As filed with the Securities and Exchange Commission on February 12, 1999
(File Nos. 333-67705 and
811- ).
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 1 [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 Pre-Effective Amendment No. 1 to the Registration Statement of
Mackenzie Solutions (the "Registrant") contains the Prospectus and Statement of
Additional Information to be used with the five series that comprise the
Registrant's International Solutions asset allocation program.
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 PERFORMANCE :
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; Additional Information About Investment Strategies And
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: Shareholder Information
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: Investment Advisory And Other Services
ITEM 14 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES: Trustees
and Officers
ITEM 15 INVESTMENT ADVISORY AND OTHER SERVICES: Investment Advisory
And Other Services
ITEM 16 BROKERAGE ALLOCATION AND OTHER PRACTICES: Brokerage Allocation
ITEM 17 CAPITAL STOCK AND OTHER SECURITIES: 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 April ___, 1999
INTERNATIONAL SOLUTIONS
International Solutions I - Conservative Growth
International Solutions II - Balanced Growth
International Solutions III - Moderate Growth
International Solutions IV - Long-term Growth
International Solutions V - Aggressive Growth
International Solutions is an asset allocation program currently consisting of
the five separate investment portfolios ("Funds") listed above, each of which is
a series of Mackenzie Solutions (a registered open-end investment company). The
Funds enable investors to tailor their exposure to different investment
techniques in the international securities markets (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
SUMMARY................................................................... 3
ADDITIONAL INFORMATION ABOUT INVESTMENT STRATEGIES AND RISKS...............12
MANAGEMENT.................................................................17
SHAREHOLDER INFORMATION....................................................17
APPENDIX A: INVESTMENT OBJECTIVES AND POLICIES OF THE UNDERLYING FUNDS....33
RECEIVING ADDITIONAL INFORMATION ABOUT THE FUNDS...........................37
SHAREHOLDER INQUIRIES......................................................37
<PAGE>
SUMMARY
The International Solutions Funds each have their own investment objectives,
strategies and risk profiles, 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
international equity mutual funds that invest largely in stocks to achieve
growth. Other underlying funds are international bond mutual funds that
emphasize total return. The underlying funds may focus their investments in
single countries or geographic regions, and in established or emerging markets
and economies.
INVESTMENT OBJECTIVES:
International Solutions I Primarily capital preservation with moderate current
I - Conservative Growth: income, and secondarily capital appreciation.
International Solutions A balance of capital appreciation and capital
II - Balanced Growth: preservation, with moderate current income.
International Solutions Primarily capital appreciation, and secondarily
III - Moderate Growth: preservation of capital.
International Solutions
IV - Long-term Growth: Capital appreciation without regard to current
income.
International Solutions
V - Aggressive Growth: Aggressive capital appreciation without regard to
current income.
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 foreign
securities. As a result, an investment in a Fund is effectively
diversified over a large number of different non-U.S. issuers. Each
Fund may invest up to 50% of its assets in Ivy Funds.
The underlying funds that comprise each Fund's portfolio are selected
using investment analysis techniques that are based on "Modern
Portfolio Theory", which provides an analytical framework for combining
return, risk, cost and accounting data into a coherent portfolio
structure. This investment approach involves an initial estimate of
each underlying fund's overall risk/return profile based on an analysis
of its long-term asset return patterns. Each Fund's portfolio is then
constructed with an emphasis on these long-term risk and return
considerations, with very little shifting of a Fund's assets among the
underlying funds to any significant extent in the short-term. As a
result, the composition of each Fund's portfolio is expected to be
relatively static with only minor periodic adjustments in response to
changing market conditions.
The basic elements of the underlying fund selection process are as
follows:
a long-term return forecast is created for each underlying fund;
the risk of each underlying fund is estimated based on its
perceived potential for loss or gain and short- and long-term
returns;
the current and historical investment style of each underlying
fund is evaluated;
the relative diversification potential of each underlying fund is
measured based on its perceived potential to reduce the loss or
gain of each Fund; and
a cross-checking analysis is performed to help ensure that all
resulting portfolios conform to professional standards of asset
class and geographic diversification.
The information yielded by the preceding analyses is fed through a
specially designed computer model that produces a range of "efficient"
portfolios that, given these inputs, have the highest expected
long-term returns for their level of risk. A mix of underlying funds is
then selected for each Fund at a level of risk that is appropriate in
light of the Fund's investment objective, thereby providing a range of
investment choices for investors across a broad spectrum of risk
preferences.
The Funds' portfolios represent selections at varying points along a
risk/return continuum, from lower-risk and lower expected return to
higher risk and higher-expected return. The determination as to which
underlying fund shares a Fund will purchase, and in what amount, is
essentially a function of how the various underlying funds' return and
risk profiles combine at that point in the continuum that matches the
Fund's investment objective. For example, since bonds are generally
perceived as less risky than stocks, Funds at the more conservative end
of the risk/return continuum (such as International Solutions I) will
contain a higher proportion of bond underlying funds, and Funds at the
other end of the continuum (such as International Solutions IV and V)
will contain a higher proportion of underlying funds that invest
primarily in stocks.
Other factors that may be considered in selecting the underlying funds
that will comprise a Fund's portfolio are:
standard accounting-based valuation and risk measures;
an underlying fund manager's investment style and decision-making
process;
capital market statistics (such as alpha, beta and R2); and
cost factors, such as an underlying fund's expense ratio and
administrative overhead.
Following is a summary of each Fund's portfolio composition and
principal investment strategies in light of the underlying fund
selection process described above, and a brief description of the types
of investors for whom each Fund may be appropriate:
Fund: Principal Strategies: Who Should Invest:*
Invests 35-50% in May be appropriate for relatively
International bond funds and 50-65% conservative international investors
Solutions I in international equity seeking a prudent trade-off between
(Conservative funds. equity and fixed income investments.
Growth):
International Invests 20-35% in May be appropriate for international
Solutions II international bond investors with limited tolerance for
(Balanced funds and 65-80% in year-to-year volatility.
Growth): international equity
funds.
International Invests 75-90% in May be appropriate for moderately
Solutions III international equity aggressive international investors
(Moderate funds and 10-25% in who are willing to bear a moderate
Growth): international bonds level of risk to achieve capital
funds. risk to achieve capital appreciation.
International Invests exclusively in May be appropriate for international
Solutions IV international equity investors seeking higher potential
(Long-term funds, with 20-35% growth over the long-term while being
Growth): invested in emerging willing to sustain significant
market equity funds. fluctuations in capital value in the
short-term.
International Invests exclusively in May be appropriate for aggressive
Solutions V international equity investors who have a longer time
(Aggressive funds, with 35-50% horizon for their investments and are
Growth): invested in emerging willing to bear a higher level of
market equity funds. 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. You should consult with your financial advisor
to determine which Fund or combination of Funds, if any, may
be appropriate in light of your individual financial needs and
risk tolerance.
PRINCIPAL RISKS:
ALL FUNDS:
As with any mutual fund, you may lose money by investing in a Fund.
Certain risks of loss are inherent in the Funds' international
investment emphasis and in the way their portfolios are structured.
Specifically, since the Funds' portfolios are comprised almost
exclusively of the shares of other mutual funds that invest heavily in
foreign securities, 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 foreign markets and securities
in which the underlying fund is invested). Among the chief risks
associated with this investment approach are the following:
MANAGEMENT RISK: The underlying funds that comprise each Fund's
portfolio are separately managed and their securities are
purchased on the basis of a wide range of different investment
strategies and management styles. An underlying fund's manager
might not select securities that perform as well as the securities
held by other mutual funds that are not investment options for the
Funds, which would diminish the returns of those Funds that hold
the underlying fund's shares. Each Fund's manager could also
misjudge the expected investment performance of the underlying
funds that are candidates for inclusion in the Fund's portfolio,
resulting in similar performance shortfalls.
GENERAL MARKET RISK: It is always possible that the underlying
funds held in a Fund's portfolio will not produce favorable
returns, even where "management risk" is not a factor.
Specifically, 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. An underlying fund will
experience some amount of price volatility 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.
FOREIGN SECURITY RISK: Investing in foreign securities involves a
number of economic, financial and political considerations that
are not associated with the U.S. markets and that could affect a
Fund's performance favorably or unfavorably depending upon
prevailing conditions at any given time.
Among these potential risks are:
greater price volatility;
comparatively weak supervision and regulation of securities
exchanges, brokers and issuers;
higher brokerage costs;
fluctuations in foreign currency exchange rates and related
conversion costs;
adverse tax consequences; and
settlement delays.
The risks of investing in foreign securities are more acute in
countries with new or developing economies (see "Emerging Market
Securities" in the "Additional Information About Investment Strategies
And Risks" section).
FUND-SPECIFIC RISKS:
The degree to which each Fund is affected by the performance of a
single underlying fund will depend upon the relative weight of the
underlying fund's shares in the Fund's portfolio. The weightings for
each Fund, by general underlying fund type, are captured by the
percentage figures in the table that appears in the preceding section.
Following is information about the general risks associated with each
Fund's investment strategies. Other important information about the
risks to which the Funds and their investors are exposed indirectly by
virtue of the investment activities of the underlying funds appears in
the section entitled "Additional Information About Investment
Strategies And Risks".
INTERNATIONAL SOLUTIONS I - CONSERVATIVE GROWTH: By investing as
much as 50% of its assets in international fixed income funds,
this Fund will more susceptible than the other Funds to losses
caused by a downturn in the international bond markets.
INTERNATIONAL SOLUTIONS II - BALANCED GROWTH: This Fund's higher
emphasis (relative to the Conservative Growth Fund) on underlying
funds that invest in equity securities make it less susceptible to
bond market losses, but may lead to moderately increased
volatility.
INTERNATIONAL SOLUTIONS III - MODERATE GROWTH: The underlying
funds that comprise this Fund invest more in equity securities
than fixed income securities, which increases the Fund's exposure
to downturns in the equity markets and is likely to cause the Fund
to experience greater fluctuations in value.
