Annual Report December 31, 2010
2010 Table of Contents
Financial Highlights
Letter to Shareholders
Eleven-Year Historical Financial Highlights
Subsidiary Profiles
Management’s Discussion and Analysis
Financial Statements
Corporate Directory
Corporate Information
2
4
14
16
18
53
89
90
®
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 two million clients and approximately $98.8 billion in fee-earning
assets (at March 31, 2011). The company operates primarily through subsidiaries CI Investments Inc., which
offers the industry’s broadest selection of investment funds, and Assante Wealth Management (Canada) Ltd.,
which provides financial advisory services through a national network of 750 financial advisors. 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
(in millions of dollars, except per share amounts)
As at December 31, 2010
As at December 31, 2009
% change
Assets under management
Fee-earning assets
Shares outstanding
72,825
95,925
64,226
86,456
287,434,257
291,821,114
13
11
(2)
(from continuing operations)
December 31, 2010
December 31, 2009
% change
For the year ended
For the year ended
Average retail assets under management
Management fees
Total revenues
SG&A
Trailer fees
Net income
Earnings per share
EBITDA*
EBITDA* per share
Dividends per share
64,546
1,188.0
1,378.4
261.5
346.4
330.8
1.14
669.8
2.32
0.77
55,430
1,041.5
1,218.5
278.9
299.7
296.2
1.01
539.3
1.84
0.63
Average shares outstanding
289,069,167
292,481,685
16
14
13
(6)
16
12
13
24
26
22
(1)
*EBITDA (Earnings before interest, taxes, depreciation and amortization) and pre-tax operating earnings are not standardized earnings
measures prescribed by GAAP; however, management believes that most of its shareholders, creditors, other stakeholders and
investment analysts prefer to include the use of these performance measures in analyzing CI’s results. CI’s method of calculating these
measures may not be comparable to similar measures presented by other companies. EBITDA is a measure of operating performance,
a facilitator for valuation and a proxy for cash flow.
2
CIX vs S&P/TSX Composite Index Total Return IPO in June 1994 = 100
S&P/TSX Composite Index
CIX
2,711
2,425
2,760
2,445
2,595
1,339
1,468
1,562
1,079
215
923
214
942
195
244
284
354
395
434
291
392
461
May
2001
May
2002
May
2003
May
2004
May
2005
May
2006
Dec.
2006
Dec.
2007
Dec.
2008
Dec.
2009
Dec.
2010
CIX Share Price : $
14.10
12.00
11.90
16.44
17.30
31.03
26.72
28.07
22.00
22.50
14.50
May
2001
May
2002
May
2003
May
2004
May
2005
May
2006
Dec.
2006
Dec.
2007
Dec.
2008
Dec.
2009
Dec.
2010
Dividends Per Share : $
2.25
1.74
1.155
0.675
0.70
0.77
0.63
0.29
0.405
0.025
0.06
May
2001
May
2002
May
2003
May
2004
May
2005
May
2006
Dec.
2006
Dec.
2007
Dec.
2008
Dec.
2009
Dec.
2010
3,500
3,000
2,500
2,000
1,500
1,000
500
0
35
30
25
20
15
10
5
0
2.50
2.00
1.50
1.00
0.50
0.00
3
Letter to Shareholders
Dear Shareholders,
In 2010, your company experienced one of the best years in its history. CI’s excellent performance was in stark
contrast to the news headlines, which were dominated by issues such as European government debt, the Gulf
oil spill, and fears that the developed economies would slip back into recession.
The markets, however, shrugged off these concerns and staged a decisive rally in mid-year that continued
through to December and into the first quarter of 2011. The general strength in corporate earnings and a series
of positive economic reports helped to fuel these gains.
For the year, the S&P/TSX Composite rose 17.6%, while global markets made broad-based gains. The S&P 500
climbed 8.3% and the MSCI World Index was up 5.9%. The bond market, as represented by the DEX Universe
Bond Index, rose 6.7%. (All indexes are reported in Canadian dollars.)
CI’s funds took advantage of the rally, posting strong performance during the period. This investment
performance, in combination with net sales of over $1 billion and the acquisition of Hartford Investments
Canada Corp. in December 2010, drove our assets to double-digit gains. CI’s assets under management increased
by $8.6 billion or 13% to $72.8 billion over the year, while total fee-earning assets were up $9.4 billion or 11%
to $95.9 billion.
It’s important to note that assets under management of $72.8 billion represented a record high for CI,
underscoring that 2010 was not a year of recovery, but a year of growth for your company. During the year,
CI had outstanding results in asset growth, fund performance, profitability, competitive positioning, and the
development of successful products and portfolio manager relationships.
CI occupies a unique space in this country as a large and successful Canadian-owned, independent financial
services firm, focused on asset management. We continue to build on our competitive advantages in all aspects
of our business and, as always, are seeking new opportunities for growth. In the rest of this letter, we will discuss
these opportunities, our strategy and the highlights of 2010.
4
4
Our Strategy
CI’s long-term strategy consists of a focus on these key elements:
• 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.
• 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. It also reinforces our relationships with advisors, by allowing them to meet
the needs of most clients through one firm.
• 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, other
institutional relationships, our relationship with the Sun Life Financial advisor network, and our
ownership of Assante Wealth Management. These relationships have made a significant contribution
to the growth of our sales and assets.
• 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
As stated earlier, CI’s assets under management grew by 13% to $72.8 billion during the year. Once again, our
asset growth outpaced the overall industry, with the Investment Funds Institute of Canada reporting annual
growth in member assets of 12%, to $636 billion (a number that does not include CI). Our industry market share
exceeds 10%. A more useful metric in showing the earnings power of CI is average assets. In 2010, our average
retail assets under management were $64.5 billion, for an increase of $9 billion or 16%.
CI’s growth has continued into the first quarter of this year, with assets under management at March 31, 2011
reaching $75.5 billion. Average retail assets under management for the quarter were $74.1 billion, up $8.4 billion
or 13% from the fiscal 2010 total.
5
5
CI’s revenues in 2010 were $1.4 billion, up 13% from the year before. Net income was $330.8 million, or $1.14
per share, also up 13% from $1.01 in 2009. However, it is important to note that our 2009 results benefited from
a $45 million tax recovery related to provincial income tax changes. To adjust for the impact of taxes, we look
at pre-tax operating earnings, which were $2.12 per share in fiscal 2010 – up 22% from the prior year.
A key element in executing our strategy has always been to exercise financial discipline, and part of this is to
ensure that expenses are aligned with assets. Even as our assets grew over the past year, we ensured that expenses
did not keep pace. As a result, selling, general and administrative expenses declined to 0.40% of average retail
assets under management from 0.44% in 2009.
In 2009, we restructured CI’s debt by issuing $550 million in debentures, a move that allowed us to reduce our
interest costs, extend the term of our debt and diversify our funding sources by paying down our bank credit
facility. In December 2010, we issued another $300 million in debentures at an interest rate of 3.94% for five
years. CI’s net debt at March 31, 2011 was approximately $689 million, carried a very favourable average cost
of 3.16% and was in line with our targeted debt-to-EBITDA ratio of 1:1.
With the growth in our assets in 2010, there was a significant increase in CI’s free cash flow – that is, cash flow
in excess of the requirements for funding the growth of the business. In 2010, CI generated $339 million in free
cash flow, up from $278 million in 2009 (including tax adjustments).
This allowed CI to pay dividends of $220 million or $0.76 per share in 2010, and buy back $97 million in shares,
at an average cost per share of $20.02. That dividend payment represents an increase of 33% from 2009, when
CI paid out $0.57 per share. In the first quarter of 2011, we increased the dividend again – for the fourth time
in two years – to a rate of $0.075 per share per month or $0.90 annually.
It is our policy to return excess cash to you, the shareholders of the company. And to show the depth of this
commitment, we point to our long-term record on this issue. Since June 1994, when CI went public with a
stock issue of $25 million, we have returned an astounding $3.5 billion to our shareholders. This consisted of
$1 billion in dividends, $1.4 billion in distributions, made when CI was an income trust, and $1.1 billion in
share repurchases.
6
At December 31, 2010, CI’s share price was $22.50, up slightly from $22.00 a year earlier. With dividends, the
total return on CI shares in 2010 was 5.8%. Over the long term, CI has significantly outperformed the index
and its peers, with a total return from its 1994 IPO to December 31, 2010 of 2,495%. This compares to 361%
for the S&P/TSX Composite and 938% for its financial services sub-index.
Operating Results
Strength in sales
In 2010, CI posted gross sales of $9.8 billion and net sales of $1.1 billion. Gross sales were up 15% over 2009,
reflecting increasing investor confidence and the continuing appeal of our product lineup. Net sales were down
from $1.5 billion the year before, with segregated funds being a primary reason for the change, as many policies
reached their 10-year maturity date during the year. During the financial crisis of 2008-2009, segregated funds
were top sellers for us, as the safety provided by their guarantees attracted investors. In 2010, our overall sales
were much more diversified as investors returned to mutual funds. CI’s extensive lineup means that, even as
investors’ preferences and market conditions change, we have a product that will meet their needs.
The diversity in our products and in our distribution relationships has contributed to notable consistency in our
sales. CI is the only fund company in Canada to have posted net sales in excess of $1 billion each year for the past
seven consecutive years. CI is typically one of the industry’s top-selling firms, and ranked fourth for net sales in 2010.
High-performing products
One indicator of the quality of our funds is, of course, performance. At March 31, 2011, 85% of our assets under
management were first or second quartile over 10 years and 83% were first or second quartile over five years.
CI continues to lead the industry with the most mutual and segregated funds with the top four and five-star
rankings from Morningstar Canada. At March 31, 2011, there were 55 CI funds with a five-star ranking and
135 with four stars.
Our funds and portfolio managers continued to gather industry recognition for their results. CI received three
Canadian Investment Awards in 2010, including the very prestigious Morningstar Fund Manager of the Decade
award for Eric Bushell, Chief Investment Officer of our Signature Global Advisors team. In choosing Eric,
Morningstar Canada cited the excellent returns over the past decade in many Signature funds, the consistency
of those returns, their risk management, and Eric’s success in building a “strong, credible team” at Signature,
7
with significant global research capabilities. CI and its managers have now won an impressive 43 Canadian
Investment Awards since 1998. In early 2011, it was announced that CI had won nine Lipper Fund Awards,
which honours funds that have excelled in delivering consistently strong risk-adjusted performance, relative to
peers. Our funds have won 28 Lipper awards since 2007.
Despite the large gains in the equity markets over the past two years, investors maintain a distinct preference for
conservative investment options, especially those that provide income. CI refines its fund lineup on an ongoing
basis as Canadians’ financial needs evolve. In 2010, our product launches included:
• SunWise Essential Series, a segregated fund family offered in partnership with Sun Life Financial. This
product, which provides investors with the option of receiving a guaranteed income for life among other
benefits, has been well received, gathering over $525 million in assets from its September introduction to
March 31, 2011.
• Two diversified income funds, Select Income Advantage Managed Corporate Class and CI Income
Advantage Fund.
• Signature Gold Corporate Class, which was introduced to meet investor demand for a fund that focuses
exclusively on the gold and precious metals asset class.
Castlerock Investments – a new platform for growth
On December 15, 2010, CI completed the acquisition of Hartford Investments Canada, which had approximately
$1.8 billion in assets under management in 17 mutual funds. In February 2011, we renamed the firm Castlerock
Investments Inc., replaced three of the firm’s five sub-advisors with CI portfolio managers, and launched four
new funds to broaden the firm’s lineup. We elected to operate Castlerock as a distinct division of CI with its
own brand because a long-term contract with a third-party service provider precluded us from immediately
integrating the administration of the funds into CI’s platform.
In the short period since the change, the results have been impressive. Castlerock’s assets under management
have increased over 7% to $1.9 billion from the announcement of the acquisition to March 31, 2011, and net
sales have been positive. We expect this division to generate $20 million in EBTIDA in 2011, an excellent
return on our investment in the firm.
In particular, the Castlerock acquisition has enhanced our relationship with key distributors and gained us two
high-quality portfolio management teams – Black Creek Investment Management and Greystone Managed
8
Investments. Black Creek specializes in global equity investing and has established a track record of superior
performance that includes winning two Lipper Fund Awards in 2011. Greystone is one of Canada’s largest
pension managers and has achieved proven results with Canadian and U.S. equity and dividend mandates. Both
firms are available to retail mutual fund investors exclusively through Castlerock.
Today, Castlerock offers a focused lineup of core mutual funds, managed by some of Canada’s best investment
talent. With the backing of CI’s resources in sales and marketing, Castlerock represents a promising platform
for growth.
Portfolio management expertise
The addition of Castlerock illustrates the success of our diversified approach to portfolio management. We
offer a choice of top-ranked management teams who operate independently of one another. These teams
consist of both external sub-advisors and in-house teams. This model easily allows for the addition of new sub-
advisors, such as Black Creek and Greystone, whose funds have posted net sales since the acquisition and have
exceptional potential for gathering new assets.
At the same time, we have developed significant expertise at our in-house management teams – Signature
Global Advisors (led by Eric Bushell), Harbour Advisors (led by Gerry Coleman) and Cambridge Advisors (led
by Alan Radlo). Since 1997, when Harbour was established as CI’s first in-house money manager, the proportion
of our assets managed internally has grown steadily, reaching 68% ($51 billion) as of March 31, 2011.
We have recently bolstered the resources of our Cambridge team with the hiring of two prominent portfolio
managers and two analysts. The Cambridge funds have posted outstanding performance over the three years
since their launch in 2008, and we are confident this team can attain significant growth in assets.
We are also willing to support portfolio management expertise outside of the traditional sub-advisory role.
In 2010, CI purchased a minority interest in Red Sky Capital Management Ltd., an alternative investment
manager owned and led by Timothy Lazaris, an experienced hedge fund manager and a long-time financial
services analyst. Red Sky benefits from the credibility and stability of CI, while we gain access to another avenue
of growth within the asset management business.
9
Developing multiple distribution channels
As mentioned, the acquisition of Castlerock has enhanced our relationships with key distribution channels,
notably advisors in the brokerage channel. In addition, in January 2011, Edward Jones announced that CI
Investments had been named preferred partner for mutual funds, in addition to holding this status for segregated
funds. This is a tremendous opportunity to forge closer ties with advisors at one of Canada’s leading financial
services firms.
CI has met with great success over the past decade in expanding our distribution through institutional channels,
with our institutional division, CI Institutional Asset Management (CIIAM), overseeing about $10 billion in
assets. In 2009, CIIAM assigned additional resources to penetrate the pension and endowment market. The
result has been a significantly greater interest in our capabilities and, in early 2011, we received $150 million
into a Canadian balanced mandate, our largest such investment to date.
We see great potential in pensions and endowments, given that this space rivals the Canadian mutual fund
industry with approximately $600 billion in assets (excluding the Canada Pension Plan and some of the larger
pension plans) and that there are manager searches involving $40 billion to $50 billion per year.
Our involvement in institutional asset management also includes a 25% interest in Altrinsic Global Advisors,
LLC of Greenwich, Conn. This firm, which manages a number of CI funds and which CI has supported since
its founding in 2000, has experienced remarkable growth in its institutional business, reaching $11 billion in
assets under management.
Assante Wealth Management performed well in 2010, maintaining its status as Canada’s pre-eminent financial
advisory firm. Assets under administration increased by 7% over the year, as financial markets rose and Assante’s
advisors maintained their focus on the conservative management of the financial affairs of Canadian families.
Assante clients were well served through the volatile environment of the past few years given the company’s
emphasis on discipline, patience and providing diversified portfolio solutions, backed by the expertise of leading
money managers, including the portfolio management teams of CI Investments.
Assante also maintains a comprehensive communications program for advisors and clients that provides
timely insights from portfolio managers on market developments and the positioning of their funds. As market
dynamics have shifted and income planning and understanding estate and succession issues has become more
1 0
important for Canadians, Assante has further demonstrated its leadership with the innovative Wealth Matters
series for investors. This initiative provides relevant information into matters affecting the wealth of Canadians.
It also demonstrates Assante’s commitment to an integrated approach to wealth management, a comprehensive
approach to planning that incorporates all aspects of a client’s finances – risk management, estate planning, tax
planning, as well as investment management. We assist our advisors in providing this advanced level of service
through a large in-house staff that includes tax, insurance, estate planning and other experts.
Our recruiting efforts are focused on experienced advisors who embrace this philosophy and serve an affluent
clientele. In 2010, we added eight new advisors.
Assante’s competitive advantages include the security of CI’s financial strength, the benefits of CI’s experience
and support in operations, technology, client services and sales, as well as the portfolio management expertise
and products of CI Investments. With this solid foundation, Assante is pursuing a growth strategy based on
renewed recruitment efforts and fostering the growth of our advisors’ practices through the provision of wealth
planning expertise, enhanced systems support and sophisticated portfolio solutions.
Management changes
As our company grows and evolves, so too does the management of the firm. In 2010, William Holland
transitioned from the position of Chief Executive Officer, which he has held since 1999, to that of full-time
Executive Chairman. Stephen MacPhail became Chief Executive Officer in addition to President, a position he
has held since 2005. This change was made so that our titles would more accurately reflect our roles at the firm.
As Executive Chairman, Bill continues to focus on strategic initiatives, while Steve has overall responsibility for
the day-to-day operation of the firm. The change of titles has had no impact on the direction of the firm, given
that we have been working together as part of the executive team for the past 16 years.
Meanwhile, we are fortunate to have Ray Chang, our former Chairman, continue as a board member. We thank
Ray for the many valuable contributions he has made to CI in his 27 years of service, which included holding
the positions of president and CEO before becoming chairman.
