SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


[X]		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





		FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2001





		OR





[ ]		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________to_________

Commission File No. 000-17994

MACKENZIE INVESTMENT MANAGEMENT INC.

(Exact name of registrant as specified in its charter)


DELAWARE (State or other jurisdiction of incorporation or organization)		59-2522153 (IRS Employer Identification No.)


925 SOUTH FEDERAL HIGHWAY, SUITE 600 BOCA RATON, FL (Address of principal executive offices)		33432 (Zip Code)

Registrant’s telephone number, including area code (561) 393-8900

(Former name, former address and former fiscal year, if changed since last report:)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES [X] NO [ ]

As of January 29, 2002, there were 18,655,550 shares of the Registrant’s Common Stock, par value $.01 per share issued and outstanding.

MACKENZIE INVESTMENT MANAGEMENT INC.

Index to Form 10-Q


		PAGE

	PART I




	FINANCIAL INFORMATION





Item 1.	CONDENSED FINANCIAL STATEMENTS




	Condensed Consolidated Balance Sheets	3




	Condensed Consolidated Statements of Operations	4




	Condensed Consolidated Statement of Changes in




	Stockholders’ Equity	5




	Condensed Consolidated Statements of Cash Flows	6




	Notes to Condensed Consolidated Financial Statements	7-8





Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	9-15





Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	15-16






	PART II




	OTHER INFORMATION





Item 1.	LEGAL PROCEEDINGS	17





Item 2.	CHANGES IN SECURITIES AND USE OF PROCEEDS	17





Item 3.	DEFAULTS UPON SENIOR SECURITIES	17





Item 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS	17





Item 5.	OTHER INFORMATION	17





Item 6.	EXHIBITS AND REPORTS ON FORM 8-K	17

PART I. — FINANCIAL INFORMATION

ITEM 1. CONDENSED FINANCIAL STATEMENTS

MACKENZIE INVESTMENT MANAGEMENT INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


			DECEMBER 31,
			2001			MARCH 31,
			(UNAUDITED)			2001

ASSETS:




Cash and cash equivalents			$	46,703,012		$	44,797,238




Marketable securities				2,177,626			2,460,918




Receivables:




	Funds for fees and expense advances			1,488,878			2,422,457




	Other			807,652			1,261,619




Property and equipment, net of accumulated depreciation of $758,104 as of December 31, 2001 and $3,708,793 as of March 31, 2001				2,667,452			748,867




Management contracts, net of accumulated amortization of $10,119,578 as of December 31, 2001 and $9,188,207 as of March 31, 2001				3,345,417			4,276,788




Deferred selling commissions				5,841,022			6,990,800




Other assets				733,038			1,102,545

		TOTAL ASSETS	$	63,764,097		$	64,061,232

LIABILITIES AND STOCKHOLDERS’ EQUITY:




Liabilities:




	Payable to Funds for purchases of Funds’ shares and expense reimbursements		$	198,137		$	148,373




	Sub-advisory fees payable			27,119			39,258




	Dividends payable			186,556			—




	Accounts payable			327,286			658,260




	Restructuring costs			343,284			1,769,355




	Accrued expenses and other liabilities			3,471,204			2,022,529




	Deferred tax			934,062			697,260

		Total liabilities		5,487,648			5,335,035

Commitments and contingencies




Stockholders’ equity:




	Capital stock, $0.01 par value, 100,000,000 shares authorized; 18,655,550 shares as of December 31, 2001 and 18,741,800 shares as of March 31, 2001 issued and outstanding			186,556			187,418




	Additional paid-in capital			38,609,953			39,024,802




	Retained earnings			19,914,458			20,424,882




	Unearned stock compensation			—			(493,757	)




	Accumulated other comprehensive loss, net of tax			(434,518	)		(417,148	)

		Total stockholders’ equity		58,276,449			58,726,197

		TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	63,764,097		$	64,061,232

The accompanying notes are an integral part of these condensed consolidated financial statements.

MACKENZIE INVESTMENT MANAGEMENT INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


		THREE MONTHS ENDED					NINE MONTHS ENDED
		DECEMBER 31,					DECEMBER 31,

		2001			2000		2001			2000

Revenues:




	Management fees	$	2,719,700		$	5,312,970	$	9,602,986		$	19,728,174




	Sub-advisory fees from Canadian Funds		1,735,650			2,269,957		5,467,546			7,886,255




	12b-1 Service and Distribution fees		877,336			1,766,705		3,184,858			6,211,381




	Transfer agent fees		—			792,537		627,384			2,324,321




	Administrative services fees		305,550			568,695		1,064,046			2,037,569




	Fund accounting fees		173,895			202,529		549,795			613,221




	Underwriting fees		9,664			34,326		43,451			224,154




	Redemption fees		228,155			368,284		776,304			685,563




	Interest, dividends and other		211,366			773,744		1,051,260			2,223,362

			6,261,316			12,089,747		22,367,630			41,934,000

EXPENSES:




	Sales literature, advertising and promotion		347,601			964,185		1,608,977			4,243,608




	12b-1 Service fees		689,466			1,221,148		2,365,888			4,611,694




	Employee compensation and benefits		2,937,661			3,988,454		9,833,825			12,127,028




	Sub-advisory fees		61,756			118,709		225,200			2,122,689




	Amortization of management contracts		310,457			310,457		931,371			922,821




	Amortization of deferred selling commissions		491,836			680,824		1,551,970			2,025,234




	Depreciation		162,165			194,826		463,795			586,233




	General and administrative		635,629			1,783,965		2,478,508			5,351,682




	Occupancy and equipment rental		319,201			448,256		1,087,525			1,185,689




	Reimbursement to Funds for expenses		959,024			607,222		1,932,858			1,710,280

			6,914,796			10,318,046		22,479,917			34,886,958

(Loss) income before income taxes			(653,480	)		1,771,701		(112,287	)		7,047,042




(Benefit) provision for income taxes			(211,599	)		754,468		24,163			2,933,424

NET (LOSS) INCOME		$	(441,881	)	$	1,017,233	$	(136,450	)	$	4,113,618

BASIC (LOSS) EARNINGS PER SHARE		$	(0.02	)	$	0.05	$	(0.01	)	$	0.22

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING USED IN BASIC CALCULATION			18,666,797			18,626,728		18,666,797			18,617,530

DILUTED (LOSS) EARNINGS PER SHARE		$	(0.02	)	$	0.05	$	(0.01	)	$	0.22

WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING USED IN DILUTED CALCULATION*			18,666,797			18,711,010		18,666,797			18,732,084

•

Weighted average common stock equivalents of 2,534 for the nine-month period ended December 31, 2001 have been excluded from the diluted calculation, due to their anti-dilutive effect.

The accompanying notes are an integral part of these condensed consolidated financial statements.

MACKENZIE INVESTMENT MANAGEMENT INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED DECEMBER 31, 2001

(UNAUDITED)


																ACCUMULATED
	CAPITAL STOCK						ADDITIONAL						UNEARNED			OTHER			TOTAL
							PAID-IN			RETAINED			STOCK			COMPREHENSIVE			STOCKHOLDERS'
	SHARES			AMOUNT			CAPITAL			EARNINGS			COMPENSATION			LOSS, NET OF TAX			EQUITY

Balance, March 31, 2001		18,741,800		$	187,418		$	39,024,802		$	20,424,882		$	(493,757	)	$	(417,148	)	$	58,726,197




Tax expense related to partial vesting of stock grant		—			—			(10,926	)		—			—			—			(10,926	)




Amortization of unearned stock compensation		—			—			—			—			13,345			—			13,345




Capital contribution		—			—			75,627			—			—			—			75,627




Other comprehensive loss, net of tax		—			—			—			—			—			(17,370	)		(17,370	)




Retirement of common stock under stock compensation agreement		(86,250	)		(862	)		(479,550	)		—			480,412			—			—




Cash dividends on common stock, $0.01 per share		—			—			—			(373,974	)		—			—			(373,974	)




Net loss for the period		—			—			—			(136,450	)		—			—			(136,450	)

Balance, December 31, 2001		18,655,550		$	186,556		$	38,609,953		$	19,914,458		$	—		$	(434,518	)	$	58,276,449

The accompanying notes are an integral part of these condensed consolidated financial statements.

MACKENZIE INVESTMENT MANAGEMENT INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


				NINE MONTHS ENDED
				DECEMBER 31,

				2001			2000

Cash flows from operating activities:




	Net (loss) income			$	(136,450	)	$	4,113,618




	Adjustments to reconcile net (loss) income to net cash provided by operating activities:




		Depreciation			463,795			586,233




		Amortization of management contracts			931,371			922,821




		Amortization of deferred selling commissions			1,551,970			2,025,234




		Amortization of unearned compensation			13,345			106,758




		Deferred tax expense			236,356			208,307




		Payment of deferred selling commissions			(402,192	)		(3,314,849	)




		Loss on disposal of property and equipment			66,111			—




		Loss on sale of marketable securities			110,640			243,745




		Change in assets and liabilities:




			Receivables		1,013,326			2,298,553




			Other assets		(66,150	)		23,384




			Payable to Funds for purchases of Funds’ shares and expense reimbursements		49,764			263,349




			Sub-advisory fees payable		(12,139	)		(3,208,882	)




