportion of funds have been sold with a front-end sales charge, which have higher
trailer fees and contribute to a decline in margins. However, this year the decline in management fee and trailer
fee rates was primarily a result of an increase in the percentage of assets in money market funds and Class I
Operating Profit Margin
CI monitors its operating profitability on retail assets under management within its Asset Management segment by measuring the operating profit margin,
which is defined as management fees from funds less trailer fees and SG&A expenses net of equity-based compensation expense (recovery), calculated
as a percentage of average retail assets under management.
Quarter ended Quarter ended Year ended Year ended
(as a % of average retail AUM) December 31, 2008 December 31, 2007 December 31, 2008 December 31, 2007
Management fees
Less:
Trailer fees
Net SG&A expenses
Operating profit margin
1.921
0.559
0.372
0.990
1.982
0.577
0.359
1.046
1.933
0.558
0.362
1.013
1.990
0.568
0.354
1.068
2 4
funds relative to CI’s total assets under management. While CI has historically been able to limit growth in
SG&A expenses below the growth in assets under management in order to mitigate the decline in its margins,
this is particularly difficult in periods when assets under management decline.
Commissions paid from CI’s cash resources on the sale of funds on a deferred sales charge basis are, for
financial reporting purposes, amortized evenly over the 36 or 84 months immediately following the sale of the
funds, for low-load or full-load deferred sales charges, respectively. The actual cash payment in any period is
reported in the Consolidated Statements of Cash Flows under Investing Activities. Amortization of deferred
sales commissions was $38.4 million for the quarter ended December 31, 2008, compared with $32.1 million
for the quarter ended December 31, 2007. Amortization of deferred sales commissions was $145.3 million for
the year ended December 31, 2008, compared with $119.9 million for the year ended December 31, 2007.
The increase is consistent with the increase in deferred sales commissions paid in the last several years.
Other expenses decreased from $7.9 million for the quarter ended December 31, 2007 to $4.9 million for the
quarter ended December 31, 2008. For the year ended December 31, 2008, other expenses increased to
$21.5 million from $18.7 million for the comparative period in 2007. Other expenses included $9.2 million
related to KBSH for the year ended December 31, 2008 compared with $10.6 million for the year ended
December 31, 2007. Also included in other expenses are distribution fees to limited partnerships and
expenditures related to corporate strategic initiatives.
Asset Administration Segment
The Asset Administration segment includes the operating results and financial position of Blackmont and
AWM and its subsidiaries, including ACM and AFM.
Results of Operations
The table that follows presents the operating results for the Asset Administration segment:
Quarter ended Quarter ended Year ended Year ended
(in millions) December 31, 2008 December 31, 2007 December 31, 2008 December 31, 2007
Administration fees
Other revenue
Total revenue
Selling, general and administrative
Investment dealer fees
Amortization of fund contracts
Other
Total expenses
Income before income taxes and non-segmented items
$82.0
8.4
$90.4
30.5
53.4
0.3
2.5
$86.7
$3.7
$106.8
4.3
$111.1
29.2
72.7
0.4
0.5
$102.8
$8.3
$366.6
33.8
$400.4
133.3
252.0
1.5
10.6
$397.4
$3.0
$402.6
14.3
$416.9
104.6
280.2
1.5
7.2
$393.5
$23.4
The Asset Administration segment had income before income taxes and non-segmented items of $3.7 million
for the quarter ended December 31, 2008, down from $8.3 million for the quarter ended December 31, 2007.
Income before income taxes and non-segmented items was $3.0 million for the year ended December 31,
2 5
2008, down $20.4 million from $23.4 million for the year ended December 31, 2007. The decrease is mainly
attributed to a decrease in revenues as well as an increase in SG&A expenses, as Blackmont was consolidated
for a full year.
Revenues
Administration fees are earned on assets under administration in the AWM and Blackmont business and from
the administration of third-party business. These fees were $82.0 million for the quarter ended
December 31, 2008, a decrease of 23% from the $106.8 million for the same period in 2007. For the year ended
December 31, 2008, administration fees were $366.6.million, down 9% from $402.6 million for the year ended
December 31, 2007. Net of intersegment amounts, administration fee revenue was $58.7 million for the quarter
ended December 31, 2008, compared with $81.3 million for the quarter ended December 31, 2007. For the
year ended December 31, 2008, net administration fee revenue was $266.0 million, down from $292.3 million
for the year ended December 31, 2007. The decrease in administration fee revenue is due to a decrease in assets
under administration and a reduction of fee revenue in the capital market division of Blackmont.
Administration fees should be considered in conjunction with investment dealer fees, an expense that
represents the payout to financial advisors. The decrease in assets under administration is due to the significant
declines in equity markets around the world in 2008.
Other revenues earned by the Asset Administration segment are mainly comprised of interest income on cash
balances, fees related to registered accounts and foreign exchange gains and losses. For the quarter ended
December 31, 2008, other revenues were $8.4 million, increasing from $4.3 million for quarter ended
December 31, 2007. Other revenues were higher at $33.8 million for the year ended December 31, 2008 relative
to $14.3 million for the year ended December 31, 2007. The increase from the prior year is a result of including
Blackmont for 12 months and a reclassification of overhead charges from expense recovery to other income.
Expenses
Investment dealer fees are the direct costs attributable to the operation of the AWM and Blackmont dealerships,
including payments to financial advisors based on the revenues generated from assets under administration.
These fees decreased as a result of lower revenues and were $53.4 million and $252.0 million for the quarter
and year ended December 31, 2008, respectively, compared to $72.7 million and $280.2 million for the
comparable periods last year.
Dealer Gross Margin
CI monitors its operating profitability on the revenues earned within its Asset Administration segment by measuring the dealer gross margin, which is
calculated as administration fee revenue less investment dealer fees, divided by administration fee revenue. CI uses this measure to assess the margin
remaining after the payout to advisors.
Quarter ended Quarter ended Year ended Year ended
(in millions) December 31, 2008 December 31, 2007 December 31, 2008 December 31, 2007
Administration fees
Less:
Investment dealer fees
Dealer gross margin
$82.0
53.4
$28.6
34.9%
$106.8
72.7
$34.1
31.9%
$366.6
252.0
$114.6
31.3%
$402.6
280.2
$122.4
30.4%
2 6
As detailed in the table below, dealer gross margin was $28.6 million or 34.9% of administration fee revenue
for the quarter ended December 31, 2008 and $114.6 million or 31.3% of administration fee revenue for the
year ended December 31, 2008. These figures compare to $34.1 million or 31.9% and $122.4 million or 30.4%
for the same periods last year. The increase in year-over-year gross margin is a result of a decrease in variable
compensation in the capital markets division of Blackmont and a reduction in advisor grid payouts as lower
rates are paid on lower revenue levels. The compensation directly tied to fee revenue is lower at Blackmont
(where SG&A costs are generally paid by Blackmont) than at AWM (where SG&A costs are generally borne
by advisors). These two businesses have different business models and are operated separately, sharing certain
key infrastructure and services from CI.
Selling, general and administrative (“SG&A”) expenses for the segment were $30.5 million for the quarter
ended December 31, 2008, slightly higher than the $29.2 million expense in the fourth quarter of 2007. For
the year ended December 31, 2008, SG&A expenses were $133.3 million, an increase of 27% from
$104.6 million for the year ended 2007. This increase is primarily a result of including Blackmont for a full
year and a reclassification of overhead charges from expense recovery to other income.
Liquidity and Capital Resources
The balance sheet for CI at December 31, 2008 reflects total assets of $3.59 billion, a decrease of $32.0 million
from $3.63 billion at December 31, 2007. This decrease can be attributed to a decrease in current assets of
$64.7 million and an increase in long-term assets of $32.7 million. CI’s cash and cash equivalents balance
increased by $24.7 million in the year ended December 31, 2008.
CI generates significant cash flow from its operations. Cash flow provided by operating activities was
$583.3 million for the year ended December 31, 2008. Excluding the change in working capital, cash flow from
operations was $564.6 million. Both levels of cash flow were sufficient to meet distributions during the period.
As CI has converted back to a corporate structure as of January 1, 2009, there is no longer a requirement to pay
out substantially all of its cash flow. At current levels of cash flow and anticipated dividend payout rates, CI
would produce considerable excess cash in order to meet its obligations and pay down debt.
CI purchased $1.2 million in marketable securities and disposed of $1.9 million for a net increase in cash of
$0.7 million in the year ended December 31, 2008. The fair value of marketable securities at December 31, 2008
was $10.8 million. Marketable securities are comprised of seed capital investments in CI’s funds and other
strategic investments.
Accounts receivable and prepaid expenses increased to $276.9 million at December 31, 2008 from
$211.6 million at December 31, 2007. The primary reason for the increase in accounts receivable is a
$32.6 million advance to a related party (see Related Party Transactions for details). Future income tax assets
decreased by $8.7 million as a result of the $27.1 million decrease in the equity-based compensation liability.
During the 12 months ended December 31, 2008, long-term assets increased primarily as a result of a
$48.4 million increase in deferred sales commissions, which reflected new sales commissions paid totalling
$190.9 million net of $142.5 million of amortization.
2 7
Liabilities decreased by $183.1 million during the year ended December 31, 2008. The $107.6 million
decrease in distributions payable was the main contributor to this change. Current income taxes payable
decreased by $1.0 million. Future income taxes payable decreased by $34.2 million, mainly due to an increase
in the balance of tax loss carry-forwards, which was partially offset by an increase in future income taxes payable
on the balance of deferred sales commissions. In addition, the equity-based compensation liability decreased
by $27.1 million, as CI’s unit price closed down $13.57 since December 31, 2007 and there were fewer options
outstanding at the end of December 31, 2008.
CI drew $71.5 million on its credit facility during the year ended December 31, 2008, increasing long-term
debt. At December 31, 2008, CI had drawn $999.4 million at an average rate of 3.17%, compared with
$927.9 million drawn at an average rate of 4.90% at December 31, 2007. Net of cash and marketable securities,
debt was $908.5 million at December 31, 2008, versus $848.3 million at December 31, 2007.
Principal repayments are only required under the facility should the banks decide not to renew the facility on
its anniversary, in which case 50% of the principal would be repaid in eight equal calendar quarterly instalments
with the balance payable two years following the first quarterly instalment. These payments would be payable
beginning June 30, 2009 should the banks not renew the facility. On January 14, 2008, the facility was amended
to increase the amount that may be borrowed by $100 million. On July 8, 2008, the facility was further
amended to increase the amount that may be borrowed by $150 million. The current limit on the facility is
$1.25 billion.
CI’s current ratio of debt to EBITDA is 1.6:1. CI is comfortable with this ratio and has a long-term target of
1:1. CI expects that, absent acquisitions in which debt is increased, the amount of debt incurred to finance
growth will fall below the amount of increase in EBITDA and the ratio of debt to EBITDA will trend lower.
CI’s current debt service ratio is 11:1.
CI is well within its financial covenants with respect to its credit facility, which requires that the debt service
ratio remain above 1.5, the debt to EBITDA ratio remain below 2.5 to 1, and assets under management not fall
below $45 billion for a period of seven consecutive business days.
CI’s main uses of capital were the financing of deferred sales commissions, the payment of distributions on its
Exchangeable LP units and Trust units, the funding of capital expenditures and the repurchase of Trust units
through its normal course issuer bid program.
CI paid sales commissions of $190.9 million in the year ended December 31, 2008. This compares to
$180.0 million in the year ended December 31, 2007. The amount of deferred sales commissions incurred in
the 12 month period ended December 31, 2008 relates to sales of back-end load units of approximately
$330 million per month. Sales have continued at approximately the same level as in 2008, and CI expects that
current levels of cash flow will be sufficient to continue to fund sales commissions.
2 8
During the year ended December 31, 2008, CI incurred capital expenditures of $9.4 million compared to
$3.9 million in 2007, primarily for computer hardware and software. While CI has delayed certain minor
capital expenditures in the wake of the economic slowdown, key initiatives are continuing and capital
expenditures in 2009 should approximate the levels of prior years.
Unitholders’ equity increased $151.0 million in the year ended December 31, 2008. During the year, CI
repurchased Trust units under its normal course issuer bid, in part to satisfy obligations under its deferred equity
unit plan, at a cost of $108.1 million. In December 2008, CI issued 15 million units at a price of $14.00 per
unit, raising $202.2 million, net of expenses of $7.8 million. CI declared distributions of $416.7 million
($524.3 million paid), which was less than net income for the year ended December 31, 2008 by $28.7 million.
CI has indicated that future dividend levels are expected to be $0.12 per share per quarter, or approximately
$140 million per year.
