Mackenzie
Review of Segment Operating Results

Fee and Net Investment Income

Management fees were $645.5 million for the year ended December 31, 2004, an increase of $87.3 million from $558.2 million in 2003. This increase is consistent with the 14.7% increase in Mackenzie's average mutual fund assets under management and the increase in the average management fee rate, a result of an increase in the percentage of assets in equity funds which have a higher management fee rate than money market and fixed income funds. Also contributing to the year over year growth in management fees was an increase in private and institutional assets under management.

Administration fees include the following main components: operating expenses charged to funds; fees earned from administering the VenGrowth labour sponsored venture capital funds; asset allocation fees; and trustee and other administration fees generated from the MRS Group account administration business. Administration fees declined by $8.0 million to $140.5 million in 2004 compared to $148.5 million in 2003. The decline in administration fees is attributable to a $5.4 million decline in operating expenses charged to funds, consistent with the decline in expenses incurred by Mackenzie on behalf of its mutual funds, and a reduction of $2.6 million in asset allocation fees and administration fees earned by the MRS Group.

Mackenzie earns distribution fee income upon redemption of mutual fund units sold on a deferred sales charge basis. Fees charged range from 5.5% in the first year and decrease to zero after seven years. Distribution fee income decreased $4.0 million to $35.6 million from $39.6 million in the previous year. This decrease is a result of the aging of Mackenzie's mutual fund units, which results in lower applicable redemption fees.

Net investment income and other represents the net interest margin from M.R.S. Trust's lending and deposit operations. Net investment income in 2004 was $15.8 million, a decline of $4.1 million from $19.9 million in 2003. The decline in the current year is primarily attributed to a gain realized on the disposition of real estate held for sale in 2003. There is no corresponding gain in the current year's results. The remainder of the decline is due to changes in the composition of M.R.S. Trust's lending and deposit portfolios and the compression of the net interest margin thereon.