			Restructuring costs		(1,426,071	)		—




			Accounts payable, accrued expenses and other liabilities		1,117,701			2,851,500




			Income taxes payable		—			(129,819	)

Net cash provided by operating activities					3,511,377			6,989,952

Cash flows from investing activities:




	Purchase of management contracts				—			(79,874	)




	Purchases of property and equipment				(2,012,834	)		(274,088	)




	Purchases of marketable securities				(30,269	)		(1,546,549	)




	Proceeds from the sale of marketable securities				175,071			1,602,442

Net cash used in investing activities					(1,868,032	)		(298,069	)

Cash flows from financing activities:




	Capital contribution				449,847			—




	Proceeds from the exercise of stock options				—			59,000




	Dividends paid				(187,418	)		(187,118	)

Net cash provided by (used in) financing activities					262,429			(128,118	)

Net increase in cash and cash equivalents					1,905,774			6,563,765




Cash and cash equivalents, beginning of period					44,797,238			41,095,301

Cash and cash equivalents, end of period				$	46,703,012		$	47,659,066

The accompanying notes are an integral part of these condensed consolidated financial statements.

MACKENZIE INVESTMENT MANAGEMENT INC.

Notes to Condensed Consolidated Financial Statements
December 31, 2001
(Unaudited)

1. BASIS OF PRESENTATION

The unaudited interim condensed consolidated financial statements of Mackenzie Investment Management Inc. (“MIMI”) and its consolidated subsidiaries (the “Company”) included herein have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, these condensed consolidated financial statements include all appropriate adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position and results of operations for the periods shown. The results of operations for the nine-month period ended December 31, 2001 are not necessarily indicative of the results of operations to be expected for the year ended March 31, 2002. These interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2001.

2. COMPREHENSIVE (LOSS) INCOME

Comprehensive (loss) income was $(153,820) and $(242,265) for the nine and three-month periods ended December 31, 2001, respectively, as compared to $3,879,295 and $908,390 for the nine and three-month periods ended December 31, 2000, respectively. Other comprehensive (loss) income for the nine and three-month periods ended December 31, 2001 and 2000 relates to unrealized (depreciation)/appreciation on marketable securities.

3. (LOSS) EARNINGS PER SHARE

The following table reconciles the weighted average shares outstanding used to calculate basic and diluted (loss) earnings per share for the three and nine-month periods ended December 31, 2001 and 2000:


	THREE MONTHS ENDED				NINE MONTHS ENDED
	DECEMBER 31,				DECEMBER 31,

	2001		2000		2001		2000

Weighted average number of common shares outstanding used in basic calculation		18,666,797		18,626,728		18,666,797		18,617,530




Effect of dilutive stock options		—		84,282		—		114,554

Weighted average number of common and common equivalent shares outstanding used in the diluted calculation		18,666,797		18,711,010		18,666,797		18,732,084

Options to purchase common stock excluded from the computation of diluted earnings per share due to their antidilutive effect		1,399,000		1,281,718		1,399,000		1,251,446

4. RESTRUCTURING

During the fourth quarter of fiscal year 2001, the Company recorded a $3,032,000 restructuring charge to cover costs associated with the plan of outsourcing the transfer agency operations and downsizing the sales, marketing and other various support functions. During the same period, the Company made payments totaling approximately $1,263,000 for these costs. For the nine-month period ended December 31, 2001, the Company made payments totaling approximately $1,426,000. The Company anticipates that the remaining restructuring costs of approximately $343,000, which primarily relates to lease obligations, will be paid from funds provided from operations in the ensuing nine-month period.

5. CASH DIVIDENDS ON COMMON STOCK

In June and December 2001, the Company declared a $0.01 per common share cash dividend to shareholders of record on June 27, 2001 and December 28, 2001, respectively. The December dividend was paid in January 2002.

6. STOCK GRANT AND DEFERRED COMPENSATION

In November 2001, a Portfolio Manager and Vice-President resigned from the Company (the “Former Employee”). Pursuant to the terms of a stock grant agreement entered into in connection with his employment, the non-vested portion of his stock grant, awarded in May 2000, was forfeited and cancelled. In addition, the Former Employee participated in a deferred compensation arrangement whereby the non-vested portion of the deferred compensation was forfeited upon resignation.

The stock grant and deferred compensation that has been forfeited as a result of the Former Employee’s resignation was recorded as a reduction of employee compensation and benefits in the condensed consolidated statement of operations for the three months ended December 31, 2001 to the extent such amounts were previously recorded as an expense.

7. NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial Accounting Standard (“Statement”) No. 142, “Goodwill and Other Intangible Assets”. The Statement, which is effective for fiscal years beginning after December 15, 2001, revises the accounting, amortization, and disclosure of goodwill and other intangible assets. The Company is in the process of assessing the impact of Statement No. 142 on its financial position and results of operations.

