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mackenzie cundill value fund

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  • 1. mackenzie cundill value fund annual audited financial statements | march 31, 2010 global equity management report Management’s Responsibility for Financial Reporting the accompanying financial statements have been prepared by mackenzie financial corporation, as manager of mackenzie cundill Value fund (the “fund”). the manager is responsible for the integrity, objectivity and reliability of the data presented. this responsibility includes selecting appropriate accounting principles and making judgments and estimates consistent with canadian generally accepted accounting principles. the manager is also responsible for the development of internal controls over the financial reporting process, which are designed to provide reasonable assurance that relevant and reliable financial information is produced. the Board of directors (the “Board”) of mackenzie financial corporation is responsible for reviewing and approving the financial statements and overseeing the manager’s performance of its financial reporting responsibilities. the Board is assisted in discharging this responsibility by an audit committee, which reviews the financial statements and recommends them for approval by the Board. the audit committee also meets regularly with the manager, internal auditors and external auditors to discuss internal controls over the financial reporting process, auditing matters and financial reporting issues. deloitte & touche llP are the external auditors of the fund. they are appointed by the Board. the external auditors have audited the financial statements in accordance with canadian generally accepted auditing standards to enable them to express to the securityholders their opinion on the financial statements. their report is set out below. On behalf of mackenzie financial corporation, manager of the fund charles R. sims Venkat Kannan President and chief executive Officer chief financial Officer, funds may 14, 2010 auditors’ report to the securityholders of mackenzie cundill Value fund (the “fund”) We have audited the statements of net assets of the fund as at march 31, 2010 and 2009, the statements of operations and of changes in net assets for the periods then ended, as indicated in note 1, and the statement of investments as at march 31, 2010. these financial statements are the responsibility of the fund’s manager. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with canadian generally accepted auditing standards. those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. an audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. an audit also includes assessing the accounting principles used and significant estimates made by the fund’s management, as well as evaluating the overall financial statement presentation. in our opinion, these financial statements present fairly, in all material respects, the financial position of the fund as at march 31, 2010 and 2009, the results of its operations and the changes in its net assets for the periods then ended, as indicated in note 1, in accordance with canadian generally accepted accounting principles. deloitte & touche llP chartered accountants, licensed Public accountants toronto, canada may 14, 2010
  • 2. mackenzie cundill value fund annual audited financial statements | march 31, 2010 global equity statements of net assets statements of operations As at March 31 For the periods ended March 31 (note 1) In thousands (except per security figures) In thousands (except per security figures) 2010 2009 2010 2009 $ $ $ $ Assets Income investments at fair value 4,986,754 4,241,726 dividends 133,062 77,843 cash and short-term investments 377,018 452,691 interest 3,015 12,524 accrued interest and dividends receivable 17,611 23,505 less withholding tax (13,917) (3,882) Revenue from securities lending – – Receivables for securities sold 46,158 36,560 Other – 3 subscriptions receivable 4,229 3,749 122,160 86,488 amounts receivable – derivative transactions 146,936 48,771 5,578,706 4,807,002 Expenses (note 4) management fees and investment counsel fees 92,199 73,287 Liabilities administration fees 16,124 12,200 Payables for securities purchased 129,547 127,077 independent Review committee fees 27 11 Redemptions payable 9,964 5,878 interest charges 1 5 management and investment counsel fees payable 738 542 108,351 85,503 Operating expenses payable – – net investment income (loss) before amounts payable – derivative transactions 1,505 249,100 rebated and absorbed expenses 13,809 985 141,754 382,597 Rebated and absorbed expenses 12 9 Net assets 5,436,952 4,424,405 Net investment income (loss) for the period 13,821 994 Series net assets (note 2) Realized gain (loss) on sale of investments 278,861 (1,471,370) Series a 213,251 180,722 change in unrealized appreciation (depreciation) 1,169,390 (59,706) transaction costs (4,504) (4,547) Series b 9,475 9,533 Net gain (loss) on investments 1,443,747 (1,535,623) Series C 4,182,311 3,468,744 Series F 177,715 157,147 increase (decrease) in net assets from operations 1,457,568 (1,534,629) Series F8 87 218 increase (decrease) in net assets from operations Series g 39,489 35,954 per series Series i 19,703 24,440 Series a 58,142 (64,868) Series o 619,409 415,981 Series b 2,926 (3,484) Series R 127,071 89,531 Series C 1,117,407 (1,226,505) Series S 105 – Series F 51,152 (59,016) Series t6 5,805 3,533 Series F8 59 (115) Series t8 42,531 38,602 Series g 11,483 (13,101) Net assets per security (note 2) Series i 7,708 (7,772) Series a 21.65 16.24 Series o 162,262 (116,337) Series b 23.78 17.84 Series R 32,958 (20,215) Series S 6 – Series C 8.91 6.68 Series t6 1,384 (1,224) Series F 6.88 5.16 Series t8 12,081 (14,985) Series F8 9.51 7.74 Series Z – (7,007) Series g 9.56 7.17 increase (decrease) from operations per security Series i 6.76 5.09 Series a 5.58 (5.47) Series o 6.26 4.68 Series b 6.02 (6.08) Series R 7.99 5.98 Series C 2.26 (2.26) Series S 10.82 – Series F 1.83 (1.75) Series t6 10.60 8.44 Series F8 2.89 (3.14) Series t8 9.52 7.74 Series g 2.51 (2.43) Series i 1.89 (1.67) Series o 1.68 (1.45) Series R 2.16 (1.79) Series S 2.18 – Series t6 2.69 (3.05) Series t8 2.54 (2.79) Series Z – (2.08) The accompanying notes are an integral part of these financial statements.
