As filed with the Securities and Exchange Commission on November 20, 1998
(File Nos. 33- and 811- ).
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
MACKENZIE SOLUTIONS
(Exact Name of Registrant as Specified in Charter)
Via Mizner Financial Plaza
700 South Federal Highway - Suite 300
Boca Raton, Florida 33432
(Address of Principal Executive Offices)
Registrant's Telephone Number: (800) 777-6472
C. William Ferris
Mackenzie Investment Management Inc.
Via Mizner Financial Plaza
700 South Federal Highway - Suite 300
Boca Raton, Florida 33432
(Name and Address of Agent for Service)
Copies to:
Joseph R. Fleming, Esq.
Dechert Price & Rhoads
Ten Post Office Square, South - Suite 1230
Boston, MA 02109
Approximate date of proposed public offering: As soon as practicable after the
effective date of this Registration Statement.
Title of securities being registered: Shares of beneficial interest, no par
value per share.
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until Registrant files a further
amendment that specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933, or until this Registration Statement becomes effective on such date
as the Commission, acting pursuant to Section 8(a) of the Securities Act of
1933, may determine.
<PAGE>
MACKENZIE SOLUTIONS
CROSS REFERENCE SHEET
This Registration Statement contains the Prospectus and Statement of
Additional Information to be used with the five series that comprise Mackenzie
Solutions (the "Registrant").
ITEMS REQUIRED BY FORM N-1A:
PART A:
ITEM 1 FRONT AND BACK COVER PAGES: Front and back cover pages
ITEM 2 RISK/RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCES: Principal
Investment Strategies; Principal Risks
ITEM 3 RISK/RETURN SUMMARY: FEE TABLE: Fees and Expenses
ITEM 4 INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, AND RELATED
RISKS: Principal Investment
Strategies; Principal Risks; Investment Objectives, Principal
Investment Strategies, and Related Risks
ITEM 5 MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE: Not applicable
ITEM 6 MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE: Management
ITEM 7 SHAREHOLDER INFORMATION: Shareholder Information
ITEM 8 DISTRIBUTION ARRANGEMENTS: Distribution Arrangements
ITEM 9 FINANCIAL HIGHLIGHTS INFORMATION: Not applicable
PART B
ITEM 10 COVER PAGE AND TABLE OF CONTENTS: Cover Page; Table of Contents
ITEM 11 FUND HISTORY: General Information
ITEM 12 DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS: Investment
Objectives, Strategies and Risks;
Investment Restrictions; Appendix A
ITEM 13 MANAGEMENT OF THE FUND: Trustees and Officers; Compensation Table
ITEM 14 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES: Trustees and
Officers
ITEM 15 INVESTMENT ADVISORY AND OTHER SERVICES: Portfolio Management;
Custodian; Fund Accounting Services;
Transfer Agent and Dividend Paying Agent; Administrator; Auditors
ITEM 16 BROKERAGE ALLOCATION AND OTHER PRACTICES: Brokerage Allocation
ITEM 17 CAPITAL STOCK AND OTHER SECURITIES: Special Rights and Privileges;
Capitalization and Voting Rights
ITEM 18 PURCHASE, REDEMPTION AND PRICING OF SHARES: Special Rights and
Privileges; Capitalization and Voting
Rights; Net Asset Value
ITEM 19 TAXATION OF THE FUND: Taxation
ITEM 20 UNDERWRITERS: Distribution Services
ITEM 21 CALCULATION OF PERFORMANCE DATA: Performance Information
ITEM 22 FINANCIAL STATEMENTS: Financial Statements
<PAGE>
[Front Cover Page]
PROSPECTUS February ___, 1999
Mackenzie Solutions
Mackenzie Solutions I - Conservative Growth
Mackenzie Solutions II - Balanced Growth
Mackenzie Solutions III - Moderate Growth
Mackenzie Solutions IV - Long-term Growth
Mackenzie Solutions V - Aggressive Growth
Mackenzie Solutions (the "Trust") is a registered open-end investment company
currently consisting of five separate portfolios (listed above) that form the
International Solutions asset allocation program. The International Solutions
funds enable investors to tailor their exposure to different investment
techniques and related risks by investing primarily in the shares of other
mutual funds that in turn invest a broad range of foreign securities. No offer
is made in this Prospectus of shares of these other funds.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
[Insert all logos]
<PAGE>
TABLE OF CONTENTS
Mackenzie Solutions: AN OVERVIEW Page
PRINCIPAL INVESTMENT STRATEGIES Page
PRINCIPAL RISKS Page
FEES AND EXPENSES Page
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT
STRATEGIES, AND RELATED RISKS Page
MANAGEMENT Page
SHAREHOLDER INFORMATION Page
DISTRIBUTION ARRANGEMENTS Page
APPLICATION Page
ADDITIONAL INFORMATION ABOUT THE FUNDS Page
SHAREHOLDER INQUIRIES Page
<PAGE>
Mackenzie Solutions: AN OVERVIEW
WHAT IS Mackenzie Solutions?
International Solutions is an asset allocation program that consists of five
separate international investment portfolios ("Funds"). Each Fund has its own
investment objective, strategies and risk profile, ranging from "conservative
growth" to "aggressive growth," and invests in the shares of other mutual funds
(referred to as "underlying funds") from the following registered fund
complexes: Bankers Trust, Ivy Funds, Lazard Asset Management, Montgomery Asset
Management, Scudder Funds, Strong Funds and Warburg Pincus Funds. Many of the
underlying funds are equity mutual funds that invest largely in stocks to
achieve growth. Other underlying funds are bond mutual funds that primarily seek
total return. The underlying funds may focus their investments in single
countries or geographic regions, and in established or emerging markets and
economies.
WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
Mackenzie Solutions I Primarily capital preservation with
- -Conservative Growth: moderate current income, and secondarily
capital appreciation.
Mackenzie Solutions II -Balanced A balance of capital appreciation and
Growth: capital preservation, with moderate
current income.
Mackenzie Solutions III -Moderate Primarily capital appreciation, and
Growth: secondarily near-term preservation of
capital.
Mackenzie Solutions IV - Capital appreciation without regard to
Long-term Growth: current income.
Mackenzie Solutions V -Aggressive Capital appreciation without regard to
Growth: current income and with substantial
emerging markets exposure.
PRINCIPAL INVESTMENT STRATEGIES:
Each Fund typically divides its assets among six to twelve underlying
funds whose combined investment strategies and techniques are
consistent with the Fund's achievement of its investment objective.
Each underlying fund in turn invests in a wide range of international
securities. As a result, an investment in a Fund is effectively
diversified over hundreds of different foreign issuers. Each Fund
normally invests roughly 50% of its assets in Ivy Funds.
The underlying fund selection process is based on longer-term trends in
market forces. As a result, the composition of each Fund's portfolio is
expected to be relatively static with only minor adjustments in
response to market developments. Among the factors usually
considered in selecting the underlying funds that will
comprise the Fund's portfolio are:
the variability of the each underlying fund's returns over
time and how the fund has performed relative to the other
funds that might be included in a Fund's portfolio;
standard accounting-based valuation and risk measures;
long-term expected return and risk parameters;
each manager's investment style and decisionmaking process;
capital market statistics (such as alpha, beta and R2); and
cost factors, such as its expense ratio, sales load (if any)
and administrative overhead.
Following is a summary of each Fund's portfolio composition and
principal investment strategies, and a brief description of the types
of investors for whom each Fund may be appropriate:
FUND: PRINCIPAL STRATEGIES: WHO SHOULD INVEST:*
International Normally invests 35-50% May be appropriate for relatively
Solutions I in international bond conservative investors seeking a
-Conservative funds and 50-65% in prudent trade-off between equity
Growth international equity and fixed income investments.
funds.
International Normally invests 20-35% May be appropriate for investors
Solutions II in international bond with limited tolerance for
-Balanced funds and 65-80% in year-to-year volatility.
Growth international equity
funds.
International Normally invests 75-90% May be appropriate for moderately
Solutions III in international equity aggressive investors who are
-Moderate funds, and 10-25% in willing to bear a moderate level
Growth: international bonds funds. of risk to achieve capital
appreciation.
International Normally invests exclusively May be appropriate for investors
Solutions IV in international equity seeking higher potential growth
Long-term funds, with 20-35% invested over the long-term while being
Growth: in emerging market equity willing to sustain significant
funds. fluctuations in capital value in
the short-term.
International Normally invests exclusively May be appropriate for
Solutions V - in international equity aggressive investors who have
Aggressive funds, with 35-50% invested a longer time horizon for
Growth: in emerging market equity their investments and are
funds. willing to bear a higher
level of risk in seeking
greater return.
* The information appearing in the "Who Should Invest" column is provided
merely as a general guide and not as an investment recommendation.
Investors should consult with their financial advisors to determine
which Fund (or combination of Funds) may be appropriate in light of
their individual financial needs and risk tolerance.
PRINCIPAL RISKS
The central premise of the Mackenzie Solutions asset allocation program
is that a well diversified international investment portfolio tends to be
less volatile than an international portfolio that emphasizes a particular
type of investment category or technique, such as stocks, bonds, or a
particular country or industry sector. By investing in a broad array of
mutual funds that are each managed separately and invest in many different
types of securities and foreign markets, the Funds offer a high level of
diversification to investors at most levels of risk tolerance. As with any
mutual fund, however, you may lose money by investing in the Funds. Certain
risks of loss are inherent in the way the Funds' portfolios are structured.
Specifically, since the Funds' portfolios are comprised mainly of other
mutual funds, the ultimate performance of a Fund will depend upon the
success of these underlying funds (and each underlying fund's performance
will depend in turn on the markets and securities in which the underlying
fund is invested). On the other hand, since each Fund is broadly
diversified through its investments in multiple underlying funds, investors
in the Funds are less exposed to the risk of loss than they might otherwise
be if they were to invest in a single underlying funds directly.
The value of each underlying fund's investments and the income they
generate will vary daily and generally reflect market conditions,
interest rates and other issuer-specific, political or economic
developments. The underlying funds spread investment risk in varying
degrees by limiting their holdings in any one company or industry. Each
underlying fund will experience some degree of price volatility,
however, that is driven by the extent to which its own investment
portfolio is exposed to these various conditions. A Fund could
therefore lose money at any time during which the underlying funds in
which it is invested are not performing as well as expected.
By investing in the underlying funds indirectly by purchasing shares of
a Fund, you will bear not only your proportionate share of the Fund's
expenses (see "Fees and Expenses" below) but also, indirectly, a
proportionate share of the fees and expenses charged by the underlying
funds. The underlying funds may also invest some portion of their
assets in other investment companies. Where this occurs, the underlying
funds will be subject to the expenses charged by those investment
companies to their shareholders.
The degree to which each Fund is affected by the performance of any one
underlying fund will depend upon the relative weight of the underlying
fund's shares in the Fund's portfolio. For example, International
Solutions I - Conservative Growth, a portfolio that is expected to
invest heavily in international fixed income funds, would be more
susceptible to losses caused by a downturn in the international bond
markets than would Mackenzie Solutions V - Aggressive Growth, which
normally invests exclusively in equity funds. On the other hand,
Mackenzie Solutions I Conservative Growth has only limited exposure
to losses that occur in the international equity markets.
The relative weight (and hence the corresponding risk) of each Fund's
investments in the underlying funds is captured by the percentage
figures in the table appearing in the "Principal Investment Strategies"
section. The "Investment Objectives, Principal Investment Strategies
and Related Risks" section of this Prospectus contains a description of
the risks to which investors in the Funds are exposed indirectly by
virtue of the investment activities of the underlying funds.
The underlying funds that comprise each Fund's portfolio are listed in
the Fund's financial statements (which are available to shareholders
upon request and without charge as soon as they are available). The
investment objectives and principal investment strategies of the Ivy
Funds are summarized in Appendix A to this Prospectus and in the Funds'
Statement of Additional Information (the "SAI" - please see the back
cover page for ordering information).
FEES AND EXPENSES
The following tables show the fees and expenses that apply to each Fund
and its shareholders:
-------------------- ------------ -------------- ---------- ---------------
Other Total Annual
Annual Fund Management Distribution Expenses Fund Operating
Operating Expenses Fees and/or Expenses
(1)(as a percentage Service
percentage of Rule 12b-1)
averate net assets) Fees
------------------- ------------- --------------- ------------ ---------------
International
Solutions I
-Conservative
Growth:
Class A None 0.25% 0.50% 0.75%
Class B None 1.00% 0.50% 1.50%
Class C None 1.00% 0.50% 1.50%
Class I None None 0.41% (2) 0.41% (2)
Advisor Class None None 0.50% 0.50%
International
Solutions II
-Balanced Growth:
Class A None 0.25% 0.50% 0.75%
Class B None 1.00% 0.50% 1.50%
Class C None 1.00% 0.50% 1.50%
Class I None None 0.41% (2) 0.41% (2)
Advisor Class None None 0.50% 0.50%
International
Solutions III
-Moderate Growth:
Class A None 0.25% 0.50% 0.75%
Class B None 1.00% 0.50% 1.50%
Class C None 1.00% 0.50% 1.50%
Class I None None 0.41% (2) 0.41% (2)
Advisor Class None None 0.50% 0.50%
International
Solutions IV -
Long-term Growth:
Class A None 0.25% 0.50% 0.75%
Class B None 1.00% 0.50% 1.50%
Class C None 1.00% 0.50% 1.50%
Class I None None 0.41% (2) 0.41% (2)
Advisor Class None None 0.50% 0.50%
International
Solutions V
Aggressive Growth:
Class A None 0.25% 0.50% 0.75%
Class B None 1.00% 0.50% 1.50%
Class C None 1.00% 0.50% 1.50%
Class I None None 0.41% (2) 0.41% (2)
Advisor Class None None 0.50% 0.50%
------------------- --------- ---------- --------- ---------
(1) Annual fund operating expenses are based on estimated fees and
expenses that each Fund expects to incur in its initial fiscal
year ending December 31, 1999.
(2) "Other Expenses" of Class I shares are lower than such
expenses for each Fund's other classes because that class
bears lower administrative services fees and transfer agency
fees than Class A, Class B, Class C and Advisor Class shares
(see "Fund Administration and Accounting" in the SAI).
Each Fund's shareholders will also bear indirectly the Fund's
proportionate share of fees and expenses charged by the underlying
funds in which the Fund is invested.
EXAMPLES:
The following examples are intended to help you compare the cost of
investing in each Fund with the cost of investing in other mutual
funds. Each example assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of
those periods. Each example also assumes that your investment has a 5%
return each year and that each Fund's operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be as follows:
---------------------------------------- ---------------- ---------------
One year: Three years:
---------------------------------------- ---------------- ---------------
Mackenzie Solutions I - Conservative
Growth
Class A $647 $801
Class B $653 (1) $774(2)
Class B (no redemption) $153 $474
Class C $253 (3) $574(3)
Class C (no redemption) $153 $474
Class I $ 42 $132
Advisor Class $ 51 $160
Mackenzie Solutions II - Balanced Growth:
Class A $647 $801
Class B $653 (1) $774 (2)
Class B (no redemption) $153 $474
Class C $253 (3) $574 (3)
Class C (no redemption) $153 $474
Class I $ 42 $132
Advisor Class $ 51 $160
Mackenzie Solutions III - Moderate
Growth: $647 $801
Class A $653 (1) $774 (2)
Class B $153 $474
Class B (no redemption) $253 (3) $574 (3)
Class C $153 $474
Class C (no redemption) $ 42 $132
Class I $ 51 $160
Advisor Class
Mackenzie Solutions IV -
Long-term Growth:
Class A $647 $801
Class B $653 (1) $774(2)
Class B (no redemption) $153 $474
Class C $253 (3) $574(3)
Class C (no redemption) $153 $474
Class I $ 42 $132
Advisor Class $ 51 $160
Mackenzie Solutions V - Aggressive
Growth:
Class A $65 $801
Class B $65 (1) $774 (2)
Class B (no redemption) $15 $474
Class C $25 (3) $574(3)
Class C (no redemption) $15 $474
Class I $ 4 $132
Advisor Class $ 5 $160
----------------------------------------- ------------ ------------
* Assumes deduction of the maximum 5.75% initial sales charge at the
time of purchase and no deduction of a CDSC at the time of redemption.
** Class I shares are not subject to an initial sales charge at the
time of purchase, nor are they subject to the deduction of a CDSC
at the time of redemption.
(1) Assumes deduction of a 5% CDSC at the time of redemption.
(2) Assumes deduction of a 3% CDSC at the time of redemption.
(3) Assumes deduction of a 1% CDSC at the time of redemption.
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES,
AND RELATED RISKS
Mackenzie Solutions I - CONSERVATIVE GROWTH:
The primary investment objective of the Conservative Portfolio is
primarily capital preservation with moderate current income and
seconarily capital appreciation. The underlying funds that make up
the Conservative Portfolio invest primarily in fixed income and equity
securities, which work together to balance its overall risk.
Historically, foreign equity securities have been considered a greater
investment risk than international investment-grade bonds. The
Conservative Portfolio has the highest weighting in foreign bonds,
thus bearing the lowest relative overall risk among the five Funds.
Mackenzie Solutions II - BALANCED GROWTH:
The primary investment objective of the Balanced Portfolio is a
balance of capital appreciation and capital preservation, with moderate
current income. The underlying funds in which the Fund invests in
turn invest primarily in fixed income and equity securities, which
work together to balance its overall risk. The Fund's higher emphasis
(relative to the Conservative Growth Fund) on underlying funds that
invest in equity securities may lead to moderately increased
volatility, but its greater emphasis on fixed income securities
reduces its overall risk relative to the Moderate, Long-Term Growth
and Aggressive Growth Funds.
Mackenzie Solutions III - MODERATE GROWTH:
The primary investment objective of the Moderate Portfolio is primarily
capital appreciation, with near-term preservation of capital as
secondary to this primary objective. The underlying funds that make up
the Moderate Portfolio invest primarily in equity and fixed income
securities, which work together to balance its overall risk.
Mackenzie Solutions IV - LONG-TERM GROWTH:
The primary investment objective of the Long-Term Growth Portfolio is
capital appreciation without regard to current income. The underlying
funds that make up the Long-Term Growth Portfolio invest in securities
that incur more risk than the other portfolios but not as much as the
Aggressive Growth Portfolio. For example, the Long-Term Growth
Portfolio has a moderate to high weighting in emerging markets (but
less than the Aggressive Growth Portfolio).
Mackenzie Solutions V - AGGRESSIVE GROWTH:
The investment objective of the Aggressive Growth Portfolio is capital
appreciation without regard to current income and with substantial
emerging markets exposure. The underlying funds that make up the
Aggressive Growth Portfolio may have significant holdings in emerging
markets securities, which historically have incurred greater social,
political and economic risk than developed markets (see "Emerging
Markets" below.)
RISKS ASSOCIATED WITH THE UNDERLYING FUNDS:
Each Fund is indirectly exposed (to varying degrees, depending on
its portfolio composition) to the risks associated with the
securities held by the underlying funds, which are as follows:
COMMON STOCKS:
Many of the underlying funds invest primarily in common stock.
Common stock can be issued by companies to raise cash. All
common stock shares that could be owned represent a
proportionate ownership interest in a company. As a result,
the value of common stock rises and falls with a company's
success or failure. The market value of common stock can
fluctuate significantly, with smaller companies being
particularly susceptible to price swings. Transaction costs in
smaller company stocks may also be higher than those of larger
companies.
DEBT SECURITIES:
Certain of the underlying funds invest a significant portion
of their assets in debt securities, some of which may be below
investment grade (sometimes referred to as "high yield" or
"junk" bonds). Investment in debt securities involves both
interest rate and credit risk. Generally, the value of debt
instruments rises and falls inversely with fluctuations in
interest rates. For example, as interest rates decline the
value of debt securities generally increases. Conversely,
rising interest rates tend to cause the value of debt
securities to decrease. The fixed income segments of each
Fund's portfolio are therefore susceptible to the decline in
value of the fixed income funds in which it invests in a
rising interest rate environment. The market value of debt
securities also tends to vary according to the relative
financial condition of the issuer. Bonds with longer
maturities also tend to be more volatile than bonds with
shorter maturities.
HIGH-YIELD BONDS:
In general, securities rated below Baa by Moody's or BBB by
S&P (commonly referred to as "high yield" or "junk" bonds)
offer higher yields due to the increased risk that the issuer
will be unable to meet its obligations on interest or
principal payments at the time called for by the debt
instrument. For this reason, these bonds are considered
speculative.
FOREIGN SECURITIES, IN GENERAL:
Because of the international emphasis of the International
Solutions asset allocation strategy, all of the Funds will
have significant exposure to foreign securities regardless of
the relative weight in the Funds' portfolios of fixed income
and equity-oriented underlying funds.
Investments in foreign securities involve an array of
economic, financial and political considerations not typically
associated with U.S. markets, which may affect an underlying
fund's performance favorably or unfavorably, depending upon
prevailing conditions at any given time. For example, foreign
investing may involve brokerage costs and tax considerations
that are not usually present in the U.S. markets. The
securities markets of certain foreign countries may also be
smaller, less liquid and subject to greater price volatility
that the U.S.
markets.
Other factors that can affect the value of foreign securities
held by the underlying funds include currency fluctuations,
blockages, conversion costs or transfer restrictions, and
comparatively weak government supervision and regulation of
securities exchanges, brokers and issuers. In addition,
foreign companies may not be subject to uniform accounting,
auditing and financial reporting standards and information
about their securities and business operations may be less
available. Settlement of portfolio transactions may also be
delayed due to local restrictions or communication problems,
which can cause an underlying fund to miss attractive
investment opportunities or impair its ability to dispose of
securities in a timely fashion (resulting in a loss if the
value of the securities subsequently declines).
EMERGING MARKETS:
The risks of investing in foreign securities are heightened in
countries with new or developing economies. For example, the
securities of many issuers in emerging market countries are
even less liquid and more volatile than the securities of
issuers in more developed foreign countries. Emerging market
countries may also have relatively unstable governments and be
susceptible to sudden adverse government actions (such as
nationalization of businesses, restrictions on foreign
ownership or prohibitions against repatriation of assets). The
risk of settlement delays is also increased. Many emerging
markets can experience unusually high inflation rates, which
in extreme cases can cause the value of assets in those
countries to erode sharply.
ASIA PACIFIC SECURITIES:
The economic structures of many Asia Pacific countries are
less mature and their political systems are often less stable
than in other more developed countries. The markets of
developing countries can provide higher rates of return to
investors than the markets of more developed countries, but
these developing markets also tend to be much more volatile.
Among the chief risks associated with investing in countries
in the Asia Pacific region are (i) restrictions on
repatriation of capital, (ii) unusually large currency
fluctuations, (iii) the cost of currency conversion, (iv)
price volatility and share illiquidity, and (v) extreme
political economic risks, such as the nationalization or
expropriation of assets and the risk of war. Investments in
countries such as China that have recently opened their
capital markets should be regarded as speculative. The
dependence of many Asia Pacific countries on foreign economic
assistance may also cause settlement delays.
SOUTH AMERICAN SECURITIES:
The securities markets of Latin America and certain South
American countries are substantially smaller, less developed,
less liquid and more volatile than the major securities
markets in more developed nations. This can cause prices to be
erratic for reasons apart from factors that affect the quality
of the securities. For example, limited market size may cause
prices to be unduly influenced by traders who control large
positions. For may years, most Latin and South American
countries have experienced substantial (and in some cases
extremely high) rates of inflation, which have had and may
continue to have very negative effects on the economies and
securities markets of these countries. In addition, certain
Latin and South American countries are among the largest
debtors to commercial banks and foreign governments, and some
have declared moratoria on the payment of principal and/or
interest on external debt.
OTHER IMPORTANT RISK INFORMATION:
A Fund may from time to time take a temporary defensive position and
invest without limit in investment grade corporate bonds, U.S.
government securities, commercial paper, certificates of deposit
and other money market securities. When a Fund assumes such a
defensive position it may be less well positioned to achieve its
investment objective. Under certain circumstances, a Fund may also
borrow from qualified banks. Borrowing may exaggerate the effect on a
Fund's net asset value of any increase or decrease in the value of the
securities it holds. Money borrowed will also be subject to interest
costs.
YEAR 2000 RISKS: Many computer software and hardware systems in use
today cannot distinguish between the year 2000 and the year 1900
because of the way dates are encoded and calculated (the "Year 2000
Problem"). The inability of computer-based systems to make this
distinction could have a seriously adverse effect on the handling of
securities trades, pricing and account services worldwide. The Funds'
service providers are taking steps that each believes are reasonably
designed to address the Year 2000 Problem with respect to the computer
systems that they use. The Funds believe these steps will be sufficient
to avoid any material adverse impact on the Funds. At this time,
however, there can be no assurance that significant problems will not
occur (which either directly or indirectly may cause a Fund to lose
money).
MANAGEMENT
INVESTMENT ADVISOR:
Ivy Management, Inc. ("IMI"), located at Via Mizner Financial Plaza,
700 South Federal Highway, Boca Raton, Florida 33432, provides business
and portfolio management services to the Funds. IMI is an
SEC-registered investment advisor with over $4.6 billion in assets
under management, and also advises and provides business management
services to the Ivy Funds. For its services, each Fund pays IMI a fee
at the annual rate of 0.10% of the Fund's average daily net asset
value. IMI may select a portfolio consultant for the Funds (subject to
review and approval by the Trust's Board of Trustees). The portfolio
consultant would be responsible for selecting the underlying funds that
comprise each Fund's portfolio and rebalancing the relative mix of
funds within each Fund's portfolio in light of its investment
objective.
<PAGE>
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES:
Each Fund calculates its share price by dividing the value of its net
assets by the total number of its shares outstanding as of the close of
business (usually 4:00 p.m. Eastern time) on the New York Stock
Exchange on each day the Exchange is open for trading (normally any
weekday that is not a national holiday). The value of a Fund's net
assets on any given day is based almost entirely on the net asset value
of the Underlying Funds whose shares are held in the Fund's portfolio.