In August 2001, the FASB issued Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. Statement No. 144, which is effective for financial statements for years beginning after December 15, 2001, addresses financial accounting and reporting for the impairment or disposal of certain long-lived assets. In conjunction with the adoption of Statement No. 142 above, the Company is in the process of assessing the impact of Statement No. 144 on its financial position and results of operations.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

Certain statements in the Quarterly Report on Form 10-Q under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and elsewhere in this report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions; the loss of, or the failure to replace, any significant sub-advisory relationships; changes in the relative investment performance; and investor sentiment for international investing. The Company wishes to caution readers not to place undue reliance on such forward-looking statements and remind readers that these forward-looking statements speak only as of the date of this Quarterly Report. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

GENERAL

MIMI is a public company listed on the Toronto Stock Exchange. Its majority shareholder, Mackenzie Financial Corporation (“MFC”), a Toronto-based investment counsel and mutual fund management company, owns approximately 86% of the outstanding common shares of MIMI at December 31, 2001. MFC is a wholly owned subsidiary of Investors Group Inc. MIMI is an investment adviser and has three wholly owned subsidiaries, as follows:

•		Ivy Management, Inc. (“IMI”), an investment adviser;

•		Ivy Mackenzie Distributors, Inc. (“IMDI”), a broker/dealer; and

•		Ivy Mackenzie Service Corp. (“IMSC”), formerly a transfer agent. (SEE “OUT-SOURCING THE TRANSFER AGENCY”).

The Company’s principal business activities are carried on solely in the United States and include:

•		Managing public mutual funds offered in the U.S. by Ivy Fund (the “U.S. Funds”) which is a U.S. open-end series investment company registered under the Investment Company Act of 1940, as amended;

•		Providing investment advisory services to the U.S. Funds and sub-advisory services to twenty two Universal Funds at December 31, 2001 sold only in Canada and managed by MFC (the “Canadian Funds”);

•		Providing sub-advisory services to five Premier Funds (the “Premier Funds”) at December 31, 2001 sold in the U.K., Ireland and Luxembourg and managed by Premier Asset Management PLC (“Premier”); MFC has a less than 25% beneficial interest in Premier as of December 31, 2001;

•		Underwriting, selling and otherwise distributing redeemable shares of the U.S. Funds in the U.S. through various distribution channels; and

•		Providing administrative and fund accounting services to the U.S. Funds.

The Company derives its revenues principally from on-going management fees and sub-advisory fees, calculated as a percentage of average daily net assets under management, and from fees related to services performed for the U.S. Funds under contracts for administrative and fund accounting services. The level of net assets under management is affected by gross sales, redemptions and changes in market values of the mutual fund’s portfolio of investments. As the level of assets under management fluctuates so does management, sub-advisory, distribution, and administrative services fee revenue.

OUT-SOURCING THE TRANSFER AGENCY

Prior to June 30, 2001, IMSC provided transfer agency services to the U.S. Funds. As part of the Company’s restructuring plans initiated in the fourth quarter of fiscal year 2001, the Company successfully completed the transition of the transfer agency function to the current third party service provider, PFPC Inc., as of June 30, 2001. Effective August 31, 2001, the Company completed the process of de-registering IMSC as a transfer agent with the Securities and Exchange Commission.

VOLUNTARY REIMBURSEMENT OF OPERATING EXPENSES

In connection with a review of the overall management relationship between Ivy International Fund (“IIF”) and the Company (including its affiliates) in December 2001, the Company determined to make and recorded a voluntary reimbursement to IIF’s operating expenses in the amount of $400,000.

RESULTS OF OPERATIONS

NINE MONTHS ENDED DECEMBER 31, 2001 COMPARED TO NINE MONTHS ENDED DECEMBER 31, 2000

ASSETS UNDER MANAGEMENT

Average net assets under management for the U. S. Funds decreased $1,390 million, or 50%, to $1,376 million for the nine-month period ended December 31, 2001 from $2,766 million for the nine-month period ended December 31, 2000. The Canadian Funds’ average net assets decreased to $1,963 million for the nine-month period ended December 31, 2001 from $3,198 million for the nine-month period ended December 31, 2000, representing a decrease of $1,235 million or 39%.