  • 3. mackenzie cundill value fund annual audited financial statements | march 31, 2010 global equity statements of changes in net assets For the periods ended March 31 (note 1) In thousands 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 Series a Series b Series C Series F Series F8 $ $ $ $ $ Net assets – beginning of period 180,722 271,875 9,533 14,766 3,468,744 5,065,191 157,147 250,771 218 601 increase (decrease) in net assets from operations 58,142 (64,868) 2,926 (3,484) 1,117,407 (1,226,505) 51,152 (59,016) 59 (115) distributions paid to securityholders: investment income (942) (1,803) (11) (44) (3,671) (19,276) (1,978) (3,537) (1) (4) capital gains – – – – – – – – – – Return of capital – – – – – – – – (14) (27) total distributions paid to securityholders (942) (1,803) (11) (44) (3,671) (19,276) (1,978) (3,537) (15) (31) security transactions: Proceeds from securities issued – 60 – 3 416,293 382,656 35,847 35,509 8 82 Reinvested distributions 891 1,696 11 42 3,645 19,154 1,850 3,311 9 19 Value of securities redeemed (25,562) (26,238) (2,984) (1,750) (820,107) (752,476) (66,303) (69,891) (192) (338) total security transactions (24,671) (24,482) (2,973) (1,705) (400,169) (350,666) (28,606) (31,071) (175) (237) total increase (decrease) in net assets 32,529 (91,153) (58) (5,233) 713,567 (1,596,447) 20,568 (93,624) (131) (383) Net assets – end of period 213,251 180,722 9,475 9,533 4,182,311 3,468,744 177,715 157,147 87 218 increase (decrease) in fund securities (note 5): Securities Securities Securities Securities Securities Securities outstanding – beginning of period 11,126 12,473 534 618 518,992 565,502 30,460 36,028 28 53 issued for cash – – – – 51,292 50,759 5,756 5,960 1 8 Reinvested distributions 42 97 – 2 418 2,653 276 596 1 2 Redeemed (1,318) (1,444) (135) (86) (101,179) (99,922) (10,652) (12,124) (21) (35) Securities outstanding – end of period 9,850 11,126 399 534 469,523 518,992 25,840 30,460 9 28 Series g Series i Series o Series R Series S $ $ $ $ $ Net assets – beginning of period 35,954 54,603 24,440 30,646 415,981 488,906 89,531 69,540 – – increase (decrease) in net assets from operations 11,483 (13,101) 7,708 (7,772) 162,262 (116,337) 32,958 (20,215) 6 – distributions paid to securityholders: investment income (243) (481) (242) (309) (12,032) (9,671) (2,638) (2,309) – – capital gains – – – – – – – – – – Return of capital – – – – – – – – – – total distributions paid to securityholders (243) (481) (242) (309) (12,032) (9,671) (2,638) (2,309) – – security transactions: Proceeds from securities issued 745 2,675 2,576 7,099 115,416 101,074 16,719 46,549 110 – Reinvested distributions 239 474 212 291 11,612 9,624 – 1,328 – – Value of securities redeemed (8,689) (8,216) (14,991) (5,515) (73,830) (57,615) (9,499) (5,362) (11) – total security transactions (7,705) (5,067) (12,203) 1,875 53,198 53,083 7,220 42,515 99 – total increase (decrease) in net assets 3,535 (18,649) (4,737) (6,206) 203,428 (72,925) 37,540 19,991 105 – Net assets – end of period 39,489 35,954 19,703 24,440 619,409 415,981 127,071 89,531 105 – increase (decrease) in fund securities (note 5): Securities Securities Securities Securities Securities Securities outstanding – beginning of period 5,013 5,664 4,806 4,495 88,838 77,819 14,968 8,682 – – issued for cash 84 311 408 1,240 20,895 19,260 2,227 6,934 11 – Reinvested distributions 26 61 32 53 1,906 1,914 – 207 – – Redeemed (992) (1,023) (2,330) (982) (12,761) (10,155) (1,287) (855) (1) – Securities outstanding – end of period 4,131 5,013 2,916 4,806 98,878 88,838 15,908 14,968 10 – The accompanying notes are an integral part of these financial statements.
  • 4. mackenzie cundill value fund annual audited financial statements | march 31, 2010 global equity statements of changes in net assets (cont’d) For the periods ended March 31 (note 1) In thousands 2010 2009 2010 2009 2010 2009 2010 2009 Series t6 Series t8 Series Z total $ $ $ $ Net assets – beginning of period 3,533 4,044 38,602 64,056 – 47,511 4,424,405 6,362,510 increase (decrease) in net assets from operations 1,384 (1,224) 12,081 (14,985) – (7,007) 1,457,568 (1,534,629) distributions paid to securityholders: investment income (9) (14) (40) (227) – – (21,807) (37,675) capital gains – – – – – – – – Return of capital (308) (227) (3,451) (3,864) – – (3,773) (4,118) total distributions paid to securityholders (317) (241) (3,491) (4,091) – – (25,580) (41,793) security transactions: Proceeds from securities issued 2,229 2,092 3,457 4,540 – 21,440 593,400 603,779 Reinvested distributions 121 94 798 1,011 – – 19,388 37,044 Value of securities redeemed (1,145) (1,232) (8,916) (11,929) – (61,944) (1,032,229) (1,002,506) total security transactions 1,205 954 (4,661) (6,378) – (40,504) (419,441) (361,683) total increase (decrease) in net assets 2,272 (511) 3,929 (25,454) – (47,511) 1,012,547 (1,938,105) Net assets – end of period 5,805 3,533 42,531 38,602 – – 5,436,952 4,424,405 increase (decrease) in fund securities (note 5): Securities Securities Securities Securities outstanding – beginning of period 419 338 4,986 5,701 – 5,207 issued for cash 231 202 381 466 – 2,396 Reinvested distributions 12 10 89 114 – – Redeemed (114) (131) (987) (1,295) – (7,603) Securities outstanding – end of period 548 419 4,469 4,986 – – The accompanying notes are an integral part of these financial statements.
