Improved markets and the integration of recent acquisitions helped boost fourth-quarter revenues and earnings at CI Fund Management Inc.

The Toronto-based fund manager said Wednesday revenues for the three months ended May 31 totalled $263.9 million, up 84% from $143.7 million in the prior year, reflecting the significant increase in fee-earning assets. Net income jumped more than seven-fold to $75.4 million (26¢ per share) from $10.4 million (4¢).

CI said the net income figure included an expense relating to stock-based compensation, which if adjusted for comparability purposes, results in net income before stock-based compensation of $82.9 million (28¢) for the quarter vs $41.1 million (18¢).

For the full year, total revenues were up 47% to $845 million vs $576 million a year ago, while net income rose 211% to $221 million (82¢) from $71 million (32¢).

“In addition to favourable market conditions in fiscal 2004, the successful acquisitions of Assante Corp., Synergy Asset Management Inc.
and Skylon Capital Corp. contributed significantly to CI’s growth,” the company said in a release.

CI said the acquisition of IQON Financial Management Inc., which closed June 3, will add $4.2 billion of administered assets, increasing CI’s total net administered assets to $16.2 billion.

In its management discussion accompanying the results, CI said it is improving its distribution business, that it has uncovered some market timing in its funds, and that no takeover of the company is imminent.

CI says that it is making “significant progress” in the enhancement of the Assante operations, which it acquired almost a year ago. It says that these improvements “should create a strong platform for continued growth in this business”, and it notes that its recent acquisition of IQON reflects its “ongoing commitment to expanding its distribution capabilities”.

As for the core money management business, CI boasts that “the good performance of its funds, expanded areas of distribution, and high levels of support, have all been critical in the improvement of CI’s fund sales in fiscal 2004”. However, it points out that market gain, boosting its asset totals, “have had the greatest impact on the company’s profitability”.

“Operationally, CI has positioned itself to take advantage of favourable market conditions by consolidating investment managers, streamlining its fund lineup and focusing on managing operations efficiently to lower corporate and fund operating expenses,” it says.

As for other operational issues, CI says that it has cooperated with the Ontario Securities Commission’s inquiry into late trading and market timing in mutual funds. CI says that it has found no evidence of late trading, but that it has reported that there has been some instances of “frequent trading” in some of its funds to the OSC.

CI says that, “in response to changed market perceptions towards frequent trading”, in November 2003, it implemented restrictions on frequent trading in its funds by levying a 2% fee on certain trades that are redeemed or switched within 30 business days.

Looking ahead a year or so, CI notes that its standstill agreement with Sun Life ends July 25, 2005. That agreement essentially keeps Sun Life’s ownership of the firm at 34%; and binds executives Bill Holland, Stephen MacPhail and Peter Anderson; among other things. After the expiry of the standstill agreement, Sun Life will be subject only to the normal takeover rules.

However, the firm notes, “At this time, Sun Life has not provided CI with any indication that it has any intention of changing its current level of shareholding either prior to or after the expiry of the standstill agreement. Should this situation change, CI will evaluate what options are in the best interests of all shareholders at that time.”