ANNUAL FINANCIAL REPORT
December 31, 2018
About CI Financial . . . . . . . . . . . . . . 1
2018 Year at a Glance . . . . . . . . . . . . . . 2
Historical Financial Highlights . . . . . . . . . 6
Letter to Shareholders . . . . . . . . . . . . . . . . . . 8
Corporate Social Responsibility . . . . . . . . . . . 20
Subsidiary Profiles . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Management’s Discussion and Analysis . . . . . . . . . . 40
Consolidated Financial Statements . . . . . . . . . . . . . . . 72
Notes to Consolidated Financial Statements . . . . . . . . . 80
Corporate Directory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
TABLE OF CONTENTS
CI Financial Corp. is an independent Canadian company offering global asset
management and wealth management advisory services. Since 1965, we have been
Private Counsel LP
driven by a commitment to provide our clients with the highest-quality investments
and advice. We have $129.3 billion in assets under management and $41.8 billion in
assets under advisement (at December 31, 2018). We are guided by our core beliefs
that active management adds value to clients’ portfolios and that investors benefit
from working with professional financial advisors. CI became a public company in
June 1994 and is listed on the Toronto Stock Exchange under the symbol CIX.
CI operates primarily through subsidiaries CI Investments Inc., Assante Wealth
Management (Canada) Ltd., CI Private Counsel LP, First Asset Investment
Management Inc., BBS Securities Inc., GSFM PTY Limited of Australia and
WealthBar Financial Services Inc.
• CI Investments is one of Canada’s pre-eminent investment managers and offers
a wide selection of investment solutions and leading portfolio management
teams. CI Institutional Asset Management serves the institutional marketplace.
• Assante Wealth Management provides financial advisory services through
830 professional advisors across Canada.
• CI Private Counsel is our high net worth discretionary investment counsel
business and is made up of Assante Private Client and Stonegate Private Counsel.
• First Asset is a leader in providing innovative, actively managed exchange-traded funds to the Canadian marketplace.
• BBS Securities is a Canadian financial technology company that provides a wide range of innovative brokerage and
trading services. Virtual Brokers is its online brokerage division.
• GSFM is a leading manager and distributor of investment strategies and products to Australian institutional and retail investors.
• WealthBar is a leading Canadian online management and financial planning platform.
CI also owns a majority stake in Marret Asset Management Inc., a Toronto-based fixed-income investment manager, and
minority interests in Altrinsic Global Advisors, LLC, a global asset manager based in Greenwich, Connecticut, and Lawrence
Park Capital Partners Ltd. of Toronto, which specializes in alternative fixed-income strategies.
Annual Financial Report | 1 | December 31, 2018
2018 Year at a Glance
$295.4
MILLION
In dividends paid out
to shareholders
in 2018.
CI
Investments
kicked off
an initiative to
modernize and
simplify our
product lineup.
2018
Earnings
Per Share
It was a record-setting year
for CI earnings per share
Free Cash Flow
(In millions)
Q1 | $166.9
Q2 | $163.0
Q3 | $169.2
Q4 | $156.5
$655.5
Total
$2.38
Total
CI Share
Buybacks
(In millions)
$656.9
Total
CI LIQUID
ALTERNATIVES™
C I P R I V A T E P O O L S TM
CI MOSAIC
ETF PORTFOLIOS™
In Q4 CI Investments launched
two INNOVATIVE NEW PRODUCTS
to help better meet the needs
of our clients. In 2018, CI
also prepared for the
launch of the unique
CI Mosaic ETF
portfolios.
Annual Financial Report | 3 | December 31, 2018
Q1Record HighRecord HighQ2Record HighQ3Q4$0.59$0.61$0.62$0.57Q1 — $150.0 Q4 — $159.9 Q3 — $188.8 Q2 — $152.7
Enhanced lineup with successful
launch of First Asset Enhanced
Government Bond ETF and
First Asset Health Care
Giants Covered
Call ETF.
In Q4, CI pushed our DIGITAL
STRATEGY forward with the
announcement of our
acquisition of WealthBar
Financial Services Inc.,
a leading Canadian
online wealth
management
and financial
planning
platform.
Virtual Brokers, a division of BBS Securities,
announced industry-leading changes to the
commission structure for its online
discount brokerage services. The
changes make their fees the
most competitive offered
in the space for
Canadian retail
investors.
Annual Financial Report | 4 | December 31, 2018
Q4In Q4#1Also ranked as the top Canadian online broker by the Globe & Mail for 2018. Launched Munro Partners products in Canada:
Munro Global Equity Fund and Munro Alternative
Growth Fund (CI Liquid Alternatives),
and a Cambridge Global Asset
Management managed
product in Australia.
Annual Financial Report | 5 | December 31, 2018
2018 Investment Executive Dealer Report Card, reflecting advisors’ ranking of their firms.2018 J.D. Power Canadian Full Service Investor Satisfaction Study, for firms offering wealth management and private banking services.#1#233CI REDUCED MANAGEMENT FEES ON 33 FUNDS IN Q3.CI also enhanced our Preferred Pricing Program to benefit clients. HISTORICAL FINANCIAL HIGHLIGHTS
[In millions of dollars, except per share amounts]
(from continuing operations)
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
Years Ended Dec. 31
Years Ended Dec. 31
Assets under management, end of year
Assets under advisement†
Total 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
Adjusted net income*
Adjusted EBITDA*
Earnings per share
Adjusted earnings* per share
Adjusted EBITDA* per share
Dividends recorded per share
124,360
41,813
166,173
(9,285)
2,004.2
232.2
2,236.4
522.5
631.2
239.4
1,393.1
225.5
617.8
617.5
906.2
2.38
2.38
3.50
1.18
143,028
42,699
185,727
117,889
38,235
156,124
111,124
34,552
145,676
102,886
31,874
134,761
91,090
28,766
119,856
(1,464)
(5,916)
3,431
3,928
3,686
973
323
1,059
1,451
1,740
1,897.1
214.2
2,111.3
459.1
587.4
324.3
1,370.8
240.7
499.8
579.2
923.1
1.89
2.19
3.49
1.40
1,748.7
199.6
1,948.3
396.8
540.2
321.3
1,258.3
187.3
502.8
532.1
879.0
1.86
1.96
3.24
1.36
1,787.9
209.8
1,997.6
372.5
553.6
314.0
1,240.1
204.9
552.6
563.7
940.4
1.99
2.02
3.37
1.30
CIX Share Price
Shares outstanding, end of year
17.28
243,721,650
29.77
28.87
30.60
271,884,495
265,302,141
276,026,778
281,708,663
284,396,101
282,914,642
283,567,039
287,434,257
291,821,114
292,492,805
21.10
22.50
22.00
14.50
ASSETS UNDER MANAGEMENT
(AS AT FISCAL YEAR-END IN $ BILLIONS)
CIX SHARE PRICE
(AS AT FISCAL YEAR-END IN $)
DIVIDENDS PER SHARE
(FOR THE FISCAL YEAR IN $)
150
120
90
60
30
0
‘09
‘10
‘11
‘12
‘13
‘14
‘15
‘16
‘17
‘18
40
35
30
25
20
15
10
5
0
‘09
‘10
‘11
‘12
‘13
‘14
‘15
‘16
‘17
‘18
1.5
1.2
0.9
0.6
0.3
0.0
‘09
‘10
‘11
‘12
‘13
‘14
‘15
‘16
‘17
‘18
† Includes assets managed by CI and held by clients of advisors with Assante and Stonegate.
* Adjusted net income, adjusted earnings per share, adjusted EBITDA (earnings before interest, tax, depreciation, and amortization), and
adjusted EBITDA per share are not standardized earnings measures prescribed by IFRS. A description of these non-IFRS measures and a
reconciliation to IFRS is provided in the “Non-IFRS Measures” section on page 37 of this report.
Annual Financial Report | 6 | December 31, 2018
69,558
22,698
92,257
1,302.8
193.5
1,496.3
290.8
379.5
304.9
975.2
144.2
376.9
376.9
726.2
1.31
1.31
2.53
0.89
72,825
23,645
96,470
1,193.0
186.7
1,379.7
263.6
346.2
295.4
905.2
146.0
328.6
328.4
669.7
1.14
1.14
2.32
0.77
64,226
22,414
86,640
1,041.5
177.0
1,218.5
278.9
299.7
298.4
877.0
45.3
296.2
275.9
539.3
1.01
0.94
1.84
0.63
52,801
19,236
72,037
1,163.8
202.4
1,366.2
256.4
336.1
340.0
932.5
(17.5)
451.2
451.2
638.6
1.62
1.62
2.29
1.74
75,723
24,586
100,309
1,277.7
180.1
1,457.8
286.0
374.0
294.0
954.0
151.6
352.2
352.2
703.6
1.24
1.24
2.48
0.955
24.93
1,669.1
206.8
1,875.9
341.8
511.6
304.6
1,158.0
192.5
525.4
520.0
894.5
1.85
1.83
3.15
1.19
32.29
1,432.6
184.1
1,616.7
314.5
429.2
290.5
1,034.2
155.9
426.6
426.4
769.6
1.50
1.50
2.71
1.065
35.35
Selling, general and administrative
Net sales of funds
Management fees
Other income
Total revenues
Trailer fees
Other expenses
Total expenses
Income taxes
Net income
Adjusted net income*
Adjusted EBITDA*
Earnings per share
Adjusted earnings* per share
Adjusted EBITDA* per share
Dividends recorded per share
124,360
41,813
166,173
(9,285)
2,004.2
232.2
2,236.4
522.5
631.2
239.4
1,393.1
225.5
617.8
617.5
906.2
2.38
2.38
3.50
1.18
1,897.1
214.2
2,111.3
459.1
587.4
324.3
1,370.8
240.7
499.8
579.2
923.1
1.89
2.19
3.49
1.40
1,748.7
199.6
1,948.3
396.8
540.2
321.3
1,258.3
187.3
502.8
532.1
879.0
1.86
1.96
3.24
1.36
1,787.9
209.8
1,997.6
372.5
553.6
314.0
1,240.1
204.9
552.6
563.7
940.4
1.99
2.02
3.37
1.30
CIX Share Price
Shares outstanding, end of year
17.28
243,721,650
29.77
28.87
30.60
271,884,495
265,302,141
276,026,778
(from continuing operations)
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
Years Ended Dec. 31
Years Ended Dec. 31
Assets under management, end of year
Assets under advisement†
Total assets
143,028
42,699
185,727
117,889
38,235
156,124
111,124
34,552
145,676
102,886
31,874
134,761
91,090
28,766
119,856
75,723
24,586
100,309
69,558
22,698
92,257
72,825
23,645
96,470
64,226
22,414
86,640
52,801
19,236
72,037
(1,464)
(5,916)
3,431
3,928
3,686
973
323
1,059
1,451
1,740
1,669.1
206.8
1,875.9
341.8
511.6
304.6
1,158.0
192.5
525.4
520.0
894.5
1.85
1.83
3.15
1.19
32.29
1,432.6
184.1
1,616.7
314.5
429.2
290.5
1,034.2
155.9
426.6
426.4
769.6
1.50
1.50
2.71
1.065
35.35
286.0
374.0
294.0
954.0
151.6
352.2
352.2
703.6
1.24
1.24
2.48
0.955
24.93
1,277.7
180.1
1,457.8
1,302.8
193.5
1,496.3
1,193.0
186.7
1,379.7
1,041.5
177.0
1,218.5
290.8
379.5
304.9
975.2
144.2
376.9
376.9
726.2
1.31
1.31
2.53
0.89
263.6
346.2
295.4
905.2
146.0
328.6
328.4
669.7
1.14
1.14
2.32
0.77
278.9
299.7
298.4
877.0
45.3
296.2
275.9
539.3
1.01
0.94
1.84
0.63
1,163.8
202.4
1,366.2
256.4
336.1
340.0
932.5
(17.5)
451.2
451.2
638.6
1.62
1.62
2.29
1.74
21.10
22.50
22.00
14.50
281,708,663
284,396,101
282,914,642
283,567,039
287,434,257
291,821,114
292,492,805
TOTAL REVENUES
(FOR THE FISCAL YEAR IN $ MILLIONS)
ADJUSTED EARNINGS PER SHARE*
(FOR THE FISCAL YEAR IN $)
ADJUSTED EBITDA PER SHARE*
(FOR THE FISCAL YEAR IN $)
2500
2000
1500
1000
500
0
‘09
‘10
‘11
‘12
‘13
‘14
‘15
‘16
‘17
‘18
2.5
2.0
1.5
1.0
0.5
0.0
‘09
‘10
‘11
‘12
‘13
‘14
‘15
‘16
‘17
‘18
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
‘09
‘10
‘11
‘12
‘13
‘14
‘15
‘16
‘17
‘18
Annual Financial Report | 7 | December 31, 2018
DEAR SHAREHOLDERS,
In 2018, your company took bold steps towards our goal of being the leading independent Canadian wealth management
firm with broad, diverse and competitive business lines both in Canada and abroad. While building our business for continued
success in the future, we successfully managed through short-term volatility affecting the broader markets and our industry.
CI Financial posted record earnings per share and record free cash flow for the year, thanks to our diligent management of
expenses and focus on those factors within our control. At the same time, we continued to invest in our services for clients,
our operations and the execution of our longer-term strategy. Our accomplishments included the acquisition of WealthBar
Financial Services, a leading online investment platform, the introduction of several innovative products, and the launch of a
wide-ranging initiative to rationalize our product lineup and modernize how we service and interact with our clients.
There’s no doubt that our industry is facing its most challenging time since the financial crisis a decade ago. Both bond and
equity markets have become increasingly volatile. The Toronto Stock Exchange, for example, corrected 17% from its peak
in the third quarter of 2018 to its bottom in the fourth quarter – before reversing the entire decline in the first part of this
year. This volatility inevitably impacted investment performance and industry sales levels. At the same time, our industry
is undergoing a secular transformation driven by forces that include more stringent regulation, increased focus on fees,
digitalization, and heightened competition from incumbents and new entrants.
CI is adapting to this ever-changing and challenging environment, intent on maintaining our leadership in the industry of the
future. Our competitive advantages today include our position as a diverse wealth management firm and Canada’s largest
independent investment fund company, our profitability and financial strength, the quality of our portfolio management
teams, and the diversity of our distribution channels and our product lineup. Our well-defined strategy capitalizes on
these advantages while recognizing the evolving needs and preferences of advisors and investors.
We remain very confident in our capabilities and our direction. The key elements of our strategy include:
• Building additional scale in all aspects of our business;
• Expanding our channels of distribution and broadening our access to investors; and
• Adopting digital technologies to transform our company to thrive in a rapidly changing landscape.
Annual Financial Report | 8 | December 31, 2018
BUILDING SCALE
Achieving greater scale is crucial in today’s asset management
business, as it allows for re-investment in the business while spreading
these capital and operating costs over a larger asset base. While CI is already
one of the largest firms in the Canadian investment industry, increasing scale
remains a priority.
CI’s Growth Since 1994
Annual Financial Report | 9 | December 31, 2018
18645678192421 29427180919472879692100120135146156166 1994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018Assets Under ManagementAssets Under Advisement17% CAGR199419992002200320042007201020132015201620172018Initial Public OfferingBPI FinancialClarica DiversicoRockwaterCapitalIQONFinancialHartfordInvestmentsCanadaMarret AssetManagementSpectrumInvestmentManagementSynergy AssetManagement As shown in the “CI’s Growth Since 1994” chart, CI has a history of building scale through the acquisition and effective
integration of other firms, with the most recent being Sentry Investments, BBS Securities and WealthBar. Further acquisitions
are always an option, but only when there is a strategic fit and the cost and valuations make sense.
In addition to acquisitions, consistent, long-term organic growth has led to CI’s current strong position in the Canadian market.
We see many opportunities to expand our roster of businesses, some of which I will touch on further in this letter. One
notable example is our advisory businesses of Assante Wealth Management and CI Private Counsel, which incorporates
Stonegate Private Counsel and Assante Private Client. These firms have posted excellent growth driven by a compelling value
proposition of holistic wealth management – making CI one of the largest managers of high-net-worth assets in Canada. As
the high-net-worth and ultra-high-net-worth markets continue to expand, we expect to be key players and we have set a goal
of doubling assets under advisement at Assante and CI Private Counsel to $100 billion over the next five years.
Annual Financial Report | 10 | December 31, 2018
GAINING ACCESS TO INVESTORS
Securing access to distribution – especially distribution channels that are affiliated with our firm – has been a strategic priority
for CI for over two decades and it is becoming even more important as our industry transforms. While it was once common
for asset managers in Canada to operate without affiliated distribution channels, that approach is increasingly risky.
Most recently, we have expanded our access to investors into new and exciting markets through a range of acquisitions.
I would note that these acquisitions have brought other benefits as well. The recent purchase of a majority stake in
WealthBar not only expanded our distribution, but significantly enhanced our digital capabilities. Others include:
• BBS Securities and Virtual Brokers (2017), which has given us capability in the brokerage and trading services areas, along
with an award-winning online discount broker platform.
• GSFM (2016), formerly Grant Samuel Funds Management, is providing us with access to the large Australian and New
Zealand retail and institutional investment markets.
• First Asset Investment Management (2015), which has given us a meaningful presence in the ETF market and greater
exposure to investors and advisors who prefer this type of investment vehicle.
Importantly, we are leveraging our affiliations to further expand our reach. For example, in 2018, we launched Munro
Alternative Global Growth Fund in Canada with Australian-based Munro Partners as portfolio manager. (Munro is distributed
by GSFM, which also has an equity stake in the firm.) Conversely, GSFM is now offering Cambridge Smaller Companies Fund
in Australia. The portfolio manager is CI’s Cambridge Global Asset Management. Another example is the growing synergies
between CI Investments and First Asset, with First Asset operating several ETFs with CI Investments portfolio managers and
CI Investments launching CI Mosaic ETF Portfolios (discussed below).
Finally, our efforts to expand our access to investors will gain significant support from our digital strategy.
Annual Financial Report | 11 | December 31, 2018
ENHANCING OUR DIGITAL CAPABILITY
Technology is increasingly integrated into every aspect of life and the investment industry is no exception. CI has made
a significant commitment to the digital transformation of our firm by first, making it a strategic priority and a priority for
management throughout the company, and second, by devoting significant financial resources to these initiatives. Our
strategy has been accelerated through the addition of leading digital expertise from WealthBar and BBS Securities.
Technology is being utilized across all areas of our business – client services, portfolio management, operations, administration
and our sales team – to modernize our organization and improve our interactions with advisors and investors.
Ultimately, our goal is to redesign the client and advisor experience by building a large, independent and integrated online platform
that can enhance each interaction we have with them. Regardless of age, financial requirements, or investment preferences, we
want to connect with advisors and investors and provide them with the right solutions today and in the future. Even as their
needs evolve, our technology-driven service platforms will be able to provide them with the support they need.
We will always be firm believers in the value of advice and in the unmatched ability of advisors to work one on one with
investors to help them achieve their financial goals. We also understand that investors today have an increasingly diverse
range of investment preferences and options. At one end of the spectrum there are the self-directed investors who are
more comfortable using technology to do their research and trades. At the other end, there are the more traditional
investors who have a dedicated advisor they trust for all their investment needs – whether simple or complex. In between,
there are investors who are comfortable with a “hybrid” service delivering a varying degree of advice. That includes those
using robo-advice, those who use a robo-platform and a virtual advisor, and those who utilize a “do-it-yourself” investing
platform while accessing advice when needed. By building a platform that follows this model, we are able to service
investors and support advisors across this spectrum, having a solution available within CI as their needs evolve.
Our goal is to continue enhancing and expanding our relationships with advisors, while building our capability to allow us
to be a preferred independent choice for every type of investor. Our strategy of increasing scale, broadening our access
to investors and enhancing our digital capability is designed to allow us to effectively serve each of those investment
preferences with a flexible range of products, capability and price points. That’s how we will live up to our goal of being
a leading Canadian based global diversified wealth management firm. We continued to take significant steps toward
achieving that goal in 2018.
Annual Financial Report | 12 | December 31, 2018
Annual Financial Report | 13 | December 31, 2018
INVESTMENT APPROACHESLEVEL OF ADVICElowhighHYBRID ADVICE• ROBO-ADVICETRADITIONAL• DEDICATED ADVISORSELF-DIRECTED• ORDER EXECUTION• ROBO PLATFORM WITH VIRTUAL ADVISOR• VIRTUAL ADVISOR 2018 INITIATIVES
SALES AND SERVICE
Our revenues were up year over year, and our gross sales were solid and improving in the last quarter, but our net sales
remained negative, particularly in our Canadian retail and Canadian institutional businesses. We are fully committed to
returning to positive net sales and are working hard to accomplish that goal.
Factors that affected our sales include those that were present across the industry, including an upswing in market volatility.
Other factors affected us more than some other firms, including the fact that we hold significant assets in categories
that have become out of favour with investors, such as Canadian equity and Canadian balanced, and in product lines
such as segregated funds that are closed to investors. In addition, several of our key portfolio management teams were
conservatively positioned for much of 2017 and 2018, as their investment disciplines indicated that markets were becoming
increasingly overvalued, and as a result, their relative performance lagged behind some more aggressive competitors.
As we move into a new year, we have reason for optimism. The dramatic volatility over the second half of the year
demonstrated the value of our portfolio management teams’ investment approaches and we are confident in their abilities to
reward investors over the long term. We are providing additional tools and training to our salespeople, who continue to build
deep relationships with advisors by working with them as partners who can provide value-added information and help their
businesses succeed. The level of our gross sales and the fact that we are doing business with increasing numbers of advisors
who have never worked with CI before demonstrate that the core of our business remains strong. In our institutional division,
our sales pipeline remains robust and a number of previously won commitments are due to be funded in 2019.
In 2018 and continuing into 2019, we have undertaken national advertising campaigns with an emphasis on partnership,
underlining our commitment to serving investors through advisors. CI Investments’ advertising used the theme “Trusted
Partner in Wealth,” its new tagline. This campaign has been refreshed this year with increased focus on the value of advice.
Assante Wealth Management’s advertising is based on “This is why we’re here,” and tells true-life stories of how Assante
advisors have built deep relationships with clients to help them meet not only their financial goals, but their life goals.
We also expect other initiatives across our company, some of which are discussed later in this letter, to result in stronger
sales. These include new products, our plan to modernize and simplify our overall product lineup, and other enhancements
in client service and support.
Annual Financial Report | 14 | December 31, 2018
WHEN INVESTING:
The most important
factor is YOU.
Financial advisors know this.
At Assante Wealth
Management, we
understand that your
questions about money
are really questions
about your future.
This is why
we’re here.
Seek sound financial advice.
At Assante Wealth Management,
we understand that your questions
about money are really questions
about your future.
This is why
we’re here.
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Annual Financial Report | 15 | December 31, 2018
Select photo from image Library PRODUCT LINEUP MODERNIZATION
As CI has grown, it has become a more complex business with a wide mix of funds, platforms and programs. While they
have all contributed to the company’s growth, the time has come to make significant changes. In 2018, we began a multi-
year project to simplify and modernize our product lineup, while enhancing our services. The simple goal of this initiative
is to make it easier for advisors and investors to do business with us, and to provide a well-rounded suite of effective and
appealing products that meet our clients’ needs at every stage of their life.
We will be implementing the initial phases of this project in 2019. It is much more than a project to reduce the number of
funds we offer – it is a comprehensive review that will evaluate and update our product offering and operations across
our lines of business. It will change the face of CI.
It is also important to note that this initiative doesn’t limit our ability to innovate or introduce
new products that address clear market needs. As examples of that, in 2018 and early 2019
we launched several innovative investment solutions, including:
• Liquid alternative mutual funds, which provide retail investors with access to
alternative investment strategies through three solutions: Lawrence Park
Alternative Investment Grade Credit Fund, Marret Alternative Absolute
Return Bond Fund and Munro Alternative Global Growth Fund.
• CI Private Pools, which offer a selection of 17 focused mandates
that draw on CI’s broad lineup of portfolio management teams
to provide high-net-worth investors with sophisticated
strategies and the flexibility to construct portfolios
tailored to their needs.
• First Asset Enhanced Government Bond ETF, which
focuses on investing in government debt and will be
managed by Marret Asset Management, and First Asset
Health Care Giants Covered Call ETF, which will invest equally in
the securities of 20 health care companies.
• CI Mosaic ETF Portfolios, which blend the benefits of ETFs with the
accessibility of a mutual fund structure.
Annual Financial Report | 16 | December 31, 2018
FREE CASH FLOW & RETURN TO SHAREHOLDERS (in $ millions)
300
250
200
150
100
50
0
FCF
Dividend
Buyback
156
95
167
153
94
163
156
61
169
160
45
158
Q1– ‘18
Q2– ‘18
Q3– ‘18
Q4– ‘18
CAPITAL ALLOCATION POLICY
CI has a long history of generating high levels of free cash flow and of returning that cash to shareholders through a
combination of dividends and share repurchases. In 2018, CI’s management and Board of Directors decided to take
advantage of historically low valuations on our stock by adopting a new capital allocation policy, which redirected a
portion of our dividend payout to share buybacks. In total, we bought back $656.9 million in shares over the course of the
year and paid $295.4 million in dividends.