  • 5. mackenzie cundill value fund annual audited financial statements | march 31, 2010 global equity statement of investments As at March 31, 2010 average Fair No. of Cost Value Country Sector Shares ($ 000s) ($ 000s) equitieS the Bank of n.t. Butterfield & son ltd. Bermuda financials 1,359,924 4,745 1,933 the Bank of n.t. Butterfield & son ltd. Rights exp. 04-11-2010 Bermuda financials 1,513,595 – 369 Bce inc. canada telecommunication services 2,790,382 83,947 83,098 canfor corp. canada materials 6,028,900 48,520 56,853 chesapeake energy corp. united states energy 5,558,000 153,424 133,332 conocoPhillips united states energy 4,743,020 256,718 246,389 the dai-ichi mutual life insurance Japan financials 82,902 130,409 125,984 daiwa securities Group inc. Japan financials 10,226,500 58,422 54,505 dell inc. united states information technology 13,434,300 209,101 204,713 deutsche telekom aG Germany telecommunication services 8,796,228 157,289 121,019 directV class a united states consumer discretionary 5,794,568 114,363 198,892 exor sPa italy financials 11,032,592 95,326 194,614 fairfax financial Holdings ltd. sub. voting canada financials 816,100 163,300 310,102 fedex corp. united states industrials 3,505,600 209,619 332,363 Haw Par corp. ltd. singapore industrials 18,033,000 59,361 78,251 JPmorgan chase & co. special Warrants exp. 10-28-2018 united states financials 4,248,774 54,954 66,296 Kirin Holdings co. ltd. Japan consumer staples 9,537,000 112,401 142,654 loblaw companies ltd. canada consumer staples 1,134,100 36,357 42,483 mediaset sPa italy consumer discretionary 17,342,668 171,364 151,177 microsoft corp. united states information technology 8,256,920 213,298 245,269 montpelier Re Holdings ltd. united states financials 5,177,300 84,590 88,248 muenchener Rueckversicherungs - Gesellschaft aG (munichRe) Reg. Germany financials 1,549,664 234,735 255,185 niPPOnKOa insurance co. ltd. Japan financials 16,699,000 112,706 106,403 nokia OYJ finland information technology 7,742,000 108,055 122,338 Parmalat sPa italy consumer staples 60,459,173 137,826 167,935 Pfizer inc. united states Health care 11,207,600 249,996 195,131 samsung electronics co. ltd. Pfd. south Korea information technology 352,273 164,353 170,050 sega sammy Holdings inc. Japan consumer discretionary 15,194,200 195,069 186,372 seven & i Holdings co. ltd. Japan consumer staples 7,763,700 227,752 189,953 sK telecom co. ltd. south Korea telecommunication services 817,676 191,327 127,291 sK telecom co. ltd. adR south Korea telecommunication services 1,891,915 55,074 33,074 u.s. Bancorp united states financials 6,670,700 148,749 174,990 Viacom inc. class B united states consumer discretionary 6,904,100 149,467 240,830 West fraser timber co. ltd. canada materials 884,000 28,103 33,565 Willis Group Holdings Plc united states financials 3,308,400 96,413 105,093 total equities 4,517,133 4,986,754 transaction costs (6,001) – total investments 4,511,132 4,986,754 derivative instruments (see schedule of derivative instruments) 145,431 cash and short-term investments 377,018 Other assets less liabilities (72,251) total net assets 5,436,952 The accompanying notes are an integral part of these financial statements.
  • 6. mackenzie cundill value fund annual audited financial statements | march 31, 2010 global equity schedule of derivative instruments As at March 31, 2010 Current unrealized Forward amounts bought Number of Maturity Contract Cost Fair Value gain (loss) Currency Contracts in Canadian Dollars Contracts Date Counterparty ($ 000s) ($ 000s) ($ 000s) amounts (sold) in euros (53,377,000) 83,423,139 2 apr. 30, 2010 Royal Bank of canada (83,423) (73,218) 10,205 (15,000,000) 23,332,867 1 may 7, 2010 the Bank of nova scotia (23,333) (20,576) 2,757 (15,000,000) 23,130,657 1 may 14, 2010 state street securities inc. (23,131) (20,576) 2,555 (79,808,115) 120,183,895 1 Jun. 11, 2010 Royal Bank of canada (120,184) (109,487) 10,697 (80,007,914) 118,781,884 1 Jun. 25, 2010 the toronto-dominion Bank (118,782) (109,767) 9,015 (67,700,000) 92,563,475 1 Jul. 16, 2010 state street securities inc. (92,563) (92,898) (335) (80,007,914) 117,131,604 1 aug. 13, 2010 the toronto-dominion Bank (117,132) (109,817) 7,315 (79,782,115) 114,068,965 1 aug. 27, 2010 Royal Bank of canada (114,069) (109,522) 4,547 (133,384,914) 185,568,683 1 sep. 17, 2010 the toronto-dominion Bank (185,569) (183,143) 2,426 (79,782,115) 109,030,688 1 sep. 24, 2010 Royal Bank of canada (109,031) (109,552) (521) (683,850,087) 987,215,857 (987,217) (938,556) 48,661 amounts (sold) in Japanese yen (11,946,919,662) 136,728,426 1 apr. 7, 2010 the Bank of nova scotia (136,728) (129,713) 7,015 (11,897,302,068) 137,720,180 1 apr. 14, 2010 state street securities inc. (137,720) (129,205) 8,515 (8,784,302,068) 103,068,265 1 Jun. 23, 2010 state street securities inc. (103,068) (95,496) 7,572 (10,028,882,662) 110,903,195 2 Jul. 28, 2010 the Bank of nova scotia (110,903) (109,095) 1,808 (11,897,302,068) 135,365,822 1 aug. 11, 2010 state street securities inc. (135,366) (129,455) 5,911 (11,946,919,662) 140,411,584 1 sep. 1, 2010 the Bank of nova scotia (140,412) (130,049) 10,363 (66,501,628,190) 764,197,472 (764,197) (723,013) 41,184 amounts (sold) in Singapore dollars (11,502,771) 8,525,181 1 Jun. 9, 2010 the toronto-dominion Bank (8,525) (8,347) 178 (10,600,000) 7,778,332 1 Jun. 23, 2010 state street securities inc. (7,778) (7,692) 86 (31,879,720) 23,545,714 1 aug. 25, 2010 Royal Bank of canada (23,546) (23,141) 405 (31,898,486) 23,302,277 1 sep. 15, 2010 the toronto-dominion Bank (23,302) (23,157) 145 (11,474,305) 8,339,672 1 sep. 22, 2010 Royal Bank of canada (8,340) (8,330) 10 (97,355,282) 71,491,176 (71,491) (70,667) 824 The accompanying notes are an integral part of these financial statements.