INTERNATIONAL SOLUTIONS IV - LONG-TERM GROWTH: By investing
exclusively in underlying funds that in turn invest heavily in
equity securities, this Fund is expected to be more volatile than
those Funds with more balanced portfolios. This Fund also has a
moderate emerging markets exposure, and is susceptible to the
increased risks associated with those markets.
INTERNATIONAL SOLUTIONS V - AGGRESSIVE GROWTH: Since this Fund
invests exclusively in equity underlying funds that may also have
significant holdings in emerging markets securities, it is more
susceptible to wide fluctuations in value than the other Funds.
FEES AND EXPENSES:
The following tables describe the fees and expenses that you may pay if you buy
and hold a Fund's shares:
Shareholder Fees (fees paid directly from your investment):
- ------------ ----------------------- ---------------------- ------------------
Maximum Sales Maximum Deferred
Charge (Load) Sales Charge [Maximum
Imposed on Purchases (Load) (as a Account Fee]
All Funds: (as a percentage percentage of
of offering price) original purchase
price
- ------------ --------------------- ------------------------ ------------------
Class A 5.75% None _____
Class B None 5.00% _____
Class C None 1.00% _____
Class I None None _____
Advisor Class None None _____
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
<TABLE>
---------------- -------------- --------------- ------------- ----------------- ----------------- ----------------
<CAPTION>
Distribution Total Annual Expenses Waived Net Annual
Management and/or Other Fund Operating or Fund Operating
Fees Service Expenses(1) Expenses(1) Reim-bursed(1)(2) Expenses(1)(2)
(12b-1) Fees
---------------- -------------- --------------- ------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
International
Solutions I
-Conservative
Growth:
Class A .10% 0.25% ______% ______% ______% ______%
Class B .10% 1.00% ______% ______% ______% ______%
Class C .10% 1.00% ______% ______% ______% ______%
Class I .10% None ______% ______% ______% ______%
Advisor Class .10% None ______% ______% ______% ______%
International
Solutions II
-Balanced
Growth:
Class A .10% 0.25% ______% ______% ______% ______%
Class B .10% 1.00% ______% ______% ______% ______%
Class C .10% 1.00% ______% ______% ______% ______%
Class I .10% None ______% ______% ______% ______%
Advisor Class .10% None ______% ______% ______% ______%
International
Solutions III
-Moderate
Growth:
Class A .10% 0.25% ______% ______% ______% ______%
Class B .10% 1.00% ______% ______% ______% ______%
Class C .10% 1.00% ______% ______% ______% ______%
Class I .10% None ______% ______% ______% ______%
Advisor Class .10% None ______% ______% ______% ______%
International
Solutions IV -
Long-term
Growth:
Class A .10% 0.25% ______% ______% ______% ______%
Class B .10% 1.00% ______% ______% ______% ______%
Class C .10% 1.00% ______% ______% ______% ______%
Class I .10% None ______% ______% ______% ______%
Advisor Class .10% None ______% ______% ______% ______%
International
Solutions V
Aggressive
Growth:
Class A .10% 0.25% ______% ______% ______% ______%
Class B .10% 1.00% ______% ______% ______% ______%
Class C .10% 1.00% ______% ______% ______% ______%
Class I .10% None ______% ______% ______% ______%
Advisor Class .10% None ______% ______% ______% ______%
---------------- -------------- --------------- ------------- ----------------- ----------------- ----------------
</TABLE>
(1) Based on estimated amounts for each Fund's initial fiscal year ending
December 31, 1999.
(2) Ivy Management, Inc., the Funds' Manager, has agreed to waive and/or
reimburse each Fund's fees and expenses to the extent necessary to ensure
that the Funds' Annual Fund Operating Expenses do not exceed the amounts
shown in the far right column above.
Each Fund's shareholders will indirectly bear the Fund's proportionate share of
fees and expenses charged by the underlying funds in which the Fund is invested.
The range for the average weighted expense ratio borne by each Fund, based on
the underlying funds' most recent annual reports, is expected to be as follows:
International Solutions I -- ___% - ___%; International Solutions II -- ___% -
___%; International Solutions III -- ___% - ___%; International Solutions IV --
___% - ___%; and International Solutions V -- ___% - ___%. (The expected expense
ratios of the underlying funds are stated as a range since the average assets of
the Fund invested in each of the underlying funds will fluctuate.)
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:
<PAGE>
- --------------------------------- -------------------- --------------------
One year: Three years:
- --------------------------------- -------------------- --------------------
International 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
International 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
International Solutions III -
Moderate 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
Advisor Class
International 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
International Solutions V -
Aggressive 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
- --------------------------------- -------------------- --------------------
* 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.
<PAGE>
ADDITIONAL INFORMATION ABOUT INVESTMENT STRATEGIES AND RISKS
The central premise of the International Solutions asset allocation program is
that a well diversified investment portfolio tends to be less volatile than a
portfolio that emphasizes a particular type of investment category or technique,
such as stocks, bonds, or a particular country or industry sector. Consistent
with this premise, the Funds seek a high level of diversification for investors
at most levels of risk tolerance 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. What differentiates each Fund from the other
four is largely a matter of the relative mix of equity and fixed income
underlying funds held in the Fund's portfolio. Historically, foreign equity
securities have been considered a less risky than international investment-grade
bonds, and each Fund's investment strategy is tailored accordingly in light of
the Fund's particular investment objective.
INVESTMENT STRATEGY AND RISK PROFILES:
INTERNATIONAL SOLUTIONS I - CONSERVATIVE GROWTH: The primary investment
objective of the Conservative Growth Fund is capital preservation with moderate
current income, and secondarily capital appreciation. A number of the underlying
funds that make up the Conservative Growth Fund invest primarily in fixed income
securities, with limited exposure to equity securities and their associated
volatility. Because the Conservative Growth Fund has the highest weighting in
foreign bonds among the five Funds, it is expected to bear the lowest relative
overall risk. The Fund will have a moderate degree of exposure to the
international equity markets, however, making the Fund potentially more volatile
that a mutual fund that invests exclusively in fixed income securities or has
some portion of its assets invested in the United States.
INTERNATIONAL SOLUTIONS II - BALANCED GROWTH: The primary investment
objective of the Balanced Growth Fund is a balance of capital appreciation and
capital preservation, with moderate current income. The Fund's portfolio of
underlying funds is designed to expose the Fund to the growth opportunities that
equity investing offers while preserving some degree of the stability
historically associated with fixed income securities. The Fund's higher emphasis
(relative to International Solutions I Fund) on underlying funds that invest in
equity securities may lead to moderately increased volatility, but its equal
emphasis on fixed income securities reduces its overall risk relative to the
Moderate, Long-Term Growth and Aggressive Growth Funds.
INTERNATIONAL SOLUTIONS III - MODERATE GROWTH: The investment objective of
the Moderate Growth Fund is primarily capital appreciation, with preservation of
capital as secondary to this primary objective. The underlying funds that make
up the Moderate Growth Fund invest primarily in equity securities, with some
exposure to fixed income securities intended to mitigate losses that may occur
in the equity markets.
INTERNATIONAL SOLUTIONS IV - LONG-TERM GROWTH: The primary investment
objective of the Long-Term Growth Fund is capital appreciation without regard to
current income. The underlying funds that make up the Long-Term Growth Fund
invest primarily in equity securities, which are likely to cause greater
fluctuations in the Fund's share price than would be the case with International
Solutions I, II and III (which have varying degrees of exposure to the
historically more stable fixed income markets). The Long-Term Growth Fund also
has a moderate to high weighting in emerging markets (but less than the
Aggressive Growth Fund).
INTERNATIONAL SOLUTIONS V - AGGRESSIVE GROWTH: The investment objective of
the Aggressive Growth Fund is aggressive capital appreciation without regard to
current income. The underlying funds that comprise the Aggressive Growth Fund
may have significant holdings in emerging markets securities, which historically
have incurred greater social, political and economic risk than developed markets
and are therefore more volatile.
Each Fund may from time to time take a temporary defensive position and
invest without limit in U.S. government securities and short-term commercial
paper. When a Fund assumes such a defensive position it may not achieve its
investment objective. Of course, there can be no guarantee that a Fund will
achieve its investment objective even when it is not assuming a defensive
position.
INVESTMENT RISKS OF THE UNDERLYING FUNDS:
The main risks associated with investing in each Fund, such as "management
risk", "market risk" and "foreign securities risk", are described in the
"Principal Risks" section on page ___ of this Prospectus. Because the return on
your investment is tied so closely to the performance of the underlying funds,
following is a description of the types of securities in which the underlying
funds principally invest and their associated risks. The Funds most likely to be
affected by each investment technique are also indicated.
COMMON STOCKS: Many of the underlying funds invest primarily in common
stock. Common stock can be issued by companies to raise cash, and represents a
proportionate ownership interest in the issuing 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.
Most likely to be affected: All Funds.
DEBT SECURITIES: 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. A Fund's
portfolio is 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 tend to be more volatile
than bonds with shorter maturities.
Some of the underlying funds may invest a significant portion of their
assets in low-rated debt securities (sometimes referred to as "high yield" or
"junk" bonds). In general, low-rated debt securities 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 and could significantly
weaken the returns of any underlying fund that holds them in its portfolio.
An underlying fund may also have significant holdings in sovereign debt.
For a variety of reasons (such as cash flow problems, limited foreign reserves,
and political constraints), the governmental entity that controls the repayment
of sovereign debt may not be able or willing to repay the principal or interest
when due. A governmental entity's ability to honor its debt obligations to an
underlying fund may also be contingent on its receipt from others (such as the
International Monetary Union and more solvent foreign governments) of specific
disbursements, which may in turn be conditioned on the perceived health of the
governmental entity's economy and/or its implementation of economic reforms. If
any of these conditions fail, an underlying fund could lose the entire value of
its investment for an indefinite period of time.
Most likely to be affected: International Solutions I and II.
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
(see "Foreign Currencies" below);
comparatively weak government supervision and regulation of securities
exchanges, brokers and issuers;
non-uniform accounting, auditing and financial reporting standards;
unavailability of information about an issuer's securities and business
operations; and
settlement delays (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).
Most likely to be affected: All Funds.
