Mackenzie
Review Of The Business

Product Development, Service and Positioning

Mackenzie is a recognized product innovator in Canada and is constantly striving to develop better products that meet the evolving needs of investors. Mackenzie pioneered the now common RSP clone fund concept. In recent years, Mackenzie has faced significant competition from structured yield products such as income trusts, structured funds of income trusts, closed-end TSX listed equity, fixed income and derivative split share products, and bank principal guaranteed equity fund structures. Over the last five years the market capitalization of income trusts listed on the TSX has grown significantly. In contrast, open-ended mutual funds experienced net redemptions in 2003 and only modest net sales growth in 2004.

Management is confident that it can meet these competitive market forces with superior investment product structures for financial advisors and their clients. Mackenzie’s ability to innovate has historically been a key to growth in assets under management and administration. In mid-2004 Mackenzie formalized a Structured Products Group to focus on such opportunities and to drive all non-mutual-fund product development.

In partnership with CIBC, Mackenzie issued CIBC FULPaY† Mackenzie Funds-Linked Deposit Notes Series 4, 5 and 6. The Notes have the potential to deliver returns through a link to the performance of selected Mackenzie funds. Sold over a selling period of limited duration and traded on the secondary market, these debt instruments proved popular with investors seeking the upside potential offered by mutual funds but concerned about safety of principal. Total sales of the three Mackenzie issued CIBC FULPaY† Mackenzie Funds-Linked Deposit Notes exceeded $75 million in 2004. In June the structured products team closed its first Resource Limited Partnership, which at December 31, 2004 had assets of $33.8 million. In December, the team ended the year with an offering under the Maxxum Trust banner which raised net proceeds of $95.2 million on the initial closing and $8.1 million on the final closing in early 2005. Underlying assets of the various structured products are being managed by Mackenzie investment managers. We expect the Structured Products Group to continue to be active in 2005.

To compete with in-house wrap programs developed by some distributors, we launched Symmetry, an asset allocation product, in February 2004. Symmetry, targeted at the emerging affluent investor, has a minimum investment requirement of $25,000. Symmetry portfolios are constructed to meet each investor’s unique profile using strategic asset allocation and are extremely tax efficient due to their use of the Mackenzie Capital Class platform. The program allows further customization with the integration of active funds to incorporate style biases, investment themes, or concentration on a particular geographic region. Symmetry brings together the best of strategic asset allocation and advice to provide a level of customization not available with most other programs. At December 31, 2004, Symmetry assets were $290.5 million.

The ongoing strong performance of the resource sectors provided an opportunity for Waddell & Reed, a major business partner of Mackenzie in the United States. Waddell & Reed acts as a sub-advisor to Mackenzie and also distributes in the United States the Ivy Global Natural Resource Fund. Several leading investment firms in the United States have recommended the fund, and as a result assets in this fund grew from $190.0 million at the beginning of the year to $1.1 billion as at December 31, 2004.

VenGrowth Capital Partners Inc. (VenGrowth) added to its family of retail venture capital funds and, in late 2003, launched VenGrowth Traditional Industries Fund, its most conservative offering to date. The fund, with assets of $26.1 million at the end of 2004, uses VenGrowth’s hallmark later-stage investment strategy. Mackenzie markets and is the fund administrator for VenGrowth’s retail funds, which at December 31, 2004 totalled $1.0 billion in assets.

Financial advisors insist on a high quality back office service as part of the overall partnership with a fund company. It is for that reason Mackenzie continues to invest in technology, process improvement and its people. A recent survey of advisor preferences conducted by TARP, a customer service research firm, found that financial advisors’ overall satisfaction levels with Mackenzie’s service are at an all time high since research was commenced in 2001. Mackenzie continues to evolve and look at new ways of doing business to increase efficiencies and to continue to leverage the group wide opportunities within the Power Financial group of companies.