  • 7. mackenzie cundill value fund annual audited financial statements | march 31, 2010 global equity schedule of derivative instruments (cont’d) As at March 31, 2010 Current unrealized Forward amounts bought Number of Maturity Contract Cost Fair Value gain (loss) Currency Contracts in Canadian Dollars Contracts Date Counterparty ($ 000s) ($ 000s) ($ 000s) amounts (sold) in South Korean won (36,082,655,184) 31,820,042 1 apr. 9, 2010 Royal Bank of canada (31,820) (32,354) (534) (14,337,341,590) 12,874,768 1 apr. 30, 2010 Royal Bank of canada (12,875) (12,836) 39 (14,388,236,875) 13,129,750 1 may 14, 2010 the toronto-dominion Bank (13,130) (12,877) 253 (36,082,655,184) 33,173,352 1 Jun. 11, 2010 Royal Bank of canada (33,173) (32,267) 906 (35,845,305,040) 32,314,902 1 Jun. 25, 2010 the toronto-dominion Bank (32,315) (32,042) 273 (34,395,305,040) 31,296,911 1 Jul. 16, 2010 the toronto-dominion Bank (31,297) (30,726) 571 (35,845,305,040) 32,757,875 1 Jul. 30, 2010 the toronto-dominion Bank (32,758) (32,008) 750 (35,845,305,040) 32,750,393 1 aug. 13, 2010 the toronto-dominion Bank (32,750) (31,995) 755 (36,082,655,184) 32,460,107 1 aug. 27, 2010 Royal Bank of canada (32,460) (32,193) 267 (36,082,655,184) 32,498,113 1 sep. 3, 2010 Royal Bank of canada (32,498) (32,186) 312 (36,082,655,184) 32,076,322 1 sep. 17, 2010 Royal Bank of canada (32,076) (32,172) (96) (351,070,074,545) 317,152,535 (317,152) (313,656) 3,496 amounts (sold) in u.S. dollars (119,216,031) 124,125,182 1 apr. 9, 2010 the Bank of nova scotia (124,125) (121,034) 3,091 (119,145,689) 124,279,682 1 apr. 16, 2010 state street securities inc. (124,280) (120,966) 3,314 (102,551,561) 108,294,414 1 apr. 23, 2010 Royal Bank of canada (108,294) (104,123) 4,171 (63,000,000) 66,388,467 1 may 7, 2010 the Bank of new York mellon (66,388) (63,967) 2,421 (50,000,000) 52,703,700 1 may 7, 2010 the Bank of nova scotia (52,704) (50,768) 1,936 (116,100,000) 118,781,155 3 may 14, 2010 state street securities inc. (118,781) (117,884) 897 (102,739,352) 109,427,565 1 may 21, 2010 the toronto-dominion Bank (109,428) (104,318) 5,110 (130,000,000) 133,556,613 1 Jun. 11, 2010 Royal Bank of canada (133,557) (132,004) 1,553 (102,739,352) 106,552,880 1 Jun. 25, 2010 the toronto-dominion Bank (106,553) (104,329) 2,224 (140,000,000) 143,975,154 1 Jul. 16, 2010 the Bank of new York mellon (143,975) (142,192) 1,783 (119,145,689) 127,397,206 1 Jul. 23, 2010 state street securities inc. (127,397) (121,020) 6,377 (119,216,031) 127,999,347 1 Jul. 23, 2010 the Bank of nova scotia (127,999) (121,092) 6,907 (102,739,352) 108,921,750 1 Jul. 30, 2010 the toronto-dominion Bank (108,922) (104,363) 4,559 (112,000,000) 116,751,941 2 aug. 13, 2010 the toronto-dominion Bank (116,752) (113,786) 2,966 (119,145,689) 122,843,271 1 aug. 20, 2010 state street securities inc. (122,843) (121,055) 1,788 (119,216,031) 123,103,644 1 sep. 3, 2010 the Bank of nova scotia (123,104) (121,143) 1,961 (25,000,000) 25,388,701 1 sep. 17, 2010 the Bank of new York mellon (25,389) (25,408) (19) (102,551,561) 104,458,982 1 sep. 24, 2010 Royal Bank of canada (104,459) (104,232) 227 (1,864,506,338) 1,944,949,654 (1,944,950) (1,893,684) 51,266 total forward currency contracts 145,431 total derivative instruments at fair value 145,431 The accompanying notes are an integral part of these financial statements.
  • 8. mackenzie cundill value fund annual audited financial statements | march 31, 2010 global equity notes to financial statements 1. the information provided in these financial statements and notes thereto is for the periods ended or as at march 31, 2010 and march 31, 2009, as applicable. in the year a fund or series is established or reinstated, ‘period’ represents the period from inception or reinstatement to the period end of that fiscal year. Refer to note 8 for the formation date of the fund and the inception date of each series. for funds formed prior to June 30, 2008, the fiscal year-end of the fund was changed from June 30 to march 31, effective march 31, 2009. the fund is authorized to issue an unlimited number of units (referred to as “security” or “securities”) of multiple series. series of the fund are available for sale under simplified Prospectus or exempt distribution options. 2. Significant accounting Policies these financial statements have been prepared in accordance with canadian generally accepted accounting principles (“GaaP”). GaaP requires management to make estimates and assumptions that affect the amounts, primarily valuation of investments, reported in the financial statements. actual results may differ from such estimates. (a) adoption of new accounting policies in march 2009, the canadian institute of chartered accountants (“cica”) issued amendments to section 3862, financial instruments – disclosures (“section 3862”) of the cica Handbook – accounting to align with international financial Reporting standard (“ifRs”) 7, financial instruments – disclosures. the amendments require all financial instruments measured at fair value to be classified into one of three levels that distinguish fair value measurements by the inputs used for valuation. the funds adopted these amendments effective for the year ended march 31, 2010. these classifications have been disclosed in note 8. for funds formed prior to July 1, 2007, section 3862, section 3863, financial instruments – Presentation (“section 3863”) and section 1535, capital disclosure (“section 1535”) of the cica Handbook – accounting were adopted effective July 1, 2008. section 3862 and section 3863 replaced section 3861, financial instruments – disclosure and Presentation, revising and enhancing disclosure and presentation requirements. the impact of the adoption of these two sections, which place increased emphasis on disclosures about the nature and extent of risks arising from financial instruments and how the fund manages those risks, has been disclosed in note 8. the impact of the adoption of section 1535, which establishes standards for disclosing information about an entity’s capital and how it is managed, has been disclosed in note 5. the adoption of these new standards does not impact the daily valuation of the fund’s investments or net assets. (b) Valuation the fair value of investments as at the financial reporting period end is determined as follows: investments listed on a public securities exchange or traded on an over-the-counter market are valued at the closing bid price. Where no closing bid price is available, the last sale or close price is used. mutual fund securities of an underlying fund are valued on a business day at the price calculated by the manager of such underlying fund in accordance with the constating documents of such underlying fund. unlisted or non- exchange traded investments, or investments where a last bid, sale or close price is unavailable or investments for which market quotations are, in mackenzie financial corporation’s (“mackenzie”) opinion, inaccurate, unreliable, or not reflective of all available material information, are valued at their fair value as determined by mackenzie using appropriate and accepted industry valuation techniques including valuation models. the fair value determined using