The comparison of net assets under management for the U.S. Funds, Canadian Funds and Premier Funds is as follows:


			(IN MILLIONS, EXCEPT PERCENTAGES)

			NINE MONTHS ENDED
			DECEMBER 31,

						DOLLAR			PERCENT
			2001			2000			CHANGE			CHANGE

U.S. FUNDS:




Beginning net assets, March 31st			$	1,587		$	3,512			($1,925	)		(54.8	)




	Period activity:




		Sales		244			583			(339	)		(58.1	)




		Redemptions		(553	)		(1,382	)		(829	)		(60.0	)

		Net Sales (Redemptions)		(309	)		(799	)		490			61.3




		Market Appreciation (Depreciation), less distributions		(96	)		(674	)		578			85.8

Ending net assets, December 31st			$	1,182		$	2,039			($857	)		(42.0	)




CANADIAN FUNDS’ NET ASSETS AS AT DECEMBER 31ST:			$	1,893		$	2,619			($726	)		(27.7	)




PREMIER FUNDS’ NET ASSETS AS AT DECEMBER 31ST:			$	45		$	32		$	13			40.6

IIF continues to represent a significant portion of the assets under management and the underlying net redemption activity. The following chart reflects this concentration:


		(IN MILLIONS, EXCEPT PERCENTAGES)

		FOR THE NINE MONTHS
		ENDED DECEMBER 31,						CHANGES

		2001			2000			$			%

U.S. Funds’ net assets at December 31st		$	1,182		$	2,039		$	(857	)		(42.0	)




Ivy International Fund’s net assets at December 31st			525			976			(451	)		(46.2	)




	as a percentage of U.S. Funds’ net assets		44.4	%		47.9	%		0			0




U.S. Funds’ sales		$	244		$	583		$	(339	)		(58.1	)




Ivy International Fund’s sales			132			186			(54	)		(29.0	)




	as a percent of U.S. Funds’ sales		54.1	%		31.9	%




U.S. Funds’ redemptions		$	553		$	1,382		$	(829	)		(60.0	)




Ivy International Fund’s redemptions			304			969			(665	)		(68.6	)




	as a percent of U.S. Funds’ redemptions		55.0	%		70.1	%




Net redemptions excluding Ivy International Fund		$	137		$	16		$	121			756.3

REVENUES

As described in further detail below, total revenues decreased by 47% for the nine-month period ended December 31, 2001 as compared to the nine-month period ended December 31, 2000.

Management fees decreased 51% for the nine-month period ended December 31, 2001 as compared to the nine-month period ended December 31, 2000 as a result of the decrease in the U.S. Funds’ average net assets under management.

Sub-advisory fees from the Canadian Funds decreased 31% for the nine-month period ended December 31, 2001 as compared to the nine-month period ended December 31, 2000 as a result of the decrease in the average net assets of the Canadian Funds.

12b-1 Service and Distribution fees decreased 49% for the nine-month period ended December 31, 2001 as compared to the nine-month period ended December 31, 2000 due to the decrease in the U.S. Funds’ average net assets under management.

Administrative service, fund accounting and transfer agent fees collectively decreased 55% for the nine-month period ended December 31, 2001 as compared to the nine-month period ended December 31, 2000 due principally to the decline in average net assets under management, a decrease in the number of U.S. Funds due to reorganizations and dissolutions in the latter portion of fiscal year 2001 and outsourcing of the Company’s internal transfer agency.

For the nine-month period ended December 31, 2001 as compared to the nine-month period ended December 31, 2000, underwriting fees have decreased 81%, due to decreases in Class A share sales and redemption fees have increased 13% due to increases in redemptions of Class B and C shares.

Interest, dividends and other revenue decreased 53% for the nine-month period ended December 31, 2001 compared to the nine-month period ended December 31, 2000 due to a decrease in investment income earned as a result of declining interest rates and lower distributions from the investments in Ivy Funds.

EXPENSES

As described in further detail below, total operating expenses for the nine-month period ended December 31, 2001 decreased 36% compared to the nine-month period ended December 31, 2000.

Sales literature, advertising and promotion decreased 62% for the nine-month period ended December 31, 2001 compared to the nine-month period ended December 31, 2000 due to a re-focused marketing plan.

12b-1 Service fees paid to broker/dealers decreased 49% for the nine-month period ended December 31, 2001 compared to the nine-month period ended December 31, 2000 due to the decrease in net assets under management.

Employee compensation and benefits decreased 19% for the nine-month period ended December 31, 2001 compared to the nine-month period ended December 31, 2000. The decrease is due to an overall decrease in the number of employees as of December 31, 2001, which was 84 as compared to 152 at December 31, 2000, a comparative decrease of 45%. From May 2000 to December 2001, the Company increased its investment advisory personnel by 35% to 27 professionals, in part as a result of the internalization of the management of IIF. The increase in investment advisory personnel was offset by the reduction in headcount in connection with the restructuring initiated in the fourth quarter of fiscal year 2001 (See Note 4 — Restructuring, to the condensed consolidated financial statements).

Sub-advisory fees decreased 89% for the nine-month period ended December 31, 2001 compared to the nine-month period ended December 31, 2000 due to a decline in sub-advised net assets and the internalization of the portfolio management of IIF during the first quarter of fiscal year 2001.

