Report To Shareholders
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R. Jeffrey Orr
President and
Chief Executive Officer
IGM Financial Inc. |
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The Company changed its name to IGM Financial Inc.
in 2004, reflecting its growth and development over
the past few years into an organization that now serves
the financial needs of Canadians through multiple businesses.
While IGM Financial's businesses operate distinctly,
each with their own leadership, products and brands,
they share a common focus in providing clients with
personalized one-to-one financial advice, and are each
committed to leadership and excellence within their
respective segments of the market.
IGM Financial made significant progress on many fronts
in 2004. Strong financial results were again delivered
to shareholders during the year. The Company's two principal
businesses - Investors Group Inc. and Mackenzie Financial
Corporation - each enhanced their competitive positions
and experienced strong momentum in areas such as sales,
recruiting and retention. The Company added to its position
of strength in the financial advice market through the
acquisition of 75% of Investment Planning Counsel Inc.
Leadership transition occurred at each of Investors
Group and Mackenzie, positioning the Company strongly
for the future.
Financial results
Net income attributable to common shareholders, excluding the items noted below, was $615.6 million for the year ended December 31, 2004 compared to $533.5 million in 2003. Earnings per share were $2.31 compared to $2.01 in 2003, an increase of 14.9%. Net income in 2004 excludes a charge to earnings recorded in the fourth quarter of $28.8 million ($19.2 million after tax) which includes both compensation payments to certain unitholders of Investors Group and related costs resulting from settlement agreements with regulatory agencies (unitholder compensation). Net income in 2003 excludes:
- a dilution gain of $14.8 million recorded in the
third quarter resulting from the reduction in the
Company's percentage ownership of Great-West Lifeco
Inc. related to their acquisition of Canada Life;
- the reversal of $24.8 million ($15.6 million after tax) of restructuring costs related to the acquisition of Mackenzie Financial Corporation recorded in the fourth quarter; and
- a non-cash income tax charge of $24.8 million recorded in the fourth quarter arising from increases in Ontario income tax rates and their effect on the future income tax liability related to indefinite life intangible assets.
Net income attributable to common shareholders, including the items noted above, was $596.4 million for the year ended December 31, 2004 compared to $539.1 million in 2003. Earnings per share were $2.24 compared to $2.03 in 2003.
Dividends increased for the fifteenth consecutive year, rising 16 cents to $1.15 per share.
Operating Highlights
Investors Group Inc.'s enhancements to its Consultant
programs and client product offering resulted in tangible
benefits in 2004. Significant improvement in Consultant
retention coupled with strong recruiting produced the
highest growth of the Consultant network in many years.
It also resulted in a meaningful reduction in the redemption
rate of Investors Group's mutual funds, at a time when
redemption rates in the industry overall were rising.
Mackenzie Financial Corporation has pursued a strategy focused on building excellent relationships with financial advisors, maintaining a high quality product line-up and adding to its team of experienced and talented investment managers. It was rewarded in 2004 by strong growth in sales and assets under management. Mackenzie led all companies within the advice segment of the industry in sales of mutual funds.
Notwithstanding that 2004 was a year of significant growth and investment, the Company’s principal operating units remained focused on prudent management of operating costs within the context of higher sales and activity levels.
Acquisition Of Investment Planning Counsel
In May of this year, the Company completed the acquisition
of 75% of Investment Planning Counsel Inc. Investment
Planning Counsel is Canada's fifth largest financial
planning organization, with $8 billion in client assets
under administration, which includes $1.5 billion in
mutual fund assets under management. Investment Planning
Counsel serves the financial needs of Canadians through
a network of 600 financial advisors.
The acquisition provides IGM Financial with an expanded presence in the financial planning market and provides it with an additional source of growth for the future. With the acquisition, the Company now owns two of Canada’s five largest financial planning organizations and has further extended its broad and diverse distribution platform. Investment Planning Counsel will retain its strong entrepreneurial culture and will be led by its existing management team.
Industry Perspective
In 2004, improved market conditions were reflected
in higher industry activity, sales and asset levels.
Net inflows into mutual funds increased relative to
other investment alternatives on an industry-wide basis,
as investors chose to put more of their investment dollars
into funds. IGM Financial saw significant year-over-year growth, and significantly stronger sales. However,
investors remained cautious in 2004 in their choice
of investments, seeking products that offered yield
and capital protection rather than capital appreciation.
Throughout 2004, the mutual fund industry in the U.S. and Canada was affected by investigations into market timing issues. IGM Financial worked closely
with regulators to bring satisfactory resolution to these matters for the industry, the Company and its clients. The Company will continue to work with regulators and other industry members for the application of clear and consistent standards for the benefit of clients.
Leadership
Transition in the leadership of IGM Financial's two
principal businesses - Investors Group and Mackenzie
- was successfully completed in 2004 and early 2005,
positioning IGM Financial strongly for the future.
Mr. Murray J. Taylor was appointed President and Chief
Executive Officer of Investors Group Inc. in April,
2004. Mr. Taylor's appointment followed very successful
roles with Investors Group as head of sales and marketing
operations and previously as leader of the transition
activities between Mackenzie and Investors Group. He
joined Investors Group after 25 years with Great-West
Life and London Life, where he played a key role in
establishing those companies' leading market positions
among life companies in individual investment products.
In 2004, Mr. James L. Hunter announced his intention to retire as President and Chief Executive Officer of Mackenzie Financial Corporation. Mr. Hunter has been with Mackenzie since 1992. During that time, Mackenzie has strengthened its leadership position in the mutual fund industry and enhanced its reputation in Canada for providing high quality products and services to financial advisors and their clients. The Board wishes to thank him for his contributions over many years to Mackenzie and to IGM Financial.
The Company was pleased to announce that Mr. Charles R. Sims will join Mackenzie Financial Corporation in March of 2005 as President and Chief Executive Officer. Mr. Sims has extensive experience in the Canadian, U.S. and international mutual fund markets. For the past 15 years he has been with Franklin Resources Inc., the largest publicly traded asset management company in the world, where he has held leadership roles in the U.S. and Canada across a range of activities.
Board Of Directors
At the Company's Annual Meeting in 2004, The Honourable
Paul Desmarais, P.C., C.C., retired from the Board of
Directors of IGM Financial. Mr. Desmarais was a director
of the Company's predecessor corporation since 1966,
and of the Company since 1986. He has played a fundamental
role in guiding the Company over the years, and has
been integral to its success. In recognition of his
significant contribution, the Board of Directors appointed
Mr. Desmarais Director Emeritus. Ms. Wanda Dorosz also
retired from the Board in 2004, having served as a director
of the Company since 1995 and also served on the Investment
Committee of the Board. We wish to thank her for her
contribution to the Company.
The Board of Directors wishes to thank our many employees and the consultants and advisors with whom we partner for their continued support and commitment. Our success is a testament to their efforts.
Looking Ahead
The past few years have witnessed changes in the industry’s
competitive landscape and in client preferences. IGM
Financial has continued to build its position in the
marketplace and strengthen its businesses, guided by
the perspective that it is in a leadership position
in a highly attractive industry possessing strong long
term growth prospects.
After several years of successfully managing change within our businesses, we are confident in our ability to identify and take advantage of the opportunities which lie ahead of us.
On behalf of the Board of Directors,
R. Jeffrey Orr
President and Chief Executive Officer
IGM Financial Inc.
February 18, 2005 |