valuation models requires the use of inputs and assumptions based on observable market data including volatility and other applicable rates or prices. in limited circumstances, the fair value may be determined using valuation techniques that are not supported by observable market data. the cost of investments is determined on a weighted average cost basis. short-term notes are valued at the closing bid price. if the closing bid price is not available, such short-term notes are valued at cost plus accrued interest, which approximates fair value. short-term notes held by the fund are included in the statements of net assets – cash and short-term investments. accrued interest and dividends receivable, subscriptions receivable, receivables for securities sold, redemptions payable, management fees payable, operating expenses payable and payables for securities purchased are recorded at cost. since such assets and liabilities are short-term in nature, cost approximates fair value. (c) investment transactions and income recognition investment transactions are accounted for on a trade date basis. income from investments is recognized on an accrual basis. interest income is accrued based on the number of days the investment is held during the period. dividends are accrued as of the ex-dividend date. Gains or losses on the sale of investments, including foreign exchange gains or losses on such investments, are calculated on an average cost basis. distributions received from an underlying fund are included in interest income, dividend income or realized gains (losses) on sale of investments, as appropriate. income, realized gains (losses) and unrealized gains (losses) are allocated daily among the series on a pro-rata basis. transaction costs related to purchases and sales of investments are expensed and included in the statements of Operations – transaction costs.
  • 9. mackenzie cundill value fund annual audited financial statements | march 31, 2010 global equity notes to financial statements 2. Significant accounting Policies (cont’d) (d) derivative transactions certain funds may use derivatives (such as options, futures, forward contracts, swaps or customized derivatives) to hedge against losses caused by changes in securities prices, interest rates or exchange rates. certain funds may also use derivatives for non-hedging purposes in order to invest indirectly in securities or financial markets, to gain exposure to other currencies, to seek to generate additional income, and/or for any other purpose considered appropriate by each fund’s portfolio manager(s), provided that the use of the derivative is consistent with each fund’s investment objectives. any use of derivatives will comply with canadian mutual fund laws, subject to the regulatory exemptions granted to the funds, as applicable. Refer to “exemptions from national instrument 81-102” in the annual information form of each fund for further details, including the complete conditions of these exemptions. Valuations of derivative instruments are carried out daily, using normal exchange reporting sources for exchange-traded derivatives and specific broker enquiry for over-the-counter derivatives. the value of forward contracts is the gain or loss that would be realized if, on the valuation date, the positions were to be closed out. the change in value of forward contracts is included in the statements of Operations – change in unrealized appreciation (depreciation). the value of futures contracts or swaps fluctuates daily, and cash settlements made daily, where applicable, by the fund are equal to the unrealized gains or losses on a “mark to market” basis. these unrealized gains or losses are recorded and reported as such until the fund closes out the contract or the contract expires. margin paid or deposited in respect of futures contracts or swaps is reflected as a receivable in the statements of net assets – margin on futures contracts. any change in the variation margin requirement is settled daily. the value of options is the gain or loss that would be realized if, on the valuation date, the positions were to be closed out. the premium paid for purchased options or received for written options is included in the statement of investments as a cost of the options contracts. Realized gains and losses from derivative instruments that are specific economic hedges are accounted for in the same manner as the underlying investments being hedged. Realized gains and losses from derivative instruments that are not specific economic hedges, but that are used to gain exposure to a particular market, are included in the statements of Operations – income (loss) from derivative contracts. Refer to the schedule of derivative instruments, as applicable, included in the statement of investments for a listing of derivative positions as at march 31, 2010. (e) securities lending, repurchase and reverse repurchase transactions certain funds are permitted to enter into securities lending, repurchase and reverse repurchase transactions as set out in each fund’s simplified Prospectus. these transactions involve the temporary exchange of securities for collateral with a commitment to redeliver the same securities on a future date. income is earned from these transactions in the form of fees paid by the counterparty and, in certain circumstances, interest paid on cash or securities held as collateral. income earned from these transactions is recognized on an accrual basis and included in the statements of Operations – Revenue from securities lending. all the counterparties have an approved credit rating equivalent to a standard & Poor’s credit rating of not less than a-1 (low) on their short-term debt and of a on their long-term debt. the value of cash or securities held as collateral must be at least 102% of the fair value of the securities loaned, sold or purchased. (f) foreign exchange foreign currency purchases and sales of investments and foreign currency dividend and interest income and expenses are translated to canadian dollars at the rate of exchange prevailing at the time of the transactions. foreign exchange gains (losses) on purchases and sales of foreign currencies are included in the statements of Operations – Realized gain (loss) on sale of investments. the fair value of investments and other assets and liabilities, denominated in foreign currencies, are translated to canadian dollars at the rate of exchange prevailing on each business day. (g) net assets per security net assets per security is computed by dividing the net assets attributable to a series of securities on a business day by the total number of securities of the series outstanding on that day. (h) net asset value per security the canadian securities administrators (“csa”) amended its regulations effective september 8, 2008 such that the daily net asset Value (“naV”) of an investment fund may be calculated without reference to GaaP. the difference between naV and net assets (as reported in the financial statements) is mainly due to valuing securities at bid for financial statement purposes while naV typically utilizes closing price to determine fair value. Refer to note 8 for the fund’s naV per security.