EMERGING MARKET SECURITIES: The risks of investing in foreign securities
are heightened in countries with new or developing economies. Among these
additional risks are the following:
securities that are even less liquid and more volatile than those in more
developed foreign countries;
less stable governments that are susceptible to sudden adverse actions
(such as nationalization of businesses, restrictions on foreign ownership or
prohibitions against repatriation of assets);
increased settlement delays;
unusually high inflation rates (which in extreme cases can cause the value
of a country's assets to erode sharply);
restrictions on repatriation of capital;
unusually large currency fluctuations and currency conversion costs (see
"Foreign Currencies" below); and
high national debt levels (which may impede an issuer's payment of
principal and/or interest on external debt).
Most likely to be affected: International Solutions IV and V.
FOREIGN CURRENCIES: Investing in foreign securities typically involves the
use of foreign currencies. The value of an underlying fund's assets, as measured
in U.S. dollars, may be affected favorably or unfavorably by changes in foreign
currency exchange rates and exchange control regulations. Currency conversions
can also be costly.
Most likely to be affected: All Funds.
DEPOSITORY INSTRUMENTS: Many of the underlying funds invest in foreign
securities through the mechanism of sponsored and unsponsored "depository
receipts" and "depository shares," which are instruments that evidence ownership
of underlying securities issued by a U.S. or foreign corporation. Unsponsored
depository programs are organized independently without the cooperation of the
issuer of the underlying securities. As a result, information concerning the
issuer may not be as current or as readily available as in the case of sponsored
depository instruments, and their prices may be more volatile than if they were
sponsored by the issuers of the underlying securities.
Most likely to be affected: All Funds.
OTHER RISKS: The underlying funds can use a wide range of other investment
techniques to achieve their respective investment objectives, including zero
coupon bonds, illiquid securities, repurchase agreements, and derivative
transactions (such as options, futures, and foreign currency transactions). The
risks associated with these various techniques are described in each underlying
fund's prospectus, and some are summarized in the Funds' Statement of Additional
Information (which is available on request and without charge from the Funds'
distributor at the address printed on the back cover page). Any of these
investment techniques could cause an underlying fund to lose money if not used
successfully or if they are not practically available for investment purposes at
a time when their use would benefit the underlying fund.
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 after the close of the annual
or semi-annual period to which they relate. The investment objectives and
principal investment strategies of the underlying funds are summarized in
Appendix A to this Prospectus.
OTHER IMPORTANT INFORMATION:
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 could cause a Fund to lose
money).
EURO CONVERSION RISKS: On January 1, 1999, a new European currency
called the "Euro" was introduced and adopted for use by eleven European
countries. The transition to daily usage of the Euro, including
circulation of Euro bills and coins, will occur during the period from
January 1, 1999 through December 31, 2001. Certain European Union (EU)
members, including the United Kingdom, did not officially implement the
Euro on January 1, 1999 and may cause market disruptions when and if
they decide to do so. Where this occurs, the underlying funds (and
hence the Funds that hold their shares) could experience investment
losses.
MANAGEMENT
INVESTMENT ADVISOR:
Ivy Management, Inc. ("IMI"), located at Via Mizner Financial Plaza,
700 South Federal Highway, Boca Raton, Florida 33432, provides business
and asset allocation 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. A team of investment professionals, including one or more asset
allocation specialists, selects the underlying funds that comprise each
Fund's portfolio and determines when rebalancing of the relative mix of
funds within a Fund's portfolio may be appropriate in light of
prevailing market conditions. 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.
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
regular trading (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 A Class B Class C Class I Advisor 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 Sales Maximum None None None None
Charge 5.75%, with
options for a
reduced or
waiver of
initial sales
charge
- ---------------- --------------- ------------ ------------- --------- ----------
- ---------------- --------------- ------------ ------------- --------- ----------
CDSC None, except Maximum 5%, 1.00% for None None
on certain but the first
NAV purchases declining year
over six
years.
- ---------------- --------------- ------------ ---------------- ------- ---------
- ---------------- --------------- ------------ ---------------- ------- ---------
Service and 0.25% Service 0.25% Service 0.25% Service None None
Distribution fee fee and 0.75% fee and 0.75%
Fees Distribution Distribution
fee fee
- ---------------- --------------- ------------ ---------------- ------- ---------
* Minimum initial and subsequent investments for retirement plans are $25.
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
Dollar Amount
Subject to Charge
Year Since Purchase
--------------------- --------------------
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 a Fund'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 the expense ratio for
Class A, Class I and Advisor Class 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 International Solutions
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
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 International
Solutions 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 IMSC by 4:00 p.m. Eastern time to
be processed at the NAV for that day. Any redemption request 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 seven days (or longer in the case of shares
recently purchased by check) to send redemption proceeds.
HOW TO EXCHANGE YOUR FUND SHARES:
Shares of a 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. A Fund may therefore limit the frequency of
exchanges by a shareholder or cancel a shareholder's exchange
privilege if at any time it appears that such market timing
strategies are being used.
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 paid out of a Fund's net investment income (including
ordinary income dividends received by the Fund from an underlying fund)
and net short-term capital gains will be taxable to you as ordinary
income. If an underlying fund in which a Fund invests derives dividends
paid by U.S. corporations, a portion of the dividends paid by the Fund
may be eligible for the dividends-received deduction for corporate
shareholders. Distributions of net long-term capital gains earned by a
Fund (including long-term capital gain distributions received by the
Fund from an underlying fund) are taxable to you as long-term capital
gains, regardless of how long you have held your Fund shares. Fund
distributions are taxable to you in the same manner whether received in
cash or reinvested in additional Fund shares.
A distribution will be treated as paid to you on December 31 of the
current calendar year if it is declared by a Fund in October, November
or December with a record date in such a month and paid by the Fund
during January of the following calendar year.
Each year the Funds will notify you of the tax status of dividends and
other distributions.
Upon the sale or other disposition of your Fund shares, you may realize
a capital gain or loss which will be long-term or short-term, generally
depending upon how long you held your shares.
Each Fund may be required to withhold U.S. federal income tax at the
rate of 31% of all taxable distributions payable to you if you fail to
provide the Fund with your correct taxpayer identification number or to
make required certifications, or if you have been notified by the IRS
that you are subject to backup withholding. Backup withholding is not
an additional tax. Any amounts withheld may be credited against your
U.S. federal income tax liability.
Fund distributions also may be subject to state, local and foreign
taxes. You should consult your own tax adviser regarding the particular
tax consequences of an investment in a Fund.
* * * * *
<PAGE>
INTERNATIONAL SOLUTIONS
ACCOUNT APPLICATION
Please mail applications and checks to: Ivy Mackenzie Services Corp.,
P.O. Box 3022, Boca Raton, FL 33431-0922.
(This application should not be used for retirement accounts for
which Ivy is custodian.)
Account Number:
(Fund Use Only)
Dealer #:
Branch #:
Rep. I.D. #:
Acct. Type:
Soc Cd:
Div Cd:
CG Cd:
Exc Cd:
Red Cd:
1. REGISTRATION
/ / Individual / / Joint Tenant / / Estate / / UGMA/UTMA / /
Corporation / / Partnership / / Sole Proprietor / / Trust / / Other
Date of Trust
Owner, Custodian or Trustee
Co-owner or Minor
Minor's State of Residence
Street
City
State
Zip Code
Phone Number -- Day
Phone Number -- Evening
2. TAX ID
Citizenship: / / U.S. / / Other ________________
Social Security Number
Tax Identification Number
Under penalties of perjury, I certify by signing in Section 8 below
that: (1) the number shown in this section is my correct taxpayer
identification number (TIN), and (2) I am not subject to backup
withholding because: (a) I have not been notified by the Internal
Revenue Service (IRS) that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (b) the IRS
has notified me that I am no longer subject to backup withholding.
(Cross out item (2) if you have been notified by the IRS that you are
currently subject to backup withholding because of underreporting
interest or dividends on your tax return.) Please see the "Tax
Consequences" section of the Prospectus for additional information on
completing this section.
3. DEALER INFORMATION
The undersigned ("Dealer") agrees to all applicable provisions in this
Application, guarantees the signature and legal capacity of the
Shareholder, and agrees to notify IMSC of any purchases made under a
Letter of Intent or Rights of Accumulation.
Dealer Name
Branch Office Address
City
State
Zip Code
Representative's Name and Number
Representative's Phone Number
Authorized Signature of Dealer
4. INVESTMENTS
A. Enclosed is my check ($1,000 minimum) made payable to
International Solutions. Please invest it in Class A __ Class
B __ Class C __ Class I __or Advisor Class __ shares.
$ International Solutions I - Conservative Growth
$ __________________ International Solutions II - Balanced Growth
$ __________________ International Solutions III - Moderate Growth
$ __________________ International Solutions IV - Long-Term Growth
$ __________________ International Solutions V - Aggressive Growth
B. I qualify for an elimination of the sales charge due to the
following privilege (applies only to Class A shares):
__ New Letter of Intent (if ROA or 90-day backdate
privilege is applicable, provide account(s)
information below.)
__ ROA with the account(s) listed below.
__ Existing Letter of Intent with account(s) listed
below.
Fund Name(s)
Account Number(s)
If establishing a Letter of Intent, you will need to purchase
Class A shares over a thirteen-month period in accordance with
the provisions in the Prospectus. The Aggregate amount of
these purchases will be at least equal to the amount indicated
below (see Prospectus for minimum amount required for reduced
sales charges).
/ / $50,000
/ / $100,000
/ / $250,000
/ / $500,000
C. FOR DEALER USE
Confirmed trade orders: [Confirm Number, Number of Shares,
Trade Date]
5. DISTRIBUTION OPTIONS
I would like to reinvest dividends and capital gains into additional
shares in this account at net asset value unless a different option is
checked below.
/ / Reinvest all dividends and capital gains into additional
shares of a different International Solutions fund.
Fund Name
Account Number
/ / Pay all dividends in cash and reinvest capital gains into
additional shares in this Fund or a different International
Solutions fund.
