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Amvescap chief rebuffs CI Fund's advances

Reiterates firm not interested in selling

MUTUAL FUNDS REPORTER

The new boss of Amvescap PLC shrugged off CI Fund Management Inc.'s takeover overtures yesterday, reiterating the troubled fund company has no interest in selling operations to the highest bidder.

"Any inquiry that has been made to Amvescap has been responded to. I really can't add any more than that. It's sort of shadow boxing otherwise," said Martin Flanagan, Amvescap's chief executive officer, in a conference call with analysts. Mr. Flanagan, a former co-CEO at rival company Franklin Resources Inc., was hired last month after an extensive executive search.

"I was at Franklin Templeton for 22 years and I intend to be here for 22 years. It was not a three-month view," he told analysts. "Forward momentum in this organization . . . will far exceed any short-term gains that might be talked about right now."

On July 6, CI of Toronto confirmed it had made an unsolicited $7-billion cash offer for Amvescap, a British-based asset manager best known in Canada for the AIM and Trimark brands.

Amvescap's board of directors rejected the CI proposal, saying the company does not have the financial resources to launch a formal offer.

There have been few developments since.

Amvescap hired the well-regarded Mr. Flanagan to turn around the company's sagging fortunes. CI, meanwhile, has contacted investment banking company Fenchurch Advisory Partners and the law firm Freshfields, both of London, to advise on a bid.

Financial results for the second quarter ended June 30 indicate Mr. Flanagan has a challenging road ahead.

Amvescap's profit after tax dipped to £38.7-million ($68.6-million U.S.) or 4.9 pence a share compared with £41.5-million or 5.2 pence a share reported for the same three-month period a year earlier. That's despite a revenue increase to £295.5-million, up from £288.8-million in 2004.

Funds under management dropped 0.6 per cent in the quarter to $373.2-billion (U.S.) as $8.5-billion in combined redemptions and currency losses outpaced $5.8-billion in stock market gains. Four years ago, the company had more than $400-billion in funds under management.

U.S. operations, dogged by scandal and weak performance, are the source of much of the company's woes. Funds under management in the United States sunk to $245.4-billion as of June 30, down $3.6-billion from March 31. The company is paying a $450-million fine to settle improper trading allegations.

Mr. Flanagan will be well compensated for his efforts. According to The Sunday Times of London, the new CEO may earn more than $50-million over the next four years. He will earn a base annual salary of $790,000 plus a potential annual bonus of $4.7-million. If performance targets are met, he will receive a maximum of five million shares worth more than $36-million at the current market price. In addition, Amvescap paid Mr. Flanagan $11.7-million to buy out his position in Franklin Resources.

© 2007 The Globe and Mail. All rights reserved.

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