As filed with the Securities and Exchange Commission on April 28, 2000
(File Nos. 333-67705 and 811-09107).
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 2 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 5 [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
[x] It is proposed that this Post-Effective Amendment will become effective
on May 1, 2000 pursuant to paragraph (b) of Rule 485.
<PAGE>
THIS POST-EFFECTIVE AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT OF MACKENZIE
SOLUTIONS (THE "REGISTRANT") IS FILED FOR THE PURPOSES OF UPDATING CERTAIN
FINANCIAL INFORMATION FOR INTERNATIONAL SOLUTIONS I - CONSERVATIVE GROWTH,
INTERNATIONAL SOLUTIONS II - BALANCED GROWTH, INTERNATIONAL SOLUTIONS III -
MODERATE GROWTH, INTERNATIONAL SOLUTIONS IV - LONG-TERM GROWTH AND INTERNATIONAL
SOLUTIONS V - AGGRESSIVE GROWTH, EACH A SEPARATE SERIES OF THE REGISTRANT (EACH
A "FUND"), AND MAKING OTHER NON-MATERIAL CHANGES TO THE FUNDS' DISCLOSURE
DOCUMENTS.
<PAGE>
MACKENZIE SOLUTIONS
CROSS REFERENCE SHEET
This Post-Effective Amendment No. 2 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: Financial Highlights
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; Information About The Underlying
Funds; Investment Restrictions
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>
<PAGE> 1
INTERNATIONAL
SOLUTIONS
PROSPECTUS
May 1, 2000
<TABLE>
<S> <C> <C>
INTERNATIONAL SOLUTIONS
International Solutions is an asset
allocation program currently INTERNATIONAL SOLUTIONS I CONSERVATIVE GROWTH
consisting of five separate
investment portfolios ("Funds"). The
Funds enable investors to tailor their INTERNATIONAL SOLUTIONS II BALANCED GROWTH
exposure to different investment
techniques in the international INTERNATIONAL SOLUTIONS III MODERATE GROWTH
securities markets and related risks
by investing primarily in the shares INTERNATIONAL SOLUTIONS IV LONG-TERM GROWTH
of other mutual funds that in turn
invest in a broad range of foreign INTERNATIONAL SOLUTIONS V AGGRESSIVE GROWTH
securities. No offer is made in this
Prospectus for shares of these other
funds.
</TABLE>
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy or accuracy of this Prospectus. Any
representation to the contrary is a criminal offense.
Investments in the Funds are not deposits of any bank and are not federally
insured by the Federal Deposit Insurance Corporation or any other government
agency.
MACKENZIE
<PAGE> 2
TABLE OF CONTENTS
INVESTMENT OBJECTIVES 3
INVESTMENT STRATEGIES AND RISKS 4
FEES AND EXPENSES 7
ADDITIONAL INFORMATION ABOUT INVESTMENT STRATEGIES AND RISKS 10
MANAGEMENT 15
SHAREHOLDER INFORMATION:
PRICING OF FUND SHARES 15
HOW TO BUY SHARES 15
HOW TO REDEEM SHARES 21
HOW TO EXCHANGE SHARES 22
DISTRIBUTIONS AND TAXES 23
FINANCIAL HIGHLIGHTS
INVESTMENT OBJECTIVES AND STRATEGIES OF THE UNDERLYING FUNDS 24
2
<PAGE> 3
INVESTMENT OBJECTIVES
The International Solutions Funds each has its own investment objectives,
strategies and risks, ranging from "conservative growth" to "aggressive growth,"
and invest in the shares of other mutual funds (referred to as "underlying
funds"). Each Fund pursues its objectives through a different mix of underlying
funds.
<TABLE>
<S> <C>
INTERNATIONAL SOLUTIONS I - Primarily capital preservation with moderate current income, and
CONSERVATIVE GROWTH: secondarily capital appreciation.
INTERNATIONAL SOLUTIONS II - A balance of capital appreciation and capital preservation, with moderate
BALANCED GROWTH: current income.
INTERNATIONAL SOLUTIONS III - Primarily capital appreciation, and secondarily preservation of capital.
MODERATE GROWTH:
INTERNATIONAL SOLUTIONS IV -- Capital appreciation without regard to current income.
LONG-TERM GROWTH:
INTERNATIONAL SOLUTIONS V - Aggressive capital appreciation without regard to current income.
AGGRESSIVE GROWTH:
</TABLE>
The underlying funds are from the following registered fund complexes:
- DEUTSCHE ASSET MANAGEMENT - MONTGOMERY ASSET MANAGEMENT
- IVY FUNDS - SCUDDER FUNDS
- LAZARD ASSET MANAGEMENT - 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.
3
<PAGE> 4
INVESTMENT STRATEGIES AND RISKS
HOW ARE A FUND'S ASSETS INVESTED?
Each Fund normally invests in eight to fifteen underlying funds whose combined
investment strategies and techniques are consistent with the Fund's investment
objectives. 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 foreign issuers. Each Fund's portfolio is expected
to be relatively static with only minor periodic adjustments in response to
changing market conditions.
HOW ARE A FUND'S UNDERLYING FUNDS CHOSEN?
The selection of the underlying funds that comprise each Fund's portfolio is
based on "Modern Portfolio Theory", which provides an analytical framework for
transforming 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 the
following factors:
- the underlying fund's long-term return forecast;
- its estimated risk level, based on its perceived potential for loss or
gain and short- and long-term returns;
- its current and historical investment style; and
- its relative diversification potential, based on its perceived potential to
reduce the loss or increase the gain of each Fund.
Other factors that may be considered include:
- 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.
The information produced by this analysis is used as input for a specially
designed computer model that produces a range of "efficient" portfolios with the
highest expected long-term returns for their respective levels of risk. A
cross-checking analysis is performed to help ensure that all portfolios conform
to professional standards of asset class and geographic diversification. 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 objectives. The result is a range
of investment choices for investors across a broad spectrum of risk preferences.
4
<PAGE> 5
WHAT ARE EACH FUND'S PRINCIPAL STRATEGIES?
<TABLE>
<CAPTION>
FUND PRINCIPAL STRATEGIES WHO SHOULD INVEST?
---- -------------------- ------------------
<S> <C> <C>
INTERNATIONAL SOLUTIONS I - Invests 35-50% in international bond May be appropriate for relatively
CONSERVATIVE GROWTH funds and 50-65% in international conservative international investors
equity funds. seeking a prudent trade-off between
equity and fixed income investments.
INTERNATIONAL SOLUTIONS II - Invests 20-35% in international bond May be appropriate for international
BALANCED GROWTH funds and 65-80% in international investors with limited tolerance for
equity funds. year-to-year volatility.
INTERNATIONAL SOLUTIONS III - Invests 75-90% in international equi- May be appropriate for moderately
MODERATE GROWTH ty funds and 10-25% in international aggressive international investors who
bond funds. are willing to bear a moderate level of
volatility.
INTERNATIONAL SOLUTIONS IV - Invests exclusively in international May be appropriate for international
LONG-TERM GROWTH equity funds, with 20-35% invested investors who are willing to sustain
in emerging market equity funds. potentially significant fluctuations in
capital value in the short-term.
INTERNATIONAL SOLUTIONS V - Invests exclusively in international May be appropriate for aggressive
AGGRESSIVE GROWTH equity funds, with 35-50% international investors who have a longer
in emerging market equity funds. time horizon for their investments and are
willing to bear a higher level of risk.
</TABLE>
* 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.
5
<PAGE> 6
WHAT ARE THE FUNDS' MAIN RISK CHARACTERISTICS?
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:
- 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 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 included in the Fund's
portfolio, 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 conditions. A Fund could therefore
lose money at any time during which the underlying funds in which it invests
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 an underlying fund's performance
and, therefore, a Fund's performance 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. These additional risks include, among others:
- greater price volatility and less liquidity;
- less stable governments;
- abrupt changes in exchange rate regime or monetary policy; and
- unusually high inflation rates and/or high national debt levels.
(See "Emerging Market Securities" in the "Additional Information About
Investment Strategies and Risks" section.)
6
<PAGE> 7
WHAT ARE THE SPECIAL RISKS ASSOCIATED WITH EACH FUND?
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 in the table on page 5 under the heading
"Principal Strategies". Following is information about the general risks
associated with each Fund's investment strategies. Other important information
about the risks that the Funds and their investors are exposed to 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 be more
susceptible than the other Funds to losses caused by a downturn in the
international bond markets. Because fixed income investments fall in value as
interest rates rise, this Fund is also susceptible to losses at times of
rising interest rates.
- - INTERNATIONAL SOLUTIONS II - BALANCED GROWTH: This Fund's greater
emphasis (relative to the Conservative Growth Fund) on underlying funds
that invest in equity securities may lead to moderately increased volatility.
This Fund also may be susceptible to losses at times of rising interest
rates.
- INTERNATIONAL SOLUTIONS III - MODERATE GROWTH: The underlying funds that
comprise this Fund invest more in equity securities than fixed income
securities. This increases the Fund's exposure to downturns in the equity
markets and is likely to cause the Fund to experience greater fluctuations in
value. This Fund is less susceptible to losses at times of rising interest
rates.
- 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 (see
"Emerging Market Securities" in the "Additional Information About Investment
Strategies and Risks" section).
- 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 (see "Emerging Market Securities"
in the "Additional Information About Investment Strategies and Risks"
section).
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)
<TABLE>
<CAPTION>
Maximum Sales Maximum Deferred
Charge (Load) Sales Charge (Load) Maximum Sales
Imposed on Purchases (as a percentage of Charge (Load)
Fund (as a percentage of original purchase Imposed on Redemption Exchange
Class offering price) price) Reinvested Dividends Fee* Fee
----- -------------------- -------------------- -------------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Class A 5.75% None None None None
Class B None 5.00% None None None
Class C None 1.00% None None None
Class I None None None None None
Advisor Class None None None None None
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds wire, a
$10 wire fee will be charged to your account.
7
<PAGE> 8
ANNUAL FUND OPERATING EXPENSES(expenses that are deducted from Fund assets):
<TABLE>
<CAPTION>
TOTAL ANNUAL NET FUND
MANAGEMENT 12b-1 DISTRIBUTION OTHER FUND OPERATING EXPENSES OPERATING
FEES AND/OR SERVICE FEES EXPENSES(1) EXPENSES(1)(2) REIMBURSED(1)(2) EXPENSES(1)(2)
---------- ------------------- ---------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
INTERNATIONAL SOLUTIONS I -
CONSERVATIVE GROWTH
Class A 0.25% 0.25% 63.12% 63.62% 62.75% 0.87%
Class B 0.25% 1.00% 63.12% 64.37% 62.75% 1.62%
Class C 0.25% 1.00% 63.12% 64.37% 62.75% 1.62%
Class I 0.25% None 63.03% 63.28% 62.75% 0.53%
Advisor Class 0.25% None 63.12% 63.37% 62.75% 0.62%
INTERNATIONAL SOLUTIONS II -
BALANCED GROWTH
Class A 0.25% 0.25% 64.69% 65.19% 64.36% 0.83%
Class B 0.25% 1.00% 64.69% 65.94% 64.36% 1.58%
Class C 0.25% 1.00% 64.69% 65.94% 64.36% 1.58%
Class I 0.25% None 64.60% 64.85% 64.36% 0.49%
Advisor Class 0.25% None 64.69% 64.94% 64.36% 0.58%
INTERNATIONAL SOLUTIONS III-
MODERATE GROWTH
Class A 0.25% 0.25% 23.46% 23.96% 23.21% 0.75%
Class B 0.25% 1.00% 20.46% 21.71% 23.21% 1.50%
Class C 0.25% 1.00% 20.46% 21.71% 23.21% 1.50%
Class I 0.25% None 22.55% 22.80% 23.21% 0.41%
Advisor Class 0.25% None 22.46% 22.71% 23.21% 0.50%
INTERNATIONAL SOLUTIONS IV -
LONG-TERM GROWTH
Class A 0.25% 0.25% 16.19% 16.69% 17.38% 0.69%
Class B 0.25% 1.00% 14.69% 15.94% 17.38% 1.44%
Class C 0.25% 1.00% 14.69% 15.94% 17.38% 1.44%
Class I 0.25% None 16.78% 17.03% 17.38% 0.35%
Advisor Class 0.25% None 16.69% 16.94% 17.38% 0.44%
INTERNATIONAL SOLUTIONS V -
AGGRESSIVE GROWTH
Class A 0.25% 0.25% 56.98% 57.48% 56.83% 0.65%
Class B 0.25% 1.00% 56.98% 58.23% 56.83% 1.40%
Class C 0.25% 1.00% 56.98% 58.23% 56.83% 1.40%
Class I 0.25% None 56.89% 57.14% 56.83% 0.31%
Advisor Class 0.25% None 56.98% 57.23% 56.83% 0.40%
</TABLE>
(1) Based on estimated amounts for each Fund's fiscal year ending
December 31, 2000.
(2) Ivy Management, Inc. ("IMI"), the Funds' Manager, has agreed to reimburse
each Fund's expenses for the current fiscal year to the extent necessary to
ensure that each Fund's Annual Fund Operating Expenses do not exceed the
amounts shown in the "Net Fund Operating Expenses" column above.
For years two through ten the Fund's Manager has agreed to reimburse each Fund's
expenses to the extent necessary to ensure that each Fund's Annual Fund
Operating Expenses do not exceed the following amounts.
<TABLE>
<S> <C>
- International Solutions I: Class A - 1.42%; Class B - 2.17%; Class C - 2.17%; Class I - 1.08%; Advisor Class - 1.17%.
- International Solutions II: Class A - 1.38%; Class B - 2.13%; Class C - 2.13%; Class I - 1.04%; Advisor Class - 1.13%.
- International Solutions III: Class A - 1.30%; Class B - 2.05%; Class C - 2.05%; Class I - 0.96%; Advisor Class - 1.05%.
- International Solutions IV: Class A - 1.24%; Class B - 1.99%; Class C - 1.99%; Class I - 0.90%; Advisor Class - 0.99%.
- International Solutions V: Class A - 1.20%; Class B - 1.95%; Class C - 1.95%; Class I - 0.86%; Advisor Class - 0.95%.
</TABLE>
Each Fund's shareholders will bear indirectly the Fund's proportionate share
of fees and expenses charged by the underlying funds in which the Fund is
invested. The weighted average expense ratios borne by each Fund are derived
from the underlying funds' most recent shareholder reports. Based on the
expected portfolio composition of each Fund (which can change but is likely
to be relatively static), the weighted average expense ratios for each Fund
are estimated to fall within the following ranges: International Solutions I
- 1.30%-1.44%; International Solutions II - 1.34%-1.48%; International
Solutions III - 1.42%- 1.56%; International Solutions IV - 1.48%-1.62%;
International Solutions V - 1.52%-1.66%.
Each manager of an underlying fund has agreed to make a payment to IMI at an
annual rate of up to 0.25% of the average daily value of the shares of the
underlying fund held by a Fund during any calendar quarter. Such payments
will be used by IMI to reduce the expenses of the Fund. By effectively
lowering each Fund's expenses, the payments will also reduce the amount of
the reimbursement by IMI necessary to maintain each Fund's Annual Operating
Expense at the level stated above.
8
<PAGE> 9
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:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
INTERNATIONAL SOLUTIONS I -
CONSERVATIVE GROWTH
Class A* $659 $947 $1,257 $2,134
Class B $665 (1) $926 (2) $1,314 $2,269
Class B (no redemption) $165 $626 $1,114 $2,269
Class C $265 (3) $626 $1,114 $2,460
Class C (no redemption) $165 $626 $1,114 $2,460
Class I** $ 54 $289 $ 542 $1,268
Advisor Class** $ 63 $317 $ 591 $1,371
INTERNATIONAL SOLUTIONS II -
BALANCED GROWTH
Class A* $655 $936 $1,237 $2,092
Class B $661 (1) $914 (2) $1,294 $2,227
Class B (no redemption) $161 $614 $1,094 $2,227
Class C $261 (3) $614 $1,094 $2,419
Class C (no redemption) $161 $614 $1,094 $2,419
Class I** $ 50 $276 $ 521 $1,221
Advisor Class** $ 59 $304 $ 569 $1,325
INTERNATIONAL SOLUTIONS III -
MODERATE GROWTH
Class A* $647 $912 $1,197 $2,007
Class B $653 (1) $890 (2) $1,253 $2,142
Class B (no redemption) $153 $590 $1,053 $2,142
Class C $253 (3) $590 $1,053 $2,335
Class C (no redemption) $153 $590 $1,053 $2,335
Class I** $ 42 $251 $ 477 $1,128
Advisor Class** $ 51 $279 $ 526 $1,233
INTERNATIONAL SOLUTIONS IV -
LONG-TERM GROWTH
Class A* $641 $895 $1,167 $1,943
Class B $647 (1) $871 (2) $1,222 $2,078
Class B (no redemption) $147 $571 $1,022 $2,078
Class C $247 (3) $571 $1,022 $2,273
Class C (no redemption) $147 $571 $1,022 $2,273
Class I** $ 36 $232 $ 445 $1,057
Advisor Class** $ 45 $260 $ 493 $1,163
INTERNATIONAL SOLUTIONS V -
AGGRESSIVE GROWTH
Class A* $638 $883 $1,147 $1,900
Class B $643 (1) $859 (2) $1,201 $2,035
Class B (no redemption) $143 $559 $1,001 $2,035
Class C $243 (3) $559 $1,001 $2,230
Class C (no redemption) $143 $559 $1,001 $2,230
Class I** $ 32 $219 $ 423 $1,010
Advisor Class** $ 41 $248 $ 472 $1,116
</TABLE>
* 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 and Advisor Class 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.
9
<PAGE> 10
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 or bonds, or a particular country or industry sector. Consistent
with this premise, the Funds offer a high level of diversification for
international investors at various 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.
The Funds' portfolios represent different points along a risk/return continuum,
ranging from lower risk and lower expected return to higher risk and higher
expected return. Each Fund's investments are determined by how the various
underlying funds' return and risk profiles combine at that point in the
continuum that best matches the Fund's investment objectives. 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
and II) will invest in a higher proportion of bond underlying funds. In doing
so, however, these Funds are less likely to experience the higher potential
returns historically associated with equity investments. By contrast, Funds at
the more aggressive end of the continuum (such as International Solutions IV and
V) will invest in a higher proportion of underlying funds that hold common
stocks, but as a result are exposed to greater price volatility and similar
investment risks.
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. The Conservative Growth Fund has the highest weighting in foreign
bonds among the five Funds, and therefore is expected to bear the lowest
relative overall risk. The Fund will have a moderate degree of exposure to the
international equity markets, thus making the Fund potentially more volatile
than 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 the Conservative Growth Fund) on underlying funds that invest in
equity securities may lead to moderately increased volatility, but its equal
emphasis on fixed income securities is expected to reduce its overall risk
relative to the Moderate Growth, Long-term Growth and Aggressive Growth Funds.
10
<PAGE> 11
INTERNATIONAL SOLUTIONS III - MODERATE GROWTH: The investment objective of the
Moderate Growth Fund is primarily capital appreciation, with preservation of
capital as a secondary 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 short-term losses that may occur in the
equity markets.
INTERNATIONAL SOLUTIONS IV - LONG-TERM GROWTH: The 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 the Conservative Growth,
Balanced Growth and Moderate Growth Funds (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 projected higher growth rates than established markets. However, emerging
market securities have historically experienced 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 commercial paper. When a Fund
assumes such a defensive position it may not achieve its investment objectives.