Distributable Cash
Quarter ended Quarter ended Year ended Year ended Inception to
(in millions, except per unit amounts) Dec. 31, 2008 Dec. 31, 2007 Dec. 31, 2008 Dec. 31, 2007 Dec. 31, 2008
Cash flow from operating activities $112.6 $186.7 $583.3 $677.6 $1,515.4
Less standardized items:
Capital expenditures 0.8 1.7 9.4 3.9 18.0
Deferred sales commissions 39.7 41.0 190.9 180.0 444.9
Restrictions on distributions – – – – –
Standardized distributable cash $72.1 $144.0 $383.0 $493.7 $1,052.5
per unit $0.26 $0.51 $1.37 $1.75 $3.74
Add adjusting items:
Growth portion of deferred sales commissions 25.7 27.0 134.9 123.0 301.9
Equity-based compensation 0.5 1.7 4.3 17.9 49.3
Non-cash working capital change 0.6 (12.7) (18.7) (4.3) 17.5
Adjusted distribution base $104.7 $160.0 $503.5 $630.3 $1,421.2
per unit $0.38 $0.56 $1.81 $2.23 $5.05
Distributions paid $94.2 $163.1 $524.3 $623.9 $1,433.0
per unit $0.34 $0.57 $1.88 $2.20 $5.09
Cost of unit repurchases $5.4 $81.9 $108.1 $115.2 $327.9
Pay-out ratio on standardized distributable cash 138% 170% 165% 150% 167%
Pay-out ratio on adjusted distribution base 95% 153% 126% 117% 124%
Pay-out ratio on adjusted distribution base,
net of unit repurchases 90% 102% 104% 99% 101%
The above calculation of standardized distributable cash is a simple measure of the cash available to be paid
out to unitholders. It is intended to rely solely on items recorded in accordance with GAAP. The calculation
starts with cash flows from operating activities less cash outlays in the period for tangible and intangible capital
assets, which includes capital expenditures and deferred sales commissions, and contractual limitations or
restrictions on the distribution of cash in the period by virtue of a covenant within a debt agreement, of which
CI has none.
2 9
CI believes that this measure, while standardized, does not capture the amount available to be distributed to
unitholders and has therefore provided a calculation of an adjusted distribution base above. CI makes three
adjustments, as set out below.
CI defines its productive capacity as its assets under management. This is split into two pools – front-end and
back-end financed assets. Front-end financed assets do not require any investment by CI, whereas CI pays the
commission to investment advisors for back-end financed assets. CI allocates a portion of its spending on
deferred sales commissions as the amount required to replenish that productive capacity when back-end
financed assets are redeemed by investors. Any incremental spending on deferred sales commissions is viewed
as growing CI’s productive capacity and is financed by debt, not out of current period cash flow.
CI also adjusts for the cash-settled component of equity-based compensation on an after-tax basis. These
amounts are the result of increases in the unit price of CI and could have been settled with units. It is therefore
viewed as a financing item and is added to the adjusted distribution base.
Other than moderate seasonal fluctuations, CI’s business does not require incremental working capital at its
current productive capacity; it is an amount that may grow with the growth of CI and would therefore be
financed with debt. The change in working capital is therefore an additional adjustment in calculating the
adjusted distribution base.
CI generally distributes most of its adjusted distribution base, with the view that the adjusting items are either
expenditures related to growth in the business or other financing items to be considered in conjunction with
the debt and equity components of CI’s balance sheet.
The pay-out ratio on standardized distributable cash, as set out in the table above, includes the amount
disbursed on the repurchase of units during the period. The pay-out ratio on the adjusted distribution base is
calculated both with and without the unit repurchase amount. To date, all distributions paid have been on
account of income.
Effective January 1, 2009, CI converted to a corporate structure and will no longer calculate distributable cash.
Risk Management
The disclosures below provide an analysis of the risk factors affecting CI’s business operations.
Market Risk
Market risk is the risk of a financial loss resulting from adverse changes in underlying market factors, such as
interest rates, foreign exchange rates, equity and commodity prices. A description of each component of market
risk is described below:
(cid:129) Interest rate risk is the risk of gain or loss due to the volatility of interest rates.
(cid:129) Foreign exchange rate risk is the risk of gain or loss due to volatility of foreign exchange rates.
(cid:129) Equity risk is the risk of gain or loss due to the changes in the prices and the volatility of individual equity
instruments and equity indices.
3 0
CI’s financial performance is indirectly exposed to market risk. Any decline in financial markets or lack of
sustained growth in such markets may result in a corresponding decline in performance and may adversely
affect CI’s assets under management, management fees and revenues, which would reduce cash flow to CI and
ultimately CI’s distributions.
Asset Management Segment
CI is subject to market risk throughout its Asset Management business segment. The following is a description
of how CI mitigates the impact this risk has on its financial position and operating earnings.
Management of the Asset Management segment’s market risk is the responsibility of the Chief Compliance
Officer, who reports to CI’s senior management. Management and Compliance have established a control
environment that ensures risks are reviewed regularly and that risk controls throughout CI are operating in
accordance with regulatory requirements, including risk mitigation where appropriate. Compliance carefully
reviews the exposure to interest rate risk, foreign currency risk and equity risk by monitoring and identifying any
potential market risks to CI’s senior management. When a particular market risk is identified, portfolio managers
of the funds are directed to mitigate the risk by reducing their exposure. During the year, CI’s corporate policy
remained unchanged but additional resources were allocated to monitor and mitigate market risks.
At December 31, 2008, approximately 20% of CI’s assets under management were held in fixed-income
securities, which are exposed to interest rate risk. An increase in interest rates causes market prices of fixed-
income securities to fall, while a decrease in interest rates causes market prices to rise. CI estimates that a
50 basis point change in the value of these securities would cause a change of $0.3 million in annual pre-tax
earnings in the Asset Management segment.
At December 31, 2008, close to 68% of CI’s assets under management were based in Canadian currency,
which diminishes the exposure to foreign exchange risk. However, approximately 13% of CI’s assets under
management were based in U.S. currency at December 31, 2008. Any change in the value of the Canadian
dollar relative to the U.S. currency will cause fluctuations in CI’s assets under management upon which CI’s
management fees are calculated. CI estimates that a 10% change in Canadian/U.S. exchange rates would cause
a change of $8.2 million in the Asset Management segment’s annual pre-tax earnings.
About 63% of CI’s assets under management were held in equity securities, which are subject to equity risk.
Equity risk is classified into two categories: general equity risk and issuer-specific risk. CI employs internal and
external fund managers to take advantage of these individuals’ expertise in particular market niches, sectors and
products and to reduce issuer-specific risk through diversification. CI estimates that a 10% change in the prices
of equity indices would cause a change of $54.5 million in annual pre-tax earnings.
Asset Administration Segment
CI’s Asset Administration business is exposed to market risk. The following is a description of how CI mitigates
the impact this risk has on its financial position and results of operations.
3 1
Risk management for the Asset Administration segment is the responsibility of the Chief Compliance Officer
and senior management. Responsibilities include ensuring policies, processes and internal controls are in place
and in accordance with regulatory requirements. CI’s internal audit department reviews CI’s adherence to
these policies and procedures.
CI’s operating results are exposed to market risk impacting the Asset Administration segment given that this
segment usually generates about 1% of the total income before non-segmented items. This segment had
income of $3.0 million before income taxes for the year ended December 31, 2008. Investment advisors
regularly review their client portfolios to assess market risk and consult with clients to make appropriate changes
to mitigate it. The effect of a 10% change in any component of market risk (comprised of interest rate risk,
foreign exchange risk and equity risk) would have resulted in a change of less than $1 million to the Asset
Administration segment’s pre-tax earnings.
Credit Risk
Credit risk is the risk of loss associated with the inability of a third party to fulfill its payment obligations. CI is
exposed to the risk that third parties that owe it money, securities or other assets will not perform their
obligations. These parties include trading counterparties, customers, clearing agents, exchanges, clearing
houses and other financial intermediaries as well as issuers whose securities are held by CI. These parties may
default on their obligations due to bankruptcy, lack of liquidity, operational failure or other reasons. CI does not
have a significant exposure to any individual counterparty. Credit risk is mitigated by regularly monitoring the
credit performance of each individual counterparty and holding collateral where appropriate.
One of the primary sources of credit risk to CI arises when CI extends credit to clients to purchase securities by
way of margin lending. Margin loans are due on demand and are collateralized by the financial instruments in
the client’s account. CI faces a risk of financial loss in the event a client fails to meet a margin call if market
prices for securities held as collateral decline and if CI is unable to recover sufficient value from the collateral
held. The credit extended is limited by regulatory requirements and by CI’s internal credit policy. Credit risk is
managed by dealing with counterparties CI believes to be creditworthy and by actively monitoring credit and
margin exposure and the financial health of the counterparties. CI has concluded that current economic and
credit conditions have not significantly impacted its financial assets.
Changes in Economic, Political and Market Conditions
CI’s performance is directly affected by financial market and political conditions, including the legislation and
policies of governments. The financial markets and businesses operating in the securities industry are volatile
and are directly affected by, among other factors, domestic and foreign economic conditions and general trends
in business and finance, all of which are beyond the control of CI. There can be no assurance that financial
market performance will be favourable in the future. Any decline in financial markets or lack of sustained
growth in such markets may result in a corresponding decline in performance and may adversely affect CI’s
assets under management, fees and/or revenues, which would reduce cash flow to CI.
3 2
Investment Performance of the Funds
If the funds managed by CI are unable to achieve investment returns that are competitive with or superior to
those achieved by other comparable investment products offered by CI’s competitors, such funds may not
attract assets through gross sales or may experience redemptions, which may have a negative impact on CI’s
assets under management. This would have a negative impact on CI’s revenue and profitability.
Competition
CI operates in a highly competitive environment, with competition based on a variety of factors, including the
range of products offered, brand recognition, investment performance, business reputation, financing strength,
the strength and continuity of institutional, management and sales relationships, quality of service, level of fees
charged and level of commissions and other compensation paid. CI competes with a large number of mutual
fund companies and other providers of investment products, investment management firms, broker-dealers,
banks, insurance companies and other financial institutions. Some of these competitors have greater capital
and other resources, and offer more comprehensive lines of products and services than CI. The trend toward
greater consolidation within the investment management industry has increased the strength of a number of
CI’s competitors. Additionally, there are few barriers to entry by new investment management firms, and the
successful efforts of new entrants has resulted in increased competition. CI’s competitors seek to expand market
share by offering different products and services than those offered by CI. There can be no assurance that CI
will maintain its current standing in the market or its current market share, and that may adversely affect the
business, financial condition or operating results of CI.
Management Fees and Other Costs
CI’s ability to maintain its management fee structure will be dependent on its ability to provide investors with
products and services that are competitive. There can be no assurance that CI will not come under competitive
pressure to lower the fees charged or that it will be able to retain the current fee structure, or with such fee
structure, retain its investors in the future. Changes to management fees, commission rates, structures or service
fees related to the sale of mutual funds and closed-end funds could have an adverse effect on CI’s operating
results. By reason of CI’s implementation in 2005 of fixed administration fees for its mutual funds, a significant
decrease in the value of the relevant funds, in combination with the fixed administration fees, could reduce
margins and have an adverse effect on CI’s operating results.
Risks of Significant Redemptions of CI’s Assets Under Management
CI earns revenue primarily from management fees earned for advising and managing pools of assets. These
revenues depend largely on the value and composition of mutual fund assets under management. The level of
assets under management is influenced by three factors: (i) sales; (ii) redemption rates; and (iii) investment
performance. Sales and redemptions may fluctuate depending on market and economic conditions, investment
performance, and other factors. Recent market volatility has contributed to significant redemptions and
diminished sales for participants in the Canadian wealth management industry.
Administration Vulnerability and Error
The administrative services provided by CI depend on software supplied by third-party suppliers. Failure of a
key supplier, the loss of these suppliers’ products, or problems or errors related to such products would have a
material adverse effect on the ability of the CI to provide these administrative services. Changes to the pricing
3 3
arrangement with such third-party suppliers because of upgrades or other circumstances could have an adverse
effect upon the profitability of the CI. There can be no assurances that the CI’s systems will operate or that the
CI will be able to prevent an extended systems failure in the event of a subsystem component or software failure
or in the event of an earthquake, fire or any other natural disaster, or a power or telecommunications failure.
Any systems failure that causes interruptions in the operations of the CI could have a material adverse effect on
its business, financial condition and operating results. CI may also experience losses in connection with
employee errors. Although expenses incurred by CI in connection with employee errors have not been
significant in the past, there can be no assurances that these expenses will not increase in the future.
Sufficiency of Insurance
Members of CI maintain various types of insurance which may include financial institution bonds, errors and
omissions insurance, directors’, trustees’ and officers’ liability insurance, agents’ insurance and general
commercial liability insurance. There can be no assurance that a claim or claims will not exceed the limits of
available insurance coverage, that any insurer will remain solvent or willing to continue providing insurance
coverage with sufficient limits or at a reasonable cost or that any insurer will not dispute coverage of certain
claims due to ambiguities in the relevant policies. A judgment against any member of CI in excess of available
coverage could have a material adverse effect on CI both in terms of damages awarded and the impact on the
reputation of CI.