1 1
Outlook
In the first quarter of 2011, global markets continued to advance in the face of global events such as the
earthquake and tsunami in Japan, the fighting in Libya and unrest in Middle Eastern nations, and the ongoing
European debt issues. The S&P/TSX Composite registered a 5.6% gain in the quarter, the S&P 500 Index was
up 3.3% and the MSCI World Index rose 2.3% (all in Canadian dollars).
As mentioned above, CI’s assets under management were $75.5 billion at March 31, 2011, a new record for
your company, while total assets were $98.8 billion. During the three-month period, CI had gross sales of $3.2
billion and net sales of $463 million.
CI remains well positioned for profitability and growth, with continued strength in our product lineup, portfolio
management, sales, distribution, financial condition, personnel, and competitive standing. As a large and
diversified wealth management company, we are benefiting from many engines of growth. These include our
traditional mutual and segregated fund business, acquisitions, expanded distribution relationships, new successes
in the institutional marketplace, and non-traditional businesses such as our investment in Red Sky. Most
importantly, your management team maintains the flexibility and the willingness to take advantage of attractive
opportunities when they arise.
In closing, we thank you for your support.
William T. Holland
Executive Chairman
Stephen A. MacPhail
President and Chief Executive Officer
1 2
1 3
Eleven-Year Historical Financial Highlights
(millions of dollars, except per share amounts)
(from continuing operations)
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 share
EBITDA* per share
Dividends per share
2010
72,825
23,100
95,925
Years Ended Dec. 31
2009
2008
2007
64,226
22,230
86,456
52,802
19,501
72,303
67,171
27,319
94,490
1,059
1,451
1,740
1,898
1,188.0
190.4
1,378.4
261.5
346.4
300.5
908.4
139.2
330.8
330.8
669.8
1.14
2.32
0.77
1,041.5
177.0
1,218.5
1,163.8
202.4
1,366.2
1,292.7
210.2
1,502.9
278.9
299.7
298.4
877.0
45.3
296.2
296.2
539.3
1.01
1.84
0.630
256.4
336.1
340.0
932.5
(17.5)
451.2
451.2
638.6
1.62
2.29
1.740
291.1
369.1
291.6
951.8
(54.4)
605.5
605.5
724.3
2.15
2.57
2.250
Shareholders’ equity, end of year
Shares outstanding, end of year
1,613.6
287,434,257
1,610.9
291,821,114
1,601.7
292,492,805
1,450.7
281,514,003
*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 shareholders,
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
Total Revenues
$millions
26.8
25.7
33.1
69.4
76.7
82.8
72.3
May '01
May '02
May '03
May '04
May '05
May '06
91.8
94.5
Dec. '06
(seven months)
Dec. '07
610.9
512.8
668.4
954.5
1,195.1
1,323.4
805.0
0
20
40
60
80
86.5
95.9
100
Dec. '08
Dec. '09
Dec. '10
0
500
1000
1,502.9
1,366.2
1,218.5
1,378.4
1500
2000
May '01
May '02
May '03
May '04
May '05
May '06
Dec. '06
(seven months)
Dec. '07
Dec. '08
Dec. '09
Dec. '10
1 4
Seven Months Ended
Dec. 31, 2006
2006
2005
2004
2003
2002
2001
Years Ended May 31
62,737
29,080
91,817
56,905
25,915
82,820
49,243
27,504
76,747
49,310
20,102
69,412
32,257
827
33,084
24,876
837
25,713
25,817
1,017
26,834
437
3,111
1,734
920
(596)
481
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
1.155
1,110.0
213.4
1,323.4
994.6
200.5
1,195.1
353.6
291.0
204.2
848.8
165.6
309.0
309.0
577.4
1.08
2.02
0.700
328.1
250.7
168.4
747.2
163.2
284.7
284.7
529.5
0.97
1.81
0.675
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
0.405
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
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
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
1,371.1
280,132,687
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
Income Before Income Taxes
$millions
EBITDA*
Per Share $
May '01
May '02
May '03
May '04
May '05
May '06
Dec. '06
(seven months)
Dec. '07
Dec. '08
Dec. '09
Dec. '10
58.8
124.3
120.0
391.7
447.9
474.6
323.6
433.7
341.4
551.1
May '01
May '02
May '03
May '04
May '05
May '06
Dec. '06
(seven months)
Dec. '07
Dec. '08
Dec. '09
Dec. '10
1.75
1.51
1.32
1.65
1.81
2.02
1.42
1.84
0
100
200
300
400
470.0
500
600
700
0.0
0.5
1.0
1.5
2.0
2.57
2.29
2.32
2.5
3.0
1 5
Subsidiary Profiles
CI Investments Inc.
CI Investments is one of Canada’s largest investment management companies, with approximately $75 billion
in assets under management (at March 31, 2011) on behalf of 1.7 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, Skylon, Portfolio Series, Portfolio Select Series, and SunWise Essential Series. We also market a
lineup of 21 mutual funds under the Castlerock brand through our subsidiary Castlerock Investments Inc. In
addition, we manage portfolio solutions under the United Financial brand, which are available through advisors
with Assante Wealth Management. We service the institutional marketplace through a dedicated division, CI
Institutional Asset Management.
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 43 Canadian Investment Awards over the past 13 years, including the prestigious Analysts’ Choice
Investment Fund Company of the Year in 2006, 2007 and 2009, as well as Morningstar Fund Manager of the
Decade in 2010 and Morningstar Fund Manager of the Year in 2009 for Mr. Bushell. Mr. Coleman is a two-time
Fund Manager of the Year, receiving the award in 2001 and 2008.
1 6
®
Assante Wealth Management (Canada) Limited
Assante Wealth Management is a leading provider of fully integrated wealth management solutions for affluent
Canadians. With 750 advisors across Canada, our independent advisory network is one of the largest in the
country. We serve over 300,000 clients nationwide, administering $23.5 billion in assets (at March 31, 2011)
on their behalf.
The success of Assante is closely linked to our advisors and the strong partnership we have developed with them.
Backed by a wealth of resources, including investment analysts, portfolio managers, tax lawyers, accountants,
estate planning and insurance specialists and wealth planners, Assante advisors provide a comprehensive and
integrated approach to wealth management.
We also support our advisors by providing an industry-leading suite of products and solutions. This includes
the United Financial brand of solutions, Evolution Private Managed Accounts and Optima Strategy, which
are managed by CI Investments Inc. and are available exclusively through Assante advisors. For high net
worth clients with more complex wealth planning needs, Assante offers the Private Client Managed Portfolios
through the United Financial division of CI Private Counsel LP.
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, a division of CI Private Counsel LP, is a group of experienced professionals who
provide wealth planning and inter-generational financial services to high net worth individuals and families.
1 7
Management’s Discussion and Analysis
This Management’s Discussion and Analysis (“MD&A”) dated February 16, 2011 presents an analysis of the
financial position of CI Financial Corp. and its subsidiaries (“CI”) as at December 31, 2010, compared with
December 31, 2009, and the results of operations for the year ended and quarter ended December 31, 2010,
compared with the year ended and quarter ended December 31, 2009 and the quarter ended September 30, 2010.
CI was structured as an income trust from June 30, 2006 to December 31, 2008. In October 2008, CI announced
that it would convert back to a corporate structure and on January 1, 2009, effected that conversion.
Unless the context otherwise requires, all references to CI are to CI Financial Corp. and, as applicable, its predecessors,
CI Financial Income Fund and CI Financial Inc. together with the entities and subsidiaries controlled by it and its
predecessors. All references to “shares” refer collectively to common shares subsequent to December 31, 2008 and to
units prior to the conversion. All references to “dividends” refer collectively to payments to shareholders subsequent
to December 31, 2008 and to payments to unitholders prior to the conversion.
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
and United. These two entities amalgamated on January 1, 2010 to continue as CI Investments. The Asset
Administration segment includes the operating results and financial position of AWM and its subsidiaries,
including Assante Capital Management Ltd. (“ACM”) and Assante Financial Management Ltd. (“AFM”). The
operations of Blackmont were discontinued as at December 31, 2009 and are no longer included in the Asset
Administration segment.
This MD&A contains forward-looking statements concerning anticipated future events, results, circumstances,
performance or expectations with respect to CI and its products and services, including its business operations,
strategy and financial performance and condition. When used in this MD&A, such statements use such words as
“may”, “will”, “expect”, “believe”, and other similar terms. These statements are not historical facts but instead
represent management beliefs regarding future events, many of which, by their nature are inherently uncertain
and beyond management control. Although management believes that the expectations reflected in such forward-
looking statements are based on reasonable assumptions, such statements involve risks and uncertainties. Factors
that could cause actual results to differ materially from expectations include, among other things, general
economic and market conditions, including interest and foreign exchange rates, global financial markets, changes
in government regulations or in tax laws, industry competition, technological developments and other factors
described under “Risk Factors” or discussed in other materials filed with applicable securities regulatory authorities
from time to time. The material factors and assumptions applied in reaching the conclusions contained in these
forward-looking statements include that the investment fund industry will remain stable and that interest rates will
remain relatively stable. The reader is cautioned against undue reliance on these forward-looking statements. For a
1 9
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 dated February 26, 2010, which
is available at www.sedar.com.
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 shareholders, 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.
FISCAL YEARS ENDING
December 31, 2010 December 31, 2009 December 31, 2008
$1,366.2
932.5
433.7
(17.5)
451.2
$445.4
$1,378.4
908.4
470.0
139.2
330.8
$330.8
$1,218.5
877.0
341.5
45.3
296.2
$244.8
$1.14
$0.77
$3,265.3
$870.4
287.4
289.1
$1.01
$0.63
$3,006.4
$676.5
291.8
292.5
$1.62
$1.74
$3,614.1
$999.4
292.5
278.7
Selected AnnuAl InformAtIon
(millions, except per share amounts)
Total revenue
Total expenses
Income before income taxes
Income taxes
Net income from continuing operations
Net income
Earnings per share from continuing operations
Dividends per share
Total assets
Total long-term debt
Shares outstanding
Average shares outstanding
2 0
SummAry of QuArterly reSultS
(millions of dollars, except per share amounts)
INCOME STATEMENT DATA
Management fees
Administration fees
Other revenues
Total revenues
Selling, general & administrative
Trailer fees
Investment dealer fees
Amortization of deferred sales commissions
Interest expense
Other expenses
Total expenses
2010
2009
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
313.1
293.3
293.1
288.5
287.9
273.5
251.0
229.1
35.4
18.7
31.3
11.7
32.4
13.3
35.3
12.2
34.4
11.2
31.0
14.2
29.8
11.1
29.2
16.0
367.2
336.3
338.8
336.0
333.5
318.7
291.9
274.3
69.6
91.4
25.8
43.1
5.7
2.3
67.8
85.1
22.9
43.0
3.8
2.6
56.2
85.9
23.8
42.7
4.2
3.3
67.9
83.9
25.8
42.0
4.3
5.3
75.6
83.5
24.6
41.3
5.9
7.3
72.9
79.0
22.1
40.3
7.8
5.9
71.4
71.5
20.9
39.5
6.4
4.2
59.0
65.7
20.5
38.6
6.5
6.6
237.9
225.2
216.1
229.2
238.2
228.0
213.9
196.9
Income before income taxes
129.3
111.1
122.7
106.8
Income taxes
Net income (loss) from continuing operations
Net income (loss) from discontinued operations
Net income
37.9
91.4
–
91.4
35.6
75.5
–
33.7
89.0
–
31.9
74.9
–
95.3
(20.5)
115.8
90.7
24.3
66.4
2.2
(49.0)
78.0
25.1
52.9
(2.3)
50.6
77.4
16.3
61.1
(2.3)
58.8
75.5
89.0
74.9
118.0
17.4
Earnings per share from continuing operations
0.32
0.26
0.31
0.26
0.40
0.23
0.18
0.21
Earnings per share
0.32
0.26
0.31
0.26
0.40
0.06
0.17
0.20
Dividends per share
0.205 0.195
0.19
0.18
0.17
0.15
0.15
0.16
2 1
Business Overview
CI is a diversified wealth management firm and one of Canada’s largest independent investment fund
companies. 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 and AFM 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
revenue principally from commissions and fees earned on the sale of mutual funds and other financial products
and ongoing service to clients.
Business Strategy
CI maximizes shareholder value by increasing and retaining assets under management and assets under administration
while maintaining its earnings margin. Management believes this can be achieved by focusing on the following
factors: diversity of products offered by CI; experience and depth of investment managers; performance of the funds;
service levels provided to dealers and investors; and skill and knowledge of management.
CI offers Canadian investors a wide range of Canadian and international investment products through a network
of investment dealers, mutual fund dealers, and insurance agents, which include advisors with AWM and Sun
Life Financial. Several acquisitions of fund management companies have allowed CI to offer investors what
management believes to be the broadest selection of investment funds in the Canadian mutual fund industry,
including the largest lineup of segregated funds.
CI uses three teams of in-house and approximately 20 external investment managers to provide investment advice
regarding the portfolios of the funds. Many of these investment managers have long careers in the industry as well
as extensive track records with CI. This lineup of investment managers provides a wide selection of styles and areas
of expertise for CI’s funds.
CI strives to select managers with a reputation for skilled investment management. CI often has significantly sized
mandates available to attract the top talent in this field. Many of CI’s investment managers have provided excellent
long-term performance for our largest funds. However, CI can and will make changes to its investment managers
when unsatisfactory investment performance has occurred.
CI is the manager of the funds and provides services that include managing or arranging for the management of
investment portfolios, marketing of the funds, maintaining securityholders records and accounts, reporting to the
securityholders and processing transactions relating to securities of the funds. CI has invested in information systems
and internal training of staff to an extent which ensures it provides accurate and timely service to dealers and agents
selling CI’s products and to investors.
2 2
Management of CI has the specialized skills and knowledge to focus on meeting several key objectives. These
include: the needs of its clients, developing new products, enhancing investor awareness and increasing market
share by marketing to investment dealers, mutual fund dealers and life insurance agents.
2010 Overview
CI’s average retail assets under management for 2010 increased 16% from 2009. This increase was primarily a result
of strong market performance of the funds as well as over $1 billion in net sales of CI’s funds. CI’s revenues have
similarly grown from the levels of a year ago. While some expenses, such as trailer fees and investment advisor fees,
vary directly with the level of assets under management, most of CI’s expenses are fixed in nature. This point is
illustrated by the 7% increase in SG&A (excluding equity-based compensation), which is markedly lower than the
increase in average assets under management.
During this period of market recovery, sales of investment funds have increased significantly. CI’s gross sales during
the year were up 15% from the previous year. However, redemptions were up 23%, resulting in a decrease in net
sales from last year.
CI continued to be the third-largest investment fund company in Canada with total assets under management of
$72.8 billion at December 31, 2010. CI’s market share is approximately 10%.
According to Morningstar, CI led the entire industry with the most five-star rated funds (including multiple
versions) for all of 2010 and has ranked either first or second place for the past nine years. In addition, CI has won
42 Canadian Investment Awards since 1998 and 28 Lipper Awards since 2007. In December 2010, Eric Bushell was
named Morningstar Fund Manager of the Decade at the Canadian Investment Awards.
Key Events
In October, CI announced that it had reached an agreement to buy Hartford Investments Canada Corp.
(“Hartford”). This acquisition closed on December 15th at which time CI took over management of Hartford’s
$1.8 billion in assets under management. The company was renamed Castlerock Investments Inc. in January 2011.
The deal is expected to be accretive to CI’s earnings in 2011 and provides CI with new sub-advisory relationships
including Black Creek Investment Management Inc. and Greystone Managed Investments Inc.
In December, CI Investments issued $300 million fixed rate debentures due in 2016, bearing an interest rate of
3.94%. The debentures were rated A (low) by DBRS and BBB+ by Standard & Poor’s and were over-subscribed by
investors. The net proceeds were used to pay for the acquisition of Hartford, pay down amounts drawn against CI’s
credit facility, and for general corporate purposes.
During 2010, CI continued to create new products to appeal to changing investor preferences. CI launched
three new mutual funds – Select Income Advantage Managed Corporate Class, CI Income Advantage Fund and
Signature Gold Corporate Class. Additionally, in association with Sun Life Financial, CI launched a new family of
segregated funds called the SunWise Essential Series.
2 3
Key Performance Drivers
CI’s results are driven primarily by the level of its assets under management, which are in turn driven by the returns
earned by its funds and the net sales of the funds. The margin earned on these assets under management determines,
to a large extent, CI’s profitability.
The returns of each fund reflect the returns of equities and bonds or other securities held by the fund. These
returns will reflect the returns of equity and bond indexes plus the over or under performance of the investment
manager of each fund. In years when markets decline (such as 2008) CI’s assets will decline. Conversely, CI’s assets
will appreciate in years when markets perform well. For a particular period, the average assets under management
will drive CI’s results as CI receives the majority of its fees on a daily basis. CI reported average retail assets under
management for 2010 of $64.5 billion, up $9.1 billion from 2009 – this increase of 16% was supported by the relative
stability of markets compared with the preceding two years.
Fund sales and acquisitions also affect CI’s assets under management. CI has experienced aggregate positive net
sales of its funds in each of the last six years, including $1.5 billion in 2009 and $1.1 billion in 2010. The addition
of Hartford’s funds discussed earlier added $1.8 billion to CI’s ending assets under management. While sales results
help increase assets under management, they are also an indicator of the level of demand for CI’s products and our
success in delivering attractive products.
CI’s margin on its assets under management is measured as the management fee revenue earned less the direct costs
to service, manage and administer the funds. These costs include trailer fees and selling, general and administrative
expenses. The calculation of this margin is detailed in the Asset Management segment discussion.
CI uses several performance indicators to assess its results. These are described throughout the results of operations
and the discussion of the two operating segments and include the following: pre-tax operating earnings, EBITDA,
operating profit margin and dealer gross margin.