Amortization of deferred selling commissions decreased 23% for the nine-month period ended December 31, 2001 compared to the nine-month period ended December 31, 2000 due to weaker Class B and C share sales and the resulting lower Class B and C share asset base.

General and administrative expenses decreased 54% for the nine-month period ended December 31, 2001 compared to the nine-month period ended December 31, 2000. The decrease was attributable to the outsourcing of the transfer agency, the general reductions in connection with the restructuring initiated in the fourth quarter of fiscal year 2001 (See Note 4 — Restructuring, to the condensed consolidated financial statements) as well as the non-recurrence of costs incurred in the prior year in connection with various fund reorganizations.

IMI contractually limits total fund expenses for certain U.S. Funds and bears expenses in excess of such limits. The increase of 13% for the nine-month period ended December 31, 2001 compared to the nine-month period ended December 31, 2000 resulted from: (1) an increase in the reimbursement related to decreases in the average net asset values of the funds for which IMI limits expenses; and (2) a voluntary reimbursement of $400,000 in IIF’s operating expenses. Such increases were partially offset by a decrease in the number of funds being reimbursed during the current year over the prior year period as a result of fund reorganizations in the latter half of fiscal year 2001. Excluding the voluntary reimbursement to IIF, fund expense reimbursement for the nine-month period ended December 31, 2001 would have decreased 10% as compared to the nine-month period ended December 31, 2000 (See “Voluntary Reimbursement of Operating Expenses”).

THREE MONTHS ENDED DECEMBER 31, 2001 COMPARED TO THREE MONTHS ENDED DECEMBER 31, 2000

ASSETS UNDER MANAGEMENT

Average net assets under management for the U. S. Funds decreased $1,061 million, or 47%, to $1,179 million for the three-month period ended December 31, 2001 from $2,240 million for the three-month period ended December 31, 2000. The Canadian Funds’ average net assets decreased to $1,826 million for the three-month period ended December 31, 2001 from $2,885 million for the three-month period ended December 31, 2000, representing a decrease of $1,059 million or 37%.

The change in net assets under management for the U.S. Funds is as follows:


			(IN MILLIONS, EXCEPT PERCENTAGES)

			THREE MONTHS ENDED DECEMBER 31,
									DOLLAR			PERCENT
			2001			2000			CHANGES			CHANGES

U.S. FUNDS:




Beginning net assets, September 30th			$	1,130		$	2,616			($1,486	)		(56.8	)




	Period activity:




		Sales		41			172			(131	)		(76.2	)




		Redemptions		(130	)		(447	)		(317	)		(70.9	)

		Net Sales (Redemptions)		(89	)		(275	)		186			67.6




		Market Appreciation (Depreciation), less distributions		141			(302	)		443			146.7

Ending net assets, December 31st			$	1,182		$	2,039			($857	)		(42.0	)

Ivy International Fund continues to represent a significant portion of the assets under management and the underlying net redemption activity. The following chart reflects this concentration:


		(IN MILLIONS, EXCEPT PERCENTAGES)

		FOR THE THREE MONTHS ENDED DECEMBER 31,						CHANGES

			2001			2000		$			%

U.S. Funds’ net assets at December 31st		$	1,182		$	2,039			($857	)	(42.0	)




Ivy International Fund’s net assets at December 31st			525			976			(451	)	(46.2	)




	as a percentage of U.S. Funds’ net assets		44.4	%		47.9	%




U.S. Funds’ sales		$	41		$	172			($131	)	(76.2	)




Ivy International Fund’s sales			27			69			(42	)	(60.9	)




Ivy International Fund’s sales			65.9	%		40.1	%




U.S. Funds’ redemptions		$	130		$	447			($317	)	(70.9	)




Ivy International Fund’s redemptions			77			300			(223	)	(74.3	)




	as a percent of U.S. Funds’ redemptions		59.2	%		67.1	%




Net redemptions excluding Ivy International Fund		$	39		$	44		$	(5	)	(11.4	)

REVENUES

As described in further detail below, total revenues decreased by 48% for the three-month period ended December 31, 2001 as compared to the three-month period ended December 31, 2000.

Management fees decreased 49% for the three-month period ended December 31, 2001 as compared to the three-month period ended December 31, 2000 as a result of the decrease in the U.S. Funds’ average net assets under management.

Sub-advisory fees from the Canadian Funds decreased 24% for the three-month period ended December 31, 2001 as compared to the three-month period ended December 31, 2000 as a result of the decrease in the average net assets of the Canadian Funds.

12b-1 Service and Distribution fees decreased 50% for the three-month period ended December 31, 2001 as compared to the three-month period ended December 31, 2000 due to the decrease in the U.S. Funds’ average net assets under management.