Regulation of CI
Certain subsidiaries of CI are heavily regulated in all jurisdictions where they carry on business. Laws and
regulations applied at the national and provincial level generally grant governmental agencies and self-
regulatory bodies broad administrative discretion over the activities of CI, including the power to limit or restrict
business activities. Possible sanctions include the revocation or imposition of conditions on licenses to operate
certain businesses, the suspension or expulsion from a particular market or jurisdiction of any of CI’s business
segments or its key personnel or financial advisors, and the imposition of fines and censures. It is also possible
that the laws and regulations governing a subsidiary’s operations or particular investment products or services
could be amended or interpreted in a manner that is adverse to CI. To the extent that existing or future
regulations affecting the sale or offering of CI’s product or services or CI’s investment strategies cause or
contribute to reduced sales of CI’s products or lower margins or impair the investment performance of CI’s
products, CI’s aggregate assets under management and its revenues may be adversely affected.
General Business Risk and Liability
Given the nature of CI’s business, CI may from time to time be subject to claims or complaints from investors
or others in the normal course of business. The legal risks facing CI, its trustees, officers, employees or agents
in this respect include potential liability for violations of securities laws, breach of fiduciary duty and misuse of
investors’ funds. Some violations of securities laws and breach of fiduciary duty could result in civil liability,
fines, sanctions, or expulsion from a self-regulatory organization or the suspension or revocation of CI’s
subsidiaries’ right to carry on their existing business. CI may incur significant costs in connection with such
potential liabilities.
3 4
Leverage and Restrictive Covenants
The ability of CI to make distributions or dividends or other payments is subject to applicable laws and
contractual restrictions contained in the instruments governing any indebtedness of CI and its subsidiaries
(including CI’s credit facility). The degree to which CI is leveraged could have important consequences to
unitholders, including: CI’s ability to obtain additional financing for working capital, capital expenditures or
acquisitions in the future may be limited; CI may be unable to refinance indebtedness on terms acceptable to
it or at all; and a significant portion of CI’s cash flow from operations may be dedicated to the payment of the
principal and interest on its indebtedness, thereby reducing the funds available for future operations. The credit
facility contains several restrictive covenants that limit the discretion of CI with respect to certain business
matters or require lender consent and a number of financial covenants that require CI to meet certain financial
ratios and financial condition tests. A failure to comply with the obligations in CI’s credit facility could result
in a default which, if not cured or waived, could permit acceleration of the relevant indebtedness. If the
indebtedness under CI’s current credit facility were to be accelerated, there can be no assurance that CI’s assets
would be sufficient to repay in full that indebtedness. In addition, should the lenders elect not to extend the
term of CI’s current credit facility upon its annual renewal, 50% of the principal would be repaid in eight equal
calendar quarterly instalments with the remaining balance payable two years following the first quarterly
instalment. There can be no assurance that future borrowings or equity financing will be available to CI, or
available on acceptable terms, in an amount sufficient to fund CI’s needs.
Unit Price Risk
Unit price risk arises from the potential adverse impact on CI’s earnings due to movements in CI’s unit price.
CI’s equity-based compensation liability is directly affected by fluctuations in CI’s unit price. CI’s senior
management actively manages equity risk by employing a number of techniques. This includes closely
monitoring fluctuations in CI’s unit price and purchasing CI units at optimal times on the open market for the
trust created solely for the purposes of holding CI units for CI’s equity-based compensation. As well, CI has in
the past entered into total return swap transactions to mitigate its exposure to the price of CI units and the
resulting fluctuations in its equity based compensation. The effect of a $1.00 change in CI’s unit price at
December 31, 2008 would have resulted in a change of approximately $2.4 million in equity-based
compensation.
Related Party Transactions
On October 6, 2008, Sun Life announced the sale of its 37% interest in CI to Bank of Nova Scotia
(“Scotiabank”) for $22.00 per unit for a total compensation of $2.3 billion. The transaction closed on
December 12, 2008 and as a result, Sun Life is no longer a related party of CI and Scotiabank became a related
party for financial reporting purposes.
CI and Sun Life entered into an arrangement whereby, among other things, Sun Life would distribute CI’s
funds through Sun Life’s sales force on a preferred basis and that CI would perform essentially all administrative
and management services to Sun Life’s Clarica and SunWise segregated funds. These activities are in the
normal course of business for CI and Sun Life is compensated at normal commercial rates as a distributor of
fund products as disclosed in the funds’ prospectus or other offering documents. These payments are in the
form of commissions on sales of funds on a deferred sales charge basis ($41.8 million for the period from
3 5
January 1, 2008 to December 12, 2008 versus $46.4 million for the 12 months ended December 31, 2007) and
trailer fees ($90.3 million for the period from January 1, 2008 to December 12, 2008 versus $101.7 million for
the 12 months ended December 31, 2007).
CI entered into transactions related to the advisory and distribution of its mutual funds with Scotiabank. These
transactions were in the normal course of operations and were recorded at the agreed upon exchange amounts.
During the period from December 13, 2008 to December 31, 2008, CI incurred charges for deferred sales
commissions of $0.04 million and trailer fees of $0.24 million which were paid or payable to Scotiabank. The
balance payable to Scotiabank as at December 31, 2008 of $0.4 million is included in accounts payable and
accrued liabilities.
Scotiabank is the agent for CI’s revolving credit facility. As at December 31, 2008, CI had drawn $999.4 million
against this facility in the form of banker’s acceptances ($990.0 million) and a prime rate loan ($9.4 million).
During the period of December 13, 2008 to December 31, 2008, CI incurred interest and stamping fees of
$1.4 million, which were recorded as interest expense.
During 2008, CI provided a demand loan to one of its managed funds pursuant to a promissory note agreement.
The loan facility is for a maximum of $50.0 million and interest is calculated at above market rates. The loan
is secured by the assets of the fund by way of a pledge agreement. As at December 31, 2008, $32.6 million was
outstanding including interest and is included in accounts receivable and prepaid expenses. During the year
ended December 31, 2008, interest of $0.3 million was recorded and included in other income.
Unit Capital
As at December 31, 2008, CI had 234,757,501 Trust units and 57,735,304 Exchangeable LP units outstanding.
Effective January 1, 2009, CI converted back to a corporate structure and all Trust and LP units were exchanged
on a one-for-one basis into common shares of CI Financial Corp., which is the continuing entity for CI
Financial Income Fund.
At December 31, 2008, 3.4 million options to purchase Trust units were outstanding, of which 2.5 million
options were exercisable. These options are now all options to purchase common shares under their original
terms and conditions.
Contractual Obligations
The table that follows summarizes CI’s contractual obligations at December 31, 2008.
PAY M E N T S D U E B Y P E R I O D
Less than 5 or more
(millions) Total 1 year 2 3 4 5 years
Long-term debt $999.4 $187.4 $249.8 $562.2 $– $– $–
Operating leases 54.2 19.2 12.6 7.9 5.7 4.5 4.3
Total $1,053.6 $206.6 $262.4 $570.1 $5.7 $4.5 $4.3
3 6
Significant Accounting Estimates
The consolidated financial statements have been prepared in accordance with Canadian generally accepted
accounting principles. For a discussion of significant accounting policies, refer to Note 1 and Note 2 of the
Notes to the Consolidated Financial Statements included in CI’s 2008 Annual Report. CI’s ongoing review of
the fair value of financial instruments resulted in a writedown of $5 million in the third quarter and a writedown
of $6 million in the fourth quarter of 2008. CI carries significant goodwill and intangible assets on its balance
sheet. CI uses valuation models that use estimates of future market returns and sales and redemptions of
investment products as the primary determinants of fair value. CI has reassessed these key variables in light of
the current economic climate. Estimates of sales and redemptions are very likely to change as economic
conditions either improve or deteriorate, whereas estimates of future market returns are less likely to do so. The
models are most sensitive to current levels of assets under management and administration as well as estimates
of future market returns. While these balances are not currently impaired, a decline of 10% in the fair value of
certain models may result in an impairment of goodwill or other intangibles recorded on the balance sheet.
Changes in Significant Accounting Policies
On January 1, 2008, CI adopted CICA Handbook Section 1535, Capital Disclosures, Section 3862, Financial
Instruments – Disclosures and Section 3863, Financial Instruments – Presentation.
CICA Section 1535 requires the disclosure of both qualitative and quantitative information that enables users
of financial statements to evaluate the entity’s objectives, policies and processes for managing capital.
CICA Section 3862 and CICA Section 3863 enhance disclosures to enable users to evaluate the significance
of financial instruments, the nature and extent of risks arising from financial instruments and how an entity
manages such risks. The new standards require specific qualitative and quantitative disclosures about each type
of risk. This includes new requirements to quantify certain risk exposures and to provide sensitivity analysis for
some risks.
These standards require significant new disclosures found in Note 12 and Note 13 to the consolidated interim
financial statements. The new standards did not have an impact on the financial position or results of operations
of CI.
Future Accounting Changes
In February 2008, the AcSB confirmed that all Canadian publicly accountable enterprises will be required to
adopt International Financial Reporting Standards (“IFRS”) for years beginning on or after January 1, 2011. CI
will adopt IFRS for the year beginning January 1, 2011 and will present the interim and annual consolidated
financial statements including comparative 2010 financial statements in accordance with IFRS.
CI has developed a transition plan for the changeover to IFRS. During the first half of 2009, CI will assess the
impact IFRS has on accounting policies and implementation decisions; information technology and data
systems; financial statement presentation and disclosures; internal control over financial reporting; disclosure
controls and procedures and business activities including the impact on debt covenants. Following this
3 7
assessment, an implementation plan will be developed to transition CI’s financial reporting process, including
internal controls and information systems to IFRS. During 2010, CI will internally report its financial results
in accordance with IFRS in preparation of adoption on January 1, 2011.
CI is currently in the process of assessing the differences between IFRS and Canadian GAAP, as well as the
alternatives available upon adoption. The impact these differences may have on the financial results has not
been yet been determined and will be an ongoing process as the International Accounting Standards Board and
the AcSB issue new standards and recommendations.
Disclosure Controls and Internal Controls over Financial Reporting
The Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), together with management,
have designed and evaluated the effectiveness of CI’s disclosure controls and procedures as at December 31,
2008. They have concluded that they are reasonably assured these Internal Controls over Financial Reporting
(“ICFR”) and Disclosure Controls and Procedures (“DC&P”), as defined in National Instrument 52-109 –
Certification of Disclosure in Issuers’ Annual and Interim Filings, were effective and that material information
relating to CI was made known to them within the time periods specified under applicable securities
legislation.
The CEO and CFO have designed or caused the design of ICFR and DC&P. The COSO framework was used
to assist the CEO and CFO in the evaluation of CI's ICFR. The CEO and CFO used various tools to evaluate
ICFR and DC&P which included interaction with key control systems, review of policy and procedure
documentation, observation or reperformance of control procedures. There were no reportable deficiencies or
material weaknesses identified during the evaluation process. For the year ended December 31, 2008, there
were no changes to ICFR.
Additional information relating to CI, including the most recent audited financial statements, management
information circular and annual information form are available on SEDAR at www.sedar.com.
3 8
Management’s Report To Unitholders
Management of CI Financial Income Fund ["CI"] is responsible for the integrity and objectivity of the
consolidated financial statements and all other information contained in this document. The consolidated
financial statements have been prepared in accordance with Canadian generally accepted accounting
principles and are based on management's best information and judgment.
In fulfilling its responsibilities, management has developed internal control systems and procedures designed
to provide reasonable assurance that CI's assets are safeguarded, that transactions are executed in accordance
with appropriate authorization, and that accounting records may be relied upon to properly reflect CI's
business transactions.
The Audit Committee of the Board of Trustees is composed of outside directors who meet periodically and
independently with management and the auditors to discuss CI's financial reporting and internal control. The
Audit Committee reviews the results of the audit by the auditors and their audit report prior to submitting the
consolidated financial statements to the Board of Trustees for approval. The external auditors have
unrestricted access to the Audit Committee.
Management recognizes its responsibility to conduct CI's affairs in the best interests of its unitholders.
William T. Holland
Chief Executive Officer
Douglas J. Jamieson
Chief Financial Officer
3 9
Auditors’ Report
To the Unitholders of
CI Financial Income Fund
We have audited the consolidated balance sheets of CI Financial Income Fund ["CI"] as at December 31,
2008 and 2007, and the consolidated statements of income and comprehensive income, changes in unitholders'
equity, and cash flows for the years then ended. These financial statements are the responsibility of CI's
management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those
standards require that we plan and perform an audit to obtain reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial
position of CI as at December 31, 2008 and 2007 and the results of its operations and its cash flows for the
years then ended in accordance with Canadian generally accepted accounting principles.
