CI board rubber stamps trust conversion

CI Financial’s board of directors has approved a plan to begin the process of converting the mutual fund company into an income trust.

“Management of CI and its Board of Directors believe that an income trust structure would benefit both CI and its shareholders,” the company said today in a statement accompanying its latest quarterly earnings report.

CI has been evaluating the merits of converting to a trust for the past three years, the company revealed on Tuesday. The first official announcement that itwas considering such a move came on September 8, 2005, but the plan was shelved just a few weeks later after the Canada Revenue Agency said it would no longer issue advance rulings on trust conversions. Following that, former Finance Minister Ralph Goodale cast further uncertainty on the structure, announcing a review of their tax status.

However, Goodale ultimately decided to make no change to the tax status of trusts, and the new finance minister, Jim Flaherty, has indicated he will support his predecessor’s choice.

CI’s board of has authorized management of CI to “pursue and negotiate the transaction with any and all necessary regulatory authorities and external third parties with a view to developing and submitting to the Board of Directors, for its consideration and approval, a final structure for the conversion.”

CI has asked for an advance tax ruling from CRA and says the conversion will also be subject to a number of additional conditions, including court approval, approval of the shareholders of CI and regulators.

Give the complexities involved, CI says it is unable to predict when the process will be complete, but the firm does say that the business and operations of CI will be unaffected by the conversion and the company will continue to be run by current senior management and staff.

CI’s third quarter profits fell 10% compared to the same period last year, to $73.1 million. However, earning for the quarter included a $28.2 million expense for stock-based compensation that “reflects the increase in CI’s share price during the quarter from $24.10 to $28,” the company said. Excluding that cost, earnings per share would have been 32 cents, compared to 28 cents in Q3 of last year.

Total revenue for the three-month period ending February 28 increased by 8% to $330.4 million and total fee-earning assets were at $73.7 billion, a 6% rise. Assets under management were also higher, climbing 17% to $55.3 billion. “The increase in CI’s average assets was the result of strong market performance and positive sales of CI’s funds,” the fundco said.

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com