  • 10. mackenzie cundill value fund annual audited financial statements | march 31, 2010 global equity notes to financial statements 2. Significant accounting Policies (cont’d) (i) increase (decrease) from operations per security increase (decrease) from operations per security in the statements of Operations represents increase (decrease) in net assets from operations attributable to the series for the period, divided by the weighted average number of securities outstanding during the period. (j) comparative amounts certain prior period comparative amounts have been reclassified to conform to the current period’s presentation. 3. income taxes the fund qualifies as a mutual fund trust under the provisions of the income tax act (canada) and, accordingly, is subject to tax on its income including net realized capital gains in the taxation year, which is not paid or payable to its securityholders as at the end of the taxation year. it is the intention of the fund to distribute all of its net income and sufficient net realized capital gains so that the fund will not be subject to income taxes other than foreign withholding taxes, if applicable. losses of the fund cannot be allocated to investors and are retained in the fund for use in future years. non-capital losses incurred in 2006 and later may be carried forward up to 20 years, and non-capital losses incurred prior to 2006 may be carried forward up to 10 years, to reduce taxable income and realized capital gains of future years. capital losses may be carried forward indefinitely to reduce future realized capital gains. Refer to note 8 for the fund’s loss carryforwards. 4. Management Fees and operating expenses mackenzie, manager of the fund, is paid a management fee for managing the investment portfolio, providing investment analysis and recommendations, making investment decisions, making brokerage arrangements relating to the purchase and sale of the investment portfolio and making arrangements with registered dealers for the purchase and sale of securities of the fund by investors. the management fee is calculated on each series of securities as a percentage of the net asset value of the series, as of the close of business on each business day. each series of the fund is charged a fixed rate annual administration fee, including any implementation period adjustments, (“administration fee”), as applicable, and in return, mackenzie bears all of the operating expenses of the fund, other than certain specified fund costs. the administration fee is calculated as a fixed annual percentage of the daily net asset value of each relevant series of the fund. Other fund costs include taxes (including, but not limited to Gst and income tax), interest and borrowing costs, fees and expenses of the mackenzie funds’ independent Review committee, any new fees related to external services that were not commonly charged in the canadian mutual fund industry as of June 15, 2007 and the costs of complying with any new regulatory requirements after June 15, 2007. mackenzie may waive or absorb management fees and/or administration fees at its discretion and stop waiving or absorbing such fees at any time without notice. Refer to note 8 for the management fee and administration fee rates charged to each series of securities. 5. Fund’s Capital the capital of the fund is divided into different series with each series having an unlimited number of securities. the securities outstanding for the fund as at march 31, 2010 and 2009 are presented in the statements of changes in net assets. mackenzie manages the capital of the fund in accordance with the investment objectives as discussed in note 8. 6. Financial instruments Risk i. Risk exposure and management the fund’s investment activities expose it to a variety of financial risks, as defined in section 3862. the fund’s exposure to financial risks is concentrated in its investments, which are presented in the statement of investments, as at march 31, 2010, grouped by asset type, with geographic and sector information. mackenzie seeks to minimize potential adverse effects of financial risks on the fund’s performance by employing professional, experienced portfolio advisors, by monitoring the fund’s positions and market events daily, by diversifying the investment portfolio within the constraints of the fund’s investment objectives, and where applicable, by using derivatives to hedge certain risk exposures. to assist in managing risks, mackenzie also uses internal guidelines that identify the target exposures for each type of risk, maintains a governance structure that oversees the fund’s investment activities and monitors compliance with the fund’s stated investment strategy, internal guidelines, and securities regulations.
  • 11. mackenzie cundill value fund annual audited financial statements | march 31, 2010 global equity notes to financial statements 6. Financial instruments Risk (cont’d) ii. Liquidity risk liquidity risk arises when the fund encounters difficulty in meeting its financial obligations as they come due. the fund is exposed to liquidity risk due to potential daily cash redemptions of redeemable securities. in accordance with securities regulations, the fund must maintain at least 90% of its assets in liquid investments (i.e., investments that can be readily sold). in addition, the fund retains sufficient cash and short-term investment positions to maintain adequate liquidity. the fund also has the ability to borrow up to 5% of its net assets for the purposes of funding redemptions. if the fund held any illiquid investments as at march 31, 2010, they have been identified in the statement of investments. iii. Currency risk currency risk arises when the fair value of financial instruments that are denominated in a currency other than the canadian dollar, which is the fund’s reporting currency, fluctuates due to changes in exchange rates. note 8 summarizes the fund’s exposure, if applicable and significant, to currency risk. iv. Interest rate risk interest rate risk arises when the fair value of interest-bearing financial instruments fluctuates due to changes in the prevailing levels of market interest rates. cash and short-term investments do not expose the fund to significant amounts of interest rate risk. note 8 summarizes the fund’s exposure, if applicable and significant, to interest rate risk. v. Other price risk Other price risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or currency risk), whether caused by factors specific to an individual investment, its issuer, or all factors affecting all instruments traded in a market or market segment. all investments present a risk of loss of capital. this risk is managed through a careful selection of investments and other financial instruments within the parameters of the investment strategy. except for options written and futures contracts, the maximum risk resulting from financial instruments is equivalent to their fair value. the maximum risk of loss on options written and futures contracts is equal to their notional values. However, options written are used within the overall investment management process to manage the risk from the underlying investments and do not typically increase the overall risk of loss to the fund. note 8 summarizes the fund’s exposure, if applicable and significant, to other price risk. vi. Credit risk credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the fund. note 8 summarizes the fund’s exposure, if applicable and significant, to credit risk. all transactions in listed securities are executed with approved brokers. to minimize the possibility of settlement default, securities are exchanged for payment simultaneously, where market practices permit, through the facilities of a central depository and/or clearing agency where customary. the carrying amount of investments and other assets represents the maximum credit risk exposure as at march 31, 2010. certain funds may enter into securities lending transactions with counterparties whereby the funds temporarily exchange securities for collateral with a commitment by the counterparty to deliver the same securities on a future date. credit risk associated with these transactions is considered minimal as all counterparties have a sufficient, approved credit rating and the value of cash or securities held as collateral must be at least 102% of the fair value of the securities loaned. certain funds may be exposed to credit risk from the counterparties to the derivative instruments used by the funds. this credit risk is minimized by ensuring that all the counterparties to derivative instruments have an approved credit rating equivalent to a standard & Poor’s credit rating of not less than a-1 (low) on their short-term debt and of a on their long-term debt. vii. Underlying funds certain funds that invest in underlying funds may be indirectly exposed to currency risk, interest rate risk, other price risk and credit risk from fluctuations in the value of financial instruments held by the underlying funds. note 8 summarizes the fund’s exposure, if applicable and significant, to these risks from underlying funds. 7. Future accounting Standards the canadian accounting standards Board (“acsB”) has confirmed its plan to adopt all ifRs, as published by the international accounting standards Board, for most publicly accountable entities on or by January 1, 2011. On may 12, 2010, the acsB announced it will propose amendments which will provide most investment funds with the option to defer adoption of ifRs until fiscal years beginning on or after January 1, 2012. mackenzie is currently assessing the impact of this announcement on the fund and its plans for adopting ifRs. accordingly, the fund will adopt ifRs for either its fiscal period beginning april 1, 2011 or 2012, and will issue its initial financial statements in accordance with ifRs, including comparative information, for either the interim period ending september 30, 2011 or 2012.