Each Underlying Fund is responsible for determining its own net asset
value on any given day.
The number of shares you receive when you place an order for Fund
shares is based on the Fund's net asset value next determined after
your order is received by Ivy Mackenzie Services Corp. (the Funds'
transfer agent) or by your registered securities dealer. If you are
buying Class A shares, the number of shares you receive will be reduced
by an amount that is equal to the value of the front-end sales charge
that applies to Class A shares (see "Distribution Arrangements" below).
HOW TO PURCHASE FUND SHARES:
Purchasing Fund shares involves "Choosing the Appropriate Class of
Shares" and "Submitting Your Purchase Order". Please read these
sections below carefully before investing.
CHOOSING THE APPROPRIATE CLASS OF SHARES - Each Fund offers five
different classes of shares referred to as Class A, Class B, Class C,
Class I and Advisor Class, the essential features of which are as
follows (if you do not specify on your Account Application which class
of shares you are purchasing, it will be assumed that you are
purchasing Class A shares):
CLASS A SHARES: Class A shares are sold at net asset value
plus a maximum sales charge 5.75% of (the "offering price"). The
sales charge may be reduced or eliminated if certain conditions
are met (see "Additional Purchase Information" below). Class A
shares are also subject to a .25% annual service fee payable
under a Distribution Plan adopted in accordance with Rule 12b-1
under the 1940 Act.
CLASS B SHARES: Class B shares are offered at net asset value
without an initial sales charge, but subject to a contingent
deferred sales charge ("CDSC") that declines from 5% to zero on
certain redemptions within 6 years of purchase. Class B shares are
also subject to a .75% Rule 12b-1 distribution fee and a .25% Rule
12b-1 service fee, and convert automatically into Class A shares 8
years after purchase.
CLASS C SHARES: Class C shares are offered at net asset value
without an initial sales charge, but subject to a CDSC of 1% for
redemptions within the first year of purchase. Class C shares are
also subject to a .75% Rule 12b-1 distribution fee and a .25% Rule
12b-1 service fee.
CLASS I AND ADVISOR CLASS SHARES: Class I and Advisor Class
shares are offered to certain classes of investors at net asset
value without any sales load or Rule 12b-1 fees (see "How to Buy
Shares" below).
The following table displays the various investment minimums, sales
charges and expenses that apply to each class.
------------- -------- --------- -------- --------- ------------
Class Class Class Class Advisor
A B C I Class
------------- -------- --------- -------- --------- ------------
------------- -------- --------- -------- --------- ------------
Minimum
Initial $1,000 $1,000 $1,000 $5,000,000 $10,000
Investment*
------------- -------- --------- -------- ------------ -----------
------------- -------- --------- -------- ------------ -----------
Minimum
Subsequent $ 25 $ 25 $ 25 $ 10,000 $ 250
Investment*
------------ -------- --------- -------- ------------ -----------
------------ -------- --------- -------- ------------ -----------
Initial Maximum None None None None
Sales 5.75%, with
Charge options for
a reduced
or waiver
of initial
sales charge
---------- --------- --------- ---------- ---------- -----------
---------- --------- --------- ---------- ---------- -----------
CDSC None, except Maximum 1.00% for None None
on certain 5%, but the first
NAV declining year
purchase over six
years.
--------- ----------- ---------- ----------- ---------- ----------
--------- ----------- ---------- ----------- ---------- ----------
Service 0.25% 0.25% 0.25% None None
and Service Service Service fee
Distribu- fee fee and and 0.75%
tion 0.75% Distribution
Fees** Distribu- fee
tion fee
--------- ----------- ---------- ------------- -------- ----------
* Minimum initial and subsequent investments for retirement plans are $25.
** Because these fees are paid out of a Fund's assets on an ongoing basis
over time these fees will increase the cost of your investment and may
end up costing more than other types of sales charges.
ADDITIONAL PURCHASE INFORMATION:
CLASS A SHARES - Class A shares are sold at a public offering
price equal to their net asset value per share ("NAV") plus an
initial sales charge, as set forth below (which is reduced as the
amount invested increases):
- --------------------------- ----------------- ---------------- -----------------
Sales Charge as Sales Charge Portion of
a Percentage of as a Public Offering
Public Offering Percentage of Price Retained
Amount Invested Price Net Amount by Dealer
Invested
- --------------------------- ----------------- ---------------- -----------------
- --------------------------- ----------------- ---------------- -----------------
Less than $50,000 5.75% 6.10% 5.00%
- --------------------------- ----------------- ---------------- -----------------
- --------------------------- ----------------- ---------------- -----------------
$50,000 but less than 5.25% 5.54% 4.50%
$100,000
- --------------------------- ----------------- ---------------- -----------------
- --------------------------- ----------------- ---------------- -----------------
$100,000 but less than 4.50% 4.71% 3.75%
$250,000
- --------------------------- ----------------- ---------------- -----------------
- --------------------------- ----------------- ---------------- -----------------
$250, 000 but less than 3.00% 3.09% 2.50%
$500,000
- --------------------------- ----------------- ---------------- -----------------
$500,000 or over* 0.00% 0.00% 0.00%
- --------------------------- ----------------- ---------------- -----------------
* See "How to Eliminate Your Initial Sales Charge" below
Class A shares that are acquired through reinvestment of dividends
or distributions are not subject to an initial sales charge.
HOW TO REDUCE YOUR INITIAL SALES CHARGE:
"Rights of Accumulation" permits you to pay the sales charge
that applies to the cost or value (whichever is higher) of all
Mackenzie Solutions Class A shares you own.
A "Letter of Intent" permits you to pay the sales charge that
would apply to your cumulative purchase of Fund shares over a
13-month period (certain restrictions apply).
HOW TO ELIMINATE YOUR INITIAL SALES CHARGE:
You may purchase Class A shares at NAV (without an initial sales
charge or a CDSC) through any one of the following methods:
through certain investment advisors and financial planners who charge a
management, consulting or other fee for their services; under certain
qualified retirement plans;
as an employee or director of Mackenzie Investment Management Inc. or its
affiliates, or as an employee of a selected dealer;
through the Merrill Lynch Daily K Plan (the "Plan")
provided the Plan has at least $3 million in assets or
over 500 or more eligible employees. Class B shares of a
Fund are made available to Plan participants at NAV
without a CDSC if the Plan has less than $3 million in
assets or fewer than 500 eligible employees. For further
information see "Group Systematic Investment Program" in
the SAI.
You may also purchase Class A shares at NAV if you are investing
at least $500,000 through a dealer or agent. A CDSC of 1% applies
if you redeem your shares within 24 months after the end of the
calendar month in which the purchase was made to compensate the
Funds' distributor for the up-front commission it pays out of its
own resources to compensate the selling dealer for its
distribution assistance, as follows:
------------------------------- -------------------------------
Purchase Amount Commission
------------------------------- -------------------------------
------------------------------- -------------------------------
First $3,000,000 1.00%
------------------------------- -------------------------------
------------------------------- -------------------------------
Next $2,000,000 0.50%
------------------------------- -------------------------------
------------------------------- -------------------------------
Over $5,000,000 0.25%
------------------------------- -------------------------------
Certain trust companies, bank trust departments, credit unions,
savings and loans and other similar organizations may be also
exempt from the initial sales charge on Class A shares.
CLASS B AND CLASS C SHARES - Class B and Class C shares are not subject
to an initial sales charge but are subject to a CDSC. If you redeem
your Class C shares within one year of purchase they will be subject to
a CDSC of 1%, and Class B shares redeemed within six years of purchase
will be subject to a CDSC at the following rates:
--------------------- --------------------
CDSC as a
Percentage of
Year Since Purchase Dollar Amount
Subject to Charge
--------------------- --------------------
First 5%
--------------------- --------------------
--------------------- --------------------
Second 4%
--------------------- --------------------
--------------------- --------------------
Third 3%
--------------------- --------------------
--------------------- --------------------
Fourth 3%
--------------------- --------------------
--------------------- --------------------
Fifth 2%
--------------------- --------------------
--------------------- --------------------
Sixth 1%
--------------------- --------------------
--------------------- --------------------
Seventh and 0%
thereafter
--------------------- --------------------
The CDSC for both Class B and Class C shares will be assessed on an
amount equal to the lesser of the current market value or the original
purchase cost of the shares being redeemed. No charge will be assessed
on increases in account value above the original purchase price or on
reinvested dividends and distributions.
The CDSC for Class B shares is waived for:
Certain post-retirement withdrawals from an IRA or other
retirement plan if you are over 59 1/2 years old.
Redemptions by certain eligible 401(a) and 401(k) plans and
certain retirement plan rollovers.
Redemption resulting from a tax-free return of excess
contribution to an IRA.
Withdrawals resulting from shareholder death or disability
provided that the redemption is requested within one year of
death or disability.
Withdrawals through the Systematic Withdrawal Plan of up to
12% per year of your account value at the time the plan is established.
Both Class B shares and Class C shares are subject to an ongoing
service and distribution fee at a combined annual rate of up to 1.00%
of the portfolio's average net assets attributable to its Class B or
Class C shares. The ongoing distribution fees will cause these shares
to have a higher expense ratio than that of Class A shares and Class I
shares. Ivy Mackenzie Distributors, Inc. ("IMDI"), the Funds'
distributor, uses the money that it receives from the deferred sales
charge and the distribution fees to cover various promotional and sales
related expenses, as well as expenses related to providing
distributions services, such as compensating selected dealers and
agents for selling these shares.
Approximately eight years after the original date of purchase, your
Class B shares will be converted automatically to Class A shares. Class
A shares are subject to lower annual expenses than Class B shares. The
conversion from Class B shares to Class A shares is not considered a
taxable event for federal income tax purposes. Class C shares do not
have a similar conversion privilege.
CLASS I AND ADVISOR CLASS - Class I shares are offered only to
institutions and certain individuals, and are not subject to an initial
sales charge or a CDSC, nor to ongoing service or distribution fees.
Advisor Class shares are offered only to certain retirement plan
trustees and financial advisors. Class I and Advisor class shares also
bear lower fees than Class A, Class B and Class C shares.
SUBMITTING YOUR PURCHASE ORDER:
INITIAL INVESTMENTS:
Complete and sign the Account Application appearing at the end of this
Prospectus. Enclose a check payable to International Solutions (see
page [XX] for minimum initial investments.) Deliver your application
materials to your registered representative or selling broker, or send
them to one of the addresses below:
BY REGULAR MAIL: BY COURIER:
Ivy Mackenzie Services Corp. Ivy Mackenzie Services Corp.
P.O. Box 3022 700 South Federal Hwy.
Boca Raton, FL 33431-0922 Boca Raton, FL 33432
BUYING ADDITIONAL SHARES:
There are many ways to increase your investment in a Fund:
BY MAIL - Send your check with a completed investment slip
(attached to your account statement) or written instructions
indicating the account registration, fund number or name, and
account number. Mail to one of the addresses above.
THROUGH YOUR BROKER - Deliver to your registered
representative or selling broker the investment slip attached
to your statement, or written instructions, along with your
payment.
BY WIRE - Purchases may also be made by wiring money from
your bank account to your Ivy account. Your bank may charge a
fee for wiring funds. Before wiring any funds, please call
IMSC at (800) 777-6472. Wiring instructions are as follows:
First Union National Bank of Florida
Jacksonville, FL
ABA #063000021
Account #2090002063833
For further credit to:
Your Mackenzie Solutions Account Number
Your Fund Number and Account Number
BY AUTOMATIC INVESTMENT METHOD - You can authorize to have
funds electronically drawn each month from your bank account
and invested as a purchase of shares into your IS account.
Complete sections [XX] and [XX] of the Account Application.
HOW TO REDEEM YOUR FUND SHARES:
SUBMITTING YOUR REDEMPTION ORDER:
You may redeem your Fund shares through your registered securities
dealer or directly through IMSC. If you choose to redeem through your
registered securities dealer, the dealer is responsible for properly
transmitting redemption orders in a timely manner.
If you choose to redeem directly through IMSC, you have several ways to
submit your request:
BY MAIL - Send your written redemption request to IMSC at one
of the addresses on page XX of this Prospectus. Be sure that
all registered owners listed on the account sign the request.
Signature guarantees and supporting legal documentation may be
required. When you redeem, IMSC will normally send redemption
proceeds to you on the next business day, but may take up to
seven business days (or longer in the case of shares recently
purchased by check).
BY TELEPHONE - Call IMSC at (800) 777-6472 to redeem from
your account. In order to process your redemption order by
telephone, you must have telephone redemption privileges on
your account. IMSC employs reasonable procedures that require
personal identification prior to acting on redemption
instructions communicated by telephone to confirm that such
instructions are genuine. In the absence of such procedures, a
Fund or IMSC may be liable for any losses due to unauthorized
or fraudulent telephone instructions.
BY SYSTEMATIC WITHDRAWAL PLAN (SWP) - You can authorize to
have funds electronically drawn each month from your IS
account and deposited directly into your bank account. Certain
minimum balances and minimum distributions apply. Complete
sections XX of the Account Application to add this feature to
your account.
RECEIVING YOUR REDEMPTION PROCEEDS - You can receive redemption
proceeds through a variety of payment methods:
BY CHECK - Unless otherwise instructed, checks will be made
payable to the current account registration and sent to the
address of record.
BY FEDERAL FUNDS WIRE - Proceeds will be wired on the next
business day to a pre-designated bank account. Requests by
telephone can only be accepted for amounts up to $50,000. Your
account will be charged $10 each time redemption proceeds are
wired to your bank, and your bank may also charge you a fee
for receiving a Federal Funds wire.
BY ELECTRONIC FUNDS TRANSFER - For SWP redemptions only.
IMPORTANT REDEMPTION INFORMATION:
A CDSC may apply to certain Class A share redemptions, to
Class B shares redeemed within 6 years of purchase, and to
Class C shares that are redeemed within one year of purchase.
All redemptions are made at the NAV next determined after a
redemption request has been received in good order. Requests
for redemptions must be received by 4:00 p.m. Eastern time to
be processed at the NAV for that day. Any redemption request
in good order that is received after 4:00 p.m. Eastern time
will be processed at the price determined on the following
business day.
If you own shares of more than one class of a Fund, the Fund
will redeem first the shares having the highest 12b-1 fees.
Any shares subject to a CDSC will be redeemed last unless you
specifically elect otherwise.
A Fund may (on 60 days' notice) redeem the accounts of
shareholders whose investment, including sales charges paid,
has been less than $1,000 for more than 12 months.
A Fund may take up to 7 business days (or longer in the case
of shares recently purchased by check) to send redemption
proceeds.
HOW TO EXCHANGE YOUR FUND SHARES:
Shares of one Fund may be exchanged for shares of another Fund, subject
to certain restrictions (see "Important Exchange Information" below).
SUBMITTING YOUR EXCHANGE ORDER - You may submit an exchange request to
IMSC as follows:
BY MAIL - Send your written exchange request to IMSC at one
of the addresses on page XX of this Prospectus. Be sure that
all registered owners listed on the account sign the request.
BY TELEPHONE - Call IMSC at (800) 777-6472 to authorize an
exchange transaction. In order to process your exchange order
by telephone, you must have telephone exchange privileges on
your account. IMSC employs reasonable procedures that require
personal identification prior to acting on exchange
instructions communicated by telephone to confirm that such
instructions are genuine. In the absence of such procedures, a
Fund or IMSC may be liable for any losses due to unauthorized
or fraudulent telephone instructions.
IMPORTANT EXCHANGE INFORMATION:
You must exchange into the same share class you currently
own.
Exchanges are considered taxable events and may result in a
capital gain or a capital loss for tax purposes.
It is the policy of the Funds to discourage the use of the
exchange privilege for the purpose of timing short-term market
fluctuations. The Funds therefore reserve the right to limit
the frequency of exchanges or cancel the exchange privilege if
circumstances warrant.
DIVIDENDS AND DISTRIBUTIONS:
Each Fund generally declares and pays dividends and capital
gain distributions (if any) at least once a year.
Dividends and distributions are "reinvested" in additional
Fund shares unless you request to receive them in cash.
Reinvested dividends and distributions are added to your
account at NAV and are not subject to a CDSC regardless of
which share class you own.
Cash dividends and distributions can be sent to you:
BY MAIL - a check will mailed to the address of record unless
otherwise instructed.
BY ELECTRONIC FUNDS TRANSFER ("EFT") - your proceeds will be
directly deposited into your bank account.
To change your dividend and/or distribution options, call IMSC
at (800) 777-6472.
TAX CONSEQUENCES:
Dividends that shareholders receive from a Fund's net investment income
generally are taxable as ordinary income. Long-term capital gains
distributions, if any, are taxable to shareholders at the maximum
long-term capital gains rate. The holding period for long-term capital
gain treatment depends on how long the Fund has held the asset(s)
giving rise to the gain, regardless of how long shareholders have held
their Fund shares. Short-term capital gains and any other taxable
income distributions are taxable as ordinary income. A portion of the
dividends from ordinary income may qualify for the dividends received
deduction for corporations.
<PAGE>
APPLICATION
(To be filed by amendment)
<PAGE>
APPENDIX A
Following is a brief description of the investment objective and
principal investment policies of the eight underlying funds that are series of
Ivy Fund. The risks associated with these investment practices are described in
Appendix A to the SAI. The following information is merely a summary and should
not be relied upon as a complete statement of the investment techniques that the
Ivy Funds may use to achieve their respective investment objectives. Additional
information about the Ivy Funds and the other underlying funds may be obtained
by calling or writing to the Distributor at the phone number and address printed
on the back cover page of this Prospectus. Contact information relating to the
other underlying funds is also available through the Distributor.
IVY ASIA PACIFIC FUND has a primary investment objective of
long-term growth. Consideration of current income is secondary to this
principal objective. Under normal circumstances the Fund invests at
least 65% of its total assets in securities issued in Asia-Pacific
countries, which are defined to include China, Hong Kong, India,
Indonesia, Malaysia, Pakistan, the Philippines, Singapore, Sri Lanka,
South Korea, Taiwan, Thailand and Vietnam. Securities of Asia-Pacific
issuers include: (a) securities of companies organized under the laws
of an Asia-Pacific country or for which the principal securities
trading market is in the Asia-Pacific region; (b) securities that are
issued or guaranteed by the government of an Asia-Pacific country, its
agencies or instrumentalities, political subdivisions or the country's
central bank; (c) securities of a company, wherever organized, where at
least 50% of the company's non-current assets, capitalization, gross
revenue or profit in any one of the two most recent fiscal years
represents (directly or indirectly through subsidiaries) assets or
activities located in the Asia-Pacific region; and (d) any of the
preceding types of securities in the form of depository shares.
Normally, the Fund is invested at all times in at least three
Asia-Pacific countries. The Fund does not normally concentrate its
investments in any particular industry.
IVY CHINA REGION FUND has a principal investment objective of
long-term capital growth. Consideration of current income is secondary
to this principal objective. Under normal circumstances the Fund
invests at least 65% of its total assets in equity securities of
companies that are expected to benefit from the economic development
and growth of China, Hong Kong and Taiwan. A significant percentage of
the Fund's assets may also be invested in the securities markets of
South Korea, Singapore, Malaysia, Thailand, Indonesia and the
Philippines (collectively, with China, Hong Kong and Taiwan, the "China
Region"). The Fund may invest 25% or more of its total assets in the
securities of issuers located in any one China Region country, and may
have more than 50% of its total assets in Hong Kong. The balance of the
Fund's assets ordinarily are invested in (i) certain investment-grade
debt securities and (ii) the equity securities of companies whose
current or expected performance is judged by IMI to be strongly
associated with the China Region. The Fund may invest less than 35% of
its net assets in "high yield" or "junk" bonds (i.e., those rated Ba or
below by Moody's or BB or below by S&P), but will not invest in debt
securities rated less than C by either Moody's or S&P.
IVY DEVELOPING NATIONS FUND has a principal objective of
long-term growth. Consideration of current income is secondary to this
principal objective. The Fund normally invests at least 65% of its
total assets in the equity securities of companies that IMI believes
will benefit from the economic development and growth of emerging
markets. The Fund considers countries having emerging markets to be
those that (i) are generally considered to be "developing" or
"emerging" by the World Bank and the International Finance Corporation,
or (ii) are classified by the United Nations (or otherwise regarded by
their authorities) as "emerging." The Fund normally invests its assets
in the securities of issuers located in at least three emerging market
countries, and may invest 25% or more of its total assets in the
securities of issuers located in any one country. For purposes of
capital appreciation, the Fund may invest up to 35% of its total assets
in (i) debt securities of government or corporate issuers in emerging
market countries, (ii) equity and debt securities of issuers in
developed countries (including the United States), and (iii) cash or
cash equivalents such as bank obligations (including certificates of
deposit and bankers' acceptances), commercial paper, short-term notes
and repurchase agreements. The Fund will not invest more than 20% of
its total assets in "high yield" or "junk" bonds, and will not invest
in debt securities rated less than C by either Moody's or S&P.
IVY INTERNATIONAL FUND II has a principal objective of
long-term capital growth primarily through investment in equity
securities. Consideration of current income is secondary to this
principal objective. The Fund normally invests at least 65% of its
total assets in common stocks (and securities convertible into common
stocks) principally traded in European, Pacific Basin and Latin
American markets. For temporary defensive purposes, the Fund may also
invest in equity securities principally traded in U.S. markets. The
Fund invests in a variety of economic sectors, industry segments and
individual securities in order to reduce the effects of price
volatility in any one area and to enable shareholders to participate in
markets that do not necessarily move in concert with U.S. markets.
IVY INTERNATIONAL SMALL COMPANIES FUND has a principal
investment objective of long-term growth primarily through investment
in foreign equity securities. Consideration of current income is
secondary to this principal objective. Under normal circumstances the
Fund invests at least 65% of its total assets in common and preferred
stocks (and securities convertible into common stocks) of foreign
issuers having total market capitalization of less than $1 billion. The
Fund invests its assets in a variety of economic sectors, industry
segments and individual securities in order to reduce the effects of
price volatility in any area and to enable shareholders to participate
in markets that do not necessarily move in concert with the U.S.
market.
IVY INTERNATIONAL STRATEGIC BOND FUND [[to be completed after
initial prospectus for this fund is drafted]].
IVY PAN-EUROPE FUND has a principal investment objective of
long-term capital growth. Consideration of current income is secondary
to this principal objective. The Fund normally invests 65% of its total
assets in the equity securities of "European companies," which include
any issuer (a) that is organized under the laws of a European country;
(b) that derives 50% or more of its total revenues from goods produced
or sold, investments made or services performed in Europe; or (c) for
which the principal trading market is in Europe. The Fund may also
invest up to 35% of its total assets in the equity securities of
issuers domiciled outside of Europe. The Fund does not expect to
concentrate its investments in any particular industry. The Fund may
invest up to 35% of its net assets in debt securities, but will not
invest more than 20% of its net assets in "high yield" or "junk" bonds.
The Fund will not invest in debt securities rated less than C by either
Moody's or S&P.
IVY SOUTH AMERICA FUND has an investment objective of
long-term capital growth. Consideration of current income is secondary
to this principal objective. The Fund normally invests at least 65% of
its total assets in securities issued in South America. Securities of
South American issuers include (a) securities of companies organized
under the laws of a South American country or for which the principal
securities trading market is in South America; (b) securities that are
issued or guaranteed by the government of a South American country, its
agencies or instrumentalities, political subdivisions or the country's
central bank; (c) securities of a company, wherever organized, where at
least 50% of the company's non-current assets, capitalization, gross
revenue or profit in any one of the two most recent fiscal years
represents (directly or indirectly through subsidiaries) assets or
activities located in South America; or (d) any of the preceding types
of securities in the form of depository shares. The Fund may, however,
participate in markets throughout Latin America, which for purposes of
this Prospectus is defined as Mexico, Central America, South America
and the Spanish-speaking islands of the Caribbean, and it is expected
that the Fund will be invested at all times in at least three
countries. Under present conditions, the Fund expects to focus its
investments in Argentina, Brazil, Chile, Colombia, Peru and Venezuela.
The Fund does not expect to concentrate its investments in any
particular industry. The Fund may invest in debt securities (including
zero coupon bonds) when IMI anticipates that the potential for capital
appreciation from debt securities is likely to equal or exceed that of
equity securities (e.g., a favorable change in relative foreign
exchange rates, interest rate levels or the creditworthiness of
issuers). These include debt securities issued by South American
Governments ("Sovereign Debt"). Most of the debt securities in which
the Fund may invest are not rated, and those that are rated are
expected to be below investment-grade (i.e., "high yield" or "junk"
bonds).
Each of the eight Ivy Fund series may also engage (to a greater or
lesser extent, as described in each Fund's prospectus) in any or all of the
following derivative investment practices: purchasing put and call option on
securities and/or stock indices, selling covered put options, writing covered
call options, entering into foreign currency exchange transactions, engaging in
transactions in (and options on) stock index and/or foreign currency futures
contracts, and entering into forward foreign currency contracts. For temporary
or emergency purposes, or to assume a defensive position when market conditions
warrant, an Ivy Fund series may borrow money from banks (but only to the extent
described in its prospectus), and may invest without limit in cash, U.S.
government securities, commercial paper and bank obligations (and related
repurchase agreements). The Ivy Funds may also invest (to a greater or lesser
extent, as described in each Fund's prospectus) in investment grade debt
securities, repurchase agreements, restricted and illiquid securities,
securities issued on a "when issued" or firm commitment basis, and zero coupon
bonds. The risks associated with these investment practices are described in
Appendix A to the SAI.
<PAGE>
[Back Cover Page]
ADDITIONAL INFORMATION ABOUT THE FUNDS
Additional information about the Funds and their investments is contained in the
Statement of Additional Information ("SAI") for the Funds dated February ___,
1999, which is available upon request and without charge from the Distributor at
the following address and phone number:
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
(800) 456-5111
Information about the Funds (including the SAI) may also be reviewed and copied
at the SEC's Public Reference Room in Washington, D.C. (please call
1-800-SEC-0330 for further details). Information about the Funds is also
available on the SEC's Internet Website (www.sec.gov), and copies of this
information may be obtained, upon payment of a copying fee, by writing the
Public Reference Section of the SEC, Washington, D.C. 20549-6009.