Fund Name
Account Number
/ / Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN C OR D
ABOVE, BE:
/ / Sent to the address listed in the registration.
/ / Sent to the special payee listed in Section 7A
/ / (By Mail) 7B
/ / (By E.F.T.)
6. OPTIONAL SPECIAL FEATURES
A. / / Automatic Investment Method (AIM)
- I wish to invest _________________ / / once per month / /
twice / / 3 times / / 4 times
- My bank account will be debited on the _________ day of the
month
Please invest $___________________ each period starting in the
month of __________________ in
---------------------------.
Fund Name
/ / Class A
/ / Class B
/ / Class C
/ / Class I
/ / Advisor Class
/ / I have attached a voided check to ensure my correct bank
account will be debited.
B. SYSTEMATIC WITHDRAWAL PLANS**
I wish to automatically withdraw funds from my account in
____________________ Fund Name
/ / Monthly / / Quarterly / /Semiannually / / Annually
/ / Once / / Twice / / 3 times / / 4 times per month
I request the distribution be:
/ / Sent to the address listed in the registration.
/ / Sent to the special payee listed in Section 7.
/ / Invested into additional shares of the same class of a different
International Solutions fund.
Fund Name
Account Number
Amount $__________________(Minimum $50) starting on or about the
-_______ day of the month
-_______ day of the month
-_______ day of the month*
NOTE: Account minimum: $5,000 in shares at current offering price
C. FEDERAL FUNDS TRANSFER FOR REDEMPTION PROCEEDS**
I authorize the Agent to honor telephone instructions for the
redemption of Fund shares up to $50,000. Proceeds may be wire
transferred to the bank account designated ($1,000 minimum).
(Complete Section 7B)
TELEPHONE EXCHANGES** / / YES / / NO
I authorize exchanges by telephone among the International
Solutions funds upon instructions from any person as more
fully described in the Prospectus. To change this option once
established, written instructions must be received from the
shareholder of record or the current registered
representative.
If neither box is checked, the telephone exchange privilege
will be provided automatically.
TELEPHONIC REDEMPTIONS** / / YES / / NO
The Fund or its agents are authorized to honor telephone
instructions from any person as more fully described in the
Prospectus for the redemption of Fund shares. The amount of
the redemption shall not exceed $50,000 and the proceeds are
to be payable to the shareholder of record and mailed to the
address of record. To change this option once established,
written instructions must be received from the shareholder of
record or the current registered representative.
If neither box is checked, the telephone redemption privilege
will be provided automatically.
* There must be a period of at least seven calendar days
between each investment/withdrawal period.
** This option may not be used if shares are issued in
certificate form.
7. SPECIAL PAYEE
A. MAILING ADDRESS
Please send all disbursements to this special payee:
Name of Bank or Individual
Account Number (If Applicable)
Street
City/State/Zip
B. FED WIRE / E.F.T. INFORMATION
Financial Institution
ABA #
Account #
Street
City/State/Zip
(Please attach a voided check)
8. SIGNATURES
Investors should be aware that the failure to check the "No" under
Section 6D or 6E above means that the Telephone Exchange/Redemption
Privileges will be provided. The Fund employs reasonable procedures
that require personal identification prior to acting on
exchange/redemption instructions communicated by telephone to confirm
that such instructions are genuine. In the absence of such procedures,
the Fund may be liable for any losses due to unauthorized or fraudulent
telephone instructions. Please see "How to Exchange Your Fund Shares"
and "How to Redeem Your Fund Shares" in the Prospectus for more
information on these privileges.
I certify to my legal capacity to purchase or redeem shares of the Fund
for my own account or for the account of the organization named in
Section 1. I have received a current Prospectus and understand its
terms are incorporated in this application by reference. I am
certifying my taxpayer information as stated in Section 2.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO
AVOID BACKUP WITHHOLDING.
------------------------------
Signature of Owner, Custodian, Date
Trustee or Corporate Officer
------------------------------
Signature of Joint Owner, Date
Co-Trustee or Corporate Officer
(Remember to sign Section 8)
<PAGE>
APPENDIX A: INVESTMENT OBJECTIVES AND POLICIES OF THE UNDERLYING FUNDS
Following is a brief description of the investment objectives and
principal investment policies of the underlying funds. The risks associated with
certain of these investment practices are described in the SAI. The following
information and the risk information contained in the SAI is merely a summary
and should not be relied upon as a complete statement of the investment
techniques that the underlying funds may use to achieve their respective
investment objectives. Additional information about the Ivy 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.
EQUITY UNDERLYING FUNDS:
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. Other securities
and investment techniques that the Fund's manager considers important
in achieving the Fund's investment objective (or in controlling the
Fund's exposure to risk) include: sponsored and unsponsored depository
receipts, cash or cash equivalents (such as commercial paper and
short-term notes), foreign currency exchange transactions, forward
foreign currency exchange transactions, shares of other investment
companies, illiquid securities, put and call options on securities and
stock indices, transactions in and options on stock futures and foreign
currency futures contracts.
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. Other securities
and investment techniques that the Fund's manager considers important
in achieving the Fund's investment objective (or in controlling the
Fund's exposure to risk) include: sponsored and unsponsored depository
receipts, illiquid securities, shares of other investment companies,
derivative transactions (such as foreign currency transactions, forward
foreign currency contracts, and options on securities, stock indices,
stock futures and foreign currency futures), and cash and cash
equivalents (such as commercial paper and short-term notes).
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. 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. Other
securities and investment techniques that the Fund's manager considers
important in achieving the Fund's investment objective (or in
controlling the Fund's exposure to risk) include: investment grade debt
securities, cash or cash equivalents, short-term notes, repurchase
agreements, domestic or foreign commercial paper, shares of other
investment companies, illiquid securities, stock index futures
contracts, and put and call options on securities and stock indices.
[Unaffiliated underlying funds to be added by amendment.]
EMERGING MARKET UNDERLYING FUNDS:
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. 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. Other
securities and investment techniques that the Fund's manager considers
important in achieving the Fund's investment objective (or in
controlling the Fund's exposure to risk) include: warrants, cash and
cash equivalents, commercial paper, short-term notes, illiquid
securities, foreign currency exchange transactions, forward foreign
currency contracts, stock index and foreign currency futures contracts,
and shares of other investment companies that invest in Asia-Pacific
countries.
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. Other securities and investment
techniques that the Fund's manager considers important in achieving the
Fund's investment objective (or in controlling the Fund's exposure to
risk) include: sponsored and unsponsored depository receipts, foreign
currency exchange transactions, forward foreign currency contracts,
illiquid securities and shares of other investment companies.
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 the Fund's manager 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. Other securities and
investment techniques that the Fund's manager considers important in
achieving the Fund's investment objective (or in controlling the Fund's
exposure to risk) include: debt securities of government or corporate
issuers in emerging market countries, equity and debt securities of
issuers in developed countries (including the United States), cash or
cash equivalents such as bank obligations (including certificates of
deposit and bankers' acceptances), commercial paper, short-term notes
and repurchase agreements.
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. 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.
[Unaffiliated underlying funds to be added by amendment.]
FIXED INCOME FUNDS:
IVY INTERNATIONAL STRATEGIC BOND FUND seeks total return by investing
primarily in the debt securities of foreign issuers and, consistent
with that objective, to maximize current income. The Fund seeks to
achieve its objectives by investing primarily in a managed portfolio of
high quality bonds denominated in foreign currencies. At least 65% of
the Fund's total assets will normally be invested in bonds of foreign
issuers. Other securities and investment techniques that the Fund's
manager considers important in achieving the Fund's investment
objective (or in controlling the Fund's exposure to risk) include:
other debt securities, including those issued in the U.S. and/or that
are convertible into common stock, as well as high yield (or "junk")
bonds and zero coupon bonds; options, futures, forward foreign currency
contracts and other derivatives transactions; short sales of
securities; and short-term obligations denominated in U.S. and foreign
currencies (including, but not limited to, bank deposits, bankers'
acceptances, certificates of deposit, commercial paper, short-term
government, government agency, supranational agency and corporate
obligations, and repurchase agreements).
[Unaffiliated underlying funds to be added by amendment.]
For temporary or emergency purposes or to assume a defensive position when
market conditions warrant, an underlying fund may, to the extent described in
its prospectus, (i) borrow money from banks and (ii) invest without limit in
cash, U.S. government securities, commercial paper and similar money market
securities.
<PAGE>
[Back Cover Page]
RECEIVING ADDITIONAL INFORMATION ABOUT THE FUNDS
Additional information about the Funds and their investments is contained in the
Statement of Additional Information for the Funds dated April ___, 1999 (the
"SAI"), which is incorporated by reference into this Prospectus and 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>
INTERNATIONAL SOLUTIONS
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
International Solutions I - Conservative Growth
International Solutions II - Balanced Growth
International Solutions III - Moderate Growth
International Solutions IV - Long-Term Growth
International Solutions V - Aggressive Growth
STATEMENT OF ADDITIONAL INFORMATION
April ___, 1999
This Statement of Additional Information ("SAI") describes the five
investment portfolios (the "Funds") that comprise the International Solutions
asset allocation program of Mackenzie Solutions (the "Trust"). The International
Solutions program is designed to enable investors to tailor their exposure to
different investment techniques and related risks by investing in a single Fund
or group of Funds that invest primarily in the shares of other mutual funds. All
of the mutual funds in which the Funds invest have an international investment
emphasis. No offer is made in this SAI of the shares of any of these other
funds.