Toronto, Canada
February 20, 2009
4 0
FINANCIAL STATEMENTS
Consolidated Balanced Sheets
A S AT D E C E M B E R 3 1
(in thousands of dollars)
ASSETS
Current
Cash and cash equivalents
Client and trust funds on deposit
Securities owned, at market [note 11]
Marketable securities [note 11]
Accounts receivable and prepaid expenses [note 12 (c) and 15]
Income taxes recoverable
Future income taxes [note 16]
Total current assets
Capital assets, net [note 4]
Deferred sales commissions, net of accumulated amortization of $475,227
[2007 – $445,858] [note 15]
Fund contracts [note 5]
Goodwill [note 3]
Other assets [note 6]
LIABILITIES AND UNITHOLDERS’ EQUITY
Current
Accounts payable and accrued liabilities [notes 3, 9 and 15]
Distribution payable [note 14]
Client and trust funds payable
Securities sold short, at market [note 11]
Income taxes payable
Equity-based compensation [note 10[b]]
Current portion of long-term debt [note 7]
Total current liabilities
Long-term debt [note 7]
Preferred shares issued by subsidiary [note 8]
Future income taxes [note 16]
Total liabilities
Commitments and contingencies [note 18]
Unitholders’ equity
Unit capital [note 10[a]]
Contributed surplus
Deficit
Accumulated other comprehensive income (loss)
Total unitholders’ equity
2008
$
80,081
333,610
34,776
10,774
276,938
–
31
736,210
29,852
588,935
1,014,757
1,125,884
98,881
3,594,519
164,874
–
469,355
11,195
15,481
95
187,388
848,388
812,013
19,678
312,728
1,992,807
1,985,912
47,587
(431,162)
(625)
1,601,712
3,594,519
2007
$
55,406
429,016
69,532
24,222
211,629
2,348
8,756
800,909
34,938
540,492
1,019,436
1,132,926
97,848
3,626,549
230,371
107,636
472,201
28,354
16,521
27,151
135,325
1,017,559
792,616
18,740
346,967
2,175,882
1,788,501
39,300
(377,983)
849
1,450,667
3,626,549
(see accompanying notes)
On behalf of the Board of Trustees: ______________________ _______________________
William T. Holland G. Raymond Chang
Trustee Trustee
4 2
Consolidated Statements of Income and Comprehensive Income
F O R T H E Y E A R E N D E D D E C E M B E R 3 1
(in thousands of dollars, except per unit amounts)
2008
$
2007
$
REVENUE
Management fees 1,163,818 1,292,726
Administration fees 265,973 292,297
Redemption fees 35,985 31,521
Gain (loss) on sale of marketable securities (2) 1,698
Other income [note 6 and 15] 46,138 36,665
1,511,912 1,654,907
EXPENSES
Selling, general and administrative [note 10(b)(c)] 332,581 346,695
Trailer fees [note 15] 336,071 368,845
Investment dealer fees 169,473 189,132
Amortization of deferred sales commissions and fund contracts 147,162 123,478
Interest [note 7 and 15] 46,608 39,598
Other [note 6] 32,084 25,866
Restructuring costs [note 6] 11,000 –
Impairment of available-for-sale assets [note 11] 11,000 –
1,085,979 1,093,614
Income before income taxes 425,933 561,293
Provision for (recovery of) income taxes [note 16]
Current 6,328 7,427
Future (25,751) (71,189)
(19,426) (63,762)
Net income for the year 445,356 625,055
Other comprehensive income (loss), net of tax [note 11]
Unrealized gain (loss) on available-for-sale financial assets,
net of income taxes of $164 [2007 – $282] 545 1,079
Reversal of (gains) losses to net income on available-for-sale
financial assets, net of income taxes of ($389) [2007 – $33] (2,019) 65
Total other comprehensive income (loss), net of tax (1,474) 1,144
Comprehensive income 443,882 626,199
Basic earnings per unit [note 10(e)] $1.60 $2.21
Diluted earnings per unit [note 10(e)] $1.59 $2.21
(see accompanying notes)
4 3
Consolidated Statements of Changes in Unitholders’ Equity
F O R T H E Y E A R E N D E D D E C E M B E R 3 1
(in thousands of dollars)
UNIT CAPITAL [note 10(a)]
Balance, beginning of year
Issuance of unit capital
Unit repurchase, net of issuance of unit capital
on vesting of deferred equity units [note 10(c)]
Balance, end of year
CONTRIBUTED SURPLUS [note 10(a)(c)(d)]
Balance, beginning of year
Conversion of Rockwater deferred stock units
Compensation expense for deferred equity unit plan
Issuance of unit capital on vesting of deferred equity units
Balance, end of year
DEFICIT
Balance, beginning of year
Net income for the year
Cost of units repurchased in excess of stated value [note 10(a)]
Unit issuance costs [note 10(a)]
Distributions declared [note 14]
Balance, end of year
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance, beginning of year
Other comprehensive income (loss)
Balance, end of year
Net change in unitholders’ equity during the year
Unitholders’ equity, beginning of year
Unitholders’ equity, end of year
(see accompanying notes)
2008
$
1,788,501
210,048
(12,637)
1,985,912
39,300
–
27,139
(18,852)
47,587
(377,983)
445,356
(76,602)
(5,265)
(416,668)
(431,162)
849
(1,474)
(625)
151,045
1,450,667
1,601,712
2007
$
1,652,472
178,615
(42,586)
1,788,501
–
27,338
13,956
(1,994)
39,300
(281,425)
625,055
(91,003)
–
(630,610)
(377,983)
(230)
1,079
849
79,850
1,370,817
1,450,667
4 4
Consolidated Statements of Cash Flows
F O R T H E Y E A R E N D E D D E C E M B E R 3 1
2008 2007
(in thousands of dollars) $ $
OPERATING ACTIVITIES
Net income for the year 445,356 625,055
Add (deduct) items not involving cash
Loss (gain) on sale of marketable securities 2 (1,698)
Impairment of available-for-sale assets 11,000 –
Equity-based compensation (27,056) (15,847)
Amortization of deferred sales commissions and fund contracts 147,162 123,478
Amortization of other 13,854 13,500
Future income taxes (25,751) (71,189)
564,567 673,299
Net change in non-cash working capital balances related to operations 18,737 4,312
Cash provided by operating activities 583,304 677,611
INVESTING ACTIVITIES
Purchase of marketable securities (1,200) (34,125)
Proceeds on sale of marketable securities 1,948 27,207
Additions to capital assets (9,402) (3,943)
Deferred sales commissions paid (190,926) (179,998)
Additions to other assets (399) (481)
Cash paid on acquisition, including transaction costs,
net of cash and cash equivalents acquired [note 3] – (137,271)
Cash used in investing activities (199,979) (328,611)
FINANCING ACTIVITIES
Increase in long-term debt 71,460 351,878
Repurchase of unit capital [note 10(a)] (108,091) (115,222)
Issuance of unit capital [note 10(a)] 202,285 106,252
Repayment of short-term borrowing – (34,775)
Distributions paid to unitholders [note 14] (524,304) (623,937)
Cash used in financing activities (358,650) (315,804)
Net increase in cash and cash equivalents during the year 24,675 33,196
Cash and cash equivalents, beginning of year 55,406 22,210
Cash and cash equivalents, end of year 80,081 55,406
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid 39,563 36,842
Income taxes paid 12,387 13,421
(see accompanying notes)
4 5
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
CI Financial Income Fund ["CI"] is an unincorporated open-ended limited purpose trust established under the laws of the Province of
Ontario pursuant to a Declaration of Trust dated May 18, 2006. CI's primary business is the management and distribution of a broad
range of financial products and services, including mutual funds, segregated funds, financial planning, insurance, investment advice,
wealth management and estate and succession planning. CI also participates in the underwriting of securities transactions,
institutional sales and principal trading.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles
["GAAP"].
Basis of presentation
The consolidated financial statements include the accounts of CI, CI Investments Inc. ["CI Investments"], United Financial Corporation
["United"], Assante Wealth Management (Canada) Ltd. ["AWM"], Blackmont Capital Inc. ["Blackmont"] and their subsidiaries. The
consolidated financial statements also include the assets and liabilities and results of operations of variable interest entities where
CI is the primary beneficiary. Hereinafter, CI and its subsidiaries are referred to as CI.
Revenue recognition
Management fees are based upon the net asset value of the respective funds and are recognized on an accrual basis.
Administration fees and other income are recognized as services are provided under contractual arrangements. Administration fees
include commission revenue, which is recorded on a trade date basis, investment banking revenue, which is recorded when earned
and is typically the prospectus receipt date, and advisory fees, which are recorded when the services related to the underlying
engagements are completed. In addition, administration fees include the realized and unrealized gains and losses on securities
owned and sold short that are freely tradable.
Redemption fees payable by securityholders of deferred sales charge mutual funds, the sales commission of which was financed by
CI, are recognized as revenue on the trade date of the redemption of the applicable mutual fund securities.
Financial instruments
Financial assets may be classified either as held-for-trading ["HFT"], available-for-sale ["AFS"], held-to-maturity ["HTM"], or loans and
receivables and financial liabilities may be classified as either as HFT or other. All financial instruments are initially measured at fair
value. After initial recognition, financial instruments classified as HFT or AFS are measured at fair value using quoted market prices
in an active market. For financial instruments where an active market does not exist, fair value is based on valuation techniques,
unless it is an equity instrument classified as AFS, in which case it is measured at cost. All other financial instruments, which include
those classified as HTM investments, loans and receivables and other financial liabilities, are measured at amortized cost using the
effective interest rate method. Changes in fair value for financial assets classified as AFS are reflected in other comprehensive
income until the financial asset is disposed of or becomes impaired. Changes in fair value of financial instruments, other than those
classified as AFS, are reflected in earnings.
4 6
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
Financial instruments included in CI's accounts have the following classifications:
(cid:129) Cash and cash equivalents are classified as HFT and measured at fair value.
(cid:129) Client and trust funds on deposit and accounts receivable are classified as loans and receivables and measured at amortized cost.
(cid:129) Securities owned and sold short, at market, are classified as HFT and measured at fair value.
(cid:129) Marketable securities are classified as AFS and measured at fair value, unless it is an equity instrument that does not have an
active market quotation, in which case it is measured at cost.
(cid:129) Other assets are classified as loans and receivables and measured at amortized cost, with the exception of a long-term investment
asset classified as AFS and measured at fair value.
(cid:129) Accounts payable, distributions payable, client and trust funds payable, long-term debt and preferred shares issued by subsidiary
are classified as other financial liabilities and measured at amortized cost.
Cash and cash equivalents
Cash and cash equivalents include cash on deposit, highly liquid investments and interest bearing deposits with original maturities
of 90 days or less.
Client and trust funds
Client and trust funds on deposit include amounts representing cash held in trust with Canadian financial institutions for clients in
respect of self-administered Registered Retirement Savings Plans and Registered Retirement Income Funds, and amounts received
from clients for which the settlement date on the purchase of securities has not occurred or accounts in which the clients maintain a
cash balance. Client and trust funds on deposit also include amounts for client transactions that are entered into on either a cash or
margin basis and recorded on the trade date of the transaction. Amounts are due from clients on the settlement date of the transaction
for cash accounts. For margin accounts, CI extends credit to a client for the purchase of securities, collateralized by the financial
instruments in the client's account. Amounts loaned are limited by margin regulations of the Investment Industry Regulatory
Organization of Canada ["IIROC"] and other regulatory authorities and are subject to CI's credit review and daily monitoring procedures.
The corresponding liabilities related to the above accounts and transactions are included in client and trust funds payable.
Securities owned and sold short
Securities owned and sold short, which are freely tradable, are recorded at market value and any unrealized gain or loss is included
in administration fees income. Securities transactions are recorded on a trade-date basis. Market value is based on quoted prices,
which is based on "bid" for securities owned and "ask" for securities sold short, where active markets exist. For securities in non-
active markets, market value is based on valuation techniques and management's best estimate of fair value.
Marketable securities
Marketable securities consist of investments in mutual fund securities, publicly traded companies and an investment in a private
company. Marketable securities are measured at fair value. The fair value of publicly traded companies is determined using quoted
market prices. Mutual fund securities are valued using the net asset value per unit of each fund. CI's investment in a private company
is valued at cost and adjusted for impairment. Realized and unrealized gains and losses are recognized using average cost. Except
for impairment losses, gains and losses in the fair value of marketable securities are recorded as other comprehensive income (loss)
4 7
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
until disposed of, at which time any gain or loss is recorded in net income. When a decline in fair value is other than temporary and
there is objective evidence of impairment, the cumulative loss that had been recognized directly in other comprehensive income (loss)
is removed and recognized in net income, even though the financial asset has not been derecognized.
Collateralized securities transactions
Securities purchased under agreements to resell ["reverse repurchase agreements"] are accounted for as collateralized lending
transactions and are recorded at their initial contractual amounts plus accrued interest. Interest earned on the reverse repurchase
agreements is included in other income. CI's policy is to obtain possession of collateral with a market value equal to or in excess of
the principal amount loaned under resale agreements. Collateral is valued daily and CI may require counterparties to deposit additional
collateral or return collateral pledged, when appropriate, to ensure that the market value of the underlying collateral remains sufficient.