The approach has provided us with greater flexibility and optionality in using our free cash flow. At the time of writing, we
continue to believe the best use of our free cash flow is repurchasing CI shares.
Since CI’s IPO in 1994, we have returned a total of $8.0 billion to shareholders through dividends, distributions and
share repurchases.
BRINGING DIGITAL TO LIFE
Over the course of 2018, we continued building and enhancing our technology capabilities to meet current and anticipated
future needs, all with a goal of redefining the advisor and investor experience.
In 2018, we launched a new website for CI Financial, and continued work on a new CI Investments site, the first phase of
which went live in early 2019. We also laid the groundwork for the redesign of our online client and advisor portals, along
with the development of mobile applications, digital onboarding and the enhancement of our infrastructure.
As noted earlier, the acquisitions of BBS and, more recently, WealthBar, have added highly skilled staff members and
technology that are already having an impact and enhancing our capabilities across the organization.
Annual Financial Report | 17 | December 31, 2018
OUTLOOK
We are operating in an environment that is changing faster than ever before. With continued scrutiny on the value of
active versus passive management, constant advances in technology, significant changes in investment behaviour and
expectations, along with intense competition, this is truly one of the most challenging times in our history.
But CI has never backed away from a challenge. In 2019, we celebrate our 25th anniversary of being a publicly traded
company, and it has led me to reflect on our history. And what is very clear is that CI has never been a complacent
organization. Moving quickly to adapt to – and anticipate – change is part of our DNA.
Consider the dramatic growth we have gone through over the last quarter century, from our earliest days as a small but
ambitious mutual fund company, to the large and diverse independent wealth management firm that we are today. We
made bold decisions that ultimately carved out our path to success.
Since I returned to CI over three years ago, the pace of change has accelerated. We are taking tough but necessary steps,
like the capital allocation policy and extensive changes to our product lineup, to maintain our position as an industry leader.
In April 2019, I announced my intention to retire no later than the end of my current contract with CI, which expires in
mid-2020. It was a difficult decision made easier by the depth of our leadership group and the broad-based strength of
CI. With a solid business strategy in place and a team that is willing to test and challenge ourselves to be better every day,
I am confident that we remain on the right track.
I have several key initiatives that I want to see through, and I will play an active role in working with the Board of Directors
to ensure a smooth transition to our next leader. I have great faith in the Board and know they will select a dynamic
successor who will execute our vision for this great organization, setting the stage for continued success.
Annual Financial Report | 18 | December 31, 2018
In closing, I extend my thanks to our employees for their tremendous work,
to advisors and other partners for their business, and to shareholders
for your support.
Sincerely,
Peter W. Anderson
President & Chief Executive Officer
In December, I announced
that Sheila Murray, President of
CI Financial, was retiring at the end
of March 2019. While I am happy for
Sheila as she moves on to the next phase
of her life, everyone here at CI misses her
day-to-day leadership and enthusiasm.
Sheila joined CI in January 2008 as General Counsel
and she was an instrumental part of the growth and
success of this organization. In 2016, she was named
President and oversaw Operations, IT, HR and Legal, among
other departments. Throughout her time here, she played an
important role in the evolution of our organization and we all
benefited from her energy and drive.
We are fortunate that Sheila will remain on the CI Financial board.
There is no doubt that Sheila has left an indelible mark on CI and that
we are all better for having had the opportunity to work with
and learn from her in our time together.
Peter
SheilaThank you
Corporate
Social
Responsibility
Annual Financial Report | 20 | December 31, 2018
CI Financial strives to operate with responsibility and integrity, from the management of
our funds to the conduct of all aspects of our business. We are committed to treating
our employees and business partners with respect and consideration, to supporting
communities across Canada, and to reducing our impact on the environment.
This section highlights some of CI’s efforts and achievements in these areas.
MEMBERSHIPS
Signatory to the UNPRI
The United Nations Principles for Responsible Investment (UNPRI) is the world’s leading
proponent of responsible investment. It encourages investors to use responsible
investment to enhance returns and better manage risks.
Associate Member of the RIA
The Responsible Investment Association (RIA) is Canada’s membership association for
responsible investment. RIA members believe that the integration of environmental,
social and governance (ESG) factors into the selection and management of investments
can provide superior risk-adjusted returns while contributing to positive societal change.
Annual Financial Report | 21 | December 31, 2018
COMMITMENT to Corporate Governance and Integrity
• CI’s Board of Directors and management are committed to maintaining a high standard of governance in compliance with
the governance guidelines of the Canadian securities administrators and best practices recommendations of the Canadian
Coalition for Good Governance.
• All directors, officers and employees of CI Financial, its subsidiaries and affiliates are governed by the CI Code of Business
Conduct and Ethics, which requires them to follow the highest standards of integrity and ethical business conduct.
• The Board of Directors pays special attention to governance through the its Governance, Human Resources, and
Compensation Committee, and focuses on risk management through the board’s Audit and Risk Committee.
• CI upholds principles, policies and procedures that promote integrity and ensure compliance with applicable laws and
regulations in specialized areas of the company. These include policies addressing money laundering, bribery and corruption,
personal trading by portfolio managers and other employees, as well as sales practices.
• CI has established formal Ethical Reporting Procedures through which employees can anonymously report questionable
conduct and concerns to the Board’s Lead Director.
• CI employees are required to complete annual Security Awareness Training.
2018
HIGHLIGHT
Each year, CI is rated on its
environment, social and governance
performance by various research firms. In
2018, CI was once again rated as an outperformer
in the area of governance within the diversified
financials sector group by research firm Sustainalytics.
Annual Financial Report | 22 | December 31, 2018
COMMITMENT to Responsible Investing
• As a signatory to the United Nations-supported Principles for Responsible Investment (UNPRI), CI Investments believes
that responsible investing plays a role in achieving the best possible risk-adjusted returns for our funds.
• CI Investments has a formal Responsible Investment Policy that addresses the integration of environmental, social,
governance (ESG) factors into the investment decision-making process. While CI Investments does not normally exclude
specific sectors or companies from investment, there is an exception. In recognition of the prohibitions contained within
the United Nations Anti-Personnel Landmines Convention and the United Nations Convention on Cluster Munitions,
CI Investments will not knowingly directly invest in companies associated with the production, use or distribution of such
weapons. This restriction applies to all actively managed funds where CI Investments directly controls the investment
strategy of the fund, including those that are sub-advised.
• In early 2019, CI Investments expanded our responsible investment program to include our Sentry Investment Management
team, as well as First Asset Investment Management. With four in-house teams – Signature Global Asset Management,
Cambridge Global Asset Management, Harbour Advisors and CI Multi-Asset Management – already following responsible
investing principles, approximately 70% of CI Investments’ assets under management are now covered by our Responsible
Investment Policy.
RESPONSIBLE INVESTING AT CI
CORE COMPONENTS
• Responsible Investment Policy
• Investment Exclusions
• Minimum ESG Ranking Criteria
• Third-Party ESG Data
• Dedicated Responsible
Investment Team
PROCESS
Step 1:
In-house portfolio managers have
continual access to third-party ESG data.
Step 2:
Investment exclusions list provided to
in-house portfolio managers & external
sub-advisors on an ongoing basis.
Step 3:
In-house portfolio managers provided
with customized ESG screens of
portfolios with flagged holdings on
an ongoing basis by CI’s Responsible
Investment Team.
Step 4:
In-house portfolio managers review
flagged holdings and document findings.
Step 5:
Monitoring by CI’s compliance
department
Annual Financial Report | 23 | December 31, 2018
COMMITMENT to Our Employees
• CI provides extensive training and learning opportunities to its employees, and supports those who pursue education
and training on their own initiative. We invested over $500,000 in employee development and training in 2018.
• Our Women’s Mentoring Program sees high-potential women paired with a senior leader for 18 months. It boasts over 90
mentee graduates since inception, and has been profiled as an industry best practice; our Women’s Mentoring Alumni
Program continues the development of these mentees. MentorCity, an additional mentoring program that is open
to men and women, sees CI mentors creating online profiles so that mentees can search and request a mentor with
competency strengths aligned to their development interest.
• Our training initiatives give employees access to a variety of tools and resources to support skill development, including
eLearning courses and classroom-based workshops. One example is our Ready to Lead Management Development Program,
which has over 155 graduates since 2014. Once that program is completed, graduates have access to other opportunities to
build on the foundation of their leadership skills, including the Leading with Confidence program for frontline managers.
• CI is also committed to the health and well-being of our employees. Our Wellness Program offers employees a range of
activities, including individual health assessments with a nutritionist, lunch-time workout classes, and “Lunch and Learn”
sessions focused on wellness in the workplace.
• We continue to celebrate the contributions of long-serving employees through
the CI Service Recognition Program. Employees are awarded “milestone
days,” which are additional paid days off that are given out when they
reach certain employment anniversaries with the company.
• We provide opportunities for students to gain experience and
exposure to the working world through our Summer Student
Program. In 2018, we hired over 65 summer students, and
5% of our new full-time hires were former participants
in our Summer Student Program.
• 50 high school students participated in our Take
Our Kids to Work Day, where we arranged
mock interviews and had an Employee
Financial Services Representative teach
a class on saving money.
• We also hired over 35 co-op students
as part of our partnerships with the
University of Waterloo, Wilfrid Laurier
University, and the University of Toronto.
Annual Financial Report | 24 | December 31, 2018
SickKids GetLoud
Rally and March
CI was a Premium
Sponsor of SickKids
GetLoud, a campaign
to help build a new
SickKids hospital, and
raised over $78,000 from
employees across the
company, making us the
event’s top external
employee donor.
Our employees held bake sales, sports competitions,
and a special wine tasting and silent auction
event to help raise funds. Many employees
and their families also attended
the five-kilometre fundraising
walk in downtown Toronto.
“As a co-op Student, CI has provided me with countless opportunities for personal and professional growth in a corporate environment that delivers the necessary tools that are required to succeed in an increasingly competitive labour market. ” — 2018 co-op student COMMITMENT to Communities
CI is committed to supporting communities across Canada and to being a good corporate citizen. In 2018, we contributed
over $500,000 through company and employee donations. We also proudly continued with our Ray Day Program, which
allows CI employees to dedicate one work day of the year to volunteer and support a cause of their choice.
SickKids GetLoud
Rally and March
CI was a Premium
Sponsor of SickKids
GetLoud, a campaign
to help build a new
SickKids hospital, and
raised over $78,000 from
employees across the
company, making us the
event’s top external
employee donor.
Our employees held bake sales, sports competitions,
and a special wine tasting and silent auction
event to help raise funds. Many employees
and their families also attended
the five-kilometre fundraising
walk in downtown Toronto.
RAISED OVER
$78,000
Second Harvest
CI served as a Platinum
Sponsor of “Toronto Taste”,
Second Harvest’s annual event
that raised over $925,000 in 2018.
Throughout the year, employees also
fundraised and donated over $3,800,
enough money to provide more
than 7,600 meals to
those in need.
Annual Financial Report | 25 | December 31, 2018
“CI Financial has been a critical source of support for Second Harvest. In 2018, CI helped Second Harvest rescue and deliver enough fresh, nutritious surplus food for over 222,000 meals for vulnerable people throughout the Greater Toronto Area.Because of CI’s support, enough food for hundreds of thousands of healthy meals has been rescued from needless waste, nourishing thousands and remediating environmental damage. Without the incredible support of partners like CI, we would not exist! Thank you for your unwavering commitment to our community.”— Jennifer Verschraegen, Vice-President of Philanthropy, Second Harvest $50,000
DONATION
as part of a larger
$500,000 committment
Wilfrid Laurier University
CI is proud to partner with Wilfrid Laurier University
in preparing Canada’s next generation of financial managers,
and to provide support for the “Building Canada’s
Best Business School” fundraising campaign.
In 2018, CI donated $50,000 as part of
a larger $500,000 commitment
to supporting the finance program
at the Lazaridis School of
Business and Economics and
to establishing the
CI Financial
Finance Lab.
$12,000
DONATION
The Arthritis Society
In 2018, CI was proud to donate
$12,000 to the Arthritis Society, an
organization we have supported since 2008.
These funds will contribute to cutting-edge
research, proactive advocacy and innovative solutions
that will deliver better health outcomes
for people affected by arthritis.
$25,000
in post-secondary
scholarships
Children’s Aid Foundation of Canada
CI continued to support the Children’s Aid Foundation
of Canada (CAF), donating a total of $25,000 in post-secondary
scholarships in 2018. These scholarships were funded by donations
from CI’s leadership team and targeted young people who are living in,
or have recently left, the care of the child welfare system. In addition
to our scholarship program, CI also hired four summer students
associated with CAF in 2018, giving them the opportunity to
gain work experience and prepare for a bright future.
Annual Financial Report | 26 | December 31, 2018
Other organizations CI
and our employees supported
in 2018 included:
Annual Financial Report | 27 | December 31, 2018
COMMITMENT to Environmental Sustainability
PAPER CONSUMPTION
• In 2018, CI continued the delivery of electronic client materials and offered online availability of our proxy materials.
• We continued to use paper certified under the Sustainable Forestry Initiative. This standard sets mandatory practice
requirements for the responsible procurement of all fibre sourced directly from forests.
WASTE REDUCTION
• CI continued to recycle paper, plastics and office equipment in 2018:
– Recycled over 50,000 single-use coffee and tea capsules, resulting in the recovery of over 100 kilograms of aluminum.
• In 2018, CI switched from providing staff with single-use coffee and tea capsules to compostable pouches.
CI GREEN COMMITTEE
The committee is a group of committed and enthusiastic employees with a shared vision of making CI a more sustainable
workplace. The committee had several noteworthy accomplishments in 2018:
• Through a battery collection program, over 85 pounds of batteries were diverted from landfills.
• CI employees once again competed in a “Waste Free Challenge” to see who could bring in lunches with the least
amount of waste.
• The “CI Swap Day” allowed employees to exchange their used items and promote the reuse of goods.
Patrick Hodgson
Nature Reserve
In May 2018, a group of 12 CI employees
joined the Nature Conservancy of Canada
and the Nottawasaga Valley Conservation
Authority for a day of tree planting on
the Patrick Hodgson Nature Reserve in
the ecologically significant Minesing
Wetlands. With the team’s help, over
900 trees were planted.
Annual Financial Report | 28 | December 31, 2018
Employee
Spotlights
Tommy Thompson Park
In June 2018, 50 CI employees in
Toronto travelled to Tommy Thompson Park
to remove invasive plant species and support
park maintenance. This type of work is crucial for
ensuring the integrity of the park’s natural ecosystem,
including its native plant species, as well as native bird
and butterfly populations.
“I appreciate CI and the Toronto and Region Conservation
Foundation organizing such a wonderful event. I am proud
that I contributed my time doing something meaningful
that benefited our living environment. ”
– Tommy Thompson Park | Ray Day participant
Shoreline Clean Up
In October 2018, 100 CI employees in
Toronto travelled to Humber Bay Park East
to clean up the Humber Bay shoreline.
Volunteers removed garbage and “tiny litter”
consisting of straws, bottle caps, and small and
broken pieces of plastic and styrofoam to help
preserve the park’s natural ecosystem. The team
collected an incredible 591 pounds of garbage.
“I really enjoyed the experience and felt good about
coming together with my colleagues to make a tangible
difference in the community. I hope that more companies
and individuals make a similar commitment, because it
was very rewarding and, most importantly,
there is still a lot of work to do! ”
— Shoreline Clean Up | Ray Day participant
Annual Financial Report | 29 | December 31, 2018
“It is refreshing to see CI support their
employees by organizing these types of
volunteer opportunities. The effort
helps to create a company culture
that clearly cares about
its people and the
community. ”
— Ray Day participant
RAY DAYS
CI provides employees with one paid day off per year,
known as a RAY DAY, to volunteer with a community
organization or charity of their choice. This program was
named in memory of CI’s former Chairman and CEO
Ray Chang, who was well-known for his commitment
to philanthropy. The program is designed to give
employees the ability to contribute to the
community in a way that matters to them.
In 2018, hundreds of employees used their
Ray Day to give back to the community.
Some of the charitable events employees
have allocated their Ray Day towards
include: The Yonge Street Mission,
Manitoba Underdogs Rescue, Nature
Conservancy of Canada, SickKids
Foundation, and Habitat for Humanity.
To complement the Ray Day
initiative, in 2018 CI offered
employees two opportunities
to use their Ray Day in
support of environmental
causes. Further details
can be found in the
previous section
“Commitment to
Environmental
Sustainability.”
Annual Financial Report | 30 | December 31, 2018
Ray Days SPOTLIGHT On
Living City Environmental Dinner
Each year, the Toronto and Region Conservation (TRC) Foundation
hosts the Living City Environmental Dinner – the organization’s
flagship fundraising event. In 2018, it was the event’s 25th year and
CI contributed an $8,000 donation in support of:
• Habitat restoration projects protecting Toronto
and Greater Toronto Region greenspace and wildlife
• Flood, climate change and water monitoring efforts
• Learning and mentorship programs for adults and youth
• Maintaining parks, trails and attractions.
SPOTLIGHT On
Toronto and Region
Conservation Foundation
In 2018, CI established a partnership with the
TRC Foundation, the charitable arm of the Toronto
and Region Conservation Authority, an organization
with a vision to create a cleaner, greener and
healthier “Living City.” As a Toronto-based asset
manager, CI is proud to support an organization that
works to protect the natural environment in which
many of our employees and their children live, work
and play
“ Working with CI Financial has been tremendous for the
TRC Foundation. The team showed its commitment to
our local environment when staff cleaned up almost 591
pounds of garbage from a Toronto shoreline and removed
invasive plant species from an important bird migration
area. CI has embraced our vision for The Living City. We are
appreciative of the hard work and support shown by all levels
of staff and look forward to more combined environmental
achievements.”
— Derek Edwards, Executive Director, TRC Foundation
Annual Financial Report | 31 | December 31, 2018
Subsidiary Profiles
Annual Financial Report | 32 | December 31, 2018
CI INVESTMENTS INC.
CI Investments is one of Canada’s largest investment management companies. We are
2018 Operating Highlights
proud to partner with more than 35,000 financial advisors and 1.3 million investors,
who trust us to help them achieve their financial goals. We believe in the value of
• Launched three liquid
advice, along with the benefits of active management and responsible investing.
alternative mutual funds,
providing retail investors
CI’s comprehensive product lineup features a broad selection of portfolio
with access to alternative
managers and investment styles and a wide choice of mandates covering various
investment strategies.
regions, asset classes, and industries, all offered through a variety of platforms.
• Launched CI Private Pools,
a platform of 17 focused
Our strength comes from the expertise and experience of our portfolio managers,
mandates for affluent and
who represent the full spectrum of investment disciplines, from value to growth. Our
high net worth investors.
in-house investment management teams are Signature Global Asset Management,
• Developed CI Mosiac ETF
Harbour Advisors, Cambridge Global Asset Management, Sentry Investment
Portfolios, which were
Management and CI Multi-Asset Management. We also service the institutional
launched in January 2019.
marketplace through our dedicated CI Institutional Asset Management division.
• Reduced management fees
CI continues to build and foster successful relationships with financial advisors
fixed administration fees on
and third-party institutions to support the distribution of our products and
Sentry funds.
services, which include mutual funds, segregated funds, managed solutions and
• Lowered minimum
on 33 funds and introduced
alternative investments.
investments for the
CI Preferred PricingTM
program.
• Received 18 FundGrade A+
Awards, as presented by
Fundata Canada Inc., and
four Thomson Reuters
Lipper Fund Awards.
Annual Financial Report | 33 | December 31, 2018
Private Counsel LP
ASSANTE WEALTH MANAGEMENT (CANADA) LTD.
AND CI PRIVATE COUNSEL LP
Assante Wealth Management is one of Canada’s largest professional services
firms in wealth management and planning, supporting more than 830 advisors
who serve approximately 300,000 clients and their families nationwide. Assante’s
services are offered through Assante Capital Management, an investment dealer,
and Assante Financial Management, a mutual fund dealer.
CI Private Counsel, our high net worth discretionary investment counsel business,
is made up of Assante Private Client, which supports Assante Wealth Management
advisors, and Stonegate Private Counsel, which provides integrated wealth
planning and investment advice to ultra-high net worth and high net worth clients
across Canada.
Assante and CI Private Counsel continue to achieve consistent growth and have
$41.7 billion in assets under advisement (AUA), as at December 31, 2018. Our success
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, our advisors provide a comprehensive and integrated approach
to wealth management.
Across our lines of business, we also support our advisors by providing advanced
solutions, including Evolution Private Managed Accounts, a program managed by
CI Investments and available exclusively through Assante advisors.
Annual Financial Report | 34 | December 31, 2018
2018 Operating Highlights
• Recruited a number of
established advisor teams,
adding $1.4 billion to AUA.
• Grew our presence in the
high net worth market,
with the total value of
households of more than
$1 million in assets increasing
to $18.6 billion, or 45% of
our total AUA (as at
December 31, 2018).
• Launched our Charitable
Giving Program, which allows
clients to build philanthropic
giving into their overall
wealth plan through a
simple, sophisticated and
tax-efficient solution.
• Ranked #1 in the 2018
Investment Executive Dealer
Report Card, and #2 in the
2018 J.D. Power Full Service
Investor Satisfaction Study.
• Launched Private Client
Connect, a new digital
interface that allows advisors
to view and monitor their
clients’ portfolios and asset
mixes in real-time.
• Reduced fees across high net
worth offerings, including
Evolution Private Managed
Accounts and Private Client
Managed Portfolios.
• Incorporated three
alternative investment
options into the Assante
Private Client offering as
part of a continued effort
to expand the breadth of its
investment mandates.
FIRST ASSET INVESTMENT MANAGEMENT INC.
First Asset is an established leader in exchange-traded funds in the Canadian
marketplace with $5.0 billion in assets under management (AUM) in ETFs,
as well as closed-end funds and mutual funds (at December 31, 2018).
First Asset’s focus is on delivering better risk-adjusted returns than the
broad market through a comprehensive suite of smart beta and actively
managed ETF solutions. First Asset has a track record of introducing market-
leading investment methodologies and was one of the first firms to offer
broad, comprehensive factor-based investing to Canada, beginning with
single-factor strategies focused on value and momentum and extending
into multi-factor ETF solutions. First Asset continues to differentiate itself
from competitors by offering one of the largest lineups of actively managed
ETFs in Canada, leveraging the considerable portfolio management talent
within the CI Financial group of companies.
An increasingly competitive landscape – including a growing number of
providers and products, and record asset levels – demonstrates the interest
in ETFs by advisors and their clients. First Asset is well positioned as an expert
in ETFs and is positioned for continued growth and leadership in the industry.
2018 Operating Highlights
• Experienced strong growth in our ETF lineup, with AUM increasing
by $580 million to $4.4 billion.
• Ended 2018 with record total AUM of $5.0 billion.
• Successfully integrated the First Asset sales, marketing and product
functions into CI Investments to provide access to a more holistic
organizational offering.
• Continued to optimize our ETF lineup with the successful launch
of First Asset Enhanced Government Bond ETF and First Asset Health
Care Giants Covered Call ETF.
• Received five 2018 FundGrade A+ Awards, as presented by Fundata
Canada Inc., and two 2018 Thomson Reuters Lipper Fund Awards.
Annual Financial Report | 35 | December 31, 2018
BBS SECURITIES INC.
BBS Securities is a Canadian financial technology company and a registered investment/broker dealer
that provides a wide range of innovative brokerage and trading services to a diverse client base of
portfolio managers, introducing brokers, and institutional and retail investors.
Through our online brokerage division, Virtual Brokers, BBS provides services using a proprietary
system that is one of the most technologically advanced and efficient online discount
brokerage platforms in the Canadian market.
BBS offers brokerage services (such as clearing, custody, settlement, trade execution
services for securities, ETFs, options, bonds, and bullion precious metals), multiple
trading platforms, access to new issues and IPOs, securities lending and
borrowing, risk monitoring and compliance supervisory stations to various
hedge funds, institutions, and portfolio managers and retail investors. We also
offer extensive fund management and trading services for institutional clients,
while providing trading tools and support to professional traders. We leverage our
technological capability to provide online brokerage and trade execution services to
individual investors, active traders and institutions.
2018 Operating Highlights
• Total AUM grew by 60% to approximately $1.0 billion.
• Increased client accounts by 48% to 63,669.
• Onboarded more than 28 new robo-advisors, portfolio managers and advisors onto our platform.
• Named Canada’s top online broker by the Globe & Mail in early 2019.
• Integrated a state-of-the-art portfolio management monitoring and risk controlling tool into Virtual
Brokers’ website to help aggregate client assets from all Canadian financial institutions.
• Started a project with Assante that will see BBS become the custody and clearing broker for
Assante’s omnibus business.
• Became an active participant in CI’s overall digital transformation roadmap and its
brokerage service provider.
All financials are as of December 31, 2018 compared to November 1, 2017,
when BBS was acquired by CI Financial.
Annual Financial Report | 36 | December 31, 2018
GSFM PTY LIMITED
GSFM, formerly Grant Samuel Funds Management, is a leading manager and distributor of
investment funds to institutional and retail investors in Australia. The firm was founded in 2007
and today manages approximately A$6 billion in assets (at December 31, 2018).