This SAI is not a prospectus and should be read in conjunction with the
prospectus for the Funds dated April ___, 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>
TABLE OF CONTENTS
GENERAL INFORMATION.........................................................1
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS.................................1
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS OF THE UNDERLYING FUNDS.........3
INVESTMENT RESTRICTIONS....................................................12
INVESTMENT ADVISORY AND OTHER SERVICES.....................................13
INVESTMENT MANAGER................................................13
CUSTODIAN.........................................................14
FUND ACCOUNTING SERVICES..........................................15
TRANSFER AGENT AND DIVIDEND PAYING AGENT..........................15
ADMINISTRATOR.....................................................15
AUDITORS..........................................................16
TRUSTEES AND OFFICERS.............................................16
COMPENSATION TABLE.........................................................17
BROKERAGE ALLOCATION.......................................................17
CAPITALIZATION AND VOTING RIGHTS...........................................18
SPECIAL RIGHTS AND PRIVILEGES..............................................19
AUTOMATIC INVESTMENT METHOD.......................................19
EXCHANGE OF SHARES................................................19
LETTER OF INTENT..................................................21
RETIREMENT PLANS..................................................22
REINVESTMENT PRIVILEGE............................................26
REDUCED SALES CHARGES AND RIGHTS OF ACCUMULATION..................26
SYSTEMATIC WITHDRAWAL PLAN........................................27
GROUP SYSTEMATIC INVESTMENT PROGRAM...............................27
REDEMPTIONS.......................................................28
CONVERSION OF CLASS B SHARES......................................29
NET ASSET VALUE............................................................30
TAXATION 30
TAXATION OF THE FUNDS AND THEIR SHAREHOLDERS......................31
DISTRIBUTIONS.....................................................31
DISPOSITION OF SHARES.............................................32
BACKUP WITHHOLDING................................................33
TAXATION OF THE UNDERLYING FUNDS..................................33
DISTRIBUTION SERVICES......................................................34
PERFORMANCE INFORMATION....................................................36
OTHER IMPORTANT INFORMATION................................................39
FINANCIAL STATEMENTS.......................................................39
APPENDIX A: STATEMENT OF ASSETS AND LIABILITIES
AS OF____________, 1999 AND REPORT OF INDEPENDENT ACCOUNTANTS..............40
<PAGE>
GENERAL INFORMATION
The Funds 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 Fund 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 Fund'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 Fund 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 Funds (see "Management of the
Funds" below).
The Funds are designed to accommodate distinct investor financial goals
and profiles, ranging from "conservative growth" to "aggressive growth". There
is no guarantee that a Fund will be able to meet its investment objective, and
an investor in the Funds could lose money.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
Each Fund has its own investment objective and principal investment
strategies, which are summarized below and described in greater detail in the
"Principal Risks" and "Additional Information about Investment Strategies and
Risks" sections of the Prospectus.
INTERNATIONAL SOLUTIONS I - CONSERVATIVE GROWTH: The primary
investment objective of the Conservative Growth Fund is capital
preservation with moderate current income, and secondarily capital
appreciation. A number of the underlying funds that make up the
Conservative Growth Fund invest primarily in fixed income securities,
with limited exposure to equity securities and their associated
volatility. Because the Conservative Growth Fund has the highest
weighting in foreign bonds among the five Funds, it is expected to bear
the lowest relative overall risk. The Fund will have a moderate degree
of exposure to the international equity markets, however, making the
Fund potentially more volatile that a mutual fund that invests
exclusively in fixed income securities or has some portion of its
assets invested in the United States.
INTERNATIONAL SOLUTIONS II - BALANCED GROWTH: The primary investment
objective of the Balanced Growth Fund is a balance of capital
appreciation and capital preservation, with moderate current income.
The Fund's portfolio of underlying funds is designed to expose the Fund
to the growth opportunities that equity investing offers while
preserving some degree of the stability historically associated with
fixed income securities. The Fund's higher emphasis (relative to
International Solutions I Fund) on underlying funds that invest in
equity securities may lead to moderately increased volatility, but its
equal emphasis on fixed income securities reduces its overall risk
relative to the Moderate, Long-Term Growth and Aggressive Growth Funds.
INTERNATIONAL SOLUTIONS III - MODERATE GROWTH: The investment
objective of the Moderate Growth Fund is primarily capital
appreciation, with preservation of capital as secondary to this primary
objective. The underlying funds that make up the Moderate Growth Fund
invest primarily in equity securities, with some exposure to fixed
income securities intended to mitigate losses that may occur in the
equity markets.
INTERNATIONAL SOLUTIONS IV - LONG-TERM GROWTH: The primary investment
objective of the Long-Term Growth Fund is capital appreciation without
regard to current income. The underlying funds that make up the
Long-Term Growth Fund invest primarily in equity securities, which are
likely to cause greater fluctuations in the Fund's share price than
would be the case with International Solutions I, II and III (which
have varying degrees of exposure to the historically more stable fixed
income markets). The Long-Term Growth Fund also has a moderate to high
weighting in emerging markets (but less than the Aggressive Growth
Fund).
INTERNATIONAL SOLUTIONS V - AGGRESSIVE GROWTH: The investment
objective of the Aggressive Growth Fund is aggressive capital
appreciation without regard to current income. The underlying funds
that comprise the Aggressive Growth Fund may have significant holdings
in emerging markets securities, which historically have incurred
greater social, political and economic risk than developed markets and
are therefore more volatile.
The Funds are subject to varying degrees of potential investment risk
and return. The more aggressive Funds (such as International Solutions IV and V)
are designed for international investors with a longer investment time horizon
and a high degree of risk tolerance. In pursuing higher returns through a mix of
underlying funds that invest more heavily in equity securities (including those
in emerging market countries), these Funds are susceptible to greater risks and
wider fluctuations in value. In contrast, the more conservative Funds (such as
International Solutions I and II) are designed for international investors with
a shorter investment time horizon and/or a lower degree of risk tolerance.
The principal risks of investing in a particular Fund are determined by
the nature of the securities held by the underlying funds in which the Fund
invests. Each Fund's assets are allocated among certain of the underlying funds
in accordance with predetermined percentage ranges, based on the Fund'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 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. 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 held by the Fund. For example, the Conservative Fund, 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 Fund, which normally invests primarily in
underlying funds that are equity-oriented. On the other hand, the Conservative
Fund 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 Funds. 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 Funds.
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 Fund 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 Fund may also deviate from its primary investment emphasis on the
underlying funds and assume a temporary defensive position by investing in U.S.
government securities and short-term commercial paper. During such times, a Fund
may miss out on indirect investment opportunities through underlying funds that
continue to perform well despite the market factors that gave rise to the Fund's
having assumed its defensive position. Assuming a defensive position could also
cause a Fund to experience a higher turnover rate. Higher than normal trading in
underlying fund shares 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 Fund at ordinary income tax rates (see "Dividends,
Distributions and Taxes").
For temporary or emergency purposes, each Fund 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
Fund's net asset value of any increase or decrease in the value of the
securities held by the Fund. Money borrowed will also be subject to interest
costs (which may include commitment fees and/or the cost of maintaining minimum
average balances).
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS OF THE UNDERLYING FUNDS
Following is a brief description of the investment objectives and
principal investment policies of the underlying funds in which the Funds may
invest. 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 after the close of the
annual or semi-annual period to which they relate. The following information, as
well as the risk information appearing in the section that follows, is merely a
summary and should not be relied upon as a complete statement of the investment
techniques and that the underlying funds may use, or the risks to which they may
be exposed, in pursuing their respective investment objectives. Additional
information about the Ivy Funds may be obtained by calling or writing to the
Distributor at the phone number and address printed on the cover page of this
SAI. Contact information relating to the other underlying funds is also
available through the Distributor.
INVESTMENT OBJECTIVES AND STRATEGIES:
EQUITY UNDERLYING FUNDS:
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. Other securities and investment techniques that the
Fund's manager considers important in achieving the Fund's
investment objective (or in controlling the Fund's exposure to
risk) include: sponsored and unsponsored depository receipts, cash
or cash equivalents (such as commercial paper and short-term
notes), foreign currency exchange transactions, forward foreign
currency exchange transactions, shares of other investment
companies, illiquid securities, put and call options on securities
and stock indices, transactions in and options on stock futures
and foreign currency futures contracts.
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. Other securities and investment techniques that the
Fund's manager considers important in achieving the Fund's
investment objective (or in controlling the Fund's exposure to
risk) include: sponsored and unsponsored depository receipts,
illiquid securities, shares of other investment companies,
derivative transactions (such as foreign currency transactions,
forward foreign currency contracts, and options on securities,
stock indices, stock futures and foreign currency futures), and
cash and cash equivalents (such as commercial paper and short-term
notes).
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. 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. Other securities and investment techniques
that the Fund's manager considers important in achieving the
Fund's investment objective (or in controlling the Fund's exposure
to risk) include: investment grade debt securities, cash or cash
equivalents, short-term notes, repurchase agreements, domestic or
foreign commercial paper, shares of other investment companies,
illiquid securities, stock index futures contracts, and put and
call options on securities and stock indices.
[Unaffiliated underlying fund information to be added by amendment.]
EMERGING MARKET UNDERLYING FUNDS:
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.
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. Other securities and
investment techniques that the Fund's manager considers important
in achieving the Fund's investment objective (or in controlling
the Fund's exposure to risk) include: warrants, cash and cash
equivalents, commercial paper, short-term notes, illiquid
securities, foreign currency exchange transactions, forward
foreign currency contracts, stock index and foreign currency
futures contracts, and shares of other investment companies that
invest in Asia-Pacific countries.
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. Other securities and investment
techniques that the Fund's manager considers important in
achieving the Fund's investment objective (or in controlling the
Fund's exposure to risk) include: sponsored and unsponsored
depository receipts, foreign currency exchange transactions,
forward foreign currency contracts, illiquid securities and shares
of other investment companies.
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 the
Fund's manager 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. Other securities and
investment techniques that the Fund's manager considers important
in achieving the Fund's investment objective (or in controlling
the Fund's exposure to risk) include: debt securities of
government or corporate issuers in emerging market countries,
equity and debt securities of issuers in developed countries
(including the United States), cash or cash equivalents such as
bank obligations (including certificates of deposit and bankers'
acceptances), commercial paper, short-term notes and repurchase
agreements.
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. 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 "high yield" or "junk" bonds.
[Unaffiliated underlying fund information to be added by amendment.]