Substantially all reverse repurchase agreement activities are transacted under master netting agreements that give CI the right, in the
event of default, to liquidate collateral held and to set off receivables and payables with the same counterparty.
CI uses securities lending and borrowing primarily to facilitate the securities settlement process. These arrangements are typically
short-term in nature, with interest being received on the cash delivered. These transactions are collateralized by either cash or
securities and are subject to daily margin calls for any deficiency between the market value of the security given and the amount of
collateral received. CI manages its credit exposure by establishing and monitoring aggregate limits by counterparty for these
transactions. Interest earned on cash collateral is based on a negotiated rate and is included in other income.
Capital assets
Capital assets are recorded at cost less accumulated amortization. These assets are amortized over their estimated useful lives as follows:
Computer hardware
Computer software
Office equipment
30% declining balance or straight-line over three to four years
Straight-line over two to four years
20% declining balance or straight-line over five to ten years
Leasehold improvements
Straight-line over the term of the lease
Deferred sales commissions
Commissions paid on sales of deferred sales charge mutual funds represent commissions paid by CI to brokers and dealers, and are
recorded on the trade date of the sale of the applicable mutual fund securities. Deferred sales commissions are recorded net of any
write-down for impairment. CI evaluates the carrying value of deferred sales commissions for potential impairment based on
estimated discounted future cash flows from fees earned on the related mutual fund securities.
Deferred sales commissions are amortized on a straight-line basis over 84 months from the date recorded, except for low-load mutual
fund securities, which are amortized on a straight-line basis over 36 months.
Fund contracts
Fund administration contracts and fund management contracts [collectively, "fund contracts"] are recorded net of any write-down for
impairment. CI evaluates the carrying value of fund contracts for potential impairment based on estimated future cash flows. These
evaluations are performed on an annual basis or more frequently if events or changes in circumstances indicate a potential
impairment. Any impairment would be written off to income.
4 8
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
Fund administration contracts are amortized on a straight-line basis over 25 years. Fund management contracts with a finite life are
amortized on a straight-line basis over a period of up to 20 years, depending on the contractual terms of such agreements and
management's best estimate of their useful lives. Fund management contracts with an indefinite life are not amortized.
Goodwill
Goodwill is recorded as the excess of purchase price over identifiable assets acquired. Goodwill is allocated to the reporting units
and any impairment is identified by comparing the carrying value of a reporting unit with its fair value. If the carrying value of a
reporting unit exceeds its fair value, goodwill impairment is measured as the excess of the carrying amount of the reporting unit's
goodwill over the implied fair value of the goodwill, based on the fair value of the assets and liabilities of the reporting unit. These
evaluations are performed on an annual basis or more frequently if events or changes in circumstances indicate a potential
impairment. Any impairment would be written off to income.
Equity-based compensation
CI has an employee incentive unit option plan, which includes a cash settlement option. Compensation expense is recognized and
recorded as a liability based upon the intrinsic value of outstanding unit options at the balance sheet date and the proportion of their
vesting periods that have elapsed. On the exercise of unit options for cash, the liability recorded with respect to the options is reduced
for the settlement. If unit options are exercised for units, the liability recorded with respect to the options and consideration paid by
the option holders are credited to unit capital.
CI also has a deferred equity unit plan for senior executives, investment advisors and other key employees whereby deferred equity
units ["DEU Awards"] are granted in lieu of compensation. Compensation expense is recognized and recorded as contributed surplus
based upon the market value of DEU Awards at the grant date. Forfeitures of DEU Awards reduce compensation expense to the extent
contributed surplus was previously recorded for such awards. On vesting of DEU Awards, unit capital is credited for the amounts
initially recorded as contributed surplus to reflect the issuance of unit capital.
Compensation trust
CI uses a compensation trust, which holds CI's Trust units, to fulfill obligations to employees arising from CI's deferred equity unit
plan. CI is the primary beneficiary of the trust and therefore, the trust is consolidated in accordance with the principles of CICA
Section 1590, Subsidiaries.
Income taxes
The liability method of tax allocation is used in accounting for income taxes. Under this method, future income tax assets and
liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities, and measured
using the substantively enacted tax rates and laws that will be in effect when the differences are expected to reverse.
Earnings per unit
The treasury stock method is used in the calculation of per unit amounts. Basic earnings per unit is determined by dividing net income
by the weighted average number of units outstanding during the period. Diluted earnings per unit is determined by adjusting the
weighted average number of units outstanding for the dilutive effect of DEU Awards under the deferred equity unit plan. The
employee incentive unit option plan does not have a dilutive effect on earnings per unit as CI accounts for its unit options as a liability.
4 9
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
Foreign currency translation
Monetary assets and liabilities are translated into Canadian dollars using the exchange rates in effect at the balance sheet date.
Non-monetary assets and liabilities are translated into Canadian dollars using historical exchange rates. Revenue and expenses are
translated at average rates prevailing during the period. Other foreign currency transactions are translated into Canadian dollars
using the exchange rate in effect on the transaction date. Translation exchange gains and losses are included in other income in the
period in which they occur.
Comprehensive income
Comprehensive income includes all changes to unitholders' equity other than those resulting from investments by owners and
distributions to owners and is presented in the consolidated statement of income and comprehensive income. In addition to net
income, it includes other comprehensive income (loss), such as unrealized gains and losses on financial assets classified as AFS and
other changes from non-owner sources. Accumulated other comprehensive income (loss) is presented in the consolidated statement
of unitholders' equity.
Use of estimates
The preparation of consolidated financial statements in conformity with Canadian generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results
could differ from those estimates.
2. CHANGE IN ACCOUNTING POLICY
On January 1, 2008, CI adopted CICA Handbook Section 1535, Capital Disclosures, Section 3862, Financial Instruments - Disclosures
and Section 3863, Financial Instruments - Presentation.
CICA Section 1535 requires the disclosure of both qualitative and quantitative information that enables users of financial statements
to evaluate the entity's objectives, policies and processes for managing capital.
CICA Section 3862 and CICA Section 3863 enhance disclosures to enable users to evaluate the significance of financial instruments,
the nature and extent of risks arising from financial instruments and how an entity manages such risks. The new standards require
specific qualitative and quantitative disclosures about each type of risk. This includes new requirements to quantify certain risk
exposures and to provide sensitivity analysis for some risks.
These new standards result in additional disclosures in the notes to the consolidated financial statements [see notes 12 and 13], but
did not have an impact on the financial position or results of operations of CI.
3. BUSINESS ACQUISITION
On April 4, 2007, CI acquired control of Rockwater Capital Corporation ["Rockwater"], a full service investment dealer and portfolio
management company, and completed its acquisition of all the outstanding shares during the second quarter of 2007. The acquisition
was accounted for using the purchase method and the results of operation have been consolidated from the date of the transaction.
5 0
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
As consideration, CI paid $150,251 in cash and issued 2,631,784 in total of Trust units and Exchangeable LP units. The Trust units and
Exchangeable LP units of CI issued as consideration were valued at $27.50 per unit, the weighted average price over the five trading
days prior to April 2, 2007, the initial expiry date of the offer to purchase.
Details of the net assets acquired, at fair value, are as follows:
Cash and cash equivalents
Client and trust funds on deposit
Accounts receivable and prepaid expenses
Securities owned
Capital assets
Future income taxes
Fund management contracts
Other assets
Accounts payable and accrued liabilities
Client and trust funds payable
Securities sold short
Short-term borrowing
Other liabilities
Preferred shares issued by subsidiary
Goodwill on acquisition
Details of consideration given, at fair value, are as follows:
Cash
CI Trust units and Exchangeable LP units
Transaction costs
$
15,487
389,839
121,919
63,707
12,813
16,684
20,000
37,105
(120,780)
(397,676)
(22,956)
(34,775)
(33,004)
(18,100)
174,858
225,121
$
150,251
72,363
2,507
225,121
The acquired fund management contracts include management contracts with an indefinite life valued at $4,500 and management
contracts valued at $15,500, which is being amortized over its finite life of 20 years.
The goodwill on acquisition is not deductible for income tax purposes. Goodwill of $43,400 relates to the Asset Management
segment and $131,458 relates to the Asset Administration segment.
Included in other liabilities at the date of acquisition are accruals for severance and exit costs of $19,000, all of which was paid as
at December 31, 2008 [December 31, 2007 - $12,233].
5 1
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
In 2008, CI reduced its legal provision related to the acquisition of Rockwater by $10,000, which was previously included in accounts
payable and accrued liabilities. Accordingly, goodwill recorded on the Rockwater acquisition was reduced by $7,042 [net of future
income taxes of $2,958]. These adjustments are reflected in the acquisition information presented above.
4. CAPITAL ASSETS
Capital assets consist of the following as at December 31:
2008 2007
Accumulated Accumulated
Cost amortization Cost amortization
$ $ $ $
Computer hardware and software 33,907 29,317 29,391 20,098
Office equipment 13,984 8,538 13,059 6,909
Leasehold improvements 30,877 11,061 26,914 7,419
78,768 48,916 69,364 34,426
Less accumulated amortization 48,916 34,426
Net book value 29,852 34,938
5. FUND CONTRACTS
Fund contracts consist of the following as at December 31:
2008 2007
Accumulated Accumulated
Cost amortization Cost amortization
$ $ $ $
Fund administration contracts 37,600 7,543 37,600 6,040
Fund management contracts
Finite life 27,500 9,882 27,500 6,706
Indefinite life 967,082 – 967,082 –
1,032,182 17,425 1,032,182 12,746
Less accumulated amortization 17,425 12,746
Net book value 1,014,757 1,019,436
5 2
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
6. OTHER ASSETS, INCOME AND EXPENSE
Other assets consists mainly of an investment in a limited partnership, long-term accounts receivable, prepaid expenses, deferred
charges and loans advanced to employees, investment advisors and capital markets professionals.
CI has an employee unit purchase loan program for key employees. These loans are renewable yearly and bear interest at prescribed
rates. As at December 31, 2008, the carrying amount of employee unit purchase loans is $19,333 [December 31, 2007 – $16,317] and
is included in other assets. These loans become due immediately upon termination of employment or sale of the units that are held
as collateral. As at December 31, 2008, the units held as collateral have a market value of approximately $22,494 [December 31,
2007 – $35,037].
CI has a hiring and retention incentive program whereby loans are extended to investment advisors and capital markets professionals.
These loans are initially recorded at their principal amount, may bear interest at prescribed rates and are forgiven on a straight-line
basis over the applicable contractual period, which varies in length from three to seven years. The forgiven amount is included in
selling, general and administration expenses. As at December 31, 2008, loans to investment advisors and capital markets
professionals of $38,656 [December 31, 2007 – $44,127] is included in other assets. These loans become due on demand upon
termination or breach in the terms of the agreements.
Other income consists mainly of institutional management fees, custody fees, equity income, interest income and fees earned from
collateralized securities transactions. Other expenses consist mainly of institutional management expenses, distribution fees to
limited partnerships and capital taxes.
7. LONG-TERM DEBT
CI has a revolving credit facility with three Canadian chartered banks for general corporate purposes for $1,250,000. Amounts may
be borrowed under this facility in Canadian dollars through prime rate loans, which bear interest at the greater of the bank's prime
rate plus 0.10% and the Canadian Deposit Offering Rate plus 0.85%, or bankers' acceptances, which bear interest at bankers'
acceptance rates plus 1.10%. Amounts may also be borrowed in U.S. dollars through base rate loans, which bear interest at the
greater of the bank's reference rate for loans made by it in Canada in U.S. funds plus 0.10% and the federal funds overnight rate plus
0.85%, or LIBOR loans which bear interest at LIBOR plus 1.10%.
CI may also borrow under this facility in the form of letters of credit, which bear a fee of 1.10% on any undrawn portion. As at
December 31, 2008, CI had accessed $600 [December 31, 2007 - $720] by way of letters of credit.
Loans are made by the banks under a 364-day revolving credit facility, the term of which may be extended annually at the banks'
option. If the banks elect not to extend the term, 50% of the outstanding principal amount shall be repaid in equal quarterly
instalments over the following two years, with the remaining 50% of the outstanding principal balance due two years following the
first quarter-end payment.
The credit facility is collateralized by a registered general security agreement from CI and certain subsidiaries of CI, assignment of the
shares in CI Investments, United, AWM, and certain subsidiaries of AWM, and assignment of the management agreements and
redemption fees of CI Investments and United. The credit facility contains a number of financial covenants that require CI to meet
certain financial ratios and financial condition tests. CI is within its financial covenants with respect to its credit facility, which require
5 3
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
that the debt service ratio remains above 1.5:1 and that the debt to earnings before interest, taxes, depreciation and amortization ratio
remains below 2.5:1. In addition, CI's assets under management cannot fall below $45 billion for more than seven consecutive business
days. There can be no assurance that future borrowings or equity financing will be available to CI or available on acceptable terms.