Fee-Earning Assets and Sales
Total fee-earning assets, which include mutual and segregated funds, structured products, institutional managed
assets, AWM assets under administration, and other fee-earning assets were $95.9 billion at December 31, 2010,
an increase of 11% from $86.5 billion at December 31, 2009. As shown in the table on the following page, these
assets consist of $71.4 billion in retail managed funds, $0.4 billion in structured products, $1.0 billion in institutional
managed assets, $22.5 billion in AWM assets under administration, and $0.6 billion in other fee-earning assets.
2 4
fee-eArnIng ASSetS as at December 31
(in billions)
Retail managed funds
Structured products
Total retail assets under management
Institutional managed assets
Total assets under management
AWM assets under administration*
Other fee-earning assets
Total fee-earning assets
2010
$71.4
0.4
71.8
1.0
72.8
22.5
0.6
2009
$62.4
0.4
62.8
1.4
64.2
21.5
0.8
$95.9
$86.5
% change
14
–
14
(29)
13
5
(25)
11
*Includes $10.2 billion and $9.6 billion of managed assets in CI and United funds in 2010 and 2009 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 retail assets under management during each of the past two years is detailed in the table
below.
chAnge In retAIl ASSetS under mAnAgement
(in billions)
Retail assets under management at January 1
Gross sales
Redemptions
Net sales
Market performance
Retail assets under management at December 31
2010
$62.8
9.9
8.8
1.1
7.9
$71.8
2009
$50.8
8.6
7.1
1.5
10.5
$62.8
The table below sets out the levels and changes in CI’s average retail assets under management and the gross
and net sales for the relevant periods. As most of CI’s revenues and expenses are based on assets throughout the
year, average asset levels are critical to the analysis of CI’s financial results.
(in billions)
Average retail AUM
Change to December 31, 2010
Gross sales
Net sales
Quarter ended
Dec. 31, 2010
Quarter ended
Sept. 30, 2010
Quarter ended
Dec. 31, 2009
$68.244
$2.3
($0.2)
$63.527
7.4%
$2.2
$0.2
$61.186
11.5%
$2.3
$0.4
2 5
The Investment Funds Institute of Canada (IFIC) reported $12.0 billion in industry net sales of mutual funds for
the year ended December 31, 2010, up $6.9 billion from net sales of $5.1 billion in the same period for 2009. Total
industry assets as reported by IFIC at December 31, 2010 of $635.7 billion were up 12% from $566.2 billion at
December 31, 2009.
Results of Operations
year ended december 31, 2010
For the year ended December 31, 2010, CI reported net income from continuing operations of $330.8 million ($1.14
per share) versus $296.2 million ($1.01 per share) for the year ended December 31, 2009. Including discontinued
operations, CI reported net income of $244.8 million ($0.84 per share) in 2009.
In 2010, CI recorded $139.2 million in income tax expense for an effective tax rate of 29.6%, compared to an
effective tax rate of 13.3% in 2009. Included in 2009 is a $45.4 million income tax adjustment related to changes
in provincial tax rates that were substantively enacted on November 16, 2009. In early 2010, CI had utilized all
of its remaining tax losses that were generated while CI was structured as an income trust. The current portion of
income tax expense now closely reflects CI’s total taxes after adjusting for timing differences between accounting
income and taxable income.
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, non-recurring items, performance fees and investment gains, plus amortization of deferred sales commissions (DSC) and
fund contracts, and equity-based compensation expense.
(in millions, except per share amounts)
Quarter ended
Dec. 31, 2010
Quarter ended
Sept. 30, 2010
Quarter ended
Dec. 31, 2009
Year ended
Year ended
Dec. 31, 2010 Dec. 31, 2009
Income before income taxes
Less:
Redemption fees
Performance fees
Non-recurring item(s)
Gain (loss) on marketable securities
Add:
Amortization of DSC and fund contracts
Equity-based compensation expense
Pre-tax operating earnings
per share
$129.3
$111.1
$95.3
$470.0
$341.4
8.4
–
3.7
–
43.7
2.8
$163.7
$0.57
7.4
–
–
–
43.6
3.3
$150.6
$0.52
7.3
–
–
–
42.5
13.2
$143.7
$0.49
30.9
–
3.7
(0.1)
174.1
1.8
$611.4
$2.12
30.2
0.1
–
2.9
164.4
36.8
$509.4
$1.74
2 6
For the year ended December 31, 2010, redemption fee revenue was $30.9 million compared with $30.2 million
for the year ended December 31, 2009. Other income for the year ended December 31, 2010 was $25.3 million
compared to $19.5 million in the prior year. The increase was due to a non-recurring revenue item of $5.0 million
($3.7 million net of expenses).
Amortization of deferred sales commissions and fund contracts was $174.1 million in 2010, an increase from
$164.4 million in 2009. The increase was a result of higher spending on deferred sales commissions paid to brokers
and dealers on the sale of back-end load mutual funds.
Interest expense of $18.2 million was recorded for the year ended December 31, 2010 compared with $26.5 million
for the year ended December 31, 2009. The decrease in interest expense reflected lower average debt levels and
lower borrowing costs, as discussed under “Liquidity and Capital Resources.” Debt is generally used to fund growth
in the company and to repurchase share capital.
Other expenses for the year ended December 31, 2010 were $10.0 million compared to $19.4 million in the prior
year. The decrease from the prior year is primarily due to a $2.5 million decrease in capital taxes, a $2.5 million
write-off of a receivable asset in fiscal 2009, and a $1.0 million amortized cost adjustment of preferred shares in
fiscal 2009.
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.
(in millions, except per share amounts)
Quarter ended
Dec. 31, 2010
Quarter ended
Sept. 30, 2010
Quarter ended
Dec. 31, 2009
Year ended
Year ended
Dec. 31, 2010 Dec. 31, 2009
Net income from continuing operations
Add (deduct):
Interest expense
Income tax expense (recovery)
Amortization of DSC and fund contracts
Amortization of other items
EBITDA
per share
EBITDA margin (as a % of revenue)
$91.4
$75.5
$115.8
$330.8
$296.2
5.7
37.9
43.7
2.0
$180.7
$0.63
49.2%
3.8
35.6
43.6
1.8
$160.3
$0.56
47.6%
5.9
(20.5)
42.5
1.6
$145.3
$0.50
43.6%
18.2
139.2
174.1
7.5
$669.8
$2.32
48.6%
26.5
45.3
164.4
6.9
$539.3
$1.84
44.3%
2 7
CI’s pre-tax operating earnings, as set out in the table on page 26, adjust for the impact of equity-based compensation,
gains and losses on marketable securities, performance fees and non-recurring items. Redemption fee revenue and
the amortization of deferred sales commissions and fund contracts are netted out to remove the impact of financing
back-end assets under management.
Pre-tax operating earnings were $611.4 million in 2010, an increase of 20% from 2009. This change reflects the
16% change in average retail assets under management.
As illustrated in the table on the prior page, EBITDA for the year ended December 31, 2010 was $669.8 million
($2.32 per share) compared with $539.3 million ($1.84 per share) for the year ended December 31, 2009. The
24% year-over-year increase in EBITDA was primarily due to the 16% increase in average retail assets under
management as well as the $35.0 million decrease in equity-based compensation expense.
Quarter ended december 31, 2010
For the quarter ended December 31, 2010, CI reported net income from continuing operations of $91.4 million
($0.32 per share) versus $115.8 million ($0.40 per share) for the quarter ended December 31, 2009 and $75.5
million ($0.26 per share) for the quarter ended September 30, 2010. Including discontinued operations, CI
reported net income of $118.0 million ($0.40 per share) in the fourth quarter of 2009.
For the fourth quarter of 2010, CI recorded $37.9 million in income tax expense for an effective tax rate of 29.3%,
compared to a recovery of $20.5 million in the fourth quarter of 2009. As mentioned earlier, the recovery in the
comparable quarter last year included a $45.4 million income tax adjustment related to changes in provincial tax
rates – net of this adjustment the effective tax rate was 26.1%.
For the quarter ended December 31, 2010, redemption fee revenue was $8.4 million compared with $7.3 million
for the quarter ended December 31, 2009 and $7.4 million for the quarter ended September 30, 2010. The increase
from 2009 related to an increase in redemptions.
Amortization of deferred sales commissions and fund contracts was $43.7 million in the fourth quarter of 2010, an
increase from $42.5 million in the fourth quarter of 2009 and from $43.6 million in the third quarter of 2010. The
increase from the prior year period was a result of higher spending ($4.9 million) on deferred sales commissions paid
to brokers and dealers on the sale of back-end charge mutual funds during the year.
Interest expense of $5.7 million was recorded for the quarter ended December 31, 2010 compared with $5.9 million
for the quarter ended December 31, 2009 and $3.8 million for the quarter ended September 30, 2010. The decrease
in interest expense from the prior year period reflected slightly lower average debt levels and borrowing costs, as
discussed under “Liquidity and Capital Resources.”
2 8
Pre-tax operating earnings were $163.7 million in the fourth quarter of 2010, an increase of 14% from the fourth
quarter of 2009 and up 9% from the prior quarter. These changes primarily reflect the change in average retail assets
under management, which were up 12% from the fourth quarter of 2009 and up 7% from the prior quarter.
As illustrated in the table on page 27, EBITDA for the quarter ended December 31, 2010 was $180.7 million
($0.63 per share) compared with $145.3 million ($0.50 per share) for the quarter ended December 31, 2009 and
$160.3 million ($0.56 per share) for the quarter ended September 30, 2010. The 24% year-over-year increase in
quarterly EBITDA was primarily due to the 12% increase in average retail assets under management as well as the
$10.4 million decrease in equity-based compensation expense.
Asset Management Segment
The Asset Management segment is CI’s principal business segment and includes the operating results and financial
position of CI Investments and United.
results of operations
The following table presents the operating results for the Asset Management segment:
Quarter ended
Dec. 31, 2010
Quarter ended
Sept. 30, 2010
Quarter ended
Dec. 31, 2009
Year ended
Year ended
Dec. 31, 2010 Dec. 31, 2009
$313.1
15.0
$328.1
55.6
95.0
44.4
1.1
$196.1
$132.0
$293.3
7.8
$301.1
54.6
88.6
44.2
1.1
$188.5
$112.6
$287.9
7.0
$294.9
63.4
86.8
42.9
5.4
$198.5
$96.4
$1,188.0
40.6
$1,228.6
208.1
360.5
176.6
6.1
$751.3
$477.3
$1,041.5
36.1
$1,077.6
229.3
312.3
166.2
16.2
$724.0
$353.6
(in millions)
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 taxes and non-segmented items
year ended december 31, 2010
revenues
Revenues from management fees were $1,188.0 million for the year ended December 31, 2010, an increase of 14%
from the year ended December 31, 2009. The changes were mainly attributable to changes in average retail assets
under management, which were up 16% from 2009. The change in average assets reflects the improvement in
global equity markets as well as net sales of $1.1 billion. As a percentage of average retail assets under management,
management fees were 1.841% for 2010 compared to 1.879% for 2009.
2 9
Average management fee rates decreased from the prior year primarily as a result of a higher proportion of CI’s assets
being Class F, Class I and separately managed accounts (“SMA”), which have lower management fees. Class F pays
no trailer fees to advisors, who typically charge their clients a flat or asset-based fee. Class I and SMA, which are
for institutional and high net worth clients with large holdings, have reduced management fees. At December 31,
2010, there were $1.1 billion and $11.3 billion in Class F and Class I/SMA, respectively, totalling 17.2% of retail
assets under management. At December 31, 2009, Class F, Class I and SMA were 15.7% of retail assets under
management, with $0.9 billion in Class F and $9.0 billion in Class I/SMA.
For the year ended December 31, 2010, other revenue was $40.6 million versus $36.1 million for the year ended
December 31, 2009. The largest component of other revenue is redemption fees. Redemption fees were $30.9
million for 2010 compared with $30.2 million for 2009.
expenses
Selling, general and administrative (“SG&A”) expenses for the Asset Management segment were $208.1 million for
the year ended December 31, 2010, a decrease from $229.3 million for the year ended December 31, 2009. Included
in SG&A are expenses relating to CI’s equity-based compensation plan. The year ended December 31, 2010
included an equity-based compensation expense of $1.8 million compared with an expense of $36.8 million in the
year ended December 31, 2009.
On July 1, 2010, CI modified its equity-based compensation plan. This affected CI’s reporting by changing the fair
value of outstanding options at that date as well as the expense related to the amortization of that fair value over the
options’ remaining life. Equity-based compensation expense has been a volatile component of compensation that
is tied to the performance of CI’s share price, and so the financial results presented hereinafter exclude the expense
to aid the reader in conducting a comparative analysis.
SG&A expenses, net of the amount related to equity-based compensation (“net SG&A”), were $206.3 million for
2010, up 7% from $192.5 million for 2009. This increase reflects items within CI’s SG&A that fluctuate with asset
levels, including external investment managers, and slightly increased spending on compensation.
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.
(as a % of average retail AUM)
Management fees
Less:
Trailer fees
Net SG&A expenses
Operating profit margin
Quarter ended
Dec. 31, 2010
Quarter ended
Sept. 30, 2010
Quarter ended
Dec. 31, 2009
Year ended
Year ended
Dec. 31, 2010 Dec. 31, 2009
1.820
0.531
0.307
0.982
1.832
0.532
0.320
0.980
1.867
0.541
0.326
1.000
1.841
0.537
0.320
0.984
1.879
0.541
0.347
0.991
3 0
As a percentage of average retail assets under management, net SG&A expenses were 0.320% for the year ended
December 31, 2010, down from 0.347% for the year ended December 31, 2009. A large proportion of CI’s costs are
fixed, which is why SG&A decreased as a percentage of average retail assets.
Trailer fees were $360.5 million for 2010 compared with $312.3 million for 2009. Net of inter-segment amounts,
this expense was $346.4 million for the year ended December 31, 2010 versus $299.7 million for the year ended
December 31, 2009. As a percentage of average retail assets under management, trailer fees were 0.537% in 2010,
down from 0.541% in 2009. The decline was due to asset mix changes that also affected management fee revenues.
Amortization of deferred sales commissions and fund contracts was $176.6 million for 2010, up from $166.2
million for the prior year. This change is consistent with the change in deferred sales commissions paid in the
past several years.
Other expenses were $6.1 million for the year ended December 31, 2010 compared to $16.2 million in the year
ended December 31, 2009. The decrease from the prior year is due to the elimination of capital taxes and an
amortized cost adjustment of preferred shares in fiscal 2009.
Income before income taxes and interest expense for CI’s principal segment was $477.3 million for 2010, compared
with $353.6 million in 2009. The increase from last year is due to the increase in average retail assets under
management, the decrease in SG&A expenses and the decrease in other expenses.
As shown in the table on page 30, for the year ended December 31, 2010, CI’s operating profit margin on the
Asset Management segment, as a percentage of average retail assets under management adjusted for equity-based
compensation expense, was 0.984%, down from 0.991% for the year ended December 31, 2009. The decrease from
the prior year was primarily a result of lower management fees as a percentage of average retail assets, due to changes
in the mix of assets under management.
Generally, as a result of increasing competition and changes in distribution channels, CI’s margins have been in a
gradual downward trend. A higher proportion of Class I/SMA assets, which charge lower average management fee
rates are being sold relative to Class A. In addition, in recent years, an increasing proportion of funds have been sold
with a front-end sales charge, which have higher trailer fee rates. Historically, CI has 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.
3 1
Quarter ended december 31, 2010
revenues
Revenues from management fees were $313.1 million for the quarter ended December 31, 2010, an increase of
9% from the quarter ended December 31, 2009 and 7% from $293.3 million for the quarter ended September
30, 2010. The changes were mainly attributable to changes in average retail assets under management, which were
up 12% and 7% from the quarters ended December 31, 2009 and September 30, 2010, respectively. As a percentage
of average retail assets under management, management fees were 1.820% for the quarter ended December 31, 2010
compared to 1.867% in the fourth quarter of last year and 1.832% in the prior quarter. As discussed earlier, the
decline relates to the change in the mix of CI’s assets under management.
For the quarter ended December 31, 2010, other revenue was $15.0 million versus $7.0 million and $7.8 million for
the quarters ended December 31, 2009 and September 30, 2010, respectively. Redemption fees were $8.4 million
for the quarter ended December 31, 2010 compared with $7.3 million and $7.4 million for the quarters ended
December 31, 2009 and September 30, 2010, respectively. Also included in other revenue in the fourth quarter is
a non-recurring fee of $5.0 million ($3.7 million net of expenses).
expenses
Selling, general and administrative (“SG&A”) expenses for the Asset Management segment were $55.6 million
for the quarter ended December 31, 2010, a decrease from $63.4 million for the fourth quarter in 2009 and an
increase from $54.6 million for the quarter ended September 30, 2010. As mentioned earlier, included in SG&A
are expenses relating to CI’s equity-based compensation plan. The quarter ended December 31, 2010 included
an equity-based compensation expense of $2.8 million compared with an expense of $13.2 million in the quarter
ended December 31, 2009. The quarter ended September 30, 2010 had an equity-based compensation expense
of $3.3 million.
SG&A expenses, net of the amount related to equity-based compensation (“net SG&A”), were $52.8 million for
the quarter ended December 31, 2010, up slightly from $50.2 million for the comparable quarter in 2009 and from
$51.3 million for the prior quarter.
As a percentage of average retail assets under management, net SG&A expenses were 0.307% for the quarter ended
December 31, 2010, down from 0.326% for the quarter ended December 31, 2009 and 0.320% for the quarter ended
September 30, 2010. As mentioned earlier, the decrease is a result of a large proportion of CI’s costs being fixed.