SHAREHOLDER INQUIRIES
Please call Ivy Mackenzie Services Corp., the Funds' transfer agent, at
1-800-777-6472 regarding any other inquiries about the Funds.
Investment Company Act File No. _____________
<PAGE>
MACKENZIE SOLUTIONS
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Mackenzie Solutions I - Conservative Growth
Mackenzie Solutions II - Balanced Growth
Mackenzie Solutions III - Moderate Growth
Mackenzie Solutions IV - Long-Term Growth
Mackenzie Solutions V - Aggressive Growth
STATEMENT OF ADDITIONAL INFORMATION
February ___, 1999
This Statement of Additional Information ("SAI") describes the five
investment portfolios (the "Portfolios") that comprise Mackenzie Solutions (the
"Trust"), an asset allocation program that enables investors to tailor their
exposure to different investment techniques and related risks by investing in a
single Portfolio or group of Portfolios that invest primarily in the shares of
other mutual funds. All of the mutual funds in which the Portfolios invest have
an international investment emphasis.
This SAI is not a prospectus and should be read in conjunction with the
prospectus for the Portfolios dated February ___, 1999 (the "Prospectus"), which
may be obtained upon request and without charge from the Trust at the
Distributor's address and telephone number printed below.
INVESTMENT MANAGER
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 777-6472
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
<PAGE>
ii
TABLE OF CONTENTS
GENERAL INFORMATION................................................1
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS........................1
UNDERLYING FUNDS THAT ARE SERIES OF IVY FUND.......................3
THE PORTFOLIO'S INVESTMENT RESTRICTIONS............................7
MANAGEMENT OF THE PORTFOLIOS.......................................7
TRUSTEES AND OFFICERS.............................................10
COMPENSATION TABLE................................................10
BROKERAGE ALLOCATION..............................................10
DISTRIBUTION SERVICES....................................11
CUSTODIAN................................................14
FUND ACCOUNTING SERVICES.................................14
TRANSFER AGENT AND DIVIDEND PAYING AGENT.................14
ADMINISTRATOR............................................15
AUDITORS.................................................15
SPECIAL RIGHTS AND PRIVILEGES.....................................15
AUTOMATIC INVESTMENT METHOD..............................15
EXCHANGE OF SHARES.......................................16
LETTER OF INTENT.........................................18
RETIREMENT PLANS.........................................18
REINVESTMENT PRIVILEGE...................................22
REDUCED SALES CHARGES AND RIGHTS OF ACCUMULATION.........22
SYSTEMATIC WITHDRAWAL PLAN...............................23
GROUP SYSTEMATIC INVESTMENT PROGRAM......................23
REDEMPTIONS..............................................25
CONVERSION OF CLASS B SHARES.............................26
PERFORMANCE INFORMATION...........................................26
CAPITALIZATION AND VOTING RIGHTS..................................29
TAXATION 30
DEBT SECURITIES ACQUIRED AT A DISCOUNT...................31
DISTRIBUTIONS............................................32
DISPOSITION OF SHARES....................................33
BACKUP WITHHOLDING.......................................33
NET ASSET VALUE...................................................34
ADDITIONAL INFORMATION............................................35
FINANCIAL STATEMENTS..............................................35
APPENDIX A:.......................................................36
RISKS ASSOCIATED WITH INVESTMENT TECHNIQUES
USED BY UNDERLYING FUNDS THAT ARE SERIES OF IVY FUND.....36
APPENDIX B
STATEMENT OF ASSETS AND LIABILITIES AS
OF____________, 1999 AND REPORT OF INDEPENDENT
ACCOUNTANTS..........----................................37
<PAGE>
37
GENERAL INFORMATION
The Portfolios are separately managed series of the Trust, a
diversified open-end management investment company organized as a Massachusetts
business trust on November 18, 1998. Each Portfolio invests primarily in the
shares of other mutual funds (referred to in this SAI as "underlying funds"),
and normally allocates its investments among six to twelve underlying funds with
a mix of equity and fixed income investments that is appropriate in light of the
Portfolio's investment objective. Many of the underlying funds are equity mutual
funds that invest largely in stocks to achieve growth. Other underlying funds
are bond mutual funds that primarily seek total return. The underlying funds may
focus their investments in single countries or geographic regions, and in
established or emerging markets and economies. All of the underlying funds have
an international investment emphasis. Each Portfolio normally invests roughly
50% of its assets in underlying funds that are series of Ivy Fund, a registered
open-end management investment company that is part of the same "group of funds"
as the Trust (within the meaning of the 1940 Act). IMI provides business and
portfolio management services to the Ivy Funds and to the Portfolios (see
"Management of the Portfolios" below).
The Portfolios are designed to accommodate distinct investor financial
goals and profiles (ranging from "conservative growth" to "aggressive growth"),
and can serve as a complete investment program or as part of a larger portfolio
strategy. There is no guarantee that a Portfolio will be able to meet its
investment objective, and an investor in the Portfolios could lose money.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
Each Portfolio has its own investment objective and principal
investment strategies, which are summarized below and described in greater
detail in the "Principal Risks" and "Investment Objectives, Principal Investment
Strategies and Related Risks" sections of the Prospectus.
MACKENZIE SOLUTIONS I - CONSERVATIVE GROWTH:
The primary investment objective of the Conservative Portfolio is
primarily capital preservation with moderate current income, and
secondarily capital appreciation. The underlying funds that make up the
Conservative Portfolio invest primarily in fixed income and equity
securities, which work together to balance its overall risk.
Historically, foreign equity securities have been considered a greater
investment risk than international investment-grade bonds. The
Conservative Portfolio has the highest weighting in foreign bonds, thus
bearing the lowest relative overall risk among the five Funds.
MACKENZIE SOLUTIONS II - BALANCED GROWTH:
The primary investment objective of the Balanced Portfolio is a balance
of capital appreciation and capital preservation, with moderate current
income. The underlying funds in which the Fund invests in turn invest
primarily in fixed income and equity securities, which work together to
balance its overall risk. The Fund's higher emphasis (relative to the
Conservative Growth Fund) on underlying funds that invest in equity
securities may lead to moderately increased volatility, but its greater
emphasis on fixed income securities reduces its overall risk relative
to the Moderate, Long-Term Growth and Aggressive Growth Funds.
MACKENZIE SOLUTIONS III - MODERATE GROWTH:
The primary investment objective of the Moderate Portfolio is primarily
capital appreciation, with near-term preservation of capital as
secondary to this primary objective. The underlying funds that make up
the Moderate Portfolio invest primarily in equity and fixed income
securities, which work together to balance its overall risk.
MACKENZIE SOLUTIONS IV - LONG-TERM GROWTH:
The primary investment objective of the Long-Term Growth Portfolio is
capital appreciation without regard to current income. The underlying
funds that make up the Long-Term Growth Portfolio invest in securities
that incur more risk than the other portfolios but not as much as the
Aggressive Growth Portfolio. For example, the Long-Term Growth
Portfolio has a moderate to high weighting in emerging markets (but
less than the Aggressive Growth Portfolio.)
MACKENZIE SOLUTIONS V - AGGRESSIVE GROWTH:
The investment objective of the Aggressive Growth Portfolio is capital
appreciation without regard to current income and with substantial
emerging markets exposure. The underlying funds that make up the
Aggressive Growth Portfolio may have significant holdings in emerging
market securities, which historically have incurred greater social,
political and economic risk than developed markets (see "Emerging
Markets" below.)
The risks of investing in a particular Portfolio are determined by the
nature of the securities held by the underlying funds in which the Portfolio
invests. Each Portfolio's assets are allocated among certain of the underlying
funds in accordance with predetermined percentage ranges, based on the
Portfolio's investment objective and the Advisor's evaluation of the financial
markets, world economies and the relative performance potential of the
underlying funds.
The value of each underlying fund's investments and the income they
generate will vary daily and generally reflect market conditions, interest rates
and other issuer-specific, political or economic developments. As diversified,
open-end investment company's, the underlying funds spread investment risk in
varying degrees by limiting their holdings in any one company or industry. Each
underlying fund will experience some degree of price volatility, however, that
is driven by the extent to which its own investment portfolio is exposed to
these various conditions. A Portfolio could therefore lose money at any time
during which the underlying funds in which it is invested are not performing as
well as expected. The degree to which each Portfolio is affected by the
performance of any one underlying fund will depend upon the relative weight of
the underlying fund's shares held by the Portfolio. For example, the
Conservative Portfolio, which is expected to have significant holdings in
international fixed income funds, would be more susceptible to losses caused by
a downturn in the international bond markets than would be the Aggressive
Portfolio, which normally invests primarily in underlying funds that are
equity-oriented. On the other hand, the Conservative Portfolio has only limited
exposure to losses that occur in the international equity markets.
Other considerations relating to the underlying funds can affect the
performance of the Portfolios. For example, investment decisions by the
investment advisers of the underlying funds are made independently and bear no
direct relation to the management techniques employed with respect to the
Portfolios. Accordingly, the investment adviser of an underlying fund may decide
to purchase shares of the same issuer whose shares are being sold by the
investment adviser of another underlying fund (which would cause an indirect
expense to a Portfolio in the form or transaction costs without accomplishing
any investment purpose). The underlying funds are also permitted under the
securities laws to invest some portion of their assets in other investment
companies. Where this occurs, the underlying funds will be subject to the
expenses charged by those investment companies to its shareholders.
Each Portfolio may also deviate from its primary investment emphasis on
the underlying funds and assume a temporary defensive position by investing in
cash and liquid debt securities, such as U.S. government securities, commercial
paper, bank obligations, short-term notes and repurchase agreements. During such
times, a Portfolio may miss out on indirect investment opportunities through
underlying funds that continue to perform well despite the market factors that
gave rise to the Portfolio's having assumed its defensive position. Assuming a
defensive position would also cause a Portfolio to experience a higher turnover
rate. To the extent a Portfolio is purchasing shares of underlying funds that
have sales loads, a higher turnover rate would result in correspondingly higher
sales loads paid by the Portfolio. Higher than normal trading in underlying fund
shares also may result in realization of net short-term capital gains that would
not otherwise be realized, and shareholders are taxed on such gains when
distributed from the Portfolio at ordinary income tax rates (see "Dividends,
Distributions and Taxes").
For temporary or emergency purposes, each Portfolio may also borrow
from qualified banks to the maximum extent permitted by the Investment Company
Act of 1940, as amended (the "1940 Act"). Borrowing may exaggerate the effect on
a Portfolio's net asset value of any increase or decrease in the value of the
securities held by the Portfolio. Money borrowed will also be subject to
interest costs (which may include commitment fees and/or the cost of maintaining
minimum average balances).
UNDERLYING FUNDS THAT ARE SERIES OF IVY FUND
Following is a brief description of the investment objective and
principal investment policies of the underlying funds that are series of Ivy
Fund. The risks associated with these investment practices are described in
Appendix A. Additional information about the Ivy Funds and the other underlying
funds may be obtained by calling or writing to the Distributor at the phone
number and address printed on the cover of this SAI.
IVY ASIA PACIFIC FUND has a primary investment
objective of long-term growth. Consideration of current income
is secondary to this principal objective. Under normal
circumstances the Fund invests at least 65% of its total
assets in securities issued in Asia-Pacific countries, which
are defined to include China, Hong Kong, India, Indonesia,
Malaysia, Pakistan, the Philippines, Singapore, Sri Lanka,
South Korea, Taiwan, Thailand and Vietnam. Securities of
Asia-Pacific issuers include: (a) securities of companies
organized under the laws of an Asia-Pacific country or for
which the principal securities trading market is in the
Asia-Pacific region; (b) securities that are issued or
guaranteed by the government of an Asia-Pacific country, its
agencies or instrumentalities, political subdivisions or the
country's central bank; (c) securities of a company, wherever
organized, where at least 50% of the company's non-current
assets, capitalization, gross revenue or profit in any one of
the two most recent fiscal years represents (directly or
indirectly through subsidiaries) assets or activities located
in the Asia-Pacific region; and (d) any of the preceding types
of securities in the form of depository shares. Normally, the
Fund is invested at all times in at least three Asia-Pacific
countries. The Fund does not normally concentrate its
investments in any particular industry. The Fund may invest up
to 5% of its net assets in "high yield" or "junk" bonds (i.e.,
those rated Ba or below by Moody's or BB or below by S&P). The
Fund will not invest in debt securities rated less than C by
either Moody's or S&P.
IVY CHINA REGION FUND has a principal investment
objective of long-term capital growth. Consideration of
current income is secondary to this principal objective. Under
normal circumstances the Fund invests at least 65% of its
total assets in equity securities of companies that are
expected to benefit from the economic development and growth
of China, Hong Kong and Taiwan. A significant percentage of
the Fund's assets may also be invested in the securities
markets of South Korea, Singapore, Malaysia, Thailand,
Indonesia and the Philippines (collectively, with China, Hong
Kong and Taiwan, the "China Region"). The Fund may invest 25%
or more of its total assets in the securities of issuers
located in any one China Region country, and may have more
than 50% of its total assets in Hong Kong. The balance of the
Fund's assets ordinarily are invested in (i) certain
investment-grade debt securities and (ii) the equity
securities of companies whose current or expected performance
is judged by IMI to be strongly associated with the China
Region. The Fund may invest less than 35% of its net assets in
"high yield" or "junk" bonds, but will not invest in debt
securities rated less than C by either Moody's or S&P.
IVY DEVELOPING NATIONS FUND has a principal
objective of long-term growth. Consideration of current income
is secondary to this principal objective. The Fund normally
invests at least 65% of its total assets in the equity
securities of companies that IMI believes will benefit from
the economic development and growth of emerging markets. The
Fund considers countries having emerging markets to be those
that (i) are generally considered to be "developing" or
"emerging" by the World Bank and the International Finance
Corporation, or (ii) are classified by the United Nations (or
otherwise regarded by their authorities) as "emerging." The
Fund normally invests its assets in the securities of issuers
located in at least three emerging market countries, and may
invest 25% or more of its total assets in the securities of
issuers located in any one country. For purposes of capital
appreciation, the Fund may invest up to 35% of its total
assets in (i) debt securities of government or corporate
issuers in emerging market countries, (ii) equity and debt
securities of issuers in developed countries (including the
United States), and (iii) cash or cash equivalents such as
bank obligations (including certificates of deposit and
bankers' acceptances), commercial paper, short-term notes and
repurchase agreements. The Fund will not invest more than 20%
of its total assets in "high yield" or "junk" bonds, and will
not invest in debt securities rated less than C by either
Moody's or S&P.
IVY INTERNATIONAL FUND II has a principal objective
of long-term capital growth primarily through investment in
equity securities. Consideration of current income is
secondary to this principal objective. The Fund normally
invests at least 65% of its total assets in common stocks (and
securities convertible into common stocks) principally traded
in European, Pacific Basin and Latin American markets. For
temporary defensive purposes, the Fund may also invest in
equity securities principally traded in U.S. markets. The Fund
invests in a variety of economic sectors, industry segments
and individual securities in order to reduce the effects of
price volatility in any one area and to enable shareholders to
participate in markets that do not necessarily move in concert
with U.S. markets.
IVY INTERNATIONAL SMALL COMPANIES FUND has a
principal investment objective of long-term growth primarily
through investment in foreign equity securities. Consideration
of current income is secondary to this principal objective.
Under normal circumstances the Fund invests at least 65% of
its total assets in common and preferred stocks (and
securities convertible into common stocks) of foreign issuers
having total market capitalization of less than $1 billion.
The Fund invests its assets in a variety of economic sectors,
industry segments and individual securities in order to reduce
the effects of price volatility in any area and to enable
shareholders to participate in markets that do not necessarily
move in concert with the U.S. market. The Fund may invest up
to 5% of its net assets in "high yield" or "junk" bonds, but
will not invest in debt securities rated less than C by either
Moody's or S&P.
IVY INTERNATIONAL STRATEGIC BOND FUND [[to be
completed after initial prospectus for this fund is filed]].
IVY PAN-EUROPE FUND has a principal investment
objective of long-term capital growth. Consideration of
current income is secondary to this principal objective. The
Fund normally invests 65% of its total assets in the equity
securities of "European companies," which include any issuer
(a) that is organized under the laws of a European country;
(b) that derives 50% or more of its total revenues from goods
produced or sold, investments made or services performed in
Europe; or (c) for which the principal trading market is in
Europe. The Fund may also invest up to 35% of its total assets
in the equity securities of issuers domiciled outside of
Europe. The Fund does not expect to concentrate its
investments in any particular industry. The Fund may invest up
to 35% of its net assets in debt securities, but will not
invest more than 20% of its net assets in "high yield" or
"junk" bonds. The Fund will not invest in debt securities
rated less than C by either Moody's or S&P.
IVY SOUTH AMERICA FUND has an investment objective
of long-term capital growth. Consideration of current income
is secondary to this principal objective. The Fund normally
invests at least 65% of its total assets in securities issued
in South America. Securities of South American issuers include
(a) securities of companies organized under the laws of a
South American country or for which the principal securities
trading market is in South America; (b) securities that are
issued or guaranteed by the government of a South American
country, its agencies or instrumentalities, political
subdivisions or the country's central bank; (c) securities of
a company, wherever organized, where at least 50% of the
company's non-current assets, capitalization, gross revenue or
profit in any one of the two most recent fiscal years
represents (directly or indirectly through subsidiaries)
assets or activities located in South America; or (d) any of
the preceding types of securities in the form of depository
shares. The Fund may, however, participate in markets
throughout Latin America, which for purposes of this
Prospectus is defined as Mexico, Central America, South
America and the Spanish-speaking islands of the Caribbean, and
it is expected that the Fund will be invested at all times in
at least three countries. Under present conditions, the Fund
expects to focus its investments in Argentina, Brazil, Chile,
Colombia, Peru and Venezuela. The Fund does not expect to
concentrate its investments in any particular industry. The
Fund may invest in debt securities (including zero coupon
bonds) when IMI anticipates that the potential for capital
appreciation from debt securities is likely to equal or exceed
that of equity securities (e.g., a favorable change in
relative foreign exchange rates, interest rate levels or the
creditworthiness of issuers). These include debt securities
issued by South American Governments ("Sovereign Debt"). Most
of the debt securities in which the Fund may invest are not
rated, and those that are rated are expected to be below
investment-grade (i.e., "high yield" or "junk" bonds).
Each of the eight Ivy Fund series may also engage (to a greater or
lesser extent, as described in each Fund's prospectus) in any or all of the
following derivative investment practices: purchasing put and call option on
securities and/or stock indices, selling covered put options, writing covered
call options, entering into foreign currency exchange transactions, engaging in
transactions in (and options on) stock index and/or foreign currency futures
contracts, and entering into forward foreign currency contracts. For temporary
or emergency purposes, or to assume a defensive position when market conditions
warrant, an Ivy Fund series may borrow money from banks (but only to the extent
described in its prospectus), and may invest without limit in cash, U.S.
government securities, commercial paper and bank obligations (and related
repurchase agreements). The risks associated with these investment practices are
described in Appendix A.
THE PORTFOLIO'S INVESTMENT RESTRICTIONS
Each Portfolio has adopted certain fundamental investment policies,
which may only be changed with the approval of a majority of the Portfolio's
outstanding voting shares (see "Capitalization and Voting Rights").
Under these policies, no Portfolio may:
(i) issue senior securities (except as permitted under the 1940
Act, and as otherwise permitted by any authorized regulatory
authority);
(ii) borrow money (except as permitted under the 1940 Act, and as
otherwise permitted by any authorized regulatory authority);
(iii) engage in the business of underwriting securities issued by
others (except as otherwise permitted by applicable law);
(iv) concentrate its investments in a particular industry or group
of industries;
(v) purchase or sell real estate;
(vi) purchase physical commodities or contracts relating to
physical commodities; and
(vii) make loans (except as permitted under the 1940 Act, and as
otherwise permitted by any authorized regulatory authority).
Each of the policies described in this section relate to the Portfolios
and may or may not have been adopted by the underlying funds, each of which has
its own investment policies and restrictions that are described in its
prospectus and statement of additional information.
MANAGEMENT OF THE PORTFOLIOS
Ivy Management, Inc. ("IMI") provides business and portfolio management
and investment advisory services to the Portfolios pursuant to a Business
Management and Investment Advisory Agreement (the "Advisory Agreement"). The
Advisory Agreement was approved by the sole shareholder of each Portfolio on
__________, 1999. Before that, the Advisory Agreement was approved at a meeting
held on ___________, 1999 by each Portfolio's Board of Trustees , including a
majority of the Trustees who are neither "interested persons" (as defined in the
1940 Act) of the Portfolios nor have any direct or indirect financial interest
in the operation of the Portfolios' distribution plans (see "Distribution
Services") or in any related agreement (referred to herein as the "Independent
Trustees").
IMI is a wholly owned subsidiary of Mackenzie Investment Management
Inc. ("MIMI") (address), a Delaware corporation that has approximately 10% of
its outstanding common stock listed on the Toronto Stock Exchange ("TSE"). MIMI
is a subsidiary of Mackenzie Financial Corporation ("MFC"), 150 Bloor Street
West, Toronto, Ontario, Canada, a public corporation organized under the laws of
Ontario whose shares are listed for trading on the TSE. MFC is registered in
Ontario as a mutual fund dealer. IMI currently acts as manager and investment
adviser to all of the underlying funds that are series of Ivy Fund.
The Advisory Agreement obligates IMI to make investments for the
accounts of the Portfolios in accordance with its best judgment and within the
investment objectives and restrictions set forth in the Prospectus, the 1940 Act
and the provisions of the Code relating to regulated investment companies, and
subject to policy decisions adopted by the Trustees. Under the Advisory
Agreement, IMI is also obligated to (1) coordinate with each Portfolio's
Custodian and monitor the services it provides to the Portfolio; (2) coordinate
with and monitor any other third parties furnishing services to the Portfolios;
(3) provide the Portfolios with necessary office space, telephones and other
communications facilities as needed; (4) provide the services of individuals
competent to perform administrative and clerical functions that are not
performed by employees or other agents engaged by the Portfolios or by IMI
acting in some other capacity pursuant to a separate agreement or arrangements
with the Portfolios; (5) maintain or supervise the maintenance by third parties
of such books and records of the Portfolios as may be required by applicable
Federal or state law; (6) authorize and permit IMI's directors, officers and
employees who may be elected or appointed as trustees or officers of the
Portfolios to serve in such capacities; and (7) take such other action with
respect to the Portfolios, upon their approval, as may be required by applicable
law, including without limitation the rules and regulations of the SEC and of
state securities commissions and other regulatory agencies.
Each Portfolio pays IMI a monthly fee for its services under the
Advisory Agreement at an annual rate of 0.10% of the Portfolio's average net
assets. Each Portfolio is also responsible for the following expenses: (1) the
fees and expenses of the Portfolio's Independent Trustees; (2) the salaries and
expenses of any of the Portfolios' officers or employees who are not affiliated
with IMI; (3) interest expenses; (4) taxes and governmental fees, including any
original issue taxes or transfer taxes applicable to the sale or delivery of
shares or certificates therefor; (5) brokerage commissions and other expenses
incurred in acquiring or disposing of portfolio securities; (6) the expenses of
registering and qualifying shares for sale with the SEC and with various state
securities commissions; (7) accounting and legal costs; (8) insurance premiums;
(9) fees and expenses of the Portfolios' Custodian and Transfer Agent and any
related services; (10) expenses of obtaining quotations of portfolio securities
and of pricing shares; (11) expenses of maintaining the Portfolios' legal
existence and of shareholders' meetings; (12) expenses of preparation and
distribution to existing shareholders of periodic reports, proxy materials and
prospectuses; and (13) fees and expenses of membership in industry
organizations.
The initial term of the Advisory Agreement is two years from
______________, 1999 (the Advisory Agreement's commencement date). The Advisory
Agreement will continue in effect with respect to the Portfolios from year to
year, or for more than the initial period, as the case may be, only so long as
such continuance is specifically approved at least annually (i) by the vote of a
majority of the Independent Trustees and (ii) either (a) by the vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
each Portfolio or (b) by the vote of a majority of the entire Board. If the
question of continuance of the Advisory Agreement (or adoption of any new
agreement) is presented to the shareholders, continuance (or adoption) shall be
effected only if approved by the affirmative vote of a majority of the
outstanding voting securities of each Portfolio.
See "Capitalization and Voting Rights."
The Advisory Agreement may be terminated with respect to a Portfolio at
any time, without payment of any penalty, by the vote of a majority of the
Board, or by a vote of a majority of the outstanding voting securities of that
Portfolio, on 60 days' written notice to IMI, or by IMI on 60 days' written
notice to the Trust. The Advisory Agreement shall terminate automatically in the
event of its assignment.
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI. Employees of IMI are
permitted to make personal securities transactions, subject to the requirements
and restrictions set forth in IMI's Code of Ethics. The Code of Ethics is
designed to identify and address certain conflicts of interest between personal
investment activities and the interests of investment advisory clients such as
the Portfolios. Among other things, the Code of Ethics, which generally complies
with standards recommended by the Investment Company Institute's Advisory Group
on Personal Investing, prohibits certain types of transactions absent prior
approval, applies to portfolio managers, traders, research analysts and others
involved in the investment advisory process, and imposes time periods during
which personal transactions may not be made in certain securities, and requires
the submission of duplicate broker confirmations and monthly reporting of
securities transactions. Exceptions to these and other provisions of the Code of
Ethics may be granted in particular circumstances after review by appropriate
personnel.