As at December 31, 2008, CI had drawn $999,401 [December 31, 2007 – $927,941] on its credit facility in the form of bankers'
acceptances of $990,001 [December 31, 2007 – $927,941] and a prime rate loan of $9,400 [December 31, 2007 – nil] at an effective
interest rate of 3.17% [December 31, 2007 – 4.90%]. Interest expense attributable to the long-term debt for the year ended
December 31, 2008 was $44,963 [December 31, 2007 – $37,775].
8. PREFERRED SHARES ISSUED BY SUBSIDIARY
As at December 31, 2008, there are 20,662,500 preferred shares issued and outstanding. These preferred shares were issued by a
subsidiary of Rockwater on December 31, 2004. The preferred shares vest in equal instalments over a three-year period and will be
redeemed or purchased for $1.00 per share, subject to adjustments, on December 31, 2009. The preferred shares do not have any
entitlement to dividends nor do they have any voting rights.
9. RESTRUCTURING COSTS
During the year ended December 31, 2008, restructuring costs of $11 million were accrued and include severance payments and exit
costs related to the downsizing of CI's activities as a result of market conditions. As at December 31, 2008, restructuring costs of
$2.6 million had been paid and $8.4 million is included in accounts payable and accrued liabilities.
5 4
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
10. UNIT CAPITAL
[a] Authorized and issued
A summary of the changes to CI's unit capital is as follows:
Number of units Stated Value
Units [in thousands] # $
Authorized
An unlimited number of Trust units of CI
A limited number of Class B limited partner units of Canadian International LP and special voting units of CI
["Exchangeable LP units", which are exchangeable into one Trust unit]
Trust units, balance, December 31, 2006 133,674 788,513
Issuance of unit capital [note 3] 4,443 126,519
Issuance of unit capital on vesting of deferred equity units 71 1,994
Unit repurchase (4,446) (28,581)
Conversion from Exchangeable LP units 971 5,785
Trust units, balance, December 31, 2007 134,713 894,230
Issuance of unit capital 15,002 210,048
Issuance of unit capital on vesting of deferred equity units 699 18,852
Unit repurchase (4,722) (31,489)
Conversion from Exchangeable LP units 89,065 542,559
Trust units, balance, December 31, 2008 234,757 1,634,200
Exchangeable LP units, balance December 31, 2006 146,459 863,959
Issuance of unit capital [note 3] 1,313 36,097
Conversion to Trust units (971) (5,785)
Exchangeable LP units, balance, December 31, 2007 146,801 894,271
Conversion to Trust units (89,065) (542,559)
Exchangeable LP units, balance, December 31, 2008 57,736 351,712
Trust and Exchangeable LP units, December 31, 2007 281,514 1,788,501
Trust and Exchangeable LP units, December 31, 2008 292,493 1,985,912
During the year ended December 31, 2008, 3,636,691 Trust units [December 31, 2007 – 3,232,100 units] were repurchased under a
normal course issuer bid at an average cost of $22.55 per unit [December 31, 2007 – $26.67 per unit] for a total consideration of
$82,007 [December 31, 2007 – $86,198]. Deficit was increased by $57,722 [December 31, 2007 – $64,906] for the cost of the units
repurchased in excess of their stated value.
During the year ended December 31, 2008, 1,085,052 Trust units [December 31, 2007 – 1,214,200 units] were repurchased for CI's
deferred equity unit plan for total consideration of $26,084 [December 31, 2007 – $29,024] increasing the deficit by $18,880
[December 31, 2007 – $26,097]. Included in the cost of the units repurchased for the year ended December 31, 2007 was $11,339
5 5
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
resulting from the acquisition of Rockwater, which was credited to contributed surplus. In addition, during the year ended December
31, 2007, 581,870 units were issued to the compensation trust, which has been consolidated, at a value of $15,999 in exchange for
common shares of Rockwater and was recorded as a unit repurchase and credited to contributed surplus.
On June 19, 2007, CI issued 3,700,000 Trust units, at the market price of $28.67 per unit, by way of private placement, of which,
2,300,000 units were issued to Sun Life Financial Inc., a related party at that time, in exchange for cash.
On December 30, 2008, CI issued 15,000,000 Trust units, at the market price of $14.00 per unit for gross proceeds of $210,000. Unit
issuance costs were $9,261, of which $1,498 was paid to CI's subsidiary Blackmont. Non-related party issuance costs of $7,763
[$5,265 net of income taxes] were recorded as a charge against retained earnings.
[b] Employee incentive unit option plan
CI Financial Inc. [the "Company"] had an employee stock option plan [the "Plan"] as amended and restated on April 9, 2003 for the
executives and key employees of the Company. On June 30, 2006, as part of the Conversion, the Plan was amended and restated and
all options under the Plan were exchanged for unit options [the "Unit Option Plan"]. The unit options are the economic equivalent of
the exchanged Company options [except that the unit options will be exercised for Trust units, rather than common shares].
The maximum number of Trust units that may be issued under the Unit Option Plan is 14,000,000 units. As at December 31, 2008,
there are 3,437,830 units [December 31, 2007 – 2,878,254 units] reserved for issuance on exercise of unit options. These options vest
over periods of up to five years, may be exercised at prices ranging from $12.57 to $41.14 per Trust unit with a total intrinsic value
of $1,878 as at December 31, 2008 [December 31, 2007 – $28,929] and expire at dates up to 2013.
A summary of the changes in the Unit Option Plan is as follows:
Number of options Weighted average
(in thousands) exercise price
# $
Options outstanding, December 31, 2006 4,539 16.30
Options exercisable, December 31, 2006 1,774 14.79
Conversion of Rockwater stock options 398 35.96
Options exercised (1,943) 15.26
Options cancelled (116) 38.75
Options outstanding, December 31, 2007 2,878 18.80
Options exercisable, December 31, 2007 2,103 18.98
Options granted 973 12.57
Options exercised (321) 15.08
Options cancelled (92) 32.11
Options outstanding, December 31, 2008 3,438 17.03
Options exercisable, December 31, 2008 2,460 18.78
5 6
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
In conjunction with the acquisition of Rockwater, the outstanding stock options of Rockwater were converted to unit options under
CI's Unit Option Plan.
The option component of equity-based compensation expense recovery under the Unit Option Plan for the year ended December 31,
2008 of $24,474 [December 31, 2007 – expense of $12,316] has been included in selling, general and administrative expenses.
Options outstanding and exercisable as at December 31, 2008 are as follows:
Number
of options
outstanding
(in thousands)
Weighted average
remaining
contractual life
(years)
Number
of options
exercisable
(in thousands)
973
425
647
1,207
14
2
5
11
3
8
3
5
135
3,438
4.9
0.3
1.4
1.5
2.0
1.6
1.3
2.1
2.8
1.0
0.6
0.4
0.1
2.2
–
425
647
1,207
14
2
5
7
2
8
3
5
135
2,460
Exercise
price
$
12.57
15.59
17.04
18.15
18.94
19.34
20.02
23.06
23.09
26.70
29.95
33.20
41.14
12.57 to 41.14
[c] Deferred equity unit plan
CI has a deferred equity unit plan ["DEU Plan"] for senior executives, investment advisors and other key employees. DEU Awards are
granted to eligible participants in lieu of compensation and vest over a period of up to three years. Each vested DEU Award entitles
the participant to receive one Trust unit of CI. Compensation expense is recognized and credited to contributed surplus. Upon vesting,
amounts previously recorded as contributed surplus are credited to unit capital.
During the year ended December 31, 2008, CI credited contributed surplus for $27,139 [December 31, 2007 – $13,956] related to
compensation of which, $3,340 related to the acceleration of vesting provision for certain employees. During the year ended
December 31, 2008, CI credited unit capital for $18,852 [December 31, 2007 – $1,994] on vesting of 699,000 [December 31, 2007 –
71,000] DEU Awards. As at December 31, 2008, the unamortized value of DEU Awards outstanding is $2,847 [December 31, 2007 –
$6,341].
5 7
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
[d] Compensation trust
CI uses a compensation trust to acquire Trust units on the open market in order to fulfill its obligations under the DEU Plan.
A summary of the changes in the DEU Awards outstanding and the Trust units repurchased by the compensation trust for the DEU
Plan is as follows:
[in thousands] Number of DEU’s
DEU Awards outstanding, December 31, 2006 –
Granted
824
Conversion of Rockwater deferred stock units 958
Cancelled (36)
Vested (71)
DEU Awards outstanding, December 31, 2007 1,675
Granted 1,169
Cancelled (145)
Vested (699)
DEU Awards outstanding, December 31, 2008 2,000
Trust units held by the compensation trust, December 31, 2006 –
Units repurchased for DEU Plan 1,214
Conversion of Rockwater deferred stock units 582
Released on vesting (71)
Trust units held by the compensation trust, December 31, 2007 1,725
Units repurchased for DEU Plan 1,085
Released on vesting (699)
Trust units held by the compensation trust, December 31, 2008 2,111
In conjunction with the acquisition of Rockwater, the outstanding deferred stock units of Rockwater were converted to deferred equity
units under CI's DEU Plan.
[e] Basic and diluted earnings per unit
The weighted average number of units outstanding for the year ended December 31 is as follows:
(in thousands)
Basic
Diluted
2008
278,658
280,534
2007
282,214
283,301
5 8
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
[f] Maximum share dilution
The following table presents the maximum number of shares that would be outstanding if all the outstanding options as at
January 31, 2009 were exercised:
(in thousands)
Units outstanding at January 31, 2009
DEU Awards outstanding
Options to purchase units
$
293,359
1,193
3,432
297,984
11. FINANCIAL INSTRUMENTS
Financial instruments are classified according to the following categories as at December 31, 2008.
Loans and
receivables
Designated or other
Held- as held- Available- financial
for-trading for-trading for-sale liabilities
$ $ $ $
Cash and cash equivalents 80,081 – – –
Client and trust funds on deposit – – – 333,610
Securities owned, at market – 34,776 – –
Marketable securities – – 10,774 –
Accounts receivable – – – 268,103
Other assets – – 8,176 90,705
Total financial assets 80,081 34,776 18,950 692,418
Accounts payable and accrued liabilities – – – 164,874
Client and trust funds payable – – – 469,355
Securities sold short, at market – 11,195 – –
Long-term debt – – – 999,401
Preferred shares issued by subsidiary – – – 19,678
Total financial liabilities – 11,195 – 1,653,308
5 9
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
Financial instruments are classified according to the following categories as at December 31, 2007.
Loans and
receivables
Designated or other
Held- as held- Available- financial
for-trading for-trading for-sale liabilities
$ $ $ $
Cash and cash equivalents 55,406 – – –
Client and trust funds on deposit – – – 429,016
Securities owned, at market – 69,532 – –
Marketable securities – – 24,222 –
Accounts receivable – – – 206,088
Other assets – – 11,889 85,959
Total financial assets 55,406 69,532 36,111 721,063
Accounts payable and accrued
liabilities – – – 230,371
Distribution payable – – – 107,636
Client and trust funds payable – – – 472,201
Securities sold short, at market – 28,354 – –
Long-term debt – – – 927,941
Preferred shares issued by subsidiary – – – 18,740
Total financial liabilities – 28,354 – 1,756,889
Financial assets and liabilities classified as held-for-trading are measured at fair value. Gains and losses recorded on these financial
instruments are reflected in net income.
6 0
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
Securities owned and sold short classified as held-for-trading, consist of the following at December 31:
2008 2007
Securities Securities Securities Securities
owned sold short owned sold short
$ $ $ $
Money market instruments
CAD money market 6,618 206 7,685 ─
USD money market 8,789 – 5,904 ─
15,407 206 13,589 ─
Bonds
U.S. and Cdn. government backed 12,737 9,018 14,152 11,518
Corporate 5,092 1,821 26,969 15,571
17,829 10,839 41,121 27,089
Equity securities
Listed securities 866 150 12,737 1,265
Broker warrants 674 – 2,085 ─
1,540 150 14,822 1,265
34,776 11,195 69,532 28,354
As at December 31, 2008, corporate and government debt maturities range from 2009 to 2041 [December 31, 2007 – 2008 to 2034]
and bear interest at ranges from 2.70% to 11.60% [December 31, 2007 – 2.70% to 12.75%].
Available-for-sale assets include CI's marketable securities which are reflected at fair value with the exception of a privately held
investment carried at cost less impairment. During the third quarter of 2008, CI determined that its investment in the privately held
investment became permanently impaired and adjusted the cost and carrying value of marketable securities by $5,000.
This impairment adjustment was recognized in net income as an impairment of available-for-sale assets. In the fourth quarter of
2008, CI determined that the fair value decline of $6,000 in its publicly held securities was other than temporary. The total unrealized
loss of $6,000 in publicly held securities is recorded in net income as an impairment of available-for-sale assets. This amount includes
the reversal of unrealized gains of $2,019 [net of income taxes of $389] previously recorded as accumulated other comprehensive
income in prior periods.