GSFM partners with high-calibre investment managers in Australia and globally to offer unique investment
strategies to the Australian market. We have formed relationships with seven investment managers – Epoch
Investment Partners of New York, Payden & Rygel of Los Angeles, Australian-based managers Munro Partners,
Tribeca Investment Partners and Triple3 Partners, Man Group of London and Cambridge Global Asset Management,
a division of CI Investments. Each offers a differentiated investment strategy in their specialist asset classes. These
mandates span Australian equities, global equities, fixed income and volatility.
CI Financial owns 83% of GSFM, and GSFM executives hold a 17% equity stake.
2018 Operating Highlights
• Developed the new GSFM brand, which was launched in early 2019.
• Supported the introduction of Munro Partners to the Canadian market through
the launch of Munro Alternative Global Growth Fund along with Munro Global
Growth Equity Fund, which is one of CI’s new liquid alternative mandates.
Munro Partners is a Melbourne, Australia based global equities manager
distributed by GSFM and in which GSFM has an equity stake.
• Munro Partners won Money Management/Lonsec
Fund Manager of the Year award, Emerging Manager category.
• Awarded new institutional fixed income mandates totaling $690 million.
Annual Financial Report | 37 | December 31, 2018
WEALTHBAR FINANCIAL SERVICES INC.
WealthBar is a leading Canadian online wealth management and financial planning platform offering premium online
investing portfolios and low-fee ETFs, along with unlimited commission-free advice. WealthBar makes sophisticated
investing and investment advice accessible online to everyday Canadians.
Founded in 2014, the robo-advisory firm has approximately $275 million in assets under management (at December 31, 2018)
for investors from coast to coast. WealthBar offers a diverse service and product offering that combines technology with
human advisors for a personalized experience. This “hybrid model” provides the opportunity for engagement between
clients and advisors depending on the wealth planning services required
WealthBar offers a mix of ETF portfolios and Private Investment Portfolios, and added an exclusive advisor channel in
2017. This digital wealth management platform for advisors helps them scale their business and augment their offering.
WealthBar aims to offer properly diversified portfolios, using a range of asset combinations of equities, bonds, REITs,
preferred shares and other financial strategies, which can mitigate risk and obtain good performance for clients.
CI Financial announced the acquisition of a majority share of WealthBar in December 2018, with the transaction closing in
January 2019. CI Financial owns 75% of WealthBar, while WealthBar executives hold a 25% equity stake.
Annual Financial Report | 38 | December 31, 2018
Annual Financial Report | 39 | December 31, 2018
Management’s
Discussion and Analysis
December 31, 2018
CI FINANCIAL CORP
FINANCIAL HIGHLIGHTS
| FINANCIAL HIGHLIGHTS |
[millions of dollars,
except share amounts]
Assets under management
Assets under advisement
Total assets
Average assets under
management
Management fees
Total revenues
Selling, general & administrative
Trailer fees
Net income
Adjusted net income1
Basic earnings per share
Diluted earnings per share
Adjusted earnings per share1
Free cash flow1
Return on equity2
As at and for the quarters ended
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018 Mar. 31, 2018 Dec. 31, 2017
124,360
41,813
166,173
136,526
44,359
180,884
138,182
43,717
181,900
139,223
42,658
181,881
143,028
42,699
185,727
129,316
138,322
139,487
141,870
142,469
474.2
529.2
126.2
149.1
140.4
140.3
0.57
0.57
0.57
509.9
569.0
131.4
160.6
158.3
158.2
0.62
0.62
0.62
506.3
564.6
129.7
159.6
160.0
159.9
0.61
0.60
0.61
513.7
573.5
135.2
162.0
159.1
159.0
0.59
0.59
0.59
532.1
594.4
130.8
167.8
139.5
173.7
0.51
0.51
0.63
156.5
169.2
163.0
166.9
180.6
37.1%
39.1%
38.6%
39.3%
39.9%
%
change
quarter-
over-
quarter
%
change
year-
over-
year
(9)
(6)
(8)
(7)
(7)
(7)
(4)
(7)
(11)
(11)
(8)
(8)
(8)
(8)
(5)
(13)
(2)
(11)
(9)
(11)
(11)
(4)
(11)
1
(19)
12
12
(10)
(13)
(7)
Dividends paid per share
Dividend yield
0.1800
4.2%
0.2350
3.5%
0.3525
6.0%
0.3525
5.1%
0.3525
(23)
(49)
4.7%
Average shares outstanding
246,810,100
256,739,584
264,090,648
269,648,509
274,261,643
Shares outstanding
243,721,650
251,755,586
260,562,210
266,560,958
271,884,495
Share price
High
Low
Close
Change in share price
Total shareholder return
Market capitalization
P/E Ratio2
Long-term debt (including the
current portion)
Net debt1
Net debt to adjusted EBITDA1
20.68
16.47
17.28
(15.7%)
(14.9%)
4,212
7.3
1,503.7
1,255.3
1.51
24.38
19.95
20.51
(13.2%)
(12.3%)
5,164
8.4
1,444.0
1,209.3
1.30
27.71
23.36
23.63
(14.4%)
(13.2%)
6,157
9.7
1,428.5
1,126.2
1.21
30.23
27.02
27.60
(7.3%)
(6.1%)
7,357
11.4
29.78
27.32
29.77
9.1%
10.4%
8,094
12.5
1,366.3
1,053.2
1.13
1,118.1
860.9
0.86
(4)
(3)
(15)
(17)
(16)
(18)
(13)
4
4
16
(10)
(10)
(31)
(40)
(42)
(48)
(42)
34
46
76
1 Adjusted net income, adjusted earnings per share, free cash flow, net debt, and EBITDA are not standardized earnings measures prescribed
by IFRS. Descriptions of these measures, as well as others, and reconciliations to the nearest IFRS measures, where necessary, are provided
in the “Non-IFRS Measures” section of this MD&A.
2 Trailing 12 months, calculated using adjusted net income.
Annual Financial Report | 41 | December 31, 2018
1 December 31, 2018
Q4 Financial Report
| MANAGEMENT’S DISCUSSION & ANALYSIS |
This Management’s Discussion and Analysis (“MD&A”) dated February 8, 2019 presents an analysis of the financial position of
CI Financial Corp. and its subsidiaries (“CI”) as at December 31, 2018, compared with December 31, 2017, and the results of
operations for the quarter and year ended December 31, 2018, compared with the quarter and year ended December 31, 2017
and the quarter ended September 30, 2018.
CI’s Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board. Amounts are expressed in Canadian dollars. The principal
subsidiaries referenced herein include CI Investments Inc. (“CI Investments”) and Assante Wealth Management (Canada) Ltd.
(“AWM” or “Assante”). The Asset Management segment of the business includes the operating results and financial position of
CI Investments and its subsidiaries, including CI Private Counsel LP (“CIPC”), as well as the operating results and financial position
of First Asset Investment Management Inc. (“First Asset”) and Grant Samuel Funds Management Pty Limited (“GSFM”). 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”), as well as the operating results and financial
position of BBS Securities Inc. (“BBS”).
This MD&A contains forward-looking statements concerning anticipated future events, results, circumstances, performance or
expectations with respect to CI Financial Corp. (“CI”) and its products and services, including its business operations, strategy
and financial performance and condition. Forward-looking statements are typically identified by words such as “believe”, “expect”,
“foresee”, “forecast”, “anticipate”, “intend”, “estimate”, “goal”, “plan” and “project” and similar references to future periods, or
conditional verbs such as “will”, “may”, “should”, “could” or “would”. 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’s
control. Although management believes that the expectations reflected in such forward-looking statements are based on
reasonable assumptions, such statements involve risks and uncertainties. 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. 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 or discussed in CI’s disclosure materials filed with applicable securities regulatory authorities from time to time.
The foregoing list is not exhaustive and the reader is cautioned to consider these and other factors carefully and not to place
undue reliance on forward-looking statements. Other than as specifically required by applicable law, CI undertakes no obligation
to update or alter any forward-looking statement after the date on which it is made, whether to reflect new information, future
events or otherwise.
This MD&A includes several non-IFRS financial measures that do not have any standardized meaning prescribed by IFRS and may
not be comparable to similar measures presented by other companies. CI believes that these financial measures provide
information that is useful to investors in understanding CI’s performance and facilitate a comparison of quarterly and full year
results from period to period. Descriptions of these non-IFRS measures and reconciliations to the nearest IFRS measure, where
necessary, are provided in the “Non-IFRS Measures” section of this MD&A. Note that figures in tables may not add due to rounding.
3 December 31, 2018
Q4 Financial Report
Annual Financial Report | 42 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
TABLE 1: SELECTED ANNUAL INFORMATION
[millions, except per share amounts]
Management fees
Total revenue
Selling, general & administrative
Total expenses
Income before income taxes
Income taxes
Non-controlling interest
Net income available to shareholders
Adjusted net income1
Free cash flow1
Basic earnings per share
Diluted earnings per share
Adjusted earnings per share1
Adjusted EBITDA1
Total assets
Gross debt
Net debt1
Average shares outstanding
Shares outstanding
Share price
Fiscal Years Ending December 31
2018
2017
2016
$2,004.2
$2,236.4
$522.5
$1,393.1
$843.3
$225.5
$0.4
$617.5
$617.5
$655.5
$2.38
$2.38
$2.38
$1,897.1
$2,111.3
$459.1
$1,303.6
$807.7
$258.8
-$0.2
$549.1
$628.4
$648.4
$2.08
$2.08
$2.38
$1,748.7
$1,948.3
$396.8
$1,179.6
$768.7
$208.1
-$0.2
$560.8
$590.0
$604.7
$2.07
$2.07
$2.18
$906.2
$891.8
$835.0
$4,292.2
$1,503.7
$1,255.3
259.3
243.7
$17.28
$4,345.3
$1,118.1
$860.9
264.4
271.9
$29.77
$3,186.0
$758.7
$572.9
271.1
265.3
$28.87
Market capitalization
$7,659
1Adjusted net income, adjusted earnings per share, free cash flow, adjusted EBITDA and net debt are not standardized earnings measures
prescribed by IFRS. Descriptions of these non-IFRS measures, as well as others, and reconciliations to IFRS, where necessary, are provided
in the "Non-IFRS Measures" section of this MD&A.
$4,212
$8,094
4 December 31, 2018
Q4 Financial Report
Annual Financial Report | 43 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
TABLE 2: SUMMARY OF QUARTERLY RESULTS
[millions of dollars, except per share amounts]
2018
2017
INCOME STATEMENT DATA
Management fees
Administration fees
Other revenues
Total revenues
Selling, general & administrative
Trailer fees
Investment dealer fees
Deferred sales commissions paid
Interest expense
Other expenses
Total expenses
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
474.2
509.9
506.3
513.7
532.1
452.9
462.6
449.5
51.8
3.2
50.2
8.9
47.5
10.8
48.1
11.7
45.8
16.5
42.0
9.3
41.6
6.1
44.6
8.5
529.2
569.0
564.6
573.5
594.4
504.1
510.3
502.6
126.2
149.1
131.4
160.6
40.5
3.9
12.4
5.9
40.1
4.1
11.6
3.5
129.7
159.6
37.6
5.6
9.9
4.2
135.2
162.0
37.7
8.5
9.3
4.6
130.8
167.8
37.3
7.3
8.6
49.2
108.7
139.3
34.5
6.5
5.7
1.7
111.6
142.3
34.2
7.1
5.3
3.5
108.0
138.0
36.7
10.3
5.4
3.7
337.8
351.2
346.7
357.4
401.0
296.5
304.0
302.1
Income before income taxes
191.3
217.8
218.0
216.2
193.4
207.6
206.3
200.5
Income taxes
Non-controlling interest
51.0
—
59.5
0.1
58.0
0.1
57.0
0.1
53.9
0.1
54.0
—
96.8
(0.2)
54.1
(0.1)
Net income attributable to shareholders
140.3
158.2
159.9
159.0
139.4
153.6
109.6
146.5
Earnings per share
Diluted earnings per share
0.57
0.57
0.62
0.62
0.61
0.60
0.59
0.59
0.51
0.51
0.60
0.60
0.42
0.42
0.55
0.55
Dividends paid per share
0.1800
0.2350
0.3525
0.3525
0.3525
0.3525
0.3475
0.3450
Q4 Financial Report
5 December 31, 2018
Annual Financial Report | 44 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
BUSINESS OVERVIEW
CI is a diversified wealth management firm and through CI Investments, one of Canada’s largest independent investment fund
companies. The principal business of CI is the management, marketing, distribution and administration of investment products
for Canadian investors. CI also has asset management operations in Australia through its subsidiary GSFM. CI’s products 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
investment funds and other fee-earning investment products. The Asset Administration segment derives its revenue principally
from fees and commissions from ongoing service and on the sale of investment funds and other financial products.
BUSINESS STRATEGY
CI provides wealth and investment management services and earns fee revenue on its assets under management (“AUM”) and
assets under administration (“AUA”). Management believes that client goals and asset growth can be achieved by focusing on
the following factors: quality and diversity of products offered by CI; experience and depth of investment managers; service levels
provided to dealers and investors; and the skill and knowledge of its employees.
CI offers investors a wide range of Canadian and global investment products through a network of investment dealers, mutual
fund dealers, and insurance agents, which include advisors with AWM. Acquisitions of fund management companies and years
of product innovation and development have allowed CI to offer investors a broad selection of investment products.
CI uses in-house teams and external investment managers to provide portfolio management services. These investment managers
typically 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’s management is focused on continuing to build a global diversified wealth management company based in Canada. With
ongoing expansion in terms of scale, expertise and reach, CI will be able to explore new markets and introduce new capabilities
that will help drive the organization’s future growth. At the same time, CI continues to view the Canadian business, relationships
and channels as critical parts of the organization’s DNA. In summary, CI’s strategy is based on three major themes:
• Maintain and grow our leading position in Canada;
•
•
Achieve greater scale by growing assets in Canada and abroad;
Increase access to distribution in Canada and abroad.
An important factor underlying these themes is the continued development of our digital capabilities. The acquisition of BBS in
2017 added advanced trading technology and online services to the firm, and has assisted in CI’s digital transformation. CI acquired
WealthBar in January 2019, a leading Canadian online wealth management and financial planning platform. CI’s goal is to not
only expand avenues of distribution, but to provide clients with improved products and services, allowing them to do business
with the firm when, where and how they want.
6 December 31, 2018
Q4 Financial Report
Annual Financial Report | 45 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
KEY PERFORMANCE DRIVERS
The key performance indicator for the Asset Management segment is the level of AUM, and for the Asset Administration segment,
the level of AUA. Assets Under Advisement includes both AUA (assets under administration) and assets held by clients of advisors
with Stonegate Private Counsel. Total assets are comprised of AUM and Assets Under Advisement. CI’s AUM and AUA are primarily
driven by fund performance as well as the gross sales and redemptions of its investment products. As most of CI’s revenues and
expenses are based on daily asset levels throughout the year, average assets for a particular period are critical to the analysis of
CI’s financial results. While some expenses, such as trailer fees, vary directly with the level of AUM, a portion of CI’s expenses do
not. In particular, the amount of deferred sales commissions paid depends on the amount of deferred load fund sales. Over the
long term, CI manages the level of its discretionary spend to be consistent with or below the growth in its revenue, though in
any given period, CI may choose to make investments in people or technology that benefit the long-term growth of the company.
CI uses several performance indicators to assess its results. These indicators are described throughout the results of operations
and the discussion of the two operating segments and include the following measures prescribed by IFRS: net income and earnings
per share; and measures not prescribed by IFRS: adjusted net income, adjusted earnings per share, operating cash flow, free cash
flow, EBITDA, adjusted EBITDA, EBITDA margin, adjusted EBITDA margin, dealer gross margin, net debt, asset management margin,
and SG&A efficiency margin. Descriptions of these non-IFRS measures and reconciliations to IFRS are provided below.
Q4 Financial Report
7 December 31, 2018
Annual Financial Report | 46 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
NON-IFRS MEASURES
CI reports certain financial information using non-IFRS measures as CI believes that these financial measures provide information
that is useful to investors in understanding CI’s performance and facilitate a comparison of quarterly and full-year results from
period to period.
ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE
CI defines adjusted net income as net income, net of non-controlling interest, and net of other provisions and adjustments. CI
uses adjusted net income and adjusted earnings per share to compare underlying profitability for different periods.
TABLE 3: ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE
[millions of dollars, except per share amounts]
Net Income
Add:
Provisions for compensation, legal and tax costs
Fair value adjustment to contingent consideration
Less:
Non-controlling interest
Adjusted net income
Adjusted earnings per share
OPERATING CASH FLOW AND FREE CASH FLOW
Quarter
ended
Dec. 31, 2018
140.4
Quarter
ended
Sep. 30, 2018
158.3
Quarter
ended
Dec. 31, 2017
139.5
Year
ended
Dec. 31, 2018
617.8
Year
ended
Dec. 31, 2017
548.9
—
—
—
140.3
0.57
—
—
0.1
158.2
0.62
28.7
5.6
0.1
173.7
0.63
—
—
0.4
617.5
2.38
73.7
5.6
(0.2)
628.4
2.38
CI measures its operating cash flow before the change in operating assets and liabilities, and the actual cash amount paid for
interest and income taxes, as these items often distort the cash flow generated during the period. Operating assets and liabilities
are affected by seasonality, interest is primarily paid semi-annually, and tax installments paid may differ materially from the cash
tax accrual.
Free cash flow is calculated as operating cash flow adjusted for provisions. CI uses this measure, among others, when determining
how to deploy capital.
Q4 Financial Report
8 December 31, 2018
Annual Financial Report | 47 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
TABLE 4: OPERATING CASH FLOW AND FREE CASH FLOW
[millions of dollars]
Cash provided by operating activities
Add:
Income taxes paid
Interest paid
Less:
Net change in non-cash working capital
Operating cash flow
Add:
Provisions for compensation, legal and tax costs
Free cash flow
Quarter
ended
Dec. 31, 2018
178.3
Quarter
ended
Sep. 30, 2018
174.0
Quarter
ended
Dec. 31, 2017
143.0
Year
ended
Dec. 31, 2018
608.2
Year
ended
Dec. 31, 2017
581.1
57.7
12.4
91.8
156.5
—
156.5
58.2
7.1
70.1
169.2
—
169.2
51.6
12.7
55.4
151.9
28.7
180.6
240.5
38.3
231.5
655.5
—
655.5
206.6
22.0
235.0
574.7
73.7
648.4
EBITDA, ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
CI uses EBITDA (earnings before interest, taxes, depreciation and amortization) and adjusted EBITDA, which it defines as EBITDA,
net of non-controlling interest and other provisions and adjustments, to assess its underlying profitability prior to the impact of
its financing structure, income taxes and the amortization of intangibles and other items. This permits comparisons of companies
within the industry, normalizing for different financing methods and levels of taxation. Adjusted EBITDA is a measure of operating
performance, a facilitator for valuation and a proxy for cash flow. Adjusted EBITDA margin expresses adjusted EBITDA as a
percentage of total revenue.
TABLE 5: EBITDA, ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
[millions of dollars, except per share amounts]
Net Income
Add:
Interest Expense
Provision for income taxes
Amortization of intangibles and other
EBITDA
EBITDA per share
Add:
Provisions for compensation, legal and tax costs
Fair value adjustment to contingent consideration
Less:
Non-controlling interest
Adjusted EBITDA
Adjusted EBITDA per share
Total revenue
Adjusted EBITDA Margin
Quarter
ended
Dec. 31, 2018
140.4
Quarter
ended
Sep. 30, 2018
158.3
Quarter
ended
Dec. 31, 2017
139.5
Year
ended
Dec. 31, 2018
617.8
Year
ended
Dec. 31, 2017
548.9
12.4
51.0
5.4
209.1
0.85
—
—
0.1
209.0
0.85
11.6
59.5
5.2
234.6
0.91
—
—
0.2
234.4
0.91
8.6
53.9
4.7
206.7
0.75
39.0
5.6
0.2
251.0
0.92
43.1
225.5
20.6
906.9
3.50
—
—
0.7
906.2
3.50
24.9
258.8
14.5
847.2
3.20
39.0
5.6
—
891.8
3.37
529.2
39.5%
569.0
41.2%
594.4
42.2%
2,236.4
2,111.3
40.5%
42.2%
9 December 31, 2018
Q4 Financial Report
Annual Financial Report | 48 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
NET DEBT
CI calculates net debt as long-term debt (including the current portion) less cash and marketable securities, net of cash required
for regulatory purposes and non-controlling interests. Net debt is a measure of leverage and CI uses this measure to assess its
financial flexibility.
TABLE 6: NET DEBT
[millions of dollars]
Current portion of long-term debt
Long-term debt
Less:
Cash and short-term investments
Marketable securities, excluding BBS’ securities owned, at market
Add:
Regulatory capital and non-controlling interests
Net Debt
DEALER GROSS MARGIN
As at
As at
Dec. 31, 2018
Dec. 31, 2017
—
1,503.7
1,503.7
137.2
133.0
21.7
1,255.3
222.0
896.1
1,118.1
124.6
145.3
12.6
860.9
CI monitors its operating profitability on the revenues earned within its Asset Administration segment by measuring its dealer
gross margin, which is calculated as administration fee revenue less investment dealer fees, divided by administration fee revenue
(all figures before inter-segment eliminations). CI uses this measure to assess the profitability of the Asset Administration segment
before SG&A expenses.
TABLE 7: DEALER GROSS MARGIN
[millions of dollars]
Administration fees
Less:
Investment dealer fees
Dealer gross margin
ASSET MANAGEMENT MARGIN
Quarter
ended
Dec. 31, 2018
94.2
Quarter
ended
Sep. 30, 2018
94.8
Quarter
ended
Dec. 31, 2017
89.5
Year
ended
Dec. 31, 2018
372.4
Year
ended
Dec. 31, 2017
341.9
75.4
18.7
19.9%
76.4
18.4
19.4%
72.4
17.1
19.1%
298.0
74.3
279.9
62.0
20.0%
18.1%
CI assesses the overall performance of the asset management segment using a trailing 12-month asset management margin,
where deferred sales commissions, trailer fees, and SG&A expenses are deducted from management fees and measured as a
percentage of management fees (all figures are before inter-segment eliminations). This removes distortion caused by other
revenues and expenses, eliminates the financing impact of back-end load funds, and eliminates revenue mix variances because
it is measured as a percentage of management fees and not average AUM. Using a trailing 12-month margin eliminates any
seasonality associated with SG&A expenses.
Q4 Financial Report 10 December 31, 2018
Annual Financial Report | 49 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
TABLE 8: ASSET MANAGEMENT MARGIN
[millions of dollars - trailing 12 months]
Management fees
Less:
Deferred sales commissions paid
Trailer fees
Net management fees
Less:
SG&A expenses
Asset management margin
SG&A EFFICIENCY MARGIN
Quarter ended
Dec. 31, 2018
Quarter ended
Sep. 30, 2018
Quarter ended
Jun. 30, 2018
Quarter ended
Mar. 31, 2018
Quarter ended
Dec. 31, 2017
2,004.2
2,062.0
2,005.0
1,961.3
1,897.1
23.1
662.8
1,318.2
424.6
893.6
44.6%
26.7
682.5
1,352.8
433.1
919.7
44.6%
29.2
660.1
1,315.6
415.3
900.3
44.9%
30.8
642.0
1,288.5
402.4
886.1
45.2%
32.6
616.8
1,247.7
380.0
867.7
45.7%
CI uses a trailing 12-month SG&A efficiency margin to assess its costs relative to management fees earned, net of deferred sales
commissions and trailer fees, which are not directly controllable by CI. These expenses are determined by the type, class and
load of funds in which CI’s clients invest. SG&A expenses are subtracted from these net management fees and the remainder is
measured as a percentage of net management fees. Using a trailing 12-month margin eliminates any seasonality associated with
SG&A expenses.
TABLE 9: SG&A EFFICIENCY MARGIN
[millions of dollars - trailing 12 months]
Management fees
Less:
Deferred sales commissions paid
Trailer fees
Net management fees
Less:
SG&A expenses
SG&A efficiency margin
Quarter ended
Dec. 31, 2018
Quarter ended
Sep. 30, 2018
Quarter ended
Jun. 30, 2018
Quarter ended
Mar. 31, 2018
Quarter ended
Dec. 31, 2017
2,004.2
2,062.0
2,005.0
1,961.3
1,897.1
23.1
662.8
26.7
682.5
29.2
660.1
30.8
642.0
32.6
616.8
1,318.2
1,352.8
1,315.6
1,288.5
1,247.7
424.6
893.6
67.8%
433.1
919.7
68.0%
415.3
900.3
68.4%
402.4
886.1
68.8%
380.0
867.7
69.5%
Q4 Financial Report 11 December 31, 2018
Annual Financial Report | 50 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
ASSETS AND SALES
CI is one of Canada’s largest independent investment fund companies with assets under management of $124.4 billion and assets
under advisement of $41.8 billion at December 31, 2018, as shown in Table 10. Assets under advisement are comprised of AUA
and assets held by clients of advisors with Stonegate Private Counsel. Assets under management decreased 13% year over year,
mainly due to challenging market conditions and net redemptions of funds. The 2% decrease in assets under advisement from
last year was due to market declines, partially offset by net sales and advisor recruitment. Total assets, which include mutual,
segregated and hedge funds, separately managed accounts, structured products, exchange-traded funds, pooled funds and assets
under advisement, were $166.2 billion at December 31, 2018, down $19.6 billion from $185.7 billion at December 31, 2017.