<PAGE>
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of the Trust, their business
addresses and principal occupations during the past five years are:
POSITION WITH BUSINESS AFFILIATIONS OCCUPATIONS
NAME, ADDRESS, AGE THE TRUST AND PRINCIPAL OCCUPATIONS
C. William Ferris Secretary/ Senior Vice President, Chief Financial
700 South Federal Hwy. Treasurer Officer and Secretary/Treasurer of MIMI
Suite 300 (1995-present); Senior Vice President,
Boca Raton, FL 33432 Finance and Administration/Compliance
Age: 53 Officer of MIMI (1989-1994); Sr. Vice
President, Secretary/Treasurer and Clerk
of IMI (1994-present); Vice President,
Finance/Administration and Compliance
Officer of IMI (1992-1994); Senior Vice
President, Secretary/Treasurer and
Director of IMDI (1994-present);
Secretary/Treasurer and Director of IMDI
(1993-1994); President and Director of
IMSC (1996-present); Secretary/
Treasurer and Director of IMSC
(1993-1996); Secretary/Treasurer of
MFI (1993-1995); Secretary/Treasurer
of MST (1994-1998).
As of the date of this SAI, the Officers and Trustees of the Trust as a
group owned no Portfolio shares.
COMPENSATION TABLE
MACKENZIE SOLUTIONS
(FISCAL YEAR ENDED DECEMBER 31, 1998)
[[TABLE TO BE INSERTED BY AMENDMENT]]
BROKERAGE ALLOCATION
Subject to the overall supervision of the President and the Board, IMI
places orders for the purchase and sale of the Portfolios' underlying fund
shares and other permitted securities investments. All portfolio transactions
are effected at the best price and execution obtainable. Purchases and sales of
debt securities, where applicable, are usually principal transactions and
therefore brokerage commissions are usually not required to be paid by the
Portfolios for such purchases and sales (although the price paid generally
includes undisclosed compensation to the dealer). The prices paid to
underwriters of newly issued securities usually include a concession paid by the
issuer to the underwriter, and purchases of after-market securities from dealers
normally reflect the spread between the bid and asked prices. In connection with
OTC transactions, IMI attempts to deal directly with the principal market
makers, except in those circumstances where IMI believes that a better price and
execution are available elsewhere.
IMI selects broker-dealers to execute transactions and evaluates the
reasonableness of commissions on the basis of quality, quantity, and the nature
of the firms' professional services. Commissions to be charged and the rendering
of investment services, including statistical, research, and counseling services
by brokerage firms, are factors to be considered in the placing of brokerage
business. The types of research services provided by brokers may include general
economic and industry data, and information on securities of specific companies.
Research services furnished by brokers through whom the Portfolios effect
securities transactions may be used by IMI in servicing all of its accounts. In
addition, not all of these services may be used by IMI in connection with the
services it provides to the Portfolios. IMI may consider sales of shares of Ivy
funds as a factor in the selection of broker-dealers and may select
broker-dealers who provide it with research services. IMI will not, however,
execute brokerage transactions other than at the best price and execution. As of
the date of this SAI, the Portfolios have not paid any brokerage commissions.
The Portfolios may, under some circumstances, accept securities in lieu
of cash as payment for Portfolio shares. The Portfolios will accept securities
only to increase their holdings in a portfolio security or to take a new
portfolio position in a security that IMI deems to be a desirable investment for
the Portfolios. While no minimum has been established, it is expected that each
Portfolio will not accept securities having an aggregate value of less than $1
million. The Portfolios may reject in whole or in part any or all offers to pay
for the Portfolios' shares with securities and may discontinue accepting
securities as payment for the Portfolios' shares at any time without notice. The
Portfolios will value accepted securities in the manner and at the same time
provided for valuing portfolio securities of the Portfolios, and the Portfolios'
shares will be sold for net asset value determined at the same time the accepted
securities are valued. The Trust will only accept securities delivered in proper
form and will not accept securities subject to legal restrictions on transfer.
The acceptance of securities by the Trust must comply with the applicable laws
of certain states.
DISTRIBUTION SERVICES
Ivy Mackenzie Distributors, Inc. ("IMDI"), a wholly owned subsidiary of
MIMI, serves as the exclusive distributor of the Portfolios' shares pursuant to
a Distribution Agreement with the Portfolios dated (the "Distribution
Agreement"). The Board approved the Distribution Agreement on . IMDI distributes
shares of the Portfolios through broker-dealers who are members of the National
Association of Securities Dealers, Inc. and who have executed dealer agreements
with IMDI. IMDI distributes shares of the Portfolios continuously, but reserves
the right to suspend or discontinue distribution on that basis. IMDI is not
obligated to sell any specific amount of Portfolios shares.
Pursuant to the Distribution Agreement, IMDI is entitled to deduct a
commission on all Class A Portfolio shares sold equal to the difference, if any,
between the public offering price, as set forth in the Portfolio's then-current
prospectus, and the net asset value on which such price is based. Out of that
commission, IMDI may reallow to dealers such concession as IMDI may determine
from time to time. In addition, IMDI is entitled to deduct a CDSC on the
redemption of Class A shares sold without an initial sales charge and Class B
and Class C shares, in accordance with, and in the manner set forth in, the
Prospectus.
Under the Distribution Agreement, each Portfolio bears, among other
expenses, the expenses of registering and qualifying its shares for sale under
federal and state securities laws and preparing and distributing to existing
shareholders periodic reports, proxy materials and prospectuses.
As of the date of this each SAI, IMDI had not received any payments
under the Distribution Agreement with respect to any Portfolio.
The Distribution Agreement will continue in effect for each Portfolio
for successive one-year periods, provided that such continuance is specifically
approved at least annually by the vote of a majority of the Independent
Trustees, cast in person at a meeting called for that purpose and by the vote of
either a majority of the entire Board or a majority of the outstanding voting
securities of the Portfolio. The Distribution Agreement may be terminated with
respect to any Portfolio at any time, without payment of any penalty, by IMDI on
60 days' written notice to the Portfolio or by any Portfolio by vote of either a
majority of the outstanding voting securities of any Portfolio or a majority of
the Independent Trustees on 60 days' written notice to IMDI. The Distribution
Agreement shall terminate automatically in the event of its assignment.
RULE 18F-3 PLAN. On February 23, 1995, the SEC adopted Rule 18f-3 under
the 1940 Act, which permits a registered open-end investment company to issue
multiple classes of shares in accordance with a written plan approved by the
investment company's board of directors and filed with the SEC. At a meeting
held on _________________, the Trustees adopted a Rule 18f-3 plan on behalf of
the Portfolios. The key features of the Rule 18f-3 plan are as follows: (i)
shares of each class of each Portfolio represent an equal pro rata interest in
that Portfolio and generally have identical voting, dividend, liquidation, and
other rights, preferences, powers, restrictions, limitations, qualifications,
terms and conditions, except that each class bears certain class-specific
expenses and has separate voting rights on certain matters that relate solely to
that class or in which the interests of shareholders of one class differ from
the interests of shareholders of another class; (ii) subject to certain
limitations described in the Prospectus, shares of a particular class of each
Portfolio may be exchanged for shares of the same class of another Ivy fund; and
(iii) each Portfolio's Class B shares will convert automatically into Class A
shares of that Portfolio after a period of eight years, based on the relative
net asset value of such shares at the time of conversion.
RULE 12B-1 DISTRIBUTION PLANS. The Trust has adopted on behalf of each
Portfolio, in accordance with Rule 12b-1 under the 1940 Act, separate Rule 12b-1
distribution plans pertaining to each Portfolio's Class A, Class B and Class C
shares (each, a "Plan"). In adopting each Plan, a majority of the Independent
Trustees have concluded in accordance with the requirements of Rule 12b-1 that
there is a reasonable likelihood that each Plan will benefit the Portfolio and
its shareholders. The Trustees of the Trust believe that the Plans should result
in greater sales and/or fewer redemptions of each Portfolio's shares, although
it is impossible to know for certain the level of sales and redemptions of each
Portfolio's shares in the absence of a Plan or under an alternative distribution
arrangement.
Under each Plan, the Portfolios each pay to IMDI a service fee, accrued
daily and paid monthly, at the annual rate of up to 0.25% of the average daily
net assets attributable to its Class A, Class B or Class C shares, respectively.
The services for which service fees may be paid include, among other things,
advising clients or customers regarding the purchase, sale or retention of
Portfolio shares, answering routine inquiries concerning the Portfolios and
assisting shareholders in changing options or enrolling in specific plans.
Pursuant to each Plan, service fee payments made out of or charged against the
assets attributable to a Portfolio's Class A, Class B or Class C shares must be
in reimbursement for services rendered for or on behalf of the affected class.
The expenses not reimbursed in any one month may be reimbursed in a subsequent
month. The Class A Plan does not provide for the payment of interest or carrying
charges as distribution expenses.
Under the Portfolios' Class B and Class C Plans, each Portfolio also
pays IMDI a distribution fee, accrued daily and paid monthly, at the annual rate
of 0.75% of the average daily net assets attributable to its Class B or Class C
shares. IMDI may reallow to dealers all or a portion of the service and
distribution fees as IMDI may determine from time to time. The distribution fees
compensate IMDI for expenses incurred in connection with activities primarily
intended to result in the sale of each Portfolio's Class B or Class C shares,
including the printing of prospectuses and reports for persons other than
existing shareholders and the preparation, printing and distribution of sales
literature and advertising materials. Pursuant to each Class B and Class C Plan,
IMDI may include interest, carrying or other finance charges in its calculation
of distribution expenses, if not prohibited from doing so pursuant to an order
of or a regulation adopted by the SEC.
Among other things, each Plan provides that (1) IMDI will submit to the
Board at least quarterly, and the Trustees will review, written reports
regarding all amounts expended under the Plan and the purposes for which such
expenditures were made; (2) each Plan will continue in effect only so long as
such continuance is approved at least annually, and any material amendment
thereto is approved, by the votes of a majority of the Board, including the
Independent Trustees, cast in person at a meeting called for that purpose; (3)
payments by each Portfolio under each Plan shall not be materially increased
without the affirmative vote of the holders of a majority of the outstanding
shares of the relevant class; and (4) while each Plan is in effect, the
selection and nomination of Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Portfolios shall be committed to the discretion
of Trust who are not "interested persons" of the Portfolios.
IMDI may make payments for distribution assistance and for
administrative and accounting services from resources that may include the
management fees paid by the Portfolio. IMDI also may make payments (such as the
service fee payments described above) to unaffiliated broker-dealers for
services rendered in the distribution of the Portfolios' shares. To qualify for
such payments, shares may be subject to a minimum holding period. However, no
such payments will be made to any dealer or broker if at the end of each year
the amount of shares held does not exceed a minimum amount. The minimum holding
period and minimum level of holdings will be determined from time to time by
IMDI.
A report of the amount expended pursuant to each Plan, and the purposes
for which such expenditures were incurred, must be made to the Board for its
review at least quarterly. As of the date of this SAI, no payments had been made
under the Plans with respect to each Portfolio.
Each Plan may be amended at any time with respect to the class of
shares of each Portfolio to which the Plan relates by vote of the Trustees,
including a majority of the Independent Trustees, cast in person at a meeting
called for the purpose of considering such amendment. Each Plan may be
terminated at any time with respect to the class of shares of each Portfolio to
which the Plan relates, without payment of any penalty, by vote of a majority of
the Independent Trustees, or by vote of a majority of the outstanding voting
securities of that class.
If the Distribution Agreement or any Plan is terminated (or not
renewed) with respect to any of the Portfolios (or class of shares thereof),
each may continue in effect with respect to any other Portfolio (or Class of
shares thereof) as to which they have not been terminated (or have been
renewed).
CUSTODIAN
Pursuant to a Custodian Agreement with the Trust, Brown Brothers
Harriman & Co. (the "Custodian"), a private bank and member of the principal
securities exchanges, located at 40 Water Street, Boston, Massachusetts 02109
(the "Custodian"), maintains custody of the Portfolios' assets.
FUND ACCOUNTING SERVICES
Pursuant to a Fund Accounting Services Agreement, MIMI provides certain
accounting and pricing services for the Portfolios. As compensation for those
services, each Portfolio pays MIMI a monthly fee plus out-of-pocket expenses as
incurred. The monthly fee is based upon the net assets of each Portfolio at the
preceding month end at the following rates: $1,250 when net assets are $10
million and under; $2,500 when net assets are over $10 million to $40 million;
$5,000 when net assets are over $40 million to $75 million; and $6,500 when net
assets are over $75 million. As of the date of this SAI, no payments have been
made under the agreement.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Pursuant to a Transfer Agency and Shareholder Service Agreement, IMSC,
a wholly owned subsidiary of MIMI, is the transfer agent for the Portfolios.
Under the Agreement, each Portfolio (except with respect to its Class I shares)
pays a monthly fee at an annual rate of $20.00 for each open Class A, Class B
and Class C account. Each Portfolio pays $10.25 per open Class I account. In
addition, each Portfolio pays a monthly fee at an annual rate of $4.58 per
account that is closed plus certain out-of-pocket expenses. As of the date of
this SAI, the Portfolios had made no payments for transfer agency services.
Certain broker-dealers that maintain shareholder accounts with the Portfolios
through an omnibus account provide transfer agent and other shareholder-related
services that would otherwise be provided by IMSC if the individual accounts
that comprise the omnibus account were opened by their beneficial owners
directly. IMSC pays such broker-dealers a per account fee for each open account
within the omnibus account, or a fixed rate (e.g., .10%) fee, based on the
average daily net asset value of the omnibus account (or a combination thereof).
As of the date of this SAI, no payments have been made with respect to the
provision of these services for the Portfolios.
ADMINISTRATOR
Pursuant to an Administrative Services Agreement, MIMI provides certain
administrative services to the Portfolios. As compensation for these services,
each Portfolio (except with respect to its Class I shares) pays MIMI a monthly
fee at the annual rate of .10% of that Portfolio's average daily net assets.
Each Portfolio pays MIMI a monthly fee at the annual rate of .01% of its average
daily net assets for Class I. As of the date of this SAI, the Portfolios had
made no payments under the Administrative Services Agreement.
Outside of providing administrative services to the Portfolios, as
described above, MIMI may also act on behalf of IMDI in paying commissions to
broker-dealers with respect to sales of Class B and Class C shares of the
Portfolios. As of the date of this SAI, no payments have been made with respect
to the provision of these services for the Portfolios.
AUDITORS
PricewaterhouseCoopers LLP, independent certified public accountants,
have been selected as auditors for the Portfolios. The audit services performed
by PricewaterhouseCoopers LLP include audits of the annual financial statements
of each Portfolio. Other services provided principally relate to filings with
the SEC and the preparation of the Portfolios' tax returns.
SPECIAL RIGHTS AND PRIVILEGES
The Portfolios offer (and except as noted below bear the cost of
providing) to investors the following rights and privileges. Each Portfolio
reserves the right to amend or terminate any one or more of these rights and
privileges. Notice of amendments to or terminations of rights and privileges
will be provided to shareholders in accordance with applicable law.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method, which enables a Portfolio shareholder
to have specified amounts automatically drawn each month from his or her bank
for investment in Portfolio shares, is available for all classes of shares
except Class I. The minimum initial and subsequent investment under this method
is $50 per month (except in the case of a tax qualified retirement plan for
which the minimum initial and subsequent investment is $25 per month). A
shareholder may terminate the Automatic Investment Method at any time upon
delivery to Ivy Mackenzie Services Corp. ("IMSC") of telephone instructions or
written notice. To use this privilege, please complete Sections __ and __ of the
Account Application that is included with the Prospectus.
EXCHANGE OF SHARES
Shareholders of the Portfolios have an exchange privilege with each
other Portfolio. Before effecting an exchange, shareholders should review the
Prospectus and this SAI as it relates to the Portfolio into which the exchange
is being made.
INITIAL SALES CHARGE SHARES. Class A shareholders may exchange their
Class A shares ("outstanding Class A shares") for Class A shares of another
Portfolio ("new Class A Shares") on the basis of the relative net asset value
per Class A share, plus an amount equal to the difference, if any, between the
sales charge previously paid on the outstanding Class A shares and the sales
charge payable at the time of the exchange on the new Class A shares. (The
additional sales charge will be waived for Class A shares that have been
invested for a period of 12 months or longer.)
CONTINGENT DEFERRED SALES CHARGE SHARES -- CLASS-A: Class A
shareholders may exchange their Class A shares that are subject to a contingent
deferred sales charge ("CDSC"), as described in the Prospectus ("outstanding
Class A shares"), for Class A shares of another Portfolio ("new Class A shares")
on the basis of the relative net asset value per Class A share, without the
payment of any CDSC that would otherwise be due upon the redemption of the
outstanding Class A shares. Class A shareholders of the Portfolio exercising the
exchange privilege will continue to be subject to that Portfolio's CDSC period
following an exchange if such period is longer than the CDSC period, if any,
that applies to the new Class A shares. For purposes of computing the CDSC that
may be payable upon the redemption of the new Class A shares, the holding period
of the outstanding Class A shares is "tacked" onto the holding period of the new
Class A shares.
CLASS B: Class B shareholders may exchange their Class B shares
("outstanding Class B shares") for Class B shares of another Portfolio ("new
Class B shares") on the basis of the relative net asset value per Class B share,
without the payment of any CDSC that would otherwise be due upon the redemption
of the outstanding Class B shares. Class B shareholders of the Portfolio
exercising the exchange privilege will continue to be subject to that
Portfolio's CDSC schedule.
For purposes of both the conversion feature and computing the CDSC that
may be payable upon the redemption of the new Class B shares (prior to
conversion), the holding period of the outstanding Class B shares is "tacked"
onto the holding period of the new Class B shares.
The following table shows the CDSC schedule that applies to each
Portfolio's Class B shareholders:
CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE OF
DOLLAR AMOUNT SUBJECT TO CHARGE
YEAR SINCE PURCHASE
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and thereafter 0%
CLASS C: Class C shareholders may exchange their Class C shares
("outstanding Class C shares") for Class C shares of another Portfolio ("new
Class C shares") on the basis of the relative net asset value per Class C share,
without the payment of any CDSC that would otherwise be due upon redemption.
(Class C shares are subject to a CDSC of 1% if redeemed within one year of the
date of purchase.)
CLASS I AND ADVISOR CLASS: Subject to any "minimum purchase"
restrictions set forth in the following paragraph, Class I and Advisor Class
shareholders may exchange their outstanding Class I (or Advisor Class) shares
for Class I (or Advisor Class) shares of another Portfolio on the basis of the
relative net asset value per Class I (or Advisor Class) share.
ALL CLASSES: The minimum value of shares which may be exchanged into
another Portfolio in which shares are not already held is $_______
($___________, in the case of Class I shares). No exchange out of a Portfolio
(other than by a complete exchange of all Portfolio shares) may be made if it
would reduce a shareholder's interest in the Portfolio to less than $______
($__________, in the case of Class I shares).
Each exchange will be made on the basis of the relative net asset value
per share of the Portfolios involved in the exchange next computed following
receipt by IMSC of telephone instructions or a properly executed written
request. Exchanges, whether written or telephonic, must be received by IMSC by
the close of regular trading on the Exchange (normally 4:00 p.m. Eastern time)
to receive the price computed on the day of receipt. Exchange requests received
after that time will receive the price next determined following receipt of the
request. The exchange privilege may be modified or terminated at any time upon
at least 60 days' notice (to the extent required by applicable law). See
"Redemptions."
An exchange of shares between any of the Portfolios may result in a
taxable gain or loss. Generally, this will be a capital gain or loss (long-term
or short-term, depending on the holding period of the shares) in the amount of
the difference between the net asset value of the shares surrendered and the
shareholder's tax basis for those shares. However, in certain circumstances,
shareholders will be ineligible to take sales charges into account in computing
taxable gain or loss on an exchange. See "Taxation."
With limited exceptions, gain realized by a tax-deferred retirement
plan will not be taxable to the plan and will not be taxed to the participant
until distribution. Each investor should consult his or her tax adviser
regarding the tax consequences of an exchange transaction.
LETTER OF INTENT
Reduced sales charges apply to initial investments in Class A shares of
the Portfolios made pursuant to a non-binding Letter of Intent. A Letter of
Intent may be submitted by an individual, his or her spouse and children under
the age of 21, or a trustee or other fiduciary of a single trust estate or
single fiduciary account. (See the Account Application in the Prospectus.) Any
investor may submit a Letter of Intent stating that he or she will invest, over
a period of 13 months, at least $__________ in Class A shares of a Portfolio. A
Letter of Intent may be submitted at the time of an initial purchase of Class A
shares of the Portfolio or within 90 days of the initial purchase, in which case
the Letter of Intent will be backdated. A shareholder may include, as an
accumulation credit, the value (at the applicable offering price) of all Class A
shares of the Portfolios held of record by him or her as of the date of his or
her Letter of Intent. During the term of the Letter of Intent, IMSC will hold
Class A shares representing 5% of the indicated amount (less any accumulation
credit value) in escrow. The escrowed Class A shares will be released when the
full indicated amount has been purchased. If the full indicated amount is not
purchased during the term of the Letter of Intent, the investor is required to
pay IMDI an amount equal to the difference between the dollar amount of sales
charge that he or she has paid and that which he or she would have paid on his
or her aggregate purchases if the total of such purchases had been made at a
single time. Such payment will be made by an automatic liquidation of Class A
shares in the escrow account. A Letter of Intent does not obligate the investor
to buy (or the Trust) to sell the indicated amount of Class A shares, and the
investor should read carefully all the provisions of the letter before signing.
RETIREMENT PLANS
Shares of the Portfolios may be purchased in connection with several
types of tax-deferred retirement plans. Shares of more than one Portfolio may be
purchased in a single application establishing a single account under the plan,
and shares held in such an account may be exchanged among the Portfolios in
accordance with the terms of the applicable plan and the exchange privilege
available to all shareholders. Initial and subsequent purchase payments in
connection with tax-deferred retirement plans must be at least $25 per
participant.
The following fees will be charged to individual shareholder accounts
as described in the retirement prototype plan document:
Retirement Plan New Account Fee no fee
Retirement Plan Annual Maintenance Fee $10.00 per fund account
For shareholders whose retirement accounts are diversified across
several Portfolios, the annual maintenance fee will be limited to not more than
$20.
The following discussion describes the tax treatment of certain
tax-deferred retirement plans under current Federal income tax law. State income
tax consequences may vary. An individual considering the establishment of a
retirement plan should consult with an attorney and/or an accountant with
respect to the terms and tax aspects of the plan.
INDIVIDUAL RETIREMENT ACCOUNTS: Shares of each Portfolio may be used as
a funding medium for an Individual Retirement Account ("IRA"). Eligible
individuals may establish an IRA by adopting a model custodial account available
from IMSC, who may impose a charge for establishing the account. Individuals
should consult their tax advisers before investing IRA assets in an Ivy fund if
that fund primarily distributes exempt-interest dividends.
An individual who has not reached age 70-1/2 and who receives
compensation or earned income is eligible to contribute to an IRA, whether or
not he or she is an active participant in a retirement plan. An individual who
receives a distribution from another IRA, a qualified retirement plan, a
qualified annuity plan or a tax-sheltered annuity or custodial account ("403(b)
plan") that qualifies for "rollover" treatment is also eligible to establish an
IRA by rolling over the distribution either directly or within 60 days after its
receipt. Tax advice should be obtained in connection with planning a rollover
contribution to an IRA.
In general, an eligible individual may contribute up to the lesser of
$2,000 or 100% of his or her compensation or earned income to an IRA each year.
If a husband and wife are both employed, and both are under age 70-1/2, each may
set up his or her own IRA within these limits. If both earn at least $2,000 per
year, the maximum potential contribution is $4,000 per year for both. For years
after 1996, the result is similar even if one spouse has no earned income; if
the joint earned income of the spouses is at least $4,000, a contribution of up
to $2,000 may be made to each spouse's IRA. Rollover contributions are not
subject to these limits.
An individual may deduct his or her annual contributions to an IRA in
computing his or her Federal income tax within the limits described above,
provided he or she (or his or her spouse, if they file a joint Federal income
tax return) is not an active participant in a qualified retirement plan (such as
a qualified corporate, sole proprietorship, or partnership pension, profit
sharing, 401(k) or stock bonus plan), qualified annuity plan, 403(b) plan,
simplified employee pension, or governmental plan. If he or she (or his or her
spouse) is an active participant, whether the individual's contribution to an
IRA is fully deductible, partially deductible or not deductible depends on (i)
adjusted gross income and (ii) whether it is the individual or the individual's
spouse who is an active participant, in the case of married individuals filing
jointly. Contributions may be made up to the maximum permissible amount even if
they are not deductible. Rollover contributions are not includible in income for
Federal income tax purposes and therefore are not deductible from it.
Generally, earnings on an IRA are not subject to current Federal income
tax until distributed. Distributions attributable to tax-deductible
contributions and to IRA earnings are taxed as ordinary income. Distributions of
non-deductible contributions are not subject to Federal income tax. In general,
distributions from an IRA to an individual before he or she reaches age 59-1/2
are subject to a nondeductible penalty tax equal to 10% of the taxable amount of
the distribution. The 10% penalty tax does not apply to amounts withdrawn from
an IRA after the individual reaches age 59-1/2, becomes disabled or dies, or if
withdrawn in the form of substantially equal payments over the life or life
expectancy of the individual and his or her designated beneficiary, if any, or
rolled over into another IRA, amounts withdrawn and used to pay for deductible
medical expenses and amounts withdrawn by certain unemployed individuals not in
excess of amounts paid for certain health insurance premiums, amounts used to
pay certain qualified higher education expenses, and amounts used within 120
days of the date the distribution is received to pay for certain first-time
homebuyer expenses. Distributions must begin to be withdrawn not later than
April 1 of the calendar year following the calendar year in which the individual
reaches age 70-1/2. Failure to take certain minimum required distributions will
result in the imposition of a 50% non-deductible penalty tax.
ROTH IRAs: Shares of the Portfolios also may be used as a funding
medium for a Roth Individual Retirement Account ("Roth IRA"). A Roth IRA is
similar in numerous ways to the regular (traditional) IRA, described above. Some
of the primary differences are as follows.
A single individual earning below $95,000 can contribute up to $2,000
per year to a Roth IRA. The maximum contribution amount diminishes and gradually
falls to zero for single filers with adjusted gross incomes ranging from $95,000
to $110,000. Married couples earning less than $150,000 combined, and filing
jointly, can contribute a full $4,000 per year ($2,000 per IRA). The maximum
contribution amount for married couples filing jointly phases out from $150,000
to $160,000. An individual whose adjusted gross income exceeds the maximum
phase-out amount cannot contribute to a Roth IRA.