  • 12. mackenzie cundill value fund annual audited financial statements | march 31, 2010 global equity notes to financial statements 8. Fund Specific information (in ’000s, except for (a)) (a) fund formation and series information date of formation October 7, 1998 the fund may issue an unlimited number of securities of each series. the number of issued and outstanding securities of each series is disclosed in the statements of changes in net assets. series a and B securities are no longer available for sale. series c securities are offered to retail investors investing a minimum of $500 in the fund. series f securities are offered to investors who are enrolled in a dealer-sponsored fee-for-service or wrap program and who are subject to an asset- based fee rather than commissions on each transaction, and employees of mackenzie and its subsidiaries and directors of mackenzie. series f8 securities are offered to investors who are enrolled in a dealer-sponsored fee-for-service or wrap program, who are subject to an asset- based fee rather than commissions on each transaction, who invest at least $5,000 in mackenzie funds (excluding the mackenzie segregated funds), and who want to receive a regular monthly cash flow of 8% per annum. series G securities are offered to retail investors investing a minimum of $500, who are members of a group RRsP, dPsP or pension plan (a “group plan”). series i securities are offered to investors investing a minimum of $500,000 in mackenzie funds (excluding the mackenzie segregated funds). series O securities are offered to investors investing a minimum of $5,000,000 in mackenzie funds (excluding the mackenzie segregated funds) and who have entered into a series O account agreement with mackenzie, and also available for employees of mackenzie and its subsidiaries without the minimum investment requirement. mackenzie may waive the minimum investment level for institutional accounts which are expected to exceed $5,000,000 within a period of time acceptable to mackenzie. series R securities are available only to other mackenzie funds and certain institutional investors for mackenzie fund-of-fund arrangements. series s securities are offered to london life insurance company, Great-West life assurance company, canada life assurance company and certain other mutual funds, but may be sold to other investors as determined by mackenzie. series t6 securities are offered to retail investors investing a minimum of $5,000 in mackenzie funds (excluding the mackenzie segregated funds) who want to receive a regular monthly cash flow of 6% per annum. series t8 securities are offered to retail investors investing a minimum of $5,000 in mackenzie funds (excluding the mackenzie segregated funds) who want to receive a regular monthly cash flow of 8% per annum. series Z securities are offered to other mackenzie funds. an investor in the fund may choose among different purchase options that are available under each series. these purchase options include a sales charge purchase option, a redemption charge purchase option and a low-load purchase option. the charges under the sales charge purchase option are negotiated by an investor with their dealer. the charges under the redemption charge and low-load purchase options are paid to mackenzie if an investor redeems securities of the fund during specific time periods. not all series of the fund are available under each purchase option and the charges under each purchase option may vary amongst the different series. for further details on these purchase options please refer to the fund’s simplified Prospectus.
  • 13. mackenzie cundill value fund annual audited financial statements | march 31, 2010 global equity notes to financial statements 8. Fund Specific information (in ’000s, except for (a)) (cont’d) (a) fund formation and series information (cont’d) inception/ Management administration Net asset Value per Security ($) Series Reinstatement Date Fees Fees* Mar. 31, 2010 Mar. 31, 2009 series a January 16, 1967 2.00% (1) –** 21.67 16.29 series B June 30, 1997 2.35% (1) –** 23.80 17.89 series c October 7, 1998 2.00% 0.26% 8.92 6.70 series f december 6, 1999 1.00% 0.26% 6.88 5.17 series f8 april 4, 2007 1.00% 0.28% 9.52 7.76 series G april 1, 2005 1.50% 0.26% 9.57 7.19 series i October 25, 1999 1.35% 0.28% 6.76 5.10 series O June 28, 2000 – (2) 0.15% 6.27 4.70 series R July 3, 2007 – (3) – (3) 8.00 5.99 series s October 6, 2009 – (4) 0.03% 10.83 – series t6 July 30, 2007 2.00% 0.26% 10.61 8.46 series t8 may 1, 2006 2.00% 0.26% 9.53 7.76 series Z none issued – (3) – (3) – – * does not include any implementation period adjustments, as applicable. ** not applicable (1) the management fee for this series is a flat fee that includes all operation expenses, except Gst, brokerage commissions and income taxes (if any). (2) the management fee for series O securities is negotiable by the investor and is payable directly to mackenzie by series O investors, not by the fund. the rate will not exceed the series i management fee rate, if any. (3) no management fees or administration fees are charged to the investor or the fund in respect of the series R and series Z securities. (4) the management fee for series s securities is negotiable by the investor and is payable directly to mackenzie by series s investors, not by the fund. (b) investments by Other funds and affiliates as at march 31, 2010, mackenzie and other funds managed by mackenzie and affiliates of mackenzie (london life insurance company, Great-West life assurance company and canada life assurance company) had an investment of $2,552 and $127,176 (2009 – $nil and $89,531) in the fund. On may 5, 2010, mackenzie redeemed substantially all of its investment in the fund. (c) loss carryforwards as at the last taxation year-end, the fund has capital losses of $1,351,623 which may be carried forward indefinitely to reduce future realized capital gains. there were no non-capital losses available to carry forward for tax purposes. (d) management and investment counsel fees mackenzie is paid a management fee for managing the fund’s investment and business affairs and mackenzie cundill investment management ltd. is paid an investment counsel fee. (e) securities lending as at march 31, 2010 and 2009, the fund did not enter into securities lending, repurchase or reverse repurchase transactions. (f) commissions the brokerage commissions paid to certain dealers included an amount of $38 (2009 – $nil) that was available for payment to third party vendors for the provision of investment decision making services. this amount represented 0.8% (2009 – nil%) of the total commissions and other transaction costs paid during the period.