TABLE 10: TOTAL ASSETS
[billions of dollars]
Assets under management
Assets under advisement1
Total assets
As at
As at
December 31, 2018
December 31, 2017
% change
124.4
41.8
166.2
143.0
42.7
185.7
(13)
(2)
(11)
1Includes $25.2 billion and $25.8 billion of assets managed by CI and held by clients of advisors with Assante and Stonegate in 2018 and 2017,
respectively.
After a year of strong performance for capital markets in 2017, investors experienced a bumpier ride in 2018. Downward
volatility resurfaced in the first quarter, and though markets moved generally higher through the summer months, a sharp sell-
off in the fourth quarter meant that most asset classes registered negative returns for the year. For Canadian investors in
foreign markets, losses were mitigated somewhat by the weakness of the Canadian dollar, which declined against most large
global currencies, including 8% relative to the U.S. dollar for the year.
U.S. equities posted some of the best results among global assets in 2018, with the S&P 500 Index reaching an all-time high
and setting a record for the longest bull market on record in the third quarter. After the fourth quarter sell-off, however, the
index finished the year with a loss of 4.4% (a gain of almost 4% in Canadian dollar terms). Canada’s S&P/TSX Composite Index,
meanwhile, was weighed down by themes that included plunging energy prices as well as weakness in materials and financial
services. The Canadian benchmark finished the year with a loss of 8.9%. The MSCI World Index, a broad measure of developed
market equities, fell 8.2% in U.S. dollars (-0.2% in Canadian dollars).
The change in AUM during each of the past five quarters is detailed in Table 11 and a breakdown of CI’s sales is provided in
Table 12.
Q4 Financial Report 12 December 31, 2018
Annual Financial Report | 51 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
TABLE 11: CHANGE IN ASSETS UNDER MANAGEMENT
[billions of dollars]
Quarter ended
Dec. 31, 2018
Quarter ended
Sep. 30, 2018
Quarter ended
Jun. 30, 2018
Quarter ended
Mar. 31, 2018
Quarter ended
Dec. 31, 2017
Assets under management, beginning
136.526
138.182
139.223
143.028
121.725
Gross sales
Redemptions
Net sales
Acquisitions (divestitures)
Fund performance
Assets under management, ending
Average assets under management
3.023
5.742
(2.719)
—
(9.447)
124.360
129.316
3.015
5.433
(2.418)
—
0.762
136.526
138.322
3.209
6.028
(2.819)
(1.025)
2.803
138.182
139.487
5.187
6.515
(1.328)
—
(2.477)
139.223
141.870
4.251
5.657
(1.406)
19.019
3.690
143.028
142.469
CI’s Canadian business, excluding products closed to new investors, had $2.6 billion in gross sales and $2.7 billion in net
redemptions for the quarter ended December 31, 2018. CI’s international business had $260 million in net sales in the fourth
quarter, up $466 million from the same quarter last year. CI’s closed business, comprised primarily of segregated fund contracts
that are no longer available for sale, had $259 million in net redemptions for the quarter.
TABLE 12: SALES BREAKDOWN
[millions of dollars]
Canadian Business
Retail
Institutional
International Business
Retail
Institutional
Closed Business
Total
Quarter ended December 31, 2018
Year ended December 31, 2018
Gross Sales
Redemptions
Net Sales
Gross Sales
Redemptions
Net Sales
2,160
414
2,574
225
209
434
15
4,491
802
5,294
76
99
175
274
3,023
5,742
(2,331)
(389)
(2,720)
150
110
260
(259)
(2,719)
10,536
2,576
13,112
525
729
1,254
69
14,434
18,767
3,263
22,029
298
249
547
1,142
23,719
(8,231)
(687)
(8,918)
227
480
707
(1,074)
(9,285)
Q4 Financial Report 13 December 31, 2018
Annual Financial Report | 52 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
RESULTS OF OPERATIONS
Year Ended December 31, 2018
For the year ended December 31, 2018, CI reported net income attributable to shareholders of $617.5 million ($2.38 per share)
versus $549.1 million ($2.08 per share) for the year ended December 31, 2017. The year ended December 31, 2017 included two
provisions: a $45 million income tax provision for the settlement of outstanding notices of reassessment relating to the interest
rate charged on subordinated notes within CI's income trust structure for the years 2006 to 2008; and a $39.0 million ($28.7
million after tax) provision for compensation, legal, and tax costs primarily related to the acquisitions of Sentry and BBS. Last year
also included a $5.6 million fair value adjustment to contingent consideration related to First Asset.
For 2017, net income attributable to shareholders, excluding the provisions and fair value adjustment detailed above, was $628.4
million ($2.38 per share). The $10.9 million decrease in adjusted net income was primarily due to SG&A expenses increasing
13.8%, relative to a 5.6% increase in management fees, each of which is described in further detail below.
CI’s total revenue was $2,236.4 million in 2018, an increase of 5.9% when compared to total revenue of $2,111.3 million in 2017.
The change from last year was primarily due to the increase in management fees as a result of the 8.7% increase in average AUM.
Management fees increased at a lower rate relative to average AUM due to fee reductions on certain products and changes to
CI’s mix of business. CI’s acquisition of Sentry in October 2017 drove the positive change in AUM, partially offset by net redemptions
of funds.
SG&A expenses for the year ended 2018 were $522.5 million, compared to $459.1 million for the year ended 2017. SG&A increased
year over year primarily due to the inclusion of Sentry and BBS for a full year. As an annualized percentage of average AUM, SG&A
expenses were 0.381%, up from 0.364% last year. The increase in basis points was a result of strategic investments in CI’s business.
In 2018, CI paid $22.1 million in deferred sales commissions, compared with $31.3 million in 2017. Consistent with the Canadian
mutual fund industry, CI’s sales into deferred load funds has been steadily decreasing over the past decade.
Interest expense of $43.1 million was recorded for the year ended December 31, 2018 compared with $24.9 million for the year
ended December 31, 2017. The change in interest expense reflects the changes in average debt levels and interest rates, as
discussed under the Liquidity and Capital Resources section.
CI recorded $225.5 million in income tax expense in 2018, for an effective tax rate of 26.7%, compared to $258.8 million in 2017.
The effective tax rate for 2017 was higher than normal due to $45 million in current income tax expenses recorded in the second
quarter related to the settlement of outstanding notices of reassessment received for the years 2006 to 2008.
CI’s effective tax rate may differ from its statutory tax rate, which is currently 26.5%, as a result of some expenses being non-
deductible or partially deductible, or some revenue items not being fully taxable.
Q4 Financial Report 14 December 31, 2018
Annual Financial Report | 53 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
Quarter Ended December 31, 2018
For the quarter ended December 31, 2018, CI reported net income attributable to shareholders of $140.3 million ($0.57 per
share) versus $139.4 million ($0.51 per share) for the quarter ended December 31, 2017 and $158.2 million ($0.62 per share)
for the quarter ended September 30, 2018. As mentioned earlier, the fourth quarter of 2017 included a $39.0 million ($28.7
million after tax) provision for compensation, legal and tax costs primarily related to the acquisitions of Sentry and BBS. The
quarter also included a $5.6 million fair value adjustment to contingent consideration related to First Asset.
For the quarter ended December 31, 2017, net income attributable to shareholders, excluding the provisions and fair value
adjustment detailed above, was $173.7 million ($0.63 per share). The decrease from the prior year was mainly due to lower
management fees resulting from lower average AUM.
CI’s total revenue was $529.2 million in the fourth quarter of 2018, a decrease of 11.0% when compared to total revenue of
$594.4 million in the same period in 2017. On a consecutive quarter basis, total revenue decreased 7.0% from $569.0 million in
the third quarter of 2018. The decrease from both periods was primarily due to lower average AUM.
SG&A expenses for the fourth quarter of 2018 were $126.2 million, compared to $130.8 million in the same quarter of 2017 and
$131.4 million in the prior quarter. SG&A decreased from both periods due to lower variable expenses as well as cost containment
measures implemented by management. As an annualized percentage of average AUM, SG&A expenses were 0.387%, up from
0.364% for the fourth quarter of last year and up from 0.377% for the prior quarter.
In the fourth quarter of 2018, CI paid $3.9 million in deferred sales commissions, compared with $7.3 million in the same quarter
of 2017 and $4.1 million in the prior quarter. Consistent with the Canadian mutual fund industry, CI’s sales into deferred load
funds has been steadily decreasing over the past decade.
Interest expense of $12.4 million was recorded for the quarter ended December 31, 2018 compared with $8.6 million for the
quarter ended December 31, 2017 and $11.6 million for the quarter ended September 30, 2018. The change in interest expense
reflects the changes in average debt levels and interest rates, as discussed under the Liquidity and Capital Resources section.
For the fourth quarter of 2018, CI recorded $51.0 million in income tax expense for an effective tax rate of 26.6% compared to
$53.9 million, or 27.8%, in the fourth quarter of 2017, and $59.5 million, or 27.3%, in the prior quarter.
Q4 Financial Report 15 December 31, 2018
Annual Financial Report | 54 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
ASSET MANAGEMENT SEGMENT
The Asset Management segment is CI’s principal business segment and its operating results are presented in Table 13.
TABLE 13: RESULTS OF OPERATIONS - ASSET MANAGEMENT SEGMENT
[millions of dollars]
Management fees
Other revenue
Total revenue
Selling, general and administrative
Trailer fees
Deferred sales commissions paid
Amortization of intangibles
Other expenses
Total expenses
Non-controlling interest
Income before taxes and non-segmented items
Year Ended December 31, 2018
Revenues
Quarter
ended
Dec. 31, 2018
474.2
Quarter
ended
Sep. 30, 2018
509.9
Quarter
ended
Dec. 31, 2017
532.1
Year
ended
Dec. 31, 2018
2,004.2
Year
ended
Dec. 31, 2017
1,897.1
(5.0)
469.2
101.0
156.3
4.1
1.6
3.3
0.9
510.9
107.5
168.7
4.3
1.5
1.0
266.3
282.9
0.1
202.8
0.2
227.8
9.6
541.6
109.6
176.0
7.7
1.4
46.7
341.3
0.2
200.1
2.3
2,006.5
14.5
1,911.6
424.6
662.8
23.1
5.9
8.3
380.0
616.8
32.6
3.7
52.0
1,124.7
1,085.2
0.5
881.2
(0.2)
826.6
Revenues from management fees were $2,004.2 million for the year ended December 31, 2018, a change of 5.6% from $1,897.1
million for the year ended December 31, 2017. The change in management fees from last year was mainly due to the inclusion
of Sentry for a full year, offset by net redemptions of funds. Net management fees (management fees less trailer fees and deferred
sales commissions) as a percentage of average AUM were 0.961%, down from 0.988% for 2017.
For the year ended December 31, 2018, other revenue was $2.3 million versus $14.5 million for the year ended December 31,
2017. The decrease was primarily a result of mark-to-market losses on CI’s marketable securities and lower distributions on
investments in the fourth quarter.
Expenses
SG&A expenses for the Asset Management segment were $424.6 million for the year ended December 31, 2018, compared with
$380.0 million for the year ended December 31, 2017. As a percentage of average AUM, SG&A expenses were 0.309% for 2018,
up from 0.301% for 2017. The increase as a percentage of average AUM from the prior year was primarily a result of CI reinvesting
in its business along with the acquisition of Sentry. Another measure that CI uses to assess its costs is the SG&A efficiency margin,
as discussed in the “Non-IFRS Measures” section and as set out in Table 9. CI’s SG&A efficiency margin was 67.8% for 2018,
compared with 69.5% for 2017.
Q4 Financial Report 16 December 31, 2018
Annual Financial Report | 55 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
Trailer fees were $662.8 million for the year ended December 31, 2018, up 7.5% from $616.8 million for the year ended
December 31, 2017. Net of inter-segment amounts, this expense was $631.2 million for 2018 versus $587.4 million for 2017. The
increase from last year was due to the inclusion of Sentry for a full year.
In 2018, before inter-segment eliminations, CI paid $23.1 million in deferred sales commissions, compared with $32.6 million in
2017. CI’s sales into deferred load funds has been steadily decreasing over the past decade, consistent with the investment fund
industry as a whole.
Other expenses for the year ended December 31, 2018 were $8.3 million, compared to $52.0 million last year. In 2017, the primary
component of other expenses were the provisions for compensation, legal and tax costs discussed earlier.
For 2018, the asset management margin was 44.6% versus 45.7% for 2017. The decrease in margin was a function of management
fees increasing at a lower rate relative to the increase in SG&A. The calculations and definitions of asset management margin
can be found in the “Non-IFRS Measures” section and in the trailing 12-month calculations in Table 8.
Income before taxes and non-segmented items for CI’s principal segment was $881.2 million for the year ended December 31,
2018, up from $826.6 million for the year ended December 31, 2017.
Quarter Ended December 31, 2018
Revenues
Revenues from management fees were $474.2 million for the quarter ended December 31, 2018, a decrease of 10.9% from
$532.1 million for the quarter ended December 31, 2017 and a decrease of 7.0% from $509.9 million for the quarter ended
September 30, 2018. The decrease in management fees from the fourth quarter of last year was mainly due to the 9.2% decrease
in average AUM. Net management fees (management fees less trailer fees and deferred sales commissions) as a percentage of
average AUM were 0.963%, down from 0.970% for the fourth quarter last year and from 0.966% for the prior quarter.
For the quarter ended December 31, 2018, other revenue was $(5.0) million versus $9.6 million for the quarter ended
December 31, 2017 and $0.9 million for the quarter ended September 30, 2018. The decrease was primarily a result of lower
redemption fee revenue, mark-to-market losses on marketable securities, and lower distributions on investments.
Expenses
SG&A expenses for the Asset Management segment were $101.0 million for the quarter ended December 31, 2018, compared
with $109.6 million for the fourth quarter in 2017 and $107.5 million for the prior quarter. SG&A decreased from both periods
due to lower variable expenses as well as cost containment measures implemented by management. As a percentage of average
AUM, SG&A expenses were 0.310% for the quarter ended December 31, 2018, up from 0.305% for the quarter ended
December 31, 2017, and up slightly from 0.308% in the quarter ended September 30, 2018. Another measure that CI uses to
assess its costs is the SG&A efficiency margin, as discussed in the “Non-IFRS Measures” section and as set out in Table 9. CI’s
current quarter SG&A efficiency margin was 67.8%, down from 68.6% in the fourth quarter of last year and down slightly from
68.1% in the prior quarter.
Q4 Financial Report 17 December 31, 2018
Annual Financial Report | 56 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
Trailer fees were $156.3 million for the quarter ended December 31, 2018, down 11.2% from $176.0 million for the quarter ended
December 31, 2017 and down 7.4% from $168.7 million for the prior quarter. Net of inter-segment amounts, this expense was
$149.1 million for the quarter ended December 31, 2018 versus $167.8 million for the fourth quarter of 2017 and $160.6 million
for the third quarter of 2018. The decrease from both periods was primarily due to the changes in average AUM.
In the fourth quarter of 2018, before inter-segment eliminations, CI paid $4.1 million in deferred sales commissions, compared
with $7.7 million in the same quarter of 2017 and $4.3 million in the prior quarter. CI’s sales into deferred load funds has been
steadily decreasing over the past decade.
Other expenses for the quarter ended December 31, 2018 were $3.3 million, compared to $46.7 million in the same quarter of
last year and $1.0 million in the previous quarter. Other expenses for the fourth quarter of last year included the provisions for
compensation, legal and tax costs discussed earlier as well as the $5.6 million fair value adjustment to contingent consideration
payments related to First Asset.
The asset management margin for the fourth quarter of 2018 was 44.9% compared to 44.9% in the fourth quarter of 2017 and
45.0% in the prior quarter. The calculations and definitions of asset management margin can be found in the “Non-IFRS Measures”
section.
Income before taxes and non-segmented items for CI’s principal segment was $202.8 million for the quarter ended December 31,
2018, up 1.3% from $200.1 million in the same period in 2017 and down 11.0% from $227.8 million in the previous quarter. For
the fourth quarter of 2017, income before taxes and non-segmented items, excluding the provisions and fair value adjustment
to contingent consideration discussed earlier, was $244.7 million.
ASSET ADMINISTRATION SEGMENT
The Asset Administration segment operating results are presented in Table 14.
TABLE 14: RESULTS OF OPERATIONS - ASSET ADMINISTRATION SEGMENT
[millions of dollars]
Administration fees
Other revenue
Total revenue
Selling, general and administrative
Investment dealer fees
Amortization of intangibles
Other expenses
Total expenses
Income before taxes and non-segmented items
Quarter
ended
Dec. 31, 2018
94.2
Quarter
ended
Sep. 30, 2018
94.8
Quarter
ended
Dec. 31, 2017
89.5
Year
ended
Dec. 31, 2018
372.4
Year
ended
Dec. 31, 2017
341.9
8.3
102.4
25.1
75.4
1.0
0.1
101.6
0.8
8.0
102.8
23.9
76.4
1.0
0.1
101.4
1.4
6.9
96.4
21.2
72.4
0.9
0.2
94.7
1.7
32.3
404.7
97.9
298.0
3.8
0.3
400.0
4.6
25.7
367.6
79.1
279.9
2.7
(0.3)
361.4
6.3
Q4 Financial Report 18 December 31, 2018
Annual Financial Report | 57 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
Year Ended December 31, 2018
Revenues
Administration fees were $372.4 million for the year ended December 31, 2018, an increase of 8.9% from $341.9 million for the
year ended December 31, 2017. The change in administration fees from last year related to the change in assets under
administration at Assante as well as the inclusion of BBS for a full year. Net of inter-segment amounts, administration fee revenue
was $197.6 million for the 12 months ended December 31, 2018, up from $174.0 million for the 12 months ended December 31,
2017.
Other revenue earned by the Asset Administration segment is mainly comprised of non-advisor-related activities. For 2018, other
revenue was $32.3 million, up from $25.7 million for 2017.
Expenses
Investment dealer fees were $298.0 million for the year ended December 31, 2018 compared to $279.9 million for the year ended
December 31, 2017. Net of inter-segment amounts, investment dealer fees were $155.9 million, up from $142.7 million last year.
Investment dealer fees generally fluctuate with Assante’s administration fee revenue.
As discussed in the “Non-IFRS Measures” section of this MD&A and as set out in Table 7, dealer gross margin was $74.3 million
or 20.0% of administration fee revenue for the 12 months ended December 31, 2018 compared to $62.0 million or 18.1% for the
12 months ended December 31, 2017. The increase in dealer gross margin as a percentage of administration fee revenue was
mainly due to the inclusion of BBS for a full year, which earns administration fees but does not pay investment dealer fees.
SG&A expenses for the segment were $97.9 million for 2018 compared to $79.1 million for 2017. The increase in SG&A expenses
from last year was due to the inclusion of BBS for full year, as well as an increase in Assante’s discretionary spend.
The Asset Administration segment had income before taxes and non-segmented items of $4.6 million for the year ended
December 31, 2018, compared to $6.3 million for the year ended December 31, 2017.
Quarter Ended December 31, 2018
Revenues
Administration fees were $94.2 million for the quarter ended December 31, 2018, an increase of 5.3% from $89.5 million for the
same period a year ago and a decrease of 0.6% from $94.8 million for the prior quarter. The change in administration fees from
the same quarter last year related to the change in assets under administration at Assante as well as the inclusion of BBS for a
full quarter. Net of inter-segment amounts, administration fee revenue was $51.8 million for the quarter ended December 31,
2018, up from $45.8 million for the quarter ended December 31, 2017 and up from $50.2 million in the previous quarter.
For the quarter ended December 31, 2018, other revenue was $8.3 million, up from $6.9 million in the same quarter of 2017
and up from $8.0 million in the third quarter of 2018.
Q4 Financial Report 19 December 31, 2018
Annual Financial Report | 58 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
Expenses
Investment dealer fees were $75.4 million for the quarter ended December 31, 2018 compared to $72.4 million for the fourth
quarter of 2017 and $76.4 million for the quarter ended September 30, 2018. Net of inter-segment amounts, investment dealer
fees were $40.5 million, up from $37.3 million for the same quarter last year and up from $40.1 million for the quarter ended
September 30, 2018.
As discussed in the “Non-IFRS Measures” section of this MD&A and as set out in Table 7, dealer gross margin was $18.7 million
or 19.9% of administration fee revenue for the quarter ended December 31, 2018 compared to $17.1 million or 19.1% for the
fourth quarter of 2017 and $18.4 million or 19.4% for the previous quarter. The increase in dealer gross margin as a percentage
of administration fee revenue from the fourth quarter of 2017 was mainly due to the inclusion of BBS for a full quarter.
SG&A expenses for the segment were $25.1 million for the quarter ended December 31, 2018 compared to $21.2 million in the
fourth quarter of 2017 and $23.9 million in the third quarter of 2018. The increase in SG&A expenses from the same period last
year was due to the addition of BBS for a full quarter as well as an increase in Assante’s discretionary spend.
The Asset Administration segment had income before taxes and non-segmented items of $0.8 million for the quarter ended
December 31, 2018, compared to $1.7 million for the fourth quarter of 2017 and $1.4 million for the prior quarter.
LIQUIDITY AND CAPITAL RESOURCES
CI generated $655.5 million of free cash flow in 2018, compared to $648.4 million for 2017. Reconciliations of free cash flow to
cash provided by operating activities are provided in the “Non-IFRS Measures” section and set out in Table 4.
CI primarily uses cash flow to fund capital expenditures, fund acquisitions, pay down debt, pay dividends on its shares, and
repurchase shares through its normal course issuer bid. At current levels of cash flow and anticipated dividend payout rates, CI
produces sufficient cash to meet its obligations and support planned business operations for at least the next 12 months.
CI’s cash flows may fluctuate, primarily in the first quarter, as a result of the balance of cash income taxes and incentive
compensation being paid at the end of February.
Q4 Financial Report 20 December 31, 2018
Annual Financial Report | 59 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
TABLE 15: SUMMARY OF CASH FLOWS
[millions of dollars]
Free cash flow
Less:
Investments in marketable securities, net of marketable securities sold
Capital expenditures
Share repurchases, net of shares issued
Dividends paid
Debt repaid / (drawn)
Working capital and other items
Net change in cash
Cash at January 1
Cash at December 31
Year ended
Dec. 31, 2018
Year ended
Dec. 31, 2017
655.5
(4.2)
11.7
656.5
295.4
(384.7)
68.2
642.9
12.6
124.6
137.2
648.4
18.7
9.2
413.2
368.0
(358.8)
191.4
641.7
6.7
117.9
124.6
During 2018, CI invested $17.8 million in marketable securities and received proceeds of $22.0 million from the disposition of
marketable securities. Excluding BBS’ securities owned, at market, the fair value of CI’s investments as of December 31, 2018
was $133.0 million. This was comprised of seed capital investments in CI funds and strategic investments.
During the year ended December 31, 2018, CI invested $11.7 million in capital assets, up from $9.2 million in the year ended
December 31, 2017. These investments related primarily to technology and leasehold improvements.
During 2018, CI paid dividends of $295.4 million and repurchased 28.5 million shares under its normal course issuer bid at a total
cost of $656.9 million, or $23.03 per share. CI’s current dividend rate is $0.18/share per calendar quarter.
The statement of financial position for CI at December 31, 2018 reflected total assets of $4.292 billion, a decrease of $53.0 million
million from $4.345 billion at December 31, 2017. This change was primarily due to a decrease in marketable securities, as well
as accounts receivable and prepaid expenses, partially offset by an increase in cash and client and trust funds on deposit.
CI’s cash and cash equivalents increased by $12.6 million in 2018 to $137.2 million as of December 31, 2018. Accounts receivable
and prepaid expenses decreased by $79.6 million to $156.8 million as of December 31, 2018. Capital assets increased by $1.7
million during the year ended December 31, 2018 as a result of $11.7 million in capital additions less $10.0 million in amortization.
Total liabilities increased by $419.6 million during the year to $2.859 billion at December 31, 2018. This change was mainly
attributable to a $385.6 million increase in debt, as well as an increase in dividends payable, as CI declared dividends through to
the end of 2019. In total, CI had $1,225.0 million in outstanding debentures at December 31, 2018 with a weighted average
interest rate of 3.16% and a carrying value of $1,220.2 million.
As of December 31, 2018, CI had drawn $283.5 million against its $700 million credit facility. Principal repayments on any drawn
amounts are only required at the maturity of the facility. At the beginning of the fourth quarter, CI amended its credit facility
agreement, which has a new maturity date of December 11, 2021.
Q4 Financial Report 21 December 31, 2018
Annual Financial Report | 60 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
Net debt, as discussed in the “Non-IFRS Measures” section and as set out in Table 6, was $1,255 million at December 31, 2018,
up from $861 million at December 31, 2017. This increase was primarily due to CI returning more cash to shareholders in the
form of share repurchases and dividends, relative to the amount of free cash flow that was generated for the period. The average
gross debt level for the year ended December 31, 2018 was $1,415 million, compared to $966 million for last year.
At December 31, 2018, CI was in a positive working capital position. This, in addition to the availability of its credit facility, reflects
the ability of CI to meet its cash flow requirements.
