CI shareholders approve trust conversion

Shareholders of CI Financial have overwhelmingly approved the proposal to convert the company from its existing corporate structure to that of an income trust. The result of the vote, held at a special meeting in Toronto on Thursday, was 99.8% in favour of the move.

“I’d call it a pretty good result,” joked Stephen MacPhail, CI’s president and chief operating officer.

The vote was one of the last few hurdles for the conversion. The company has already completed all the leg-work and now only faces a June 27 court date, for final approval.

“We anticipate converting to an income trust somewhere between the 28th and 30th of this month,” MacPhail says. “It’s going to be that quick. Everything is done; we’re just waiting to get a copy of the tax ruling.”

The company has been an on-again, off-again candidate for trust conversion since September 8, 2005, when the proposal was first tabled. The notion was shelved shortly thereafter, when the federal government said it would review the trust issue, hinting that it may move to preclude conversion of large, profitable companies such as CI.

When the feds announced they would instead level the playing field for investors, bringing dividend taxation in line with that of income trust distributions, talk of conversion resumed at CI.

The conversion rate for shareholders will be 1-to-1, with no change in pricing aside from what the market dictates.

As of June 22, CI stock is yielding a dividend of 72 cents per year. The first distribution as an income trust is expected to be 16.75 cents per share, payable July 15, raising the annual distribution to $2.01.

The official declaration will not be made until the conversion is cleared, although the board of trustees will be made up of the same members as the corporation’s board of directors.

“Given the growth profile for the company and our track record, we would expect to be trading at a pretty good yield,” MacPhail says.

Conversion to a trust is not expected to impair CI’s ability to participate in any future market consolidation, he says, because the trust units will prove a superior currency for making such a transaction. Besides which, he points out that the company has never been a hoarder of cash.

The company is also moving its fiscal year-end to December 31 and its TSX symbol will change to CIX.UN.

Shares of CI were up 1.5% on the news by mid-afternoon, indicating that approval was pretty much a foregone conclusion. The company is Canada’s third largest mutual fund complex, according to statistics from IFIC, with more than $54 billion in assets under management.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.