A 13% drop in fourth-quarter earnings at TSX Group Inc. was mainly because of a tax charge, the company said today in a conference call, after releasing its 2007 results.

Net income for the fourth quarter fell to $30.4 million, or 46¢ a share, compared with earnings of $35.1 million, or 51¢ a share for the three months ending Dec. 31, 2007, in the same period a year earlier.

The operator of the Toronto Stocks Exchange and the Toronto Venture Exchange said earnings per share prior to a tax adjustment was 66¢. The future tax asset was reduced, and income tax expense increased by $13.3 million, primarily as a result of decreases in federal corporate income tax rates that were enacted in December 2007.

The one-time tax cost reduced net income by $13.3 million, or 20¢ a share.

Revenue rose 22% to $111.2 million, it said, as the company brought in more money from its issuer services, trading and market data businesses.

Cash flow rose to $53.2 million from $38.2 million a year earlier.

In early Dec., TSX announced a $1.3-billion cash and stock deal to acquire the Montreal Exchange (MX), which will mark its move into derivatives trading. MX shareholders will vote on the deal on Feb.13 and then it is subject to regulatory approval.

Interim co-CEO Michael Ptasnik said the TSX is hoping to close the deal by the end of this quarter, which includes a L’Autorité des marchés financiers (AMF) hearing.

“The process is moving forward with all the different regulators,” said Ptasnik, during today’s conference call. “And there’s been no indication that we will not be able hit the Q1 timing.”

In March, 2007, TSX announced plans to open a derivitaves exchange, DEX, with International Securities Exchange Holdings Inc. Ptasnik said TSX will have to pay a $15 million break-fee for halting the deal, if the MX deal closes as planned, and no further business can be arranged with ISE.

TSX saw the departure of CEO Richard Nesbitt at the start of this year, when he resigned to lead CIBC World Markets. The TSX board is on the hunt for his replacement, Ptasnik said during today’s call.

Annual revenue for 2007 up 20% to $424.7 million, as compared with $352.8 million in 2006 reflecting increased revenue from issuer services, trading and market data.

Net income increased by 13% over 2006 to $148.7 million, or $2.19 per common share largely due to the higher revenue. This was partially offset by higher expenses and income taxes.

Prior to a one-time tax charge, annual earnings per diluted share was $2.39 for 2007.

As well, TSX Group board of directors declared a dividend of 38¢ on each common share outstanding, payable on February 28 to shareholders of record at the close of business on February 14.

TSX Group shares gained 25¢ today, or 0.55%, to end the session at $45.90.