CI’s ratios of debt to adjusted EBITDA and net debt to adjusted EBITDA were 1.8 to 1 and 1.5 to 1, respectively. CI was within its
financial covenants with respect to its credit facility, which required that the debt to EBITDA ratio remain below 3.0 to 1, and
assets under management not fall below $85 billion, based on a rolling 30-day average.
Shareholders’ equity was $1.430 billion at December 31, 2018, a decrease of $473.0 million from December 31, 2017.
Q4 Financial Report 22 December 31, 2018
Annual Financial Report | 61 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
RISK MANAGEMENT
CI is exposed to a number of risks that are inherent in the wealth management business. Some factors which introduce or
exacerbate risk are within the control of management and others are, by their nature, outside of CI’s direct control but must
still be managed. Effective risk management is a key component to achieving CI’s business objectives and protecting company
and client assets. It is an ongoing process involving the Board of Directors and the company’s Risk Management Committee,
comprised of senior executives representing CI’s business units. The Board has delegated primary responsibility for oversight
of risk management to the Audit and Risk Committee of the Board of Directors.
The Risk Management Committee monitors, evaluates and manages risk, and ensures that business strategies and activities are
consistent with CI’s risk appetite. Regular reports are provided to the Audit and Risk Committee of CI’s Board.
As noted above, the Risk Management Committee is comprised of senior executives from each core business unit and operating
area at CI. CI has developed an enterprise-wide approach to monitoring, evaluating and managing risk. The members of the
Risk Management Committee identify and evaluate specific and material risks, applying both a quantitative and a qualitative
analysis and then assess the likelihood of occurrence of a particular risk event. Once risks have been identified and rated,
strategies and procedures are developed to minimize or avoid negative consequences and these risk mitigation processes are
implemented and monitored with each business unit.
The risks described below are not the only risks facing CI. The risks set out below are risks and uncertainties that the Risk
Management Committee currently believe could materially affect CI’s future financial performance. The reader should carefully
consider the risks described below, and the other information contained in this MD&A, including under the heading “Forward-
Looking Statements” before making an investment decision.
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 the performance of CI’s investment funds 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
ability to meet its financial obligations.
Q4 Financial Report 23 December 31, 2018
Annual Financial Report | 62 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
MARKET RISK FOR THE ASSET MANAGEMENT SEGMENT
At December 31, 2018, approximately 27% of CI’s assets under management were held in fixed-income securities, which are
exposed to interest rate risk. An increase in interest rates causes market prices of fixed-income securities to fall, while a decrease
in interest rates causes market prices to rise. CI estimates that a 50 basis point change in interest rates would cause a change
of about $6 million in annual pre-tax earnings in the Asset Management segment.
At December 31, 2018, about 50% of CI’s assets under management were based in Canadian currency. While CI’s concentration
in Canadian currency assets reduces its exposure to foreign exchange risk, approximately 27% 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. CI estimates that a 10% change in Canadian/U.S. exchange rates would cause a change of about
$26 million in the Asset Management segment’s annual pre-tax earnings.
About 59% of CI’s assets under management were held in equity securities at December 31, 2018, 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 about $61 million in annual pre-tax earnings.
CI has a control environment that ensures market risks are reviewed regularly. CI’s compliance group reviews and monitors CI’s
fund and portfolio investments for compliance with investment policies and regulations. CI also reviews investment processes,
portfolio positioning and attribution of results of its investment teams on a regular basis.
MARKET RISK FOR THE ASSET ADMINISTRATION SEGMENT
CI’s operating results are not materially exposed to market risk impacting the asset administration segment given that this
segment usually generates less than 1% of the total income before non-segmented items (this segment reported a gain of $0.8
million before income taxes and non-segmented items for the quarter ended December 31, 2018). 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 one component of market risk (comprised of interest rate risk, foreign exchange risk and equity risk)
would have resulted in a change of approximately $4 million to the Asset Administration segment’s annual pre-tax earnings.
POLITICAL AND MARKET RISK
CI’s performance is directly affected by financial markets and political conditions, including any political change and uncertainty
in the United States and globally. These changes may cause significant volatility and decline in the global economy or specific
international, regional and domestic financial markets which are beyond the control of CI. There can be no assurance that financial
market performance will be favourable in the future. Any decline in financial markets or lack of sustained growth in such markets
may result in a corresponding decline in performance, which could negatively impact CI’s business and impede the growth of CI’s
assets under management and revenue.
Q4 Financial Report 24 December 31, 2018
Annual Financial Report | 63 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
STRATEGIC RISK
Strategic risks are risks that directly impact the overall direction of CI and the ability of CI to successfully identify growth
opportunities and implement proposed solutions. The key strategic risk is the risk that management fails to anticipate, and
respond to, changes in the business environment, including demographic, regulatory and competitive changes. CI’s performance
is directly affected by the financial market and business conditions, including the legislation and policies of the governments
and regulatory authorities having jurisdiction over CI’s operations. These are beyond the control of CI; however, an important
part of the risk management process is the ongoing review and assessment of industry and economic trends and changes.
Strategies are then designed to effectively respond to any anticipated changes, including identifying acquisition opportunities,
developing new business lines, introducing new products, and implementing cost control strategies.
Part of CI’s strategy includes strategic acquisitions and investments in growth opportunities. Strategic acquisitions may benefit
CI through increasing fee earning assets, broadening CI’s distribution relationships, enhancing CI’s business capabilities and
capturing cost synergies. CI embarks on a thorough due diligence process prior to any acquisition; however, there can be no
assurances that the anticipated benefits of any acquisition will be achieved. The success of an acquisition is contingent upon
many factors, including retaining key employees, securing assets acquired, obtaining legal and regulatory approvals, integrating
operations and vendor relationships, and having favourable economic conditions.
REPUTATION RISK
Reputation risk is the potential negative impact of a deterioration of CI’s image or lower public confidence in the CI brand, its
senior management or its products and services. Operational errors, poor performance, regulatory investigation or sanctions,
litigation or employee misconduct could result in reputational harm to CI. Through its Codes of Conduct, governance practices,
risk management programs, policies, procedures and training, CI attempts to prevent and detect any activities by CI officers,
directors, and employees that would harm CI’s reputation. While all employees, directors and officers are expected to protect
the reputation of CI, there can be no assurances that unauthorized or unsuccessful activities may result in damage to CI’s
reputation, which could adversely affect CI’s business and profitability.
COMPETITION RISK
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, 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, and potential future
competitors may have, greater technical, financial, marketing, distribution or other resources than CI. The trend toward greater
consolidation within the investment management industry has increased the strength of a number of CI’s competitors. CI’s
competitors seek to expand market share by offering different products and services and more competitive pricing than those
offered by CI. While CI continues to develop and market new products and services and remains competitive with respect to
fees, there can be no assurance that CI will maintain its current standing or market share or investment performance relative
to its competitors, which may adversely affect the business, financial condition or operating results of CI.
Q4 Financial Report 25 December 31, 2018
Annual Financial Report | 64 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
In addition, there are uncertainties involved in the introduction of new products and services, including technical requirements,
operational controls and procedures, compliance with regulatory requirements and shifting market preferences. The
development and introduction of new products and services may require ongoing support and investment. A failure to manage
the risks involved in the implementation of new products and services may lead to operational lapses, increased capital
requirements, and competitive alternatives, which could adversely affect CI’s standing, market share or investment performance
relative to its competitors and negatively impact the business, financial condition or operating results of CI.
DISTRIBUTION RISK
CI distributes its investment products through a number of distribution channels, including brokers, independent financial
planners and insurance advisors. CI’s access to these distribution channels is impacted by the strength of the relationship with
certain business partners and the level of competition faced from the financial institutions that own those channels. While CI
continues to develop and enhance existing relationships, there can be no assurance that CI will, in the future, enjoy the level
of access that it has in the past, which would adversely affect its sales of investment products.
REGULATORY AND LEGAL RISK
CI’s business is dependent upon compliance with and continued registration under securities laws in all jurisdictions in which
CI and its subsidiaries 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 product or services or CI’s investment strategies cause or
contribute to reduced sales of CI’s products or lower margins or impair the investment performance of CI’s products, CI’s aggregate
assets under management and its revenues may be adversely affected. In addition, the ongoing change in the securities regulatory
environment governing CI’s business may require additional human resources and operations which will increase costs.
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 corporate laws, securities laws, stock exchange rules and misuse of investors’ funds. Some violations
of corporate laws, securities laws or stock exchange rules could result in civil liability, fines, sanctions, or expulsion from a self-
regulatory organization or the suspension or revocation of CI’s right to carry on an existing business. CI may incur significant
costs in connection with such potential liabilities.
Q4 Financial Report 26 December 31, 2018
Annual Financial Report | 65 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
INFORMATION TECHNOLOGY RISK
CI uses information technology and the internet to streamline business operations and to improve the client and advisor
experience. However, with the use of information technology and the internet, email messaging and other online capabilities,
CI is exposed to information security risk that could potentially have an adverse impact on its business. CI is dependent on its
information security policies, procedures and capabilities to protect its computer and telecommunications systems and the data
that it transmits through its information technology systems. Any information technology event, such as a hacker attack or virus,
or internal issue, such as the failure to implement sufficient controls, could result in unauthorized access to sensitive or
confidential information, theft, operational disruption, regulatory actions, legal liability or reputational harm. CI actively monitors
this risk and continues to develop controls to protect against cyber threats that are becoming more sophisticated and pervasive.
In addition, CI has and will continue to implement safeguards to control access to sensitive information, through password
protection, encryption of confidential information and other means. Notwithstanding these measures, CI cannot fully mitigate
the risk associated with information technology security. If mobile electronic devices, such as laptops or smart phones, are
stolen, lost or left unattended, such devices may become exposed to hacking or other unauthorized use. As well, CI is dependent
on the efficiency and effectiveness of the technology it uses and keeping pace with a continuously evolving information
technology landscape. Malfunctioning of any of the technologies used by CI and being slow to keep pace could disrupt the
company’s success and negatively impact CI’s financial position and reputation.
CI’s business is dependent on the physical integrity of its infrastructure, including its office space, storage centers and other
facilities. CI has taken precautions to protect the physical security of its infrastructure, and the sensitive information contained
therein, through passkey protection, limited after-hours access and clean desk policies. However, a breach of the physical integrity
of CI infrastructure may leave sensitive information vulnerable to unauthorized access and use, increasing a possible security
risk, which could negatively impact CI’s business and reputation.
OPERATIONAL RISK
Operational risk is the risk of loss resulting from inadequate or failed internal processes or systems. The operational risk that CI
is exposed to may arise from, technology failures, business disruption, theft and fraud, failure of key third parties, employee
errors, processing and execution errors, and inaccurate or incomplete client information. Operational risk may result in a financial
loss but can also lead to regulatory sanctions and harm to CI’s reputation. Operational risk driven by people and processes are
mitigated through human resources policies and practices, and a strong internal control environment. Operational risks driven
by systems and services are managed through controls over technology development and change management as well as
enhanced procedures for oversight of third-party service providers. While CI continuously monitors its operational risks, there
can be no assurances that CI’s internal control procedures can mitigate all operational risks.
TAXATION RISK
CI is subject to various uncertainties concerning the interpretation and application of Canadian tax laws. CI Investments is
considered a large case file by the Canada Revenue Agency and, as such, is subject to audit each year. There is a significant lag
between the end of a fiscal year and when such audits are completed. Therefore, at any given time, several years may be open
for audit and/or adjustments. While CI regularly assesses the likely outcome of these audits in order to determine the
Q4 Financial Report 27 December 31, 2018
Annual Financial Report | 66 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
appropriateness of its tax provision, there can be no assurance that CI will accurately predict the outcomes of these audits. If
tax authorities disagree with CI’s application of such tax laws, CI’s profitability and cash flows could be adversely affected.
REDEMPTION RISK
CI earns revenue primarily from management fees earned for advising and managing investment fund assets. The level of these
assets is dependent on (i) sales; (ii) redemptions; and (iii) investment performance. Sales and redemptions may fluctuate
depending on market and economic conditions, investment preference, or other factors.
Significant redemptions could adversely affect investor fund returns by impacting market values and increasing transaction costs
or taxable distributions. Continued large redemptions could negatively impact the prospects and operating results of CI.
KEY PERSONNEL RISK
The success of CI 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, could
adversely affect CI’s business. The retention of these key managers and the identification and development of the next generation
of managers is an area of focus for CI. 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.
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 with specialized skills related to, among other things, marketing, risk management,
credit, information technology, accounting, administrative operations and legal affairs. These highly skilled and often highly
specialized individuals play an important role in developing, implementing, operating, managing and distributing CI’s products
and services. Accordingly, the recruitment and retention of skilled personnel, continuous training and transfer of knowledge
are key activities that are essential to CI’s performance. CI has taken, and will continue to take, steps to encourage our key
employees to remain employed at CI, including the implementation of long-service awards, employee engagement strategies
and enhanced transparency measures with respect to compensation. In addition, the focus on asset growth and the reliance
on investment performance to sell financial products has 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. The loss of these individuals or an inability to attract,
retain and motivate a sufficient number of qualified personnel could result in a loss of clients and a decline in sales and adversely
affect CI’s business.
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.
Q4 Financial Report 28 December 31, 2018
Annual Financial Report | 67 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS | MANAGEMENT’S DISCUSSION & ANALYSIS |
INSURANCE RISK
CI maintains various types of insurance which include financial institution bonds, errors and omissions insurance, directors’,
trustees’ and officers’ liability insurance, agents’ insurance and general commercial liability insurance. Management evaluates
the adequacy of CI’s insurance coverage on an ongoing basis. However, 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 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.
CAPITAL RISK
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.
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 significant exposure to any individual counterparty. Credit risk is mitigated
by regularly monitoring the credit performance of individual counterparties 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.
LIQUIDITY RISK
Liquidity risk is the risk that CI may not be able to generate sufficient funds and within the time required in order to meet its
obligations as they come due. While CI currently has access to financing, unfavourable market conditions may affect the ability
of CI to obtain loans or make other arrangements on terms acceptable to CI.
Q4 Financial Report 29 December 31, 2018
Annual Financial Report | 68 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS SHARE CAPITAL
As at December 31, 2018, CI had 243,721,650 shares outstanding.
Employee Incentive Share Option Plan: At December 31, 2018, 7.0 million options to purchase shares were outstanding, of which
5.8 million options were exercisable at prices ranging from $27.44 to $35.88.
Restricted Share Unit (“RSU”) Plan: 663,773 RSUs were outstanding as at December 31, 2018.
Deferred Share Unit (“DSU”) Plan: 15,563 DSUs were outstanding as at December 31, 2018.
Additional details about the above Plans can be found in Note 9 to the Consolidated Financial Statements.
CONTRACTUAL OBLIGATIONS
The table that follows summarizes CI’s contractual obligations at December 31, 2018.
PAYMENTS DUE BY YEAR
[millions of dollars]
Long-term debt
Operating leases
Total
Total
1,508.5
90.0
1,598.5
1 year
or less
—
14.1
14.1
2
450.0
12.9
462.9
3
483.5
12.3
495.8
4
—
11.8
11.8
More than
5 years
250.0
27.2
277.2
5
325.0
11.7
336.7
SIGNIFICANT ACCOUNTING ESTIMATES
The December 31, 2018 Consolidated Financial Statements have been prepared in accordance with IFRS. For a discussion of all
significant accounting policies, refer to Note 1 of the Notes to Consolidated Financial Statements. Note 3 provides a discussion
regarding the methodology used for business acquisitions. Note 5 provides a discussion regarding the recoverable amount of CI’s
goodwill and intangible assets compared to its carrying value.
NEW ACCOUNTING POLICIES
Effective, January 1, 2018, CI retrospectively adopted IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial
Instruments. Note 2 of the December 31, 2018 Notes to Consolidated Financial Statements provides a discussion regarding the
new accounting standards and the impact the adoption had on the Consolidated Financial Statements.
Q4 Financial Report 30 December 31, 2018
Annual Financial Report | 69 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS 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 as defined in National Instrument 52-109 (NI 52-109). Management evaluated,
with participation of the CEO and CFO, the effectiveness of the disclosure controls and procedures as at December 31, 2018.
Based on this evaluation, the CEO and CFO have concluded that they are reasonably assured these disclosure controls and
procedures were effective as at December 31, 2018 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 as defined in NI 52-109 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 IFRS. 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, concluded
that the internal controls over financial reporting were effective as at December 31, 2018. 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 quarter ended December 31, 2018, there have been no changes to the internal
controls 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 annual financial statements, management information circular
and annual information form, is available on SEDAR at www.sedar.com and on CI’s website at www.cifinancial.com. Information contained
in or otherwise accessible through the websites mentioned in this MD&A does not form part of, and is not incorporated by reference into,
this MD&A.
Q4 Financial Report 31 December 31, 2018
Annual Financial Report | 70 | December 31, 2018
MANAGEMENT’S DISCUSSION & ANALYSIS Consolidated
Financial Statements
December 31, 2018
CI FINANCIAL CORP
INDEPENDENT AUDITORS’ REPORT
Independent Auditor's Report
TO THE SHAREHOLDERS OF CI FINANCIAL CORP.
Opinion
We have audited the consolidated financial statements of CI Financial Corp. and its subsidiaries (the Company), which comprise
the consolidated statements of financial position as at December 31, 2018 and 2017, and January 1, 2017, and the consolidated
statements of income and comprehensive income, consolidated statements of changes in shareholders’ equity and consolidated
statements of cash flows for the years ended December 31, 2018 and 2017, and notes to the consolidated financial statements,
including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated
financial position of the Company as at December 31, 2018 and 2017, and January 1, 2017, and its consolidated financial
performance and its consolidated cash flows for the years ended December 31, 2018 and 2017 in accordance with International
Financial Reporting Standards (IFRSs).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section
of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit
of the consolidated financial statements in Canada, and we have fulfilled our ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Other Information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion & Analysis.
•
The information, other than the consolidated financial statements and our auditor’s report thereon, in the Annual Report.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information, and in
doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
We obtained Management’s Discussion & Analysis prior to the date of this auditor’s report. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We
have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If based on the work we will
perform on this other information, we conclude there is a material misstatement of other information, we are required to report
that fact to those charged with governance.
Q4 Financial Report 33 December 31, 2018
Annual Financial Report | 73 | December 31, 2018
INDEPENDENT AUDITORS’ REPORT
Independent Auditor's Report
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with
IFRSs, 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.
In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally
accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and
maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may
involve collusion, forgery,
intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Company’s internal
control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
•
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the
Q4 Financial Report 34 December 31, 2018
Annual Financial Report | 74 | December 31, 2018
INDEPENDENT AUDITORS’ REPORT
Independent Auditor's Report
date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a
going concern.
•
Evaluate the overall presentation, structure, and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction,
supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Gary Chin.
Toronto, Canada
February 7, 2019
Q4 Financial Report 35 December 31, 2018
Annual Financial Report | 75 | December 31, 2018
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
[in thousands of Canadian dollars]
ASSETS
Current
Cash and cash equivalents
Client and trust funds on deposit
Investments [note 12]
Accounts receivable and prepaid expenses
Income taxes receivable
Total current assets
Capital assets, net [note 4]
Intangibles [note 5]
Other assets [notes 6 and 8]
Total assets
LIABILITIES AND EQUITY
Current
Accounts payable and accrued liabilities
Current portion of provision for other liabilities [note 8]
Dividends payable [note 10]
Client and trust funds payable
Income taxes payable
Current portion of long-term debt [note 7]
Total current liabilities
Deferred lease inducement
Dividends payable long-term [note 10]
Long-term debt [note 7]
Provision for other liabilities [note 8]
Deferred income taxes [notes 2 and 11]
Total liabilities
Equity
Share capital [note 9(a)]
Contributed surplus
Deficit [note 2]
Accumulated other comprehensive income [note 2]
Total equity attributable to the shareholders of the Company
Non-controlling interests
Total equity
Total liabilities and equity
(see accompanying notes)
On behalf of the Board of Directors:
As at
December 31, 2018
$
As at
December 31, 2017
$
As at
January 1, 2017
$
137,160
365,520
168,122
156,798
8,891
836,491
44,985
3,370,341
40,399
4,292,216
253,518
14,591
175,290
370,756
—
—
814,155
11,320
43,822
1,503,733
20,177
466,083
2,859,290
2,125,130
25,270
(720,600)
277
1,430,077
2,849
1,432,926
4,292,216
124,582
327,733
200,910
236,356
—
889,581
43,241
3,375,840
36,592
4,345,254
299,004
61,210
64,598
375,647
1,124
222,000
1,023,583
12,214
—
896,119
37,385
470,393
117,899
185,424
85,013
148,218
—
536,554
34,741
2,407,966
206,735
3,185,996
222,742
37,246
61,015
183,148
8,586
—
512,737
11,770
—
758,658
48,063
309,548
2,439,694
1,640,776
2,360,257
22,058
(493,534)
14,301
1,903,082
2,478
1,905,560
4,345,254
1,885,066
18,062
(369,689)
9,148
1,542,587
2,633
1,545,220
3,185,996
William T. Holland
Director
Tom P. Muir
Director
Q4 Financial Report 36 December 31, 2018
Annual Financial Report | 76 | December 31, 2018
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
For the years ended December 31
For the years ended December 31
[in thousands of Canadian dollars, except per share amounts]
REVENUE
Management fees
Administration fees
Redemption fees
Realized and unrealized (loss) gain on investments [note 2]
Other income [note 6]
EXPENSES
Selling, general and administrative [note 18]
Trailer fees
Investment dealer fees
Deferred sales commissions [note 2]
Amortization of intangibles
Interest [note 7]
Other [note 6]
Income before income taxes
Provision for (recovery of) income taxes [notes 2 and 11]
Current
Deferred
Net income for the year
Net income (loss) attributable to non-controlling interests
Net income attributable to shareholders [note 2]
Other comprehensive income, net of tax [note 2]
Unrealized gain on available-for-sale financial assets,
net of income taxes of nil [2017 - $843]
Reversal of gains to net income on available-for-sale financial assets,
net of income taxes of nil [2017 - $(56)]
Exchange differences on translation of foreign operations
Total other comprehensive income, net of tax
Comprehensive income for the year
Comprehensive income (loss) attributable to non-controlling interests
Comprehensive income attributable to shareholders [note 2]
Basic earnings per share attributable to shareholders [note 9(e)]
Diluted earnings per share attributable to shareholders [note 9(e)]
(see accompanying notes)
Q4 Financial Report 37 December 31, 2018
Annual Financial Report | 77 | December 31, 2018
2018
$
2,004,151
197,591
14,851
(8,115)
27,887
2017
$
1,897,061
174,009
15,276
1,365
23,585
2,236,365
2,111,296
522,518
631,243
155,871
22,113
9,645
43,054
8,621
1,393,065
843,300
229,009
(3,556)
225,453
617,847
371
617,476
—
—
808
808
618,655
371
618,284
$2.38
$2.38
459,103
587,408
142,698
31,295
6,424
24,926
51,707
1,303,561
807,735
262,001
(3,205)
258,796
548,939
(155)
549,094
5,515
(407)
45
5,153
554,092
(155)
554,247
$2.08
$2.08
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS’ EQUITY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the years ended December 31
For the years ended December 31
[in thousands of Canadian dollars]
$
$
$
Share
capital
[note 9(a)]
Contributed
surplus
Deficit
[note 2]
Accumulated
other
comprehensive
Total
shareholders’
equity
Non-
controlling
interests
$
$
income
[note 2]
$
Total
equity
$
Balance, January 1, 2018
2,360,257
22,058
(478,702)
(531)
1,903,082
2,478
1,905,560
Comprehensive income
Dividends declared [note 10]
—
—
Shares repurchased, net of tax
(243,180)
—
617,476
— (449,919)
— (409,455)
Issuance [notes 8 and 9]
534
—
Issuance of share capital for equity-
based plans, net of tax
Compensation expense for
equity-based plans, net of tax
7,519
(7,113)
—
10,325
—
—
—
Change during the year
(235,127)
3,212
(241,898)
Balance, December 31, 2018
2,125,130
25,270
(720,600)
Balance, January 1, 2017
1,885,066
18,062
(369,689)
Comprehensive income
Dividends declared [note 10]
Shares repurchased, net of tax
Business combination [note 3]
Issuance [notes 8 and 9]
Issuance of share capital for equity-
based plans, net of tax
Compensation expense for
equity-based plans, net of tax
Change during the year
—
—
(108,249)
576,996
2,190
4,254
(4,254)
—
475,191
8,250
3,996
—
549,094
— (371,578)
— (301,361)
—
—
—
—
—
—
808
618,284
371
618,655
—
—
—
—
—
808
277
9,148
5,153
—
—
—
—
—
—
(449,919)
(652,635)
534
406
10,325
— (449,919)
— (652,635)
—
—
—
534
406
10,325
(473,005)
371
(472,634)
1,430,077
2,849
1,432,926
1,542,587
2,633
1,545,220
554,247
(371,578)
(409,610)
576,996
2,190
—
8,250
(155)
554,092
— (371,578)
— (409,610)
—
—
—
—
576,996
2,190
—
8,250
(123,845)
5,153
360,495
(155)
360,340
Balance, December 31, 2017
2,360,257
22,058
(493,534)
14,301
1,903,082
2,478
1,905,560
(see accompanying notes)
Q4 Financial Report 38 December 31, 2018
Annual Financial Report | 78 | December 31, 2018
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31
For the years ended December 31
[in thousands of Canadian dollars]
OPERATING ACTIVITIES (*)
Net income for the year
Add (deduct) items not involving cash
Realized and unrealized loss (gain) on investments
Fair value adjustment to put option and contingent consideration
Equity-based compensation
Amortization of intangibles
Amortization and depreciation of other
Deferred income taxes
Cash provided by operating activities before net change in operating assets and liabilities
Net change in operating assets and liabilities
Cash provided by operating activities
INVESTING ACTIVITIES
Purchase of investments
Proceeds on sale of investments
Additions to capital assets
Decrease (increase) in other assets
Additions to intangibles
Cash paid to settle put option and contingent liability [note 8]
Interest in joint operation
Acquisition of subsidiary, net of cash acquired [note 3]
Cash used in investing activities
FINANCING ACTIVITIES
Increase (decrease) in amounts drawn on credit facility
Issuance of debentures
Repurchase of share capital
Issuance of share capital
Share issue expense paid
Dividends paid to shareholders
Cash used in financing activities
Net increase in cash and cash equivalents during the year
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
(*) Included in operating activities are the following:
Interest paid
Income taxes paid
(see accompanying notes)
Q4 Financial Report 39 December 31, 2018
Annual Financial Report | 79 | December 31, 2018
2018
$
2017
$
617,847
548,939
8,115
(1,144)
13,728
9,645
10,912
(3,556)
655,547
(47,336)
608,211
(17,768)
21,960
(11,709)
(2,824)
(4,359)
(13,694)
—
—
(28,394)
(222,000)
606,667
(656,907)
406
—
(295,405)
(567,239)
12,578
124,582
137,160
38,289
240,519
(1,365)
5,600
10,228
6,424
8,110
(3,205)
574,731
6,377
581,108
(38,343)
19,676
(9,229)
125,917
(10,697)
(11,808)
(609)
(226,710)
(151,803)
110,000
248,820
(413,243)
—
(204)
(367,995)
(422,622)
6,683
117,899
124,582
22,015
206,642
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
CI Financial Corp. [“CI”] is a publicly listed company (TSX: CIX) incorporated under the laws of the Province of Ontario and has its
registered office and principal place of business located at 2 Queen Street East, Toronto, Ontario.
CI’s primary business is the management and distribution of a broad range of financial products and services, including mutual
funds, segregated funds, exchange-traded funds, financial planning, insurance, investment advice, wealth management and
estate and succession planning.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements of CI have been prepared in accordance with International Financial Reporting Standards
[“IFRS”] as issued by the International Accounting Standards Board [“IASB”].
These consolidated financial statements were authorized for issuance by the Board of Directors of CI on February 7, 2019.
BASIS OF PRESENTATION
The consolidated financial statements of CI have been prepared on a historical cost basis, except for certain financial instruments
that have been measured at fair value. The consolidated financial statements have been prepared on a going concern basis. CI’s
presentation currency is the Canadian dollar, which is CI’s functional currency.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of CI and all its subsidiaries on a consolidated basis after elimination
of intercompany transactions and balances. Subsidiaries are entities over which CI has control, when CI has the power, directly
or indirectly, to govern the financial and operating policies of an entity, is exposed to variable returns from its activities, and is
able to use its power to affect such variable returns to which it is exposed.
CI’s principal subsidiaries are as follows:
•
CI Investments Inc. [“CI Investments”], Assante Wealth Management (Canada) Ltd. [“AWM”], First Asset Capital Corp.
[“First Asset”], BBS Securities Inc. [“BBS”] and their respective subsidiaries. Effective, June 1, 2018, Sentry Investments
Corp. amalgamated with CI Investments.
•
CI holds a controlling 65% interest in Marret Asset Management Inc. [“Marret”]. A non-controlling interest is recorded
in the consolidated statements of income and comprehensive income to reflect the non-controlling interest’s share of
the income and comprehensive income, and a non-controlling interest is recorded within equity in the consolidated
statements of financial position to reflect the non-controlling interest’s share of the net assets of Marret.
•
CI holds a controlling 83% interest in Grant Samuel Funds Management [“GSFM”] and granted a put option to
shareholders for the remaining 17% minority interest. CI considers the non-controlling interest in GSFM to have already
been acquired and consolidates 100% of the income and comprehensive income in the consolidated statements of
income and comprehensive income. GSFM has an interest in a joint arrangement classified as a joint operation. The
Q4 Financial Report 40 December 31, 2018
Annual Financial Report | 80 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
consolidated financial statements include GSFM’s recognition of its share of the joint operation’s assets, liabilities, income
and comprehensive income.
Hereinafter, CI and its subsidiaries are referred to as CI.
CI manages a range of mutual funds, segregated funds, structured products and other funds that meet the definition of structured
entities under IFRS. CI earns fees for providing management and administrative services to these investment funds. Fees are
calculated on assets under management in these funds, which totalled $124.4 billion as at December 31, 2018 [2017 – $143.0
billion]. CI does not consolidate these investment funds because the form of fees and ownership interest are not significant
enough to meet the definition of control under IFRS. CI provides no guarantees against the risk of financial loss to the investors
of these investment funds.
REVENUE RECOGNITION
Revenue is recognized when control of the goods or services are transferred to CI at an amount that reflects the consideration
to which CI expects to be entitled in exchange for those goods or services. Revenue is measured at the fair value of the consideration
received or receivable. In addition to these general principles, CI applies the following specific revenue recognition policies:
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 security holders 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
Classification and measurement of financial assets
CI classifies its financial assets as fair value through profit or loss [“FVPL”] and amortized cost. CI had no financial assets classified
as fair value through other comprehensive income [“FVOCI”] during the year ended December 31, 2018.
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics
and CI’s business model for managing them. With the exception of trade receivables, that do not contain a significant financing
component and are measured at the transaction price in accordance with IFRS 15, Revenue from Contracts with Customers [“IFRS
15”], all financial assets are initially measured at fair value adjusted for transaction costs.
Financial assets classified as FVPL are carried at fair value in the consolidated statements of financial position and any gains or
losses are recorded in net income in the period in which they arise. Financial assets classified as FVPL include cash and cash
equivalents, investments and other assets.
Q4 Financial Report 41 December 31, 2018
Annual Financial Report | 81 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
Financial assets are classified at amortized cost using the effective interest method if they meet the following conditions and are
not designated as FVPL:
•
they are held within a business model whose objective is to hold the financial assets and collect its contractual cash
flows
•
the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on
the principal amount outstanding
Financial assets classified at amortized cost include client and trust funds on deposit, accounts receivable and other assets.
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.
Investments
Investments include BBS’s securities owned, at market, principally for the purpose of selling or repurchasing in the near term.
Securities owned, at market, are classified as FVPL and are initially recognized on the consolidated statements of financial position
at fair value with transaction costs expensed as incurred. Subsequent realized and unrealized gains and losses are included in
administration fees income in the consolidated statements of income and comprehensive income in the period in which they
arise. Securities transactions are recorded on a trade date basis. Market value is based on quoted prices where an active market
exists. For securities in non-active markets, market value is based on valuation techniques and management’s best estimate of
fair value.
Also included in investments are marketable securities that consist of CI’s seed capital investments in CI mutual funds and strategic
investments. Investments in marketable securities are measured at fair value and recognized on the trade date. Mutual fund
securities are valued using the net asset value per unit of each fund. Realized and unrealized gains and losses are recognized
Q4 Financial Report 42 December 31, 2018
Annual Financial Report | 82 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
using average cost and recorded in net income. Distributions from mutual fund securities are recorded as other income.
Distributions that are reinvested increase the cost base of the mutual fund investments.
Impairment of financial assets
CI recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting
date, the loss allowance for the financial asset is measured at an amount equal to the lifetime expected credit losses if the credit
risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not
increased significantly since initial recognition, the loss allowance is measured for the financial asset at an amount equal to 12
months of expected credit losses. For trade receivables, CI applies the simplified approach to providing for expected credit losses,
which allows for the use of a lifetime expected credit loss provision. Impairment losses on financial assets carried at amortized
cost are reversed in subsequent periods if the amount of the loss decreases and is related to an event occurring after the
impairment was recognized.
Classification and measurement of financial liabilities
CI classifies its financial liabilities as FVPL and amortized cost. Financial liabilities are initially measured at fair value, and, where
applicable, adjusted for transaction costs unless the financial liability is classified at FVPL. Subsequently, financial liabilities are
measured at amortized cost using the effective interest method except for derivatives and financial liabilities designated at FVPL,
which are carried subsequently at fair value with gains or losses recognized in net income. Financial liabilities classified at FVPL
include derivative financial instruments included in long-term debt and a contingent consideration payable included in provision
for other liabilities. All other financial liabilities are measured at amortized cost.
Derivative financial instruments and hedge accounting
CI may use derivative financial instruments such as interest rate swaps and forward foreign exchange contracts to manage its
interest rate and foreign currency risk related to long-term debt. Derivative financial instruments are initially recognized at fair
value on the date a derivative contract is entered into and are subsequently remeasured at fair value. The accounting for
subsequent changes depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item
being hedged and the type of hedge relationship designated.
To qualify for hedge accounting, the hedging relationship must meet all of the following requirements:
• there is an economic relationship between the hedged item and the hedging instrument
• the effect of credit risk does not dominate the value changes that result from that economic relationship
• the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that
the entity actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge that
quantity of hedged item.
CI entered into an interest rate swap designated as a fair value hedge to manage the effect of changes in interest rates relating
to its fixed-rate debentures. The swap involves exchanging interest payments without exchanging the notional amount on which
the payments are based. The exchange of payments is recorded as an adjustment to interest expense on the hedged item. Changes
Q4 Financial Report 43 December 31, 2018
Annual Financial Report | 83 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
in the fair value of the swap are recorded in the consolidated statements of income and comprehensive income in other expenses,
together with any changes in the fair value of the hedged liability attributable to the hedged risk as an offset.
FAIR VALUE MEASUREMENT
CI uses valuation techniques to determine the fair value of financial instruments where active market quotes are not available.
This involves developing estimates and assumptions consistent with how market participants would price the instrument. CI
maximizes the use of observable data when developing estimates and assumptions, but this is not always available. In that case
management uses the best information available.
All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized
within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement
as a whole:
• 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
For assets and liabilities that are recognized in the consolidated financial statements on a recurring basis, CI determines whether
transfers have occurred between levels in the hierarchy by reassessing the categorization at the end of each reporting period.
COLLATERALIZED SECURITIES TRANSACTIONS
CI engages in securities lending and borrowing to facilitate the securities settlement process and to maximize revenue by acting
as an agent for such transactions. These transactions are typically short-term in nature, with interest being received on the cash
delivered. These transactions are collateralized by either cash, letters of credit or other collateral and are subject to daily margin
calls for any deficiency between the market value of the security given and the amount of collateral received. CI manages its
credit exposure by establishing and monitoring aggregate limits by counterparty for these transactions. CI’s securities lending
and borrowing transactions are recorded in accounts receivable and prepaid expenses and accounts payable and accrued liabilities.
CAPITAL ASSETS
Capital assets are recorded at cost less accumulated depreciation. These assets are depreciated over their estimated useful lives
as follows:
Computer hardware
Straight-line over three years
Office equipment
Straight-line over five years
Leasehold improvements
Straight-line over the term of the lease
Q4 Financial Report 44 December 31, 2018
Annual Financial Report | 84 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
BUSINESS COMBINATIONS
The acquisition method of accounting is used to account for the acquisition of subsidiaries by CI, whereby the purchase
consideration is allocated to the identifiable assets and liabilities on the basis of fair value at the date of acquisition. Provisional
fair values allocated at a reporting date are finalized as soon as the relevant information is available, within a period not to exceed
12 months from the acquisition date, with retroactive restatement of the impact of adjustments to those provisional fair values
effective as at the acquisition date.
CI elects on a transaction-by-transaction basis whether to measure any non-controlling interest at fair value, or at the
proportionate share of the recognized amount of the identifiable net assets of the acquired subsidiary, at the acquisition date.
Consideration transferred includes the fair values of the assets transferred, liabilities incurred and equity interests issued by CI.
Consideration also includes the fair value of any put option or contingent consideration. Subsequent to the acquisition, the put
option and contingent consideration that is based on an earnings measurement and classified as a liability is measured at fair
value with any resulting gain or loss recognized in net income. Acquisition-related costs are expensed as incurred.
INTANGIBLES
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 amounts of indefinite life fund contracts at least annually for potential impairment
by comparing the recoverable amount with their carrying amounts. CI will evaluate the carrying amount of fund contracts 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 a period of up to 25 years. Fund management contracts
with a finite life are amortized on a straight-line basis over a period of up to 20 years. The amortization period depends 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. Following initial recognition, goodwill is
stated at cost less any accumulated impairment losses. Goodwill is evaluated for impairment at least annually and any impairment
is recognized immediately in income and not subsequently reversed. Goodwill is allocated to the appropriate cash-generating
unit for the purpose of impairment testing.
Other intangibles
Other intangibles include the costs of trademarks and computer software, capitalized where it is probable that future economic
benefits that are attributable to the assets will flow to CI and the cost of the assets can be measured reliably. Computer software
is recorded initially at cost and amortized over its expected useful life of two to ten years on a straight-line basis. Trademarks
have an indefinite life and are not amortized.
Q4 Financial Report 45 December 31, 2018
Annual Financial Report | 85 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
EQUITY-BASED COMPENSATION
CI uses the fair value method to account for equity-settled employee incentive share options and restricted share units [“RSUs”]
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. Upon vesting of the RSUs, the amount accumulated
in contributed surplus for the RSUs is reclassified to share capital.
CI has a deferred share unit plan for directors. The value of the compensation at the date of grant is recognized immediately as
compensation with a corresponding increase in accounts payable and accrued liabilities. At each consolidated statement of
financial position date, the liability is revalued with an offset to compensation expense.
The amount recognized as an expense is adjusted to reflect the number of awards for which the related service conditions are
expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that do meet
the related service condition at the vesting date.
DEFERRED LEASE INDUCEMENTS
Lease inducements are deferred and amortized on a straight-line basis over the term of the lease.
INCOME TAXES
Current income tax liabilities are measured at the amount expected to be paid to tax authorities, net of recoveries based on the
tax rates and tax laws enacted or substantively enacted as at the consolidated statement of financial position dates.
The liability method of tax allocation is used in accounting for income taxes. Under this method, deferred income tax assets and
liabilities are determined based on differences between the carrying amount and tax basis 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. Deferred
tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilized. Deferred tax liabilities are generally recognized for all taxable temporary differences.
Deferred tax liabilities are recognized for taxable temporary differences arising in investments in subsidiaries and joint ventures
except where the reversal of the temporary difference can be controlled and it is probable that the difference will not reverse in
the foreseeable future. Deferred tax liabilities are not recognized on temporary differences that arise from the initial recognition
of goodwill, which is not deductible for tax purposes. Deferred tax assets and liabilities are not recognized in respect of temporary
differences that arise on initial recognition of assets and liabilities acquired other than in a business combination.
PROVISION FOR OTHER LIABILITIES
A provision for other liabilities is recognized if, as a result of a past event, CI has a present legal or constructive obligation that
can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. In the
event that the time value of money is material, provisions are determined by discounting the expected future cash flows at a
pre-tax rate that reflects a current market assessment of the time value of money and the risks specific to the liability.
Q4 Financial Report 46 December 31, 2018
Annual Financial Report | 86 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
FOREIGN CURRENCY
(i) Foreign currency transactions
Transactions that are denominated in a currency other than the functional currency of the entity are translated as follows:
Monetary assets and liabilities are translated into Canadian dollars using the exchange rates in effect as at the consolidated
statement of financial position dates. 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.
(ii) Foreign currency operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are
translated at the exchange rate in effect as at the consolidated statement of financial position dates. Revenue and expenses are
translated at average rates prevailing during the period. Translation exchange gains and losses are recognized as other
comprehensive income and reclassified to net income when the gain or loss on disposal of the foreign subsidiary is recognized.
The consolidated statements of cash flows are translated at average exchange rates during the period, whereas cash and cash
equivalents are translated at the spot exchange rate in effect as at the consolidated statement of financial position dates.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
In the process of applying CI’s accounting policies, management has made significant judgments involving estimates and
assumptions, which are summarized as follows:
(i) Impairment of intangible assets
Finite life intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. Indefinite life intangible assets, including goodwill, are tested for impairment annually or more
frequently if changes in circumstances indicate that the carrying amount may be impaired. The values associated with intangibles
involve estimates and assumptions, including those with respect to future cash inflows and outflows, discount rates and asset
lives. These estimates require significant judgment regarding market growth rates, fund flow assumptions, expected margins and
costs that could affect CI’s future results if the current estimates of future performance and fair values change. These
determinations also affect the amount of amortization expense on intangible assets with finite lives recognized in future periods.
(ii) Deferred tax assets
Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profits will be available
against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax
assets that can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning
strategies.
Q4 Financial Report 47 December 31, 2018
Annual Financial Report | 87 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
(iii) Provision for other liabilities
Due to the nature of provisions, a considerable part of their determination is based on estimates and judgments, including
assumptions concerning the future. The actual outcome of these uncertain factors may be materially different from the estimates,
causing differences with the estimated provisions. Further details are provided in Note 8.
(iv) Share-based payments
The cost of employee services received (compensation expense) in exchange for awards of equity instruments recognized is
estimated using a Black-Scholes option pricing model which requires the use of assumptions. Further details regarding the
assumptions used in the option pricing model are provided in Note 9[b].
(v) Business combinations
Business combinations require management to exercise judgment in measuring the fair value of the assets acquired and liabilities,
put option and contingent consideration liabilities incurred or assumed.
Q4 Financial Report 48 December 31, 2018
Annual Financial Report | 88 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
2. NEW ACCOUNTING STANDARDS
[A] IFRS 15
Effective January 1, 2018, CI retrospectively adopted IFRS 15. IFRS 15 replaces prior guidance, including IAS 18, Revenue. The
principles in IFRS 15 provide a more structured approach to measuring and recognizing revenue. The new guidance includes a
five-step recognition and measurement approach, requirements for accounting of contract costs, and enhanced quantitative and
qualitative disclosure requirements. Under IFRS 15, revenue is recognized at an amount that reflects the consideration to which
an entity expects to be entitled in exchange for transferring goods or services to a customer.
Prior to the adoption of IFRS 15, commissions paid on sales of deferred sales charge mutual funds were capitalized and amortized
over the redemption period. CI has determined that these costs are within the scope of IFRS 15 and do not qualify as an incremental
cost of acquiring its fund contracts. Accordingly, CI now recognizes the related sales commissions as an expense at the date
incurred. The retrospective application of IFRS 15 resulted in the derecognition of previously recognized deferred sales
commissions and the related deferred tax liability on CI’s consolidated statements of financial position of $153,644 as at January
1, 2018 ($202,811 as at January 1, 2017). CI will recognize sales commissions as an expense at the date incurred rather than
deferring and recognizing over the redemption period. CI has assessed and determined that there are no other significant impacts
resulting from the application of IFRS 15 on its consolidated financial statements.
[B] IFRS 9
Effective January 1, 2018, CI retrospectively adopted IFRS 9, Financial Instruments [“IFRS 9”], replacing IAS 39, Financial
Instruments [“IAS 39”]. IFRS 9 provides a new approach for the classification of financial assets, which shall be based on the cash
flow characteristics of the asset and the business model of the portfolio in which the asset is held.
Under IFRS 9, financial assets are classified as either FVPL, FVOCI or amortized cost and financial liabilities are categorized as
either FVPL or amortized cost. For financial liabilities designated as FVPL, IFRS 9 requires the presentation of the effects of changes
in the liability’s credit risk in other comprehensive income instead of net income. The application of IFRS 9 resulted in the
reclassification of investments of $117,830 to FVPL as at January 1, 2018, which were previously classified as available-for-sale
under IAS 39 as at December 31, 2017. CI recognized a decrease in opening deficit of $14,832 with a corresponding decrease in
the opening accumulated other comprehensive income as at January 1, 2018. The classification of all other assets and liabilities
are consistent with previous classification under IAS 39 with the exception that assets previously classified as loans and receivables
and other liabilities under IAS 39 are now classified as amortized cost under IFRS 9.
Upon adoption of IFRS 9 on January 1, 2018, CI also applied amendments to IFRS 7, Financial Instruments: Disclosures, and elected
not to restate comparative information. Prior year comparative information has been presented in accordance with its previous
accounting policy.
Q4 Financial Report 49 December 31, 2018
Annual Financial Report | 89 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
[C] APPLICATION IMPACT OF IFRS 9 AND IFRS 15 ON FINANCIAL STATEMENTS:
The following table shows the impact of the application of IFRS 9 and IFRS 15 to deficit and accumulated other comprehensive
income balances on the consolidated statements of financial position:
Deficit prior to application of IFRS 9 and IFRS 15
Deferred sales commissions
Deferred income taxes
Accumulated other comprehensive income
Total adjustment to deficit
Deficit subsequent to application of IFRS 9 and IFRS 15
Accumulated other comprehensive income prior to application of IFRS 9
Accumulated other comprehensive income
Accumulated other comprehensive income subsequent to application of IFRS 9
January 1, 2018 December 31, 2017 January 1, 2017
$
(339,890)
(205,478)
51,834
14,832
(138,812)
(478,702)
14,301
(14,832)
(531)
$
(339,890)
(205,478)
51,834
—
(153,644)
(493,534)
14,301
—
14,301
$
(166,878)
(272,699)
69,888
—
(202,811)
(369,689)
9,148
—
9,148
The comparative consolidated statements of income and comprehensive income were not restated for the application of IFRS 9.
The following table shows the impact of the application of IFRS 15 to the consolidated statements of income and comprehensive
income:
Net income attributable to shareholders prior to application of IFRS 15
Amortization of deferred sales commissions
Deferred sales commissions paid
Deferred income taxes
Differences in net income
Net income attributable to shareholders subsequent to application of IFRS 15
Comprehensive income attributable to shareholders prior to application of IFRS 15
Differences in net income
Comprehensive income attributable to shareholders subsequent to application of IFRS 15
Year ended
December 31, 2017
$
499,927
98,515
(31,295)
(18,053)
49,167
549,094
505,080
49,167
554,247
Q4 Financial Report 50 December 31, 2018
Annual Financial Report | 90 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
The following table shows the impact of the application of IFRS 15 to the consolidated statements of cash flows:
Cash provided by operating activities prior to application of IFRS 15
Deferred sales commissions paid
Cash provided by operating activities subsequent to application of IFRS 15
Cash used in investing activities prior to application of IFRS 15
Deferred sales commissions paid
Cash used in investing activities subsequent to application of IFRS 15
3. BUSINESS ACQUISITION
Sentry Investments Corp.
Year ended
December 31, 2017
$
612,403
(31,295)
581,108
(183,098)
31,295
(151,803)
On October 2, 2017, CI completed the acquisition of all outstanding shares of Sentry Investments Corp. and Sentry Investments
Inc. [collectively, “Sentry”], a Canadian asset management company, for total consideration of $807,607, in cash of $257,607 and
CI common shares of $550,000. The acquisition was accounted for using the acquisition method of accounting and the results
of operations have been consolidated from the date of the transaction.
Details of the net assets acquired as at October 2, 2017, at fair value, are as follows:
Cash and cash equivalents
Accounts receivable and prepaid expenses
Investments
Capital assets
Management contracts
Income taxes receivable
Accounts payable and accrued liabilities
Deferred lease inducements
Deferred income taxes
Fair value of identifiable net assets
Goodwill on acquisition
Total acquired cost
$
23,897
33,256
34,251
5,962
616,750
8,936
(62,544)
(1,858)
(161,943)
496,707
310,900
807,607
The acquired fund management contracts with a fair value of $616,750 include $612,750 that have an indefinite life and $4,000
with a finite life. The goodwill on acquisition is not deductible for income taxes. Goodwill of $310,900 relates to the asset
management segment.
Q4 Financial Report 51 December 31, 2018
Annual Financial Report | 91 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
Details of the consideration as at the date of acquisition are as follows:
Cash consideration, including amounts payable
Share consideration
Total consideration
Cash inflow on acquisition is as follows:
Net cash acquired (included in cash flows from investing activities)
Transaction costs (included in cash flows from financing activities)
Net cash inflow on acquisition
BBS Securities Inc.
$
257,607
550,000
807,607
$
23,897
(158)
23,739
On November 1, 2017, CI completed the acquisition of all outstanding shares and debt obligations of BBS Securities Inc., and
associated entities, including Pario Technology Corp. and Virtual Brokers Wealth Management Inc. [collectively, “BBS”], a financial
technology company for $38,369, in cash of $11,169 and CI common shares of $27,200. The acquisition was accounted for using
the acquisition method of accounting and the results of operations have been consolidated from the date of the transaction.
Details of the net assets acquired as at November 1, 2017, at fair value, are as follows:
Cash and cash equivalents
Accounts receivable and prepaid expenses
Client and trust funds on deposit
Investments
Capital assets
Fund administration contracts
Intangible - technology
Other assets
Accounts payable and accrued liabilities
Client and trust funds payable
Deferred lease inducement
Deferred income taxes
Fair value of identifiable net assets
Goodwill on acquisition
Total acquired cost
$
5,589
18,861
112,091
50,805
778
6,900
9,100
356
(15,200)
(164,690)
(99)
(4,135)
20,356
18,013
38,369
The acquired fund administration contracts with a fair value of $6,900 have a finite life. The technology acquired has a fair value
of $9,100 and an estimated useful life of 10 years. The goodwill on acquisition is not deductible for income taxes. Goodwill of
$18,013 relates to the asset administration segment.
Q4 Financial Report 52 December 31, 2018
Annual Financial Report | 92 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
Details of the consideration as at the date of acquisition is as follows:
Cash consideration, including amounts payable
Share consideration
Total consideration
Cash inflow on acquisition is as follows:
Net cash acquired (included in cash flows from investing activities)
Transaction costs (included in cash flows from financing activities)
Net cash inflow on acquisition
WealthBar Financial Services Inc.
$
11,169
27,200
38,369
$
5,589
(46)
5,543
On December 14, 2018, CI reached an agreement to acquire 75% of all the outstanding shares of WealthBar Financial Services
Inc. [“WealthBar”], a leading Canadian online wealth management and financial planning platform, for all cash consideration.
The transaction closed on January 23, 2019. The business combination of WealthBar using the acquisition method of accounting
is in progress. The estimated fair values of the assets acquired and liabilities assumed will be disclosed in the interim consolidated
financial statements as at March 31, 2019 with final figures expected within 12 months of the acquisition date.
Q4 Financial Report 53 December 31, 2018
Annual Financial Report | 93 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
4. CAPITAL ASSETS
Capital assets consist of the following:
Cost
Balance, December 31, 2016
Additions
Acquired
Retired
Balance, December 31, 2017
Additions
Retired
Balance, December 31, 2018
Accumulated depreciation
Balance, December 31, 2016
Depreciation
Acquired
Retired
Balance, December 31, 2017
Depreciation
Retired
Balance, December 31, 2018
Carrying amounts
At December 31, 2016
At December 31, 2017
At December 31, 2018
Computer
hardware
$
Office
equipment
$
Leasehold
improvements
$
9,288
3,190
4,314
(608)
16,184
3,662
(2,257)
17,589
5,770
2,522
3,208
(608)
10,892
3,466
(2,257)
12,101
3,518
5,292
5,488
12,703
1,127
2,192
—
16,022
1,938
—
17,960
10,757
813
1,554
—
13,124
1,199
—
14,323
1,946
2,898
3,637
63,030
4,912
6,510
—
74,452
6,109
(7)
80,554
33,753
4,134
1,514
—
39,401
5,300
(7)
44,694
29,277
35,051
35,860
Total
$
85,021
9,229
13,016
(608)
106,658
11,709
(2,264)
116,103
50,280
7,469
6,276
(608)
63,417
9,965
(2,264)
71,118
34,741
43,241
44,985
Q4 Financial Report 54 December 31, 2018
Annual Financial Report | 94 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
5. INTANGIBLES
Cost
Balance, December 31, 2016
Acquired
Translation
Additions
Retired
Fund
administration
contracts
$
37,600
6,900
—
—
—
Goodwill
$
1,190,464
330,576
278
—
—
Fund
management
contracts finite
life
$
Fund
management
contracts
indefinite life
$
46,157
4,000
1,167,207
612,750
—
—
—
—
—
—
Balance, December 31, 2017
1,521,318
44,500
50,157
1,779,957
Acquired
Translation
Additions
283
(496)
—
—
—
—
—
—
—
—
—
—
Balance, December 31, 2018
1,521,105
44,500
50,157
1,779,957
Accumulated amortization
Balance, December 31, 2016
Amortization
Retired
Balance, December 31, 2017
Amortization
Balance, December 31, 2018
Carrying amounts
At December 31, 2016
At December 31, 2017
At December 31, 2018
Remaining term
—
—
—
—
—
—
1,190,464
1,521,318
1,521,105
19,576
1,648
—
21,224
2,030
23,254
18,024
23,276
21,246
25,610
1,731
—
27,341
2,033
29,374
20,547
22,816
20,783
—
—
—
—
—
—
1,167,207
1,779,957
1,779,957
N/A
9.9 – 10.8 yrs
7.9 – 14.9 yrs
N/A
0.1 – 8.8 yrs
Other
intangibles
$
Total
$
31,283
2,472,711
—
—
19,797
677
51,757
—
—
4,359
56,116
19,559
3,048
677
23,284
5,582
28,866
11,724
28,473
27,250
954,226
278
19,797
677
3,447,689
283
(496)
4,359
3,451,835
64,745
6,427
677
71,849
9,645
81,494
2,407,966
3,375,840
3,370,341
CI has two cash-generating units [“CGUs”] for the purpose of assessing the carrying amount of the allocated goodwill being the
asset management and asset administration operating segments as described in Note 16. Goodwill of $1,310,510 is allocated
to the asset management segment and $210,595 is allocated to the asset administration segment as at December 31, 2018
[2017 - $1,311,006 and $210,312, respectively]. Within the asset management segment, CI has three CGUs, being CI Investments,
First Asset and GSFM of which each has indefinite life fund management contracts of $1,611,832, $87,300 and $80,825,
respectively, as at December 31, 2018 and 2017.
The recoverable amounts for goodwill and indefinite life fund management contracts have been determined based on value in
use calculations, using 10 year forecasts and a terminal value for the period thereafter. CI uses a 10 year period to reflect the
expected growth strategies for the various contracts acquired in addition to the fact that it may take several years to fully integrate
operations and benefit from synergies. The key assumptions used in the forecast calculation include assumptions on market
Q4 Financial Report 55 December 31, 2018
Annual Financial Report | 95 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
appreciation, net sales of funds and operating margins. Market appreciation rates are determined using historical inflation-
adjusted index returns adjusted for CI’s average management fee. Net sales are determined based on the historical 3 year average
as well as management’s forecasts for future sales. Inputs to the operating margin include estimates for management and trailer
fees using current average fee rates and historical rates for selling, general and administrative costs that are applied to forecasted
average assets under management over the 10 year period. The terminal value has been calculated assuming a long-term growth
rate of 2% per annum in perpetuity based on a long-term real GDP growth rate as at December 31, 2018 and 2017. A discount
rate of 8.3% - 12.5% per annum has been applied to the recoverable amount calculation as at December 31, 2018 [2017 - 8.11%].
The calculation of the recoverable amount exceeds the carrying amount of goodwill and indefinite life fund management contracts
as at December 31, 2018 and 2017.
6. OTHER ASSETS, INCOME AND EXPENSE
Other assets as at December 31, 2018 consist mainly of long-term investments, long-term accounts receivable, loans granted
under CI’s employee share purchase plan and loans extended to investment advisors under CI’s hiring and incentive program.
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, 2018, the carrying amount of employee share purchase loans is $5,188 [2017 – $5,238] 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, 2018, the shares held as collateral have a market value of approximately $5,865 [2017 –
$10,104].
CI has a hiring and retention incentive program whereby loans are extended to current investment advisors. These loans are
initially recorded at their fair value, may bear interest at prescribed rates and are contractually forgiven on a straight-line basis
over the applicable contractual period, which varies in length from three to seven years. CI utilizes the effective interest method
to amortize the forgiven amount. The forgiven amount is included in selling, general and administrative expenses. As at
December 31, 2018, loans to investment advisors of $16,039 [2017 – $10,711] are included in other assets. These loans become
due on demand upon early termination or breach in the terms of the agreements.
Other income consists mainly of fees received for the administration of third-party mutual funds, custody fees, investment income,
foreign exchange gains (losses), interest income and the revenue earned by Marret. Other income also includes the fair value
adjustment to the put option and contingent consideration discussed in Note 8. Other expenses consist mainly of the expenses
incurred by Marret, amortization of debenture transaction costs and provisions as discussed in Note 8.
Q4 Financial Report 56 December 31, 2018
Annual Financial Report | 96 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
7. LONG-TERM DEBT
Long-term debt consists of the following:
Credit facility
Prime rate loan
Bankers’ acceptances
LIBOR loan (USD $193,000)
Debentures
$450 million, 2.645% due December 7, 2020
$200 million, 2.775% due November 25, 2021
$325 million, 3.520% due July 20, 2023
$250 million, 3.904% due September 27, 2027
Long-term debt
Current portion of long-term debt
CREDIT FACILITY
2018
$
24,500
—
259,000
283,500
449,032
199,278
323,297
248,626
1,220,233
1,503,733
—
2017
$
—
222,000
—
222,000
448,568
199,050
—
248,501
896,119
1,118,119
222,000
On October 3, 2018, CI’s revolving credit facility was amended to include three Canadian chartered banks. CI may borrow up to
$700,000 under the facility in Canadian dollars through prime rate loans, which bear interest at the greater of the bank’s prime
rate and the Canadian Deposit Offering Rate plus 1.00%, or bankers’ acceptances, which bear interest at bankers’ acceptance
rates plus 0.90%. 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 and the federal funds effective rate plus 1.00%, or LIBOR
loans, which bear interest at LIBOR plus 0.90%.
CI may also borrow under this facility in the form of letters of credit, which bear a fee of 0.90% on any undrawn portion. As at
December 31, 2018 and 2017, CI had not accessed the facility by way of letters of credit.
Loans are made by the banks under a three-year revolving credit facility, with the outstanding principal balance due upon maturity
on December 11, 2021.
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 funded debt to annualized EBITDA
ratio remain below 3:1 and that CI’s assets under management not fall below $85 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.
Q4 Financial Report 57 December 31, 2018
Annual Financial Report | 97 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
On December 24, 2018, CI entered into a forward exchange contract with a Canadian chartered bank to pay Canadian dollars
$259,690 and receive U.S. dollars $193,666 maturing on January 28, 2019. CI has not applied hedge accounting to the forward
foreign exchange contract, as the fair value changes are offset in net income with the foreign exchange revaluation of the U.S.
denominated debt.
DEBENTURES
On July 20, 2018, CI completed an offering pursuant to which it issued $325,000 principal amount of debentures due July 20,
2023 at par [the “2023 Debentures”]. Interest on the 2023 Debentures is paid semi-annually in arrears at a rate of 3.520%. Interest
attributable to the 2023 Debentures was $5,143 for the year ended December 31, 2018 [2017 – nil].
The $250,000 principal amount of debentures issued at par on September 27, 2017 and due September 27, 2027 [the “2027
Debentures”] pay semi-annual interest in arrears at a rate of 3.904% per annum. Interest attributable to the 2027 Debentures
was $9,760 for the year ended December 31, 2018 [2017 – 2,547].
The $200,000 principal amount of debentures issued at par on November 25, 2016 and due November 25, 2021 [the “2021
Debentures”] pay semi-annual interest in arrears at a rate of 2.775% per annum. On February 2, 2017, CI entered into an interest
rate swap agreement with a Canadian chartered bank to swap the semi-annual fixed rate payments on the 2021 Debentures for
floating rate payments. Based on the terms of the agreement, CI pays a rate equivalent to the three-month Canadian bankers’
acceptance rate plus a spread of 138.4 basis points. The rates are reset quarterly and paid semi-annually to match the fixed
payment obligations of the 2021 Debentures. The swap agreement terminates on the maturity date of the 2021 Debentures
unless terminated by CI at an earlier date. As at December 31, 2018, the fair value of the interest rate swap agreement was an
unrealized loss of $4,959 [2017 - $6,130] and is included in long-term debt in the consolidated statements of financial position.
CI has not experienced any hedge ineffectiveness, as the terms of the interest rate swap match the terms of the debenture.
Interest attributable to the 2021 Debentures was $6,402 for the year ended December 31, 2018 [2017 – $4,967].
The $450,000 principal amount of debentures issued at par on December 7, 2015 and due December 7, 2020 [the “2020
Debentures”] pay semi-annual interest in arrears at a rate of 2.645% per annum. Interest attributable to the 2020 Debentures
was $11,903 for the year ended December 31, 2018 [2017 – $12,112].
Issuance costs and the issuance discount are amortized over the term of the debentures using the effective interest method. The
amortization expense related to the discount and transaction costs for CI’s issued debentures for the year ended December 31,
2018 was $947 [2017 –$642], which is included in other expenses.
CI may, at its option, redeem the 2020 Debentures, the 2021 Debentures, the 2023 Debentures and the 2027 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 42.5, 44.0, 36.0 and 44.5 basis points, respectively.
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.
In the event that both a change of control occurs and the rating of the debentures is lowered to below investment grade by two
out of three rating agencies as defined as below BBB- by Standard & Poor’s, BBB (low) by DBRS Limited and Baa3 by Moody’s
Q4 Financial Report 58 December 31, 2018
Annual Financial Report | 98 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
Investor Service, Inc., 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.
8. PROVISION FOR OTHER LIABILITIES AND CONTINGENCIES
CI is a party to a number of claims, proceedings and investigations, including legal, regulatory and tax, in the ordinary course of
its business. Due to the inherent uncertainty involved in these matters, it is difficult to predict the final outcome or the amount
and timing of any outflow related to such matters. Based on current information and consultations with advisors, CI does not
expect the outcome of these matters, individually or in aggregate, to have a material adverse effect on its financial position or
on its ability to continue normal business operations.
CI has made provisions based on current information and the probable resolution of such contingent consideration, claims,
proceedings and investigations as well as for amounts payable in connection with business acquisitions and severance. The
movement in amounts provided for contingent liabilities and related expenses during the years ended December 31, are as
follows:
Provision for other liabilities, beginning of year
Additions
Amounts used
Amounts reversed
Provision for other liabilities, end of year
Current portion of provision for other liabilities
Provision for other liabilities primarily include the following:
LITIGATION
2018
$
98,595
3,151
(54,838)
(12,140)
34,768
14,591
2017
$
85,309
73,244
(52,913)
(7,045)
98,595
61,210
CI is a defendant to certain lawsuits of which two are class action lawsuits related to events and transactions that gave rise to a
settlement agreement with the Ontario Securities Commission [“OSC”] in 2004. Although CI continues to believe that this
settlement fully compensated investors affected by frequent trading activity, a provision has been made based on the probable
resolution of these claims and related expenses.
CI maintains insurance policies that may provide coverage against certain claims. Amounts receivable under these policies are
not accrued for unless the realization of income is virtually certain. During the years ended December 31, 2018 and 2017, no
insurance proceeds were received, related to the settlement of legal claims.
TAXATION
CI is subject to various uncertainties concerning the interpretation and application of Canadian tax laws. If tax authorities disagree
with CI’s application of such tax laws, CI’s profitability and cash flows could be adversely affected. CI Investments is considered
Q4 Financial Report 59 December 31, 2018
Annual Financial Report | 99 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
a large case file by the Canada Revenue Agency [“CRA”], and as such, is subject to audit each year. There is a significant lag
between the end of a fiscal year and when such audits are completed. Therefore, at any given time, several years may be open
for audit and/or adjustment.
During 2017, CI recorded a current income tax expense of $45,000 as a provision for the settlement of outstanding notices of
reassessment received for the years 2006 to 2008 [“NORs”]. During the year ended December 31, 2018, CI reversed $1,466 related
to this provision for the NORs. During 2018, the CRA returned $8,392 [2017 - $120,756] from deposits placed with the CRA in
2015. As at December 31, 2018, included in accounts receivable and prepaid expenses is nil [2017 - $7,130]. Included in provision
for other liabilities as at December 31, 2018, is a legal provision of nil related to this matter [2017 - $27].
PUT OPTION AND CONTINGENT CONSIDERATION
Included in provision for other liabilities as at December 31, 2018, is a provision for the fair value of the put option granted to
minority interest shareholders for the acquisition of GSFM of $11,438, including foreign exchange translation adjustments [2017
- $16,742]. During 2018, GSFM shareholders exercised their put to CI and a total of 30,000 shares were purchased for an equivalent
Canadian cash value of $2,565. In addition, during 2018, the put option liability was reduced by $1,167 representing dividends
paid by GSFM to non-controlling shareholders. The fair value was reduced $1,144 during 2018 to reflect lower forecasted earnings
estimates with an offset to other income.
During 2018, CI made payments of $11,663, in cash - $11,129 and shares - $534, related to contingent consideration that was
payable for the First Asset acquisition [2017 - payments of $13,997, in cash - $11,808 and shares - $2,189]. As at December 31,
2018, all contingent consideration related to this acquisition has been paid [2017 - provision for other liabilities of $11,603].
RESTRUCTURING
During the year ended December 31, 2017, CI recorded provisions of $39,000, primarily for restructuring, integration and legal
costs related to the acquisition of Sentry and BBS. As at December 31, 2018, a provision of $5,756 remains [2017 - $29,776].
REMEDIATION
In 2015, CI Investments discovered an administrative error and recorded a provision of $10,750, net of recoveries for the cost to
remediate. As at December 31, 2018, a net recovery of $3,550 remains [2017 - $480].
Q4 Financial Report 60 December 31, 2018
Annual Financial Report | 100 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
9. SHARE CAPITAL
A summary of the changes to CI’s share capital for the years ended December 31 is as follows:
[A] AUTHORIZED AND ISSUED
Authorized
An unlimited number of common shares of CI
Issued
Common shares, balance, December 31, 2016
Issuance for acquisition of subsidiary, net of issuance costs
Issuance of share capital on exercise of share options
Issuance of share capital on vesting of restricted share units
Share repurchases, net of tax
Common shares, balance, December 31, 2017
Issuance for acquisition of subsidiary, net of issuance costs
Issuance of share capital on exercise of share options
Issuance of share capital on vesting of restricted share units
Share repurchases, net of tax
Common shares, balance, December 31, 2018
Number of shares
Stated value
[in thousands]
$
265,302
21,276
96
120
(14,910)
271,884
17
58
283
(28,521)
243,721
1,885,066
579,186
1,835
2,419
(108,249)
2,360,257
534
1,700
5,819
(243,180)
2,125,130
During the year ended December 31, 2018, 27,951 thousand shares [2017 – 14,410 thousand shares] were repurchased under
a normal course issuer bid at an average cost of $22.93 per share for total consideration of $640,787 [2017 – $27.73 per share
for total consideration of $399,625]. Deficit was increased by $398,278 during the year ended December 31, 2018 [2017 –
$290,714] for the cost of the shares repurchased in excess of their stated value.
During the year ended December 31, 2018, 570 thousand shares [2017 – 500 thousand shares] were repurchased for CI’s restricted
share unit plan at an average cost of $28.28 per share for total consideration of $16,120 [$11,848 after tax] [2017 – $27.24 per
share for total consideration of $13,618 [$9,985 net of tax]]. Deficit was increased by $11,177 during the year ended December 31,
2018 [2017 – 10,647] for the cost of the shares repurchased in excess of their stated value.
[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.
During the year, CI granted 78 thousand options [2017 - 599 thousand options] to employees. The fair value method of accounting
is used for the valuation of the 2018 and 2017 share option grants. Compensation expense is recognized over the two and three-
year vesting period, assuming an estimated average forfeiture rate of 0.0% for the year [2017 - 0.0%], with an offset to contributed
surplus. When exercised, amounts originally recorded against contributed surplus as well as any consideration paid by the option
Q4 Financial Report 61 December 31, 2018
Annual Financial Report | 101 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
holder are credited to share capital. The fair value of the 2018 and 2017 option grants was estimated using the Black-Scholes
option pricing model with the following weighted-average assumptions:
Year of grant
# of options granted [in thousands]
Vesting terms
Dividend yield
Expected volatility (*)
Risk-free interest rate
Expected life [years]
Forfeiture rate
Fair value per stock option
Exercise price
(*) Based on historical volatility of CI’s share price.
2018
78
2017
304
2017
295
1/3 at end of each year
1/3 at end of each year 1/2 at end of each year
5.044% - 5.085%
5.238% - 5.337%
5.238% - 5.268%
16%
16%
16%
2.285% - 2.363%
1.189% - 1.293%
1.189% - 1.229%
2.9 - 3.7
0%
2.7 - 3.6
0%
2.7 - 3.0
0%
$2.23 - $2.45
$1.88 - $2.04
$1.88 - $1.94
$28.67
$27.44
$27.44
The maximum number of shares that may be issued under the Share Option Plan is 14,000 thousand shares. As at December 31,
2018, there are 6,958 thousand shares [2017 – 8,073 thousand 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 $27.44 to $35.88 per share and expire at
dates up to 2023.
A summary of the changes in the Share Option Plan is as follows:
Options outstanding, December 31, 2016
Options exercisable, December 31, 2016
Options granted
Options exercised (*)
Options cancelled
Options outstanding, December 31, 2017
Options exercisable, December 31, 2017
Options granted
Options exercised (*)
Options cancelled
Options outstanding, December 31, 2018
Options exercisable, December 31, 2018
Number of options
[in thousands]
Weighted average
exercise price
$
8,640
3,721
599
(875)
(291)
8,073
5,014
78
(609)
(584)
6,958
5,789
31.44
31.46
27.44
25.07
31.30
31.84
33.03
28.67
27.42
31.98
32.18
32.97
(*) Weighted-average share price of options exercised was $29.54 during the year ended December 31, 2018 [2017 - $28.54]
The equity-based compensation expense under the Share Option Plan for the year ended December 31, 2018 of $975 [2017 –
$2,815] has been included in selling, general and administrative expenses.
Q4 Financial Report 62 December 31, 2018
Annual Financial Report | 102 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
Options outstanding and exercisable as at December 31, 2018 are as follows:
Exercise price
$
27.44
28.63
28.67
33.96
34.52
35.60
35.88
27.44 to 35.88
[C] RESTRICTED SHARE UNITS
Number of
options outstanding
[in thousands]
Weighted average
remaining contractual life
[years]
Number of options
exercisable
[in thousands]
534
2,143
78
2,293
229
1,461
220
6,958
3.2
2.1
4.2
1.1
0.4
0.1
1.3
1.4
191
1,395
—
2,293
229
1,461
220
5,789
CI has an employee restricted share unit plan [the “RSU Plan”] for senior executives and other key employees. Compensation
expense is recognized and recorded as contributed surplus based upon the market value of the restricted share units [“RSUs”]
at the grant date. Forfeitures of RSUs reduce compensation expense to the extent contributed surplus was previously recorded
for such awards. On vesting of RSUs, share capital is credited for the amounts initially recorded as contributed surplus to reflect
the issuance of share capital.
During the year ended December 31, 2018, CI granted 579 thousand RSUs [2017 - 514 thousand RSUs], including 38 thousand
RSUs granted, to reflect dividends declared on the common shares [2017 - 21 thousand]. Also during the year ended December
31, 2018, 284 thousand RSUs were exercised, and 24 thousand RSUs were forfeited [2017 - 120 thousand RSUs exercised, and 1
thousand RSUs forfeited]. During the year ended December 31, 2018, CI credited contributed surplus for $12,753, related to
compensation expense recognized for the RSUs [2017 - $7,413]. As at December 31, 2018, 664 thousand RSUs are outstanding
[2017 - 393 thousand RSUs].
CI uses a Trust to hold CI’s common shares, to fulfill obligations to employees arising from the RSU Plan. The common shares held
by the Trust are not considered to be outstanding for the purposes of basic and diluted earnings per share calculations.
[D] DEFERRED SHARE UNITS
The deferred share unit plan [the “DSU Plan”] was established in March 2017, whereby directors may elect to receive all or a
portion of their quarterly compensation in either cash or deferred share units [“DSUs”]. The DSUs fully vest on the grant date
and an expense is recorded based upon the market value of the DSUs at the grant date with an offset included in accounts payable
and accrued liabilities. At the end of each period, the change in the fair value of the DSUs is recorded as an expense with an offset
recorded to the liability. DSUs can only be redeemed for cash once the holder ceases to be a director of CI.
Q4 Financial Report 63 December 31, 2018
Annual Financial Report | 103 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
During the year ended December 31, 2018, 2 thousand DSUs were granted, and 12 thousand DSUs were exercised, [2017 - 13
thousand DSUs, and nil exercised]. An expense recovery of $(217) was recorded during the year ended December 31, 2018, [2017
- $740]. As at December 31, 2018, included in accounts payable and accrued liabilities, is an accrual of $269 for amounts to be
paid under the DSU Plan [2017 - $740].
[E] BASIC AND DILUTED EARNINGS PER SHARE
The following table presents the calculation of basic and diluted earnings per common share for the years ended December 31:
[in thousands]
Numerator:
2018
2017
Net income attributable to shareholders of the Company basic and diluted
$617,476
$549,094
Denominator:
Weighted average number of common shares - basic
Weighted average effect of dilutive stock options and RSU awards (*)
Weighted average number of common shares - diluted
Net earnings per common share attributable to shareholders
Basic
Diluted
259,253
329
259,582
264,435
157
264,592
$2.38
$2.38
$2.08
$2.08
(*) The determination of the weighted average number of common shares - diluted excludes 6,958 thousand shares related to stock options
that were anti-dilutive for the year ended December 31, 2018 [2017 - 7,651 thousand shares].
[F] MAXIMUM SHARE DILUTION
The following table presents the maximum number of shares that would be outstanding if all the outstanding options were
exercised and if all RSU awards vested as at January 31, 2019:
[in thousands]
Shares outstanding at January 31, 2019
RSU awards
Options to purchase shares
242,363
668
6,928
249,959
Q4 Financial Report 64 December 31, 2018
Annual Financial Report | 104 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
10. DIVIDENDS
The following dividends were paid by CI during the year ended December 31, 2018:
Record date
December 31, 2017
January 31, 2018
February 28, 2018
March 31, 2018
April 30, 2018
May 31, 2018
June 30, 2018
July 31, 2018
September 30, 2018
Paid during the year ended December 31, 2018
Payment date
January 15, 2018
February 15, 2018
March 15, 2018
April 13, 2018
May 15, 2018
June 15, 2018
July 13, 2018
August 15, 2018
October 15, 2018
Cash dividend
per share
$
Total dividend
amount
$
0.1175
0.1175
0.1175
0.1175
0.1175
0.1175
0.1175
0.1175
0.1800
31,957
31,736
31,706
31,344
31,170
30,996
30,616
30,513
45,534
295,572
The following dividends were declared but not paid during the year ended December 31, 2018:
Record date
December 31, 2018
March 31, 2019
June 30, 2019
September 30, 2019
December 31, 2019
Declared and accrued as at December 31, 2018
Payment date
January 15, 2019
April 15, 2019
July 15, 2019
October 15, 2019
January 15, 2020
Cash dividend
per share
$
Total dividend
amount
$
0.18
0.18
0.18
0.18
0.18
43,824
43,822
43,822
43,822
43,822
219,112
Q4 Financial Report 65 December 31, 2018
Annual Financial Report | 105 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
The following dividends were paid by CI during the year ended December 31, 2017:
Record date
December 31, 2016
January 31, 2017
February 28, 2017
March 31, 2017
April 30, 2017
May 31, 2017
June 30, 2017
July 31, 2017
August 31, 2017
September 30, 2017
October 31, 2017
November 30, 2017
Payment date
January 13, 2017
February 15, 2017
March 15, 2017
April 13, 2017
May 15, 2017
June 15, 2017
July 14, 2017
August 15, 2017
September 15, 2017
October 13, 2017
November 15, 2017
December 15, 2017
Paid during the year ended December 31, 2017
The following dividends were declared but not paid during the year ended December 31, 2017:
Cash dividend
per share
$
Total dividend
amount
$
0.115
0.115
0.115
0.115
0.115
0.1175
0.1175
0.1175
0.1175
0.1175
0.1175
0.1175
30,587
30,504
30,428
30,223
30,081
30,666
30,499
30,266
30,220
30,035
32,280
32,206
367,995
Record date
December 31, 2017
January 31, 2018
Declared and accrued as at December 31, 2017
Payment date
Cash dividend
per share
$
Total dividend
amount
$
January 15, 2018
February 15, 2018
0.1175
0.1175
32,299
32,299
64,598
Q4 Financial Report 66 December 31, 2018
Annual Financial Report | 106 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
11. INCOME TAXES
The following are the major components of income tax expense for the years ended December 31:
2018
$
2017
$
Consolidated Statements of Income
Current income tax expense
Based on taxable income of the current year
Adjustments in respect of prior years
Deferred income tax expense
Origination and reversal of temporary differences (net)
Other
Income tax expense reported in the consolidated statements of income
Consolidated Statements of Comprehensive Income
Deferred income taxes
Unrealized gain on available-for-sale financial assets
Reversal of gains to net income on available-for-sale financial assets
Income tax expense reported in the consolidated statements of comprehensive income
229,138
(129)
229,009
(3,556)
—
(3,556)
225,453
—
—
—
The following is a reconciliation between CI’s statutory and effective income tax rates for the years ended December 31:
Combined Canadian federal and provincial income tax rate
Increase in income taxes resulting from
Recovery of prior years’ provisions for settled tax items
Other, net
Income tax expense reported in the consolidated statements of income and comprehensive income
2018
$
26.5
—
0.2
26.7
Q4 Financial Report 67 December 31, 2018
Annual Financial Report | 107 | December 31, 2018
218,423
43,578
262,001
(3,267)
62
(3,205)
258,796
843
(56)
787
2017
$
26.5
5.5
—
32.0
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
Deferred 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 deferred income
tax liabilities and assets are as follows at December 31, 2018:
Deferred income tax liabilities
Fund contracts
Other
Total deferred income tax liabilities
Deferred income tax assets
Equity-based compensation
Non-capital loss carryforwards
Provision for other liabilities
Other
Total deferred income tax assets
Net deferred income tax liabilities
Dec. 31, 2017
Recognized
in net
income
$
$
Recognized in
other
comprehensive
income
$
488,482
1,413
489,895
8,762
3,202
5,099
2,439
19,502
470,393
(4,706)
(1,386)
(6,092)
2,834
(1,758)
(2,189)
(1,423)
(2,536)
(3,556)
—
—
—
—
—
—
102
102
(102)
Recognized
in equity
and FX
$
—
—
—
869
—
—
(217)
652
(652)
Dec. 31, 2018
$
483,776
27
483,803
12,465
1,444
2,910
901
17,720
466,083
Significant components of CI’s deferred income tax liabilities and assets are as follows at December 31, 2017:
Opening
retained
earnings
adjustments
Recognized
in net
income
Recognized in
other
comprehensive
income
Recognized
in equity
and FX Dec. 31, 2017
Deferred income tax liabilities
Fund contracts
Deferred sales commissions
Other
Dec. 31, 2016
$
322,603
69,888
—
$
—
(69,888)
—
$
1,109
—
—
Total deferred income tax liabilities
392,491
(69,888)
1,109
Deferred income tax assets
Equity-based compensation
Non-capital loss carryforwards
Provision for other liabilities
Other
Total deferred income tax assets
Net deferred income tax liabilities
5,582
2,197
5,316
210
13,305
379,186
—
—
—
—
—
1,525
1,005
(217)
2,001
4,314
Business
acquisition
[note 3]
$
164,770
—
1,413
166,183
—
—
—
3
3
$
—
—
—
—
—
—
—
(787)
(787)
$
—
—
—
—
1,655
—
—
1,012
2,667
$
488,482
—
1,413
489,895
8,762
3,202
5,099
2,439
19,502
470,393
(69,888)
(3,205)
787
166,180
(2,667)
Q4 Financial Report 68 December 31, 2018
Annual Financial Report | 108 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
12. FINANCIAL INSTRUMENTS
The carrying amounts of the financial instruments are presented in the table below and are classified according to the following
categories:
IFRS 9
December 31, 2018
$
IAS 39
December 31, 2017
$
Financial assets
Fair value through profit or loss
Cash and cash equivalents
Investments [note 2]
Other assets
Amortized cost
Financial assets
Fair value through profit or loss
137,160
Cash and cash equivalents
168,122
Investments [note 2]
9,507 Other assets
Loans and receivables
Client and trust funds on deposit
365,520
Client and trust funds on deposit
Accounts receivable
Other assets
137,979
Accounts receivable
23,006 Other assets
Available-for-sale
Investments [note 2]
Total financial assets
841,294 Total financial assets
Financial liabilities
Fair value through profit or loss
Provisions for other liabilities
Amortized cost
Financial liabilities
Fair value through profit or loss
11,438
Provisions for other liabilities
Other financial liabilities
Accounts payable and accrued liabilities
222,233
Accounts payable and accrued liabilities
Provisions for other liabilities
23,330
Provisions for other liabilities
Dividends payable
219,112
Dividends payable
Client and trust funds payable
370,756
Client and trust funds payable
Long-term debt
Total financial liabilities
1,503,733
Long-term debt
2,350,602 Total financial liabilities
124,582
83,080
6,657
327,733
219,941
22,891
117,830
902,714
28,345
282,490
70,250
64,598
375,647
1,118,119
1,939,449
CI’s investments as at December 31, 2018 and 2017 include CI’s marketable securities which are comprised of seed capital
investments in CI’s mutual funds and strategic investments. Mutual fund securities are valued using the net asset value per unit
of each fund, which represents the underlying net assets at fair values determined using closing market prices. CI’s mutual fund
securities that are valued daily are classified as level 1 in the fair value hierarchy. Mutual fund securities and strategic investments
that are valued less frequently are classified as level 2 in the fair value hierarchy. CI’s investments as at December 31, 2018, also
include securities owned, at market, consisting of money market, equity securities and bonds. Money market and equity securities
are valued based on quoted prices and are classified as level 1 in the fair value hierarchy. Bonds are valued using a market
comparison technique to fair value these instruments using observable broker quotes and are classified as level 2 in the fair value
hierarchy. There have been no transfers between level 1 and level 2 during the year.
Q4 Financial Report 69 December 31, 2018
Annual Financial Report | 109 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
Investments consist of the following as at December 31, 2018:
Marketable securities
Securities owned, at market
Total investments
Investments consist of the following as at December 31, 2017:
Marketable securities
Securities owned, at market
Total investments
Total
$
132,953
35,169
168,122
Total
$
145,262
55,648
200,910
Level 1
Level 2
Level 3
$
56,603
35,169
91,772
$
72,697
—
72,697
$
3,653
—
3,653
Level 1
Level 2
Level 3
$
66,687
55,268
121,955
$
75,361
380
75,741
$
3,214
—
3,214
Included in other assets are long-term private equity strategic investments of $9,507 [2017 - $6,657] valued using level 3 inputs.
Included in provision for other liabilities, as at December 31, 2018 is contingent consideration of nil [2017 - $11,603] and put
option payable on non-controlling interest of $11,438 [2017 - $16,742] carried at fair value and classified as level 3 in the fair
value hierarchy. Long-term debt as at December 31, 2018 includes debentures with a fair value of $1,208,715 [2017 - $906,418],
as determined by quoted market prices, which have been classified as level 2 in the fair value hierarchy.
13. RISK MANAGEMENT
Risk management is an integrated process with independent oversight. Management has developed an enterprise-wide approach
to risk management that involves executives in each core business unit and operating area of CI. Using a quantitative and qualitative
analysis, risk factors are assessed and procedures are implemented to mitigate the various events 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. The corporate finance group reviews the exposure to interest rate risk, foreign exchange risk
and price 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 loss due to the volatility of interest rates.
• Foreign exchange risk is the risk of loss due to volatility of foreign exchange rates.
• Price risk is the risk of loss due to changes in prices and volatility of financial instruments.
Q4 Financial Report 70 December 31, 2018
Annual Financial Report | 110 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
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 $283,500 [2017 – $222,000] is borrowed at a floating interest rate. In 2017, CI entered into an interest rate swap
agreement with a Canadian chartered bank to swap the semi-annual fixed rate payments on the 2021 Debentures $200,000
principal amount for floating rate payments.
Based on the amount borrowed under the credit facility and the 2021 Debentures as at December 31, 2018, each 0.50% increase
or decrease in interest rates would result in annual interest expense increasing or decreasing by $2,418 [2017 – $2,110],
respectively.
(ii) Foreign exchange risk
CI is exposed to foreign exchange risk primarily from its investment in foreign subsidiaries operating in the United States and
Australia and from CI’s investments denominated in U.S. dollars.
The following table provides the impact on net income and other comprehensive income [“OCI”] of a 10% change in the value
of foreign currencies with respect to CI’s net financial assets as at December 31, 2018:
United States dollar
Australian dollar
10% strengthening
of foreign exchange
rate on net income
10% strengthening of
foreign exchange
rate on OCI
10% weakening of
foreign exchange
rate on net income
10% weakening of
foreign exchange
rate on OCI
10,213
485
—
(584)
(10,213)
(485)
—
584
The following table provides the impact on net income and OCI of a 10% change in the value of foreign currencies with respect
to CI’s net financial assets as at December 31, 2017:
10% strengthening
of foreign exchange
rate on net income
10% strengthening of
foreign exchange
rate on OCI
10% weakening of
foreign exchange
rate on net income
10% weakening of
foreign exchange
rate on OCI
5,210
(1,357)
3,817
667
(5,210)
1,357
(3,817)
(667)
United States dollar
Australian dollar
[iii] Price risk
CI incurs price risk through its investments of $168,122 [2017 – $200,910]. Based on the carrying amount of these assets, an
increase or decrease in prices by 10% would result in estimated gains or losses of $16,812 [2017 - $20,091], respectively.
Q4 Financial Report 71 December 31, 2018
Annual Financial Report | 111 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
[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:
2020
2021
2022
2023
2027
Accounts payable and accrued liabilities
222,233
222,233
Total
$
2019
$
$
—
Dividends payable
219,112
175,290
43,822
Client and trust funds payable
370,756
370,756
—
$
—
—
—
Long-term debt
1,508,500
—
450,000
483,500
Put option and contingent consideration
11,438
3,365
2,691
2,691
Total
2,332,039
771,644
496,513
486,191
[C] CREDIT RISK
$
—
—
—
—
2,691
2,691
$
—
—
—
$
—
—
—
325,000
250,000
—
—
325,000
250,000
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. Expected credit losses associated
with CI’s financial assets are insignificant.
As at December 31, 2018, financial assets of $536,012 [2017 – $577,222], represented by client and trust funds on deposit of
$365,520 [2017 – $327,733], accounts receivable of $137,979 [2017 – $219,941] and other assets of $32,513[2017 – $29,548],
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. 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’s accounts receivable consist primarily of management fees receivable, amounts due to CI from the government agencies with
respect to input tax credits and other short-term receivables due within 90 days.
Q4 Financial Report 72 December 31, 2018
Annual Financial Report | 112 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
Securities lending and borrowing agreements consist of the following as at December 31, 2018:
Loaned or delivered as collateral
Borrowed or received as collateral
Securities lending and borrowing agreements consist of the following as at December 31, 2017:
Loaned or delivered as collateral
Borrowed or received as collateral
Cash
$
4,898
11,618
Cash
$
11,676
10,996
Securities
$
5,535
11,506
Securities
$
21,488
20,076
CI uses securities lending and borrowing to facilitate the securities settlement process. These transactions are typically short-
term in nature, fully collateralized by either cash or securities and subject to daily margin calls for any deficiency between the
market value of the security given and the amount of collateral received. CI manages its credit exposure by establishing and
monitoring aggregate limits by counterparty for these transactions. Cash loaned or delivered as collateral is included in accounts
receivable and cash borrowed or received as collateral is included in accounts payable and accrued liabilities.
Other assets consist mainly of long-term investments, long-term accounts receivable, 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.
Q4 Financial Report 73 December 31, 2018
Annual Financial Report | 113 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
14. 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 and long-term debt (including the current portion of long-term debt).
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. As at December 31,
2018, cash and cash equivalents of $20,226 [2017 - $12,124] was required to be on hand for regulatory capital maintenance.
Failure to maintain required regulatory capital by CI may result in fines, suspension or revocation of registration by the relevant
securities regulator. CI from time to time provides loans to its subsidiaries for operating purposes and may choose to subordinate
these loans in favour of general creditors. The repayment of subordinated loans is subject to regulatory approval. As at
December 31, 2018 and 2017, CI met its capital requirements.
CI’s capital consists of the following:
Shareholders’ equity
Long-term debt
Total capital
As at
As at
December 31, 2018 December 31, 2017
$
1,430,077
1,503,733
2,933,810
$
1,903,082
1,118,119
3,021,201
Q4 Financial Report 74 December 31, 2018
Annual Financial Report | 114 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
15. COMMITMENTS
LEASE COMMITMENTS
CI has entered into leases relating to the rental of office premises and computer equipment. CI has the option to renew certain
leases. The approximate future minimum annual rental payments under such leases are as follows:
2019
2020
2021
2022
2023
2024 and thereafter
ADVISOR SERVICES AGREEMENTS
$
14,053
12,911
12,324
11,790
11,729
27,243
CI is a party to certain advisor services agreements, which provide that the 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 advisor services 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.
Q4 Financial Report 75 December 31, 2018
Annual Financial Report | 115 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
16. SEGMENTED INFORMATION
CI has two reportable segments: asset management and asset administration. These segments reflect CI’s internal financial
reporting and performance measurement.
The asset management segment includes the operating results and financial position of CI Investments, CI Private Counsel LP,
First Asset, GSFM and Marret, which derive their revenues principally from the fees earned on the management of several families
of mutual funds, segregated funds and exchange traded funds.
The asset administration segment includes the operating results and financial position of BBS and AWM and its subsidiaries,
including Assante Capital Management Ltd. and Assante Financial Management Ltd. These companies derive their revenues
principally from commissions and fees earned on the sale of mutual funds and other financial products, and ongoing service to
clients.
Segmented information as at and for the year ended December 31, 2018 is as follows:
Management fees
Administration fees
Other income
Total revenue
Selling, general and administrative
Trailer fees
Investment dealer fees
Deferred sales commissions
Amortization of intangibles
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
Indefinite life intangibles
Goodwill
Fund contracts
Total assets
Asset
management
$
2,004,151
—
2,308
2,006,459
424,594
662,829
—
23,140
5,850
8,333
Asset
administration
$
Intersegment
eliminations
$
Total
$
2,004,151
197,591
34,623
—
(174,766)
—
(174,766)
2,236,365
—
(31,586)
(142,153)
(1,027)
—
—
522,518
631,243
155,871
22,113
9,645
8,621
—
372,357
32,315
404,672
97,924
—
298,024
—
3,795
288
1,124,746
400,031
(174,766)
1,350,011
881,713
4,641
432,264
558,890
1,310,510
1,779,957
3,522,731
210,595
—
769,485
—
—
—
—
—
886,354
(43,054)
(225,453)
617,847
991,154
1,521,105
1,779,957
4,292,216
Q4 Financial Report 76 December 31, 2018
Annual Financial Report | 116 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
Segmented information as at and for the year ended December 31, 2017 is as follows:
Management fees
Administration fees
Other income
Total revenue
Selling, general and administrative
Trailer fees
Investment dealer fees
Deferred sales commissions
Amortization of intangibles
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
Indefinite life intangibles
Goodwill
Fund contracts
Total assets
Asset
management
$
1,897,061
—
14,533
1,911,594
380,012
616,761
—
32,623
3,744
52,050
Asset
administration
$
Intersegment
eliminations
$
Total
$
1,897,061
174,009
40,226
—
(167,931)
—
(167,931)
2,111,296
—
(29,353)
(137,250)
(1,328)
—
—
459,103
587,408
142,698
31,295
6,424
51,707
—
341,940
25,693
367,633
79,091
—
279,948
—
2,680
(343)
1,085,190
361,376
(167,931)
1,278,635
826,404
6,257
511,436
532,543
1,311,006
1,779,957
3,602,399
210,312
—
742,855
—
—
—
—
—
832,661
(24,926)
(258,796)
548,939
1,043,979
1,521,318
1,779,957
4,345,254
Q4 Financial Report 77 December 31, 2018
Annual Financial Report | 117 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
17. COMPENSATION OF KEY MANAGEMENT
The remuneration of directors and other key management personnel of CI during the years ended December 31, is as follows:
Salaries
Equity-based compensation
Total
2018
$
6,453
2,847
9,300
2017
$
6,438
4,493
10,931
18. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Included in selling, general and administrative expenses [“SG&A”] are salaries and benefits of $279,728 for the year ended
December 31, 2018 [2017 - $242,006]. Also included in SG&A is depreciation of capital assets of $9,954 for the year ended
December 31, 2018 [2017 - $7,463]. Other SG&A of $232,836 for the year ended December 31, 2018, primarily includes marketing,
lease and information technology expenses as well as professional and regulatory fees [2017 - $209,634].
19. FUTURE ACCOUNTING POLICY CHANGES
The following standards have been issued, but are not yet effective on the date of issuance of CI’s consolidated financial statements.
IFRIC 23:
On June 7, 2017, the IFRS Interpretations Committee issued IFRIC 23, Uncertainty over Income Tax Treatments [“IFRIC 23”], which
is mandatory for annual periods on or after January 1, 2019. IFRIC 23 clarifies the accounting treatment used to reflect uncertainty
in the recognition and measurement of income taxes. CI expects the impact of the application of this standard to be insignificant.
IFRS 16:
IFRS 16, Leases [“IFRS 16”] was issued in January 2016 and will replace the previous lease standard, IAS 17, Leases, and related
Interpretations. The new standard requires lessees to recognize assets and liabilities for most leases. IRFS 16 is effective for annual
periods beginning on or after January 1, 2019.
CI has substantially completed a detailed impact assessment of IFRS 16 and plans to use the modified retrospective approach.
Under this approach, CI will recognize the lease liability based on the remaining lease payments discounted using CI’s incremental
borrowing rate as at January 1, 2019. CI will also recognize the right-of-use asset as at the date of initial application, as if IFRS 16
had always been applied since the commencement date of the lease, discounted using CI’s incremental rate of borrowing as at
January 1, 2019. Comparative figures will not be restated, and instead the cumulative effect of initial application will be recorded
as an adjustment to the opening deficit as at January 1, 2019.
In addition, CI plans to elect to apply the following practical expedients as follows:
• Apply a single discount rate to a portfolio of leases with reasonably similar characteristics
Q4 Financial Report 78 December 31, 2018
Annual Financial Report | 118 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017 • [in thousands of dollars, except per share amounts]
• Not recognize leases whose term ends within 12 months of initial application
•
Exclude initial direct costs from the measurement of the right-of-use assets as at the date of initial application
• Not recognize leases of low value
CI estimates the right-of-use asset (including prepaids and net of deferred tax) to be in the range of $46,000 - $50,000, and the
corresponding liability (net of deferred tax) to be in the range of $58,000 - $62,000, with the difference to be an adjustment to
opening deficit. The right-of-use asset will be further reduced by approximately $13,000 due to the reclassification of leasehold
inducements from its current presentation as a liability in the consolidated statements of financial position. Net income before
tax is not expected to be materially impacted.
The adoption of IFRS 16, will require an increase in the maintenance of liquid assets for regulatory purposes approximately
equivalent to the current lease liability in the range of $8,000-$12,000.
20. COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform to the consolidated financial statement presentation in the current
year.
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.
Q4 Financial Report 79 December 31, 2018
Annual Financial Report | 119 | December 31, 2018
DECEMBER 31, 2018 and 2017 • [in thousands of dollars, except per share amounts] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CORPORATE DIRECTORY
CI Financial
DIRECTORS
Peter W. Anderson
President, Chief Executive Officer
and Director
William T. Holland
Chairman of the Board
Tom P. Muir
Director
William (Bill) Butt
Director
David P. Miller
Director
Sheila A. Murray
Director
Brigette Chang-Addorisio
President,
Raymond Chang Foundation;
Director
Stephen T. Moore
Managing Director,
Newhaven Asset Management Inc.;
Director
Paul J. Perrow
Director
EXECUTIVE TEAM
Peter W. Anderson
President, Chief Executive Officer
and Director
Steven J. Donald
Executive Vice-President and
Chief Risk Officer
Rohit D. Mehta
Executive Vice-President;
President, First Asset Investment
Management Inc.
Sean Etherington
President, Assante Wealth
Management (Canada) Limited
Douglas J. Jamieson
Executive Vice-President and
Chief Financial Officer
Roy Ratnavel
Executive Vice-President and
National Sales Manager,
CI Investments Inc.
Darie Urbanky
Executive Vice-President and
Chief Operating Officer
Jamie Ross
President, CI Private Counsel
Head Office
2 Queen Street East
Twentieth Floor
Toronto, Ontario M5C 3G7
Telephone: 416-364-1145
Toll Free: 1 800 268-9374
www.cifinancial.com
Administration Office
15 York Street
Second Floor
Toronto, Ontario M5J 0A3
Investor Relations
Contact: Douglas J. Jamieson,
Executive 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
100 Adelaide Street West
Toronto, Ontario M5H 1S3
Registrar and Transfer Agent
Computershare Investor Services Inc.
8th Floor, 100 University Avenue
Toronto, Ontario M5J 2Y1
Telephone: 1 800 564-6253
Normal Course Issuer Bid
Effective June 14, 2018, the Toronto Stock Exchange (the “TSX”) accepted CI’s notice
of intention to commence a normal course issuer bid through the facilities of the
TSX. On December 13, 2018, the Toronto Stock Exchange (the “TSX) accepted CI’s
amended notice of intention to make a normal course issuer bid through the facilities
of the TSX or alternative Canadian trading systems. Under the amended bid, CI may
purchase up to 25,356,405, of its shares at the prevailing market price. Common shares
may be purchased by CI or purchased by a trustee to satisfy obligations under equity-
based compensation plans for CI. All common shares purchased by CI (but not those
purchased by such a trustee) will be cancelled. Purchases under the bid will terminate
on June 17, 2019, or on such earlier date as CI completes its purchases or provides
notice of termination. As of February 28, 2019, CI has acquired an aggregate of
20,391,600 shares under the normal course issuer bid at an average price of $20.25 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 June 18, 2019, subject to receipt of approval from the TSX.
Digital Report
This Annual Report can be downloaded from CI’s website at www.cifinancial.com
under “Financial Information”.
Annual General Meeting
This Annual General Meeting of Shareholders will be held at 2 p.m. ET on
June 24, 2019 at 15 York Street, Second Floor, Toronto.
As described in greater detail in the MD&A section of this Annual Report, 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, including the risks described under the heading “Risk Management” in the MD&A section of this Annual Report.
1904-1052_E (05/19)