An eligible individual can contribute money to a traditional IRA and a
Roth IRA as long as the total contribution to all IRAs does not exceed $2,000.
Contributions to a Roth IRA are not deductible. Contributions to a Roth IRA may
be made even after the individual for whom the account is maintained has
attained age 70 1/2.
No distributions are required to be taken prior to the death of the
original account holder. If a Roth IRA has been established for a minimum of
five years, distributions can be taken tax-free after reaching age 59 1/2, for a
first-time home purchase ($10,000 maximum, one time use), or upon death or
disability. All other distributions from a Roth IRA are taxable and subject to a
10% tax penalty unless an exception applies. Exceptions to the 10% penalty
include: disability, excess medical expenses, the purchase of health insurance
for an unemployed individual and education expenses.
An individual with an income of less than $100,000 (who is not married
filing separately) can roll his or her existing IRA into a Roth IRA. However,
the individual must pay taxes on the taxable amount in his or her traditional
IRA. Individuals who complete the rollover in 1998 will be allowed to spread the
tax payments over a four-year period. After 1998, all taxes on such a rollover
will have to be paid in the tax year in which the rollover is made.
QUALIFIED PLANS: For those self-employed individuals who wish to
purchase shares of one or more Ivy funds through a qualified retirement plan, a
Custodial Agreement and a Retirement Plan are available from IMSC. The
Retirement Plan may be adopted as a profit sharing plan or a money purchase
pension plan. A profit sharing plan permits an annual contribution to be made in
an amount determined each year by the self-employed individual within certain
limits prescribed by law. A money purchase pension plan requires annual
contributions at the level specified in the Custodial Agreement. There is no
set-up fee for qualified plans and the annual maintenance fee is $20.00 per
account.
In general, if a self-employed individual has any common law employees,
employees who have met certain minimum age and service requirements must be
covered by the Retirement Plan. A self-employed individual generally must
contribute the same percentage of income for common law employees as for himself
or herself.
A self-employed individual may contribute up to the lesser of $30,000
or 25% of compensation or earned income to a money purchase pension plan or to a
combination profit sharing and money purchase pension plan arrangement each year
on behalf of each participant. To be deductible, total contributions to a profit
sharing plan generally may not exceed 15% of the total compensation or earned
income of all participants in the plan, and total contributions to a combination
money purchase-profit sharing arrangement generally may not exceed 25% of the
total compensation or earned income of all participants. The amount of
compensation or earned income of any one participant that may be included in
computing the deduction is limited (generally to $150,000 for benefits accruing
in plan years beginning after 1993, with annual inflation adjustments). A
self-employed individual's contributions to a retirement plan on his or her own
behalf must be deducted in computing his or her earned income.
Corporate employers may also adopt the Custodial Agreement and
Retirement Plan for the benefit of their eligible employees. Similar
contribution and deduction rules apply to corporate employers.
Distributions from the Retirement Plan generally are made after a
participant's separation from service. A 10% penalty tax generally applies to
distributions to an individual before he or she reaches age 59-1/2, unless the
individual (1) has reached age 55 and separated from service; (2) dies; (3)
becomes disabled; (4) uses the withdrawal to pay tax-deductible medical
expenses; (5) takes the withdrawal as part of a series of substantially equal
payments over his or her life expectancy or the joint life expectancy of himself
or herself and a designated beneficiary; or (6) rolls over the distribution.
The Transfer Agent will arrange for Investors Bank & Trust to furnish
custodial services to the employer and any participating employees.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE ORGANIZATIONS
("403(B)(7) ACCOUNT"): Section 403(b)(7) of the Internal Revenue Code of 1986,
as amended (the "Code") permits public school systems and certain charitable
organizations to use mutual fund shares held in a custodial account to fund
deferred compensation arrangements with their employees. A custodial account
agreement is available for those employers whose employees wish to purchase
shares of the Portfolios in conjunction with such an arrangement. The special
application for a 403(b)(7) Account is available from IMSC.
Distributions from the 403(b)(7) Account may be made only following
death, disability, separation from service, attainment of age 59-1/2, or
incurring a financial hardship. A 10% penalty tax generally applies to
distributions to an individual before he or she reaches age 59-1/2, unless the
individual (1) has reached age 55 and separated from service; (2) dies or
becomes disabled; (3) uses the withdrawal to pay tax-deductible medical
expenses; (4) takes the withdrawal as part of a series of substantially equal
payments over his or her life expectancy or the joint life expectancy of himself
or herself and a designated beneficiary; or (5) rolls over the distribution.
There is no set-up fee for 403(b)(7) Accounts and the annual maintenance fee is
$20.00 per account.
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAs: An employer may deduct
contributions to a SEP up to the lesser of $30,000 or 15% of compensation. SEP
accounts generally are subject to all rules applicable to IRA accounts, except
the deduction limits, and are subject to certain employee participation
requirements. No new salary reduction SEPs ("SARSEPs") may be established after
1996, but existing SARSEPs may continue to be maintained, and non-salary
reduction SEPs may continue to be established as well as maintained after 1996.
SIMPLE PLANS: An employer may establish a SIMPLE IRA or a SIMPLE 401(k)
for years after 1996. An employee can make pre-tax salary reduction
contributions to a SIMPLE Plan, up to $6,000 a year (as indexed). Subject to
certain limits, the employer will either match a portion of employee
contributions, or will make a contribution equal to 2% of each employee's
compensation without regard to the amount the employee contributes. An employer
cannot maintain a SIMPLE Plan for its employees if any contributions or benefits
are credited to those employees under any other qualified retirement plan
maintained by the employer.
REINVESTMENT PRIVILEGE
Shareholders who have redeemed Class A shares of a Portfolio may
reinvest all or a part of the proceeds of the redemption back into Class A
shares of the Portfolio at net asset value (without a sales charge) within 60
days from the date of redemption. This privilege may be exercised only once. The
reinvestment will be made at the net asset value next determined after receipt
by IMSC of the reinvestment order accompanied by the funds to be reinvested. No
compensation will be paid to any sales personnel or dealer in connection with
the transaction.
Any redemption is a taxable event. A loss realized on a redemption
generally may be disallowed for tax purposes if the reinvestment privilege is
exercised within 30 days after the redemption. In certain circumstances,
shareholders will be ineligible to take sales charges into account in computing
taxable gain or loss on a redemption if the reinvestment privilege is exercised.
See "Taxation."
REDUCED SALES CHARGES AND RIGHTS OF ACCUMULATION
A scale of reduced sales charges applies to any investment of $50,000
or more in Class A shares of the Portfolios. See "Initial Sales Charge
Alternative -- Class A Shares" in the Prospectus. The reduced sales charge is
applicable to investments made at one time by an individual, his or her spouse
and children under the age of 21, or a trustee or other fiduciary of a single
trust estate or single fiduciary account (including a pension, profit sharing or
other employee benefit trust created pursuant to a plan qualified under Section
401 of the Code).
"Rights of Accumulation" are also applicable to current purchases of
all of the Portfolios by any of the persons enumerated above where the aggregate
quantity of Class A shares of the Portfolios and of any other investment company
distributed by IMDI previously purchased or acquired and currently owned,
determined at the higher of current offering price or amount invested, plus the
Class A shares being purchased, amounts to at least $50,000.
At the time an investment takes place, IMSC must be notified by the
investor or his or her dealer that the investment qualifies for the reduced
sales charge on the basis of previous investments. The reduced sales charge is
subject to confirmation of the investor's holdings through a check of the
particular Portfolio's records.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder (other than a Class I shareholder) may establish a
Systematic Withdrawal Plan (a "Withdrawal Plan") by telephone instructions or by
delivery to IMSC of a written election to have his or her shares withdrawn
periodically, accompanied by a surrender to IMSC of all share certificates then
outstanding in such shareholder's name, properly endorsed by the shareholder. To
be eligible to elect a Withdrawal Plan, a shareholder must have at least $5,000
in his or her account. A Withdrawal Plan may not be established if the investor
is currently participating in the Automatic Investment Method. A Withdrawal Plan
may involve the depletion of a shareholder's principal, depending on the amount
withdrawn.
A redemption under a Withdrawal Plan is a taxable event. Shareholders
contemplating participating in a Withdrawal Plan should consult their tax
advisers.
Additional investments made by investors participating in a Withdrawal
Plan must equal at least $________ each while the Withdrawal Plan is in effect.
Making additional purchases while a Withdrawal Plan is in effect may be
disadvantageous to the investor because of applicable initial sales charges or
CDSCs.
An investor may terminate his or her participation in the Withdrawal
Plan at any time by delivering written notice to IMSC. If all shares held by the
investor are liquidated at any time, participation in the Withdrawal Plan will
terminate automatically. The Portfolios or IMSC may terminate the Withdrawal
Plan option at any time after reasonable notice to shareholders.
GROUP SYSTEMATIC INVESTMENT PROGRAM
Shares of the Portfolios may be purchased in connection with investment
programs established by employee or other groups using systematic payroll
deductions or other systematic payment arrangements. The Portfolios do not
themselves organize, offer or administer any such programs. However, they may,
depending upon the size of the program, waive the minimum initial and additional
investment requirements for purchases by individuals in conjunction with
programs organized and offered by others. Unless shares of the Portfolios are
purchased in conjunction with IRAs (see "How to Buy Shares" in the Prospectus),
such group systematic investment programs are not entitled to special tax
benefits under the Code. The Portfolios reserve the right to refuse purchases at
any time or suspend the offering of shares in connection with group systematic
investment programs, and to restrict the offering of shareholder privileges,
such as check writing, simplified redemptions and other optional privileges, to
shareholders using group systematic investment programs.
With respect to each shareholder account established on or after
September 15, 1972 under a group systematic investment program, the Portfolios
and IMI each currently charge a maintenance fee of $3.00 (or portion thereof)
that for each twelve-month period (or portion thereof) that the account is
maintained. The Portfolios may collect such fee (and any fees due to IMI)
through a deduction from distributions to the shareholders involved or by
causing on the date the fee is assessed a redemption in each such shareholder
account sufficient to pay such fee. The Portfolios reserves the right to change
these fees from time to time without advance notice.
Class A shares of the Portfolios are made available to Merrill Lynch
Daily K Plan (the "Plan") participants at NAV without an initial sales charge
if:
(i) the Plan is recordkept on a daily valuation basis by Merrill
Lynch and, on the date the Plan Sponsor signs the Merrill
Lynch Recordkeeping Service Agreement, the Plan has $3 million
or more in assets invested in broker/dealer funds not advised
or managed by Merrill Lynch Asset Management, L.P. ("MLAM")
that are made available pursuant to a Service Agreement
between Merrill Lynch and the fund's principal underwriter or
distributor and in funds advised or managed by MLAM
(collectively, the "Applicable Investments");
(ii) the Plan is recordkept on a daily valuation basis by an
independent recordkeeper whose services are provided through a
contract or alliance arrangement with Merrill Lynch, and on
the date the Plan Sponsor signs the Merrill Lynch
Recordkeeping Service Agreement, the Plan has $3 million or
more in assets, excluding money market funds, invested in
Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by
Merrill Lynch plan conversion manager, on the date the Plan
Sponsor signs the Merrill Lynch Recordkeeping Service
Agreement.
Alternatively, Class B shares of the Portfolios are made available to
Plan participants at NAV without a CDSC if the Plan conforms with the
requirements for eligibility set forth in (i) through (iii) above but either
does not meet the $3 million asset threshold or does not have 500 or more
eligible employees.
Plans recordkept on a daily basis by Merrill Lynch or an independent
recordkeeper under a contract with Merrill Lynch that are currently investing in
Class B shares of the Portfolios convert to Class A shares once the Plan has
reached $5 million invested in Applicable Investments, or 10 years after the
date of the initial purchase by a participant under the Plan--the Plan will
receive a Plan level share conversion.
REDEMPTIONS
Shares of the Portfolios are redeemed at their net asset value next
determined after a proper redemption request has been received by IMSC, less any
applicable CDSC. Unless a shareholder requests that the proceeds of any
redemption be wired to his or her bank account, payment for shares tendered for
redemption is made by check within seven days after tender in proper form,
except that the Portfolios reserve the right to suspend the right of redemption
or to postpone the date of payment upon redemption beyond seven days (i) for any
period during which the Exchange is closed (other than customary weekend and
holiday closings) or during which trading on the Exchange is restricted, (ii)
for any period during which an emergency exists as determined by the SEC as a
result of which disposal of securities owned by the Portfolios is not reasonably
practicable or it is not reasonably practicable for a Portfolio to fairly
determine the value of its net assets, or (iii) for such other periods as the
SEC may by order permit for the protection of shareholders of the Portfolios.
Under unusual circumstances, when the Board deems it in the best
interest of a Portfolio's shareholders, that Portfolio may make payment for
shares repurchased or redeemed in whole or in part in securities of the
Portfolio taken at current values. If any such redemption in kind is to be made,
the Portfolio may make an election pursuant to Rule 18f-1 under the 1940 Act.
This will require the Portfolio to redeem with cash at a shareholder's election
in any case where the redemption involves less than $250,000 (or 1% of the
Portfolio's net asset value at the beginning of each 90-day period during which
such redemptions are in effect, if that amount is less than $250,000). Should
payment be made in securities, the redeeming shareholder may incur brokerage
costs in converting such securities to cash.
The Trust may redeem those accounts of shareholders who have maintained
an investment, including sales charges paid, of less than $1,000 in the
Portfolios for a period of more than 12 months. All accounts below that minimum
will be redeemed simultaneously when MIMI deems it advisable. The $1,000 balance
will be determined by actual dollar amounts invested by the shareholder,
unaffected by market fluctuations. The Trust will notify any such shareholder by
certified mail of its intention to redeem such account, and the shareholder
shall have 60 days from the date of such letter to invest such additional sums
as shall raise the value of such account above that minimum. Should the
shareholder fail to forward such sum within 60 days of the date of the Trust's
letter of notification, the Trust will redeem the shares held in such account
and transmit the redemption in value thereof to the shareholder. However, those
shareholders who are investing pursuant to the Automatic Investment Method will
not be redeemed automatically unless they have ceased making payments pursuant
to the plan for a period of at least six consecutive months, and these
shareholders will be given six-months' notice by the Trust before such
redemption. Shareholders in a qualified retirement, pension or profit sharing
plan who wish to avoid tax consequences must "rollover" any sum so redeemed into
another qualified plan within 60 days. The Trustees of the Trust may change the
minimum account size.
If a shareholder has given authorization for telephonic redemption
privilege, shares can be redeemed and proceeds sent by Federal wire to a single
previously designated bank account. The Portfolios may delay for up to seven
days delivery of the proceeds of a wire redemption request of $250,000 or more
if considered appropriate under then-current market conditions. The Trust
reserves the right to change this minimum or to terminate the telephonic
redemption privilege without prior notice. The Trust cannot be responsible for
the efficiency of the Federal wire system of the shareholder's dealer of record
or bank. The shareholder is responsible for any charges by the shareholder's
bank.
The Portfolios employ reasonable procedures that require personal
identification prior to acting on redemption or exchange instructions
communicated by telephone to confirm that such instructions are genuine. In the
absence of such instructions, a Portfolio may be liable for any losses due to
unauthorized or fraudulent telephone instructions.
CONVERSION OF CLASS B SHARES
As described in the Prospectus, Class B shares of each Portfolio will
automatically convert to Class A shares of that Portfolio, based on the relative
net asset values per share of the two classes, no later than the month following
the eighth anniversary of the initial issuance of such Class B shares of each
Portfolio occurs. For the purpose of calculating the holding period required for
conversion of Class B shares, the date of initial issuance shall mean: (1) the
date on which such Class B shares were issued, or (2) for Class B shares
obtained through an exchange, or a series of exchanges, (subject to the exchange
privileges for Class B shares) the date on which the original Class B shares
were issued. For purposes of conversion of Class B shares, Class B shares
purchased through the reinvestment of dividends and capital gain distributions
paid in respect of Class B shares will be held in a separate sub-account. Each
time any Class B shares in the shareholder's regular account (other than those
shares in the sub-account) convert to Class A shares, a pro rata portion of the
Class B shares in the sub-account will also convert to Class A shares. The
portion will be determined by the ratio that the shareholder's Class B shares
converting to Class A shares bears to the shareholder's total Class B shares not
acquired through the reinvestment of dividends and capital gain distributions.
PERFORMANCE INFORMATION
Performance information for the classes of shares of each Portfolio may
be compared, in reports and promotional literature, to: (i) the S&P 500 Index,
the Dow Jones Industrial Average ("DJIA"), or other unmanaged indices so that
investors may compare each Portfolio's results with those of a group of
unmanaged securities widely regarded by investors as representative of the
securities markets in general; (ii) other groups of mutual funds tracked by
Lipper Analytical Services, a widely used independent research firm that ranks
mutual funds by overall performance, investment objectives and assets, or
tracked by other services, companies, publications or other criteria; and (iii)
the Consumer Price Index (measure for inflation) to assess the real rate of
return from an investment in a Portfolio. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions or
administrative and management costs and expenses. Performance rankings are based
on historical information and are not intended to indicate future performance.
YIELD. Quotations of yield for a specific class of shares of a
Portfolio will be based on all investment income attributable to that class
earned during a particular 30-day (or one month) period (including dividends and
interest), less expenses attributable to that class accrued during the period
("net investment income"), and will be computed by dividing the net investment
income per share of that class earned during the period by the maximum offering
price per share (in the case of Class A shares) or the net asset value per share
(in the case of Class B and Class C shares) on the last day of the period,
according to the following formula:
YIELD = 2[({(a-b)/cd} + 1){superscript 6}-1]
Where: a = dividends and interest earned during the
period attributable to a specific class of shares,
b = expenses accrued for the period
attributable to that class (net of reimbursements),
c = the average daily
number of shares of that class
outstanding during the period that
were entitled to receive dividends,
and
d = the maximum offering
price per share (in the case of
Class A shares) or the net asset
value per share (in the case of
Class B shares, Class C shares and
Class I shares) on the last day of
the period.
AVERAGE ANNUAL TOTAL RETURN. Quotations of standardized average annual
total return ("Standardized Return") for a specific class of shares of a
Portfolio will be expressed in terms of the average annual compounded rate of
return that would cause a hypothetical investment in that class of the Portfolio
made on the first day of a designated period to equal the ending redeemable
value ("ERV") of such hypothetical investment on the last day of the designated
period, according to the following formula:
P(1 + T){superscript n} = ERV
Where: P = a hypothetical initial payment of $1,000
to purchase shares of a specific class
T = the average annual total return of shares of that class
n = the number of years
ERV = the ending redeemable
value of a hypothetical $1,000
payment made at the beginning of the
period.
For purposes of the above computation for a Portfolio, it is assumed
that all dividends and capital gains distributions made by the Portfolio are
reinvested at net asset value in additional shares of the same class during the
designated period. In calculating the ending redeemable value for Class A shares
and assuming complete redemption at the end of the applicable period, the
maximum ______% sales charge is deducted from the initial $________ payment and,
for Class B and Class C shares, the applicable CDSC imposed upon redemption of
Class B or Class C shares held for the period is deducted. Standardized Return
quotations for each Portfolio do not take into account any required payments for
federal or state income taxes. Standardized Return quotations for Class B shares
for periods of over eight years will reflect conversion of the Class B shares to
Class A shares at the end of the eighth year. Standardized Return quotations are
determined to the nearest 1/100 of 1%.
The Portfolios may, from time to time, include in advertisements,
promotional literature or reports to shareholders or prospective investors total
return data that are not calculated according to the formula set forth above
("Non-Standardized Return"). Neither initial nor CDSCs are taken into account in
calculating Non-Standardized Return; a sales charge, if deducted, would reduce
the return.
CUMULATIVE TOTAL RETURN. Cumulative total return is the cumulative rate
of return on a hypothetical initial investment of $1,000 in a specific class of
shares of a Portfolio for a specified period. Cumulative total return quotations
reflect changes in the price of each Portfolio's shares and assume that all
dividends and capital gains distributions during the period were reinvested in
the Portfolio shares. Cumulative total return is calculated by computing the
cumulative rates of return of a hypothetical investment in a specific class of
shares of a Portfolio over such periods, according to the following formula
(cumulative total return is then expressed as a percentage):
C = (ERV/P) - 1
Where: C = cumulative total return
P = a hypothetical initial investment of
$1,000 to purchase shares of a specific class
ERV= ending redeemable
value: ERV is the value, at the end
of the applicable period, of a
hypothetical $1,000 investment made
at the beginning of the applicable
period.
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION. The foregoing
computation methods are prescribed for advertising and other communications
subject to SEC Rule 482. Communications not subject to this rule may contain a
number of different measures of performance, computation methods and
assumptions, including but not limited to: historical total returns; results of
actual or hypothetical investments; changes in dividends, distributions or share
values; or any graphic illustration of such data. These data may cover any
period of a Portfolio's existence and may or may not include the impact of sales
charges, taxes or other factors.
Performance quotations for the Portfolios will vary from time to time
depending on market conditions, the composition of the Portfolios' portfolios
and operating expenses of the Portfolios. These factors and possible differences
in the methods used in calculating performance quotations should be considered
when comparing performance information regarding the Portfolios' shares with
information published for other investment companies and other investment
vehicles. Performance quotations should also be considered relative to changes
in the value of the Portfolios' shares and the risks associated with the
Portfolios' investment objectives and policies. At any time in the future,
performance quotations may be higher or lower than past performance quotations
and there can be no assurance that any historical performance quotation will
continue in the future.
The Portfolios may also cite endorsements or use for comparison its
performance rankings and listings reported in such newspapers or business or
consumer publications as, among others: AAII Journal, Barron's, Boston Business
Journal, Boston Globe, Boston Herald, Business Week, Consumer's Digest, Consumer
Guide Publications, Changing Times, Financial Planning, Financial World, Forbes,
Fortune, Growth Portfolio Guide, Houston Post, Institutional Investor,
International Portfolio Monitor, Investor's Daily, Los Angeles Times, Medical
Economics, Miami Herald, Money Mutual Portfolio Forecaster, Mutual Portfolio
Letter, Mutual Portfolio Source Book, Mutual Portfolio Values, National
Underwriter, Nelson's Directory of Investment Managers, New York Times,
Newsweek, No Load Portfolio Investor, No Load Portfolio* X, Oakland Tribune,
Pension World, Pensions and Investment Age, Personal Investor, Rugg and Steele,
Time, U.S. News and World Report, USA Today, The Wall Street Journal, and
Washington Post.
CAPITALIZATION AND VOTING RIGHTS
The capitalization of the Portfolios consists of an unlimited number of
shares of beneficial interest (no par value per share). When issued, shares of
each class of a Portfolio are fully paid, non-assessable, redeemable and fully
transferable. No class of shares of any Portfolio has preemptive rights or
subscription rights.
Under its Declaration of Trust, the Trust may create separate series or
portfolios and divide any series or portfolio into one or more classes. The
Trustees have authorized five series, each of which represents a Portfolio. The
Trustees have further authorized the issuance of Class A, Class B, Class C,
Class I and Advisor Class shares for the Portfolios.
Shareholders have the right to vote for the election of Trustees of the
Trust and on any and all matters on which they may be entitled to vote by law or
by the provisions of the Trust's By-Laws. The Trust is not required to hold a
regular annual meeting of shareholders, and it does not intend to do so. Shares
of each class of each Portfolio entitle their holders to one vote per share
(with proportionate voting for fractional shares). Shareholders of each
Portfolio are entitled to vote alone on matters that only affect the Portfolio.
All classes of shares of each Portfolio will vote together, except with respect
to the distribution plan applicable to the Portfolio's Class A, Class B or Class
C shares or when a class vote is required by the 1940 Act. On matters relating
to all Portfolios, but affecting them differently, separate votes by the
shareholders of each Portfolio are required. Approval of an investment advisory
agreement and a change in fundamental policies would be regarded as matters
requiring separate voting by the shareholders of each Portfolio. If the Trustees
of the Trust determine that a matter does not affect the interests of a
particular Portfolio, then the shareholders of that Portfolio will not be
entitled to vote on that matter. Matters that affect the Trust in general will
be voted upon collectively by the shareholders of all Portfolios.
As used in this SAI and the Prospectus, the phrase "majority vote of
the outstanding shares" of a Portfolio means the vote of the lesser of: (1) 67%
of the shares of the Portfolio (or of the Trust) present at a meeting if the
holders of more than 50% of the outstanding shares are present in person or by
proxy; or (2) more than 50% of the outstanding shares of the Portfolio (or of
the Trust).
With respect to the submission to shareholder vote of a matter
requiring separate voting by each Portfolio, the matter shall have been
effectively acted upon with respect to that Portfolio if a majority of the
outstanding voting securities of the Portfolio votes for the approval of the
matter, notwithstanding that: (1) the matter has not been approved by a majority
of the outstanding voting securities of any other Portfolio; or (2) the matter
has not been approved by a majority of the outstanding voting securities of the
Trust.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust. Shareholders will be assisted in communicating with other shareholders in
connection with the removal of a Trustee.
The Trust's shares do not have cumulative voting rights and accordingly
the holders of more than 50% of the outstanding shares could elect the entire
Board, in which case the holders of the remaining shares would not be able to
elect any Trustees.
As of the date of this SAI, there were no Portfolio shares outstanding
other than those issued to the sole shareholder.
Under Massachusetts law, the Trust's shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declaration of Trust disclaims liability of the shareholders,
Trustees or officers of the Trust for acts or obligations of the Trust, which
are binding only on the assets and property of the Trust, and requires that
notice of the disclaimer be given in each contract or obligation entered into or
executed by the Trust or its Trustees. The Declaration of Trust also provides
for indemnification out of Portfolio property for all loss and expense of any
shareholder of the Portfolio held personally liable for the obligations of the
Portfolio. The risk of a shareholder of the Trust incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations and, thus, should be considered
remote. No Portfolio is liable for the obligations of any other Portfolio.