Trailer fees were $95.0 million for the quarter ended December 31, 2010 compared with $86.8 million for the
quarter ended December 31, 2009 and $88.6 million for the quarter ended September 30, 2010. Net of inter-
segment amounts, this expense was $91.4 million for the quarter ended December 31, 2010 versus $83.5 million for
the fourth quarter of 2009 and $85.1 million for the third quarter of 2010. As a percentage of average retail assets
under management, trailer fees were 0.531% in the fourth quarter of 2010, down from 0.541% in the comparable
quarter of 2009 and 0.532% in the prior quarter. The decline from the prior year was due to asset mix changes that
also affected management fee revenues.
3 2
Amortization of deferred sales commissions and fund contracts was $44.4 million for the quarter ended December
31, 2010, up from $42.9 million in the same quarter last year and from $44.2 million in the previous quarter. This
increase is consistent with the increase in deferred sales commissions paid in the past.
Other expenses were $1.1 million for the quarter ended December 31, 2010 compared to $5.4 million in the quarter
ended December 31, 2009 and $1.1 million in the prior quarter. The decrease from the prior year period related
to the elimination of capital taxes as well as other one-time items that were charged in the fourth quarter of 2009.
Income before income taxes and interest expense for CI’s principal segment was $132.0 million for the quarter
ended December 31, 2010 compared with $96.4 million in the same period in 2009 and $112.6 million in the
previous quarter. The increase from the comparable quarter in the prior year is primarily due to the increase in
average retail assets under management as well as the decrease in SG&A expenses.
As shown in the table on page 30, for the quarter ended December 31, 2010, CI’s operating profit margin on the
Asset Management segment, as a percentage of average retail assets under management adjusted for equity-based
compensation expense, was 0.982%, down from 1.000% for the quarter ended December 31, 2009 and up from
0.980% for the prior quarter. The decrease from the prior year is mainly a result of lower management fees as a
percentage of average retail assets under management, due to changes in the mix of assets under management.
Asset Administration Segment
The Asset Administration segment includes the operating results and financial position of AWM and its
subsidiaries. The operations of Blackmont were considered discontinued as at December 31, 2009 and are no longer
included in the Asset Administration segment. Comparative prior quarterly results have been adjusted to eliminate
the discontinued operations of Blackmont.
results of operations
The table that follows presents the operating results for the Asset Administration segment:
(in millions)
Administration fees
Other revenue
Total revenue
Selling, general and administrative
Investment dealer fees
Amortization of fund contracts
Other expenses
Total expenses
Income before taxes and non-segmented items
Quarter ended
Dec. 31, 2010
Quarter ended
Sept. 30, 2010
Quarter ended
Dec. 31, 2009
Year ended
Year ended
Dec. 31, 2010 Dec. 31, 2009
$58.6
3.8
$62.4
14.0
44.5
0.4
0.6
$59.5
$2.9
$52.9
3.9
$56.8
13.2
40.3
0.4
0.8
$54.7
$2.1
$55.8
4.2
$60.0
12.2
41.7
0.4
0.8
$55.1
$4.9
$226.8
15.4
$242.2
53.4
172.5
1.5
3.8
$231.2
$11.0
$205.7
16.6
$222.3
49.6
153.3
1.5
3.2
$207.6
$14.7
3 3
year ended december 31, 2010
revenues
Administration fees are earned on assets under administration in the AWM business and from the administration
of third-party business. These fees were $226.8 million for the year ended December 31, 2010, an increase of 10%
from $205.7 million for the same period last year. Net of inter-segment amounts, administration fee revenue was
$134.4 million for the year ended December 31, 2010, up from $124.3 million for the year ended December 31,
2009. The increase from the prior year was mainly attributable to the improvement in assets under administration
over the year. Administration fees should be considered in conjunction with investment dealer fees, an expense
that represents the payout to financial advisors.
Other revenues earned by the Asset Administration segment are mainly comprised of interest income on cash
balances, and foreign exchange gains and losses. For 2010, other revenues were $15.4 million, decreasing from
$16.6 million for 2009.
expenses
Investment dealer fees represent the payout to advisors on revenues they generate and were $172.5 million for the
year ended December 31, 2010, compared to $153.3 million for the year ended December 31, 2009. This increase
relates to the increase in administration fees discussed earlier.
As detailed in the table below, dealer gross margin was $54.3 million or 23.9% of administration fee revenue for
2010, compared to $52.4 million or 25.5% for 2009. The decrease in year-over-year gross margin was a result of
financial advisors earning a higher average investment dealer fee, as their fee rate increases when they earn higher
levels of administration fees.
Selling, general and administrative (“SG&A”) expenses for the segment were $53.4 million for the year ended
December 31, 2010 compared to $49.6 million in the year ended December 31, 2009.
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.
(in millions)
Administration fees
Less:
Investment dealer fees
Dealer gross margin
Quarter ended
Dec. 31, 2010
Quarter ended
Sept. 30, 2010
Quarter ended
Dec. 31, 2009
Year ended
Year ended
Dec. 31, 2010 Dec. 31, 2009
$58.6
44.5
$14.1
24.1%
$52.9
40.3
$12.6
23.8%
$55.8
41.7
$14.1
25.3%
$226.8
$205.7
172.5
$54.3
23.9%
153.3
$52.4
25.5%
3 4
The Asset Administration segment had income before income taxes and non-segmented items of $11.0 million
for 2010, down from $14.7 million in 2009. The year-over-year decrease is due primarily to the decrease in dealer
gross margin.
Quarter ended december 31, 2010
revenues
Administration fees were $58.6 million for the quarter ended December 31, 2010, an increase of 5% from
$55.8 million for the same period last year and an increase of 11% from the prior quarter. Net of inter-segment
amounts, administration fee revenue was $35.4 million for the quarter ended December 31, 2010, up from
$34.4 million for the quarter ended December 31, 2009 and up from $31.3 million in the previous quarter. The
increase from the prior year was mainly attributable to the improvement in assets under administration over the year.
As mentioned earlier, other revenues earned by the Asset Administration segment are mainly comprised of interest
income on cash balances, and foreign exchange gains and losses. For the quarter ended December 31, 2010, other
revenues were $3.8 million, decreasing from $4.2 million for the fourth quarter of last year and down slightly from
$3.9 million in the third quarter of 2010.
expenses
Investment dealer fees were $44.5 million for the quarter ended December 31, 2010, compared to $41.7 million for
the fourth quarter last year and $40.3 million for the quarter ended September 30, 2010.
As detailed in the table on page 34, dealer gross margin was $14.1 million or 24.1% of administration fee revenue
for the quarter ended December 31, 2010 compared to $14.1 million or 25.3% for the fourth quarter of 2009 and
$12.6 million or 23.8% for the previous quarter. The decrease in gross margin from the prior year period relates to
financial advisors earning a higher average investment dealer fee rate on their administration fees.
Selling, general and administrative (“SG&A”) expenses for the segment were $14.0 million for the quarter ended
December 31, 2010 compared to $12.2 million in the fourth quarter in 2009 and $13.2 million in the third quarter
of 2010.
The Asset Administration segment had income before income taxes and non-segmented items of $2.9 million
for the quarter ended December 31, 2010, down from $4.9 million for the fourth quarter in 2009 and up from
$2.1 million for the prior quarter. The decrease from the prior year period is due primarily to the change in dealer
gross margin.
Liquidity and Capital Resources
The balance sheet for CI at December 31, 2010 reflects total assets of $3.265 billion, an increase of $258.8 million
from $3.006 billion at December 31, 2009. This change can be attributed to an increase in current assets of
$158.1 million and an increase in long-term assets of $100.7 million. CI’s cash and cash equivalents increased by
$144.4 million in 2010 as CI increased the regulatory capital held by key subsidiaries.
3 5
CI generates significant cash flow from its operations. Cash flow provided by operating activities was $576.7 million
for the year ended December 31, 2010. Excluding the change in working capital, cash flow from operations was
$503.2 million.
CI’s main uses of capital are the financing of deferred sales commissions, the payment of dividends on its shares, the
funding of capital expenditures and the repurchase of shares through its normal course issuer bid program.
CI paid sales commissions of $157.8 million in the year ended December 31, 2010. This compares to
$152.9 million in 2009. The amount of deferred sales commissions incurred in 2010 relates to back-end load fund
sales of approximately $270 million per month.
During the year ended December 31, 2010, CI incurred capital expenditures of $26.7 million, primarily for
leasehold improvements. Net of inducements this amount was $6.2 million.
Shareholders’ equity increased by $2.7 million in 2010. During the same period, CI repurchased shares under its
normal course issuer bid at a cost of $97.0 million. CI declared dividends of $245.3 million ($220.0 million paid
during the year), which was less than net income for the year ended December 31, 2010 by $85.5 million. CI’s
current dividend payments are $0.07 per share per month, or approximately $241 million per fiscal year.
As CI converted back to a corporate structure on 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 produces
sufficient cash to meet its obligations and pay down debt.
CI received proceeds of $1.7 million from the disposition of marketable securities during 2010, resulting in a loss of
$0.1 million. The fair value of marketable securities at December 31, 2010 was $33.3 million. Marketable securities
are comprised of seed capital investments in its funds and includes other strategic investments.
Accounts receivable and prepaid expenses increased to $96.2 million at December 31, 2010 from $92.7 million at
December 31, 2009. The increase from the prior year is related to fees receivable on the Hartford acquisition as well
as larger institutional management fee receivables compared to the prior year.
During the year ended December 31, 2010, long-term assets increased primarily as a result of a $71.6 million
increase in goodwill, as CI completed the acquisition of Hartford Investments in the fourth quarter. Capital assets
increased by $19.9 million during the year due in large part to leasehold improvements at CI’s recently rented
premises located at 15 York Street, Toronto.
3 6
Total liabilities increased by $256.1 million during 2010. The primary contributors to this change were the $81.6
million increase in income taxes payable and $193.8 million increase in long-term debt. Current income taxes
payable increased due to an income tax accrual as CI no longer has tax losses from its income trust structure to
shelter its income. Long-term debt increased as CI financed the acquisition of Hartford and increased its cash on
hand. The largest decreases to total liabilities were the elimination of equity-based compensation liability of $33.9
million and the $20.7 million repurchase of preferred shares for cash. The accounting for equity-based compensation
was modified on July 1, 2010 to reflect the change of CI’s employee incentive share option plan from a cash-settled
award to an equity-settled award. All outstanding options granted prior to 2010 that were previously accounted
for as a liability are now accounted for using the fair value method of accounting where transactions are recorded
as equity.
As discussed above, CI’s total debt increased by $193.8 million in the year ended 2010. At December 31, 2010, CI
had $870.4 million of debt outstanding at an average rate of 3.14%. CI’s debt included $846.4 million in debentures
(net of unamortized fees), $548.0 million of which were issued on December 16, 2009 and $298.4 million that were
issued on December 14, 2010. CI’s debt also included $24.0 million drawn against its credit facility in the form of
bankers’ acceptances. CI’s total debt at December 31, 2009 was $676.5 million, which had an average interest rate
of 1.88%. Net of cash and marketable securities, debt was $620.5 million at December 31, 2010, up $22.6 million
from $597.9 million at December 31, 2009.
Principal repayments on CI’s credit facility are only required under the facility should the bank 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 September 30, 2011 should the bank not renew the facility. The limit on the facility
at December 31, 2010 was $150 million.
CI’s current ratio of debt to EBITDA is 1.2 to 1. CI has a long-term target of 1 to 1. CI expects that, absent
acquisitions in which debt is increased, the amount of excess cash flow generated will pay down debt and the ratio
of debt to EBITDA will trend lower. CI is within its financial covenants with respect to its credit facility, which
requires that the debt to EBITDA ratio remain below 2.5 to 1, and assets under management not fall below $35
billion, based on a rolling 30-day average.
3 7
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, and equity and commodity prices. A description of each component of
market risk is described below:
• Interest rate risk is the risk of gain or loss due to the volatility of interest rates.
• Foreign exchange rate risk is the risk of gain or loss due to volatility of foreign exchange rates.
• Equity risk is the risk of gain or loss due to the changes in prices and volatility of individual equity instruments
and equity indexes.
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 impact
CI’s dividends.
AssetManagementSegment
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 market risk within CI’s assets under management is the responsibility of the Chief Compliance
Officer, who reports to CI’s senior management. The 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. The Compliance group 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.
At December 31, 2010, approximately 17% 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 25 basis point change in
interest rates would cause a change of $0.3 million in annual pre-tax earnings in the Asset Management segment.
At December 31, 2010, about 74% of CI’s assets under management were based in Canadian currency, which
diminishes the exposure to foreign exchange risk. However, at the same time, approximately 12% of CI’s assets
under management were based in U.S. currency. Any change in the value of the Canadian dollar relative to
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 $9.5 million
in the Asset Management segment’s annual pre-tax earnings.
3 8
About 72% of CI’s assets under management were held in equity securities at December 31, 2010, 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 indexes would cause a change of $58.3 million in annual pre-tax earnings.
AssetAdministrationSegment
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.
Risk management for administered assets 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 not materially exposed to market risk impacting the asset administration segment given
that this segment usually generates less than 5% of the total income before non-segmented items (this segment
had income of $2.9 million before income taxes and non-segmented items for the quarter ended December 31,
2010). 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 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.
3 9
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 favorable 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.
current financial conditions
Financial markets globally have been subject to unprecedented volatility and numerous financial institutions
have gone into bankruptcy or have had to be rescued by governmental authorities. Access to financing has been
negatively impacted by both sub-prime mortgages and the liquidity crisis affecting the asset-backed commercial
paper market. These factors may impact the ability of CI to obtain loans and make other arrangements on terms
favourable to CI. While these unprecedented levels of volatility and market turmoil appear to have stabilized, CI’s
financial results could be materially impacted by any reversal in this stability.
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.
dependence on Senior management
The success of CI and its strategic focus is dependent to a significant degree upon the contributions of senior
management. The loss of any of these individuals, or an inability to attract, retain and motivate sufficient numbers
of qualified senior management personnel on the part of CI, could adversely affect CI’s business. CI has not
purchased any “key man” insurance with respect to any of its directors, officers or key employees and has no current
plans to do so.
4 0
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 have
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 or 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 redemptions and diminished sales for participants in the
Canadian wealth management industry.
changes in tax laws
The introduction of a Harmonized Sales Tax (HST) to combine the Goods and Services Tax (GST) and Provincial
Sales Tax (PST) into a single sales tax, effectively subjects investment fund management fees to provincial taxation
for the first time. Increased taxation of investment fund management fees could result in changes to current
fee structures or negatively impact the ability of investment funds, including CI, to retain investors. This could
adversely impact the competitiveness of the investment fund industry as compared to other products or services that
are not subject to GST and will not be subject to HST.
4 1
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 CI to provide these administrative services. Changes to the pricing arrangement
with such third-party suppliers because of upgrades or other circumstances could have an adverse effect upon the
profitability of CI. There can be no assurances that CI’s systems will operate or that 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 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 as well as impose additional disclosure requirements on CI products and services. 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 products
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.
4 2
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 directors, 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.
leverage and restrictive covenants
The ability of CI to pay dividends or make 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 shareholders, 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 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 result in a
termination of dividends by CI and 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, CI’s current credit facility matures no later than the fourth anniversary
thereof (unless the bank elects to extend the term at its annual renewal). 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.
fluctuation of cash dividends
Although CI intends to distribute some portion of the income it earns, there can be no assurance regarding the
amount of cash dividends distributed upstream from its subsidiaries. The actual amount of dividends paid depends
upon numerous factors, all of which are susceptible to a number of risks and other factors beyond the control of
CI. Dividends are not guaranteed and will fluctuate with the performance of the business.
Share Price risk
Share price risk arises from the potential adverse impact on CI’s earnings due to movements in CI’s share
price. Prior to July 1, 2010, CI was affected by share price risk as CI’s equity-based compensation liability fluctuated
based on the market value of CI’s share price. As at December 31, 2010, CI is no longer affected by share price
risk as CI’s equity-based compensation is accounted for using the fair value method which is not adjusted for future
fluctuations in CI’s share price.
4 3
commitment of financial Advisors and other Key Personnel
The market for financial advisors is extremely competitive and is increasingly characterized by frequent movement
by financial advisors among different firms. Individual financial advisors of AWM have regular direct contact with
clients, which can lead to a strong and personal client relationship based on the client’s trust in the individual
financial advisor. The loss of a significant number of financial advisors could lead to the loss of client accounts
which could have a material adverse effect on the results of operations and prospects of AWM, and, in turn,
CI. Although AWM uses or has used a combination of competitive compensation structures and equity with
vesting provisions as a means of seeking to retain financial advisors, there can be no assurance that financial advisors
will remain with AWM.
The success of CI is also dependent upon, among other things, the skills and expertise of its human resources
including the management and investment personnel and its personnel with skills related to, among other
things, marketing, risk management, credit, information technology, accounting, administrative operations and
legal affairs. These individuals play an important role in developing, implementing, operating, managing and
distributing CI’s products and services. Accordingly, the recruitment of competent personnel, continuous training
and transfer of knowledge are key activities that are essential to CI’s performance. In addition, the growth in total
assets under management in the industry and the reliance on investment performance to sell financial products have
increased the demand for experienced and high-performing portfolio managers. Compensation packages for these
managers may increase at a rate well in excess of inflation and well above the rates of increase observed in other
industries and the rest of the labour market. CI believes that it has the resources necessary for the operation of CI’s
business. The loss of these individuals or an inability to attract, retain and motivate a sufficient number of qualified
personnel could adversely affect CI’s business.
capital requirements
Certain subsidiaries of CI are subject to minimum regulatory capital requirements. This may require CI to
keep sufficient cash and other liquid assets on hand to maintain capital requirements rather than using them
in connection with its business. Failure to maintain required regulatory capital by CI may subject it to fines,
suspension or revocation of registration by the relevant securities regulator. A significant operating loss by a
registrant subsidiary or an unusually large charge against regulatory capital could adversely affect the ability of CI to
expand or even maintain its present level of business, which could have a material adverse effect on CI’s business,
results of operations, financial condition and prospects.
risks Specific to the common Shares
UnpredictabilityandVolatilityofMarketPrice
Shares of a publicly traded company do not necessarily trade at values determined by reference to the underlying value
of the business. The prices at which the common shares of the Corporation will trade cannot be predicted. The
market price of CI’s common shares could be subject to significant fluctuations in response to variations in quarterly
operating results, distributions and other factors. The market price for the common shares may be adversely affected
by changes in general market conditions, fluctuations in the market for equity or debt securities and numerous other
factors beyond the control of CI.