Available-for-sale assets also includes a long-term investment of $8,176 [December 31, 2007 – $11,889] which does not have an
active equity market. This investment is carried at cost less impairment.
6 1
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
Loans and receivables or other financial liabilities are initially reflected at cost and subsequently measured at amortized cost, with
the exception of trade receivables and payables which are carried at cost which approximates fair value and related party
transactions which are reflected at cost.
12. RISK MANAGEMENT
Risk management is an integrated process with independent oversight. CI's compliance group has established a control environment
that ensures risks are reviewed regularly and that risk controls throughout CI are operating in accordance with regulatory
requirements. CI's senior management takes an active role in the risk management process by reviewing policies and procedures
within each business segment and assessing and mitigating the various financial risks that could impact CI's financial position and
results of operations.
CI's financial instruments bear the following financial risks:
[a] Market risk
Market risk is the risk of a financial loss resulting from adverse changes in underlying market factors, such as interest rates, foreign
exchange rates, and equity prices. Management of CI's market risk is the responsibility of the Chief Financial Officer. The corporate
finance group reviews the exposure to interest rate risk, foreign currency risk and equity risk by identifying, monitoring and reporting
potential market risks to the Chief Financial Officer. A description of each component of market risk is described below:
(cid:129) Interest rate risk is the risk of gain or loss due to the volatility of interest rates.
(cid:129) Foreign exchange risk is the risk of gain or loss due to volatility of foreign exchange rates.
(cid:129) Equity risk is the risk of gain or loss due to the changes in the prices and the volatility of individual equity instruments and equity
indexes.
[i] Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect the value of financial instruments. Fluctuations
in interest rates have a direct impact on the interest payments CI makes on its long-term debt. Debt outstanding is borrowed at a
floating interest rate. The existing credit facility provides CI with the option of fixing interest rates, should CI change its view on its
exposure to rising interest rates. Based on the amount borrowed under the facility as at December 31, 2008, each 50 basis point
increase or decrease in interest rates would result in annual interest expense increasing or decreasing by $5 million, respectively.
[ii] Foreign exchange risk
As at December 31, 2008, net financial assets of $13 million were denominated in U.S. currency. A 10% increase or decrease in U.S.
exchange rates would result in a foreign exchange gain or loss of $1.3 million, respectively. CI may enter into forward contracts to
manage its foreign exchange exposure.
6 2
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
Forward contracts outstanding as at December 31, 2008 are as follows:
Notional amount Average price Maturity date Spot rate Fair value
$ $ $ $ $
To sell U.S. dollars
To buy U.S. dollars
2,657 1.2082 April 30, 2009 1.2188 28
7,454 1.2191 March 31, 2009 1.2188 2
Forward contracts outstanding as at December 31, 2007 are as follows:
Notional amount Average price Maturity date Spot rate Fair value
$ $ $ $ $
To sell U.S. dollars
To buy U.S. dollars
2,182 0.9903 January 4, 2008 0.9984 (18)
4,424 0.9856 January 4, 2008 0.9984 56
[iii] Equity risk
CI's marketable securities of $10,774 and securities owned net of securities sold short of $23,581 are exposed to equity risk. Based
on the carrying balance of these assets at December 31, 2008, an increase or decrease in equity market prices by 10% would result
in estimated gains or losses of $3.4 million, respectively.
[b] Liquidity risk
Liquidity risk arises from the possibility that CI will encounter difficulties in meeting its financial obligations as they fall due. CI
manages its liquidity risk through a combination of cash received from operations as well as borrowings under its revolving credit
facility. Liquidity is monitored through a daily cash management process that includes the projection of cash flows to ensure CI meets
its funding obligations.
CI's liabilities have contractual maturities, excluding interest payments, as follows:
Total 2009 2010 2011
$ $ $ $
Accounts payable and accrued liabilities 164,874 164,874 – –
Client and trust funds payable 469,355 469,355 – –
Securities sold short, at market 11,195 11,195 – –
Long-term debt 999,401 187,388 249,850 562,163
Preferred shares issued by subsidiary 19,678 – 19,678 –
Total 1,664,503 832,812 269,528 562,163
[c] Credit risk
Credit risk arises from the potential that investors, clients or counterparties fail to satisfy their obligations.
6 3
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
As at December 31, 2008, financial assets of $700,594, represented by client and trust funds on deposit of $333,610, accounts
receivable of $268,103 and other assets of $98,881, were exposed to credit risk. CI does not have a significant exposure to any
individual counterparty. Credit risk is mitigated by regularly monitoring the credit performance of each individual counterparty and
holding collateral where appropriate.
Client and trust funds on deposit consist mainly of cash deposits or unsettled trade receivables. CI may also extend amounts to clients
on a margin basis for security purchases. Collateral is provided in margin accounts by each client in the form of securities purchased
and/or other securities and cash balances. The credit extended is limited by regulatory requirements and by CI's internal credit policy.
Credit risk is managed by dealing with counterparties CI believes to be creditworthy and by actively monitoring credit and margin
exposure and the financial health of the counterparties.
Accounts receivable consists primarily of trade receivables that are outstanding for less than 90 days. Included in accounts receivable
and prepaid expenses are securities lending and borrowing and reverse repurchase agreements, classified as loans and receivables.
Securities lending and borrowing and reverse repurchase agreements consist of the following as at December 31, 2008:
Cash Securities
Loaned or Borrowed Borrowed Loaned or
delivered as or received or received delivered as
collateral as collateral as collateral collateral
$ $ $ $
Securities lending and borrowing 30,672 3,128 30,803 2,425
Reverse repurchase agreements 88,500 – 87,399 –
Securities lending and borrowing and reverse repurchase agreements consist of the following as at December 31, 2007:
Cash Securities
Loaned or Borrowed Borrowed Loaned or
delivered as or received or received delivered as
collateral as collateral as collateral collateral
$ $ $ $
Securities lending and borrowing 46,780 23,828 46,481 21,224
Reverse repurchase agreements 38,477 – 38,498 –
CI uses securities lending and borrowing and reverse purchase agreements primarily to facilitate the securities settlement process.
These transactions are typically short-term in nature, fully collateralized by either cash or securities and are subject to daily margin
calls for any deficiency between the market value of the security given and the amount of collateral received. CI manages its credit
exposure by establishing and monitoring aggregate limits by counterparty for these transactions. Cash loaned or delivered as
collateral is included in accounts receivable and cash borrowed or received as collateral is included in accounts payable.
6 4
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
Other assets primarily represent loans granted under CI's employee unit purchase plan and loans extended to investment advisors
and capital market professionals under CI's hiring and incentive program. Employee loans are collateralized by CI units and become
due immediately upon termination of the employee or upon the sale of the units held as collateral. Commissions may be used to
offset loan amounts made to investment advisors or capital market professionals in the event of default. Credit risk associated with
other assets is limited given the nature of the relationship with the counterparties.
13. CAPITAL MANAGEMENT
CI's objectives in managing capital are to maintain a capital structure that allows CI to meet its growth strategies and build long-
term unitholder value, while satisfying its financial obligations and meeting its long-term debt covenants.
CI's capital is comprised of unitholders' equity, long-term debt (including current portion of longterm debt) and preferred shares issued
by subsidiary. CI's senior management is responsible for the management of capital. CI's Board of Trustees is responsible for
reviewing and approving CI's capital policy and management.
CI and its subsidiaries are subject to minimum regulatory capital requirements whereby sufficient cash and other liquid assets must
be on hand to maintain capital requirements rather than using them in connection with its business. Failure to maintain required
regulatory capital by CI may result in fines, suspension or revocation of registration by the relevant securities regulator. As at
December 31, 2008, CI met its capital requirements.
CI's capital consists of the following as at December 31:
Unitholders' equity
Long-term debt
Preferred shares issued by subsidiary
Total capital
14. DISTRIBUTIONS
2008
$
1,601,712
999,401
19,678
2,620,791
2007
$
1,450,667
927,941
18,740
2,397,348
Distributions are declared quarterly to unitholders of record on or about the last business day of each month and are paid on or about
the 15th of the following month. The Board of Trustees of CI is required to declare distributions in the amount of the distributable
cash flows for each period. Distributable cash flow is the cash flow of CI adjusted, at the discretion of the Board of Trustees, for
certain factors, including consideration of recent and anticipated cash flow.
6 5
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
Distributions declared during the years ended December 31, 2007 and 2008 were as follows:
Cash Cash distribution Total
Distribution per Exchangeable distribution
Record date Payment date per Trust unit LP unit amount
$ $ $
January 1, 2007 January 15, 2007 0.0900 0.0900 25,327
January 31, 2007 February 15, 2007 0.1800 0.1800 50,424
February 28, 2007 March 15, 2007 0.1800 0.1800 50,543
March 31, 2007 April 13, 2007 0.1800 0.1800 50,397
April 30, 2007 May 15, 2007 0.1800 0.1800 50,824
May 31, 2007 June 15, 2007 0.1800 0.1800 50,836
June 30, 2007 July 13, 2007 0.1800 0.1800 51,529
July 31, 2007 August 15, 2007 0.1800 0.1800 51,528
August 31, 2007 September 14, 2007 0.1900 0.1900 54,392
September 30, 2007 October 15, 2007 0.1900 0.1900 54,392
October 31, 2007 November 15, 2007 0.1900 0.1900 54,368
November 30, 2007 December 14, 2007 0.1900 0.1900 54,165
December 31, 2007 January 15, 2008 0.1400 0.1400 39,709
January 1, 2008 January 15, 2008 0.0500 0.0500 14,109
January 31, 2008 February 15, 2008 0.1900 0.1900 53,818
February 29, 2008 March 13, 2008 0.1600 0.1600 43,687
March 31, 2008 April 14, 2008 0.1600 0.1600 45,785
April 30, 2008 May 14, 2008 0.1600 0.1600 43,607
May 31, 2008 June 12, 2008 0.1700 0.1700 47,560
June 30, 2008 July 14, 2008 0.1700 0.1700 47,865
July 31, 2008 August 14, 2008 0.1700 0.1700 47,656
August 31, 2008 September 12, 2008 0.1700 0.1700 46,283
September 30, 2008 October 14, 2008 0.1700 0.1700 47,609
October 31, 2008 November 13, 2008 0.1700 0.1700 46,616
15. RELATED PARTY TRANSACTIONS
On October 6, 2008, Sun Life Financial Inc. ["Sun Life"] announced the sale of its 37% interest in CI to Bank of Nova Scotia
["Scotiabank"] for $22.00 per unit for a total consideration of $2.3 billion. The transaction closed on December 12, 2008 and as a
result, Sun Life is no longer a related party of CI and Scotiabank became a related party for financial reporting purposes.
CI entered into transactions related to the advisory and distribution of its mutual and segregated funds with Sun Life. These
transactions were in the normal course of operations and were recorded at the agreed upon exchange amounts. During the period
from January 1, 2008 to December 12, 2008, CI incurred charges for deferred sales commissions of $41,844 [year ended December 31,
2007 – $46,366], and trailer fees of $90,280 [year ended December 31, 2007 – $101,713] which were paid or payable to Sun Life.
6 6
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
CI entered into transactions related to the advisory and distribution of its mutual funds with Scotiabank. These transactions were in
the normal course of operations and were recorded at the agreed upon exchange amounts. During the period from December 13, 2008
to December 31, 2008, CI incurred charges for deferred sales commissions of $197, and trailer fees of $259 which were paid or
payable to Scotiabank. The balance payable to Scotiabank as at December 31, 2008 of $422 is included in accounts payable and
accrued liabilities.
Scotiabank is the administrative agent for CI’s revolving credit facility. As at December 31, 2008, CI had drawn long-term debt of
$999,401 in the form of bankers’ acceptances of $990,001 and a prime rate loan of $9,400. During the period December 13, 2008 to
December 31, 2008, interest and stamping fees of $1,395 was recorded as interest expense.
During 2008, CI provided a demand loan to one of its managed funds pursuant to a promissory note agreement. The loan facility is
for a maximum of $50 million and interest is calculated at market rates. The loan is secured by the assets of the fund. As at
December 31, 2008, $32,605 is outstanding, including accrued interest, and is included in accounts receivable and prepaid expenses.
During the year ended December 31, 2008, interest of $312 was recorded and included in other income.
16. INCOME TAXES
CI qualifies as a "mutual fund trust" as defined in the Income Tax Act (Canada) ["Tax Act'']. CI intends to make sufficient distributions
of its net income for tax purposes and net realized capital gains each year such that it will generally not be liable in that year for
income tax under Part I of the Tax Act. Canadian International LP is not subject to tax under the Tax Act. Each partner is required to
include in computing the partner's income for a particular taxation year the partner's share of the net income or loss of Canadian
International LP. All corporate subsidiaries of CI are subject to tax and their income tax expense is reflected in the consolidated
financial statements.