  • 14. mackenzie cundill value fund annual audited financial statements | march 31, 2010 global equity notes to financial statements 8. Fund Specific information (in ’000s, except for (a)) (cont’d) (g) Risks associated with financial instruments i. Risk exposure and management the fund pursues long-term capital growth through mackenzie cundill investment management ltd.’s (“cundill”) fundamental value style of investing: investing primarily in stocks of companies only when they trade at prices substantially below what cundill estimates their value to be. as a matter of strategy, the portfolio managers hedge foreign currency exposure where it is economical and reasonable to do so to reduce the impact of currency fluctuations. ii. Currency risk the table below indicates currencies to which the fund had significant exposure as at period end in canadian dollar terms, including the underlying principal amount of any forward currency contracts. Other financial assets and liabilities (including accrued interest and dividends receivable, and receivables/payables for securities sold/purchased) that are denominated in foreign currencies do not expose the fund to significant currency risk. Mar. 31, 2010 Mar. 31, 2009 Cash and Forward Cash and Forward Short-term Currency Net Short-term Currency Net investments investments Contracts exposure* investments investments Contracts exposure* Currency ($) ($) ($) ($) ($) ($) ($) ($) u.s. dollars 2,264,620 12,741 (1,893,684) 383,677 1,260,789 (21,402) (950,970) 288,417 Japanese yen 805,871 75,650 (723,013) 158,508 1,091,807 – (943,456) 148,351 euros 1,012,268 – (938,556) 73,712 809,559 535 (637,109) 172,985 singapore dollars 78,251 – (70,667) 7,584 54,174 – (47,888) 6,286 Bermuda dollars 2,302 – – 2,302 8,242 – – 8,242 south Korean won 297,341 – (313,656) (16,315) 402,288 – (362,487) 39,801 total 4,460,653 88,391 (3,939,576) 609,468 3,626,859 (20,867) (2,941,910) 664,082 as Percent of net assets (%) 82.1 1.6 (72.5) 11.2 82.0 (0.5) (66.5) 15.0 * includes both monetary and non-monetary financial instruments as of march 31, 2010, had the canadian dollar increased or decreased by 5% relative to all foreign currencies, with all other variables held constant, net assets would have decreased or increased, respectively, by approximately $30,473 or 0.6% of total net assets (2009 – $33,203 or 0.8%). in practice, the actual trading results may differ and the difference could be material. iii. Interest rate risk the table below summarizes the fund’s exposure to interest rate risks from its investments in bonds by term to maturity. Mar. 31, 2010 Mar. 31, 2009 bonds ($) ($) less than 1 year – – 1-5 years – – 5-10 years – 57,005 Greater than 10 years – – total – 57,005 as at march 31, 2010, had prevailing interest rates increased or decreased by 1%, assuming a parallel shift in the yield curve, with all other variables held constant, net assets would have decreased or increased, respectively, by approximately $nil or nil% of total net assets (2009 – $2,986 or 0.1%). in practice, the actual trading results may differ and the difference could be material.
  • 15. mackenzie cundill value fund annual audited financial statements | march 31, 2010 global equity notes to financial statements 8. Fund Specific information (in ’000s, except for (a)) (cont’d) (g) Risks associated with financial instruments (cont’d) iv. Other price risk the fund’s most significant exposure to price risk arises from its investment in equity securities. as at march 31, 2010, had the prices on the respective stock exchanges for these securities increased or decreased by 10%, with all other variables held constant, net assets would have increased or decreased by approximately $498,675 or 9.2% of total net assets (2009 – $418,472 or 9.5%). in practice, the actual trading results may differ and the difference could be material. v. Credit risk the fund’s greatest concentration of credit risk is in debt securities, such as bonds. the fair value of debt securities includes consideration of the creditworthiness of the debt issuer. the maximum exposure to any one debt issuer as of march 31, 2010, was nil% of the net assets of the fund (2009 – 0.9%). as of march 31, 2010 and 2009, debt securities by credit rating are as follows: Mar. 31, 2010 Mar. 31, 2009 Percent of total Percent of total Rating* bonds (%) bonds (%) aaa – – aa – – a – – BBB – – less than BBB – 100.0 unrated – – total – 100.0 * credit ratings and rating categories are based on dBRs (or equivalent ratings issued by other approved credit rating organizations) (h) fair Value classification the table below summarizes the fair value of the fund’s financial instruments using the following fair value hierarchy: level 1 – unadjusted quoted prices in active markets for identical assets or liabilities; level 2 – inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and level 3 – inputs that are not based on observable market data. Financial instruments at fair value as of March 31, 2010 level 1 level 2 level 3 total ($) ($) ($) ($) equities 4,986,385 369 – 4,986,754 total investments 4,986,385 369 – 4,986,754 derivative assets – 146,936 – 146,936 derivative liabilities – (1,505) – (1,505) short-term investments – 293,142 – 293,142 total 4,986,385 438,942 – 5,425,327 in accordance with the fund’s valuation policy, the fund applies fair value adjustment factors to the quoted market prices for non-north-american equities when north american intraday stock market movements exceed pre-determined tolerances. the adjustment factors are applied in order to estimate the impact on fair values of events occurring between the close of the non-north american stock markets and the close of business for the fund. if fair value adjustment factors are applied, non-north american equities are classified as level 2. consequently, during the period ended march 31, 2010, non-north american equities frequently transferred between level 1 (unadjusted quoted market prices) and level 2 (adjusted market prices). as of march 31, 2010, these securities were classified as level 1.