FIXED INCOME FUNDS:
IVY INTERNATIONAL STRATEGIC BOND FUND seeks total return by
investing primarily in the debt securities of foreign issuers and,
consistent with that objective, to maximize current income. The
Fund seeks to achieve its objectives by investing primarily in a
managed portfolio of high quality bonds denominated in foreign
currencies. At least 65% of the Fund's total assets will normally
be invested in bonds of foreign issuers. Other securities and
investment techniques that the Fund's manager considers important
in achieving the Fund's investment objective (or in controlling
the Fund's exposure to risk) include: other debt securities,
including those issued in the U.S. and/or that are convertible
into common stock, as well as high yield (or "junk") bonds and
zero coupon bonds; options, futures, forward foreign currency
contracts and other derivatives transactions; short sales of
securities; and short-term obligations denominated in U.S. and
foreign currencies (including, but not limited to, bank deposits,
bankers' acceptances, certificates of deposit, commercial paper,
short-term government, government agency, supranational agency and
corporate obligations, and repurchase agreements).
[Unaffiliated underlying fund information to be added by amendment.]
For temporary or emergency purposes or to assume a defensive position
when market conditions warrant, an underlying fund may, to the extent described
in its prospectus, (i) borrow money from banks and (ii) invest without limit in
cash, U.S. government securities, commercial paper and similar money market
securities.
INVESTMENT RISKS OF THE UNDERLYING FUNDS:
COMMON STOCKS: Many of the underlying funds invest primarily in common
stock. Common stock can be issued by companies to raise cash, and
represents a proportionate ownership interest in the issuing 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.
Most likely to be affected: All Funds.
DEBT SECURITIES: 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. A Fund's portfolio is 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 tend to be more
volatile than bonds with shorter maturities.
Some of the underlying funds may invest a significant portion of their
assets in low-rated debt securities (sometimes referred to as "high
yield" or "junk" bonds). In general, low-rated debt securities 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 and could significantly weaken the returns of
any underlying fund that holds them in its portfolio.
An underlying fund may also have significant holdings in sovereign
debt. For a variety of reasons (such as cash flow problems, limited
foreign reserves, and political constraints), the governmental entity
that controls the repayment of sovereign debt may not be able or
willing to repay the principal or interest when due. A governmental
entity's ability to honor its debt obligations to an underlying fund
may also be contingent on its receipt from others (such as the
International Monetary Union and more solvent foreign governments) of
specific disbursements, which may in turn be conditioned on the
perceived health of the governmental entity's economy and/or its
implementation of economic reforms. If any of these conditions fail, an
underlying fund could lose the entire value of its investment for an
indefinite period of time.
Most likely to be affected: International Solutions I and II.
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 (see "Foreign Currencies" below);
comparatively weak government supervision and regulation of
securities exchanges, brokers and issuers;
non-uniform accounting, auditing and financial reporting
standards;
unavailability of information about an issuer's securities and
business operations; and
settlement delays (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).
Most likely to be affected: All Funds.
EMERGING MARKETS: The risks of investing in foreign securities are
heightened in countries with new or developing economies. Among these
additional risks are the following:
securities that are even less liquid and more volatile than those
in more developed foreign countries;
less stable governments that are susceptible to sudden adverse
actions (such as nationalization of businesses, restrictions on
foreign ownership or prohibitions against repatriation of assets);
increased settlement delays;
unusually high inflation rates (which in extreme cases can cause
the value of a country's assets to erode sharply);
restrictions on repatriation of capital;
unusually large currency fluctuations and currency conversion
costs (see "Foreign Currencies" below); and
high national debt levels (which may impede an issuer's payment
of principal and/or interest on external debt).
Most likely to be affected: International Solutions IV and V.
FOREIGN CURRENCIES: Investing in foreign securities typically involves the
use of foreign currencies. The value of an underlying fund's assets, as
measured in U.S. dollars, may be affected favorably or unfavorably by
changes in foreign currency exchange rates and exchange control
regulations. Currency conversions can also be costly.
Most likely to be affected: All Funds.
DEPOSITORY RECEIPTS AND SHARES: Many of the underlying funds invest in
foreign securities through the mechanism of sponsored and unsponsored
"depository receipts" and "depository shares," which are instruments
that evidence ownership of underlying securities issued by a U.S. or
foreign corporation. Unsponsored depository programs are organized
independently without the cooperation of the issuer of the underlying
securities. As a result, information concerning the issuer may not be
as current or as readily available as in the case of sponsored
depository instruments, and their prices may be more volatile than if
they were sponsored by the issuers of the underlying securities.
Most likely to be affected: All Funds.
OTHER RISKS: The underlying funds may, to a greater or lesser extent,
use a wide range of other investment techniques to achieve their
respective investment objectives, which are described in detail in each
underlying fund's prospectus and statement of additional information.
Among these other investment techniques are the following, any of which
could cause an underlying fund to lose money if not used successfully
(or if they are not practically available for investment purposes at a
time when their use would benefit the underlying fund):
ILLIQUID SECURITIES: An "illiquid security" is an asset that may
not be sold or disposed of in the ordinary course of business
within seven days at approximately the value at which an
underlying fund has valued the security on its books. Illiquid
securities may include securities that are subject to restrictions
on resale ("restricted securities") because they have not been
registered under the Securities Act of 1933, as amended (the "1933
Act"). Illiquid securities often offer the potential for higher
returns than more readily marketable securities, but may be
difficult to dispose of at an advantageous time or price. Issuers
of restricted securities may not be subject to the disclosure and
other investor protection requirements that would apply if their
securities were publicly traded. An underlying fund may also have
to bear the expense of registering restricted securities for
resale, and the risk of substantial delays in effecting those
registrations.
REPURCHASE AGREEMENTS: A repurchase agreement is a contract under
which an underlying fund buys a money market instrument from a
bank or broker-dealer and obtains a simultaneous commitment from
the seller to repurchase the instrument at a specified time and at
an agreed-upon yield. These agreements often are fully
collateralized with the underlying fund's U.S. Government
securities or other securities that its advisor has approved for
use as collateral for repurchase agreements, and the collateral
must be marked-to-market daily. If the executing bank or
broker-dealer fails to perform its obligations under the contract,
the Fund could experience some delay in obtaining direct ownership
of the underlying collateral and might incur a loss if the value
of the security should decline (as well as any costs incurred in
disposing of the security).
ZERO COUPON BONDS: Zero coupon bonds are debt obligations issued
without any requirement for the periodic payment of interest, and
are issued at a significant discount from face value. The discount
approximates the total amount of interest the bonds would accrue
and compound over the period until maturity at a rate of interest
reflecting the market rate at the time of issuance. If an
underlying fund holds zero coupon bonds in its portfolio, it would
recognize income currently for Federal income tax purposes in the
amount of the unpaid, accrued interest and generally would be
required to distribute dividends representing that income to
shareholders currently (even though the underlying fund has not
actually received any income proceeds). These required cash
distribution payment could force the underlying fund to sell
portfolio securities at a disadvantageous time and/or price.
Moreover, since the interest on zero coupon obligations is not
distributed to an underlying fund on a current basis but is in
effect compounded, their value is subject to greater fluctuations
in response to changing interest rates than the value of debt
obligations that distribute income regularly.
DERIVATIVE TRANSACTIONS: An underlying fund may, but is not
necessarily required to, use various derivative investment
strategies to (i) hedge various market risks (such as interest
rates, currency exchange rates, and broad or specific equity or
fixed-income market movements), (ii) manage the effective maturity
or duration of fixed-income securities in its portfolio, and/or
(iii) enhance potential gain. These derivative investment
techniques are generally accepted as part of modern portfolio
management and are used regularly by other mutual funds and
institutional investors. Derivative transactions involve a number
of risks, however, including the possibility of default by the
other party to the transaction and, to the extent an underlying
fund's view as to certain market movements is incorrect, the risk
of losses that are greater than if the derivative technique(s) had
not been used.
The types of derivative transactions in which an underlying fund
may engage include, but are not necessarily limited to, (i) the
purchase and sale of exchange-listed and over-the-counter put and
call options on securities, equity and fixed-income indices and
other financial instruments; (ii) the purchase and sale of
financial futures contracts and options thereon; interest rate
transactions (such as swaps, caps, floors or collars); and (iii)
currency transactions (such as currency forward contracts,
currency futures contracts, and options on currencies or currency
futures). Any or all of these derivative investment techniques may
be used at any time singly or in combination, and there is no
particular strategy that dictates the use of one technique rather
than another.
Using put and call options could cause an underlying fund to lose
money by forcing the sale or purchase of portfolio securities at
inopportune times or for prices higher (in the case of put
options) or lower than (in the case of call options) than current
market values; limiting the amount of appreciation the underlying
fund can realize on its investments; or causing the underlying
fund to hold a security it might otherwise sell.
Foreign currency transactions (such as forward foreign currency
contracts) can cause investment losses in a variety of ways. For
example, changes in currency exchange rates may result in poorer
overall performance for an underlying fund than if it had not
engaged in such transactions. There may also be an imperfect
correlation between an underlying fund's portfolio holdings of
securities denominated in a particular currency and forward
contracts entered into by the underlying fund. An imperfect
correlation of this type may prevent the underlying fund from
achieving the intended hedge or expose the underlying fund to the
risk of currency exchange loss.
Futures transactions (and related options) involve other types of
risks. For example, the variable degree of correlation between
price movements of futures contracts and price movements in the
related portfolio position of an underlying fund could cause
losses on the hedging instrument that are greater than gains in
the value of the underlying fund's position. In addition, futures
and options markets may not be liquid in all circumstances and
certain over-the-counter options may have no markets. As a result,
an underlying fund might not be able to close out a transaction
without incurring substantial losses (and it is possible that the
transaction cannot even be closed). In addition, the daily
variation margin requirements for futures contracts would create a
greater ongoing potential financial risk than would purchases of
options, where the exposure is limited to the cost of the initial
premium.
Currency futures contracts and options thereon may be traded on
foreign exchanges. Such transactions may not be regulated as
effectively as similar transactions in the United States and are
subject to the risk of governmental actions affecting trading in,
or the prices of, foreign securities. The value of such positions
could also be adversely affected by (i) other complex foreign
political, legal and economic factors, (ii) lesser availability
than in the United States of data on which to make trading
decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non business hours in
the United States, (iv) the imposition of different exercise and
settlement terms and procedures and margin requirements than in
the United States, and (v) lesser trading volume.
