Mackenzie
Review of the Business

Asset Management Operations

As of December 31, 2004, more than one million clients held Mackenzie mutual funds and segregated funds purchased through a network of over 30,000 independent financial advisors. Under the Mackenzie master brand, the Mackenzie family includes: Cundill, Ivy, Keystone, Maxxum, Sentinel*, Select Managers*, Symmetry, Universal, and the recently introduced Mackenzie Structured Products brand. Total Mackenzie assets under management and administration increased 13.9% during the year to total $43.3 billion.

Gross sales of Mackenzie mutual funds were $6.8 billion for 2004, an industry leading figure for non-bank-owned fund complexes. Net sales for the year totalled $795 million. This compared to $5.3 billion gross sales and $69 million net redemptions in 2003.

In 2004, Mackenzie received six awards at the annual Canadian Investment Awards. Fred Sturm, lead manager of the Mackenzie Growth Fund and the Mackenzie Universal Canadian Resource Fund, had the distinction of being named “Analysts’ Choice Fund Manager of the Year”. Mackenzie is now home to the “Analysts’ Choice Fund Manager of the Year” award winner for six of the past seven years. Peter Cundill, lead manager of the Mackenzie Cundill Funds, received this award last year. Jerry Javasky, lead manager of Mackenzie’s Ivy Funds, received the distinction in 1998 and 2002, and Ian Ainsworth, the award winner for 1999 and 2000, joined Mackenzie in 2003 to head up its growth equity team.

With such a broad range of funds and investment styles, Mackenzie’s mutual funds experience periods of both over and under relative performance. Cundill Funds continued their industry leading performance during 2004 with all seven rated funds qualifying for the five star rating offered by Morningstar†, a leading fund rating service. As at December 31, 2004, all Cundill Funds were ranked in the first quartile for both three and five year performance by Morningstar†.

It was a year of relative underperformance for the Ivy Funds. The continued strength of the Canadian dollar during 2004 had a negative impact on the returns of the foreign holdings in this fund family. Ivy’s approach to investing continues to be the building of diversified portfolios of high quality businesses that exhibit the characteristics of conservative growth purchased at reasonable prices. Currency is not hedged so that the funds offer Canadian investors diversification not only in terms of foreign businesses, but also in terms of foreign currencies. In addition, the market activity in 2004 was focused on natural resource and energy linked companies as well as on cyclical and recovery stories, a narrow market in which the Ivy Funds tend not to participate. Despite this, the Ivy funds continue to have solid long-term performance records and to attract significant investor interest.

Another important measure of performance is recognition by investors. The Mackenzie Maxxum Dividend Fund and the Mackenzie Maxxum Dividend Growth Fund grew from assets of $1.8 billion to $2.6 billion over the year. These funds focus on conservative core value and are well positioned to address the retirement planning needs of an aging population.

Overall Mackenzie’s relative fund performance continues to be strong. At December 31, 2004, 36% of Mackenzie mutual funds had a four or five star Morningstar† rating which is unchanged from December 31, 2003, and is higher than the Morningstar† universe of 32%. As at December 31, 2004, 66% of Mackenzie’s mutual funds had a rating of three stars or better. This compares with 71% at December 31, 2003 and compares to the Morningstar† universe of 70%.

Mackenzie continues to streamline its product line to avoid duplication, create efficiencies, and enhance the value provided to investors. During 2004 six funds were merged into other funds with similar mandates to create better economies of scale for Mackenzie investors.