On June 12, 2007, federal legislation was substantively enacted to impose a tax, at a rate of 31.5%, on distributions paid by publicly
traded income trusts effective January 1, 2011. Prior to this, CI estimated the future income tax relating to certain future tax liabilities
at a nil effective tax rate. As a result of the new legislation, CI was required to record a future tax liability on the post 2010 reversals
of temporary differences at a rate of 31.5%. This resulted in an increase in future income tax liability and corresponding income tax
expense of $5,385 during the year ended December 31, 2007.
On October 31, 2007, the federal government proposed that the federal corporate income tax rates for 2008 to 2012 and later years
be reduced from the then enacted range of 20.5% to 18.5% to the reduced rate range of 19.5% to 15%. On December 14, 2007, these
tax rate changes became substantively enacted. As a result, CI's net future income tax liability was reduced by $36,423, which was
recognized during the year ended December 31, 2007.
6 7
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
The following is a reconciliation between CI's statutory and effective income tax rates for the year ended December 31:
Combined Canadian federal and provincial income tax rate
Increase (decrease) in income taxes resulting from
Income distributed to unitholders
Impact of rate changes on future income taxes
Other, net
2008
33.4
(37.9)
(1.7)
1.6
(4.6)
2007
36.0
(41.0)
(6.8)
0.4
(11.4)
Future income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. Significant components of CI's future income tax
liabilities and assets are as follows at December 31:
Future income tax liabilities
Fund contracts
Deferred sales commissions
Other
Total future income tax liabilities
Future income tax assets
Equity-based compensation
Non-capital loss carryforwards
Other
Total future income tax assets
Net future income tax liabilities
2008
$
283,312
181,325
2,235
466,872
31
121,637
32,507
154,175
312,697
2007
$
284,702
171,768
3,969
460,439
8,756
85,282
28,190
122,228
338,211
The net future income tax liabilities are classified in the consolidated balance sheets as follows:
Current future income tax assets
Non-current future income tax liabilities
2008
$
31
312,728
2007
$
8,75635,960
346,967
6 8
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
17. SEGMENTED INFORMATION
CI has two reportable segments: Asset Management and Asset Administration. These segments reflect CI's internal financial
reporting and performance measurement.
The Asset Management segment includes the operating results and financial position of CI Investments and United excluding AWM,
which derive their revenues principally from the fees earned on the management of several families of mutual and segregated funds.
The Asset Administration segment includes the operating results and financial position of Blackmont and AWM and its subsidiaries,
including Assante Capital Management Ltd. and Assante Financial Management Ltd. These companies derive their revenues
principally from commissions and fees earned on the sale of mutual funds and other financial products, and ongoing service to clients.
Segmented information as at and for the year ended December 31, 2008 is as follows:
Asset Asset Intersegment
Management Administration Elimination Total
$ $ $ $
Management fees
Administration fees
Other revenue
Total revenue
Selling, general and administrative
Trailer fees
Investment dealer fees
Amortization of deferred sales
commissions and fund contracts
Other expenses
Total expenses
Income before income taxes
and non-segmented items
Restructuring costs
Impairment of available-for-sale assets
Interest expense
Recovery of income taxes
Net income for the year
1,163,818
–
48,261
1,212,079
199,240
350,275
–
148,479
21,500
719,494
–
366,574
33,860
400,434
133,341
–
251,964
1,504
10,584
397,393
–
(100,601)
–
1,163,818
265,973
82,121
(100,601)
1,511,912
–
(14,204)
(82,491)
(2,821)
–
332,581
336,071
169,473
147,162
32,084
(99,516)
1,017,371
492,585
3,041
(1,085)
–
–
–
–
–
–
–
–
–
–
–
–
494,541
(11,000)
(11,000)
(46,608)
19,423
445,356
Identifiable assets
Goodwill
Total assets
2,030,039
858,703
2,888,742
452,882
267,181
720,063
(14,286)
–
(14,286)
2,468,635
1,125,884
3,594,519
6 9
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
Segmented information as at and for the year ended December 31, 2007 is as follows:
Asset Asset Intersegment
Management Administration Elimination Total
$ $ $ $
Management fees
Administration fees
Other revenue
Total revenue
Selling, general and administrative
Trailer fees
Investment dealer fees
Amortization of deferred sales
commissions and fund contracts
Other expenses
Total expenses
Income before income taxes
and non-segmented items
Interest expense
Recovery of income taxes
Net income for the year
Identifiable assets
Goodwill
Total assets
1,292,726
–
55,618
1,348,344
242,055
384,045
–
124,214
18,705
769,019
–
402,578
14,266
416,844
104,640
–
280,215
1,504
7,161
393,520
–
(110,281)
–
1,292,726
292,297
69,884
(110,281)
1,654,907
–
(15,200)
(91,083)
(2,240)
–
346,695
368,845
189,132
123,478
25,866
(108,523)
1,054,016
579,325
23,324
(1,758)
–
–
1,988,253
858,703
2,846,956
–
–
517,973
274,223
792,196
–
–
(12,603)
–
(12,603)
600,891
(39,598)
63,762
625,055
2,493,623
1,132,926
3,626,549
18. COMMITMENTS AND CONTINGENCIES
Lease commitments CI has entered into leases relating to the rental of office premises and computer equipment. The approximate
future minimum annual rental payments under such leases are as follows:
2009
2010
2011
2012
2013
2014 and thereafter
$
19,144
12,637
7,936
5,682
4,498
4,270
7 0
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
Unitholder advisor agreements
CI is a party to unitholder advisor agreements, which provide that the unitholder advisor has the option to require CI to purchase a
practice that cannot otherwise be transitioned to a qualified buyer. The purchase price would be in accordance with a pre-determined
formula contained in the unitholder advisor agreements.
Indemnities
CI has agreed to indemnify its trustees, directors and officers, and certain of its employees in accordance with its by-laws. CI
maintains insurance policies that may provide coverage against certain claims.
Litigation
CI is engaged in litigation arising in the ordinary course of business. None of this litigation is expected to have a material adverse
effect on the financial position or results of operations of CI.
19. FUTURE ACCOUNTING CHANGES
[a] Goodwill and intangible assets
The Canadian Accounting Standards Board ["AcSB"] has issued Section 3064, Goodwill and Intangible Assets, applicable for annual
and interim periods beginning on or after October 1, 2008. Section 3064 provides revised guidance for the recognition, measurement,
presentation and disclosure of goodwill and intangible assets. CI will adopt the new standard effective January 1, 2009 and does not
expect it to materially impact its financial position or results of operations.
[b] International Financial Reporting Standards
In February 2008, the AcSB confirmed that all Canadian publicly accountable enterprises will be required to adopt International
Financial Reporting Standards ["IFRS"] for years beginning on or after January 1, 2011. CI will adopt IFRS for the year beginning
January 1, 2011 and will present the interim and annual consolidated financial statements including comparative 2010 financial
statements in accordance with IFRS.
CI has developed a transition plan for the changeover to IFRS. During the first half of 2009, CI will assess the impact of IFRS on
accounting policies and implementation decisions; information technology and data systems; financial statement presentation and
disclosures; internal control over financial reporting; disclosure controls and procedures and business activities including the impact
on debt covenants. Following this assessment, an implementation plan will be developed to transition CI's financial reporting
process, including internal controls and information systems to IFRS. During 2010, CI will internally report its financial results in
accordance with IFRS in preparation of adoption on January 1, 2011.
CI is currently in the process of assessing the differences between IFRS and Canadian GAAP, as well as the alternatives available
upon adoption. The impact these differences may have on the financial results has not been yet been determined and will be an
ongoing process as the International Accounting Standards Board and the AcSB issue new standards and recommendations.
20. COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform to the consolidated financial statement presentation in the current year.
7 1
Notes to Consolidated Financial Statements
[in thousands of dollars, except per unit amounts]
D E C E M B E R 3 1 , 2 0 0 8 A N D 2 0 0 7
21. SUBSEQUENT EVENTS
On January 1, 2009, CI completed its conversion from an income trust to a corporation. The conversion was implemented pursuant
to a plan of arrangement under the Business Corporations Act (Ontario). Under the plan of arrangement, all of the Trust units and
Exchangeable LP units have been exchanged for common shares of CI Financial Corp. on a one-for-one basis.
Subsequent consolidated financial statements of CI Financial Corp. will be prepared using the continuity of interest in the assets,
liabilities and operations of CI. The common shares of CI Financial Corp. trade on the Toronto Stock Exchange under the symbol "CIX".
7 2
Corporate Directory
C I F I N A N C I A L
D I R E C T O R S
Ronald D. Besse
President,
Besseco Holdings Inc.;
Lead Director
G. Raymond Chang
President,
G. Raymond Chang Ltd.;
Director and Non-Executive
Chairman of the Board
Paul W. Derksen
Corporate Director;
Director
William T. Holland
Chief Executive Officer,
CI Financial;
Director
Toronto, Ontario
Toronto, Ontario
Clarksburg, Ontario
Toronto, Ontario
Stephen T. Moore
Managing Director,
Newhaven Asset Management;
Director
A. Winn Oughtred
Counsel,
Borden Ladner Gervais LLP;
Director
David J. Riddle
President,
C-Max Capital Inc.;
Director
Toronto, Ontario
Toronto, Ontario
Vancouver, B.C.
O F F I C E R S
William T. Holland
Chief Executive Officer
Stephen A. MacPhail
President
Peter W. Anderson
Executive Vice-President
Douglas J. Jamieson
Senior Vice-President and
Chief Financial Officer
David C. Pauli
Chief Operating Officer
C I I N V E S T M E N T S
E X E C U T I V E S
Sheila A. Murray
Executive Vice-President,
General Counsel and
Secretary
Peter W. Anderson
Chief Executive Officer
Douglas J. Jamieson
Chief Financial Officer
David C. Pauli
Executive Vice-President and
Chief Operating Officer
Larry H. Rowe
Senior Vice-President,
Information Technology
Derek J. Green
President and National
Sales Manager
A S S A N T E W E A LT H M A N A G E M E N T
E X E C U T I V E S
Joseph C. Canavan
Chairman and
Chief Executive Officer
Steven J. Donald
President and
Chief Operating Officer
B L A C K M O N T C A P I TA L
E X E C U T I V E S
Bruce M. Kagan
Chief Executive Officer
André Brosseau
President
7 3
Corporate Information
H E A D O F F I C E
2 Queen Street East
Twentieth Floor
Toronto, Ontario M5C 3G7
Telephone: 416-364-1145
Toll Free: 1 800 268-9374
www.ci.com/cix
I N V E S T O R R E L AT I O N S
Contact: Douglas J. Jamieson, Senior Vice-President and Chief Financial Officer
Telephone: 416-364-1145
Toll Free: 1 800 268-9374
E-mail: investorrelations@ci.com
T R A D I N G S Y M B O L
CI Financial trades on the Toronto Stock Exchange under the symbol “CIX.UN”.
A U D I T O R S
Ernst & Young LLP
Chartered Accountants
Toronto-Dominion Centre
P.O. Box 251
Toronto, Ontario M5K 1J7
R E G I S T R A R A N D T R A N S F E R A G E N T
Computershare Investor Services Inc.
9th Floor, 100 University Avenue
Toronto, Ontario M5J 2Y1
Telephone: 1 800 564-6253
E-mail: caregistry@computershare.com
N O R M A L C O U R S E I S S U E R B I D
Effective January 14, 2009, the TSX accepted CI Financial Corp.’s notice of intention to continue with a normal course issuer bid (the “Notice”)
originally commenced by CI Financial Income Fund in May 2008. Under the bid, CI may purchase up to 15,500,000 of its shares through the facilities
of the TSX at the prevailing market price. Purchases under the bid will terminate no later than May 28, 2009. As of March 31, 2009, CI had acquired an
aggregate of 3,000,473 units/shares under the bid at an average price of $17.29 per unit/share. Shareholders may obtain a copy of the Notice, without
charge, by contacting the Corporate Secretary of CI.
S H A R E H O L D E R R I G H T S P L A N
In December 2008, CI unitholders approved the adoption of the Shareholder Rights Plan, which is designed to ensure the fair treatment of CI’s
shareholders in any transaction involving a change of control of CI and to provide the Board and shareholders with adequate time to evaluate any
unsolicited takeover bid and, if appropriate, to seek out alternatives to maximize shareholder value. Full details of the plan are contained in the
Management Information Circular dated November 20, 2008, which is available on www.sedar.com.
D I G I TA L R E P O R T
This Annual Report can be downloaded from CI’s website at www.ci.com/cix under “Reports”.
7 4
This Annual Report contains forward-looking statements with respect to CI, including its business operations and strategy and financial performance and
condition. Although management believes that the expectations reflected in such forward-looking statements are reasonable, such statements involve
risks and uncertainties. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause
actual results to differ materially from expectations include, among other things, general economic and market factors, including interest rates, business
competition, changes in government regulations or in tax laws, and other factors discussed in materials filed with applicable securities regulatory authorities
from time to time.
7 5
CI Financial
2 Queen St. East
Twentieth Floor
Toronto, Ontario
M5C 3G7
www.ci.com
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