TAXATION
The following is a general discussion of certain tax rules thought to
be applicable with respect to the Portfolios. It is merely a summary and is not
an exhaustive discussion of all possible situations or of all potentially
applicable taxes. Accordingly, shareholders and prospective shareholders should
consult a competent tax adviser about the tax consequences to them of investing
in the Portfolios.
Each Portfolio intends to be taxed as a regulated investment company
under Subchapter M of the Code. Accordingly, each Portfolio must, among other
things, (a) derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to certain securities loans, and
gains from the sale or other disposition of stock, securities or foreign
currencies, or other income derived with respect to its business of investing in
such stock, securities or currencies; and (b) diversify its holdings so that, at
the end of each fiscal quarter, (i) at least 50% of the market value of each
Portfolio's assets is represented by cash, U.S. Government securities, the
securities of other regulated investment companies and other securities, with
such other securities limited, in respect of any one issuer, to an amount not
greater than 5% of the value of each Portfolio's total assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its total assets is invested in the securities of any one issuer (other
than U.S. Government securities and the securities of other regulated investment
companies).
As a regulated investment company, each Portfolio generally will not be
subject to U.S. Federal income tax on its income and gains that it distributes
to shareholders, if at least 90% of its investment company taxable income (which
includes, among other items, dividends, interest and the excess of any
short-term capital gains over long-term capital losses) for the taxable year is
distributed. Each Portfolio intends to distribute all such income.
Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax at
the Portfolio level. To avoid the tax, each Portfolio must distribute during
each calendar year, (1) at least 98% of its ordinary income (not taking into
account any capital gains or losses) for the calendar year (2) at least 98% of
its capital gains in excess of its capital losses (adjusted for certain ordinary
losses) for a one-year period generally ending on October 31 of the calendar
year, and (3) all ordinary income and capital gains for previous years that were
not distributed during such years. To avoid application of the excise tax, each
Portfolio intends to make distributions in accordance with the calendar year
distribution requirements. A distribution will be treated as paid on December 31
of the current calendar year if it is declared by a Portfolio in October,
November or December of the year with a record date in such a month and paid by
the Portfolio during January of the following year. Such distributions will be
taxable to shareholders in the calendar year the distributions are declared,
rather than the calendar year in which the distributions are received.
DEBT SECURITIES ACQUIRED AT A DISCOUNT
Some of the debt securities (with a fixed maturity date of more than
one year from the date of issuance) that may be acquired by the Portfolios may
be treated as debt securities that are issued originally at a discount.
Generally, the amount of the original issue discount ("OID") is treated as
interest income and is included in income over the term of the debt security,
even though payment of that amount is not received until a later time, usually
when the debt security matures.
Some of the debt securities (with a fixed maturity date of more than
one year from the date of issuance) that may be acquired by the Portfolios in
the secondary market may be treated as having market discount. Generally, gain
recognized on the disposition of, and any partial payment of principal on, a
debt security having market discount is treated as ordinary income to the extent
the gain, or principal payment, does not exceed the "accrued market discount" on
such debt security. In addition, the deduction of any interest expenses
attributable to debt securities having market discount may be deferred. Market
discount generally accrues in equal daily installments. The Portfolio may make
one or more of the elections applicable to debt securities having market
discount, which could affect the character and timing of recognition of income.
Some debt securities (with a fixed maturity date of one year or less
from the date of issuance) that may be acquired by the Portfolios may be treated
as having the acquisition discount, or OID in the case of certain types of debt
securities. Generally, the Portfolios will be required to include the
acquisition discount, or OID, in income over the term of the debt security, even
though payment of that amount is not received until a later time, usually when
the debt security matures. Each Portfolio may make one or more of the elections
applicable to debt securities having acquisition discount, or OID, which could
affect the character and timing of recognition of income.
The Portfolios generally will be required to distribute dividends to
shareholders representing discount on debt securities that is currently
includible in income, even though cash representing such income may not have
been received by each Portfolio. Cash to pay such dividends may be obtained from
sales proceeds of securities held by the Portfolios.
DISTRIBUTIONS
Distributions of investment company taxable income are taxable to a
U.S. shareholder as ordinary income, whether paid in cash or shares. Dividends
paid by the Portfolios to a corporate shareholder, to the extent such dividends
are attributable to dividends received from U.S. corporations by the Portfolios,
may qualify for the dividends received deduction. However, the revised
alternative minimum tax applicable to corporations may reduce the value of the
dividends received deduction. Distributions of net capital gains (the excess of
net long-term capital gains over net short-term capital losses), if any,
designated by each Portfolio as capital gain dividends, are taxable to
individual shareholders at a maximum 20% capital gains rate whether paid in cash
or in shares, and regardless of how long the shareholder has held the
Portfolio's shares; such distributions are not eligible for the dividends
received deduction. Shareholders receiving distributions in the form of newly
issued shares will have a cost basis in each share received equal to the net
asset value of a share of that Portfolio on the distribution date. A
distribution of an amount in excess of a Portfolio's current and accumulated
earnings and profits will be treated by a shareholder as a return of capital,
which is applied against and reduces the shareholder's basis in his or her
shares. To the extent that the amount of any such distribution exceeds the
shareholder's basis in his or her shares, the excess will be treated by the
shareholder as gain from a sale or exchange of the shares. Shareholders will be
notified annually as to the U.S. Federal tax status of distributions and
shareholders receiving distributions in the form of newly issued shares will
receive a report as to the net asset value of the shares received.
If the net asset value of shares is reduced below a shareholder's cost
as a result of a distribution by a Portfolio, such distribution generally will
be taxable even though it represents a return of invested capital. Shareholders
should be careful to consider the tax implications of buying shares just prior
to a distribution. The price of shares purchased at this time may reflect the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will receive a distribution that generally will be taxable to them.
DISPOSITION OF SHARES
Upon a redemption, sale or exchange of his or her shares, a shareholder
will realize a taxable gain or loss depending upon his or her basis in the
shares. Such gain or loss will be treated as capital gain or loss if the shares
are capital assets in the shareholder's hands and, if so, will be long-term or
short-term, depending upon the shareholder's holding period for the shares. Any
loss realized on a redemption sale or exchange will be disallowed to the extent
the shares disposed of are replaced (including through reinvestment of
dividends) within a period of 61 days beginning 30 days before and ending 30
days after the shares are disposed of. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss. Any loss realized by a
shareholder on the sale of Portfolio shares held by the shareholder for six
months or less will be treated for tax purposes as a long-term capital loss to
the extent of any distributions of capital gain dividends received or treated as
having been received by the shareholder with respect to such shares.
In some cases, shareholders will not be permitted to take all or
portion of their sales loads into account for purposes of determining the amount
of gain or loss realized on the disposition of their shares. This prohibition
generally applies where (1) the shareholder incurs a sales load in acquiring the
shares of a Portfolio, (2) the shares are disposed of before the 91st day after
the date on which they were acquired, and (3) the shareholder subsequently
acquires shares in the Portfolio or another regulated investment company and the
otherwise applicable sales charge is reduced under a "reinvestment right"
received upon the initial purchase of Portfolio shares. The term "reinvestment
right" means any right to acquire shares of one or more regulated investment
companies without the payment of a sales load or with the payment of a reduced
sales charge. Sales charges affected by this rule are treated as if they were
incurred with respect to the shares acquired under the reinvestment right. This
provision may be applied to successive acquisitions of fund shares.
BACKUP WITHHOLDING
Each Portfolio will be required to report to the Internal Revenue
Service ("IRS") all taxable distributions as well as gross proceeds from the
redemption of that Portfolio's shares, except in the case of certain exempt
shareholders. All such distributions and proceeds will be subject to withholding
of Federal income tax at a rate of 31% ("backup withholding") in the case of
non-exempt shareholders if (1) the shareholder fails to furnish the Portfolio
with and to certify the shareholder's correct taxpayer identification number or
social security number, (2) the IRS notifies the shareholder or the Portfolio
that the shareholder has failed to report properly certain interest and dividend
income to the IRS and to respond to notices to that effect, or (3) when required
to do so, the shareholder fails to certify that he or she is not subject to
backup withholding. If the withholding provisions are applicable, any such
distributions or proceeds, whether reinvested in additional shares or taken in
cash, will be reduced by the amounts required to be withheld.
Distributions may also be subject to additional state, local and
foreign taxes depending on each shareholder's particular situation. Non-U.S.
shareholders may be subject to U.S. tax rules that differ significantly from
those summarized above. This discussion does not purport to deal with all of the
tax consequences applicable to the Portfolios or shareholders. Shareholders are
advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the Portfolios.
NET ASSET VALUE
The net asset value per share of each Portfolio is computed by dividing
the value of the Portfolio's aggregate net assets (i.e., its total assets less
its liabilities) by the number of the Portfolio's shares outstanding. For
purposes of determining a Portfolio's aggregate net assets, receivables are
valued at their realizable amounts. Each Portfolio's liabilities, if not
identifiable as belonging to a particular class of the Portfolio, are allocated
among that Portfolio's several classes based on their relative net asset size.
Liabilities attributable to a particular class are charged to that class
directly. The total liabilities for a class are then deducted from the class's
proportionate interest in the Portfolio's assets, and the resulting amount is
divided by the number of shares of the class outstanding to produce its net
asset value per share.
Debt securities normally are valued on the basis of quotes obtained
from brokers and dealers (or pricing services that take into account appropriate
valuation factors). Interest is accrued daily. Money market instruments are
valued at amortized cost, which the Board believes approximates market value.
Options are valued at the last sale price on the exchange on which they
principally are traded, if available, and otherwise are valued at the last
offering price, in the case of written options, and the last bid price, in the
case of purchased options. Exchange listed and widely-traded OTC futures (and
options thereon) are valued at the most recent settlement price. Securities and
other assets for which market prices are not readily available are valued at
fair value as determined by IMI and approved by the Board.
Portfolio securities are valued (and net asset value per share is
determined) as of the close of regular trading on the Exchange (normally 4:00
p.m., eastern time) on each day the Exchange is open for trading. The Exchange
and the Trust's offices are expected to be closed, and net asset value will not
be calculated, on the following national business holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. On those days
when either or both of the Portfolios' Custodian or the Exchange close early as
a result of a partial holiday or otherwise, the Portfolios reserve the right to
advance the time on that day by which purchase and redemption requests must be
received.
The sale of the Portfolios' shares will be suspended during any period
when the determination of net asset value is suspended pursuant to rules or
orders of the SEC and may be suspended by the Board whenever in its judgment it
is in the Portfolios' best interest to do so.
ADDITIONAL INFORMATION
YEAR 2000 RISKS: The services provided to the Portfolios by IMI, MFC,
MIMI and the Portfolios' other service providers are dependent on those service
providers' computer systems. Many computer software and hardware systems in use
today cannot distinguish between the year 2000 and the year 1900 because of the
way dates are encoded and calculated (the "Year 2000 Problem"). The failure to
make this distinction could have a negative implication on handling securities
trades, pricing and account services. IMI, MFC, MIMI and the Portfolios' other
service providers are taking steps that each believes are reasonably designed to
address the Year 2000 Problem with respect to the computer systems that they
use. The Portfolios believe these steps will be sufficient to avoid any material
adverse impact on the Portfolios. At this time, however, there can be no
assurance that these steps will be sufficient to avoid any adverse impact on the
Portfolios.
FINANCIAL STATEMENTS
The Portfolios' Statement of Assets and Liabilities as of ________ ___, 1998 and
the Notes thereto are attached hereto as Appendix B.
<PAGE>
APPENDIX A:
RISKS ASSOCIATED WITH INVESTMENT TECHNIQUES USED BY
UNDERLYING FUNDS THAT ARE SERIES OF IVY FUND
[TO BE PROVIDED BY AMENDMENT]
<PAGE>
APPENDIX B
STATEMENT OF ASSETS AND LIABILITIES AS OF____________, 1999
AND REPORT OF INDEPENDENT ACCOUNTANTS
<PAGE>
PART C. OTHER INFORMATION
ITEM 23: EXHIBITS
(a) DECLARATION OF TRUST: Filed herewith.
(b) BY-LAWS: To be filed by amendment.
(c) INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS: To be filed by amendment.
(d) INVESTMENT ADVISORY CONTRACTS: To be filed by amendment.
(e) UNDERWRITING CONTRACTS: To be filed by amendment.
(f) BONUS OR PROFIT SHARING CONTRACTS: Not applicable.
(g) CUSTODIAN AGREEMENTS: To be filed by amendment.
(h) OTHER MATERIAL CONTRACTS: To be filed by amendment.
(i) LEGAL OPINION: To be filed by amendment.
(j) OTHER OPINIONS: Not applicable.
(k) OMITTED FINANCIAL STATEMENTS: Not applicable.
(l) INITIAL CAPITAL AGREEMENTS: Not applicable.
(m) RULE 12B-1 PLAN: To be filed by amendment.
(n) FINANCIAL DATA SCHEDULE: To be filed by amendment.
(o) RULE 18F-3 PLAN: To be filed by amendment.
ITEM 24: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
Not applicable.
ITEM 25: INDEMNIFICATION
A policy of insurance covering the Registrant and Ivy Management, Inc.
(the Registrant's investment manager) will insure the Registrant's trustees,
officers and others against liability arising by reason of an actual or alleged
breach of duty, neglect, error, misstatement, misleading statement, omission or
other negligent act. Reference is also made to Article IV of the Registrant's
Declaration of Trust, dated November 18, 1998 (filed herewith).
ITEM 26: BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the Form ADV of each of Ivy Management, Inc.
("IMI"), the Registrant's investment manager. The list required by this Item 26
of officers and directors of IMI, together with information as to any other
business profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of IMI's Form ADV.
ITEM 27: PRINCIPAL UNDERWRITERS
(a) Ivy Mackenzie Distribution, Inc. ("IMDI"), Via Mizner Financial
Plaza, 700 South Federal Highway, Suite 300, Boca Raton, Florida 33432,
Registrant's distributor, is a subsidiary of Mackenzie Investment Management
Inc. ("MIMI"), Via Mizner Financial Plaza, 700 South Federal Highway, Suite 300,
Boca Raton, Florida 33432. IMDI is the successor to MIMI's distribution
activities.
(b) The information required by this Item 27 regarding each director,
officer or partner of IMDI is incorporated by reference to Schedule A of Form BD
filed by IMDI pursuant to the Securities Exchange Act of 1934.
ITEM 28: LOCATION OF ACCOUNTS AND RECORDS
Ivy Mackenzie Services Corp., Via Mizner Financial Plaza, 700 South
Federal Highway, Suite 300, Boca Raton, Florida 33432, maintains on the
Registrant's behalf physical possession of each account, book, and other
document required to be maintained by section 31(a) of the Investment Company
Act of 1940 and the rules thereunder.
ITEM 29: MANAGEMENT SERVICES
Not applicable.
ITEM 30: UNDERTAKINGS
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, duly authorized, in the
City of Boston, and the Commonwealth of Massachusetts, on the 20th day of
November, 1998.
MACKENZIE SOLUTIONS
By: /s/ C. WILLIAM FERRIS*
President
By: /s/ JOSEPH R. FLEMING
Joseph R. Fleming, Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE: TITLE: DATE:
/s/ C. WILLIAM FERRIS* President, Treasurer (Chief 11/20/98
Financial Officer) and Trustee
By: /s/ JOSEPH R. FLEMING
Joseph R. Fleming, Attorney-in-Fact
* Executed pursuant to powers of attorney filed herewith.
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints each of Joseph R. Fleming and Sheldon A. Jones its true and lawful
attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead, to sign any and all
Registration Statements on Form N-1A applicable to Mackenzie Solutions and any
notices, amendments or supplements related thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed to these presents as of the
19th day of November, 1998.
MACKENZIE SOLUTIONS
By: _____________________________
C. William Ferris, President
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints each of Joseph R. Fleming and Sheldon A. Jones his true and lawful
attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead, to sign any and all
Registration Statements on Form N-1A applicable to Mackenzie Solutions and any
notices, amendments or supplements related thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed to these presents this 19th
day of November, 1998.
By: Title:
______________________________ President, Treasurer (Chief Financial
C. William Ferris Officer) and Trustee
<PAGE>
EXHIBIT INDEX
23(a) Declaration of Trust
DECLARATION OF TRUST
OF
MACKENZIE SOLUTIONS
DATED: November 18, 1998
<PAGE>
TABLE OF CONTENTS
Name Page
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name..............................................................1
Section 1.2. Definitions.......................................................1
ARTICLE II
TRUSTEES
Section 2.1. General Powers....................................................3
Section 2.2. Investments.......................................................4
Section 2.3. Legal Title.......................................................5
Section 2.4. Issuance and Repurchase of Shares.................................5
Section 2.5. Delegation; Committees............................................6
Section 2.6. Collection and Payment............................................6
Section 2.7. Expenses..........................................................6
Section 2.8. Manner of Acting; By-laws.........................................6
Section 2.9. Miscellaneous Powers..............................................7
Section 2.10. Principal Transactions...........................................7
Section 2.11. Number of Trustees...............................................7
Section 2.12. Election and Term................................................7
Section 2.13. Resignation and Removal..........................................8
Section 2.14. Vacancies........................................................8
Section 2.15. Delegation of Power to Other Trustees............................8
Section 2.16. Shareholder Vote, etc............................................9
Section 2.17. Independent Trustees.............................................9
ARTICLE III
CONTRACTS
Section 3.1. Distribution Contract.............................................9
Section 3.2. Advisory or Management Contract...................................9
Section 3.3. Affiliations of Trustees or Officers, Etc........................10
Section 3.4. Compliance with 1940 Act.........................................10
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS
Section 4.1. No Personal Liability of Shareholders, Trustees, Etc.............11
Section 4.2. Non-Liability of Trustees, Etc...................................11
Section 4.3. Mandatory Indemnification........................................11
Section 4.4. No Bond Required of Trustees.....................................13
Section 4.5. No Duty of Investigation; Notice in Trust Instruments, Etc.......13
Section 4.6. Reliance on Experts, Etc.........................................13
ARTICLE V
SHARES OF BENEFICIAL INTEREST.................................................14
Section 5.1. Beneficial Interest..............................................14
Section 5.2. Rights of Shareholders...........................................14
Section 5.3. Trust Only.......................................................14
Section 5.4. Issuance of Shares...............................................14
Section 5.5. Register of Shares...............................................15
Section 5.6. Transfer of Shares...............................................15
Section 5.7. Notices, Reports.................................................15
Section 5.8. Treasury Shares..................................................16
Section 5.9. Voting Powers....................................................16
Section 5.10. Meetings of Shareholders........................................16
Section 5.11. Quorum and Required Vote........................................16
Section 5.12 Action by Written Consent........................................17
Section 5.13. Series Designation..............................................17
Section 5.14. Assent to Declaration of Trust................................ .19
Section 5.15. Class Designation...............................................19
ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
Section 6.1. Redemption of Shares.............................................20
Section 6.2. Price............................................................20
Section 6.3. Payment..........................................................20
Section 6.4. Effect of Suspension of Determination of Net Asset Value.........20
Section 6.5. Repurchase by Agreement..........................................21
Section 6.6. Redemption at the Option of the Trust............................21
Section 6.7. Reductions in Number of Outstanding Shares Pursuant to
Net Asset Value Formula..........................................21
Section 6.8. Suspension of Right of Redemption................................21
ARTICLE VII
DETERMINATION OF NET ASSET VALUE
Section 7.1. Net Asset Value..................................................22
Section 7.2. Distributions to Shareholders....................................22
Section 7.3. Determination of Net Income; Constant Net Asset Value;
Reduction of Outstanding Shares...............................................23
Section 7.4. Allocation Between Principal and Income..........................24
Section 7.5. Power to Modify Foregoing Procedures.............................24
ARTICLE VIII
DURATION; TERMINATION OF TRUST
Section 8.1. Duration.........................................................24
Section 8.2. Termination of Trust or the Series of the Trust..................24
Section 8.3. Amendment Procedure..............................................25
Section 8.4. Merger, Consolidation and Sale of Assets.........................25
Section 8.5. Incorporation....................................................26
ARTICLE IX
MISCELLANEOUS
Section 9.1. Filing...........................................................26
Section 9.2. Governing Law....................................................26
Section 9.3. Counterparts.....................................................27
Section 9.4. Reliance by Third Parties........................................27
Section 9.5. Provisions in Conflict with Law or Regulations...................27
<PAGE>
DECLARATION OF TRUST
OF
MACKENZIE SOLUTIONS
DATED: NOVEMBER 18, 1998
DECLARATION OF TRUST made November 18, 1998 by the undersigned Trustee;
WHEREAS, the Trustees hereunder are desirous of forming a trust for the
purposes of carrying on the business of a management investment company;
WHEREAS, the Trust has a principal place of business at Via Mizner
Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, Florida
33432; and
WHEREAS, in furtherance of such purposes, the Trustees are acquiring
and may hereafter acquire assets and properties, to hold and manage as trustees
of a Massachusetts voluntary association with transferable shares in accordance
with the provisions hereinafter set forth;
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets and properties which they may from time to
time acquire in any manner as Trustees hereunder IN TRUST to manage and dispose
of the same upon the following terms and conditions for the pro rata benefit of
the holders from time to time of shares in this Trust as hereinafter set forth.
NOW, THEREFORE, the Trustees state the Declaration of Trust as follows:
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby is "Mackenzie
Solutions."
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "By-laws" means the By-laws referred to in Section 2.8 hereof, as from
time to time amended.
(b) "Class" means the two or more Classes as may be established and
designated from time to time by the Trustees pursuant to Section 5.15 hereof.
(c) The term "Commission" has the meaning given it in the 1940 Act. The
term "Interested Person" has the meaning given it in the 1940 Act, as modified
by any applicable order or orders of the Commission. Except as otherwise defined
by the Trustees in conjunction with the establishment of any series of Shares,
the term "vote of a majority of the Shares outstanding and entitled to vote"
shall have the same meaning as the term "vote of a majority of the outstanding
voting securities" given it in the 1940 Act.
(d) "Custodian" means any Person other than the Trust who has custody
of any Trust Property as required by Section 17(f) of the Investment Company Act
of 1940, but does not include a system for the central handling of securities
described in said Section 17(f).
(e) "Declaration" means this Declaration of Trust, as further amended
from time to time. Reference in this Declaration of Trust to "Declaration,"
"hereof," "herein," and "hereunder" shall be deemed to refer to this Declaration
rather than exclusively to the article or section in which such words appear.
(f) "Distributor" means the party, other than the Trust, to the
contract described in Section 3.1 hereof.
(g) "His" shall include the feminine and neuter, as well as the
masculine, genders.
(h) "Investment Adviser" means the party, other than the Trust, to the
contract described in Section 3.2 hereof.
(i) "Municipal Bonds" means obligations issued by or on behalf of
states, territories of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities or other issuers, the
interest from which is exempt from regular Federal income tax.
(j) The "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
(k) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.
(l) "Series" individually or collectively means the two or more Series
as may be established and designated from time to time by the Trustees pursuant
to Section 5.13 hereof. Unless the context otherwise requires, the term "Series"
shall include Classes into which shares of the Trust, or of a Series, may be
divided from time to time.
(m) "Shareholder" means a record owner of Outstanding Shares.
(n) "Shares" means the equal proportionate units of interest into which
the beneficial interest in the Trust shall be divided from time to time,
including the Shares of any and all Series and Classes which may be established
by the Trustees, and includes fractions of Shares as well as whole Shares.
"Outstanding Shares" means those Shares shown as of a time and from time to time
on the books of the Trust or its Transfer Agent as then issued and outstanding,
but shall not include Shares which have been redeemed or repurchased by the
Trust and which are at the time held in the treasury of the Trust.
(o) "Transfer Agent" means any one or more Persons other than the Trust
who maintains the Shareholder records of the Trust, such as the list of
Shareholders, the number of Shares credited to each account, and the like.
(p) The "Trust" means Mackenzie Solutions.
(q) The "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees.
(r) The "Trustees" means the person or persons who has or have signed
this Declaration, so long as he or they shall continue in office in accordance
with the terms hereof, and all other persons who may from time to time or be
duly qualified and serving as Trustees in accordance with the provisions of
Article II hereof, and reference herein to a Trustee or the Trustees shall refer
to such person or persons in this capacity or their capacities as trustees
hereunder.
ARTICLE II
TRUSTEES
Section 2.1. General Powers. The Trustees shall have exclusive and
absolute control over the Trust Property and over the business of the Trust to
the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as they deem necessary, proper or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the provisions of
this Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 2.2. Investments. The Trustees shall have the power:
(a) To operate as and carry on the business of an investment
company, and exercise all the powers necessary and appropriate to the
conduct of such operations.
(b) To invest in, hold for investment, or reinvest in,
securities, including, but not limited to, shares of open-end
investment companies; common and preferred stocks; warrants; bonds,
debentures, bills, time notes and all other evidences of indebtedness;
negotiable or non-negotiable instruments; government securities,
including securities of any state, municipality or other political
subdivision thereof, or any governmental or quasi-governmental agency
or instrumentality; and money market instruments including bank
certificates of deposit, finance paper, commercial paper, bankers
acceptances and all kinds of repurchase agreements, of any corporation,
company, trust, association, firm or other business organization
however established, and of any country, state, municipality or other
political subdivision, or any governmental or quasi-governmental agency
or instrumentality.
(c) To acquire (by purchase, subscription or otherwise), to
hold, to trade in and deal in, to acquire any rights or options to
purchase or sell, to sell or otherwise dispose of, to lend, and to
pledge any such securities, and to enter into repurchase agreements and
forward foreign currency exchange contracts, to purchase and sell
futures contracts on securities, securities indices and foreign
currencies, to purchase or sell options on such contracts, foreign
currency contracts and foreign currencies, and to engage in all types
of hedging and risk management transactions.
(d) To exercise all rights, powers and privileges of ownership
or interest in all securities, repurchase agreements, futures contracts
and options and other assets included in the Trust Property, including
the right to vote thereon and otherwise act with respect thereto and to
do all acts for the preservation, protection, improvement and
enhancement in value of all such assets.