Finally, although the use of futures and options transactions for
hedging purposes should tend to minimize the risk of loss due to a
decline in the value of the hedged position, these devices also
tend to limit any potential gain that might result from an
increase in the position's value.
INVESTMENT RESTRICTIONS
Each Fund has adopted certain fundamental investment policies, which may
only be changed with the approval of a majority of the Fund's outstanding voting
shares (see "Capitalization and Voting Rights"). Under these policies, no Fund
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 for temporary or emergency purposes (or
as otherwise permitted by the 1940 Act or 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 Funds 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.
INVESTMENT ADVISORY AND OTHER SERVICES
The business and affairs of each Fund are managed under the direction
of the Trustees. Information about the Funds' investment manager and other
service providers appears below.
INVESTMENT MANAGER
IMI provides business and portfolio management and investment advisory
services to the Funds pursuant to a Business Management and Investment Advisory
Agreement (the "Advisory Agreement"). The Advisory Agreement was approved by the
sole shareholder of each Fund on __________, 1999. Before that, the Advisory
Agreement was approved at a meeting held on ___________, 1999 by each Fund's
Board of Trustees , including a majority of the Trustees who are neither
"interested persons" (as defined in the 1940 Act) of the Funds nor have any
direct or indirect financial interest in the operation of the Funds'
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 Funds 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 Internal Revenue Code of 1986, as amended (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 Fund's Custodian and monitor the services
it provides to the Fund; (2) coordinate with and monitor any other third parties
furnishing services to the Funds; (3) provide the Funds 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
Funds or by IMI acting in some other capacity pursuant to a separate agreement
or arrangements with the Funds; (5) maintain or supervise the maintenance by
third parties of such books and records of the Funds 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 Funds to serve in such capacities; and (7) take such other action with
respect to the Funds, 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 Fund pays IMI a monthly fee for its services under the Advisory
Agreement at an annual rate of 0.10% of the Fund's average net assets. Each Fund
is also responsible for the following expenses: (1) the fees and expenses of the
Fund's Independent Trustees; (2) the salaries and expenses of any of the Funds'
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 Funds'
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 Funds' 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 Funds 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 Fund 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 Fund. See "Capitalization and Voting Rights."
The Advisory Agreement may be terminated with respect to a Fund 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 Fund, 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 Funds. 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.
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 Funds' assets.
FUND ACCOUNTING SERVICES
Pursuant to a Fund Accounting Services Agreement, MIMI provides certain
accounting and pricing services for the Funds. As compensation for those
services, each Fund pays MIMI a monthly fee plus out-of-pocket expenses as
incurred. The monthly fee is based upon the net assets of each Fund 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, Ivy
Mackenzie Services Corp. ("IMSC"), a wholly owned subsidiary of MIMI, is the
transfer agent for the Funds. Under the Agreement, each Fund (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 Fund pays $10.25 per
open Class I account. In addition, each Fund 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 Funds had made no payments for transfer agency
services. Certain broker-dealers that maintain shareholder accounts with the
Funds 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 Funds.
ADMINISTRATOR
Pursuant to an Administrative Services Agreement, MIMI provides certain
administrative services to the Funds. As compensation for these services, each
Fund (except with respect to its Class I shares) pays MIMI a monthly fee at the
annual rate of .10% of that Fund's average daily net assets. Each Fund 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 Funds had made no payments under the
Administrative Services Agreement.
Outside of providing administrative services to the Funds, 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 Funds.
As of the date of this SAI, no payments have been made with respect to the
provision of these services for the Funds.
AUDITORS
[ ], independent certified public accountants, have been selected as
auditors for the Funds. The audit services performed by [ ] include audits of
the annual financial statements of each Fund. Other services provided
principally relate to filings with the SEC and the preparation of the Funds' tax
returns.
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of the Trust, their business
addresses and principal occupations during the past five years are:
NAME, ADDRESS, AGE POSITION WITH THE TRUST BUSINESS AFFILIATIONS AND
PRINCIPAL OCCUPATIONS
C. William Ferris President, Trustee, Senior Vice President,
700 South Federal Hwy. and Secretary/Treasurer Chief Financial Officer and
Suite 300 Secretary/Treasurer of
Boca Raton, FL 33432 Mackenzie Investment
Age: 53 Management Inc. ("MIMI")
(1995-present); Senior Vice
President, Finance and
Administration/ Compliance
Officer of MIMI (1989-1994);
Senior 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
Ivy Mackenzie Distributors,
Inc. ("IMDI") (1994-present);
Secretary/Treasurer and
Director of IMDI (1993-1994);
President and Director of Ivy
Mackenzie Services Corp.
("IMSC") (1996-present);
and Secretary/Treasurer and
Director of IMSC (1993-1996).
[Other Trustees, including non-interested Trustees constituting at least 60% of
the Board, to be determined before the Funds commence operations and information
relating thereto supplied by pre-effective amendment.]
Class A shares of a Fund may be purchased without an initial sales
charge or contingent deferred sales charge by officers and Trustees of the Trust
(and their relatives). As of the date of this SAI, the Officers and Trustees of
the Trust as a group owned no Fund shares.
COMPENSATION TABLE
MACKENZIE SOLUTIONS*
NAME/ POSITION AGGREGATE PENSION OR ESTIMATED TOTAL COMPENSATION
COMPENSATION RETIREMENT ANNUAL FROM TRUST AND FUND
FROM TRUST BENEFITS BENEFITS COMPLEX PAID TO
ACCRUED AS UPON DIRECTORS
A PART OF RETIREMENT
FUND EXPENSES
C. William Ferris/
President, Trustee
and Secretary/
Treasurer
[Other Trustees
to be determined
before the
Funds commence
operations and
information relating
thereto supplied by
pre-effective
amendment.]
* Estimated for the Funds' initial fiscal year ending December 31, 1999.
BROKERAGE ALLOCATION
Subject to the overall supervision of the President and the Board, IMI
places orders for the purchase and sale of the Funds' underlying fund shares and
other permitted securities investments. In the case of the purchase and sale of
securities other than underlying fund shares (such as when a Fund is assuming a
temporary defensive position), 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. IMI may
consider sales of Fund shares as a factor in the selection of broker-dealers and
may select broker-dealers who provide IMI 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 Funds have not paid any brokerage
commissions.
CAPITALIZATION AND VOTING RIGHTS
The capitalization of the Funds consists of an unlimited number of
shares of beneficial interest (no par value per share). When issued, shares of
each class of a Fund are fully paid, non-assessable, redeemable and fully
transferable. No class of shares of any Fund 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 Fund. The
Trustees have further authorized the issuance of Class A, Class B, Class C,
Class I and Advisor Class shares for the Funds.
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 Fund entitle their holders to one vote per share (with
proportionate voting for fractional shares). Shareholders of each Fund are
entitled to vote alone on matters that only affect the Fund. All classes of
shares of each Fund will vote together, except with respect to the distribution
plan applicable to the Fund'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 Funds, but
affecting them differently, separate votes by the shareholders of each Fund 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 Fund. If the Trustees of the Trust determine that a
matter does not affect the interests of a particular Fund, then the shareholders
of that Fund 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
Funds.
As used in this SAI and the Prospectus, the phrase "majority vote of
the outstanding shares" of a Fund means the vote of the lesser of: (1) 67% of
the shares of the Fund (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 Fund (or of the Trust).
With respect to the submission to shareholder vote of a matter
requiring separate voting by each Fund, the matter shall have been effectively
acted upon with respect to that Fund if a majority of the outstanding voting
securities of the Fund 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 Fund; 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 Fund 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 Fund property for all loss and expense of any
shareholder of the Fund held personally liable for the obligations of the Fund.
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 Fund is liable for the obligations of any other Fund.
SPECIAL RIGHTS AND PRIVILEGES
Information as to how to purchase Fund shares is contained in the
Prospectus. The Funds offer (and except as noted below, bear the cost of
providing) to investors the following additional rights and privileges. Each
Fund 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 Fund shareholder to
have specified amounts automatically drawn each month from his or her bank for
investment in Fund 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 Funds have an exchange privilege with each other
Fund. Before effecting an exchange, shareholders should review the Prospectus
and this SAI as it relates to the Fund 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 Fund
("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 Fund ("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 Fund exercising the exchange
privilege will continue to be subject to that Fund'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 Fund ("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 Fund exercising the
exchange privilege will continue to be subject to that Fund'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 Fund'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 Fund ("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 Fund 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 Fund in which shares are not already held is $_______ ($___________, in
the case of Class I shares). No exchange out of a Fund (other than by a complete
exchange of all Fund shares) may be made if it would reduce a shareholder's
interest in the Fund 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 Funds 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 Funds 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 Funds 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 Fund. A Letter of
Intent may be submitted at the time of an initial purchase of Class A shares of
the Fund 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 Funds
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 Funds may be purchased in connection with several types
of tax-deferred retirement plans. Shares of more than one Fund 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 Funds 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 Funds, the annual maintenance fee will be limited to not more than $20.
The following discussion describes some aspects of 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 Fund 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 (and 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. There are
special rules for determining what portion of any distribution is allocable to
deductible and to non-deductible contributions. 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, 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 Funds 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, deductible medical expenses, certain purchases of health
insurance for an unemployed individual and qualified higher 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. 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 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 Funds 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 Fund may reinvest
all or a part of the proceeds of the redemption back into Class A shares of the
Fund 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 Funds. 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 Funds by any of the persons enumerated above where the aggregate
quantity of Class A shares of the Funds 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 Fund'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 Funds or IMSC may terminate the Withdrawal Plan
option at any time after reasonable notice to shareholders.
GROUP SYSTEMATIC INVESTMENT PROGRAM
Shares of the Funds may be purchased in connection with investment
programs established by employee or other groups using systematic payroll
deductions or other systematic payment arrangements. The Funds 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 Funds 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 Funds 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 Funds 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 Funds 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 Funds reserves the right to change these fees
from time to time without advance notice.