Administrative service, fund accounting and transfer agent fees collectively decreased 69% for the three-month period ended December 31, 2001 as compared to the three-month period ended December 31, 2000 due principally to a decline in average net assets under management, a decrease in the number of U.S. Funds due to reorganizations and dissolutions in the latter portion of fiscal year 2001 and the outsourcing of the Company’s internal transfer agency.

For the three-month period ended December 31, 2001 as compared to the three-month period ended December 31, 2000, redemption fees have decreased 38%, due to a decrease in redemptions of Class B and C shares.

Interest, dividends and other revenue decreased 73% for the three-month period ended December 31, 2001 compared to the three-month period ended December 31, 2000 due to a decrease in investment income earned as a result of declining interest rates and lower distributions from the investments in Ivy Funds.

EXPENSES

As described in further detail below, total operating expenses for the three-month period ended December 31, 2001 decreased 33% compared to the three-month period ended December 31, 2000.

Sales literature, advertising and promotion decreased 64% for the three-month period ended December 31, 2001 compared to the three-month period ended December 31, 2000 due to a re-focused marketing plan.

12b-1 Service fees paid to broker/dealers decreased 44% for the three-month period ended December 31, 2001 compared to the three-month period ended December 31, 2000 due to the decrease in average net assets under management.

Employee compensation and benefits decreased 26% for the three-month period ended December 31, 2001 compared to the three-month period ended December 31, 2000. The decrease is due to an overall decrease in the number of employees as of December 31, 2001, which was 84 as compared to 152 at December 31, 2000, a comparative decrease of 45%. From May 2000 to December 2001, the Company increased its investment advisory personnel by 35% to 27 professionals, in part as a result of the internalization of the management of IIF. The increase in investment advisory personnel was offset by the reduction in headcount in connection with the restructuring initiated in the fourth quarter of fiscal year 2001 (See Note 4 — Restructuring, to the condensed consolidated financial statements).

Amortization of deferred selling commissions decreased 28% for the three-month period ended December 31, 2001 compared to the three-month period ended December 31, 2000 due to weaker Class B and C share sales and the resulting lower Class B and C share asset base.

General and administrative expenses decreased 64% for the three-month period ended December 31, 2001 compared to the three-month period ended December 31, 2000. The decrease was attributable to the outsourcing of the transfer agency and the general reductions in connection with the restructuring initiated in the fourth quarter of fiscal year 2001 (See Note 4 — Restructuring, to the condensed consolidated financial statements) as well as the non-recurrence of costs incurred in the prior year in connection with various fund reorganizations.

IMI contractually limits total fund expenses for certain U.S. Funds and bears expenses in excess of such limits. The increase of 58% for the three-month period ended December 31, 2001 compared to the three-month period ended December 31, 2000 resulted from: (1) decreases in the net asset values of funds for which IMI voluntarily limits expenses; and (2) a voluntary reimbursement of $400,000 to IIF’s operating expenses. Excluding the voluntary reimbursement to IIF, fund expense reimbursement for the three-month period ended December 31, 2001 would have decreased 8% as compared to the three-month period ended December 31, 2000 (See “Voluntary Reimbursement of Operating Expenses”).

LIQUIDITY AND CAPITAL RESOURCES

Liquidity and capital resources are primarily derived from the operating cash flows received by the Company from managing and providing investment advisory services to the Ivy Funds and from providing sub-advisory services to the Canadian Funds. The Company manages its resources to ensure the availability of sufficient cash flows to meet all of its financial commitments. The Company believes the cash and cash equivalents at December 31, 2001, and cash expected to be generated from operations, will be sufficient to meet working capital requirements and required capital expenditures for at least the next twelve months.

The Company’s cash and cash equivalents increased by approximately $1,906,000 for the nine-month period from March 31, 2001 to December 31, 2001. The increase resulted from: (1) cash provided by operating activities from the Company’s operations of approximately $3,511,000, including the impact of a decrease in receivables, an increase in accounts payable and accrued expenses, offset by the payment of amounts related to restructuring costs and deferred selling commissions; (2) cash used in investing activities of approximately $1,868,000, primarily related to purchases of property and equipment; and (3) cash provided by financing activities of approximately $262,000 consisting of a capital contribution from MFC for costs incurred with respect to the change in control of MFC offset by the payment of dividends.

The payment of deferred selling commissions to broker/dealers was approximately $402,000 for the nine-month period ended December 31, 2001 as compared to approximately $3,315,000 for the nine-month period ended December 31, 2000. The decrease reflects a decline in Class B and C fund share sales during the nine-month period ended December 31, 2001. Commission payments made during the nine-month periods ended December 31, 2001 and 2000 were funded internally from operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

COMPETITION

The financial services industry is highly competitive and has increasingly become a global industry. There are numerous open-end investment companies of varying sizes, investment policies and objectives whose shares are being offered to the public in the U.S. Given the large number of competitors in the U.S., the Company has focused its efforts on becoming an investment specialist with a worldwide perspective offering mutual funds with an emphasis on international investing. With this focus, the Company considers that it has narrowed the competitive field to a certain extent as it competes primarily with mutual fund managers that provide specialty mutual funds, such as international funds, to investors.

The Company competes with the financial services and other investment alternatives offered by stock brokerage and investment banking firms, insurance companies, banks, savings and loan associations and other financial institutions. Many of the Company’s competitors have substantially greater resources than the Company. In addition, there has been a trend of consolidation in the mutual fund industry, which has resulted in stronger competitors. Such competition could negatively impact the Company’s market share, revenues and results of operations.

ASSET MIX

The Company’s revenues are derived primarily from investment management activities. Broadly speaking, the direction and fluctuation in the net assets of the U.S. Funds and the Canadian Funds (collectively, the “Funds”) depend upon two factors: (1) the level of sales of shares of the Funds as compared to redemptions of the shares of the Funds; and (2) the increase or decrease in the market value of the securities owned by the Funds. The Company is subject to an increased risk of volatility from changes in the global equity markets. Despite this volatility, management believes that in the long run the Company is more competitive as a result of greater diversity of global investments available to its customers.

Market values are affected by many things, including the general condition of national and world economics and the direction and volume of changes in interest rates and/or inflation rates. Fluctuations in interest rates and in the yield curve will have an effect on fixed-income net assets under management as well as on the flow of monies to and from fixed-income funds and, as a result, will affect the Company’s revenues from such funds. The effects of the foregoing factors on equity funds and fixed-income funds often operate inversely and it is, therefore, difficult to predict the net effect of any particular set of conditions on the level of net assets under management.

Certain portions of the Company’s managed portfolios are invested in various securities of corporations located or doing business in developing regions of the world, commonly known as emerging markets. These portfolios and the Company’s revenues derived from the management of such portfolios are subject to significant risks of loss from, among other factors, unfavorable political and diplomatic developments, currency fluctuations, social instability, changes in governmental policies, expropriation, nationalization, confiscation of assets and changes in legislation relating to foreign ownership. Foreign trading markets, particularly in some emerging market countries, are often smaller, less liquid, less regulated and significantly more volatile.

INVESTOR SENTIMENT FOR INTERNATIONAL INVESTING

Given the risk associated with investing in foreign and emerging markets, investors may from time to time be less supportive of investing in international funds than in U.S. equity or fixed income funds and sales of those Funds, which invest in these areas, may decrease.

REGULATORY ENVIRONMENT

Virtually all aspects of the Company’s business are subject to various federal and state laws and regulations. As discussed above, the Company and its subsidiaries are registered with federal and state governmental agencies. These supervisory agencies have broad administrative powers, including the power to limit or restrict the Company from carrying on its business if it fails to comply with applicable laws and regulations. In the event of non-compliance, the possible sanctions that may be imposed include suspending individual employees, limiting the Company’s ability to engage in business for specified periods of time, revoking the investment advisor or broker-dealer registrations and censures and fines.

ABSENCE OF PUBLIC TRADING MARKET

MFC owns approximately 86% of the issued and outstanding common shares of the Company as of December 31, 2001. The shares have been thinly traded. Further, the number of common shares of MIMI held by persons other than MFC is very small by market standards and this may have an adverse impact on liquidity and trading of the common shares.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are currently no legal proceedings pending to which the Company is a party or of which any of its property is the subject. Further, there are no material legal proceedings to which any director, officer, or affiliate of the Company or any associate thereof is a party which is adverse to the Company. There are no material administrative or judicial proceedings pending or known to be contemplated by any governmental authorities.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS:

None

(b) REPORTS ON FORM 8-K:

The Company filed the following Current Reports on Form 8-K during the quarter ended December 31, 2001:


1.		On December 10, 2001, the Company filed a Form 8-K under Item 5 announcing the declaration of a dividend of U.S. $0.01 per share to shareholders of record on December 28, 2001, with a payable date of January 7, 2002.




2.		On November 20, 2001, the Company filed a Form 8-K under Item 5 announcing the change of lead manager of the Ivy Funds International Equities Advisory team.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.


NAME	CAPACITY	DATE


/s/ KEITH J. CARLSON

Keith J. Carlson	President and Chief Executive Officer	February 1, 2002






/s/ BEVERLY YANOWITCH

Beverly Yanowitch	Vice President and Chief Financial Officer	February 1, 2002

MACKENZIE INVESTMENT MANAGEMENT INC 10-Q