(e) To acquire (by purchase, lease or otherwise) and to hold,
use, maintain, develop and dispose of (by sale or otherwise) any
property, real or personal, including cash, and any interest therein.
(f) To borrow money and in this connection issue notes or
other evidence of indebtedness; to secure borrowings by mortgaging,
pledging or otherwise subjecting as security the Trust Property; to
endorse, guarantee, or undertake the performance of any obligation or
engagement of any other Person and to lend Trust Property.
(g) To aid by further investment any corporation, company,
trust, association or firm, any obligation of or interest in which is
included in the Trust Property or in the affairs of which the Trustees
have any direct or indirect interest; to do all acts and things
designed to protect, to preserve, improve or enhance the value of such
obligation or interest, and to guarantee or become surety on any or all
of the contracts, stocks, bonds, notes, debentures and other
obligations of any such corporation, company, trust, association or
firm.
(h) To enter into a plan of distribution and any related
agreements whereby the Trust may finance directly or indirectly any
activity which is primarily intended to result in the sale of Shares.
(i) To invest, through a transfer of cash, securities and
other assets or otherwise, all or a portion of the Trust Property, or
to sell all or a portion of the Trust Property and invest the proceeds
of such sales, in another investment company that is registered under
the 1940 Act.
(j) In general to carry on any other business in connection
with or incidental to any of the foregoing powers, to do everything
necessary, suitable or proper for the accomplishment of any purpose or
the attainment of any object or the furtherance of any power herein
before set forth, either alone or in association with others, and to do
every other act or thing incidental or appurtenant to or growing out of
or connected with the aforesaid business or purposes, objects or
powers.
The foregoing clauses shall be construed both as objects and powers,
and the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
Section 2.3. Legal Title. Legal title to all the Trust Property,
including the property of any Series of the Trust, shall be vested in the
Trustees as joint tenants except that the Trustees shall have power to cause
legal title to any Trust Property to be held by or in the name of one or more of
the Trustees, or in the name of the Trust, or in the name of any other Person as
nominee, on such terms as the Trustees may determine, provided that the interest
of the Trust therein is deemed appropriately protected. The right, title and
interest of the Trustees in the Trust Property and the property of each Series
of the Trust shall vest automatically in each Person who may hereafter become a
Trustee. Upon the termination of the term of office, resignation, removal or
death of a Trustee he shall automatically cease to have any right, title or
interest in any of the Trust Property or the property of any Series of the
Trust, and the right, title and interest of such Trustee in the Trust Property
shall vest automatically in the remaining Trustees. Such vesting and cessation
of title shall be effective whether or not conveyancing documents have been
executed and delivered.
Section 2.4. Issuance and Repurchase of Shares. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise deal in Shares and, subject
to the provisions set forth in Articles VI and VII and Section 5.13 hereof, to
apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds or property of the particular Series of the
Trust with respect to which such Shares are issued, whether capital or surplus
or otherwise, to the full extent now or hereafter permitted by the laws of the
Commonwealth of Massachusetts governing business corporations.
Section 2.5. Delegation; Committees. The Trustees shall have power to
delegate from time to time to such of their number or to officers, employees or
agents of the Trust the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient, to the same extent as such
delegation is permitted by the 1940 Act.
Without limiting the generality of the foregoing provisions of this
Section 2.5, the Trustees shall have power to appoint by resolution a committee
consisting of at least one of the Trustees then in office to determine whether
(a) refusing a demand by a shareholder to initiate an action, suit, or
proceeding on behalf of the Trust, or (b) dismissing, settling, reviewing, or
investigating any action, suit, or proceeding that is brought or threatened to
be brought before any court, administrative agency or other adjudicatory body,
as the case may be, is in the best interests of the Trust. That committee shall
consist entirely of Trustees each of whom is not an "Interested Person" as the
term is defined in Section 1.2 hereof.
Section 2.6. Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
Section 2.7. Expenses. The Trustees shall have the power to incur and
pay any expenses which in the opinion of the Trustees are necessary or
incidental to carry out any of the purposes of this Declaration, and to pay
reasonable compensation from the funds of the Trust to themselves as Trustees.
The Trustees shall fix the compensation of all officers, employees and Trustees.
Section 2.8. Manner of Acting; By-laws. Except as otherwise provided
herein or in the By-laws, any action to be taken by the Trustees may be taken by
a majority of the Trustees present at a meeting of Trustees (a quorum being
present), including any meeting held by means of a conference telephone circuit
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, or by written consents of two-thirds of the
Trustees then in office. The Trustees may adopt By-laws not inconsistent with
this Declaration to provide for the conduct of the business of the Trust and may
amend or repeal such By-laws to the extent such power is not reserved to the
Shareholders.
Notwithstanding the foregoing provisions of this Section 2.8 and in
addition to such provisions or any other provision of this Declaration or of the
By-laws, the Trustees may by resolution appoint a committee consisting of less
than the whole number of Trustees then in office, which committee may be
empowered to act for and bind the Trustees and the Trust, as if the acts of such
committee were the acts of all the Trustees then in office, with respect to the
institution, prosecution, dismissal, settlement, review or investigation of any
action, suit or proceeding which shall be pending or threatened to be brought
before any court, administrative agency or other adjudicatory body.
Section 2.9. Miscellaneous Powers. Subject to Section 5.13, hereof, the
Trustees shall have the power to: (a) employ or contract with such Persons as
the Trustees may deem desirable for the transaction of the business of the
Trust; (b) enter into joint ventures, partnerships and any other combinations or
associations; (c) remove Trustees or fill vacancies in or add to their number,
elect and remove such officers and appoint and terminate such agents or
employees as they consider appropriate, and appoint from their own number, and
terminate, any one or more committees which may exercise some or all of the
power and authority of the Trustees as the Trustees may determine; (d) purchase,
and pay for out of Trust Property, insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers, distributors,
selected dealers or independent contractors of the Trust against all claims
arising by reason of holding any such position or by reason of any action taken
or omitted by any such Person in such capacity, whether or not constituting
negligence, or whether or not the Trust would have the power to indemnify such
Person against such liability; (e) establish pension, profit-sharing, share
purchase, and other retirement, incentive and benefit plans for any Trustees,
officers, employees and agents of the Trust; (f) to the extent permitted by law,
indemnify any person with whom the Trust has dealings, including the Investment
Adviser, Distributor, Transfer Agent and selected dealers, to such extent as the
Trustees shall determine; (g) guarantee indebtedness or contractual obligations
of others; (h) determine and change the fiscal year of the Trust and the method
by which its accounts shall be kept; and (i) adopt a seal for the Trust, but the
absence of such seal shall not impair the validity of any instrument executed on
behalf of the Trust.
Section 2.10. Principal Transactions. Except in transactions not
permitted by the 1940 Act or rules and regulations adopted by the Commission,
the Trustees may, on behalf of the Trust, buy any securities from or sell any
securities to, or lend any assets of the Trust to, any Trustee or officer of the
Trust or any firm of which any such Trustee or officer is a member acting as
principal, or have any such dealings with the Investment Adviser, Distributor or
Transfer Agent or with any Interested Person of such Person; and the Trust may
employ any such Person, or firm or company in which such Person is an Interested
Person, as broker, dealer, legal counsel, registrar, Transfer Agent, dividend
disbursing agent or Custodian upon customary terms.
Section 2.11. Number of Trustees. The number of Trustees shall
initially be one (1), and thereafter shall be such number as shall be fixed from
time to time by a written instrument signed by a majority of the Trustees.
Section 2.12. Election and Term. Except for the Trustees named herein
or appointed to fill vacancies pursuant to Section 2.14 hereof, the Trustees
shall be elected by the Shareholders owning of record a plurality of the Shares
voting at a meeting of Shareholders. Such a meeting shall be held on a date
fixed by the Trustees. Except in the event of resignation or removals pursuant
to Section 2.13 hereof, each Trustee shall hold office until such time as less
than a majority of the Trustees holding office have been elected by
Shareholders, and thereafter until the holding of a Shareholders' meeting as
required by the next following sentence. In such event the Trustees then in
office will call a Shareholders' meeting for the election of Trustees within the
timeframe required by applicable law. Except for the foregoing circumstances,
the Trustees shall continue to hold office and may appoint successor Trustees.
Section 2.13. Resignation and Removal. Any Trustee may resign his trust
(without the need for any prior or subsequent accounting) by an instrument in
writing signed by him and delivered to the other Trustees and such resignation
shall be effective upon such delivery, or at a later date according to the terms
of the instrument. Any of the Trustees may be removed (provided the aggregate
number of Trustees after such removal shall not be less than one) with cause, by
the action of two-thirds of the remaining Trustees. Any Trustee may be removed
at any meeting of Shareholders by vote of two thirds of the Outstanding Shares.
The Trustees shall promptly call a meeting of the Shareholders for the purpose
of voting upon the question of removal of any such Trustee or Trustees when
requested in writing so to do by the holders of not less than ten percent (10%)
of the Outstanding Shares, and in that connection, the Trustees will assist
shareholder communications to the extent provided for in Section 16(c) under the
1940 Act. Upon the resignation or removal of a Trustee, or his otherwise ceasing
to be a Trustee, he shall execute and deliver such documents as the remaining
Trustees shall require for the purpose of conveying to the Trust or the
remaining Trustees any Trust Property or property of any Series of the Trust
held in the name of the resigning or removed Trustee. Upon the incapacity or
death of any Trustee, his legal representative shall execute and deliver on his
behalf such documents as the remaining Trustees shall require as provided in the
preceding sentence.
Section 2.14. Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death, resignation,
removal, bankruptcy, adjudicated incompetence or other incapacity to perform the
duties of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to the terms of
the Declaration. In the case of an existing vacancy, including a vacancy
existing by reason of an increase in the number of Trustees, subject to the
provisions of Section 16(a) of the 1940 Act, the remaining Trustees shall fill
such vacancy by the appointment of such other person as they in their discretion
shall see fit, made by a written instrument signed by a majority of the Trustees
then in office. Any such appointment shall not become effective, however, until
the person named in the written instrument of appointment shall have accepted in
writing such appointment and agreed in writing to be bound by the terms of the
Declaration. An appointment of a Trustee may be made in anticipation of a
vacancy to occur at a later date by reason of retirement, resignation or
increase in the number of Trustees, provided that such appointment shall not
become effective prior to such retirement, resignation or increase in the number
of Trustees. Whenever a vacancy in the number of Trustees shall occur, until
such vacancy is filled as provided in this Section 2.14, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by the Declaration.
A written instrument certifying the existence of such vacancy signed by a
majority of the Trustees in office shall be conclusive evidence of the existence
of such vacancy.
Section 2.15. Delegation of Power to Other Trustees. Any Trustee may,
by power of attorney, delegate his power for a period not exceeding six (6)
months at any one time to any other Trustee or Trustees; provided that in no
case shall less than two (2) Trustees personally exercise the powers granted to
the Trustees under this Declaration except as herein otherwise expressly
provided.
Section 2.16. Shareholder Vote, etc.
Not Required. Except to the extent specifically provided to the
contrary in this Declaration, the Trustees may exercise each of the powers
granted to them in this Declaration without the vote, approval or agreement of
the shareholders unless such a vote, approval, or agreement is required by the
1940 Act or applicable laws of the Commonwealth of Massachusetts.
Section 2.17. Independent Trustees.
A Trustee who with respect to the Trust is not an Interested Person
shall be deemed to be independent and disinterested when making any
determination or taking any action as Trustee.
ARTICLE III
CONTRACTS
Section 3.1. Distribution Contract. The Trustees may in their
discretion from time to time enter into an exclusive or non-exclusive
underwriting contract or contracts providing for the sale of Shares at a price
based on the net asset value of a Share, whereby the Trustees may either agree
to sell the Shares to the other party to the contract or appoint such other
party their sales agent for the Shares, and in either case on such terms and
conditions, if any, as may be prescribed in the By-laws; and such further terms
and conditions as the Trustees may in their discretion determine not
inconsistent with the provisions of this Article III or of the By-laws; and such
contract may also provide for the repurchase of the Shares by such other party
as agent of the Trustees.
Section 3.2. Advisory or Management Contract. The Trustees may in their
discretion from time to time enter into an investment advisory or management
contract or separate advisory contracts with respect to one or more Series
whereby the other party to such contract shall undertake to furnish to the Trust
such management, investment advisory, statistical and research facilities and
services and such other facilities and services, if any, and all upon such terms
and conditions as the Trustees may in their discretion determine, including the
grant of authority to such other party to determine what securities shall be
purchased or sold by the Trust and what portion of its assets shall be
uninvested, which authority shall include the power to make changes in the
investments of the Trust or any Series.
The Trustees may also employ, or authorize the Investment Adviser to
employ, one or more sub-advisers from time to time to perform such of the acts
and services of the Investment Adviser and upon such terms and conditions as may
be agreed upon between the Investment Adviser and such sub-advisers and approved
by the Trustees. Any reference in this Declaration to the Investment Adviser
shall be deemed to include such sub-advisers unless the context otherwise
requires.
Section 3.3. Affiliations of Trustees or Officers, Etc. The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust
is a shareholder, director, officer, partner, trustee, employee,
manager, adviser or distributor of or for any partnership, corporation,
trust, association or other organization or of or for any parent or
affiliate of any organization, with which a contract of the character
described in Sections 3.1 or 3.2 above or for services as Custodian,
Transfer Agent, accounting agent or disbursing agent or for related
services may have been or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is a Shareholder of
or has an interest in the Trust, or that
(ii) any partnership, corporation, trust, association or other
organization with which a contract of the character described in
Sections 3.1 or 3.2 above or for services as Custodian, Transfer Agent,
accounting agent or disbursing agent or for related services may have
been or may hereafter be made also has any one or more of such
contracts with one or more other partnerships, corporations, trusts,
associations or other organizations, or has other business or
interests, shall not affect the validity of any such contract or
disqualify any Shareholder, Trustee or officer of the Trust from voting
upon or executing the same or create any liability or accountability to
the Trust or its Shareholders.
Section 3.4. Compliance with 1940 Act. Any contract entered into
pursuant to Sections 3.1 or 3.2 shall be consistent with and subject to the
requirements of Section 15 of the 1940 Act (including any amendment thereof or
other applicable act of Congress hereafter enacted), as modified by any
applicable order or orders of the Commission, with respect to its continuance in
effect, its termination and the method of authorization and approval of such
contract or renewal thereof.
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 4.1. No Personal Liability of Shareholders, Trustees, Etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than to the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties with respect to such Person; and all such
Persons shall look solely to the Trust Property for satisfaction of claims of
any nature arising in connection with the affairs of the Trust. If any
Shareholder, Trustee, officer, employee, or agent, as such, of the Trust, is
made a party to any suit or proceeding to enforce any such liability of the
Trust, he shall not, on account thereof, be held to any personal liability. The
Trust shall indemnify and hold each Shareholder harmless from and against all
claims and liabilities, to which such Shareholder may become subject by reason
of his being or having been a Shareholder, and shall reimburse such Shareholder
for all legal and other expenses reasonably incurred by him in connection with
any such claim or liability. The indemnification and reimbursement required by
the preceding sentence shall be made only out of the assets of the one or more
Series of which the Shareholder who is entitled to indemnification or
reimbursement was a Shareholder at the time the act or event occurred which gave
rise to the claim against or liability of said Shareholder. The rights accruing
to a Shareholder under this Section 4.1 shall not impair any other right to
which such Shareholder may be lawfully entitled, nor shall anything herein
contained restrict the right of the Trust to indemnify or reimburse a
Shareholder in any appropriate situation even though not specifically provided
herein.
Section 4.2. Non-Liability of Trustees, Etc. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust, its Shareholders,
or to any Shareholder, Trustee, officer, employee, or agent thereof for any
action or failure to act (including without limitation the failure to compel in
any way any former or acting Trustee to redress any breach of trust) except for
his own bad faith, willful misfeasance, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
Section 4.3. Mandatory Indemnification.
(a) Subject to the exceptions and limitations contained in paragraph
(b) below:
(i)....every person who is, or has been, a Trustee or
officer of the Trust shall be indemnified by the Trust to the fullest extent
permitted by law against all liability and against all expenses reasonably
incurred or paid by him in connection with any claim, action, suit or proceeding
in which he becomes involved as a party or otherwise by virtue of his being or
having been a Trustee or officer and against amounts paid or incurred by him in
the settlement thereof;
(ii)....the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; and the words
"liability" and "expenses" shall include, without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or
officer:
(i)....against any liability to the Trust, a Series thereof,
or the Shareholders by reason of a final adjudication by a court or other body
before which a proceeding was brought that he engaged in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office;
(ii)....with respect to any matter as to which he shall have
been finally adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust; or
(iii)....in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraph (b)(i) or (b)(ii)
resulting in a payment by a Trustee or officer, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office:
(A) by the court or other body approving the settlement or other
disposition; or
(B) based upon a review of readily available facts (as opposed to a full
trial-type inquiry) by (x) vote of a majority of the Disinterested Trustees
acting on the matter (provided that a majority of the Disinterested Trustees
then in office act on the matter), or (y) written opinion of independent legal
counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not
affect any other rights to which any Trustee or officer may now or hereafter be
entitled, shall continue as to a person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs, executors, administrators
and assigns of such a person. Nothing contained herein shall affect any rights
to indemnification to which personnel of the Trust other than Trustees and
officers may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in paragraph (a) of this
Section 4.3 may be advanced by the Trust prior to a final disposition thereof
upon receipt of an undertaking by or on behalf of the recipient to repay such
amount if it is ultimately determined that he is not entitled to indemnification
under this Section 4.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient, or the Trust shall be
insured against losses arising out of any such advances; or
(ii) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees act on
the matter) or an independent legal counsel in a written opinion shall
determine, based upon a review of readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that the
recipient ultimately will be found entitled to indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is one who (i)
is not an Interested Person of the Trust (including anyone who has been exempted
from being an Interested Person by any rule, regulation or order of the
Commission), or (ii) is not involved in the claim, action, suit or proceeding.
Section 4.4. No Bond Required of Trustees. No Trustee shall be
obligated to give any bond or other security for the performance of any of his
duties hereunder.
Section 4.5. No Duty of Investigation; Notice in Trust Instruments,
Etc. No purchaser, lender, Transfer Agent or other Person dealing with the
Trustees or any officer, employee or agent of the Trust shall be bound to make
any inquiry concerning the validity of any transaction purporting to be made by
the Trustees or by said officer, employee or agent or be liable for the
application of money or property paid, loaned, or delivered to or on the order
of the Trustees or of said officer, employee or agent. Every obligation,
contract, instrument, certificate, Share, other security of the Trust or
undertaking, and every other act or thing whatsoever executed in connection with
the Trust shall be conclusively presumed to have been executed or done by the
executors thereof only in their capacity as Trustees under this Declaration or
in their capacity as officers, employees or agents of the Trust. Every written
obligation, contract, instrument, certificate, Share, other security of the
Trust or undertaking made or issued by the Trustees may recite that the same is
executed or made by them not individually, but as Trustees under the
Declaration, and that the obligations of the Trust under any such instrument are
not binding upon any of the Trustees or Shareholders individually, but bind only
the trust estate, and may contain any further recital which they or he may deem
appropriate, but the omission of such recital shall not operate to bind the
Trustees individually. The Trustees shall at all times maintain insurance for
the protection of the Trust Property, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem adequate to cover
possible tort liability, and such other insurance as the Trustees in their sole
judgment shall deem advisable.
Section 4.6. Reliance on Experts, Etc. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other records
of the Trust, upon an opinion of counsel, or upon reports made to the Trust by
any of its officers or employees or by the Investment Adviser, the Distributor,
Transfer Agent, selected dealers, accountants, appraisers or other experts or
consultants selected with reasonable care by the Trustees, officers or employees
of the Trust, regardless of whether such counsel or expert may also be a
Trustee.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 5.1. Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable Shares of beneficial interest, all
of one class, except as provided in Section 5.13 and Section 5.15 hereof,
without par value, provided that the par value of the outstanding, and
authorized but unissued, shares of any Series may be changed by a written
instrument referred to in Section 5.13 hereof. The number of Shares of
beneficial interest authorized hereunder is unlimited. All Shares issued
hereunder including, without limitation, Shares issued in connection with a
dividend in Shares or a split of Shares, shall be fully paid and non-assessable.
Section 5.2. Rights of Shareholders. The ownership of the Trust
Property and the property of each Series of the Trust of every description and
the right to conduct any business herein before described are vested exclusively
in the Trustees, and the Shareholders shall have no interest therein other than
the beneficial interest conferred by their Shares, and they shall have no right
to call for any partition or division of any property, profits, rights or
interests of the Trust nor can they be called upon to share or assume any losses
of the Trust or suffer an assessment of any kind by virtue of their ownership of
Shares. The Shares shall be personal property giving only the rights
specifically set forth in this Declaration. The Shares shall not entitle the
holder to preference, preemptive, appraisal, conversion or exchange rights,
except as the Trustees may determine with respect to any Series of Shares.
Section 5.3. Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
Section 5.4. Issuance of Shares. The Trustees in their discretion may,
from time to time without vote of the Shareholders, issue Shares, in addition to
the then issued and outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount and type of consideration, including cash
or property, at such time or times and on such terms as the Trustees may deem
best, and may in such manner acquire other assets (including the acquisition of
assets subject to, and in connection with the assumption of liabilities) and
businesses. In connection with any issuance of Shares, the Trustees may issue
fractional Shares and Shares held in the treasury. The Trustees may from time to
time divide or combine the Shares into a greater or lesser number without
thereby changing the proportionate beneficial interests in the Trust.
Contributions to the Trust may be accepted for, and Shares shall be redeemed as,
whole Shares and/or 1/1,000ths of a Share or integral multiples thereof.
Section 5.5. Register of Shares. A register shall be kept at the
principal office of the Trust or an office of the Transfer Agent which shall
contain the names and addresses of the Shareholders and the number of Shares
held by them respectively and a record of all transfers thereof. Such register
shall be conclusive as to who are the holders of the Shares and who shall be
entitled to receive dividends or distributions or otherwise to exercise or enjoy
the rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or distribution, nor to have notice given to him as herein or in
the By-laws provided, until he has given his address to the Transfer Agent or
such other officer or agent of the Trustees as shall keep the said register for
entry thereon. It is not contemplated that certificates will be issued for the
Shares; however, the Trustees, in their discretion, may authorize the issuance
of share certificates and promulgate appropriate rules and regulations as to
their use.
Section 5.6. Transfer of Shares. Except as otherwise provided by the
Trustees, Shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Transfer Agent of a duly executed instrument of
transfer, together with such evidence of the genuineness of each such execution
and authorization and of other matters as may reasonably be required. Upon such
delivery the transfer shall be recorded on the register of the Trust. Until such
record is made, the Shareholder of record shall be deemed to be the holder of
such Shares for all purposes hereunder and neither the Trustees nor any Transfer
Agent or registrar nor any officer, employee or agent of the Trust shall be
affected by any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law.
Section 5.7. Notices, Reports. Any and all notices to which any
Shareholder may be entitled and any and all communications shall be deemed duly
served or given if mailed, postage prepaid, addressed to any Shareholder of
record at his last known address as recorded on the register of the Trust. A
notice of a meeting, an annual report and any other communication to
Shareholders need not be sent to a Shareholder (i) if an annual report and a
proxy statement for two consecutive shareholder meetings have been mailed to
such Shareholder's address and have been returned as undeliverable, (ii) if all,
and at least two, checks (if sent by first class mail) in payment of dividends
on Shares during a twelve-month period have been mailed to such Shareholder's
address and have been returned as undeliverable or (iii) in any other case in
which a proxy statement concerning a meeting of security holders is not required
to be given pursuant to the Commission's proxy rules as from time to time in
effect under the Securities Exchange Act of 1934. However, delivery of such
proxy statements, annual reports and other communications shall resume if and
when such Shareholder delivers or causes to be delivered to the Trust written
notice setting forth such Shareholder's then current address.
Section 5.8. Treasury Shares. Shares held in the treasury shall, until
reissued pursuant to Section 5.4, not confer any voting rights on the Trustees,
nor shall such Shares be entitled to any dividends or other distributions
declared with respect to the Shares.
Section 5.9. Voting Powers. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Section 2.12; (ii) for the
removal of Trustees as provided in Section 2.13; (iii) with respect to
termination of the Trust as provided in Section 8.2; (iv) with respect to any
amendment of this Declaration to the extent and as provided in Section 8.3; (v)
to the same extent as the stockholders of Massachusetts business corporation as
to whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or any Series or Class thereof or the Shareholders (provided, however, that a
Shareholder of a particular Series or Class shall not be entitled to bring a
derivative or class action on behalf of any other Series or Class (or
Shareholder of any other Series or Class) of the Trust); and (vi) with respect
to such additional matters relating to the Trust as may be required by this
Declaration, the By-laws or any registration of the Trust as an investment
company under the 1940 Act with the Commission (or any successor agency) or as
the Trustees may consider necessary or desirable. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote and each
fractional Share shall be entitled to a proportionate fractional vote.
Notwithstanding any other provision of this Declaration of Trust, on any matter
submitted to a vote of Shareholders, all Shares of the Trust then entitled to
vote shall be voted by individual series or Class, as appropriate, except (1)
when required by the 1940 Act, Shares shall be voted in the aggregate and not by
individual series or Classes, and (2) when the Trustees have determined that the
matter affects only the interests of one or more series or Classes, then only
Shareholders of such series or Classes shall be entitled to vote thereon. There
shall be no cumulative voting in the election of Trustees. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take any
action required by law, this Declaration or the By-laws to be taken by
Shareholders. The By-laws may include further provisions for Shareholders' votes
and meetings and related matters.
Section 5.10. Meetings of Shareholders. Meetings of Shareholders may be
called at any time by the President, and shall be called by the President and
Secretary at the request in writing or by resolution, of a majority of Trustees,
or at the written request of the holder or holders of ten percent (10%) or more
of the total number of Shares then issued and outstanding of the Trust entitled
to vote at such meeting. Any such request shall state the purpose of the
proposed meeting.