Class A shares of the Funds 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 Funds 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 Funds 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 Funds 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 Funds 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 Funds is not reasonably
practicable or it is not reasonably practicable for a Fund 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 Funds.
The Trust may redeem those accounts of shareholders who have maintained
an investment, including sales charges paid, of less than $1,000 in the Funds
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 Funds 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 Funds 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 Fund 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 Fund will
automatically convert to Class A shares of that Fund, 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 Fund
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.
NET ASSET VALUE
The net asset value per share of each Fund is computed by dividing the
value of the Fund's aggregate net assets (i.e., its total assets less its
liabilities) by the number of the Fund's shares outstanding. A Fund's
liabilities, if not identifiable as belonging to a particular class of the Fund,
are allocated among that Fund'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 Fund'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.
Each Fund's portfolio is valued (and net asset value per share is
determined) as of the close of regular trading on the New York Stock 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 Funds' Custodian or the Exchange close early as
a result of a partial holiday or otherwise, the Funds reserve the right to
advance the time on that day by which purchase and redemption requests must be
received. The net asset value per share of each underlying fund will be
calculated and reported to each Fund that holds its shares by the underlying
fund's accounting agent. Any short-term securities with a remaining maturity of
sixty days or less are valued by the amortized cost method.
If the value of a portfolio asset as determined in accordance with
these procedures is not believed to represent the fair market value of the
portfolio asset, the value of the portfolio asset is taken to be an amount
which, in the opinion of the Funds' Valuation Committee, represents fair value
on the basis of all available information.
The sale of the Funds' 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
Funds' best interest to do so.
TAXATION
The following is a general discussion of certain tax rules thought to
be applicable with respect to the Funds. 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 Funds.
TAXATION OF THE FUNDS AND THEIR SHAREHOLDERS
Each Fund intends to be taxed as a regulated investment company under
Subchapter M of the Code. Accordingly, each Fund 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 Fund'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 Fund'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 Fund 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 Fund 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 Fund level. To avoid the tax, each Fund 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 Fund
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 Fund in October, November or
December of the year with a record date in such a month and paid by the Fund
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.
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 Funds to a corporate shareholder, to the extent such dividends are
attributable to dividends received from U.S. corporations by an underlying fund,
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 Fund as capital gain dividends, are taxable to shareholders
as long-term capital gains whether paid in cash or in shares, and regardless of
how long the shareholder has held the Fund'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 Fund on the
distribution date. A distribution of an amount in excess of a Fund'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.
Income received by an underlying fund from sources within a foreign
country may be subject to withholding and other taxes imposed by that country.
If more than 50% of the value of an underlying fund's total assets at the close
of its taxable year consists of stock or securities of foreign corporations, the
underlying fund will be eligible and may elect to "pass-through" to its
shareholders, including a Fund, the amount of such foreign income and similar
taxes paid by the underlying fund. Pursuant to this election, the Fund would be
required to include in gross income (in addition to taxable dividends actually
received), its pro rata share of foreign income and similar taxes and to deduct
such amount in computing its taxable income or to use it as a foreign tax credit
against its U.S. federal income taxes, subject to limitations. A Fund would not,
however, be eligible to elect to "pass-through" to its shareholders the ability
to claim a deduction or credit with respect to foreign income and similar taxes
paid by the underlying fund.
If the net asset value of shares is reduced below a shareholder's cost
as a result of a distribution by a Fund, 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 Fund 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 Fund, (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 Fund or another regulated investment company and the otherwise
applicable sales charge is reduced under a "reinvestment right" received upon
the initial purchase of Fund 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 Fund will be required to report to the Internal Revenue Service
("IRS") all taxable distributions as well as gross proceeds from the redemption
of that Fund'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 Fund with and to
certify the shareholder's correct taxpayer identification number or social
security number, (2) the IRS notifies the shareholder or the Fund 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 Funds 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 Funds.
TAXATION OF THE UNDERLYING FUNDS
Each underlying fund intends to qualify annually and elects to be
treated as a regulated investment company under Subchapter M of the Code. In any
year in which an underlying fund qualifies as a regulated investment company and
timely distributes all of its taxable income, the underlying fund generally will
not pay any federal income or excise tax.
Distributions of an underlying fund's investment company taxable income
are taxable as ordinary income to a Fund which invests in the underlying fund.
Distributions of the excess of an underlying fund's net long-term capital gain
over its net short-term capital loss, which are properly designated as "capital
gain dividends," are taxable as long-term capital gain to a Fund which invests
in the underlying fund, regardless of how long the Fund held the underlying
fund's shares, and are not eligible for the corporate dividends-received
deduction. Upon the sale or other disposition by a Fund of shares of an
underlying fund, the Fund generally will realize a capital gain or loss which
will be long-term or short-term, generally depending upon the Fund's holding
period for the shares.
DISTRIBUTION SERVICES
Ivy Mackenzie Distributors, Inc. ("IMDI"), a wholly owned subsidiary of
MIMI, serves as the exclusive distributor of the Funds' shares pursuant to a
Distribution Agreement with the Funds dated , 1999 (the "Distribution
Agreement"). The Board approved the Distribution Agreement on , 1999. IMDI
distributes shares of the Funds 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 Funds continuously, but
reserves the right to suspend or discontinue distribution on that basis. IMDI is
not obligated to sell any specific amount of Funds shares.
Pursuant to the Distribution Agreement, IMDI is entitled to deduct a
commission on all Class A Fund shares sold equal to the difference, if any,
between the public offering price, as set forth in the Fund'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 Fund 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 Fund.
The Distribution Agreement will continue in effect for each Fund 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 Fund. The Distribution Agreement may be terminated with
respect to any Fund at any time, without payment of any penalty, by IMDI on 60
days' written notice to the Fund or by any Fund by vote of either a majority of
the outstanding voting securities of any Fund 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 _________________, 1999, the Trustees adopted a Rule 18f-3 plan on
behalf of the Funds. The key features of the Rule 18f-3 plan are as follows: (i)
shares of each class of each Fund represent an equal pro rata interest in that
Fund 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 Fund may be exchanged
for shares of the same class of another Ivy fund; and (iii) each Fund's Class B
shares will convert automatically into Class A shares of that Fund 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
Fund, in accordance with Rule 12b-1 under the 1940 Act, separate Rule 12b-1
distribution plans pertaining to each Fund'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 Fund and its shareholders.
The Trustees of the Trust believe that the Plans should result in greater sales
and/or fewer redemptions of each Fund's shares, although it is impossible to
know for certain the level of sales and redemptions of each Fund's shares in the
absence of a Plan or under an alternative distribution arrangement.
Under each Plan, the Funds 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 Fund
shares, answering routine inquiries concerning the Funds 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 Fund'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 Funds' Class B and Class C Plans, each Fund 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 Fund'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 Fund 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 Funds shall be committed to the discretion of Trust who are not
"interested persons" of the Funds.
IMDI may make payments for distribution assistance and for
administrative and accounting services from resources that may include the
management fees paid by the Fund. 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 Funds' 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 Fund.
Each Plan may be amended at any time with respect to the class of
shares of each Fund 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 Fund 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 Funds (or class of shares thereof), each may
continue in effect with respect to any other Fund (or Class of shares thereof)
as to which they have not been terminated (or have been renewed).
PERFORMANCE INFORMATION
Performance information for the classes of shares of each Fund 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 Fund'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 Fund. 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 Fund
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 Fund
will be expressed in terms of the average annual compounded rate of return that
would cause a hypothetical investment in that class of the Fund 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 Fund, it is assumed that
all dividends and capital gains distributions made by the Fund 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 Fund 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 Funds 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 Fund for a specified period. Cumulative total return quotations
reflect changes in the price of each Fund's shares and assume that all dividends
and capital gains distributions during the period were reinvested in the Fund
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 Fund
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 Fund's existence and may or may not include the impact of sales
charges, taxes or other factors.
Performance quotations for the Funds will vary from time to time
depending on market conditions, the composition of the Funds' portfolios and
operating expenses of the Funds. These factors and possible differences in the
methods used in calculating performance quotations should be considered when
comparing performance information regarding the Funds' 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 Funds' shares and the risks associated with the Funds' 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 Funds 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 Fund Guide, Houston Post, Institutional Investor, International
Fund Monitor, Investor's Daily, Los Angeles Times, Medical Economics, Miami
Herald, Money Mutual Fund Forecaster, Mutual Fund Letter, Mutual Fund Source
Book, Mutual Fund Values, National Underwriter, Nelson's Directory of Investment
Managers, New York Times, Newsweek, No Load Fund Investor, No Load Fund* 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.
OTHER IMPORTANT INFORMATION
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 could cause a Fund to lose money).
EURO CONVERSION RISKS: On January 1, 1999, a new European currency
called the "Euro" was introduced and adopted for use by eleven European
countries. The transition to daily usage of the Euro, including circulation of
Euro bills and coins, will occur during the period from January 1, 1999 through
December 31, 2001. Certain European Union (EU) members, including the United
Kingdom, did not officially implement the Euro on January 1, 1999 and may cause
market disruptions when and if they decide to do so. Where this occurs, the
underlying funds (and hence the Funds that hold their shares) could experience
investment losses.
FINANCIAL STATEMENTS
The Funds' Statement of Assets and Liabilities as of [ ],
1999 and the Notes thereto are attached hereto as Appendix A.
<PAGE>
APPENDIX A: STATEMENT OF ASSETS AND LIABILITIES AS OF____________, 1999
AND REPORT OF INDEPENDENT ACCOUNTANTS
[TO BE PROVIDED BY AMENDMENT]
<PAGE>
PART C. OTHER INFORMATION
ITEM 23: EXHIBITS
(a) DECLARATION OF TRUST: Filed with Registrant's initial
Registration Statement.
(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 with Registrant's initial
Registration Statement).
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
Pre-Effective Amendment No. 1 to Registrant's 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 12th day of February, 1999.
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 2/12/99
Financial Officer) and Trustee
By: /s/ JOSEPH R. FLEMING
Joseph R. Fleming, Attorney-in-Fact
* Executed pursuant to powers of attorney filed with Registrant's initial
Registration Statement.