4 4
Dilution
Pursuant to its articles of incorporation, as amended, the Corporation is authorized to issue an unlimited number of
common shares for the consideration and on those terms and conditions as are established by the Directors without
the approval of any shareholders. Any further issuance of common shares may dilute the interests of existing
shareholders.
ChangesinLegislationandAdministrativePolicy
There can be no assurance that certain laws applicable to CI and its subsidiaries, including income tax laws, will not
be changed in a manner that could adversely affect the value of CI. In addition, there can be no assurance that the
administrative policies and assessing practices of the Canada Revenue Agency will not be changed in a manner that
adversely affects the holders of common shares. CI may also be affected by changes in regulatory requirements, or
other taxes in Canada or foreign jurisdictions. Such changes could, depending on their nature, benefit or adversely
affect CI.
risk Specific to the debentures
ChangesinCreditworthiness
There can be no assurance that the creditworthiness of CI or CI Investments and any credit rating assigned to the
debentures issued by CI (“Debentures”) or CI Investments (“CI Investment Debentures”) will remain in effect for
any given period of time or that the rating will not be lowered or withdrawn entirely by the relevant rating agency.
A lowering or withdrawal of such rating may have an adverse effect on the market price or value and the liquidity
of the Debentures and the CI Investment Debentures.
MarketValueRisk
Prevailing interest rates will affect the market value of the Debentures and the CI Investment Debentures. The
price or market value of the Debentures and the CI Investment Debentures will decline as prevailing interest rates
for comparable securities rise. CI may choose to redeem Debentures and the CI Investment Debentures from time
to time, in accordance with its rights, including when prevailing interest rates are lower than the yield borne by the
Debentures or the CI Investment Debentures. If prevailing rates are lower at the time of redemption, a holder may
not be able to reinvest the redemption proceeds in a comparable security at an effective yield as high as the yield
on the Debentures or the CI Investment Debentures being redeemed.
LiquidityRisk
Each of the Debentures and the CI Investment Debentures constitute a new issue of securities with no established
trading market. In addition, the Debentures and the CI Investment Debentures are not listed on any exchange.
As a result, the trading market for the Debentures and the CI Investment Debentures may not be active or liquid.
There can be no assurance that an active market for the Debentures or the CI Investment Debentures will develop
or be sustained or that holders of the Debentures or the CI Investment Debentures will be able to sell their
debentures at any particular price or at all.
4 5
RankingoftheDebentures
The Debentures are unsecured obligations of CI, unconditionally guaranteed by CI Investments and may be
guaranteed by certain other subsidaries of CI. Therefore, holders of secured indebtedness of CI or of its subsidiaries
will have a claim on the assets securing such indebtedness that ranks in priority to the claims of holders of the
Debentures and will have a claim that ranks equally with the claims of holders of Debentures to the extent that
such security is insufficient to satisfy the secured indebtedness. Furthermore, although covenants given by CI or its
subsidiaries in certain agreements may restrict incurring secured indebtedness, such indebtedness may, subject to
certain conditions, be incurred.
The CI Investment Debentures are unsecured obligations of CI Investments, unconditionally guaranteed by CI.
Therefore, holders of secured indebtedness of CI Investments will have a claim on the assets securing such
indebtedness that ranks in priority to the claims of holders of the CI Investment Debentures and will have a
claim that ranks equally with the claims of holders of CI Investment Debentures to the extent that such security
is insufficient to satisfy the secured indebtedness. Furthermore, CI Investments is not precluded from incurring
additional debt.
Information Regarding Guarantors
The following tables provide unaudited consolidated financial information for CI, CI Investments and
non-guarantor subsidiaries for the periods identified below, presented with a separate column for: (i) CI; (ii)
CI Investments, (iii) the non-guarantor subsidiaries of CI on a combined basis [the “Other Subsidiaries”); (iv)
consolidating adjustments; and (v) the total consolidated amounts.
StAtement of Income dAtA for the yeAr ended decemBer 31, 2010 And 2009*
(in millions of dollars)
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
CI
Financial
CI
Investments
Other
Subsidiaries
Consolidating
Adjustments
Total
Amounts
Revenue
Income from
continuing operations
Net income
–
–
1,102.4
1,017.6
368.4
282.4
(92.4)
(81.5)
1,378.4
1,218.5
(16.8)
(16.8)
(24.4)
(24.4)
319.2
319.2
299.2
299.2
24.5
24.5
28.6
(26.5)
3.9
3.9
(7.2)
(3.5)
330.8
330.8
296.2
244.8
StAtement of Income dAtA for the three monthS ended decemBer 31, 2010 And 2009*
(in millions of dollars)
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
CI
Financial
CI
Investments
Other
Subsidiaries
Consolidating
Adjustments
Total
Amounts
Revenue
Income from
continuing operations
Net income
–
–
295.2
270.4
96.7
84.3
(24.7)
(21.2)
367.2
333.5
(4.8)
(4.8)
(4.0)
(4.0)
86.7
86.7
107.2
107.2
6.3
6.3
14.1
13.4
3.2
3.2
(1.5)
1.4
91.4
91.4
115.8
118.0
4 6
BAlAnce Sheet dAtA AS At decemBer 31, 2010 And 2009*
(in millions of dollars)
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
CI
Financial
CI
Investments
Other
Subsidiaries
Consolidating
Adjustments
Total
Amounts
Current assets
Non-current assets
Current liabilities
Non-current liabilities
250.6
1,675.5
164.2
467.7
701.3
1,381.2
79.2
668.0
264.4
2,590.4
168.7
1,011.1
110.8
2,646.2
106.6
1,239.3
278.5
78.7
192.2
–
370.5
48.8
200.9
–
(338.7)
(1,534.1)
(21.3)
(331.0)
(886.0)
(1,366.4)
(33.6)
(864.9)
454.8
2,810.5
503.8
1,147.8
296.6
2,709.8
353.1
1,042.4
*Some comparative figures have been reclassified to conform to the presentation in the current year.
Related Party Transactions
The Bank of Nova Scotia (“Scotiabank”) owns approximately 36% of the common shares of CI, and is therefore
considered a related party. CI has entered into transactions related to the advisory and distribution of its mutual
funds with Scotiabank. These transactions are in the normal course of operations and are recorded at the agreed upon
exchange amounts. During the three and 12 months ended December 31, 2010, CI incurred charges for deferred
sales commissions of $0.5 million and $2.5 million, respectively [three and 12 months ended December 31, 2009 –
$0.8 million and $2.4 million, respectively] and trailer fees of $1.8 million and $7.0 million, respectively [three and
12 months ended December 31, 2009 – $1.6 million and $5.9 million, respectively] which were paid or payable to
Scotiabank. The balance payable to Scotiabank as at December 31, 2010 of $0.6 million [December 31, 2009 – $0.6
million] is included in accounts payable and accrued liabilities.
Scotiabank is the provider and administrative agent for CI’s revolving credit facility. As at December 31, 2010,
CI had drawn long-term debt of $24.0 million [December 31, 2009 – $129.0 million] in the form of bankers’
acceptances. During the three and 12 months ended December 31, 2010, interest and stamping fees of $0.9 million
and $2.8 million, respectively [three and 12 months ended December 31, 2009 – $7.6 million and $24.7 million,
respectively] was recorded as interest expense.
On December 14, 2010, Scotiabank acted as an agent in offering CI’s debentures and received $0.3 million. On
December 16, 2009, Scotiabank and Blackmont acted as agents in offering CI’s debentures and received $0.5 million
and $0.1 million, respectively. These amounts have been netted against long-term debt and will be amortized using
the effective interest rate method over the term of the debentures. Also, on December 16, 2009, CI entered into
an interest rate swap agreement with Scotiabank as described in Note 7 of the Notes to the 2010 Consolidated
Financial Statements.
Share Capital
As at December 31, 2010, CI had 287,434,257 shares outstanding.
At December 31, 2010, 6.3 million options to purchase shares were outstanding, of which 0.7 million options were
exercisable.
4 7
Contractual Obligations
The table that follows summarizes CI’s contractual obligations at December 31, 2010.
PAymentS due By yeAr
(millions)
Credit facility
Debentures
Operating leases
Total
Total
$24.0
850.0
119.2
$993.2
1 year
or less
$3.0
100.0
13.3
$116.3
2
$6.0
250.0
10.0
$266.0
3
$15.0
–
9.2
$24.2
4
$–
200.0
8.3
$208.3
More than
5 years
$–
300.0
70.6
$370.6
5
$–
–
7.8
$7.8
Significant Accounting Estimates
The consolidated financial statements have been prepared in accordance with Canadian generally accepted
accounting principles. For a discussion of all significant accounting policies, refer to Note 1 of the Notes to the
Consolidated Financial Statements included in CI’s 2010 Annual Report. 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 also uses a valuation approach
based on a multiple of assets under administration for the Asset Administration Segment. The multiple used by CI
reflects recent transactions and research reports by independent equity research analysts. 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 20% in the fair
value of certain models may result in an impairment of goodwill or other intangibles recorded on the balance sheet.
Future Accounting Changes
International financial reporting Standards
The Canadian Accounting Standards Board (“AcSB”), confirmed that effective January 1, 2011, all publicly listed
companies will be required to prepare interim and annual financial reports in accordance with International Financial
Reporting Standards (“IFRS”). These standards will replace Canadian generally accepted accounting principles
(“Canadian GAAP”). 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.
In 2009, CI developed a transition plan for the changeover to IFRS. CI has now substantially completed its
assessment of 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. Along with this
assessment, an implementation plan was developed to transition CI’s financial reporting process, including internal
controls and information systems to IFRS. CI is on schedule to meet the timelines of its transition plan.
4 8
During the quarter ended December 31, 2010, CI completed the opening balance sheet adjustments and internally
reported its quarterly financial results in accordance with IFRS in preparation for adoption on January 1, 2011.
Although the IFRS adjustments have been determined, they are still subject to final review and approval by senior
management and the Board of Directors.
Listed below is an analysis of the IFRS standards affecting CI.
IFRS1First-timeadoptionofIFRS
IFRS 1 provides entities adopting IFRS for the first time with certain optional exemptions and mandatory exceptions
to the general requirement for full retrospective application of IFRS. CI has analyzed the various accounting policy
choices available and will implement those determined to be most appropriate in CI’s circumstance.
The most significant IFRS 1 exemption decisions for CI are as follows:
IFRS2–Share-basedPayment
At the date of transition, IFRS 2 – Share-based Payment must be applied retrospectively. However some relief
is provided in IFRS 1 for first time adopters. CI is electing not to apply retrospective treatment to the following::
• Equity instruments granted on or before November 7, 2002;
• Equity instruments granted after November 7, 2002 that vested before the date of transition to IFRS; and
•
Liabilities arising from share-based payment transactions that were settled before the date of transition
to IFRS.
CI expects that the transition adjustment related to the adoption of IFRS 2 will cause an increase in
equity-based compensation liability and a corresponding increase in the deficit.
IFRS3–BusinessCombinations
CI may elect, on transition to IFRS, to either restate all past business combinations or to apply a more limited
restatement approach. If the limited restatement approach is chosen, specific requirements must be met, such
as: maintaining the classification of the acquirer and the acquiree, recognizing or derecognizing certain acquired
assets or liabilities as required under IFRS and remeasuring certain assets and liabilities at fair value.
CI expects to apply the business combinations exemption in IFRS 1 to not apply IFRS 3 – Business
Combinations retrospectively to past business combinations. Accordingly, CI will not restate business
combinations that took place prior to the January 1, 2010 transition date or modify the carrying amounts
arising on business combinations occurring before the transition date.
4 9
IAS12-IncomeTaxes
CI expects the most significant impact of adopting IAS 12 – Income Taxes will be derived directly from the
accounting policy decisions made under IFRS 2, IAS 37, and IAS 38. The impact on CI of accounting for the tax
consequences of transactions and other events under IFRS versus Canadian GAAP will result in adjustments to the
opening balance sheet at transition.
CI expects that the transition adjustment related to the adoption of IAS 12 will cause a decrease in the future tax
liability with a corresponding decrease in the deficit.
IAS27–ConsolidatedandSeparateFinancialStatements
Currently under Canadian GAAP, there are two models to determine whether entities are to be consolidated: the
variable interest model and the voting interest model. Under IFRS, consolidation is based solely on control which
under IAS 27 – Consolidated and Separate Financial Statements is defined as “the power to govern the financial
and operating policies of an entity so as to obtain benefits from its activities.”
The adoption of IAS 27, and the related interpretive guidance in SIC-12 – Consolidation – Special Purpose Entities,
will have an immaterial impact on the financial position and results of operations in 2010.
IAS36–ImpairmentofAssets
IFRS requires a one-step approach using discounted cash flow techniques for asset impairment testing and
measurement. Canadian GAAP has a two-step approach which requires the application of discounted cash flow
techniques to measure the impairment amount, but only after the use of undiscounted cash flow analysis has
indicated the existence of impairment. The adoption of IAS 36 may result in more frequent asset write downs
since the carrying values of assets which are supported by undiscounted future cash flows may be determined to
be impaired when the future cash flows are discounted in accordance with IFRS requirements. Unlike Canadian
GAAP, previous impairment losses may be reversed or reduced (except in the case of goodwill) under IFRS if the
circumstances which led to the impairment change.
IAS 36 also requires impairment testing to be applied at a cash-generating unit level. In addition, goodwill must be
allocated to cash-generating units for impairment testing purposes. Under Canadian GAAP goodwill is allocated to
a reporting unit for purposes of impairment testing.
CI has revised its impairment testing models to comply with the requirements of IAS 36. This includes analyzing its
operations in order to determine the cash-generating units and revising its impairment models to reflect the IAS 36
concept of recoverable amount. While the methodology for testing goodwill and intangible assets will change upon
adoption of IFRS, CI does not expect the adoption of the new impairment models to cause any significant changes
in financial reporting.
5 0
IAS37–Provisions,ContingentLiabilitiesandContingentAssets
IAS 37 requires a provision to be recognized when: there is a present obligation as a result of a past transaction or
event; it is probable that an outflow of resources will be required to settle the obligation; and a reliable estimate
can be made of the obligation. “Probable” in this context means more likely than not. Under Canadian GAAP,
the criterion for recognition in the financial statements is “likely”, which is a higher threshold than “probable”.
Therefore, it is possible that there may be some provisions or contingent liabilities which would meet the
recognition criteria under IFRS that were not recognized under Canadian GAAP. Other differences between IFRS
and Canadian GAAP exist in relation to the measurement of provisions, such as the methodology for determining
the best estimate where there is a range of equally possible outcomes (IFRS uses the mid-point of the range, whereas
Canadian GAAP uses the low end of the range), and the requirement under IFRS for provisions to be discounted
where material.
CI expects that the transition adjustment related to the adoption of IAS 37 will cause an increase in provisions
relating to contingent liabilities with a corresponding increase in the deficit.
IAS38-IntangibleAssets,DeferredSalesCommissions
Under Canadian GAAP, CI’s deferred sales commissions are amortized on a straight-line basis over 84 months
from the date recorded, except for commissions on low load mutual fund securities, which are amortized on a
straight-line basis over 36 months. Under IFRS, IAS 38 – Intangible Assets requires CI to choose either the cost
method or the revaluation method for measuring the deferred sales commission. As no active market exists for
deferred sales commissions, the cost method is used to value the intangible.
IAS 38 requires that under the cost method the intangible assets should be carried at cost less any amortization
and impairment losses. The amortization method should reflect the pattern of benefits. Currently, when CI receives
redemption fees from assets that are redeemed, the corresponding unamortized deferred sales commissions related to
those revaluation are not written off. This is not consistent with the requirements of IAS 38 where the amortization
should match the benefit.
CI will have an adjustment for IAS 38 in the opening balance sheet at transition to reflect the relieving of deferred
sales commissions related to redemptions. CI expects that the transition adjustment related to the adoption of
IAS 38 will cause a decrease in deferred sales commissions with a corresponding increase in the deficit.
FinancialInstruments
Over the past number of years Canadian GAAP has substantially converged with the reporting guidelines of
IAS 39 – Financial Instruments: Recognition and Measurement and IFRS 7 – Financial Instruments: Disclosures
with respect to the recognition, measurement and disclosure of financial instruments. CI does not expect the
transition to IAS 39 and IFRS 7 to have a significant impact on the financial position or results of operations.
5 1
FrameworkforthePreparationandPresentationofFinancialStatements
CI has reviewed the definition of a liability under IFRS as described in the framework and has determined that a
deferred credit not meeting the definition of a liability will be reversed with a corresponding decrease in the deficit
upon adoption of IFRS.
CI continues to monitor and assess the impact of evolving differences between Canadian GAAP and IFRS, since
the IASB is expected to continue issuing new accounting standards during the transition year.
Since 2009, the Audit Committee has been provided with quarterly IFRS updates. At these updates, management
provided the Audit Committee with a review of the conversion project, including an overview of the project
structure and the timeline for IFRS implementation, as well as an overview of the key areas of potential financial
reporting impact. The Audit Committee will continue to receive quarterly presentations and project status updates
from management.
Disclosure Controls and Internal Controls over Financial Reporting
The Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), together with management, are
responsible for the design of CI’s disclosure controls and procedures. Management has evaluated, with participation
of the CEO and CFO , the effectiveness of the disclosure controls and procedures as at December 31, 2010. Based
on this evaluation, the CEO and CFO have concluded that they are reasonably assured these Disclosure Controls
and Procedures were effective and that material information relating to CI was made known to them within the
time periods specified under applicable securities legislation.
Management, under the supervision of the CEO and CFO, is responsible for the design and maintenance of
adequate internal controls over financial reporting for the purposes of providing reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with GAAP. However, due to its inherent limitations, internal controls over financial reporting can only provide
reasonable, not absolute, assurance that the financial statements are free of misstatements. The COSO framework
was used to assist management, along with the CEO and CFO, in the evaluation of these internal control systems.
Management, under the direction of the CEO and CFO, have concluded that the internal controls over financial
reporting are effective. Management used various tools to evaluate internal controls over financial reporting which
included interaction with key control systems, review of policy and procedure documentation, observation or
reperformance of control procedures to evaluate the effectiveness of controls and concluded that these controls are
effective. For the year ended December 31, 2010, there have been no changes to the internal controls over financial
reporting that have materially affected, or are reasonably likely to affect, internal controls over financial reporting.
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.
5 2
Financial Statements
Management’s Report to Shareholders
Management of CI Financial Corp. [“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 Directors 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 financial information prepared by management and the results of the audit by the auditors prior to recommending the
consolidated financial statements to the Board of Directors 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 shareholders.
Stephen A. MacPhail
Chief Executive Officer
Douglas J. Jamieson
Chief Financial Officer
5 4
Independent Auditors’ Report
To the shareholders of
cI financial corp.
We have audited the accompanying consolidated financial statements of CI Financial Corp. [“CI”], which comprise the
consolidated balance sheets as at December 31, 2010 and 2009, and the consolidated statements of income and comprehensive
income, changes in shareholders’ equity and cash flows for the years then ended, and a summary of significant accounting
policies and other explanatory information.
management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance
with Canadian generally accepted accounting principles, and for such internal control as management determines is necessary
to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
Auditors’ responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted
our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of
material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments,
the auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the
overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our
audit opinion.
opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of CI as at
31 December 2010 and 2009 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 23, 2011
5 5
Consolidated Balance Sheets
As at December 31
[in thousands of dollars]
ASSetS
Current
Cash and cash equivalents
Client and trust funds on deposit
Marketable securities
Accounts receivable and prepaid expenses
Future income taxes [note 16]
Assets held for sale [note 3]
Total current assets
Capital assets, net [note 4]
Deferred sales commissions, net of accumulated
amortization of $668,791 [2009 - $590,843] [note 15]
Fund contracts [note 5]
Goodwill [note 2]
Other assets [note 6]
Assets held for sale [note 3]
lIABIlItIeS And ShAreholderS’ eQuIty
Current
Accounts payable and accrued liabilities [notes 3 and 15]
Dividends payable [note 13]
Client and trust funds payable
Income taxes payable
Equity-based compensation [note 9(b)]
Preferred shares issued by subsidiary [note 8]
Current portion of long-term debt [notes 7 and 15]
Liabilities held for sale [note 3]
Total current liabilities
Deferred lease inducement
Long-term debt [notes 7 and 15]
Future income taxes [note 16]
Total liabilities
Commitments and contingencies [note 14]
Shareholders’ equity
Share capital [note 9(a)]
Contributed surplus
Deficit
Accumulated other comprehensive income (loss)
Total shareholders’ equity
2010
$
2009
$
216,537
108,726
33,300
96,194
—
—
454,757
38,101
569,090
1,038,724
1,122,892
41,702
—
3,265,266
142,708
60,320
107,673
90,304
—
—
102,747
—
503,752
19,072
767,615
361,187
1,651,626
1,984,488
16,146
(387,138)
144
1,613,640
3,265,266
72,120
109,004
6,460
92,711
9,644
6,670
296,609
18,238
582,127
1,010,078
1,051,285
47,826
268
3,006,431
138,140
35,096
108,004
8,727
33,877
20,662
8,062
561
353,129
—
668,462
373,905
1,395,496
2,008,846
11,445
(409,086)
(270)
1,610,935
3,006,431
(see accompanying notes)
On behalf of the Board of Directors:
_____________________________
William T. Holland
Director
____________________________
G. Raymond Chang
Director
5 6
Consolidated Statements of Income and Comprehensive Income
For the years ended December 31
[in thousands of dollars, except per share amounts]
reVenue
Management fees
Administration fees
Redemption fees
Gain (loss) on sale of marketable securities
Other income [note 6]
eXPenSeS
Selling, general and administrative [note 6]
Trailer fees [note 15]
Investment dealer fees
Amortization of deferred sales commissions and fund contracts
Interest [notes 7 and 15]
Other [note 6]
Income from continuing operations before income taxes
Provision for (recovery of) income taxes [note 16]
Current
Future
Net income from continuing operations for the year
Net loss from discontinued operations for the year [note 3]
Net income for the year
Other comprehensive income, net of tax
Unrealized income on available-for-sale financial assets,
net of income taxes of $13 [2009 – $4]
Reversal of losses to net income on available-for-sale
financial assets, net of income taxes of $17 [2009 – $44]
Total other comprehensive income, net of tax
Comprehensive income
Basic earnings per share from continuing operations [note 9(e)]
Diluted earnings per share from continuing operations [note 9(e)]
(see accompanying notes)
2010
$
1,187,989
134,376
30,895
(149)
25,284
1,378,395
261,499
346,391
98,244
174,144
18,152
9,955
908,385
470,010
138,898
297
139,195
330,815
—
330,815
315
99
414
331,229
$1.14
$1.14
2009
$
1,041,519
124,323
30,231
2,903
19,509
1,218,485
278,924
299,701
88,119
164,372
26,540
19,379
877,035
341,450
(3,132)
48,399
45,267
296,183
(51,337)
244,846
122
233
355
245,201
$1.01
$1.01
5 7
Consolidated Statements of Changes in Shareholders’ Equity
For the years ended December 31
[in thousands of dollars]
SHARE CAPITAL [note 9(a)]
Balance, beginning of year
Issuance of share capital on exercise of options
Share repurchase, net of issuance of share capital on vesting of
deferred equity units [note 9(c)]
Balance, end of year
CONTRIBUTED SURPLUS [note 9(c)]
Balance, beginning of year
Modification of option plan [note 9(b)]
Compensation expense for equity-based plans
Vesting of deferred equity units and options
Balance, end of year
DEFICIT
Balance, beginning of year
Net income for the year
Cost of shares repurchased in excess of stated value [note 9(a)]
Dividends declared [note 13]
Balance, end of year
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance, beginning of year
Other comprehensive income
Balance, end of year
Net change in shareholders’ equity during the year
Shareholders’ equity, beginning of year
Shareholders’ equity, end of year
(see accompanying notes)
2010
$
2,008,846
386
(24,744)
1,984,488
11,445
10,920
7,536
(13,755)
16,146
(409,086)
330,815
(63,614)
(245,253)
(387,138)
(270)
414
144
2,705
1,610,935
1,613,640
2009
$
1,985,912
—
22,934
2,008,846
47,587
—
249
(36,391)
11,445
(431,162)
244,846
(21,139)
(201,631)
(409,086)
(625)
355
(270)
9,223
1,601,712
1,610,935
5 8
Consolidated Statements of Cash Flows
For the years ended December 31
[in thousands of dollars]
OPERATING ACTIVITIES
Net income from continuing operations for the year
Add (deduct) items not involving cash
Loss (gain) on sale of marketable securities
Equity-based compensation
Amortization of deferred sales commissions and fund contracts
Amortization of other
Future income taxes
Net change in non-cash working capital balances
related to continuing operations
Cash provided by continuing operating activities
Cash used in discontinued operating activities
Cash provided by operating activities
INVESTING ACTIVITIES
Purchase of marketable securities
Proceeds on sale of marketable securities
Additions to capital assets
Deferred sales commissions paid
Proceeds on sale of other assets
Purchase of subsidiary, net of cash and cash equivalents acquired [note 2]
Proceeds on sale of discontinued operations
Cash used in investing activities
Cash provided by discontinued investing activities
Cash used in investing activities
(continued)
2010
$
330,815
149
(9,670)
174,144
7,460
297
503,195
73,490
576,685
—
576,685
(28,121)
1,651
(26,735)
(157,753)
6,124
(109,076)
—
(313,910)
—
(313,910)
2009
$
296,183
(2,903)
33,782
164,372
6,899
48,399
546,732
53,620
600,352
(47,081)
553,271
(465)
8,099
(4,116)
(152,885)
18,671
—
93,300
(37,396)
7,168
(30,228)
5 9
Consolidated Statements of Cash Flows
For the years ended December 31
[in thousands of dollars]
FINANCING ACTIVITIES
Decrease in long-term debt
Issuance of Debentures [note 7]
Repurchase of share capital [note 9(a)]
Issuance of share capital [note 9(a)]
Dividends paid to shareholders [note 13]
Cash used in financing activities
Net increase (decrease) in cash and cash equivalents during the year
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Cash and cash equivalents, beginning of year includes:
Cash from continuing operations
Cash from discontinued operations
Cash and cash equivalents, end of year includes:
Cash from continuing operations
Cash from discontinued operations
SUPPLEMENTAL CASH FLOw INFORMATION:
Interest paid
Income taxes paid
(see accompanying notes)
2010
$
(105,000)
298,250
(96,965)
386
(220,029)
(123,358)
139,417
77,120
216,537
72,120
5,000
77,120
216,537
—
216,537
15,662
57,403
2009
$
(870,376)
547,480
(36,573)
—
(166,535)
(526,004)
(2,961)
80,081
77,120
35,168
44,913
80,081
72,120
5,000
77,120
26,501
11,340
6 0
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
CI Financial Corp. [“CI”] [formerly CI Financial Income Fund] is incorporated under the laws of the Province of Ontario. 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.
On January 1, 2009, CI Financial Income Fund converted by way of a Plan of Arrangement [the “Conversion”], to a corporation
known as CI Financial Corp. Under the Conversion, unitholders of CI Financial Income Fund exchanged each of their trust units
[“Trust unit”] and Class B limited partner units of Canadian International LP [“Exchangeable LP unit”] for common shares of CI
Financial Corp. on a one-for-one basis. As a result, the consolidated financial statements of CI have been prepared using the
continuity of interest in the assets, liabilities and operations of CI Financial Income Fund.
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”] and Assante Wealth Management (Canada) Ltd. [“AWM”] and their subsidiaries. On January 1, 2010,
United amalgamated with CI Investments. 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 funds managed by CI 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, and advisory fees, which are recorded when the
services related to the underlying engagements are completed.
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 as held-for-trading [“HFT”], available-for-sale [“AFS”], held-to-maturity [“HTM”] or loans and
receivables. Financial liabilities may be classified as either 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 of 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 net income.
6 1
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
Financial instruments included in CI’s accounts have the following classifications:
•
•
•
Cash and cash equivalents and derivative financial instruments are classified as HFT and measured at fair value.
Client and trust funds on deposit and accounts receivable are classified as loans and receivables and measured at
amortized cost.
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.
• Other assets are classified as loans and receivables and measured at amortized cost.
•
Accounts payable and accrued liabilities, dividends payable, client and trust funds payable and long-term debt are
classified as other financial liabilities and measured at amortized cost.
All financial instruments recognized at fair value in the consolidated balance sheet are classified into three fair value hierarchy
levels as follows:
•
•
Level 1 – valuation based on quoted prices (unadjusted) observed in active markets for identical assets or liabilities.
Level 2 – valuation techniques based on inputs that are quoted prices of similar instruments in active markets; quoted
prices for identical or similar instruments in markets that are not active; inputs other than quoted prices used in a valuation
model that are observable for that instrument; and inputs that are derived from or corroborated by observable market data
by correlation or other means.
•
Level 3 – valuation techniques with significant unobservable market inputs.
Transaction costs on Debentures
Transaction costs and the discount associated with the issuance of long-term debt classified as other financial liabilities are
included in the carrying amount of the liability and amortized over the term of the Debentures.
Derivatives and hedging
CI may enter into interest rate swap agreements to reduce its exposure to interest rate risk on its long-term debt. CI does
not enter into derivative financial instruments for trading or speculative purposes. At the inception of the swap agreement,
CI formally documents the hedging relationship, detailing the risk management objective and the hedging strategy of the
hedge. The documentation specifies the asset, liability or cash flows being hedged, the related hedging item, the nature of
the specific risk exposure or exposures being hedged, the intended term of the hedging relationship, the method for assessing
the effectiveness of the hedging relationship, and the method for measuring the ineffectiveness of the hedging relationship.
Derivative financial instruments that have been designated and qualify for hedge accounting are classified as either cash flow
or fair value hedges. Effective December 16, 2009, CI entered into interest rate swap agreements which are designated as fair
value hedges. No other derivative financial instruments were entered into in 2010 or 2009.
6 2
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
Changes in the fair value of the interest rate swaps are recognized in the consolidated statement of income and comprehensive
income as other income. Similarly, changes in the fair value of the hedged item attributable to the hedged risk are also
recognized in the consolidated statement of income and comprehensive income as other income, with a corresponding
adjustment to the long-term debt in the consolidated balance sheet. Hedge accounting is discontinued prospectively if the
hedging relationship no longer qualifies as an effective hedge or if the hedging item is settled. The hedged item is no longer
adjusted to reflect changes in fair value. Amounts previously recorded as cumulative adjustments to the effective portion
of gains and losses attributable to the hedged risk are amortized using the effective interest rate method and recognized in
the consolidated statement of income and comprehensive income over the remaining useful life of the hedged item. Hedge
accounting is also discontinued if the hedged item is sold or terminated before maturity. In such a situation, the cumulative
adjustments with respect to the effective portion of gains and losses attributable to the hedged risk are immediately recorded
in the consolidated statement of income and comprehensive income.
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.
Marketable securities
Marketable securities consist of investments in mutual fund securities. Marketable securities are measured at fair value. Mutual
fund securities are valued using the net asset value per unit of each fund. 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) 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. Distributions from mutual fund securities are recorded as other income. Distributions that are reinvested
increase the cost base of the marketable securities.
6 3
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
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 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 commissions on 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.
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 uses the fair value method to account for equity-settled employee incentive share options. The value of the equity-based
compensation, as at the date of grant, is recognized over the applicable vesting period as compensation expense with a
corresponding increase in contributed surplus. When options are exercised, the proceeds received, together with the amount
in contributed surplus, are credited to share capital.
6 4
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
Employee incentive share options that included a cash-settlement option are recognized as compensation expense and
recorded as a liability based upon the intrinsic value of outstanding share options at the balance sheet date and the proportion
of the expired vesting period. On the exercise of these share options for cash, the liability recorded with respect to the
options is reduced for settlement. If these options are settled with shares, the liability recorded with respect to the options
and consideration paid by the option holders are credited to share capital.
CI also has a deferred equity unit plan for senior executives 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, share capital is credited for
the amounts initially recorded as contributed surplus to reflect the issuance of share capital.
Compensation trust
CI uses a compensation trust, which holds CI’s common shares, 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 Canadian Institute of Chartered Accountants [“CICA”] Handbook Section 1590, Subsidiaries.
Deferred lease inducements
Lease inducements are deferred and amortized on a straight-line basis over the term of the lease.
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 temporary 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. The effect on future income tax assets and liabilities of a change in income tax rates is recognized in income in the
year that the change is substantially enacted.
Earnings per share
Basic earnings per share is determined by dividing net income by the weighted average number of shares outstanding during
the period. Diluted earnings per share is calculated using the treasury stock method, adjusting the weighted average number
of shares for the dilutive effect of DEU Awards under the deferred equity unit plan and the exercise of share options under the
employee incentive share option plan. Prior to July 1, 2010, the employee incentive share option plan did not have a dilutive
effect on earnings per share as CI accounted for its share options as a liability.
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.
6 5
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
Comprehensive income
Comprehensive income includes all changes to shareholders’ 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 changes in shareholders’ equity.
Disposal of long-lived assets and discontinued operations
Long-lived assets classified as “held for sale” are measured at the lower of carrying value and fair value less disposal costs and
are not amortized. Assets and liabilities of operations to be discontinued are classified as “held for sale” in the consolidated
balance sheet until the transaction is completed. The results of operations that have been disposed of or that are classified
as “held for sale” are reported net of applicable income taxes as a net gain or loss from discontinued operations in the
consolidated statement of income and comprehensive income. The cash flows from discontinued operations are presented
separately in the consolidated statement of cash flows.
Use of estimates
The preparation of consolidated financial statements in conformity with Canadian GAAP 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. BUSINESS ACQUISITION
On December 15, 2010, CI acquired control of Hartford Investments Canada Corp. [“Hartford”], a mutual fund company, for cash
consideration of $115,000. CI accounted for the acquisition using the purchase method and the results of operations have been
consolidated from the date of the transaction.