Section 5.11. Quorum and Required Vote. A majority of Shares entitled
to vote shall be a quorum for the transaction of business at a Shareholders'
meeting, except that where any provisions of law or of this Declaration of Trust
permits or requires that holders of any series shall vote as a series or any
Class shall vote as a Class, then a majority of the aggregate number of Shares
of that series or Class entitled to vote shall be necessary to constitute a
quorum for the transaction of business by that series or Class. Any lesser
number shall be sufficient for adjournments. Any adjourned session or sessions
may be held, within a reasonable time after the date set for the original
meeting, without the necessity of further notice. Except when a larger vote is
required by any provision of this Declaration of Trust or the Bylaws, a majority
of the Shares voted shall decide any questions and a plurality shall elect a
Trustee, provided that where any provision of law or of this Declaration of
Trust permits or requires that the holders of any series or Class shall vote as
a series or Class, then a majority of the Shares of that series or Class voted
on the matter (or a plurality with respect to the election of a Trustee) shall
decide that matter insofar as that series or Class is concerned. Notwithstanding
anything to the contrary contained herein, a plurality of each series shall be
required to elect a Trustee.
Section 5.12. Action by Written Consent Any action taken by
Shareholders may be taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion thereof as shall be
required by any express provision of this Declaration of Trust or the Bylaws)
consent to the action in writing and such written consents are filed with the
records of the meetings of Shareholders. Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
Section 5.13. Series Designation. The Trustees, in their discretion,
may authorize the division of Shares into two or more Series, and the different
Series shall be established and designated, and the variations in the relative
rights and preferences as between the different Series shall be fixed and
determined, by the Trustees; provided, that all Shares shall be identical except
that there may be variations so fixed and determined between different Series as
to investment objective, purchase price, par value, allocation of expenses,
right of redemption, special and relative rights as to dividends and on
liquidation, conversion rights, and conditions under which the several Series
shall have separate voting rights. All references to Shares in this Declaration
shall be deemed to be Shares of any or all Series as the context may require.
Without limiting the authority of the Trustees to establish and
designate any additional Series of Shares (or Classes of Shares under Section
5.15 herein), there shall be established five initial series to be known,
respectively, as: (1) Income Portfolio; (2) Conservative Portfolio; (3) Balanced
Portfolio; (4) Growth and Income Portfolio; and (5) Growth Portfolio.
(a) All provisions herein relating to the Trust shall apply
equally to each Series of the Trust except, as the context requires
otherwise.
(b) The number of authorized Shares and the number of Shares
of each Series that may be issued shall be unlimited. The Trustees may
classify or reclassify any unissued Shares or any Shares previously
issued and reacquired of any Series into one or more Series that may be
established and designated from time to time. The Trustees may hold as
treasury Shares (of the same or some other Series), reissue for such
consideration and on such terms as they may determine, or cancel any
Shares of any Series reacquired by the Trust at their discretion from
time to time.
(c) All consideration received by the Trust for the issue or
sale of Shares of a particular Series, together with all assets in
which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever
form the same may be, shall irrevocably belong to that Series for all
purposes, subject only to the rights of creditors of such Series and
except as may otherwise be required by applicable laws, and shall be so
recorded upon the books of account of the Trust. In the event that
there are any assets, income, earnings, profits, and proceeds thereof,
funds, or payments which are not readily identifiable as belonging to
any particular Series, the Trustees shall allocate them among any one
or more of the Series established and designated from time to time in
such manner and on such basis as they, in their sole discretion, deem
fair and equitable. Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of all Series for all
purposes.
(d) The assets belonging to each particular Series shall be
charged with the liabilities of the Trust in respect of that Series and
with all expenses, costs, charges and reserves attributable to that
Series, and any general liabilities, expenses, costs, charges or
reserves of the Trust which are not readily identifiable as belonging
to any particular Series shall be allocated and charged by the Trustees
to and among any one or more of the Series established and designated
from time to time in such manner and on such basis as the Trustees in
their sole discretion deem fair and equitable. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees
shall be conclusive and binding upon the Shareholders of all Series for
all purposes. The Trustees shall have full discretion, to the extent
not inconsistent with the 1940 Act, to determine which items are
capital; and each such determination and allocation shall be conclusive
and binding upon the Shareholders. The assets of a particular Series of
the Trust shall, under no circumstances, be charged with liabilities
attributable to any other Series of the Trust. All persons extending
credit to, or contracting with or having any claim against a particular
Series of the Trust shall look only to the assets of that particular
Series for payment of such credit, contract or claim. No Shareholder or
former Shareholder of any Series shall have any claim on or right to
any assets allocated or belonging to any other Series.
(e) Each Share of a Series of the Trust shall represent a
beneficial interest in the net assets of such Series. Each holder of
Shares of a Series shall be entitled to receive his pro rata share of
distributions of income and capital gains made with respect to such
Series, except as provided in Section 5.15 hereof. Upon redemption of
his Shares or indemnification for liabilities incurred by reason of his
being or having been a Shareholder of a Series, such Shareholder shall
be paid solely out of the funds and property of such Series of the
Trust. Upon liquidation or termination of a Series of the Trust,
Shareholders of such Series shall be entitled to receive a pro rata
share of the net assets of such Series, except as provided in Section
5.15 hereof. A Shareholder of a particular Series of the Trust shall
not be entitled to participate in a derivative or class action on
behalf of any other Series or the Shareholders of any other Series of
the Trust.
The establishment and designation of any Series of Shares shall be
effective upon the execution by a majority of the then Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such Series, or as otherwise provided in such instrument. The
Trustees may by an instrument executed by a majority of their number abolish any
Series and the establishment and designation thereof. Except as otherwise
provided in this Article V, the Trustees shall have the power to determine the
designations, preferences, privileges, limitations and rights, of each Class and
Series of Shares. Each instrument referred to in this paragraph shall have the
status of an amendment to this Declaration.
Section 5.14. Assent to Declaration of Trust. Every Shareholder, by
virtue of having become a shareholder, shall be held to have expressly assented
and agreed to the terms hereof and to have become a party hereto.
Section 5.15. Class Designation. The Trustees, in their discretion, may
authorize the division of the Shares of the Trust, or, if any Series be
established, the Shares of any Series, into two or more Classes, and the
different Classes shall be established and designated, and the variations in the
relative rights and preferences as between the different Classes shall be fixed
and determined, by the Trustees; provided, that all Shares of the Trust or of
any Series shall be identical to all other Shares of the Trust or the same
Series, as the case may be, except that there may be variations between
different Classes as to allocation of expenses, right of redemption, special and
relative rights as to dividends and on liquidation, conversion rights, and
conditions under which the several Classes shall have separate voting rights.
All references to Shares in this Declaration shall be deemed to be Shares of any
or all Classes as the context may require.
(a) All provisions herein relating to the Trust, or
any Series of the Trust, shall apply equally to each Class of Shares of
the Trust or of any Series of the Trust, except as the context requires
otherwise.
(b) The number of Shares of each Class that may be
issued shall be unlimited. The Trustees may classify or reclassify any
Shares or any Series of any Shares into one or more Classes that may be
established and designated from time to time. The Trustees may hold as
treasury Shares (of the same or some other Class), reissue for such
consideration and on such terms as they may determine, or cancel any
Shares of any Class reacquired by the Trust at their discretion from
time to time.
(c) Liabilities, expenses, costs, charges and
reserves related to the distribution of, and other identified expenses
that should properly be allocated to, the Shares of a particular Class
may be charged to and borne solely by such Class and the bearing of
expenses solely by a Class of Shares may be appropriately reflected (in
a manner determined by the Trustees) and cause differences in the net
asset value attributable to, and the dividend, redemption and
liquidation rights of, the Shares of different Classes. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees
shall be conclusive and binding upon the Shareholders of all Classes
for all purposes.
(d) The establishment and designation of any Class of
Shares shall be effective upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and
designation and the relative rights and preferences of such Class, or
as otherwise provided in such instrument. The Trustees may, by an
instrument executed by a majority of their number, abolish any Class
and the establishment and designation thereof. Each instrument referred
to in this paragraph shall have the status of an amendment to this
Declaration.
ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
Section 6.1. Redemption of Shares. All Shares of the Trust shall
be redeemable, at the redemption price determined in the manner set out in
this Declaration. Redeemed or repurchased Shares may be resold by the Trust.
The Trust shall redeem the Shares upon the appropriately verified
written application of the record holder thereof (or upon such other form of
request as the Trustees may determine) at such office or agency as may be
designated from time to time for that purpose in the Trust's then effective
registration statement under the Securities Act of 1933. The Trustees may from
time to time specify additional conditions, not inconsistent with the 1940 Act,
regarding the redemption of Shares in the Trust's then effective registration
statement under the Securities Act of 1933.
Section 6.2. Price. Shares shall be redeemed at their net asset value
determined as set forth in Section 7.1 hereof as of such time as the Trustees
shall have theretofore prescribed by resolution. In the absence of such
resolution, the redemption price of Shares deposited shall be the net asset
value of such Shares next determined as set forth in Section 7.1 hereof after
receipt of such application.
Section 6.3. Payment. Payment for such Shares shall be made in cash or
in property out of the assets of the relevant Series of the Trust to the
Shareholder of record at such time and in the manner, not inconsistent with the
1940 Act or other applicable laws, as may be specified from time to time in the
Trust's then effective registration statement under the Securities Act of 1933,
subject to the provisions of Section 6.4 hereof.
Section 6.4. Effect of Suspension of Determination of Net Asset Value.
If, pursuant to Section 6.9 hereof, the Trustees shall declare a suspension of
the determination of net asset value, the rights of Shareholders (including
those who shall have applied for redemption pursuant to Section 6.1 hereof but
who shall not yet have received payment) to have Shares redeemed and paid for by
the Trust shall be suspended until the termination of such suspension is
declared. Any record holder who shall have his redemption right so suspended
may, during the period of such suspension, by appropriate written notice of
revocation at the office or agency where application was made, revoke any
application for redemption not honored and withdraw any certificates on deposit.
The redemption price of Shares for which redemption applications have not been
revoked shall be the net asset value of such Shares next determined as set forth
in Section 7.1 after the termination of such suspension, and payment shall be
made within seven (7) days after the date upon which the application was made
plus the period after such application during which the determination of net
asset value was suspended.
Section 6.5. Repurchase by Agreement. The Trust may repurchase Shares
directly, or through the Distributor or another agent designated for the
purpose, by agreement with the owner thereof at a price not exceeding the net
asset value per Share determined as of the time when the purchase or contract of
purchase is made or the net asset value as of any time which may be later
determined pursuant to Section 7.1 hereof, provided payment is not made for the
Shares prior to the time as of which such net asset value is determined.
Section 6.6. Redemption at the Option of the Trust. The Trust shall
have the right at its option and at any time to redeem Shares of any Shareholder
at the net asset value thereof as determined in accordance with the Bylaws, and
to refuse to transfer or issue new Shares or other securities of the Trust to
such Shareholder: (i) if at such time such Shareholder owns fewer Shares than,
or Shares having an aggregate net asset value of less than, an amount determined
from time to time by the Trustees; or (ii) to the extent that such Shareholder
owns Share of a particular series of Shares or Class thereof equal to or in
excess of a percentage of the outstanding Shares of that series or Class thereof
determined from time to time by the Trustees; or (iii) to the extent that such
Shareholder owns Shares of the Trust representing a percentage equal to or in
excess of such percentage of the aggregate number of outstanding Shares of the
Trust or the aggregate net asset value of the Trust determined from time to time
by the Trustees.
Section 6.7. Reductions in Number of Outstanding Shares Pursuant to Net
Asset Value Formula. The Trust may also reduce the number of Outstanding Shares
pursuant to the provisions of Section 7.3.
Section 6.8. Suspension of Right of Redemption. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary weekend and holiday closings, (ii)
during which trading on the New York Stock Exchange is restricted, (iii) during
which an emergency exists as a result of which disposal by the Trust of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Trust fairly to determine the value of its net assets, or
(iv) during any other period when the Commission may for the protection of
Shareholders of the Trust by order permit suspension of the right of redemption
or postponement of the date of payment or redemption; provided that applicable
rules and regulations of the Commission shall govern as to whether the
conditions prescribed in (ii), (iii), or (iv) exist. Such suspension shall take
effect at such time as the Trust shall specify but not later than the close of
business on the business day next following the declaration of suspension, and
thereafter there shall be no right of redemption or payment on redemption until
the Trust shall declare the suspension at an end, except that the suspension
shall terminate in any event on the first day on which said stock exchange shall
have reopened or the period specified in (ii) or (iii) shall have expired as to
which in the absence of an official ruling by the Commission, the determination
of the Trust shall be conclusive). In the case of a suspension of the right of
redemption, a Shareholder may either withdraw his request for redemption or
receive payment based on the net asset value existing after the termination of
the suspension.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Section 7.1. Net Asset Value. The value of the assets of the Trust or
any Series of the Trust shall be determined by appraisal of the securities of
the Trust or allocated to such Series, such appraisal to be on the basis of such
method as shall be deemed to reflect the fair value thereof, determined in good
faith by or under the direction of the Trustees. From the total value of said
assets, there shall be deducted all indebtedness, interest, taxes, payable or
accrued, including estimated taxes on unrealized book profits, expenses and
management charges accrued to the appraisal date, net income determined and
declared as a distribution and all other items in the nature of liabilities
attributable to the Trust or such Series or Class thereof which shall be deemed
appropriate. The net asset value of a Share shall be determined by dividing the
net asset value of the Class, or if no Class has been established, of the
Series, or, if no Series has been established, of the Trust, by the number of
Shares of that Class, or Series, or of the Trust, as applicable, outstanding.
The net asset value of Shares of the Trust or any Class or Series of the Trust
shall be determined pursuant to the procedure and methods prescribed or approved
by the Trustees in their discretion and as set forth in the most recent
Registration Statement of the Trust as filed with the Securities and Exchange
Commission pursuant to the requirements of the Securities Act of 1933, as
amended, the 1940 Act, as amended, and the Rules thereunder. The net asset value
of the Shares shall be determined at least once on each business day, as of the
close of trading on the New York Stock Exchange or as of such other time or
times as the Trustees shall determine.
The power and duty to make the daily calculations may be delegated by
the Trustees to the Investment Adviser, the Custodian, the Transfer Agent or
such other Person as the Trustees may determine by resolution or by approving a
contract which delegates such duty to another Person. The Trustees may suspend
the daily determination of net asset value to the extent permitted by the 1940
Act.
Section 7.2. Distributions to Shareholders. The Trustees shall from
time to time distribute ratably among the Shareholders of the Trust or a Series
such proportion of the net profits, surplus (including paid-in surplus),
capital, or assets of the Trust or such Series held by the Trustees as they may
deem proper. Such distributions may be made in cash or property (including
without limitation any type of obligations of the Trust or such Series or any
assets thereof), and the Trustees may distribute ratably among the Shareholders
additional Shares of the Trust or such Series issuable hereunder in such manner,
at such times, and on such terms as the Trustees may deem proper. Such
distributions may be among the Shareholders of record at the time of declaring a
distribution or among the Shareholders of record at such other date or time or
dates or times as the Trustees shall determine. The Trustees may in their
discretion determine that, solely for the purposes of such distributions,
Outstanding Shares shall exclude Shares for which orders have been placed
subsequent to a specified time on the date the distribution is declared or on
the next preceding day if the distribution is declared as of a day on which
Boston banks are not open for business, all as described in the registration
statement under the Securities Act of 1933. The Trustees may always retain from
the net profits such amount as they may deem necessary to pay the debts or
expenses of the Trust or the Series or to meet obligations of the Trust or the
Series, or as they may deem desirable to use in the conduct of its affairs or to
retain for future requirements or extensions of the business. The Trustees may
adopt and offer to Shareholders such dividend reinvestment plans, cash dividend
payout plans or related plans as the Trustees shall deem appropriate. The above
provisions may be modified to the extent required by a plan adopted by the
Trustees to establish Classes of Shares of the Trust or of a Series.
Inasmuch as the computation of net income and gains for Federal income
tax purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust or the Series to avoid or reduce liability for taxes.
Section 7.3. Determination of Net Income; Constant Net Asset Value;
Reduction of Outstanding Shares. Subject to Section 5.13 and Section 5.15
hereof, the net income of the Trust or any Series shall be determined in such
manner as the Trustees shall provide by resolution. Expenses of the Trust or a
Series, including the advisory or management fee, shall be accrued each day.
Such net income may be determined by or under the direction of the Trustees as
of the close of trading on the New York Stock Exchange on each day on which such
Exchange is open or as of such other time or times as the Trustees shall
determine, and, except as provided herein, all the net income of the Trust or
any Series, as so determined, may be declared as a dividend on the Outstanding
Shares of the Trust or such Series. If, for any reason, the net income of the
Trust or any Series, determined at any time is a negative amount, the Trustees
shall have the power with respect to the Trust or such Series (i) to offset each
Shareholder's pro rata share of such negative amount from the accrued dividend
account of such Shareholder, or (ii) to reduce the number of Outstanding Shares
of the Trust or such Series by reducing the number of Shares in the account of
such Shareholder by that number of full and fractional Shares which represents
the amount of such excess negative net income, or (iii) to cause to be recorded
on the books of the Trust or such Series an asset account in the amount of such
negative net income, which account may be reduced by the amount, provided that
the same shall thereupon become the property of the Trust or such Series with
respect to the Trust or such Series and shall not be paid to any Shareholder, of
dividends declared thereafter upon the Outstanding Shares of the Trust or such
Series on the day such negative net income is experienced, until such asset
account is reduced to zero; or (iv) to combine the methods described in clauses
(i) and (ii) and (iii) of this sentence, in order to cause the net asset value
per Share of the Trust or such Series to remain at a constant amount per
Outstanding Share immediately after each such determination and declaration. The
Trustees shall also have the power to fail to declare a dividend out of net
income for the purpose of causing the net asset value per Share to be increased
to a constant amount. The Trustees shall not be required to adopt, but may at
any time adopt, discontinue or amend the practice of maintaining the net asset
value per Share of the Trust or a Series at a constant amount.
Section 7.4. Allocation Between Principal and Income. The Trustees
shall have full discretion to determine whether any cash or property received
shall be treated as income or as principal and whether any item of expense shall
be charged to the income or the principal account, and their determination made
in good faith shall be conclusive upon the Shareholders. In the case of stock
dividends received, the Trustees shall have full discretion to determine, in the
light of the particular circumstances, how much, if any, of the value thereof
shall be treated as income, the balance, if any, to be treated as principal.
Section 7.5. Power to Modify Foregoing Procedures. Notwithstanding any
of the foregoing provisions of this Article VII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
Share net asset value or net income, or the declaration and payment of dividends
and distributions as they may deem necessary or desirable.
ARTICLE VIII
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.
Section 8.1. Duration. The Trust shall continue without
limitation of time but subject to the provisions of this Article VIII.
Section 8.2. Termination of Trust or the Series of the Trust. (a) The
Trust or any Series of the Trust may be terminated by an instrument in writing
signed by a majority of the Trustees, or by the affirmative vote of the holders
of two-thirds of the Shares of the Trust or Series outstanding and entitled to
vote, at any meeting of Shareholders. Upon the termination of the Trust or any
Series,
(i) the Trust or any Series shall carry on no business
except for the purpose of winding up its affairs;
(ii) the Trustees shall proceed to wind up the affairs of the
Trust or Series and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust or Series
shall have been wound up, including the power to fulfill or discharge
the contracts of the Trust or Series, collect its assets, sell, convey,
assign, exchange, transfer or otherwise dispose of all or any part of
the remaining Trust Property or property of the Series to one or more
persons at public or private sale for consideration which may consist
in whole or in part of cash, securities or other property of any kind,
discharge or pay its liabilities, and do all other acts appropriate to
liquidate its business; and
(iii) after paying or adequately providing for the payment of
all liabilities, and upon receipt of such releases, indemnities and
refunding agreements as they deem necessary for their protection, the
Trustees may distribute the remaining Trust Property or property of the
Series, in cash or in kind or partly each, among the Shareholders of
the Trust or Series according to their respective rights.
(b) After termination of the Trust or any Series and distribution to
the Shareholders as herein provided, a majority of the Trustees shall execute
and lodge among the records of the Trust an instrument in writing setting forth
the fact of such termination, and the Trustees shall thereupon be discharged
from all further liabilities and duties hereunder, and the rights and interests
of all Shareholders of the Trust or Series shall thereupon cease.
Section 8.3. Amendment Procedure. (a) This Declaration may be amended
by a vote of the holders of a majority of the Shares outstanding and entitled to
vote, except that an amendment which shall affect the holders of one or more
series or Classes of Shares but not the holders of all outstanding series or
Classes shall be authorized by vote of the Shareholders holding a majority of
the Shares entitled to vote of each series or Class affected and no vote of
Shareholders of a series or Class not affected shall be required. Amendments
shall be effective upon the taking of action as provided in this section or at
such later time as shall be specified in the applicable vote or instrument. The
Trustees may also amend this Declaration without the vote or consent of
Shareholders if they deem it necessary to conform this Declaration to the
requirements of applicable federal or state laws or regulations or the
requirements of the regulated investment company provisions of the Internal
Revenue Code (including those provisions of such Code relating to the retention
of the exemption from federal income tax with respect to dividends paid by the
Trust out of interest income received on Municipal Bonds), but the Trustees
shall not be liable for failing so to do. The Trustees may also amend this
Declaration without the vote or consent of Shareholders if they deem it
necessary or desirable to change the name of the Trust, to supply any omission,
to cure, correct or supplement any ambiguous, defective or inconsistent
provision hereof, or to make any other changes in the Declaration which do not
materially adversely affect the rights of Shareholders hereunder.
(b) Nothing contained in this Declaration shall permit the amendment of
this Declaration so as to impair the exemption from personal liability of the
Shareholders, Trustees, officers, employees and agents of the Trust or to permit
assessments upon Shareholders.
(c) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Shareholders or by the
Trustees as aforesaid or a copy of the Declaration, as amended, and executed by
a majority of the Trustees, shall be conclusive evidence of such amendment when
lodged among the records of the Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be terminated or amended in any respect by the
affirmative vote of a majority of the Trustees or by an instrument signed by a
majority of the Trustees.
Section 8.4. Merger, Consolidation and Sale of Assets. The Trust or any
Series thereof may merge or consolidate with any other corporation, association,
trust or other organization or may sell, lease or exchange all or substantially
all of the Trust Property or the property of any Series, including its good
will, upon such terms and conditions and for such consideration when and as
authorized by an instrument in writing signed by a majority of the Trustees.
Section 8.5. Incorporation. When authorized by an instrument in writing
signed by a majority of the Trustees, the Trustees may cause to be organized or
assist in organizing a corporation or corporations under the laws of any
jurisdiction or any other trust, partnership, association or other organization
to take over all of the Trust Property or the property of any Series or to carry
on any business in which the Trust or the Series shall directly or indirectly
have any interest, and to sell, convey and transfer the Trust Property or the
property of any Series to any such corporation, trust, association or
organization in exchange for the Shares or securities thereof or otherwise, and
to lend money to, subscribe for the Shares or securities of, and enter into any
contracts with any such corporation, trust, partnership, association or
organization, or any corporation, partnership, trust, association or
organization in which the Trust or the Series holds or is about to acquire
shares or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any Series or any successor thereto and any
such corporation, trust, partnership, association or other organization if and
to the extent permitted by law, as provided under the law then in effect.
Nothing contained herein shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in organizing one or more
corporations, trusts, partnerships, associations or other organizations and
selling, conveying or transferring a portion of the Trust Property to such
organization or entities.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Filing. This Declaration and any amendment hereto shall be
filed in the office of the Secretary of the Commonwealth of Massachusetts and in
such other places as may be required under the laws of the Commonwealth of
Massachusetts and may also be filed or recorded in such other places as the
Trustees deem appropriate. Unless the amendment is embodied in an instrument
signed by a majority of the Trustees, each amendment filed shall be accompanied
by a certificate signed and acknowledged by a Trustee stating that such action
was duly taken in a manner provided herein. A restated Declaration, integrating
into a single instrument all of the provisions of the Declaration which are then
in effect and operative, may be executed from time to time by a majority of the
Trustees and shall, upon filing with the Secretary of the Commonwealth of
Massachusetts, be conclusive evidence of all amendments contained therein and
may hereafter be referred to in lieu of the original Declaration and the various
amendments thereto. The restated Declaration may include any amendment which the
Trustees are empowered to adopt, whether or not such amendment has been adopted
prior to the execution of the restated Declaration.
Section 9.2. Governing Law. This Declaration is executed by the
Trustees and delivered in the Commonwealth of Massachusetts and with reference
to the internal laws thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
according to the internal laws of said State without regard to the choice of law
rules thereof.
Section 9.3. Counterparts. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
Section 9.4. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or
Shareholders, (b) the due authorization of the execution of any instrument or
writing, (c) the form of any vote passed at a meeting of Trustees or
Shareholders, (d) the fact that the number of Trustees or Shareholders present
at any meeting or executing any written instrument satisfies the requirements of
this Declaration, (e) the form of any By-laws adopted by or the identity of any
officers elected by the Trustees, or (f) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any Person dealing with the
Trustees and their successors.
Section 9.5. Provisions in Conflict with Law or Regulations.
(a) The provisions of this Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have constituted
a part of this Declaration; provided, however, that such determination shall not
affect any of the remaining provisions of this Declaration or render invalid or
improper any action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provisions in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
18th day of November, 1998.
/s/ JOSEPH R. FLEMING
Joseph R. Fleming, Trustee
Dechert Price & Rhoads
Ten Post Office Square South
Boston, MA 02109
THE COMMONWEALTH OF MASSACHUSETTS
County of Suffolk November 18, 1998
Then personally appeared the above-named Joseph R. Fleming, who
acknowledged the foregoing instrument to be of his own free act and deed.
Before me,
Notary Public
My commission expires:
