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Report to Shareholders
During 2002, Investors Group Inc.
once again delivered strong financial results. Synergies generated
between its operating units – Investors Group and Mackenzie
Financial Corporation – and a disciplined focus on cost
containment contributed significantly to earnings.
The environment
in 2002 was very challenging for our clients and for the financial
advisors and consultants who serve them. The third year of
a bear market, combined with mounting global tensions, have
shaken the confidence many Canadians have in financial markets.
Experience has
taught us that focusing upon fundamentals is the best way
to make sound decisions, both in times of great optimism and
in times of uncertainty. The fundamentals lead us to be optimistic
about the prospects for our clients and for the Company.
We know that
individuals in Canada as in other countries will continue
to need to save in order to provide for their futures. We
also know that equity markets have, over time, provided the
most attractive financial returns of any asset class. And
we believe that most Canadians are best served by managing
their financial affairs based upon the advice of a knowledgeable
advisor, in the context of a long-term financial plan, with
a professionally managed and diversified portfolio.
We believe these
fundamentals will eventually overcome the current forces which
are negatively impacting financial markets, and will reinforce
the strength of the Company’s advisor-based business
model.
Financial
Results
Net income attributable
to common shareholders for the year ended December 31, 2002
was $491.1 million compared to $387.7 million in 2001. Earnings
per share were $1.85 compared with $1.56 in 2001, an increase
of 18.5%. The net income figure for the same period in 2001
excludes both a restructuring charge of $95.6 million ($56.0
million after tax) taken in the second quarter and goodwill
amortization related to the acquisition of Mackenzie.
A change in accounting
estimate effective April 1, 2001 related to amortization of
sales commissions reduced expenses and increased earnings
for 2002 by $19.8 million after tax or 7.5 cents per share.
Excluding this change, earnings per share would have been
$1.78, an increase of 14%. The Company changed the period
of amortization of these expenditures to reflect a more accurate
estimate of their useful life. This estimate is also consistent
with that used by Mackenzie and the industry generally. Dividends
per share increased for the thirteenth consecutive year, rising
13 cents to 86 cents.
2002 Priorities
Over the course
of 2002, our efforts were focused on the execution of three
priorities:
- Realizing on the revenue and cost opportunities
flowing from the Mackenzie transaction.
- Achieving higher growth in asset levels.
- Containing the growth in expenses.
Achieving higher growth in asset levels
proved to be an elusive target during 2002, but the Company
achieved its objectives with respect to Mackenzie transition
activities and containing expenses. It also took many steps
to strengthen the Company’s position in order to realize
its growth potential in the future.
Mackenzie Opportunities
The acquisition of Mackenzie in 2001 provided
the Company with a premier vehicle to serve the independent
financial planner and full service broker markets.
Substantial progress was made in 2002
toward the goal of achieving $100 million in annual cost and
revenue opportunities. By year-end, the Company had achieved
$81 million in run-rate synergies for shareholders and unitholders
through initiatives which included: re-negotiated vendor relationships
and sub-advisory investment management agreements; consolidation
of a number of systems and management activities; implementation
of “best demonstrated practices”; and continued
development in the non-mutual fund areas of the Company such
as MRS and Winfund. The Company was also hard at work preparing
for the migration to common systems architecture, which will
produce additional opportunities into the future.
In December, Mackenzie completed the sale
of its U.S. subsidiary, Mackenzie Investment Management Inc.
to Waddell & Reed Financial, Inc., who were also retained
as a sub-advisor on certain Mackenzie funds distributed in
Canada.
The bridge financing facilities arranged
in 2001 in connection with the Mackenzie acquisition were
also repaid in 2002.
Asset Growth
While weak financial market conditions
resulted in lower mutual fund asset levels, the Company finished
the year with net sales on a consolidated basis, largely due
to strong relative mutual fund performance at both Investors
Group and Mackenzie and strong sales activity at Mackenzie.
There were also increases in new business in the non-mutual
fund areas of the Company, particularly in the insurance and
securities operations.
The Company took steps in 2002 to position
itself for future growth, including:
- The strengthening of Mackenzie’s
mutual fund product shelf, including changes to a number
of sub-advisory relationships and new product introductions.
- The launch of Investors Group Corporate
Class Inc., the broadest tax-advantaged fund structure available
in Canada.
- The establishment of a long-term banking
relationship between the National Bank of Canada and the
Company, Great-West Life and London Life.
These initiatives, along with a strong
commitment to support the consultants and advisors who work
with clients in every part of the country, will position the
Company for greater asset growth in the future.
Management of Expenses
The Company undertook a significant expense
management exercise during 2002 designed to achieve efficiencies
and reduce expenditure levels, without negatively affecting
our service and support to clients, consultants and advisors.
The Company reduced non-commission expenses by $65 million
when compared to the level of expenses incurred by Investors
Group and Mackenzie for the full year 2001.
Board of Directors
Retiring from the Board in 2002 were Mr.
David Jackson, who had served as a Director since 1991, and
Mr. Alexander Christ, who had served since 2001, and as a
director of Mackenzie Financial Corporation since 1971. We
wish to thank Mr. Jackson and Mr. Christ for their contributions
to the Company over many years.
The Board of Directors would also like
to acknowledge the efforts and contributions of our many employees
and the consultants and financial advisors with whom we partner.
The Company’s success would not be possible without their
ongoing support and commitment.
Looking to the Future
The priorities we established for the
Company last year also apply to 2003. Growth in asset levels,
opportunities created by the acquisition of Mackenzie and
the prudent management of expenses will be the Company’s
primary focus.
The current environment continues to be
challenging, but it has not dampened our optimism for the
future. Our energies are devoted to positioning the Company
so that we may continue to provide clients, advisors and consultants
with the best advice, products and services available in the
industry.
On behalf of the Board of Directors,
R. Jeffrey Orr
President and Chief Executive Officer
Investors Group Inc.
January 31, 2003
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