Details of the net assets acquired, at fair value, are as follows:
Cash and cash equivalents
Other assets
Future income taxes
Fund management contracts
Accounts payable and accrued liabilities
Goodwill on acquisition
6 6
$
5,947
1,482
13,135
32,000
(9,148)
71,607
115,023
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
Details of consideration given, at fair value, are as follows:
Cash
Transaction costs
$
115,000
23
115,023
The acquired fund management contracts with a fair value of $32,000 have an indefinite life. The goodwill on acquisition
is not deductible for income tax purposes. Goodwill of $71,607 relates to the Asset Management segment. Included in
accounts payable and accrued liabilities are accruals for severance and exit costs of $2,000, of which nil had been paid as at
December 31, 2010.
3. DISCONTINUED OPERATIONS
On October 26, 2009, CI announced that it had reached an agreement to sell the retail brokerage division of Blackmont Capital
Inc. [“Blackmont”] for $93.3 million. This transaction closed on December 31, 2009. The capital markets division of Blackmont
was spun out into a new, wholly owned subsidiary of CI Investments, named CI Capital Markets Inc. [“CI Capital”]. On
February 4, 2010, CI sold CI Capital to the employees of this subsidiary. This transaction closed on March 12, 2010. The results
of operations of Blackmont and CI Capital have been reported as discontinued operations in the comparative consolidated
financial statements. As at December 31, 2009, assets and liabilities held for sale represent the assets and liabilities of
CI Capital after the disposition of Blackmont. CI recorded a loss of $44,017 after transaction costs of $9,500 on the sale, which
is presented as an impairment of goodwill.
6 7
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
Summarized financial information for the discontinued operations is as follows for the year ended December 31:
Revenue
Administration fees
Other income
Expenses
Selling, general and administrative
Investment dealer fees
Impairment of goodwill
Other
Loss from discontinued operations before income taxes
Provision for (recovery of) income taxes
Current
Future
Net loss from discontinued operations for the year
Basic and diluted loss per share from discontinued operations [note 9(e)]
2009
$
102,018
4,410
106,428
65,378
43,056
44,017
7,833
160,284
(53,856)
7
(2,526)
(2,519)
(51,337)
(0.18)
6 8
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
Summarized financial information for the assets and liabilities held for sale is as follows as at December 31:
Current assets held for sale
Cash and cash equivalents
Client and trust funds on deposit
Securities owned, at market
Accounts receivable and prepaid expenses
Non-current assets held for sale
Capital assets, net
Total assets held for sale
Current liabilities held for sale
Accounts payable and accrued liabilities
Client and trust funds payable
Securities sold short, at market
Total liabilities held for sale
Net assets held for sale
2009
$
5,000
299
86
1,285
6,670
268
268
6,938
266
288
7
561
6,377
6 9
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
4. CAPITAL ASSETS
Capital assets consist of the following as at December 31:
Computer hardware and software
Office equipment
Leasehold improvements
Less accumulated amortization
Net book value
2010
Accumulated
amortization
$
32,382
8,816
16,699
57,897
Cost
$
35,467
12,463
48,068
95,998
57,897
38,101
2009
Accumulated
amortization
$
30,101
8,089
12,836
51,026
Cost
$
33,645
9,158
26,460
69,263
51,025
18,238
5. FUND CONTRACTS
Fund contracts consist of the following as at December 31:
Fund administration contracts
Fund management contracts
Finite life
Indefinite life
Less accumulated amortization
Net book value
2010
Accumulated
amortization
$
10,552
14,906
—
25,458
Cost
$
37,600
27,500
999,082
1,064,182
25,458
1,038,724
2009
Accumulated
amortization
$
9,048
13,056
—
22,104
Cost
$
37,600
27,500
967,082
1,032,182
22,104
1,010,078
6. OTHER ASSETS, INCOME AND EXPENSE
Other assets consists mainly of an investment in a limited partnership, long-term accounts receivable, deferred charges and
loans advanced to employees, shareholders and investment advisors.
CI has an employee share purchase loan program for key employees. These loans are renewable yearly and bear interest at
prescribed rates. As at December 31, 2010, the carrying amount of employee share purchase loans is $13,902 [2009 - $15,846]
and is included in other assets. These loans become due immediately upon termination of employment or sale of the shares
that are held as collateral. As at December 31, 2010, the shares held as collateral have a market value of approximately $25,985
[2009 - $29,030].
Other assets include shareholder loans in the amount of $10,368 as at December 31, 2010 [2009 - $11,303] issued primarily to
investment advisors. These amounts are secured primarily by common shares of CI that are held as collateral. These loans
become due immediately either on termination of the advisor relationship or upon the sale of CI shares that are held as
collateral. As at December 31, 2010, the shares held as collateral have a market value of approximately $18,656 [2009 - $17,352].
7 0
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
CI has a hiring and retention incentive program whereby loans are extended to current investment advisors. 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 administrative expenses. As at December 31, 2010, loans to investment advisors of $3,801 [2009 - $7,151] are 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 and interest income. Other
expenses consist mainly of institutional management expenses, distribution fees to limited partnerships, legal settlements,
amortization of debenture transaction costs and capital taxes.
7. LONG-TERM DEBT
Long-term debt consists of the following as at December 31:
Credit facility
Bankers’ acceptances
Prime rate loan
Debentures
$100 million, floating rate, due December 16, 2011
$250 million, 3.30%, due December 17, 2012
$200 million, 4.19%, due December 16, 2014
2010
$
24,025
—
24,025
99,748
249,179
199,042
$300 million, 3.94% until December 13, 2015 and floating rate until December 14, 2016
298,368
846,337
870,362
2009
$
129,025
—
129,025
99,640
248,960
198,899
—
547,499
676,524
Credit facility
Effective December 21, 2010, CI’s revolving credit facility was amended to reduce the amount that may be borrowed to $150,000
[2009 - $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 0.50% and the Canadian Deposit Offering Rate plus 0.60%, or bankers’
acceptances, which bear interest at bankers’ acceptance rates plus 1.50%. 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
0.50% and the federal funds effective rate plus 0.60%, or LIBOR loans which bear interest at LIBOR plus 1.50%.
CI may also borrow under this facility in the form of letters of credit, which bear a fee of 1.50% on any undrawn portion. As at
December 31, 2010, CI had accessed $360 [2009 - $480] by way of letters of credit.
7 1
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
Loans are made by the bank under a 364-day revolving credit facility, the term of which may be extended annually at the bank’s
option. If the bank elects not to extend the term, 50% of the outstanding principal amount shall be repaid in equal quarterly
installments 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 fully and unconditionally guaranteed by CI Investments, a wholly owned subsidiary of CI, and may be
guaranteed by certain other subsidiaries of CI. 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 that the debt to earnings before interest, taxes, depreciation and amortization ratio remain below 2.5:1 and that
CI’s assets under management not fall below $35 billion, calculated based on a rolling 30-day average. 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, 2010, the amount drawn on the credit facility had an effective interest rate of 2.54% [2009 – 1.92%]. Interest
expense attributable to the credit facility for the year ended December 31, 2010 was $5,148 [2010 – $25,446].
Debentures
On December 14, 2010, CI’s subsidiary, CI Investments, completed an offering pursuant to which it issued $300 million principal
amount of debentures due December 14, 2016 [the “2016 Debentures”]. On December 16, 2009, CI completed an offering pursuant
to which it issued $550 million principal amount of debt securities comprised of $100 million principal amount of floating rate
debentures due December 16, 2011 [the “Floating Rate Debentures”], $250 million principal amount of 3.30% debentures due
December 17, 2012 [the “2012 Debentures”] and $200 million principal amount of 4.19% debentures due December 16, 2014 [the
“2014 Debentures”], being referred to collectively herein, including the 2016 Debentures, as the “Debentures”.
The Floating Rate Debentures bears interest at the average three-month bankers’ acceptance rate, of quotes shown on the
Reuters Screen CDOR on the closing date and thereafter on each interest payment date, plus 1.20%, in arrears on March 16,
June 16, September 16 and December 16 in each year, which commenced March 16, 2010. Interest on the 2012 Debentures is paid
at the rate set out above, semi-annually in arrears on June 17 and December 17 in each year, which commenced June 17, 2010.
Interest on the 2014 Debentures is paid at the rate set out above, semi-annually in arrears on June 16 and December 16 in each
year, which commenced June 16, 2010. Interest on the 2016 Debentures will be paid at a rate of 3.94% until December 13, 2015,
semi-annually in arrears on June 14 and December 14 in each year, commencing June 14, 2011. The 2016 Debentures will bear
interest at a floating rate based on the three-month bankers’ acceptance rate plus 3.00% and paid quarterly in arrears on
March 14, June 14, September 14 and December 14 during the period December 14, 2015 to December 14, 2016.
CI may, at its option, redeem the 2012 Debentures or the 2014 Debentures, and CI Investments may, at its option, redeem the
2016 Debentures, in whole or in part, from time to time, on not less than 30 nor more than 60 days’ prior notice to the registered
holder, at a redemption price which is equal to the greater of par or the Government of Canada Yield, plus 36 basis points in
the case of the 2012 Debentures, 41 basis points in the case of the 2014 Debentures and 37.5 basis points in the case of the 2016
Debentures. CI considers this embedded prepayment option to be closely related to the Debentures and, as such, does not
account for it separately as a derivative.
7 2
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
In the event that both a change of control occurs and the rating of the Debentures is lowered to below investment grade,
defined as below BBB- by Standard and Poors and BBB (low) by DBRS Limited, CI will be required to make an offer to repurchase
all or, at the option of each holder, any part of each holder’s Debentures at a purchase price payable in cash equivalent to 101%
of the outstanding principal amount of the Debentures together with accrued and unpaid interest, to the date of purchase.
When determining the carrying value of the Debentures, CI has considered the likelihood of a change in control event and the
likelihood of exercising the prepayment option.
The Debentures issued in 2010 were issued for gross proceeds of $299,919 or a price of 99.97 [Debentures issued in
2009 – gross proceeds of $549,905 or a price of 99.98] before issuance costs of $1,561 [2009 – $2,425]. The net proceeds of
the 2016 Debentures were used to repay amounts owed on CI’s revolving credit facility and for the acquisition of Hartford.
The issuance costs and the discount of $81 [2009 – $95] will be amortized over the term of the Debentures using the effective
interest rate method. The amortization expense related to the discount and transaction costs for the year were $588 [for the
period from December 16, 2009 to December 31, 2009 – $19] which is included in other expenses.
The Floating Rate Debentures, 2012 Debentures and 2014 Debentures are fully and unconditionally guaranteed by CI Investments
and may be guaranteed by certain other subsidiaries of CI. The 2016 Debentures are fully and unconditionally guaranteed by CI.
On December 16, 2009, CI entered into interest rate swap agreements with a Canadian chartered bank to swap the fixed rate
payments on the 2012 Debentures and the 2014 Debentures for floating rate payments. Based on the terms of the agreements, CI
will pay a rate equivalent to the three-month Canadian bankers’ acceptance rate CDOR plus a spread of 142.4 basis points on the
2012 Debentures and a spread of 157.6 basis points on the 2014 Debentures. The rates are reset quarterly and paid semi-annually
to match the fixed payment obligations of the Debentures. The swap agreements terminate on the maturity date of the
respective Debentures unless terminated by CI at an earlier date. As at December 31, 2010, the fair value of the interest rate
swap was an unrealized gain of $2,467 [2009 – unrealized loss of $3,680] and is included in long-term debt in the consolidated
balance sheet. Interest expense attributable to the Debentures was $12,810 [for the period from December 16, 2009 to
December 31, 2009 – $425].
8. PREFERRED SHARES ISSUED BY SUBSIDIARY
As at December 31, 2009, there were 20,662,500 preferred shares issued and outstanding. On January 22, 2010, the preferred
shareholders sold their interests to CI in exchange for cash of $20,662.
7 3
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
9. SHARE CAPITAL
[a] Authorized and issued
Common Shares
Authorized
An unlimited number of common shares of CI
Issued
Conversion from Trust units, January 1, 2009
Conversion from Exchangeable LP units, January 1, 2009
Issuance of share capital on vesting of deferred equity units
Share repurchase
Common shares, balance, December 31, 2009
Number of shares
[in thousands] #
Stated value
$
234,757
57,736
1,588
(2,260)
291,821
1,634,200
351,712
38,368
(15,434)
2,008,846
8,993
(33,351)
1,984,488
Issuance of share capital on vesting of deferred equity units and exercise of share options
455
Share repurchase
Common shares, balance, December 31, 2010
(4,842)
287,434
During the year ended December 31, 2010, 4,842,451 shares [2009 - 2,131,476 shares] were repurchased under a normal course
issuer bid at an average cost of $20.02 per share [2009 - $16.10 per share] for total consideration of $96,965 [2009 - $34,309].
Deficit was increased by $63,614 [2009 - $19,758] for the cost of the shares repurchased in excess of their stated value.
During the year ended December 31, 2009, 128,900 shares were repurchased for CI’s deferred equity unit plan for total
consideration of $2,264 increasing the deficit by $1,381.
[b] Employee incentive share option plan
CI has an employee incentive share option plan [the “Share Option Plan”], as amended and restated, for the executives and key
employees of CI. On January 1, 2009, as part of the Conversion from an income trust back to a corporation, the Share Option
Plan was amended and restated and all unit options under the Share Option Plan were exchanged for share options.
The March 2010 federal budget, which was enacted in December 2010, included changes designed to restrict the tax deductibility
of cash payments to employees made upon exercise of stock options. In response to these changes, the Share Option Plan was
amended effective July 1, 2010 such that CI revoked the employee’s right to demand cash settlement.
As a result of this modification, all outstanding options granted prior to 2010 that were previously accounted for as liability
are accounted for using the fair value method on the modification date. As a result of this change, $10,920 was transferred
to contributed surplus and an incremental compensation expense of $430 was recorded. The remaining modification date fair
value of $7,738 will be recognized as an expense over the remaining vesting period of the respective options. The fair value
of the modified options was estimated using the Black-Scholes option-pricing model with the following weighted-average
assumptions:
7 4
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
Year of grant
# of options outstanding at
modification date [in thousands]
Dividend yield
Expected volatility
Risk-free interest rate
Expected life [years]
2005
177
4.4%
20.0%
2006
8
4.4%
20.0%
0.55% – 0.94%
1.00% – 1.29%
0 – 0.5
0.6 – 1.3
Fair value per stock option
$0.10 – $0.47
$0.05 – $0.21
Exercise price
$18.15 – $18.94
$23.06 – $23.09
2008
792
4.7%
20.0%
1.71%
2.3
$5.23
$12.57
2009
3,819
4.7% – 5.1%
20.0%
1.75% – 1.85%
2.4 – 2.6
$1.53 – $6.20
$11.60 – $18.20
Prior to the modification date, CI accounted for options granted prior to fiscal year 2010 as a liability which was accrued based
on the intrinsic value of outstanding options at the consolidated balance sheet dates and the proportion of their vesting periods
that had elapsed. On the exercise of share options for cash, the liability recorded with respect to the options was reduced for
the settlement. If share options for these grants were exercised for shares, the liability recorded with respect to the options
and consideration paid by the option holders was credited to share capital.
During the year ended December 31, 2010, CI granted 2,147,538 options to employees. The fair value method of accounting is
used for the valuation of the 2010 share option grants. Compensation expense is recognized over the three-year vesting period,
assuming a 0.75% forfeiture rate, with an offset to contributed surplus. When exercised, amounts originally recorded against
contributed surplus as well as any consideration paid by the option holder is credited to share capital. The fair value of the 2010
option grants was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions:
Year of grant
# of options grants [in thousands]
2010
1,823
2010
130
2010
194
Vesting terms
1/3 at end of each year
100% at the end of
1/3 at end of each year
following the grant date
3 years
following the grant date
Dividend yield
Expected volatility
Risk-free interest rate
Expected life [years]
Fair value per stock option
Exercise price
4.2%
20.0%
2.22%
3.5
$2.44
$21.27
4.2%
20.0%
2.38%
3.8
$2.39
$21.27
4.7%
20.0%
2.62%
3.5
$2.22
$19.48
The maximum number of shares that may be issued under the Share Option Plan is 14,000,000 shares. As at December 31, 2010,
there are 6,270,204 shares [2009 - 6,394,099 shares] reserved for issuance on exercise of share options. These options vest over
periods of up to five years, may be exercised at prices ranging from $11.60 to $23.09 per share and expire at dates up to 2015.
7 5
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
A summary of the changes in the Share Option Plan is as follows:
Options outstanding, December 31, 2008
Options exercisable, December 31, 2008
Options granted
Options exercised
Options cancelled
Options outstanding, December 31, 2009
Options exercisable, December 31, 2009
Options granted
Options exercised
Options cancelled
Options outstanding, December 31, 2010
Options exercisable, December 31, 2010
Number of options
(in thousands)
#
3,438
2,460
4,733
(1,131)
(646)
6,394
1,067
2,148
(2,198)
(74)
6,270
727
Weighted average
exercise price
$
17.03
18.78
12.40
17.54
21.01
13.11
16.52
21.11
14.06
14.65
15.50
13.52
The option component of equity-based compensation expense under the Share Option Plan for the year ended December 31,
2010 of $1,914 [2009 - $36,795] has been included in selling, general and administrative expenses.
Options outstanding and exercisable as at December 31, 2010 are as follows:
Exercise price
$
Number of
options outstanding
(in thousands) #
Weighted average
remaining contractual life
(years)
Number of
options exercisable
(in thousands) #
11.60
12.57
15.59
18.10
18.20
19.48
21.27
23.06
23.09
11.60 to 23.09
2,866
607
309
20
331
194
1,934
6
3
6,270
3.2
2.9
3.3
3.5
3.4
4.4
4.2
0.1
0.8
3.5
251
282
75
7
103
––
––
6
3
727
7 6
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
[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 common share of CI. Compensation expense is recognized and credited to contributed
surplus. Upon release, amounts previously recorded as contributed surplus are credited to share capital.
During the year ended December 31, 2010, CI debited contributed surplus for $51 [2009 - credited $249] related to compensation.
During the year ended December 31, 2010, CI credited share capital for $4,748 [2009 - $37,823] on vesting of 180,000 DEU Awards
[2009 – vesting of 1,370,000 DEU Awards and on the release of 190,000 DEU Awards related to the disposition of Blackmont].
Share capital was credited $1,448 [2009 - $545] on the transfer of 67,938 shares [28,435 shares] from the compensation trust to
the advisor equity plan. As at December 31, 2010, the unamortized value of DEU Awards outstanding is $46 [2009 - $73].
[d] Compensation trust
CI uses a compensation trust to acquire shares 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 shares repurchased by the compensation trust for the DEU
Plan is as follows:
Number of DEU’s Awards
(in thousands)
DEU Awards outstanding, December 31, 2008
Granted
Cancelled
Disposition of Blackmont
Vested
DEU Awards outstanding, December 31, 2009
Vested
Cancelled
DEU Awards outstanding, December 31, 2010
Shares held by the compensation trust, December 31, 2008
Shares repurchased for DEU Plan
Disposition of Blackmont
Transfer to advisor equity plan
Released on vesting
Shares held by the compensation trust, December 31, 2009
Released on vesting
Transfer to advisor equity plan
Shares held by the compensation trust, December 31, 2010
2,000
173
(119)
(190)
(1,370)
494
(490)
(2)
2
2,111
129
(190)
(28)
(1,370)
652
(138)
(112)
402
7 7
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
[e] Basic and diluted earnings per share
The weighted average number of shares outstanding for the year ended December 31 is as follows:
(in thousands)
Basic
Diluted
[f] Maximum share dilution
2010
289,069
289,933
2009
292,482
293,596
The following table presents the maximum number of shares that would be outstanding if all the outstanding options as
at January 31, 2011 were exercised and outstanding:
[in thousands]
Shares outstanding at January 31, 2011
DEU Awards outstanding
Options to purchase shares
287,912
2
5,513
293,427
7 8
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
10. FINANCIAL INSTRUMENTS
Financial instruments are classified according to the following categories as at December 31:
2010
2009
Carrying value
Fair value
Carrying value
$
$
$
Fair value
$
(in thousands)
Financial assets
Held-for-trading
Cash and cash equivalents
216,537
216,537
72,120
72,120
Loans and receivables
Client and trust funds on deposit
Accounts receivable
Other assets
Available-for-sale
Marketable securities
Total financial assets
Financial liabilities
Other financial liabilities
Accounts payable and accrued liabilities
Dividends payable
Client and trust funds payable
Long-term debt*
Preferred shares issued by subsidiary
108,726
82,703
41,702
33,300
482,968
142,708
60,320
107,673
870,362
—
108,726
82,703
41,702
33,300
482,968
142,708
60,320
107,673
870,362
—
Total financial liabilities
1,181,063
1,181,063
* Long-term debt includes the value of the interest rate swap [note 7].
109,004
84,543
47,826
6,460
319,953
138,140
35,096
108,004
676,524
20,662
978,426
109,004
84,543
47,826
6,460
319,953
138,140
35,096
108,004
676,524
20,662
978,426
AFS assets as at December 31, 2010 include CI’s marketable securities which are reflected at fair value. Marketable securities of
$16,773 have been classified in the Level 1 fair value hierarchy and $16,527 classified in the Level 2 fair value hierarchy.
The valuation of the interest rate swap and Debentures, included as part of long-term debt, qualifies for hedge accounting and
accordingly, the carrying value of the combined amounts approximates fair value.
For all other financial assets and financial liabilities, the carrying value approximates fair value due to the short-term nature of these
instruments.
7 9
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
11. 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:
•
•
•
Interest rate risk is the risk of gain or loss due to the volatility of interest rates.
Foreign exchange risk is the risk of gain or loss due to volatility of foreign exchange rates.
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.
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 the performance and may adversely affect CI’s assets under management
and financial results.
[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 on CI’s credit facility of $24,025 [2009 - $129,025] 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. As
at December 31, 2010, CI also has $850,000 in Debentures [2009 - $550,000], of which $100,000 is based on a floating interest
rate and the remaining $750,000 [2009 - $450,000] is based on fixed interest rates. In December 2009, CI entered into interest
rate swap agreements with a Canadian chartered bank to convert the fixed interest rates on $450,000 of the Debentures issued
in 2009 to floating interest rates.
Based on the amount borrowed under the credit facility and Debentures outstanding as at December 31, 2010, each 25 basis point
increase or decrease in interest rates would result in annual interest expense increasing or decreasing by $1.4 million [2009 - $1.7
million], respectively.
8 0
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
[ii] Foreign exchange risk
As at December 31, 2010, net financial assets of $5 million [2009 - $4 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 $0.5 million [2009 - $0.4 million],
respectively. CI may enter into forward contracts to manage its foreign exchange exposure.
[iii] Equity risk
CI’s marketable securities as at December 31, 2010 of $33,300 [2009 - $6,460] are exposed to equity risk. Based on the carrying
amount of these assets, an increase or decrease in equity market prices by 10% would result in estimated gains or losses of $3.3
million [2009 - $0.6 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
2011
2012
2013
2014
2015
2016
Accounts payable and accrued liabilities
142,708
142,708
Dividends payable
Client and trust funds payable
60,320
60,320
107,673
107,673
$
$
$
—
—
$
—
—
$
—
—
Long-term debt
Total
[c] Credit risk
874,024
103,000
256,000
15,024
200,000
1,184,725
413,701
256,000
15,024
200,000
$
—
—
—
—
$
—
—
300,000
300,000
Credit risk arises from the potential that investors, clients or counterparties fail to satisfy their obligations.
As at December 31, 2010, financial assets of $233,131 [2009 - $241,373], represented by client and trust funds on deposit of $108,726
[2009 - $109,004], accounts receivable of $82,703 [2009 - $84,543] and other assets of $41,702 [2009 - $47,826], 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.
8 1
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
Credit risk associated with accounts receivable is limited as the balance primarily consists of trade receivables that are
outstanding for less than 90 days.
Other assets primarily represent loans granted under CI’s employee share purchase plan and loans extended to investment
advisors under CI’s hiring and incentive program. Employee loans are collateralized by CI shares and become due immediately
upon termination of the employee or upon the sale of the shares held as collateral. Commissions may be used to offset loan
amounts made to investment advisors in the event of default. Credit risk associated with other assets is limited given the nature
of the relationship with the counterparties.
12. 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 shareholder value, while satisfying its financial obligations and meeting its long-term debt covenants.
CI’s capital is comprised of shareholders’ equity, long-term debt [including current portion of long-term debt] and preferred
shares issued by subsidiary. CI’s senior management is responsible for the management of capital. CI’s Board of Directors 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, 2010 and 2009, CI met its capital requirements.
CI’s capital consists of the following as at December 31:
Shareholders’ equity
Long-term debt
Preferred shares issued by subsidiary
Total capital
2010
$
1,613,640
870,362
—
2,484,002
2009
$
1,610,935
676,524
20,662
2,308,121
8 2
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
13. DIVIDENDS
Dividends are declared quarterly to shareholders of record on or about the last business day of each month and are paid on or
about the 15th of the following month.
Dividends declared during the years ended December 31, 2009 and 2010 were as follows:
Cash dividend per share
Total dividend amount
Record date
March 31, 2009
May 31, 2009
June 30, 2009
July 31, 2009
August 31, 2009
September 30, 2009
October 31, 2009
November 30, 2009
December 31, 2009
January 31, 2010
March 2, 2010
March 31, 2010
April 30, 2010
May 31, 2010
June 30, 2010
July 31, 2010
August 31, 2010
September 30, 2010
October 31, 2010
November 30, 2010
December 31, 2010
January 31, 2011
February 28, 2011
Payment date
April 15, 2009
June 15, 2009
July 15, 2009
August 14, 2009
September 15, 2009
October 15, 2009
November 13, 2009
December 15, 2009
January 15, 2010
February 12, 2010
March 15, 2010
April 15, 2010
May 14, 2010
June 15, 2010
July 15, 2010
August 13, 2010
September 15, 2010
October 15, 2010
November 15, 2010
December 15, 2010
January 14, 2011
February 15, 2011
March 15, 2011
$
0.16
0.10
0.05
0.05
0.05
0.05
0.05
0.06
0.06
0.06
0.06
0.06
0.06
0.065
0.065
0.065
0.065
0.065
0.065
0.07
0.07
0.07
0.07
$
46,886
29,120
14,624
14,613
14,627
14,601
14,601
17,503
17,507
17,549
17,504
17,460
17,460
18,828
18,702
18,742
18,723
18,679
18,719
20,115
20,107
20,107
20,107
8 3
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
14. 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:
2011
2012
2013
2014
2015
2016 and thereafter
Shareholder advisor agreements
$
13,296
10,017
9,161
8,349
7,786
70,568
CI is a party to shareholder advisor agreements, which provide that the shareholder 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 shareholder advisor agreements.
Indemnities
CI has agreed to indemnify its 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.
15. RELATED PARTY TRANSACTIONS
The Bank of Nova Scotia [“Scotiabank”] owns approximately 36.4% of the common shares of CI, and is therefore considered
a related party. CI has entered into transactions related to the advisory and distribution of its mutual funds with Scotiabank.
These transactions are in the normal course of operations and are recorded at the agreed upon exchange amounts. During
the year ended December 31, 2010, CI incurred charges for deferred sales commissions of $2,514 and trailer fees of $6,960
[2009 – $2,449 and $5,884, respectively] which were paid or payable to Scotiabank. The balance payable to Scotiabank as at
December 31, 2010 of $640 [2009 – $602] is included in accounts payable and accrued liabilities.
Scotiabank is the provider of and administrative agent for CI’s revolving credit facility. As at December 31, 2010, CI had drawn
long-term debt of $24,025 [2009 – $129,025] in the form of bankers’ acceptances of $24,025 [2009 – $129,025]. During the year
ended December 31, 2010, interest and stamping fees of $2,782 [2009 – $25,446] were recorded as interest expense.
On December 14, 2010, Scotiabank acted as an agent in offering CI’s Debentures for sale and received $263. On December 16, 2009,
Scotiabank and Blackmont acted as agents in offering CI’s Debentures for sale and received $534 and $100, respectively. These
8 4
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
amounts have been netted against long-term debt and will be amortized using the effective interest rate method over the term
of the Debentures. Also, on December 16, 2009, CI entered into an interest rate swap agreement with Scotiabank as described
in note 7.
16. INCOME TAXES
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
Impact of rate changes on future income taxes
Recovery of prior years’ provisions for settled tax items
Other, net
2010
%
30.9
(1.7)
(0.2)
0.6
29.6
2009
%
32.9
(15.9)
(2.4)
(1.3)
13.3
On March 26, 2009, the Ontario Ministry of Finance, in its 2009 Budget, proposed a reduction to the general corporate
provincial income tax rate from 14% to 12% effective July 1, 2010 and to 10% by July 1, 2013. On November 16, 2009, these tax
rate changes became substantively enacted, resulting in a $45,413 non-cash recovery of future income taxes for the year ended
December 31, 2009.
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
2010
$
256,909
148,618
2,468
407,995
—
32,651
14,157
46,808
361,187
2009
$
248,226
159,477
2,992
410,695
9,644
19,217
17,573
46,434
364,261
8 5
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
The net future income tax liabilities are classified in the consolidated balance sheets as follows at December 31:
Current future income tax assets
Non-current future income tax liabilities
17. SEGMENTED INFORMATION
2010
$
—
361,187
2009
$
9,644
373,905
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 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.
8 6
Asset
administration
$
Intersegment
elimination
$
Total
$
1,187,989
134,376
56,030
—
(92,394)
—
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
Segmented information as at and for the year ended December 31, 2010 is as follows:
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
Provision for income taxes
Net income for the year
Identifiable assets
Goodwill
Total assets
Asset
management
$
1,187,989
—
40,616
1,228,605
208,073
360,483
—
176,591
6,191
751,338
—
226,770
15,414
242,184
53,426
—
172,505
1,504
3,764
231,199
477,267
10,985
—
—
—
—
1,956,199
930,310
2,886,509
200,717
192,582
393,299
(92,394)
1,378,395
—
(14,092)
(74,261)
(3,951)
—
(92,304)
(90)
—
—
(14,542)
—
(14,542)
261,499
346,391
98,244
174,144
9,955
890,233
488,162
(18,152)
(139,195)
330,815
2,142,374
1,122,892
3,265,266
8 7
Notes to Consolidated Financial Statements
[in thousands of dollars, except per share amounts]
December 31, 2010 and 2009
Segmented information as at and for the year ended December 31, 2009 is as follows:
Asset
management
Asset
administration
Intersegment
elimination
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
Provision for income taxes
Net income for the year
Identifiable assets*
Goodwill
Total assets
* including assets held for sale
$
1,041,519
—
36,062
1,077,581
229,281
312,262
—
166,224
16,225
723,992
$
—
205,724
16,581
222,305
49,643
—
153,336
1,504
3,154
207,637
353,589
14,668
—
—
—
—
1,711,896
858,703
2,570,599
257,702
192,582
450,284
$
—
(81,401)
—
(81,401)
—
(12,561)
(65,217)
(3,356)
—
(81,134)
(267)
—
—
(14,452)
—
(14,452)
Total
$
1,041,519
124,323
52,643
1,218,485
278,924
299,701
88,119
164,372
19,379
850,495
367,990
(26,540)
(45,267)
296,183
1,955,146
1,051,285
3,006,431
18. INTERNATIONAL FINANCIAL REPORTING STANDARDS
Canadian publicly accountable enterprises must transition to IFRS for fiscal years beginning on or after January 1, 2011. As a result,
CI will adopt IFRS commencing January 1, 2011 and will publish its first consolidated financial statements, prepared in accordance
with IFRS, for the quarter ending March 31, 2011. Upon adoption, we will provide fiscal 2010 comparative financial information
also prepared in accordance with IFRS, including an opening IFRS consolidated balance sheet as at January 1, 2010.
19. COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform to the consolidated financial statement presentation in the
current year.
8 8
Corporate Directory
CI Financial
dIrectorS
Ronald D. Besse
President,
Besseco Holdings Inc.;
Lead Director
Toronto, Ontario
Stephen A. MacPhail
President and
Chief Executive Officer,
CI Financial;
Director
Toronto, Ontario
offIcerS
G. Raymond Chang
President,
G. Raymond Chang Ltd.;
Director
Toronto, Ontario
Stephen T. Moore
Managing Director,
Newhaven Asset
Management Inc.;
Director
Toronto, Ontario
Paul W. Derksen
Corporate Director;
Director
Clarksburg, Ontario
A. Winn Oughtred
Corporate Director;
Director
Toronto, Ontario
William T. Holland
Executive Chairman;
Director
Toronto, Ontario
David J. Riddle
President,
C-Max Capital Inc.;
Director
Vancouver, B.C.
Stephen A. MacPhail
President and
Chief Executive Officer
Peter W. Anderson
Executive Vice-President,
Chief Investment Officer
Sheila A. Murray
Executive Vice-President,
General Counsel and Secretary
Douglas J. Jamieson
Senior Vice-President and
Chief Financial Officer
David C. Pauli
Chief Operating Officer
CI Investments
eXecutIVeS
Derek J. Green
President
Douglas J. Jamieson
Chief Financial Officer
David C. Pauli
Executive Vice-President and
Chief Operating Officer
Larry H. Rowe
Senior Vice-President
Information Technology
Assante Wealth Management
eXecutIVeS
Steven J. Donald
President
James E. Ross
Senior Vice-President
Wealth & Estate Planning
Robert J. Dorrell
Senior Vice-President
Distribution Services
8 9
Corporate Information
Head Office
2 Queen Street East
Twentieth Floor
Toronto, Ontario M5C 3G7
Telephone: 416-364-1145
Toll Free: 1 800 268-9374
www.ci.com/cix
Investor Relations
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
Trading Symbol
CI Financial trades on the Toronto Stock Exchange under the symbol “CIX”.
Auditors
Ernst & Young LLP
Chartered Accountants
Toronto-Dominion Centre
P.O. Box 251
Toronto, Ontario M5K 1J7
Registrar and Transfer Agent
Computershare Investor Services Inc.
9th Floor, 100 University Avenue
Toronto, Ontario M5J 2Y1
Telephone: 1 800 564-6253
E-mail: caregistry@computershare.com
Normal Course Issuer Bid
Effective May 29, 2010, the TSX accepted CI’s notice of intention to commence a normal course issuer bid (the “Notice”) through
the facilities of the TSX. Under the bid, CI may purchase up to 15,558,418 shares at the prevailing market price. Purchases under the
bid will terminate no later than May 28, 2011. As of April 29, 2011, CI had acquired an aggregate of 1,897,851 shares under the normal
course issuer bid at an average price of $19.16 per share. Shareholders may obtain a copy of the Notice, without charge, by contacting
the Corporate Secretary of CI. The Corporation intends to renew its normal course issuer bid effective May 29, 2011, subject to
receipt of approval from the Toronto Stock Exchange.
Shareholder rights plan
CI entered into a rights plan agreement dated as of January 1, 2009 with Computershare Investor Services Inc., as rights agent, in
connection with the adoption of a shareholder rights plan. The Shareholder Rights Plan 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. Shareholders
will be asked to confirm the continuation of the rights plan at its annual and special meeting of shareholders on June 1, 2011. The
complete text of the rights plan may be found on SEDAR at www.sedar.com.
Digital Report
This Annual Report can be downloaded from CI’s website at www.ci.com/cix under “Reports”.
9 0
This 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 results to differ materially 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.
Q1
Quarterly Report March 31, 2010
1101-0114_E (05/11)