Investors Group Inc. continued to feel the effect of the market slowdown as sharply reduced mutual fund sales led to a slight drop in second quarter earnings.

Canada’s largest mutual fund company said today net income attributable to common shareholders for the three months ended June 30 was $129.4 million, off 0.9% from a year ago. Earnings per share were 49¢, unchanged from 2002. For the six months net income attributable to common shareholders was $249.1 million (94¢) vs $247.1 million (93¢) in 2002.

“Earnings levels were maintained in the face of reduced asset levels and lower revenues, with continued attention to the management of expenses,” president and CEO Jeffrey Orr said in a statement. “Throughout the weak market environment however, we have remained focused on building our business for the future, confident in our long-term prospects.

Mutual fund sales for the quarter at IG fell 27% to $914.4 million, with net redemptions of $381.6 million vs $22.7 million a year ago. At subsidiary Mackenzie Financial Corp. fund sales were off almost 38% to slightly more than $1 billion. Mackenzie suffered net redemptions for the quarter of $220.2 million vs net sales of $136.9 million.

Investors Group’s redemption rate at June 30 (excluding money market funds) was 11.3% vs 9.2% a year ago. The corresponding rate at June 30 for all other members of the Investment Funds Institute of Canada was 14.8%. IG’s mutual fund assets at June 30 were $37.6 billion, off 5.8% from $39.9 billion in 2002.

Mackenzie’s redemption rate for long-term funds was 12.7% this year vs 11.2% a year ago. Mutual fund assets under management at June 30 stood at $30.3 billion, down from $32.5 billion a year ago.

Jim Hunter, president and CEO of Mackenzie, said in a statement he was hopeful that the recent recovery of the stock market “will, if sustained, lead to an improved mutual fund sales environment for our industry. We will benefit from any rebound in activity, but we are also managing our business on a basis of being prepared to handle continued challenges.”

Gross combined revenues for the second quarter were $460.1 million vs $501.5 million in 2002. For the first six months of 2003 gross revenues were $915.0 million vs $1.0 billion last year. Operating expenses were $525.6 million for the six months and $258.5 million for the quarter vs $581.1 million and $283.3 million, respectively, in 2002.

Client assets under management and administration at June 30 totalled $74.9 billion vs $80.6 billion in 2002.