Of course, there can be no guarantee that a Fund will achieve its investment
objectives even when it is not assuming a defensive position.
11
<PAGE> 12
UNDERLYING FUND RISKS
The main risks associated with investing in each Fund, such as "management
risk," "general market risk" and "foreign securities risk," are described on
page 6 of this Prospectus. Because the return on your investment is tied so
closely to the performance of the underlying funds, a description of the types
of securities in which the underlying funds principally invest and their
associated risks has been provided.
EQUITY SECURITIES: Many of the underlying funds invest primarily in equity
securities. Equity securities typically represent a proportionate ownership
interest in the issuing company. As a result the value of equity securities
rises and falls with a company's success or failure. The market value of equity
securities can fluctuate significantly, with smaller companies being
particularly susceptible to price swings. Transaction costs in smaller-company
securities may also be higher than those of larger companies.
Most likely to be affected: ALL INTERNATIONAL SOLUTIONS 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 of
interest or principal payments on time. For this reason, however, 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 Fund and more solvent foreign governments) of specific
disbursements. These disbursements 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.
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<PAGE> 13
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 than 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 declines before settlement).
Most likely to be affected: ALL INTERNATIONAL SOLUTIONS FUNDS.
EMERGING MARKET SECURITIES: The risks of investing in foreign securities are
heightened in countries with new or developing economies. These additional risks
include:
- - 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, prohibitions against repatriation of assets or taxation of
capital or profits);
- - increased settlement delays;
- - abrupt changes in exchange rate regime or monetary policy;
- - restrictions on repatriation of capital;
- - unusually high inflation rates (which in extreme cases can cause the
value of a country's assets to erode sharply); 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 INTERNATIONAL SOLUTIONS FUNDS.
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<PAGE> 14
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 INTERNATIONAL SOLUTIONS FUNDS.
OTHER RISKS: The underlying funds can use a wide range of other investment
techniques to achieve their respective investment objectives. 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 on pages
24-27 of this Prospectus.
OTHER IMPORTANT INFORMATION
EUROPEAN MONETARY UNION: The Funds may have investments in Europe. 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 is
scheduled to be completed by December 31, 2001, at which time euro bills and
coins will be put into circulation. Certain European Union members, including
the United Kingdom, did not officially implement the euro and may cause market
disruptions when and if they decide to do so. Should this occur, the underlying
funds (and hence the Funds that hold their shares) could experience investment
losses.
14
<PAGE> 15
MANAGEMENT
Ivy Management, Inc. ("IMI"), located at Via Mizner Financial Plaza, 700 South
Federal Highway, Boca Raton, Florida 33432, provides investment advisory and
business management services to the Funds using a team approach. IMI's
responsibilities include making investment decisions; assisting with the
preparation of the Funds' financial statements, prospectuses and periodic
reports to shareholders, as well as Federal and state tax reporting; and
providing certain accounting and pricing services. IMI is an SEC-registered
investment advisor with over $7.2 billion in assets under management, and also
advises and provides business management services to the Ivy Funds.
Garmaise Investment Technologies (US) Inc. ("GIT"), 30 St. Clair Avenue West,
Suite 1110, Toronto, Ontario, Canada, M4V 3A1, provides asset allocation
consulting services to IMI in connection with the Funds pursuant to a
subadvisory contract with IMI. The president of GIT, an SEC-registered
investment advisor, has over 20 years of investment advisory experience and uses
a proprietary computer-based method of portfolio selection known as
"Optimization." GIT's responsibilities include making recommendations to IMI
regarding the underlying funds that comprise each Fund's portfolio and
determining when changing the relative mix of underlying funds within a Fund's
portfolio may be appropriate in light of prevailing market conditions.
For the combined services provided by IMI and GIT, each Fund pays a fee at the
annual rate of 0.25% of the Fund's average net assets.
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
Each Fund calculates its net asset value per share ("NAV") 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 NAV of the underlying funds whose shares are held
in the Fund's portfolio. Each underlying fund is responsible for determining its
own NAV on any given day.
The number of shares you receive when you place a purchase or exchange order,
and the payment you receive after submitting a redemption request, is based on
the Fund's net asset value next determined after your instructions are received
in proper form by Ivy Mackenzie Services Corp. ("IMSC"), 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 "Class A Shares" below).
HOW TO BUY SHARES
The essential features of the Funds' different classes of shares are described
in the following table. 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.
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<PAGE> 16
Each Fund has adopted separate distribution plans pursuant to Rule 12b-1 under
the Investment Company Act of 1940 for its Class A, B and C shares that allow
the Fund to pay distribution and other fees for the sale and distribution of its
shares and for services provided to shareholders. Because these fees are paid
out of each Fund's assets on an ongoing basis, over time they will increase the
cost of your investment and may cost you more than paying other types of sales
charges.
The following table displays the various investment minimums, sales charges and
expenses that apply to each class:
<TABLE>
<CAPTION>
MINIMUM MINIMUM CONTINGENT
FUND INITIAL SUBSEQUENT INITIAL SALES DEFERRED SALES SERVICE AND/OR
CLASS INVESTMENT* INVESTMENT* CHARGE CHARGE DISTRIBUTION (12b-1) FEES
- ------------- ----------- ----------- ---------------- -------------- -------------------------
<S> <C> <C> <C> <C> <C>
Class A $ 1,000 $ 100 Maximum 5.75%, None, except on 0.25% Service fee
with options for certain NAV
a reduction. purchases
Class B $ 1,000 $ 100 None Maximum 5%, 0.25% Service fee
declining over six and 0.75%
years Distribution fee
Class C $ 1,000 $ 100 None 1% for the first 0.25% Service fee
year and 0.75%
Distribution fee
Class I $ 5,000,000 $ 10,000 None None None
Advisor Class $ 10,000 $ 250 None None None
</TABLE>
* Minimum initial and subsequent investments for retirement plans are $25.
Class A Shares
INITIAL SALES CHARGE
Class A shares are sold at a public offering price equal to their NAV plus an
initial sales charge, as set forth below (the sales charge is reduced as the
amount invested increases):
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE PORTION OF PUBLIC
AS A PERCENTAGE OF AS A PERCENTAGE OF OFFERING PRICE
AMOUNT INVESTED PUBLIC OFFERING PRICE NET AMOUNT INVESTED RETAINED BY DEALER
--------------------- ------------------- ------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 5.25% 5.54% 4.50%
$100,000 but less than $250,000 4.50% 4.71% 3.75%
$250,000 but less than $500,000 3.00% 3.09% 2.50%
$500,000 or over 0.00% 0.00% 0.00%
</TABLE>
* A Contingent Deferred Sales Charge ("CDSC") of 0.50% may apply to Class A
shares that are redeemed within 12 months of the end of the month in which they
were purchased. Class A shares that are acquired through reinvestment of
dividends or distributions are not subject to an initial sales charge.
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<PAGE> 17
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 International 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 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;
- - as an employee of a selected dealer; or
- - 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.
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.
You may also purchase Class A shares at NAV if you are investing at least
$500,000 through a dealer or agent. Ivy Mackenzie Distributors, Inc. ("IMDI"),
the Funds' distributor, may pay the dealer or agent (out of IMDI's own
resources) for its distribution assistance according to the following schedule:
<TABLE>
<CAPTION>
PURCHASE AMOUNT COMMISSION
--------------- ----------
<S> <C>
First $3,000,000 0.50%
Next $2,000,000 0.25%
Over $5,000,000 0.10%
</TABLE>
IMDI may from time to time pay a bonus or other cash incentive to dealers (other
than IMDI) including, for example, those which employ a registered
representative who sells a minimum dollar amount of the shares of a Fund and/or
other funds distributed by IMDI during a specified time period.
Each Fund may, from time to time, waive the initial sales charge on its Class A
shares sold to clients of certain dealers meeting criteria established by IMDI.
This privilege will apply only to Class A shares of a Fund that are purchased
using proceeds obtained by such clients by redeeming another mutual fund's
shares on which a sales charge was paid. Purchases must be made within 60 days
of redemption from the other fund, and the Class A shares purchased are subject
to a 1.00% CDSC if redeemed within the first year after purchase.
SERVICE FEE
Class A shares are subject to an ongoing service fee at an annual rate of up to
0.25% of a Fund's average net assets attributable to its Class A shares.
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<PAGE> 18
CLASS B AND CLASS C SHARES
CONTINGENT DEFERRED SALES CHARGE
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 1.00%. Class B shares redeemed within six
years of purchase will be subject to a CDSC at the following rates:
<TABLE>
<CAPTION>
CDSC AS A PERCENTAGE
OF DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
---------------------- --------------------
<S> <C>
First 5.00%
Second 4.00%
Third 3.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter 0.00%
</TABLE>
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.
Shares will be redeemed on a lot-by-lot basis in the following order:
- - shares held more than six years;
- - shares acquired through reinvestment of dividends and distributions;
- - shares subject to the lowest CDSC percentage, on a first-in, first-out
basis
(1) with the portion of the lot attributable to capital appreciation,
which is not subject to a CDSC, redeemed first; then
(2) the portion of the lot attributable to your original basis, which is
subject to a CDSC.
WAIVER OF THE CDSC
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.
- - redemptions through the Merrill Lynch Daily K Plan, 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.
18
<PAGE> 19
SERVICE AND DISTRIBUTION FEE
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
that of Class A, Class I and Advisor Class shares. IMDI 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 distribution services, such as compensating selected dealers and
agents for selling these shares.
SHARE CONVERSION FEATURE
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 feature.
CLASS I AND ADVISOR CLASS SHARES
Class I and Advisor Class shares are not subject to an initial sales charge or a
CDSC, nor to ongoing service or distribution fees. Class I shares are offered
only to institutions and certain individuals. Advisor Class shares are offered
only to the following investors:
- - trustees or other fiduciaries purchasing shares for employee benefit plans
that are sponsored by organizations that have at least 1,000 employees;
- - any account with assets of at least $10,000 if (a) a financial planner,
trust company, bank trust department or registered investment adviser has
investment discretion, and where the investor pays such person as
compensation for his advice and other services an annual fee of at least
0.50% on the assets in the account, or (b) such account is established
under a "wrap fee" program and the account holder pays the sponsor of the
program an annual fee of at least 0.50% on the assets in the account;
- - officers and Trustees of Mackenzie Solutions (and their relatives);
- - directors or employees of Mackenzie Investment Management Inc. or its
affiliates; and
- - directors, officers, partners, registered representatives, employees and
retired employees (and their relatives) of dealers having a sales agreement
with IMDI (or trustees or custodians of any qualified retirement plan or
IRA established for the benefit of any such person).
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<PAGE> 20
SUBMITTING YOUR PURCHASE ORDER
INITIAL INVESTMENTS
Complete and sign the Account Application appearing in the middle of this
Prospectus. Enclose a check payable to the International Solutions Fund in which
you wish to invest. You should note on the check the class of shares you wish to
purchase (see page 16 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.
PO Box 3022 700 South Federal Hwy., Suite 300
Boca Raton, FL 33431-0922 Boca Raton, FL 33432
BUYING ADDITIONAL SHARES
There are several 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 account statement) or written
instructions, along with your payment.
- - BY WIRE - Purchases may also be made by wiring money from your bank account
to your International Solutions account. Your bank may charge a fee for
wiring funds. Before wiring any funds, please call IMSC at (800) 821-4350.
Wiring instructions are as follows:
First Union National Bank of Florida
Jacksonville, FL
ABA #063000021
Account #2000002757919
For further credit to:
Your International Solutions Account Registration
Your Fund Number and Account Number
- - BY AUTOMATIC INVESTMENT METHOD ("AIM") - You can elect 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 6A and 7B of the Account Application.
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<PAGE> 21
HOW TO REDEEM 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 20 of this Prospectus. Be sure that all registered owners
listed on the account sign the request. Medallion 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) 821-4350 to redeem from your individual,
joint or custodial account. To process your redemption order by telephone,
you must have telephone redemption privileges on your account (see section
6E of the Account Application). 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. Requests by
telephone can only be accepted for amounts up to $50,000.
- - BY SYSTEMATIC WITHDRAWAL PLAN ("SWP") - You can elect 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 section 6B 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. 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 ("EFT") - For SWP redemptions only.
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<PAGE> 22
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, unless you instruct
otherwise.
- - Within a class of shares, any shares subject to a CDSC will be redeemed
last unless you specifically elect otherwise.
- - Class B and Class C shares will be redeemed in the order described under
"Class B and Class C Shares -- Contingent Deferred Sales Charge".
- - 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 SHARES
You may exchange your Fund shares 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 20 of this Prospectus. Be sure that all registered
owners listed on the account sign the request.
- - BY TELEPHONE - Call IMSC at (800) 821-4350 to authorize an exchange
transaction. To process your exchange order by telephone, you must have
telephone exchange privileges on your account (see section 6E of the
Account Application). 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. For example, shareholders exchanging more
than five times in a 12-month period may be considered to be using
market-timing strategies.
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<PAGE> 23
DISTRIBUTIONS AND TAXES
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 be mailed to the address of record unless otherwise
instructed.
BY EFT - your proceeds will be directly deposited into your bank account.
To change your dividend and/or distribution options, call IMSC at (800)821-4350.
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. 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 dividend and capital gain distributions are taxable to you in the
same manner whether received in cash or reinvested in additional Fund shares.
Each year the Funds will notify you of the tax status of dividends and other
distributions.
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.
Upon the sale or exchange 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.
23
<PAGE> 24
INVESTMENT OBJECTIVES AND STRATEGIES
OF THE UNDERLYING FUNDS
Following is a brief description of the investment objectives and principal
investment strategies of the underlying funds. The risks associated with certain
of these investment practices are described in "Additional Information About
Investment Strategies and Risks" and in the SAI. The following information and
the risk information contained in this Prospectus and 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 IMDI (which distributes the Ivy Fund's shares)
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 IMDI.
EQUITY UNDERLYING FUNDS
DEUTSCHE INTERNATIONAL EQUITY PORTFOLIO, managed by Deutsche Asset Management.
The Portfolio seeks long-term capital appreciation. Under normal circumstances,
the Portfolio invests at least 65% of its total assets in the stocks and other
securities with equity characteristics of companies in developed countries
outside the United States. The Portfolio invests for capital appreciation, not
income: any dividend or interest income is incidental to the pursuit of that
goal. Almost all the companies in which the Portfolio invests are based in the
developed foreign countries that make up the MSCI EAFE Index, plus Canada. The
Portfolio may also invest a portion of its assets in companies based in the
emerging markets of Latin America, the Middle East, Europe, Asia and Africa if
management believes that their return potential more than compensates for the
extra risks associated with these markets.
IVY INTERNATIONAL FUND II's principal investment objective is long-term capital
growth. Consideration of current income is secondary to this principal
objective. The Fund invests at least 65% of its assets in equity securities
(including common stock, preferred stock and securities convertible into common
stock) principally traded in European, Pacific Basin and Latin American markets.
To control its exposure to certain risks, the Fund might engage in foreign
currency exchange transactions and forward foreign currency contracts.
IVY INTERNATIONAL SMALL COMPANIES FUND seeks long-term growth. Consideration of
current income is secondary to this principal objective. The Fund invests at
least 65% of its assets in the equity securities (including common stock,
preferred stock and securities convertible into common stock) of foreign issuers
having initial market capitalization of less than $2 billion. The Fund might
engage in foreign currency exchange transactions and forward foreign currency
contracts to control its exposure to certain risks.
IVY PAN-EUROPE FUND's principal investment objective is long-term capital
growth. Consideration of current income is secondary to this principal
objective. The Fund invests at least 65% of its assets in the equity securities
(including common stock, preferred stock and securities convertible into common
stock) of large and medium-sized European companies.
THE JAPAN FUND, INC., managed by Scudder Kemper Investments, seeks to provide
long-term capital appreciation. The Fund pursues its objective by investing at
least 80% of its assets in Japanese securities (including American Depository
Receipts). The term Japanese securities includes securities issued by companies
organized under the laws of Japan, companies affiliated with Japanese companies
and companies, wherever organized, that derive 50% or more of their revenues
from Japan. The Fund invests primarily in the common stock of Japanese
companies. It anticipates that most equity securities of Japanese companies in
which it invests will be listed on Japanese securities exchanges. However, the
Fund may also invest up to 30% of its net assets in equity securities that are
traded in an over-the-counter market.
LAZARD INTERNATIONAL EQUITY PORTFOLIO is a non-diversified fund that seeks
long-term capital appreciation. The Portfolio invests primarily in equity
securities, principally common stocks, of relatively large non-U.S. companies
with market capitalizations in the range of the Morgan Stanley Capital
International (MSCI) Europe, Australasia and Far East Index. The Portfolio
24
<PAGE> 25
generally invests at least 80% of its total assets in equity securities of
companies located in at least three different foreign countries.
LAZARD INTERNATIONAL SMALL CAP PORTFOLIO is a non-diversified fund that seeks
long-term capital appreciation. The Portfolio invests primarily in equity
securities, principally common stocks, of relatively small, non-U.S. companies
in the range of the Morgan Stanley Capital International (MSCI) Europe,
Australasia and Far East Small Cap Index. The percentage of the Portfolio's
assets invested in particular geographic sectors may shift from time to time
based on the investment manager's judgment. The Portfolio generally invests at
least 65% of its assets in equity securities of small companies located in at
least three foreign countries.
MONTGOMERY INTERNATIONAL GROWTH FUND seeks long-term capital appreciation by
investing in medium- and large-cap companies in developed stock markets outside
the United States. The Fund invests at least 65% of its total assets in the
common stocks of companies outside the United States whose shares have a stock
market value (market capitalization) of more than $1 billion. The Fund currently
concentrates its investments in the stock markets of western Europe,
particularly the United Kingdom, France, Germany, Italy and the Netherlands, as
well as developed markets in Asia, such as Japan and Hong Kong. The Fund
typically invests in at least three countries outside the United States, with no
more than 40% of its assets in any one country.
SCUDDER GREATER EUROPE GROWTH FUND is a non-diversified fund that seeks to
provide long-term growth of capital. The Fund seeks to achieve its investment
objective by investing at least 80% of its total assets in European common
stocks and other equities (equities that are traded mainly on European markets
or are issued by companies organized under the laws of Europe or do more than
half of their business there). The Fund expects that it will focus its
investments on common stocks of multinational companies in industrialized
Western and Southern Europe countries such as France, Italy, Spain and Greece.
SCUDDER INTERNATIONAL FUND seeks long-term growth of capital by investing at
least 65% of its total assets in foreign equities (equities issued by
foreign-based companies and listed on foreign exchanges). Although the Fund can
invest in companies of any size and from any country, its invests mainly in
common stocks of established companies in countries with developed economies
(other than the United States).
WARBURG PINCUS INTERNATIONAL EQUITY FUND seeks long-term capital appreciation.
Under normal market conditions, the Fund will invest at least 65% of assets in
equity securities of issuers from at least three foreign countries. The Fund
intends to diversify its investments across different countries, although at
times it may invest a significant part of its assets in a single country.
Although the Fund emphasizes developed countries, it may also invest in emerging
markets.
WARBURG PINCUS JAPAN GROWTH FUND seeks long-term growth of capital. The Fund may
invest in companies of any size, whether traded on an exchange or
over-the-counter. Under normal market conditions, the Fund will invest at least
65% of assets in equity securities of Japanese issuers. The remaining portion
may be invested in securities of other Asian issuers.
WARBURG PINCUS JAPAN SMALL COMPANY FUND seeks long-term capital appreciation.
Under normal market conditions, the Fund will invest at least 65% of assets in
equity securities of small Japanese companies. Once the 65% policy is met, the
Fund may invest in Japanese or other Asian companies of any size. The Fund will
not invest more than 10% of assets in any one country except Japan.
EMERGING MARKET UNDERLYING FUNDS
IVY ASIA PACIFIC FUND'S principal investment objective is long-term growth.
Consideration of current income is secondary to this principal objective. The
Fund invests at least 65% of its assets in
25
<PAGE> 26
equity securities (including common stock, preferred stock and securities
convertible into common stock) issued in Asia Pacific countries, which include
China, Hong Kong, India, Indonesia, Japan, Malaysia, Pakistan, the Philippines,
Singapore, Sri Lanka, South Korea, Taiwan, Thailand and Vietnam.
IVY CHINA REGION FUND's principal investment objective is long-term capital
growth. Consideration of current income is secondary to this principal
objective. The Fund invests at least 65% of its assets in the equity securities
(including common stock, preferred stock and securities convertible into common
stock) of companies that are located or have a substantial business presence in
the China Region, which includes China, Hong Kong and Taiwan, South Korea. The
Fund may also invest in equity securities of companies whose current or expected
performance is considered to be strongly associated with the China Region. A
large portion of the Fund is likely to be invested in equity securities of
companies that trade in Hong Kong.
IVY DEVELOPING MARKETS FUND's principal investment objective is long-term
growth. Consideration of current income is secondary to this principal
objective. The Fund invests at least 65% of its assets in equity securities of
companies that are located in, or are expected to profit from, countries whose
markets are generally considered to be "developing" or "emerging". The Fund may
invest more than 25% of its assets in a single country, but usually will hold
securities from at least three emerging market countries in its portfolio.
IVY SOUTH AMERICA FUND is a non-diversified fund with a principal investment
objective of long-term growth. Consideration of current income is secondary to
this principal objective. The Fund invests at least 65% of its assets in equity
securities(including common stock, preferred stock and securities convertible
into common stock) and government and corporate debt securities issued
throughout South America, Central America and the Spanish-speaking islands of
the Caribbean. The Fund is likely to have significant investments in Argentina,
Brazil, Chile, Colombia, Peru and Venezuela. The Fund may invest in low rated
debt securities to increase its potential yield.
LAZARD EMERGING MARKETS PORTFOLIO is a non-diversified fund that seeks long-term
capital appreciation. The Portfolio invests primarily in equity securities,
principally common stocks, of non-U.S. companies whose principal activities are
in emerging market countries. Emerging market countries include all countries
represented by the Morgan Stanley Capital International Emerging Markets (Free)
Index, which currently includes: Argentina, Brazil, Chile, China, Colombia, the
Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Israel, Jordan, Korea,
Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, Sri
Lanka, South Africa, Taiwan, Thailand, Turkey and Venezuela.
MONTGOMERY EMERGING MARKETS FUND seeks long-term capital appreciation by
investing in companies based or operating primarily in developing economies
throughout the world. The Fund invests at least 65% of its total assets in the
stocks of companies based in the world's developing economies, and typically
maintains investments in at least six of these countries at all times, with no
more than 35% of its assets in any single one of them. The geographic regions in
which the Fund may focus its investments include Latin America, Asia, Europe,
the Middle East and Africa.
SCUDDER EMERGING MARKETS GROWTH FUND is a non-diversified fund that seeks
long-term growth of capital. It does this by investing at least 65% of total
assets in emerging market equities (equities traded mainly in emerging markets,
or issued by companies that are based in emerging markets or have most of their
business there). The Fund invests primarily in common stocks. Examples of
emerging markets are Latin America, Southeast Asia, Eastern Europe and Africa.
SCUDDER LATIN AMERICA FUND is a non-diversified fund that seeks long-term
capital appreciation. The Fund pursues its investment objective by investing at
least 65% of total assets in Latin American common stocks and other equities
(equities that are traded mainly on Latin American markets, issued or guaranteed
by a Latin American government or issued by a company organized under the laws
of a Latin American country or any company with more than half of its business
in Latin America). Although the Fund may invest in any Latin American country,
it expects to invest primarily in common stocks of established companies in
Argentina, Brazil, Chile, Colombia, Mexico and Peru.
26
<PAGE> 27
SCUDDER PACIFIC OPPORTUNITIES FUND is a non-diversified fund that seeks
long-term growth of capital by investing at least 65% of total assets in
Pacific Basin common stocks and other equities (equities that are traded mainly
on Pacific Basin markets, issued by companies organized under the laws of a
Pacific Basin country or issued by any company with more than half of its
business in the Pacific Basin). Examples of Pacific Basin countries include
China, Malaysia, Sri Lanka, Australia and India. The Fund generally intends to
focus on common stocks from the region's smaller emerging markets and does not
invest in Japan.
FIXED INCOME UNDERLYING FUNDS
IVY INTERNATIONAL STRATEGIC BOND FUND seeks total return and, consistent with
that objective, to maximize current income. The Fund invests at least 65% of its
assets in a managed portfolio of foreign bonds. The Fund may also invest in U.S.
bonds. The types of debt securities the Fund may hold include corporate,
government, and mortgage or asset backed securities. At least 65% of the value
of the Fund's portfolio is expected to be rated in the four highest rating
categories used by Moody's and S&P. Among the 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) are low
rated debt securities (commonly referred to as "high yield" or "junk" bonds) and
derivative investment techniques (such as options, futures, interest rate and
credit swaps, and foreign currency exchange transactions).
LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO is a non-diversified fund that seeks
maximum total return from a combination of capital appreciation and current
income. The Portfolio generally invests at least 80% of its total assets in
fixed-income securities of companies within, or governments, their agencies or
instrumentalities of, at least three different non-U.S. countries. The
investment manager of the Fund currently intends to invest the Portfolio's
assets primarily in companies within, or governments of, Continental Europe, the
United Kingdom, Canada and the Pacific Basin. The Portfolio generally invests at
least 85% of its total assets in investment grade fixed-income securities and
may invest up to 15% of its total assets in fixed-income securities rated below
investment grade ("junk bonds"). Under normal market conditions, the Portfolio's
effective duration (a measure of interest rate sensitivity) will range between
two and eight years.
SCUDDER INTERNATIONAL BOND FUND is a non-diversified fund with a primary
objective of income. As a secondary objective, the Fund seeks protection and
possible enhancement of principal. The Fund pursues its investment objectives by
investing at least 65% of its total assets in high-quality bonds denominated in
foreign currencies with credit ratings within the three highest rating
categories of one or more nationally recognized rating associations, or, if
unrated, considered to be of comparable quality by the adviser. The Fund may
invest up to 15% of its net assets in bonds rated below investment-grade.
Securities rated below investment-grade (commonly referred to as "junk bonds"),
entail greater risks than investment-grade bonds.
ALL UNDERLYING FUNDS
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.
27
<PAGE> 28
FINANCIAL HIGHLIGHTS
The "Financial Highlights" tables are intended to help you understand each
Fund's financial performance and reflects results for a single Fund share. The
total returns in the tables represent the rate an investor would have earned
(or lost) during the year on an investment in each Fund (assuming reinvestment
of all dividends and distributions). This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with each Fund's financial
statements, is included in its Annual Report to shareholders (which is
available upon request).
<TABLE>
<CAPTION>
International Solutions I - Conservative Growth
--------------------------------------------------
for the period for the period for the period
October 4, 1999 August 23, 1999 July 2, 1999
(commencement) (commencement) (commencement)
to December 31, to December 31, to December 31,
--------------- ---------------- ---------------
Selected Per Share Data 1999 1999 1999
--------------- ---------------- ---------------
Class A Class B Advisor Class
--------------- ---------------- ---------------
<S> <C> <C> <C>
Net asset value, beginning of period.................................... $ 10.45 $ 10.25 $ 10.05
------- ------- -------
Income from investment operations
Net investment income (a)............................................. .09 .06 .11
Net realized and unrealized gain on investment transactions.......... . 1.48 1.64 1.82
------- ------- -------
Total from investment operations.................................... 1.57 1.70 1.93
------- ------- -------
Less distributions
Dividends
From net investment income.......................................... .09 .06 .11
In excess of net investment income.................................. .49 .51 .46
------- ------- -------
Total distributions............................................... .58 .57 .57
------- ------- -------
Net asset value, end of period.......................................... $ 11.44 $ 11.38 $ 11.41
======= ======= =======
Total return (%)(b)..................................................... 15.13 16.76 19.40
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................................ $ 40 $ 75 $ 121
Ratio of expenses to average net assets (%)(c)(d)
With expense reimbursement and service fee (%)........................ .64 1.39 .39
Without expense reimbursement and service fee (%)..................... 101.44 102.19 101.19
Ratio of net investment income to average net assets (%)(a)(c).......... 3.41 2.66 3.66
Portfolio turnover rate (%)............................................. -- -- --
</TABLE>
<TABLE>
<CAPTION>
International Solutions II - Balanced Growth
----------------------------------------------------------------------------
for the period for the period for the period for the period
September 19, 1999 August 9, 1999 August 26, 1999 July 2, 1999
(commencement) (commencement) (commencement) (commencement)
to December 31, to December 31, to December 31, to December 31,
------------------- --------------- ---------------- ---------------
Selected Per Share Data 1999 1999 1999 1999
------------------- --------------- ---------------- ---------------
Class A Class B Class C Advisor Class
------------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....... $10.11 $ 9.84 $ 10.11 $ 10.05
------ ------- ------- -------
Income from investment operations
Net investment income (a)................ .11 .10 .10 .20
Net realized and unrealized gain on
investment transactions............... 1.55 1.81 1.53 1.53
------ ------- ------- -------
Total from investment operations....... 1.66 1.91 1.63 1.73
------ ------- ------- -------
Less distributions
Dividends
From net investment income............. .11 .10 .10 .20
In excess of net investment income..... .45 .46 .46 .37
------ ------- ------- -------
Total distributions.................. .56 .56 .56 .57
------ ------- ------- -------
Net asset value, end of period............. $11.21 $ 11.19 $ 11.18 $ 11.21
====== ======= ======= =======
Total return (%)(b)........................ 16.60 19.59 16.15 17.30
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)... $ 5 $ 89 $ 6 $ 118
Ratio of expenses to average net
assets (%)(c)(d)
With expense reimbursement and
service fee (%)........................ .58 1.33 .33 .33
Without expense reimbursement and
service fee (%)........................ 99.75 100.50 100.50 99.50
Ratio of net investment income to average
net assets (%)(a)(c).................. 3.61 2.86 2.86 3.86
Portfolio turnover rate (%)................ -- -- -- --
</TABLE>
(a) Net investment income is net of expenses reimbursed by Manager and Service
fees.
(b) Total return represents aggregate total return and does not reflect a sales
charge.
(c) Annualized.
(d) Excludes expense ratios of Underlying Funds.
28
<PAGE> 29
<TABLE>
<CAPTION>
International Solutions III - Moderate Growth
----------------------------------------------------------------------------
for the period for the period for the period for the period
July 6, 1999 July 30, 1999 July 23, 1999 July 2, 1999
(commencement) (commencement) (commencement) (commencement)
to December 31, to December 31, to December 31, to December 31,
------------------- --------------- ---------------- ---------------
Selected Per Share Data 1999 1999 1999 1999
------------------- --------------- ---------------- ---------------
Class A Class B Class C Advisor Class
------------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....... $10.17 $ 10.07 $ 9.95 $ 10.07
------ ------- ------- -------
Income from investment operations
Net investment income (a)................ .14 .07 .02 .14
Net realized and unrealized gain on
investment transactions............... 1.72 1.84 2.03 1.81
------ ------- ------- -------
Total from investment operations....... 1.86 1.91 2.05 1.95
------ ------- ------- -------
Less distributions
Dividends
From net investment income............. .14 .07 .02 .14
In excess of net investment income..... .28 .33 .39 .28
------ ------- ------- -------
Total distributions.................. .42 .40 .41 .42
------ ------- ------- -------
Net asset value, end of period............. $11.61 $ 11.58 $ 11.59 $ 11.60
====== ======= ======= =======
Total return (%)(b)........................ 18.38 19.13 20.70 19.54
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)... $ 342 $ 575 $ 98 $ 400
Ratio of expenses to average net
assets (%)(c)(d)
With expense reimbursement and
service fee (%)........................ .48 1.23 1.23 .23
Without expense reimbursement and
service fee (%)........................ 32.69 33.44 33.44 32.44
Ratio of net investment income to average
net assets (%)(a)(c).................. 4.11 3.36 3.36 4.36
Portfolio turnover rate (%)................ 12 12 12 12
</TABLE>
<TABLE>
<CAPTION>
International Solutions IV - Long-term Growth
----------------------------------------------------------------------------
for the period for the period for the period for the period
July 2, 1999 July 19, 1999 August 12, 1999 July 2, 1999
(commencement) (commencement) (commencement) (commencement)
to December 31, to December 31, to December 31, to December 31,
------------------- --------------- ---------------- ---------------
Selected Per Share Data 1999 1999 1999 1999
------------------- --------------- ---------------- ---------------
Class A Class B Class C Advisor Class
------------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....... $10.10 $ 10.16 $ 9.78 $ 10.10
------ ------- ------- -------
Income from investment operations
Net investment income (a)................ .11 .09 .07 .16
Net realized and unrealized gain on
investment transactions............... 2.13 2.04 2.42 2.10
------ ------- ------- -------
Total from investment operations....... 2.24 2.13 2.49 2.26
------ ------- ------- -------
Less distributions
Dividends
From net investment income............. .11 .09 .07 .16
In excess of net investment income..... .19 .19 .22 .15
------ ------- ------- -------
Total distributions.................. .30 .28 .29 .31
------ ------- ------- -------
Net asset value, end of period............. $12.04 $ 12.01 $ 11.98 $ 12.05
====== ======= ======= =======
Total return (%)(b)........................ 22.31 21.09 25.57 22.48
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)... $ 473 $ 1,137 $ 333 $ 246
Ratio of expenses to average net
assets (%)(c)(d)
With expense reimbursement and
service fee (%)........................ .33 1.08 1.08 .08
Without expense reimbursement and
service fee (%)........................ 23.73 24.48 24.48 23.48
Ratio of net investment income to average
net assets (%)(a)(c).................. 4.17 3.42 3.42 4.42
Portfolio turnover rate (%)................ 1 1 1 1
</TABLE>
(a) Net investment income is net of expenses reimbursed by Manager and Service
fees.
(b) Total return represents aggregate total return and does not reflect a sales
charge.
(c) Annualized.
(d) Excludes expense ratios of Underlying Funds.
29
<PAGE> 30
<TABLE>
<CAPTION>
International Solutions V - Aggressive Growth
----------------------------------------------------------------------------
for the period for the period for the period for the period
July 6, 1999 September 13, 1999 July 16, 1999 July 2, 1999
(commencement) (commencement) (commencement) (commencement)
to December 31, to December 31, to December 31, to December 31,
------------------- ----------------- ---------------- ---------------
Selected Per Share Data 1999 1999 1999 1999
------------------- ----------------- ---------------- ---------------
Class A Class B Class C Advisor Class
------------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....... $10.22 $ 10.22 $ 10.10 $ 10.11
------ ------- ------- -------
Income from investment operations
Net investment income (a)................ .12 .06 .10 .24
Net realized and unrealized gain on
investment transactions............... 1.54 1.56 1.66 1.56
------ ------- ------- -------
Total from investment operations....... 1.66 1.62 1.76 1.80
------ ------- ------- -------
Less distributions
Dividends
From net investment income............. .12 .06 .10 .24
In excess of net investment income..... .45 .50 .46 .33
------ ------- ------- -------
Total distributions.................. .57 .56 .56 .57
------ ------- ------- -------
Net asset value, end of period............. $11.31 $ 11.28 $ 11.30 $ 11.34
====== ======= ======= =======
Total return (%)(b)........................ 16.38 16.07 17.65 17.95
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)... $ 66 $ 174 $ 89 $ 137
Ratio of expenses to average net
assets (%)(c)(d)
With expense reimbursement and
service fee (%)........................ .35 1.10 1.10 .10
Without expense reimbursement and
service fee (%)........................ 81.82 82.57 82.57 81.57
Ratio of net investment income to average
net assets (%)(a)(c).................. 4.70 3.95 3.95 4.95
Portfolio turnover rate (%)................ 2 2 2 2
</TABLE>
(a) Net investment income is net of expenses reimbursed by Manager and Service
fees.
(b) Total return represents aggregate total return and does not reflect a sales
charge.
(c) Annualized.
(d) Excludes expense ratios of Underlying Funds.
30
<PAGE> 31
HOW TO RECEIVE MORE INFORMATION
Additional information about the Funds and their investments is contained in the
Statement of Additional Information for the Funds dated May 1, 2000 (the "SAI"),
which is incorporated by reference into this Prospectus, and in the Funds'
annual and semi-annual reports to shareholders. The annual report includes a
discussion of the market conditions and investment strategies that significantly
affected each Fund's performance during its most recent fiscal year. The SAI and
annual and semi-annual reports are available upon request and without charge
from IMDI, the Funds' distributor, at the address below.
Information about the Funds (including the SAI and annual report) may also be
reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
(please call 1-202-942-8090 for further details). Information about the Funds is
also available on the EDGAR database on the SEC's Internet Website
(www.sec.gov), and copies of this information may be obtained, upon payment of a
copying fee, by electronic request at the following e-mail address:
[email protected], or by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
SHAREHOLDER INQUIRIES
Please call Ivy Mackenzie Services Corp., the Funds' transfer agent, at the
phone number listed below for other information or shareholder inquiries about
the Funds.
BOARD OF TRUSTEES OFFICERS
James W. Broadfoot Keith J. Carlson, Chairman
Keith J. Carlson James W. Broadfoot, President
Ian Carmichael Ted A. Parkhill, Vice President
P. Rodney Cunningham C. William Ferris, Secretary/Treasurer
Gary R. Ellis
LEGAL COUNSEL AUDITORS
Dechert Price & Rhoads PricewaterhouseCoopers LLP
Boston, Massachusetts Fort Lauderdale, Florida
CUSTODIAN INVESTMENT MANAGER
Brown Brothers Harriman & Co. Ivy Management, Inc.
Boston, Massachusetts Boca Raton, Florida
TRANSFER AGENT DISTRIBUTOR
Ivy Mackenzie Services Corp. Ivy Mackenzie Distributors, Inc.
PO Box 3022 700 South Federal Highway
Boca Raton, Florida 33431-0922 Boca Raton, Florida 33432
(800) 821-4350 (800) 821-4347
Investment Company Act File No. 811-09107
IS0799PR01 (International
Solutions Logo)
<PAGE> 32
(INTERNATIONAL SOLUTIONS)
ACCOUNT APPLICATION
PLEASE MAIL APPLICATIONS AND CHECKS TO: Ivy Mackenzie Services Corp., P.O. Box
3022, Boca Raton, FL 33431-0922
Make sure both pages of this application are included.
This application should not be used for retirement accounts for which
Mackenzie Solutions (IBT) is custodian.
FUND USE ONLY
- ---------------------- ------------------------ ------------------------
ACCOUNT NUMBER DEALER/BRANCH/REP ACCOUNT TYPE/SOC CD
1. REGISTRATION
[ ] Individual [ ] Estate [ ] Corporation [ ] Sole Proprietor
[ ] Joint Tenant [ ] UGMA/UTMA [ ] Partnership
[ ] Trust --------------------- [ ] Other -----------------------
- -------------------------------------------------------------------------------
Owner, Custodian or Trustee
- -------------------------------------------------------------------------------
Co-owner or Minor
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Street
- -------------------------------------------------------------------------------
City State Zip Code
<TABLE>
<S> <C>
- - - -
------------------------------------------ ------------------------------------------
Phone Number -- Day Phone Number -- Evening
</TABLE>
2. TAX ID NUMBER
<TABLE>
<S> <C>
- - or -
-------------------------------------- -----------------------------------
Social Security Number Tax Identification Number
<CAPTION>
<S> <C> <C>
Citizenship: [ ] U.S.
[ ] Other
-----------------------------
</TABLE>
<TABLE>
<S> <C> <C>
UNDER PENALTY 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.
</TABLE>
3. DEALER INFORMATION
<TABLE>
<S> <C> <C>
The undersigned ("Dealer") agrees to all applicable provisions in this Application, guarantees the
signature and legal capacity of the Shareholder, and agrees to notify Ivy Mackenzie Services Corp.
of any purchases made under a Letter of Intent or Rights of Accumulation.
----------------------------------------------- -----------------------------------------------
Dealer Name Representative's Name and Number
----------------------------------------------- -----------------------------------------------
Branch Office Address Representative's Phone Number
----------------------------------------------- -----------------------------------------------
City State Zip Code Authorized Signature of Dealer
</TABLE>
<PAGE> 33
4. INVESTMENTS
<TABLE>
<S> <C> <C> <C>
A. Enclosed is my check ($1,000 minimum) for $ --------------- made payable to the appropriate
International Solutions fund.*
B. Please invest in [ ] Class A [ ] Class B [ ] Class C [ ] Class I [ ] Advisor Class of the
following fund(s):
$ --------------- 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
C. I qualify for a reduction or 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 accounts listed below.
Fund Name ------------------------------- Account Number------------------------------
Fund Name ------------------------------- Account Number------------------------------
In establishing a Letter of Intent, you will need to purchase Class A shares over a 13-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
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
D. FOR DEALER USE ONLY
Confirmed trade orders:
--------------------- --------------------- ---------------------
Confirm Number Number of Shares Trade Date
*If investing in more than one Fund, make your check payable to "International Solutions".
</TABLE>
5. DISTRIBUTION OPTIONS
I would like to reinvest dividends and capital gains into additional shares of
the same class in this account at net asset value unless a different option is
checked below:
<TABLE>
<S> <C> <C> <C>
A. [ ] Reinvest all dividends and capital gains into additional shares of the same class of a different
International Solutions fund.
Fund Name ------------------------------- Account Number ------------------------------
B. [ ] Pay all dividends in cash and reinvest capital gains into additional shares of the same class of
this Fund, or in a different International Solutions fund.
Fund Name ------------------------------- Account Number ------------------------------
C. [ ] Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN B OR C ABOVE, TO BE SENT TO:
[ ] the account address of record listed in Section 1.
[ ] the special payee listed in Section 7A (by mail).
[ ] the special payee listed in Section 7B (by EFT).
</TABLE>
<PAGE> 34
6. OPTIONAL SPECIAL FEATURES
<TABLE>
<S> <C> <C> <C>
A. [ ] AUTOMATIC INVESTMENT METHOD (AIM) -- I wish to automatically invest in International Solutions
by having my bank account debited and my International Solutions account credited with additional
shares. Please attach a voided check to ensure your correct bank account will be debited.
or
B. [ ] SYSTEMATIC WITHDRAWAL PLANS (SWP) -- I wish to automatically withdraw funds from my
International Solutions account and have my bank account credited with the proceeds.
If you elect to participate in the AIM or SWP program, complete the information below:
Frequency
[ ] Annually: On the __________ day of the month of __________________________ .
[ ] Semi-Annually: On the __________ day of the months of _________________ and
_________________ .
[ ] Quarterly: On the __________ day of the [ ] first month or [ ] second month or
[ ] third month of each quarter
[ ] Monthly: [ ] once per month on the _____ day of the month*
[ ] twice per month on the ________ days of the month*
[ ] 3 times per month on the __________ days of the month*
[ ] 4 times per month on the _______________ days of the month*
Periodic Amount $ _________________ starting in the month of _________________ .
(Minimum $50)
Fund & Share Class [ ] Class A [ ] Class B [ ] Class C of _________________________ .
Fund Name
Receipt of Proceeds
(for SWPs only) [ ] Send SWP proceeds via check to the account of address of record.
[ ] Send SWP proceeds via check to the special payee listed in Section 7A.
[ ] Send SWP proceeds via electronic payment to the special payee listed in
Section 7B.
C. FEDERAL FUNDS WIRE FOR REDEMPTION PROCEEDS** [ ] YES [ ] NO
By checking "YES" immediately above, 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 in Section 7B. ($1,000 minimum).
D. TELEPHONE EXCHANGES** [ ] YES [ ] NO***
By checking "YES" immediately above, 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.
E. TELEPHONE REDEMPTIONS** [ ] YES [ ] NO***
By checking "YES" immediately above, 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.
* There must be a period of at least seven calendar days between each investment/withdrawal
period.
** This option may not be selected if shares are issued in certificate form.
*** If neither box is checked, this telephone privilege will be provided automatically.
</TABLE>
<PAGE> 35
7. SPECIAL PAYEE
If you would like to receive your redemption proceeds at an address different
than the one listed in Section 1 of this application, complete Section 7A
and/or 7B below.
<TABLE>
<S> <C> <C> <C>
A. SPECIAL PAYEE MAILING ADDRESS
----------------------------------------------------------------------------------------------------
Name of Bank or Individual
----------------------------------------------------------------------------------------------------
Account Number (if applicable)
----------------------------------------------------------------------------------------------------
Street
----------------------------------------------------------------------------------------------------
City/State/Zip
---------------------------------------------------------------------------------------------------------
B. SPECIAL PAYEE FED WIRE / E.F.T. INFORMATION
----------------------------------------------------------------------------------------------------
Financial Institution
--------------------------------------------- ---------------------------------------------------
ABA # Account Number
----------------------------------------------------------------------------------------------------
Street
----------------------------------------------------------------------------------------------------
City/State/Zip
(Please attach a voided check)
</TABLE>
8. SIGNATURES
Investors should be aware that failure to check "No" under Section 6D or 6E of
this application means that the Telephone Exchange or Telephone Redemption
Privileges will be provided. The Funds employ 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, a Fund may be liable for any losses due to
unauthorized or fraudulent telephone instructions. Please see "How to Exchange
Shares" and "How to Redeem 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.
<TABLE>
<S> <C>
- ------------------------------------------------------------ -------------------------------------
Signature of Owner, Custodian, Trustee or Corporate Officer Date
- ------------------------------------------------------------ -------------------------------------
Signature of Joint Owner, Co-Trustee or Corporate Officer Date
</TABLE>
(REMEMBER TO SIGN SECTION 8)
<PAGE>
MACKENZIE 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
May 1, 2000
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 in the international securities markets 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 May 1, 2000 (the "Prospectus"), which may be
obtained upon request and without charge from the Trust at the Distributor's
address and telephone number printed below.
The financial statements contained in the Funds' December 31, 1999
Annual Report to Shareholders are incorporated by reference into and are hereby
deemed to be part of this SAI.
INVESTMENT MANAGER
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 777-6472
<PAGE>
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc. ("IMDI")
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
INFORMATION ABOUT THE UNDERLYING FUNDS...............................3
INVESTMENT OBJECTIVES AND STRATEGIES........................4
RISKS ..................................................19
INVESTMENT RESTRICTIONS.............................................22
MANAGEMENT OF THE FUNDS.............................................23
TRUSTEES AND OFFICERS......................................23
COMPENSATION TABLE.........................................26
INVESTMENT ADVISORY AND OTHER SERVICES..............................30
INVESTMENT MANAGER.........................................30
ASSET ALLOCATION CONSULTANT................................32
TERM AND TERMINATION OF ADVISORY AGREEMENT AND
SUBADVISORY AGREEMENT...................................33
CUSTODIAN..................................................33
FUND ACCOUNTING SERVICES...................................33
TRANSFER AGENT AND DIVIDEND PAYING AGENT...................33
ADMINISTRATOR..............................................34
AUDITORS 34................................................34
BROKERAGE ALLOCATION................................................34
CAPITALIZATION AND VOTING RIGHTS....................................35
SPECIAL RIGHTS AND PRIVILEGES.......................................36
AUTOMATIC INVESTMENT METHOD................................36
EXCHANGE OF SHARES.........................................36
INITIAL SALES CHARGE SHARES.......................36
CONTINGENT DEFERRED SALES CHARGE SHARES...........37
CLASS A 37.......................................37
CLASS B 37.......................................37
CLASS C 37.......................................37
CLASS I AND ADVISOR CLASS.........................38
ALL CLASSES.......................................38
LETTER OF INTENT...........................................38
RETIREMENT PLANS...........................................39
INDIVIDUAL RETIREMENT ACCOUNTS....................39
ROTH IRAs.........................................40
QUALIFIED PLANS...................................41
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(B)(7) ACCOUNT").42
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAs..........42
SIMPLE PLANS......................................43
REINVESTMENT PRIVILEGE.....................................43
REDUCED SALES CHARGES AND RIGHTS OF ACCUMULATION...........43
SYSTEMATIC WITHDRAWAL PLAN.................................43
GROUP SYSTEMATIC INVESTMENT PROGRAM........................44
REDEMPTIONS................................................45
CONVERSION OF CLASS B SHARES...............................46
NET ASSET VALUE.....................................................47
TAXATION........................................................... 47
TAXATION OF THE FUNDS AND THEIR SHAREHOLDERS...............48
DISTRIBUTIONS..............................................48
DISPOSITION OF SHARES......................................49
BACKUP WITHHOLDING.........................................50
TAXATION OF THE UNDERLYING FUNDS...........................50
DISTRIBUTION SERVICES...............................................51
RULE 18F-3 PLAN...................................52
RULE 12B-1 DISTRIBUTION PLANS.....................53
PERFORMANCE INFORMATION.............................................57
AVERAGE ANNUAL TOTAL RETURN.......................57
CUMULATIVE TOTAL RETURN...........................65
OTHER QUOTATIONS, COMPARISONS AND
GENERAL INFORMATION............................68
FINANCIAL STATEMENTS................................................69
<PAGE>
GENERAL INFORMATION
The Funds are separately managed diversified series of the Trust, an
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
invests in eight to fifteen underlying funds whose combined investment
strategies and techniques are consistent with the Fund's investment objective.
The underlying funds are from the following registered fund complexes: Deutsche
Asset Management, Ivy Funds, Lazard Asset Management, Montgomery Asset
Management, Scudder 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
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. Their managers also use a range of investment styles (such as
"value" or "growth").
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
"Investment Strategies and Risks" and "Additional Information about Investment
Strategies and Risks" sections of the Prospectus.
o 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. The Conservative Growth Fund has the highest weighting in
foreign bonds among the five Funds, and therefore is expected to bear
the lowest relative overall risk. The Fund will have a moderate degree
of exposure to the international equity markets, thus making the Fund
potentially more volatile than a mutual fund that invests exclusively
in fixed income securities or has some portion of its assets invested
in the United States.
o 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 the
Conservative Growth Fund) on underlying funds that invest in equity
securities may lead to moderately increased volatility, but its equal
emphasis on fixed income securities is expected to reduce its overall
risk relative to the Moderate Growth, Long-term Growth and Aggressive
Growth Funds.
o INTERNATIONAL SOLUTIONS III - MODERATE GROWTH: The investment
objective of the Moderate Growth Fund is primarily capital
appreciation, with preservation of capital as a secondary 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 short-term losses that may occur in
the equity markets.
o 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 the Conservative Growth, Balanced Growth and
Moderate Growth Funds (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).
o 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 projected
higher growth rates than established markets. However, emerging market
securities have historically experienced 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 Long-term Growth Fund and
Aggressive Growth Fund) 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 Conservative Growth Fund and Balanced Growth
Fund) are designed for international investors with a shorter investment time
horizon and/or a lower degree of risk tolerance. You should consult with your
financial advisor to determine which Fund or combination of Funds, if any, may
be appropriate in light of your financial needs and risk tolerance.
The principal risks of investing in a particular Fund are determined by
the characteristics 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 Ivy Management'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 open-end
investment companies, 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 Growth 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 Growth Fund, which normally invests
primarily in underlying funds that are equity-oriented. On the other hand, the
Conservative Growth 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 of 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).
INFORMATION ABOUT 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 that the underlying funds may use, or the risks to which they may be
subject, in seeking 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 cover page of
this SAI. Contact information relating to the other underlying funds is also
available through the Distributor. IMI and IMDI serve as manager and
distributor, respectively, of each Ivy Fund.
INVESTMENT OBJECTIVES AND STRATEGIES
EQUITY UNDERLYING FUNDS:
o DEUTSCHE INTERNATIONAL EQUITY PORTFOLIO, managed by Deutsche Asset
Management. The Portfolio seeks long-term capital appreciation. Under normal
circumstances, the Portfolio invests at least 65% of its total assets in the
stocks and other securities with equity characteristics of companies in
developed countries outside the United States. The Portfolio invests for capital
appreciation, not income: any dividend or interest income is incidental to the
pursuit of that goal. Almost all the companies in which the Portfolio invests
are based in the developed foreign countries that make up the MSCI EAFE Index,
plus Canada. The Portfolio may also invest a potion of its assets in companies
based in the emerging markets of Latin America, the Middle East, Europe, Asia
and Africa if management believes that their return potential more than
compensates for the extra risks associated with these markets.
o IVY INTERNATIONAL FUND II's principal investment objective is long-term
capital growth. Consideration of current income is secondary to this principal
objective.
The Fund invests at least 65% of its assets in equity securities
(including common stock, preferred stock and securities convertible into common
stock) principally traded in European, Pacific Basin and Latin American markets.
To control its exposure to certain risks, the Fund might engage in foreign
currency exchange transactions and forward foreign currency contracts. The
Fund's manager uses a disciplined value approach while looking for investment
opportunities around the world.
The Fund invests in a variety of economic sectors and industry segments
to reduce the effects of price volatility in any one area. The Fund's manager
seeks out rapidly expanding foreign economies and companies that generally have
at least $1 billion in capitalization at the time of investment and a solid
history of operations. Other factors that the Fund's manager considers in
selecting particular countries include long term economic growth prospects,
anticipated inflation levels, and the effect of applicable government policies
on local business conditions. The Fund is managed using a value approach, which
focuses on financial ratios such as price/earnings, price/book value, price/cash
flow, dividend yield and price/replacement cost. Typically the securities
purchased are attractively valued on one or more of these measures relative to a
broad universe of comparable securities.
o IVY INTERNATIONAL SMALL COMPANIES FUND seeks long-term growth.
Consideration of current income is secondary to this principal objective.
The Fund invests at least 65% of its assets in the equity securities
(including common stock, preferred stock and securities convertible into common
stock) of foreign issuers having initial market capitalization of less than $2
billion. The Fund might engage in foreign currency exchange transactions and
forward foreign currency contracts to control its exposure to certain risks. The
Fund is managed by a team that focuses on both value and growth factors.
The Fund invests across a wide range of geographic, economic and
industry sectors. Countries are selected on the basis of a mix of factors that
include long-term economic growth prospects, anticipated inflation levels, and
the effect of applicable government policies on local business conditions. The
Fund is managed using a value approach, which focuses on financial ratios such
as price/earnings, price/book value, price/cash flow, dividend yield and
price/replacement cost. Typically the securities purchased are attractively
valued on one or more of these measures relative to a broad universe of
comparable securities.
o IVY PAN-EUROPE FUND'S principal investment objective is long-term
capital growth. Consideration of current income is secondary to this principal
objective. The Fund invests at least 65% of its assets in the equity securities
(including common stock, preferred stock and securities convertible into common
stock) of large and medium-sized European companies.
The Fund invests at least 65% of its assets in the equity securities of
large and medium-sized European companies. The Fund's management team uses a
disciplined value approach while looking for investment opportunities around the
world.
The Fund invests in companies located or otherwise doing business in
European countries and that cover a broad range of economic and industry
sectors. The Fund may also invest a significant portion of its assets outside of
Europe. Countries are selected on the basis of a mix of factors that include
long-term economic growth prospects, anticipated inflation levels, and the
effect of applicable government policies on local business conditions. The Fund
is managed using a value approach, which focuses on financial ratios such as
price/earnings, price/book value, price/cash flow, dividend yield and
price/replacement cost. Typically the securities purchased are attractively
valued on one or more of these measures relative to a broad universe of
comparable securities.
o THE JAPAN FUND, INC., managed by Scudder Kemper Investments, Inc.,
seeks to provide long-term capital appreciation.
The Fund pursues its objective by investing at least 80% of its assets
in Japanese securities (including American Depository Receipts). The term
Japanese securities includes securities issued by companies organized under the
laws of Japan, companies affiliated with Japanese companies and companies,
wherever organized, that derive 50% or more of their revenues from Japan. The
Fund intends to focus its investments in the equity securities of select
Japanese companies, both large and small, that have an active market for their
securities and that show a potential for greater-than-average growth.
The Fund invests primarily in the common stock of Japanese companies.
The Fund anticipates that most equity securities of Japanese companies in which
it invests will be listed on Japanese securities exchanges. However, the Fund
may also invest up to 30% of its net assets in equity securities that are traded
in an over-the-counter market. These are generally securities of relatively
small or little-known companies that the Fund's portfolio managers believe have
above-average earnings growth potential.
In evaluating a particular investment, the Fund's management considers
a number of factors, including the size of the company; the depth and quality of
the company's management, the company's product line, business strategy or
competitive position in its industry, marketing and technical strengths,
research and development efforts, financial strength, cost structure, revenue
and earnings growth potential, and price-earnings ratios and other stock
valuation measures.
A security is typically sold when, in the opinion of the Fund's
portfolio management team: the stock has reached its fair market value and its
appreciation is limited; a company's fundamentals and competitive strength have
deteriorated; the portfolio management team loses confidence in the company's
management; the Fund's portfolio is too heavily weighted in a particular stock
or industry; or more attractive alternatives are available in other companies or
sectors.
To a more limited extent, the Fund may, but is not required to, utilize
other investments and investment techniques that may impact fund performance,
including, but not limited to, preferred stock, debt securities convertible into
common stock and common stock purchase warrants, as well as debt securities of
varying maturities, such as those issued by the government of Japan and Japanese
companies, when the Fund's management believes that the potential for capital
appreciation from debt securities equals or exceeds that available from equity
securities. The debt securities in which the Fund may invest are rated no lower
than BBB by Standard & Poor's Corporation ("S&P") or Baa by Moody's Investors
Service, Inc. ("Moody's) or, if unrated, are of equivalent quality as determined
by the Fund's investment manager. The Fund may also invest to a limited extent
in options, futures and other derivatives (financial instruments whose value is
based on indices, commodities or securities). The Fund may invest up to 20% of
its assets in cash or in short-term government or other short-term prime
obligations.
o LAZARD INTERNATIONAL EQUITY PORTFOLIO is a non-diversified fund that
seeks long-term capital appreciation. The Portfolio invests primarily in equity
securities, principally common stocks, of relatively large non-U.S. companies
with market capitalizations in the range of the Morgan Stanley Capital
International (MSCI) Europe, Australasia and Far East Index that the Portfolio's
investment manager believes are undervalued based their earnings, cash flow or
asset values.
The Portfolio generally invests at least 80% of its total assets in
equity securities of companies located in at least three different foreign
countries. The allocation of the Portfolio's assets among geographic sectors may
shift from time to time based on the investment manager's judgment and its
analysis of market conditions. However, the Portfolio's investment manager
currently intends to invest the Portfolio's assets primarily in companies based
in developed markets.
The Portfolio may invest up to 20% of its total assets in investment
grade fixed-income securities and short-term money market instruments. The
Portfolio may engage, to a limited extent, in various investment techniques,
such as foreign currency transactions and lending portfolio securities.
The Portfolio typically sells a stock when it is no longer considered a
value company, appears less likely to benefit from the current market and
economic environment, shows deteriorating fundamentals or falls short of the
investment manager's expectations.
o LAZARD INTERNATIONAL SMALL CAP PORTFOLIO is a non-diversified fund that
seeks long-term capital appreciation. The Portfolio invests primarily in equity
securities, principally common stocks, of relatively small, non-U.S. companies
in the range of the Morgan Stanley Capital International Europe, Australasia and
Far East Small Cap Index (the "MSCI EAFE Small Cap Index") that the Portfolio's
investment manager believes are undervalued based on their earnings, cash flow
or asset values. The MSCI EAFE Small Cap Index is an unmanaged index of
securities listed on foreign stock exchanges.
In choosing stocks for the Portfolio, its investment manager looks for
smaller, well managed non-U.S. companies that have the potential to grow. The
Portfolio generally invests at least 80% of its total assets in equity
securities, including American and Global Depositary Receipts, of small non-U.S.
companies. The Portfolio generally invests at least 65% of its total assets in
equity securities of small companies located in at least three foreign
countries. The allocation of the Portfolio's assets among geographic regions may
shift from time to time based on its investment manager's judgment and analysis
of market conditions. However, the investment manager currently intends to
invest the Portfolio's assets primarily in companies based in Continental
Europe, the United Kingdom, the Pacific Basin, Latin America and Canada.
The Portfolio may invest up to 20% of its total assets in equity
securities of large companies or investment grade debt securities. The Portfolio
may engage, to a limited extent, in various investment techniques, such as
options and futures transactions, foreign currency transactions and lending
portfolio securities. The Portfolio typically sells a stock when it is no longer
considered a value company, appears less likely to benefit from the current
market and economic environment, shows deteriorating fundamentals or falls short
of the investment manager's expectations.
o MONTGOMERY INTERNATIONAL GROWTH FUND seeks long-term capital appreciation
by investing in medium- and large-cap companies in developed stock markets
outside the United States. The Fund invests at least 65% of its total assets in
the common stocks of companies outside the United States whose shares have a
stock market value (market capitalization) of more than $1 billion. The Fund
currently concentrates its investments in the stock markets of western Europe,
particularly the United Kingdom, France, Germany, Italy and the Netherlands, as
well as developed markets in Asia, such as Japan and Hong Kong. The Fund
typically invests in at least three countries outside the United States, with no
more than 40% of its assets in any one country. The Fund's portfolio managers
seek well-managed companies that they believe will be able to increase their
sales and corporate earnings on a sustained basis. In addition, the portfolio
managers purchase shares of companies that they consider to be under- or
reasonably-valued relative to their long-term prospects. The managers favor
companies that they believe have a competitive advantage, offer innovative
products or services, and may profit from such trends as deregulation and
privatization. On a strategic basis, the Fund's assets may be allocated among
countries in an attempt to take advantage of market trends. The Fund's portfolio
managers and analysts frequently travel to the countries in which the Fund
invests or may invest to gain firsthand insight into the economic, political and
social trends that affect investments in those countries.
o SCUDDER GREATER EUROPE GROWTH FUND is a non-diversified fund that
seeks to provide long-term growth of capital through investments primarily in
the equity securities of European companies. Although its focus is on long-term
growth, the Fund may provide current income principally through holdings in
dividend-paying securities.
Greater Europe includes both the industrialized nations of Western
Europe and the less wealthy or developed countries in Southern and Eastern
Europe. Within this diverse area, the Fund seeks to benefit from accelerating
economic growth transformation and deregulation taking hold. These developments
involve, among other things, increased privatizations and corporate
restructurings, the reopening of equity markets and economies in Eastern Europe,
further broadening of the European Community, and the implementation of economic
policies to promote non-inflationary growth. The Fund invests in companies it
believes are well placed to benefit from these and other structural and cyclical
changes now underway in this region of the world.
The Fund will invest, under normal market conditions, at least 80% of
its total assets in the equity securities of European companies. The Fund
defines a European company as follows: a company organized under the laws of a
European country or for which the principal securities trading market is in
Europe; or a company, wherever organized, where at least 50% of the company's
non-current assets, capitalization, gross revenue or profit in its most recent
fiscal year represents (directly or indirectly through subsidiaries) assets or
activities located in Europe.
The Fund expects the majority of its equity assets to be in the more
established and liquid markets of Western and Southern Europe. These more
established Western and Southern European countries include: Austria, Belgium,
Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Luxembourg, the
Netherlands, Norway, Spain, Sweden, Switzerland, and the United Kingdom. To
enhance return potential, however, the Fund may pursue investment opportunities
in the less wealthy nations of Southern Europe, currently Greece, Portugal and
Turkey, and the former communist countries of Eastern Europe, including
countries once part of the Soviet Union. The Fund may invest in other countries
of Europe when their markets become sufficiently developed, in the opinion of
the adviser.
The Fund intends to allocate its investments among at least three
countries at all times. The Fund's equity investments are common stock,
preferred stock (convertible or non-convertible), depositary receipts (sponsored
or unsponsored) and warrants. These may be illiquid securities. Equity
securities may also be purchased through rights. Securities may be listed on
securities exchanges, traded over-the-counter or have no organized market. In
addition, the Fund may engage in strategic transactions, including
derivatives.
The Fund may invest, under normal market conditions, up to 20% of its
total assets in European debt securities. Capital appreciation in debt
securities may arise from a favorable change in relative interest rate levels or
in the creditworthiness of issuers. Within this 20% limit, the Fund may invest
in debt securities which are unrated, rated, or the equivalent of those rated
below investment grade (commonly referred to as "junk bonds"); that is, rated
below Baa by Moody's or below BBB by S&P. Such securities may be in default with
respect to payment of principal or interest.
o SCUDDER INTERNATIONAL FUND seeks long-term growth of capital
primarily from foreign equity securities. These securities are selected
primarily to permit the Fund to participate in non-U.S. companies and economies
that are believed to have prospects for growth.
The Fund generally invests in equity securities of established
companies, listed on foreign exchanges (although the Fund may also invest in
securities traded over the counter), which the adviser believes have favorable
characteristics. The Fund's equity investments include common stock, convertible
and non-convertible preferred stock, sponsored and unsponsored depository
receipts, and warrants.
When the adviser believes that it is appropriate to do so in order to
achieve the Fund's investment objective of long-term capital growth, the Fund
may invest up to 20% of its total assets in debt securities. Such debt
securities include debt securities of governments, governmental agencies,
supranational organizations and private issuers, including bonds denominated in
the European Currency Unit (the "Euro"). Portfolio debt investments will be
selected on the basis of, among other things, yield, credit quality, and the
fundamental outlooks for currency and interest rate trends in different parts of
the globe, taking into account the ability to hedge a degree of currency or
local bond price risk. The value of fixed-income investments will fluctuate with
changes in interest rates and bond market conditions, tending to rise as
interest rates decline and decline as interest rates rise. The Fund will
predominantly purchase "investment-grade" bonds, which are those rated Aaa, Aa,
A or Baa by Moody's or AAA, AA, A or BBB by S&P or, if unrated, judged by the
adviser to be of equivalent quality. The Fund may also invest up to 5% of its
total assets in debt securities which are rated below investment-grade.
The Fund intends to diversify investments among several countries and
normally to have investments in securities of at least three different countries
other than the U.S. The Fund will invest primarily in securities of issuers in
the 21 developed foreign countries included in the Morgan Stanley Capital
International ("MSCI") World ex-US Index, but may invest in "emerging markets."
The Fund considers "emerging markets" to include any country that is defined as
an emerging or developing economy by any of the International Bank of
Reconstruction and Development (i.e., the World Bank), the International Finance
Corporation or the United Nations or its authorities. It is expected that the
Fund's investments will include companies of varying size as measured by assets,
sales or market capitalization. The major portion of the Fund's assets consists
of equity securities of established companies listed on recognized exchanges;
the adviser expects this condition to continue, although the Fund may invest in
other securities.
o WARBURG PINCUS INTERNATIONAL EQUITY FUND seeks long-term capital
appreciation. To pursue this goal, it invests in equity securities of companies
located or conducting a majority of their business outside the U.S. or companies
whose securities trade primarily in markets outside of the U.S.
Under normal market conditions, the Fund will invest at least 65% of
assets in equity securities of issuers from at least three foreign countries.
The Fund intends to diversify its investments across different countries,
although at times it may invest a significant part of its assets in a single
country. Although the Fund emphasizes developed countries, it may also invest in
emerging markets.
In choosing equity securities, the Fund's portfolio managers use a
bottom-up investment approach that begins with an analysis of individual
companies. The managers look for companies of any size whose stocks appear to be
discounted relative to earnings, assets or projected growth. The portfolio
managers determine value based upon research and analysis, taking all relevant
factors into account.
The Fund intends to invest substantially all of its assets in common
stocks, warrants and securities convertible into or exchangeable for common
stocks. To a limited extent, the Fund may also engage in other investment
practices.
o WARBURG PINCUS JAPAN GROWTH FUND seeks long-term growth of capital. To
pursue this goal, it invests in equity securities of growth companies located in
or conducting a majority of their business in Japan.
The Fund's manager believes that Japanese industry is in an important
period of deregulation and restructuring. By investing in growth companies
positioned to benefit from the dynamic structural changes taking place in the
Japanese industrial system, the Fund intends to provide investors with an
opportunity to participate in these developments. In choosing equity securities,
the Fund's portfolio manager seeks to identify Japanese companies with
attractive growth potential. The manager also looks for companies whose equity
securities appear undervalued based on factors such as earnings or assets. The
Fund may invest in companies of any size, whether traded on an exchange or
over-the-counter.
Under normal market conditions, the Fund will invest at least 65% of
assets in equity securities of Japanese issuers. The remaining portion may be
invested in securities of other Asian issuers. Except for temporary defensive
purposes, the Fund does not intend to invest in securities of non-Asian issuers.
The Fund currently intends to invest at least 80% of assets in equity
securities of Japanese issuers. Equity holdings may consist of common and
preferred stocks, rights and warrants, securities convertible into or
exchangeable for common stocks, and American Depositary Receipts. To a limited
extent, the Fund may also engage in other investment practices.
WARBURG PINCUS JAPAN SMALL COMPANY FUND seeks long-term capital
appreciation. To pursue this goal, it invests in equity securities of small
companies located in or conducting a majority of their business in Japan.
Under normal market conditions, the Fund will invest at least 65% of
assets in equity securities of small Japanese companies. The Fund considers a
"small" company to be one whose market capitalization does not exceed the
largest capitalization of companies in the JASDAQ Index, Second Section of the
Tokyo Stock Exchange or smaller half of the First Section of the Tokyo Stock
Exchange.
Some companies may outgrow the definition of a small company after the
Fund has purchased their securities. These companies continue to be considered
small for purposes of the Fund's 65% minimum allocation to Japanese
small-company equities.
Once the 65% policy is met, the Fund may invest in Japanese or other
Asian companies of any size. Except for temporary defensive purposes, the Fund
does not intend to invest in securities of non-Asian issuers. The Fund will not
invest more than 10% of assets in any one country except Japan.
In choosing equity securities, the Fund's portfolio manager looks for
companies that offer attractive opportunities for capital appreciation. Equity
holdings may consist of common stocks, rights and warrants, and securities
convertible into or exchangeable for common stocks. To a limited extent, the
Fund may also engage in other investment practices.
EMERGING MARKET UNDERLYING FUNDS:
o IVY ASIA PACIFIC FUND'S principal investment objective is long-term
growth. Consideration of current income is secondary to this principal
objective.
The Fund invests at least 65% of its assets in equity securities
(including common stock, preferred stock and securities convertible into common
stock) issued in Asia Pacific countries, which include China, Hong Kong, India,
Indonesia, Japan, Malaysia, Pakistan, the Philippines, Singapore, Sri Lanka,
South Korea, Taiwan, Thailand and Vietnam. The Fund usually invests in at least
three different countries, and does not intend to concentrate its investments in
any particular industry.
The countries in which the Fund invests are selected on the basis of a
mix of factors that include long-term economic growth prospects, anticipated
inflation levels, and the effect of applicable government policies on local
business conditions. The Fund is managed using a value approach which focuses on
financial ratios such as price/earnings, price/book value, price/cash flow,
dividend yield and price/replacement cost. Typically the securities purchased
are attractively valued on one or more of these measures relative to a broad
universe of comparable securities.
o IVY CHINA REGION FUND'S principal investment objective is long-term
capital growth. Consideration of current income is secondary to this principal
objective.
The Fund invests at least 65% of its assets in the equity securities of
companies that are located or have a substantial business presence in the China
Region, which includes China, Hong Kong, Taiwan, South Korea, Singapore,
Malaysia, Thailand, Indonesia and the Philippines. The Fund's management team
uses a value approach to find stocks it believes are undervalued relative to
their long-term growth prospects.
The Fund seeks to achieve its investment objective of long-term capital
growth primarily by investing in the equity securities of companies that are
expected to profit from the economic development and growth of the China Region
through a direct business connection (such as an exchange listing or significant
profit base) in one or more China Region countries. The Fund may invest more
than 25% of its assets in the securities of issuers in a single China Region
country, and could have significantly more than 50% of its assets invested in
Hong Kong. The Fund expects to invest the balance of its assets in the equity
securities of companies whose current or expected performance is considered to
be strongly associated with the China Region. The Fund's management team seeks
to reduce risk by focusing on companies with strong foreign joint venture
partners, well-positioned consumer franchises or monopolies, or that operate in
strategic or protected industries.
The countries in which the Fund invests are selected on the basis of a
mix of factors that include long-term economic growth prospects, anticipated
inflation levels, and the effect of applicable government policies on local
business conditions. The Fund is managed using a value approach which focuses on
financial ratios such as price/earnings, price/book value, price/cash flow,
dividend yield and price/replacement cost. Typically the securities purchased
are attractively valued on one or more of these measures relative to a broad
universe of comparable securities.
o IVY DEVELOPING MARKETS FUND'S principal investment objective is long-term
growth. Consideration of current income is secondary to this principal
objective.
The Fund seeks to achieve its principal objective of long-term capital
growth by investing at least 65% of its 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 an emerging
market country to be one that is generally viewed as "developing" or "emerging"
by the World Bank, the International Finance Corporation or the United Nations.
The Fund usually invests its assets in at least three different
emerging market countries, and may invest at least 25% of its assets in the
securities of issuers located in a single country.
The countries in which the Fund invests are selected on the basis of a
mix of factors that include long-term economic growth prospects, anticipated
inflation levels, and the effect of applicable government policies on local
business conditions. The Fund is managed using a value approach which focuses on
financial ratios such as price/earnings, price/book value, price/cash flow,
dividend yield and price/replacement cost. Typically the securities purchased
are attractively valued on one or more of these measures relative to a broad
universe of comparable securities.
o IVY SOUTH AMERICA FUND is a non-diversified fund with a principal
objective of long-term growth. Consideration of current income is secondary to
this principal objective.
The Fund invests at least 65% of its assets in equity securities
(including common stock, preferred stock and securities convertible into common
stock) and government and corporate debt securities issued throughout South
America, Central America and the Spanish-speaking islands of the Caribbean. The
Fund is likely to have significant investments in Argentina, Brazil, Chile,
Colombia, Peru and Venezuela. The Fund may invest in low rated debt securities
to increase its potential yield.
The Fund normally invests its assets in at least three different
countries, and expects to focus its investments in Argentina, Brazil, Chile,
Colombia, Peru and Venezuela. The Fund's holdings are concentrated in
high-quality companies, selected for both their defensive strengths and
long-term prospects.
The Fund does not expect to concentrate its investments in any
particular industry. The Fund may, however, invest more than 5% of a portion of
its assets in a single issuer. The countries in which the Fund invests are
selected on the basis of a mix of factors that include long-term economic growth
prospects, anticipated inflation levels, and the effect of applicable government
policies on local business conditions. The Fund is managed using a value
approach which focuses on financial ratios such as price/earnings, price/book
value, price/cash flow, dividend yield and price/replacement cost. Typically the
securities purchased are attractively valued on one or more of these measures
relative to a broad universe of comparable securities.
o LAZARD EMERGING MARKETS PORTFOLIO is a non-diversified fund that seeks
long-term capital appreciation. The Portfolio invests primarily in equity
securities, principally common stocks, of non-U.S. companies whose principal
activities are in emerging market countries that the Portfolio's investment
manager believes are undervalued based on their earnings, cash flow or asset
values.
Emerging market countries include all countries represented by the
Morgan Stanley Capital International Emerging Markets (Free) Index, which
currently includes: Argentina, Brazil, Chile, China, Colombia, the Czech
Republic, Egypt, Greece, Hungary, India, Indonesia, Israel, Jordan, Korea,
Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, Sri
Lanka, South Africa, Taiwan, Thailand, Turkey and Venezuela.
The Portfolio generally invests at least 65% of its total assets in
equity securities, including American and Global Depositary Receipts, of
companies whose principal business activities are located in emerging market
countries. The Portfolio invests at least 65% of its total assets in equity
securities of companies in at least three different foreign countries. The
allocation of the Portfolio's assets among emerging market countries may shift
from time to time based on the investment manager's judgment and its analysis of
market conditions. However, the Portfolio is likely to focus on companies in
Latin America, the Pacific Basin and Europe.
The Portfolio may invest, to a limited extent, in closed-end investment
companies that invest in emerging market securities. When the Portfolio's
investment manager believes it is warranted, the Portfolio may invest, without
limitation, in high quality fixed-income securities or the equity securities of
U.S. companies. The Portfolio may engage, to a limited extent, in various
investment techniques, such as options and futures transactions, foreign
currency transactions and lending portfolio securities.
The Portfolio typically sells a stock when it is no longer considered a
value company, appears less likely to benefit from the current market and
economic environment, shows deteriorating fundamentals or falls short of the
investment manager's expectations.
o MONTGOMERY EMERGING MARKETS FUND seeks long-term capital appreciation by
investing in companies based or operating primarily in developing economies
throughout the world. The Fund invests at least 65% of its total assets in the
stocks of companies based in the world's developing economies. The Fund
typically maintains investments in at least six of these countries at all times,
with no more than 35% of its assets in any one of them. These may include Latin
America (Argentina, Brazil, Chile, Colombia, Costa Rica, Jamaica, Mexico, Peru,
Trinidad and Tobago, Uruguay and Venezuela), Asia (Bangladesh, China/Hong Kong,
India, Indonesia, Malaysia, Pakistan, the Philippines, Singapore, South Korea,
Sri Lanka, Taiwan, Thailand and Vietnam), Europe (Czech Republic, Greece,
Hungary, Kazakhstan, Poland, Portugal, Romania, Russia, Slovakia, Slovenia,
Turkey and Ukraine), the Middle East (Israel and Jordan), and Africa (Egypt,
Ghana, Ivory Coast, Kenya, Morocco, Nigeria, South Africa, Tunisia and
Zimbabwe).
The Fund's strategy combines computer-based screening techniques with
in-depth financial review and on-site analysis of companies, countries and
regions to identify potential investments. The Fund's portfolio managers and
analysts frequently travel to the emerging markets to gain firsthand insight
into the economic, political and social trends that affect investments in those
countries. The portfolio managers strive to keep the Fund well diversified
across individual stocks, industries and countries to reduce its overall risk.
o SCUDDER EMERGING MARKETS GROWTH FUND seeks long-term growth of
capital primarily through equity investment in emerging markets around the
globe.
The Fund will invest in the Asia-Pacific region, Latin America, less
developed nations in Europe, the Middle East and Africa, focusing investments in
countries and regions where there appear to be the best value and appreciation
potential, subject to considerations of portfolio diversification and liquidity.
At least 65% of the Fund's total assets will be invested in the equity
securities of emerging market issuers. The Fund considers "emerging markets" to
include any country that is defined as an emerging or developing economy by any
one of the International Bank for Reconstruction and Development (i.e., the
World Bank), the International Finance Corporation or the United Nations or its
authorities. The Fund intends to allocate its investments among at least three
countries at all times, and does not expect to concentrate in any particular
industry. There is no limitation, however, on the amount the Fund can invest in
a specific country or region of the world.
The Fund deems an issuer to be located in an emerging market if: the
issuer is organized under the laws of an emerging market country; the issuer's
principal securities trading market is in an emerging market; or at least 50% of
the issuer's non-current assets, capitalization, gross revenue or profit in any
one of the two most recent fiscal years is derived (directly or indirectly
through subsidiaries) from assets or activities located in emerging markets.
The Fund may invest up to 35% of its total assets in emerging market and
domestic debt securities if the Adviser determines that the capital appreciation
of debt securities is likely to equal or exceed the capital appreciation of
equity securities. Debt instruments held by the Fund take the form of bonds,
notes, bills, debentures, convertible securities, warrants, bank obligations,
short-term paper, loan participations, loan assignments, and trust interests.
Under normal market conditions, the Fund may invest up to 35% of its
assets in equity securities of issuers in the U.S. and other developed markets.
In evaluating the appropriateness of such investments for the Fund, the adviser
takes into account the issuer's involvement in the emerging markets and the
potential impact of that involvement on business results. The Fund may also
purchase securities on a when-issued or forward delivery basis, enter into
reverse repurchase agreements and may engage in various strategic transactions,
including derivatives.
o SCUDDER LATIN AMERICA FUND is a non-diversified fund that seeks long-term
capital appreciation through investment primarily in the securities of Latin
American issuers. The Fund seeks to benefit from economic and political trends
emerging throughout Latin America. These trends are supported by governmental
initiatives designed to promote freer trade and market-oriented economies.
At least 65% of the Fund's total assets will be invested in the
securities of Latin American issuers, and 50% of the Fund's total assets will be
invested in Latin American equity securities. To meet its objective to provide
long-term capital appreciation, the Fund normally invests at least 65% of its
total assets in equity securities. Latin America is defined as Mexico, Central
America, South America and the Spanish-speaking islands of the Caribbean. The
Fund defines securities of Latin American issuers as follows: securities of
companies organized under the laws of a Latin American country or for which the
principal securities trading market is in Latin America; securities issued or
guaranteed by the government of a country in Latin America, its agencies or
instrumentalities, political subdivisions or the central bank of such country;
securities of companies, wherever organized, when at least 50% of an issuer's
non-current assets, capitalization, gross revenue or profit in any one of the
two most recent fiscal years represents (directly or indirectly through
subsidiaries) assets or activities located in Latin America; or securities of
Latin American issuers, as defined above, in the form of depositary shares.
Although the Fund may participate in markets throughout Latin America, under
present conditions the Fund expects to focus its investments in Argentina,
Brazil, Chile, Colombia, Mexico and Peru. The Fund may invest in other countries
in Latin America when the adviser deems it appropriate. The Fund intends to
allocate investments among at least three countries at all times.
The Fund's equity investments are common stock, preferred stock (either
convertible or non-convertible), depositary receipts and warrants. These may be
illiquid securities and may also be purchased through rights. Securities may be
listed on securities exchanges, traded over-the-counter, or have no organized
market. The Fund may invest in debt securities when the adviser anticipates that
the potential for capital appreciation is likely to equal or exceed that of
equity securities. Capital appreciation in debt securities may arise from a
favorable change in relative foreign exchange rates, in relative interest rate
levels, or in the creditworthiness of issuers. Receipt of income from such debt
securities is incidental to the Fund's objective of long-term capital
appreciation. Most debt securities in which the Fund invests are not rated. When
debt securities are rated, it is expected that such ratings will generally be
below investment grade; that is, rated below Baa by Moody's or below BBB by S&P.
The Fund may invest up to 35% of its total assets in the equity
securities of U.S. and other non-Latin American issuers.
o SCUDDER PACIFIC OPPORTUNITIES FUND is a non-diversified fund that
seeks long-term growth of capital through investment primarily in the equity
securities of Pacific Basin companies, excluding Japan.
The Fund's investment program focuses on the smaller, emerging markets
in this region of the world. The Fund invests, under normal market conditions,
at least 65% of its total assets in the equity securities of Pacific Basin
companies. Pacific Basin countries include Australia, the Peoples Republic of
China, India, Indonesia, Malaysia, New Zealand, the Philippines, Sri Lanka,
Pakistan and Thailand, as well as Hong Kong, Singapore, South Korea and
Taiwan--the so-called "four tigers." The Fund may invest in other countries in
the Pacific Basin when their markets become sufficiently developed. The Fund
will not, however, invest in Japanese securities. The Fund intends to allocate
investments among at least three countries at all times.
The Fund defines securities of Pacific Basin companies as follows:
securities of companies organized under the laws of a Pacific Basin country or
for which the principal securities trading market is in the Pacific Basin; or
securities of companies, wherever organized, when at least 50% of a company's
non-current assets, capitalization, gross revenue or profit in any one of the
two most recent fiscal years represents (directly or indirectly through
subsidiaries) assets or activities located in the Pacific Basin.
The Fund's equity investments are common stock, preferred stock (either
convertible or non-convertible), depositary receipts and warrants. These may be
illiquid securities. Equity securities may also be purchased through rights.
Securities may be listed on securities exchanges, traded over-the-counter or
have no organized market. The Fund may invest up to 35% of its total assets in
foreign and domestic debt securities if the adviser determines that the capital
appreciation of debt securities is likely to equal or exceed the capital
appreciation of equity securities. The Fund may purchase bonds rated Aaa, Aa or
A by Moody's, or AAA, AA or A by S&P or, if unrated, of equivalent quality as
determined by the adviser. Should the rating of a security in the Fund's
portfolio be downgraded, the adviser will determine whether it is in the best
interest of the Fund to retain or dispose of such security.
Under normal market conditions, the Fund may invest up to 35% of its
assets in equity securities of U.S. and other non-Pacific Basin issuers
(excluding Japan). In evaluating non-Pacific Basin investments, the adviser
seeks investments where an issuer's Pacific Basin business activities and the
impact of developments in the Pacific Basin may have a positive effect on the
issuer's business results. The Fund may also purchase shares of closed-end
investment companies that invest primarily in the Pacific Basin. In addition,
the Fund may invest in when-issued securities and convertible securities,
illiquid securities, reverse repurchase agreements and may engage in strategic
transactions, including derivatives.
FIXED INCOME UNDERLYING FUNDS:
o IVY INTERNATIONAL STRATEGIC BOND FUND seeks total return and, consistent
with that objective, to maximize current income.
The Fund invests at least 65% of its assets in a managed portfolio of
foreign bonds. The Fund may also invest in U.S. bonds. The types of debt
securities the Fund may hold include corporate, government, and mortgage or
asset backed securities. At least 65% of the value of the Fund's portfolio is
expected to be rated in the four highest rating categories used by Moody's and
S&P.
Among the 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) are low rated debt securities (commonly
referred to as "high yield" or "junk" bonds); and derivative investment
techniques (such as options, futures, interest rate and credit swaps, and
foreign currency exchange transactions).
The Fund's manager invests in bonds and bond markets that are believed
to be undervalued relative to other issuers or markets. In selecting bonds for
the Fund's portfolio, the manager will consider yields, credit quality and the
fundamental outlook for currency and interest rate trends in different parts of
the world, and may also take into account the ability to hedge currency and
local bond price risk.
The Fund's portfolio is actively managed to limit its exposure to
individual country, sector, interest rate and currency risks. The Fund may,
however, invest more than 5% of a portion of its assets in a single issuer.
o LAZARD INTERNATIONAL FIXED INCOME PORTFOLIO is a non-diversified fund
that seeks maximum total return from a combination of capital appreciation and
current income. The Portfolio generally invests at least 80% of its total assets
in fixed-income securities of companies within, or governments, their agencies
or instrumentalities of, at least three different non-U.S. countries. The
Portfolio's investment manager currently intends to invest the Portfolio's
assets primarily in companies within, or governments of, Continental Europe, the
United Kingdom, Canada and the Pacific Basin. The Portfolio invests primarily in
non-U.S. fixed-income securities of varying maturities. The Portfolio typically
invests more than half of its total assets in corporate bonds, mortgage-related
securities and asset-backed securities. The Portfolio typically invests less
than half of its total assets in foreign government obligations. The Portfolio
generally invests at least 85% of its total assets in investment grade
fixed-income securities and may invest up to 15% of its total assets in
fixed-income securities rated below investment grade ("junk" bonds). Under
normal market conditions, the Portfolio's effective duration (a measure of
interest rate sensitivity) will range between two and eight years.
The International Fixed Income Portfolio seeks high total return from a
combination of current income and capital appreciation. The Portfolio invests
primarily in non-U.S. fixed-income securities of varying maturities.
The Portfolio typically invests more than half of its total assets in
corporate bonds, mortgage-related securities and asset-backed securities. The
Portfolio typically invests less than half of its total assets in foreign
government obligations. The Portfolio generally invests at least 80% of its
total assets in fixed-income securities of companies within, or governments,
their agencies or instrumentalities of, at least three different non-U.S.
countries. The Portfolio may invest in any region of the world, including
emerging market countries. However, the Portfolio's investment manager currently
intends to invest the Portfolio's assets primarily in companies within, or
governments of, Continental Europe, the United Kingdom, Canada and the Pacific
Basin. The Portfolio also may invest in American or Global Depositary Receipts
issued in relation to a pool of fixed-income securities in which the Portfolio
could invest directly.
The Portfolio generally invests at least 85% of its total assets in
investment grade fixed-income securities or the unrated equivalent as determined
by the investment manager. The Portfolio may invest up to 15% of its total
assets in fixed-income securities rated, at the time of purchase, below
investment grade and as low as the lowest rating assigned by S&P and Moody's or
the unrated equivalent as determined by the Portfolio's investment manager.
The investment manager anticipates that, under normal market
conditions, the Portfolio's effective duration will range between two and eight
years. Duration is a measure of how sensitive the securities held by the
Portfolio may be to changes in interest rates.
The Portfolio may engage, to a limited extent, in various investment
techniques, such as options and futures transactions, foreign currency
transactions and lending portfolio securities. The Portfolio typically sells a
fixed-income security when new information changes the investment manager's
fundamental view of the issuer, the current price appreciation makes the future
value of the security less attractive or the market sector becomes overvalued
relative to other sectors.
o SCUDDER INTERNATIONAL BOND FUND is a non-diversified fund with a
primary objective of income primarily by investing in a managed portfolio of
high-grade international bonds. As a secondary objective, the Fund seeks
protection and possible enhancement of principal value by actively managing
currency, bond market and maturity exposure and by security selection.
To achieve its objectives, the Fund will primarily invest in
international bonds that are denominated in foreign currencies, including bonds
denominated in the European Currency Unit (ECU). The Fund's investments may
include debt securities issued or guaranteed by a foreign national government,
its agencies, instrumentalities or political subdivisions, debt securities
issued or guaranteed by supranational organizations, corporate debt securities,
bank or bank holding company debt securities and other debt securities including
those convertible into common stock. In addition, for temporary defensive
purposes, the Fund may vary from its investment policies during periods when the
adviser determines that it is advisable to do so because of conditions in the
securities markets or other economic or political conditions. During such
periods, the Fund may hold without limit cash and cash equivalents. It is
impossible to accurately predict for how long such alternative strategies may be
utilized.
The Fund will invest no more than 15% of its total assets in debt
securities that are rated below BBB by S&P or below Baa by Moody's, but rated no
lower than B by S&P or Moody's, respectively. The Fund may also invest in zero
coupon securities that pay no cash income and are issued at substantial
discounts from their value at maturity. When held to maturity, their entire
income, which consists of accretion of discount, comes from the difference
between the issue price and their value at maturity.
ALL UNDERLYING FUNDS: 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.
RISKS
The risks described in this section are in addition to the risks
disclosed in the Prospectus under "Additional Information About Investment
Strategies and 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):
o 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.
o MORTGAGE-BACKED SECURITIES: Mortgage-backed securities are
securities representing part ownership of a pool of mortgage
loans. Although the mortgage loans in the pool will have
maturities of up to 30 years, the actual average life of the
loans typically will be substantially less because the mortgages
will be subject to principal amortization and may be prepaid
prior to maturity. In periods of falling interest rates, the rate
of prepayment tends to increase, thereby shortening the actual
average life of the security. Conversely, rising interest rates
tend to decrease the rate of prepayment, thereby lengthening the
security's actual average life (and increasing the security's
price volatility). Since it is not possible to predict accurately
the average life of a particular pool, and because prepayments
are reinvested at current rates, the market value of
mortgage-backed securities may decline during periods of
declining interest rates. Similar risks are associated with an
underlying fund's use of other asset-backed securities investment
techniques.
o SHORT SALES: An underlying fund might sell a security short and
borrow the same security from a broker or other institution to
complete the sale. The underlying fund would realize a gain if
the security declines in price between those dates. On the other
hand, the underlying fund would lose money if the price of the
borrowed security increases between the date of the short sale
and the date on which the fund replaces the security. Moreover,
although an underlying fund's gain would be limited to the amount
at which it sold a security short, its potential loss is limited
only by the maximum attainable price of the security (which could
be quite high) less the price at which the security was sold.
o 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).
o WARRANTS: The holder of a warrant pays for the right to purchase
a given number of an issuer's shares at a specified price until
the warrant expires. If a warrant is not exercised by the date of
its expiration (such as when the underlying securities are no
longer an attractive investment), an underlying fund would lose
what it paid for the warrant.
o 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.
o NON-DIVERSIFICATION RISK: Certain of the underlying funds are
classified as "non-diversified" under the 1940 Act, and may
therefore invest a greater percentage of their respective assets
in a particular issuer than "diversified" funds. As a result,
these underlying funds may also be more susceptible than
diversified funds to the price movements of certain securities
they hold in their portfolios.
o 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.
MANAGEMENT OF THE FUNDS
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 in the "Investment Advisory and Other Services"
section, below.
TRUSTEES AND OFFICERS
The Board of Trustees of the Trust is responsible for the overall
management of the Funds, including general supervision and review of the Funds'
investment activities. The Board, in turn, elects the officers who are
responsible for administering each Fund's day-to-day operations.
The Trustees and Executive Officers of the Trust, their business
addresses and principal
The Trustees and Executive Officers of the Trust, their business
addresses and principal occupations during the past five years are:
<TABLE>
<CAPTION>
<S> <C> <C>
- ---------------------------------------- ---------------------------- ------------------------------------------------
NAME, ADDRESS, AGE POSITION WITH THE TRUST BUSINESS AFFILIATIONS AND PRINCIPAL OCCUPATIONS
- ---------------------------------------- ---------------------------- ------------------------------------------------
James W. Broadfoot* President and Trustee President, Ivy Management, Inc. (1997 -
700 South Federal Highway present); Executive Vice President, Ivy
Suite 300 Management, Inc. (1996-1997); Senior Vice
Boca Raton, FL 33432 President, Ivy Management, Inc. (1992-1996);
Age: 57 Director and Senior Vice President, Mackenzie
Investment Management Inc. (1995-present);
Senior Vice President, Mackenzie Investment Management
Inc. (1990-1995); President and Trustee,
Mackenzie Solutions (1999 to present).
Keith J. Carlson* Chairman and Trustee President, Chief Executive Officer and
700 South Federal Hwy. Director, Mackenzie Investment Management Inc.
Suite 300 (1999-present); Executive Vice President and
Boca Raton, FL 33432 Chief Operating Officer, Mackenzie Investment
Age: 43 Management Inc. (1997-1999); Senior Vice
President, Mackenzie Investment Management
Inc. (1996-1997); Senior Vice President and
Director, Mackenzie Investment Management Inc.
(1994-1996); Chairman, Senior Vice President
and Director, Ivy Management, Inc.
(1994-present); Vice President, The Mackenzie
Funds Inc. (1987-1995); Director, Ivy
Mackenzie Services Corp. (1993-present);
Senior Vice President and Director, Ivy
Mackenzie Services Corp. (1996-1997);
President and Director, Ivy Mackenzie Services
Corp. (1993-1996); Trustee and President,
Mackenzie Series Trust (1996-1998); Vice
President, Mackenzie Series Trust (1994-1996);
President, Chief Executive Officer and
Director, Ivy Mackenzie Distributors, Inc.
(1994-present); Chairman, Trustee and
Principal Executive Officer, Mackenzie
Solutions (1999-present); President and
Trustee, Mackenzie Solutions (1999).
Ian Carmichael, Trustee President, Control Systems, Inc. (sales and
1912 Sabal Palm Circle, service of computer products) (1983-present).
Boca Raton, FL 33432
Age: 51
P. Rodney Cunningham, Trustee President and Chief Executive Officer, Boca
1450 N.W. 1st Avenue Raton Transportation, Inc. (passenger
Boca Raton, FL 33432 transport)(1978-present); President and Chief
Age: 52 Executive Officer, Cunningham Communications,
Inc. (wireless communications)(1983-present);
Chairman and Chief Executive Officer, Palm
Beach Transportation, Inc. (passenger
transport)(1987-present); President and Chief
Executive Officer, Telco, Inc. (equipment
leasing)(1993-present); President and Chief
Executive Officer, 1501 F.M.R., Inc., (real
estate)(1994-present); President and Chief
Executive Officer, Newport CRC, Inc. (real
estate)(1996-present); Director, NationsBank
of Palm Beach County (banking)(1996-present);
Director, Transportation Casualty Insurance
Co. (insurance)(1988-1998).
Gary R. Ellis, Trustee Senior Vice President, Chief Financial Officer
1812 Sabal Palm Circle and Treasurer, Consolidated Cigar Holdings,
Boca Raton, FL 33432 Inc. and Consolidated Cigar Corporation (cigar
Age: 45 manufacturing and marketing)(1988-present).
C. William Ferris Secretary/Treasurer Senior Vice President, Secretary/Treasurer and
700 South Federal Hwy. Compliance Officer, Mackenzie Investment
Suite 300 Management Inc. (2000-present); Senior Vice
Boca Raton, FL 33432 President, Chief Financial Officer,
Age: 55 Secretary/Treasurer and Compliance Officer,
Mackenzie Investment Management Inc.
(1995-2000); Senior Vice President,
Secretary/Treasurer, Compliance Officer and
Clerk, Ivy Management, Inc. (1994-present);
Senior Vice President, Secretary/Treasurer and
Director, Ivy Mackenzie Distributors, Inc.
(1994-present); Director, President and Chief
Executive Officer, Ivy Mackenzie Services
Corp. (1997-present); President and Director,
Ivy Mackenzie Services Corp. (1996-1997);
Secretary/Treasurer and Director, Ivy
Mackenzie Services Corp. (1993-1996);
Secretary/Treasurer, The Mackenzie Funds Inc.
(1993-1995); Secretary/Treasurer, Mackenzie
Series Trust (1994-1998); Secretary/Treasurer,
Mackenzie Solutions (1999-present).
Ted A. Parkhill, Vice President Senior Vice President, Ivy Mackenzie
700 South Federal Hwy. Distributors, Inc. (1998-present); Marketing
Suite 300 Manager, Investors Group Inc. (1996-1998);
Boca Raton, FL 33432 National Group Sales Manager, Investors Group
Age: 35 Inc. (1994-1996); Manager, Advanced Sales of
Investors Group Inc. (1993-1994).
</TABLE>
* Deemed to be an "interested person" of the Trust, as defined under the 1940
Act.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
COMPENSATION TABLE
NAME/ AGGREGATE PENSION OR ESTIMATED TOTAL
POSITION COMPENSA- RETIREMENT ANNUAL COMPENSATION
TION FROM BENEFITS AC- BENEFITS FROM TRUST
TRUST* CRUED AS A UPON AND FUND
PART OF FUND RETIRE- COMPLEX PAID
EXPENSES MENT TO TRUSTEES**
James W. Broadfoot, $0 N/A N/A $0
President and Trustee
Keith J. Carlson, $0 N/A N/A $0
Chairman and Trustee
(Chief Executive Officer)
Ian Carmichael, Trustee $4,500 N/A N/A $4,500
P. Rodney Cunningham, $4,500 N/A N/A $4,500
Trustee
Gary R. Ellis, Trustee $4,500 N/A N/A $4,500
C. William Ferris/ Vice $0 N/A N/A $0
President and Secretary/
Treasurer
Ted A. Parkhill, $0 N/A N/A $0
Vice President
</TABLE>
* Estimated for the Funds' fiscal year ending December 31, 2000.
** Estimated for the Funds' fiscal year ending December 31, 2000. The Fund
complex consists of the Trust and Ivy Fund. During the fiscal year ending
December 31, 1999, none of the listed Trustees received compensation from Ivy
Fund.
To the knowledge of the Trust, as of April 6, 2000, no shareholder
owned beneficially or of record 5% or more of any Fund's outstanding shares of
any class, with the following exceptions:
CLASS A
Of the outstanding Class A shares of:
Balanced Growth Fund - Janney Montgomery Scott LLC A/C 5758-2585 Maureen
McHugh (IRA), 1801 Market St. Philadelphia, PA 19103-1675, owned of record
490.006 shares (100%);
Moderate Growth Fund - Janney Montgomery Scott LLC A/C 3155-4797 Suzanne H
Farrell (IRA-Roll), 1801 Market St. Philadelphia, PA 19103-1675, owned of record
2,441.117 shares (13.02%); Donaldson Lufkin Jenrette Securities Corporation
Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record 2,416.279
shares (12.89%); Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, NJ 07303-9998, owned of record 2,019.448 shares (10.77%);
Walter A Smith (IRA-Roll) JMS LLC Cust FBO A/C 7761-1321, 343 Main St., East
Setauket, NY 11733, owned of record 1,954.734 shares (10.43%); Lucy A Brown
(IRA-Roll) JMS LLC Cust FBO A/C 1829-4223, 24 Harcourt Ave., P.O. Box 176
Smithtown, NY 11787, owned of record 1,952.894 shares (10.42%); Donaldson Lufkin
Jenrette Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998,
owned of record 1,489.921 shares (7.95%); Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E, 3rd FL, Jacksonville, FL, owned of record 1,408.035 shares (7.51%); and
Janney Montgomery Scott LLC A/C 5602-8442, Darrell A Matthews (IRA-Roll), 1801
Market St., Philadelphia, PA 19103-1675, owned of record 1,323.490 shares
(7.06%); Janney Montgomery Scott LLC A/C 7811-1353, Janice M Sorrentino, 1801
Market St., Philadelphia, PA 19103-1675, owned of record 1,062.091 shares
(5.66%); and Janney Montgomery Scott LLC A/C 2867-1243 Charles V Dougherty, 1801
Market St., Philadelphia, PA 19103-1675, owned of record 963.742 shares (5.14%);
Long-term Growth Fund - NFSC FEBO # B36-000914 Thomas H Wilde TTEE W. A.
Wilde Pension Plan, 200 Summer St., P.O. Box 5838 Holliston, MA 01746, owned of
record 21,009.312 shares (36.40%); Parker Hunter Inc. FBO Keshava Reddy MD Inc.
Defined Benefit Pension U/A DTD 2/1/80, 7101 Mines Road S.E., Warren, OH 44484,
owned of record 19,142.464 shares (33.17%); and Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E, 3rd FL, Jacksonville, FL 32246, owned of record 7,960.586
shares (13.79%); and
Aggressive Growth Fund - NFSC FEBO # OJR-658359 NFSC/FMTC IRA Rollover FBO
Helen Joann Kern, 6431 Woodlake Ave., Canoga Park, CA 91301, owned of record
1,509.044 shares (28.94%); USB Piper Jaffrey Cust FBO John C. Kelly IRA
380416772, 222 So. 9th St., Minneapolis, MN 55402, owned of record 1,007.431
shares (19.32%); NFSC FEBO # OJR-658421 NFSC/FMTC IRA FBO Warren H. Hiramatsu,
703 E. Harvard Rd. Burbank, CA 91501, owned of record 985.565 shares (18.90%);
Jennifer Will, 9374 Aqua Vista Blvd., Boynton Beach, FL 33437, owned of record
970.109 shares (18.61%); and Micki Shpilner, 18 Fairland St., Lexington, MA
02421, owned of record 292.074 shares (5.60%).
CLASS B
Of the outstanding Class B shares of:
Conservative Growth Fund - Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 5,661.922 shares (63.61%); Janney
Montgomery Scott LLC A/C 3411-6567 Beth Beyers Frankel, 1801 Market St.,
Philadelphia, PA 19103-1675, owned of record 1,840.197 shares (20.67%); and IBT
CUST 403(B) FBO Donna T Perricone, 4392 Barford Road, Syracuse, NY 13215, owned
of record 1,398.500 shares (15.71%);
Balanced Growth Fund - Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 5,336.877 shares (67.10%); IBT CUST 403(B)
FBO William J. Beck, P.O. Box 674, Dexter, NY 13634, owned of record 1,547.457
shares (19.45%); and Gary E. Williams & Bonnie J. Williams JT Ten, 308 Scott
Ave., Syracuse, NY 13224, owned of record 1,068.700 shares (13.43%);
Moderate Growth Fund - Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
Fl., Jacksonville, FL, owned of record 32,155.055 shares (45.49%); AG Edwards &
Sons Inc. C/F Carl Brecht Rollover IRA Account, 11837 Old Oak Drive Granger, IN
46530-6028, owned of record 13,205.000 shares (18.68%); Carl Brecht, 11837 Old
Oak Drive, Granger, IN 46530-6028, owned of record 5,078.175 shares (7.18%); and
AG Edwards & Sons Inc. C/F Patricia J. Wilson Rollover IRA Account 1205 Chimes
Blvd., South Bend, IN 46615-3547, owned of record 3,707.627 shares (5.24%);
Long-term Growth Fund - Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 111,438.611 shares (71.14%); and
Aggressive Growth Fund - Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 17,447.363 shares (74.04%); and Michael Di
Domenico TTEE of the Desesa Engineering Co. Inc. Employee Pension Plan, 83 Dorsa
Ave, Livingston, NJ 07039, owned of record 3,170.656 shares (13.45%).
CLASS C
Of the outstanding Class C shares of:
Balanced Growth Fund - Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 519.478 shares (100%);
Moderate Growth Fund - Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 10,750.327 shares (60.88%); Jack M.
Hildreth, 10745 Kern Road, Osceola, IN 46561, owned of record 1,480.984 shares
(8.38%); John C. Calcagno, 131 Stonehouse Road, Bloomfield, NJ 07003, owned of
record 1,412.248 shares (7.99%); Prudential Securities Inc. FBO Ms Sylvette
Nicolina IRA DTD 09/04/97, 440 N. Wabash Ave., Apt. 1906, Chicago, IL
60611-7642, owned of record 1,411.000 (7.99%); and Prudential Securities Inc.
FBO Mr. Slater Alleyne IRA Rollover DTD 02/16/00 949, E. 43rd St., Brooklyn, NY
11210-3523, owned of record 1,088.850 shares (6.16%);
Long-term Growth Fund - Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 41,887.361 shares (62.36%); Dain Rauscher,
Custodian Arthur L. Verdecchia Sr. A/C #8198-1530 Individual Retirement Account,
845 Chalfont Drive, Sun Prarie, WI 53590, owned of record 4,881.261 shares
(7.26%); and Susan Bettin, 2804 Loftsmoor, Plano, TX 75025, owned of record
4,173.623 shares (6.21%); and
Aggressive Growth Fund - Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 7,192.865 shares (70.11%); and Prudential
Secutities Inc. FBO Mr. Ronald Harris Richardson Roth IRA DTD 10/05/98, P.O. Box
185, Sanford, NC 27331-0185, owned of record 2,463.917 shares (24.01%).
ADVISOR CLASS
Of the outstanding Advisor Class shares of:
Conservative Growth Fund - Mackenzie Investment Management Inc. Attn: Bev
Yanowitch, Via Mizner Financial Plaza, 700 S. Federal Hwy., Ste. 300, Boca
Raton, FL 33432, owned of record 10,604.944 shares (100%);
Balanced Growth Fund - Mackenzie Investment Management Inc. Attn: Bev
Yanowitch, Via Mizner Financial Plaza, 700 S. Federal Hwy., Ste. 300, Boca
Raton, FL 33432, owned of record 10,515.982 shares (100%);
Moderate Growth Fund - Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 30,629.313 shares (74.69%); and Mackenzie
Investment Management Inc. Attn: Bev Yanowitch, Via Mizner Financial Plaza, 700
S. Federal Hwy., Ste. 300, Boca Raton, FL 33432, owned of record 10,377.511
shares (25.30%);
Long-term Growth Fund - Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 14,905.083 shares (59.21%); and Mackenzie
Investment Management Inc. Attn: Bev Yanowitch, Via Mizner Financial Plaza, 700
S. Federal Hwy., Ste. 300, Boca Raton, FL 33432, owned of record 10,265.950
shares (40.78%); and
Aggressive Growth Fund - Mackenzie Investment Management Inc. Attn: Bev
Yanowitch, Via Mizner Financial Plaza, 700 S. Federal Hwy., Ste. 300, Boca
Raton, FL 33432, owned of record 10,516.029 shares (87.02%); and John E. Parkes,
306 Portside, Buffalo, NY 14202-4358, owned of record 1,567.997 shares (12.97%).
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.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT MANAGER
Ivy Management, Inc. ("IMI"), Via Mizner Financial Plaza, 700 South Federal
Highway, Boca Raton, Florida 33432, provides investment advisory and business
management 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 June 24, 1999. Before that,
the Advisory Agreement was approved at a meeting held on March 18, 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"), Via Mizner Financial Plaza, 700 South Federal Highway, Boca Raton,
Florida 33432, a Delaware corporation with 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 Securities and
Exchange Commission (the "SEC") and of state securities commissions and other
regulatory agencies.
Each Fund pays IMI a fee for its services under the Advisory Agreement at
an annual rate of 0.25% 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. Certain of the underlying
funds are managed by IMI. IMI also receives management fees from these
affiliated underlying funds.
For the fiscal period ended December 31, 1999, IMI had voluntarily
agreed to reimburse each Fund's fees and expenses to the extent necessary to
ensure that each Fund's Annual Operating Expenses did not exceed certain levels
disclosed in the Prospectus. For the fiscal year ending December 31, 2000, IMI
has contractually agreed to reimburse each Fund's fees and expenses to the
extent necessary to ensure that each Fund's Annual Operating Expenses do not
exceed certain levels disclosed in the Prospectus. With respect to each Fund,
IMI has entered into formal agreements with the managers of the underlying funds
pursuant to which each manager has agreed to pay to IMI an amount equal to an
annual rate of up to 0.25% of the average daily value of the shares of an
underlying fund that are held by the Fund during any calendar quarter ("service
fee"). IMI shall use these payments to reduce the expenses of the Fund payable
to certain service providers of the Fund. Because such payments shall
effectively reduce each Fund's Annual Operating Expenses, these payments from
the managers of the underlying funds may have the effect of reducing the amount
that IMI would otherwise voluntarily reimburse the Fund in order to maintain the
Fund's Annual Operating Expense at the level disclosed in the Prospectus.
During the period from July 2, 1999 (commencement of operations) through
December 31, 1999, IMI received advisory fees of $188 from Conservative Growth
Fund, $207 from Balanced Growth Fund, $789 from Moderate Growth Fund, $1,161
from Long-term Growth Fund and $272 from Aggressive Growth Fund. For the same
period, Fund expenses reimbursed by IMI amounted to $75,729 for Conservative
Growth Fund, $81,883 for Balanced Growth Fund, $101,652 for Moderate Growth
Fund, $108,664 for Long-term Growth Fund and $88,632 for Aggressive Growth
Fund.
ASSET ALLOCATION CONSULTANT
Garmaise Investment Technologies (US) Inc. ("GIT"), 30 St. Clair Avenue
West, Suite 1110, Toronto, Ontario, Canada, M4V 3A1, provides asset allocation
consulting services to IMI in connection with the Funds pursuant to a
subadvisory agreement with IMI (the "Subadvisory Agreement"). The Subadvisory
Agreement was approved by the sole shareholder of each Fund on June 24, 1999.
Before that, the Subadvisory Agreement was approved at a meeting held on May 27,
1999 by each Fund's Board of Trustees, including a majority of the Independent
Trustees.
The president of GIT, an SEC-registered investment advisor, has over 20
years of investment advisory experience and uses a proprietary computer-based
method of portfolio selection known as "Optimization." GIT's responsibilities
include making recommendations to IMI regarding the underlying funds that
comprise each Fund's portfolio and determining when changing the relative mix of
underlying funds within a Fund's portfolio may be appropriate in light of
prevailing market conditions. For its services, GIT receives a portion of the
0.25% fee that each Fund pays to IMI.
During the period from July 2, 1999 (commencement of operations)
through December 31, 1999, GIT received subadvisory fees from IMI of $20,508
with respect to Conservative Growth Fund, $20,508 with respect to Balanced
Growth Fund, $20,508 with respect to Moderate Growth Fund, $20,508 with respect
to Long-term Growth Fund and $20,508 with respect to Aggressive Growth Fund.
TERM AND TERMINATION OF ADVISORY AGREEMENT AND SUBADVISORY AGREEMENT
The initial term of the Advisory Agreement is two years from June 28, 1999.
The initial term of the Subadvisory Agreement is two years from July 1, 1999.
Each 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 either Agreement (or adoption of any new agreement) is
presented to shareholders, continuance (or adoption) shall occur only if
approved by the affirmative vote of a majority of the outstanding voting
securities of each Fund. (See "Capitalization and Voting Rights.")
Each 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.
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. For the period from July 2, 1999 (commencement of
operations) through December 31, 1999, MIMI received $8,558 from Conservative
Growth Fund, $8,559 from Balanced Growth Fund, $8,572 from Moderate Growth Fund,
$8,577 from Long-term Growth Fund and $8,559 from Aggressive Growth Fund.
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 pays a monthly fee
at an annual rate of $20.00 for each open Class A, Class B, Class C, and Advisor
Class 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. Such fees and expenses for the period from
July 2, 1999 (commencement of operations) through December 31, 1999 for
Conservative Growth Fund totaled $42. Such fees and expenses for the period from
July 2, 1999 (commencement of operations) through December 31, 1999 for Balanced
Growth Fund totaled $48. Such fees and expenses for the period from July 2, 1999
(commencement of operations) through December 31, 1999 for Moderate Growth Fund
totaled $166. Such fees and expenses for the period from July 2, 1999
(commencement of operations) through December 31, 1999 for Long-term Growth fund
totaled $237. Such fees and expenses period from July 2, 1999 (commencement of
operations) through December 31, 1999 for Aggressive Growth Fund totaled
$65.
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).
ADMINISTRATOR
Pursuant to an Administrative Services Agreement, MIMI provides certain
administrative services to the Funds. MIMI does not receive any compensation
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.
AUDITORS
PricewaterhouseCoopers LLP, 2000 East Las Olas Blvd., Ft. Lauderdale,
Florida 33301, independent certified public accountants, have been selected as
auditors for the Funds. The audit services performed by PricewaterhouseCoopers
LLP 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.
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. For the fiscal period ended December 31, 1999, the Funds did not pay
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.
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 for Class A, B and C shares, and $250 per month for Advisor Class shares
(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 IMSC of telephone
instructions or written notice. To use this privilege, please complete Sections
6A and 7B 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 $1,000 ($10,000 in the case
of Advisor Class 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 $1,000 ($10,000 in the case of Advisor Class
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 $50,000 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. The minimum distribution amount is $50 ($250 for Advisor Class
accounts), 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 ($10,000 for Advisor Class accounts). 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 $1,000 each ($250 for Advisor Class accounts) 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
($10,000 for Advisor Class accounts) 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 ($10,000 for Advisor Class accounts) 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., a wholly owned subsidiary of MIMI,
serves as the exclusive distributor of the Funds' shares pursuant to a
Distribution Agreement with the Funds dated June 28, 1999 (the "Distribution
Agreement"). The Board approved the Distribution Agreement on March 18, 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.
Each Fund has authorized IMDI to accept purchase and redemption orders
on its behalf. IMDI is also authorized to designate other intermediaries to
accept purchase and redemption orders on each Fund's behalf. Each Fund will be
deemed to have received a purchase or redemption order when an authorized
intermediary or, if applicable, an intermediary's authorized designee, accepts
the order. Client orders will be priced at each Fund's net asset value next
computed after an authorized intermediary or the intermediary's authorized
designee accepts them.
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.
During the fiscal period ended December 31, 1999, IMDI received from
sales of Class A shares of Conservative Growth Fund $0 in sales commissions, of
which $0 was retained after dealer allowances. During the fiscal period ended
December 31, 1999, IMDI received $0 in CDSCs on redemptions of Class B shares of
Conservative Growth Fund. During the fiscal period ended December 31, 1999, IMDI
received $0 in CDSCs on redemptions of Class C shares of Conservative Growth
Fund.
During the fiscal period ended December 31, 1999, IMDI received from
sales of Class A shares of Balanced Growth Fund $299 in sales commissions, of
which $39 was retained after dealer allowances. During the fiscal period ended
December 31, 1999, IMDI received $0 in CDSCs on redemptions of Class B shares of
Balanced Growth Fund. During the fiscal period ended December 31, 1999, IMDI
received $0 in CDSCs on redemptions of Class C shares of Balanced Growth Fund.
During the fiscal period ended December 31, 1999, IMDI received from
sales of Class A shares of Moderate Growth Fund $6,497 in sales commissions, of
which $846 was retained after dealer allowances. During the fiscal period ended
December 31, 1999, IMDI received $0 in CDSCs on redemptions of Class B shares of
Moderate Growth Fund. During the fiscal period ended December 31, 1999, IMDI
received $115 in CDSCs on redemptions of Class C shares of Moderate Growth Fund.
During the fiscal period ended December 31, 1999, IMDI received from
sales of Class A shares of Long-term Growth Fund $15,608 in sales commissions,
of which $2,252 was retained after dealer allowances. During the fiscal period
ended December 31, 1999, IMDI received $0 in CDSCs on redemptions of Class B
shares of Long-term Growth Fund. During the fiscal period ended December 31,
1999, IMDI received $899 in CDSCs on redemptions of Class C shares of Long-term
Growth Fund.
During the fiscal period ended December 31, 1999, IMDI received from
sales of Class A shares of Aggressive Growth Fund $2,617 in sales commissions,
of which $264 was retained after dealer allowances. During the fiscal period
ended December 31, 1999, IMDI received $0 in CDSCs on redemptions of Class B
shares of Aggressive Growth Fund. During the fiscal period ended December 31,
1999, IMDI received $382 in CDSCs on redemptions of Class C shares of Aggressive
Growth 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 March 18, 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.
During the fiscal period ended December 31, 1999, Conservative Growth
Fund paid IMDI $22 pursuant to its Class A Plan. During the fiscal period ended
December 31, 1999 Conservative Growth Fund paid IMDI $133 pursuant to its Class
B Plan. During the fiscal period ended December 31, 1999, Conservative Growth
Fund paid IMDI $0 pursuant to its Class C Plan.
During the fiscal period ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Conservative Growth Fund:
advertising $2,374; printing and mailing of prospectuses to persons other than
current shareholders, $3,530; compensation to dealers, $12; compensation to
sales personnel, $18; seminars and meetings, $3; travel and entertainment, $6;
general and administrative, $6; telephone, $0; and occupancy and equipment
rental, $0.
During the fiscal period ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Conservative Growth Fund:
advertising, $4,303; printing and mailing of prospectuses to persons other than
current shareholders, $6,397; compensation to dealers, $24; compensation to
sales personnel, $37; seminars and meetings, $5 ; travel and entertainment, $9;
general and administrative, $12; telephone, $0; and occupancy and equipment
rental $4.
During the fiscal period ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Conservative Growth Fund:
advertising, $0; printing and mailing of prospectuses to persons other than
current shareholders, $0 ; compensation to dealers, $0; compensation to sales
personnel, $0; seminars and meetings, $0; travel and entertainment, $0; general
administrative, $0; telephone, $0; and occupancy and equipment rental, $0.
During the fiscal period ended December 31, 1999, Balanced Growth Fund
paid IMDI $3 pursuant to its Class A Plan. During the fiscal period ended
December 31, 1999 Balanced Growth Fund paid IMDI $272 pursuant to its Class B
Plan. During the fiscal period ended December 31, 1999, Balanced Growth Fund
paid IMDI $18 pursuant to its Class C Plan.
During the fiscal period ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Balanced Growth Fund:
advertising $342; printing and mailing of prospectuses to persons other than
current shareholders, $556; compensation to dealers, $3; compensation to sales
personnel, $3; seminars and meetings, $0; travel and entertainment, $0; general
and administrative, $0; telephone, $0; and occupancy and equipment rental, $0.
During the fiscal period ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Balanced Growth Fund:
advertising, $6,581; printing and mailing of prospectuses to persons other than
current shareholders, $10,685; compensation to dealers, $31; compensation to
sales personnel, $55; seminars and meetings, $8; travel and entertainment, $16;
general and administrative, $19; telephone, $2; and occupancy and equipment
rental $4.
During the fiscal period ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Balanced Growth Fund:
advertising, $445; printing and mailing of prospectuses to persons other than
current shareholders, $725; compensation to dealers, $6; compensation to sales
personnel, $3; seminars and meetings, $2; travel and entertainment, $0; general
administrative, $0; telephone, $0; and occupancy and equipment rental, $0.
During the fiscal period ended December 31, 1999, Moderate Growth Fund
paid IMDI $244 pursuant to its Class A Plan. During the fiscal period ended
December 31, 1999 Moderate Growth Fund paid IMDI $932 pursuant to its Class B
Plan. During the fiscal period ended December 31, 1999, Moderate Growth Fund
paid IMDI $149 pursuant to its Class C Plan.
During the fiscal period ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Moderate Growth Fund:
advertising $13,285; printing and mailing of prospectuses to persons other than
current shareholders, $21,483; compensation to dealers, $82; compensation to
sales personnel, $109; seminars and meetings, $20; travel and entertainment,
$30; general and administrative, $35; telephone, $3; and occupancy and equipment
rental, $8.
During the fiscal period ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Moderate Growth Fund:
advertising, $14,985; printing and mailing of prospectuses to persons other than
current shareholders, $24,231; compensation to dealers, $120; compensation to
sales personnel, $122; seminars and meetings, $30; travel and entertainment,
$33; general and administrative, $39; telephone, $5; and occupancy and equipment
rental $9.
During the fiscal period ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Moderate Growth Fund:
advertising, $2,375; printing and mailing of prospectuses to persons other than
current shareholders, $3,840; compensation to dealers, $21; compensation to
sales personnel, $20; seminars and meetings, $5; travel and entertainment, $6;
general administrative, $6; telephone, $0; and occupancy and equipment rental,
$2.
During the fiscal period ended December 31, 1999, Long-term Growth Fund
paid IMDI $248 pursuant to its Class A Plan. During the fiscal period ended
December 31, 1999 Long-term Growth Fund paid IMDI $2,459 pursuant to its Class B
Plan. During the fiscal period ended December 31, 1999, Long-term Growth Fund
paid IMDI $485 pursuant to its Class C Plan.
During the fiscal period ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Long-term Growth Fund:
advertising $11,095; printing and mailing of prospectuses to persons other than
current shareholders, $19,437; compensation to dealers, $91; compensation to
sales personnel, $90; seminars and meetings, $23; travel and entertainment, $24;
general and administrative, $29; telephone, $2; and occupancy and equipment
rental, $6.
During the fiscal period ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Long-term Growth Fund:
advertising, $28,382; printing and mailing of prospectuses to persons other than
current shareholders, $47,535; compensation to dealers, $229; compensation to
sales personnel, $232; seminars and meetings, $57; travel and entertainment,
$64; general and administrative, $76; telephone, $7; and occupancy and equipment
rental $17.
During the fiscal period ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Long-term Growth Fund:
advertising, $5,894; printing and mailing of prospectuses to persons other than
current shareholders, $9,872; compensation to dealers, $61; compensation to
sales personnel, $48; seminars and meetings, $16; travel and entertainment, $13;
general administrative, $15; telephone, $1; and occupancy and equipment rental,
$4.
During the fiscal period ended December 31, 1999, Aggressive Growth
Fund paid IMDI $37 pursuant to its Class A Plan. During the fiscal period ended
December 31, 1999 Aggressive Growth Fund paid IMDI $191 pursuant to its Class B
Plan. During the fiscal period ended December 31, 1999, Aggressive Growth Fund
paid IMDI $198 pursuant to its Class C Plan.
During the fiscal period ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Aggressive Growth Fund:
advertising $2,613; printing and mailing of prospectuses to persons other than
current shareholders, $4,099; compensation to dealers, $15; compensation to
sales personnel, $22; seminars and meetings, $4; travel and entertainment, $6;
general and administrative, $7; telephone, $0; and occupancy and equipment
rental, $2.
During the fiscal period ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Aggressive Growth Fund:
advertising, $4,315; printing and mailing of prospectuses to persons other than
current shareholders, $6,767; compensation to dealers, $35; compensation to
sales personnel, $36; seminars and meetings, $9; travel and entertainment, $10
general and administrative, $11; telephone, $2; and occupancy and equipment
rental $2.
During the fiscal period ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Aggressive Growth Fund:
advertising, $3,604; printing and mailing of prospectuses to persons other than
current shareholders, $5,652; compensation to dealers, $42; compensation to
sales personnel, $29; seminars and meetings, $11; travel and entertainment, $8;
general administrative, $9; telephone, $2; and occupancy and equipment rental,
$2.
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, subject to certain exceptions. 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.
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
5.75% sales charge is deducted from the initial $1,000 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.
CONSERVATIVE GROWTH FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] ADVISOR CLASS[3]
Inception [#] to 8.51% 11.76% 19.40%
December 31, 1999[6]:
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] ADVISOR CLASS[3]
Inception [#] to 15.13% 16.76% 19.40%
December 31, 1999[6]:
- --------------------------------------------------------------------------------
[*] The Standardized Return figures for Class A shares reflect the
deduction of the maximum initial sales charge of 5.75%. The Standardized Return
figures for Class B shares reflect the deduction of the applicable CDSC imposed
on redemption of Class B shares held for the period.
[**] The Non-Standardized Return figures do not reflect the deduction
of any initial sales charge or CDSC.
[#] The inception date was October 4, 1999 for Class A shares, August
23, 1999 for Class B shares and July 2, 1999 for Advisor Class shares. Class C
and Class I shares had not commenced operations as of December 31, 1999.
[1] The Standardized Return figures for the Class A shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class A shares for the period from inception through December 31, 1999 would
have been 7.18%.
[2] The Standardized Return figures for the Class B shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class B shares for the period from inception through December 31, 1999 would
have been 9.40%.
[3] The Standardized Return figures for the Advisor Class shares
reflect expense reimbursement. Without expense reimbursement, the Standardized
Return for Advisor Class shares for the period from inception through December
31, 1999 would have been 16.40%. Advisor Class shares are not subject to an
initial sales charge or a CDSC; therefore the Non-Standardized and Standardized
Return figures are identical.
[4] The Non-Standardized Return figures for Class A shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class A shares for the period from inception through December 31,
1999 would have been 13.75%.
[5] The Non-Standardized Return figures for Class B shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class B shares for the period from inception through December 31,
1999 would have been 14.32%].
[6] The total return for a period less than a full year is calculated
on an aggregate basis and is not annualized.
BALANCED GROWTH FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3] ADVISOR CLASS[4]
Inception [#] to 9.89% 14.59% 15.15% 17.30%
December 31, 1999[8]:
NON-STANDARDIZED RETURN[**]
CLASS A[5] CLASS B[6] CLASS C[7] ADVISOR CLASS[4]
Inception [#] to 16.60% 19.59% 16.15% 17.30%
December 31, 1999[8]:
- -------------------------------------------------------------------------------
[*] The Standardized Return figures for Class A shares reflect the
deduction of the maximum initial sales charge of 5.75%. The Standardized Return
figures for Class B and C shares reflect the deduction of the applicable CDSC
imposed on redemption of Class B or C shares held for the period.
[**] The Non-Standardized Return figures do not reflect the deduction
of any initial sales charge or CDSC.
[#] The inception date was September 19, 1999 for Class A shares,
August 9, 1999 for Class B shares, August 26, 1999 for Class C shares and July
2, 1999 for Advisor Class shares. Class I shares had not commenced operations as
of December 31, 1999.
[1] The Standardized Return figures for the Class A shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class A shares for the period from inception through December 31, 1999 would
have been 8.01%.
[2] The Standardized Return figures for the Class B shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class B shares for the period from inception through December 31, 1999 would
have been 12.13%.
[3] The Standardized Return figures for the Class C shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class C shares for the period from inception through December 31, 1999 would
have been 12.78%.
[4] The Standardized Return figures for the Advisor Class shares
reflect expense reimbursement. Without expense reimbursement, the Standardized
Return for Advisor Class shares for the period from inception through December
31, 1999 would have been 14.29%. Advisor Class shares are not subject to an
initial sales charge or a CDSC; therefore the Non-Standardized and Standardized
Return figures are identical.
[5] The Non-Standardized Return figures for Class A shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class A shares for the period from inception through December 31,
1999 would have been 14.63%.
[6] The Non-Standardized Return figures for Class B shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class B shares for the period from inception through December 31,
1999 would have been 17.04%.
[7] The Non-Standardized Return figures for Class C shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class C shares for the period from inception through December 31,
1999 would have been 13.77%.
[8] The total return for a period less than a full year is calculated
on an aggregate basis and is not annualized.
MODERATE GROWTH FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3] ADVISOR
CLASS[4]
Inception [#] to 11.57% 14.13% 19.70% 19.54%
December 31, 1999[8]:
NON-STANDARDIZED RETURN[**
]
CLASS A[5] CLASS B[6] CLASS C[7] ADVISOR
CLASS[4]
Inception [#] to 18.38% 19.13% 20.70% 19.54%
December 31, 1999[8]:
- --------------------------------------------------------------------------------
[*] The Standardized Return figures for Class A shares reflect the
deduction of the maximum initial sales charge of 5.75%. The Standardized Return
figures for Class B and C shares reflect the deduction of the applicable CDSC
imposed on redemption of Class B or C shares held for the period.
[**] The Non-Standardized Return figures do not reflect the deduction
of any initial sales charge or CDSC.
[#] The inception date was July 6, 1999 for Class A shares, July 30,
1999 for Class B shares, July 23, 1999 for Class C shares and July 2, 1999 for
Advisor Class shares. Class I shares had not commenced operations as of December
31, 1999.
[1] The Standardized Return figures for the Class A shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class A shares for the period from inception through December 31, 1999 would
have been 8.68%.
[2] The Standardized Return figures for the Class B shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class B shares for the period from inception through December 31, 1999 would
have been 11.70%.
[3] The Standardized Return figures for the Class C shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class C shares for the period from inception through December 31, 1999 would
have been 16.77%.
[4] The Standardized Return figures for the Advisor Class shares
reflect expense reimbursement. Without expense reimbursement, the Standardized
Return for Advisor Class shares for the period from inception through December
31, 1999 would have been 16.52%. Advisor Class shares are not subject to an
initial sales charge or a CDSC; therefore the Non-Standardized and Standardized
Return figures are identical.
[5] The Non-Standardized Return figures for Class A shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class A shares for the period from inception through December 31,
1999 would have been 15.35%.
[6] The Non-Standardized Return figures for Class B shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class B shares for the period from inception through December 31,
1999 would have been 16.62%.
[7] The Non-Standardized Return figures for Class C shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class C shares for the period from inception through December 31,
1999 would have been 17.75%.
[8] The total return for a period less than a full year is calculated
on an aggregate basis and is not annualized.
LONG-TERM GROWTH FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3] ADVISOR CLASS[4]
Inception [#] to 16.43% 16.09% 24.57% 22.48%
December 31, 1999[8]:
NON-STANDARDIZED RETURN[**]
CLASS A[5] CLASS B[6] CLASS C[7] ADVISOR CLASS[4]
Inception [#] to 22.31% 21.09% 25.57% 22.48%
December 31, 1999[8]:
- --------------------------------------------------------------------------------
[*] The Standardized Return figures for Class A shares reflect the
deduction of the maximum initial sales charge of 5.75%. The Standardized Return
figures for Class B and C shares reflect the deduction of the applicable CDSC
imposed on redemption of Class B or C shares held for the period.
[**] The Non-Standardized Return figures do not reflect the deduction
of any initial sales charge or CDSC.
[#] The inception date was July 2, 1999 for Class A shares, July 19,
1999 for Class B shares, August 12, 1999 for Class C shares and July 2, 1999 for
Advisor Class shares. Class I shares had not commenced operations as of December
31, 1999.
[1] The Standardized Return figures for the Class A shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class A shares for the period from inception through December 31, 1999 would
have been 12.32%.
[2] The Standardized Return figures for the Class B shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class B shares for the period from inception through December 31, 1999 would
have been 13.11%.
[3] The Standardized Return figures for the Class C shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class C shares for the period from inception through December 31, 1999 would
have been 22.07%.
[4] The Standardized Return figures for the Advisor Class shares
reflect expense reimbursement. Without expense reimbursement, the Standardized
Return for Advisor Class shares for the period from inception through December
31, 1999 would have been 19.40%. Advisor Class shares are not subject to an
initial sales charge or a CDSC; therefore the Non-Standardized and Standardized
Return figures are identical.
[5] The Non-Standardized Return figures for Class A shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class A shares for the period from inception through December 31,
1999 would have been 19.20%.
[6] The Non-Standardized Return figures for Class B shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class B shares for the period from inception through December 31,
1999 would have been 18.00%.
[7] The Non-Standardized Return figures for Class C shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class C shares for the period from inception through December 31,
1999 would have been 23.06%.
[8] The total return for a period less than a full year is calculated
on an aggregate basis and is not annualized.
AGGRESSIVE GROWTH FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3] ADVISOR CLASS[4]
Inception [#] to 9.68% 11.07% 16.65% 17.95%
December 31, 1999[8]:
NON-STANDARDIZED RETURN[**]
CLASS A[5] CLASS B[6] CLASS C[7] ADVISOR CLASS[4]
Inception [#] to 16.38% 16.07% 17.65% 17.95%
December 31, 1999[8]:
- --------------------------------------------------------------------------------
[*] The Standardized Return figures for Class A shares reflect the
deduction of the maximum initial sales charge of 5.75%. The Standardized Return
figures for Class B and C shares reflect the deduction of the applicable CDSC
imposed on redemption of Class B or C shares held for the period.
[**] The Non-Standardized Return figures do not reflect the deduction
of any initial sales charge or CDSC.
[#] The inception date was July 6, 1999 for Class A shares, September
13, 1999 for Class B shares, July 16, 1999 for Class C shares and July 2, 1999
for Advisor Class shares. Class I shares had not commenced operations as of
December 31, 1999.
[1] The Standardized Return figures for the Class A shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class A shares for the period from inception through December 31, 1999 would
have been 6.77%.
[2] The Standardized Return figures for the Class B shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class B shares for the period from inception through December 31, 1999 would
have been 9.15%.
[3] The Standardized Return figures for the Class C shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class C shares for the period from inception through December 31, 1999 would
have been 13.73%.
[4] The Standardized Return figures for the Advisor Class shares
reflect expense reimbursement. Without expense reimbursement, the Standardized
Return for Advisor Class shares for the period from inception through December
31, 1999 would have been 14.90%. Advisor Class shares are not subject to an
initial sales charge or a CDSC; therefore the Non-Standardized and Standardized
Return figures are identical.
[5] The Non-Standardized Return figures for Class A shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class A shares for the period from inception through December 31,
1999 would have been 13.32%.
[6] The Non-Standardized Return figures for Class B shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class B shares for the period from inception through December 31,
1999 would have been 14.08%.
[7] The Non-Standardized Return figures for Class C shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class C shares for the period from inception through December 31,
1999 would have been 14.71%.
[8] The total return for a period less than a full year is calculated
on an aggregate basis and is not annualized.
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.
CONSERVATIVE GROWTH FUND
The following table summarizes the calculation of Cumulative Total
Return for the period indicated through December 31, 1999, assuming the maximum
5.75% front-end sales charge has not been assessed.
SINCE INCEPTION[*]
Class A 15.13%
Class B 16.76%
Advisor Class 19.40%
- ---------------------------
[*] The inception date was October 4, 1999 for Class A shares, August 23, 1999
for Class B shares and July 2, 1999 for Advisor Class shares. Class C and Class
I shares had not commenced operations as of December 31, 1999.
BALANCED GROWTH FUND
The following table summarizes the calculation of Cumulative Total
Return for the period indicated through December 31, 1999, assuming the maximum
5.75% front-end sales charge has not been assessed.
SINCE INCEPTION[*]
Class A 16.60%
Class B 19.59%
Class C 16.15%
Advisor Class 17.30%
- ---------------------------
[*] The inception date was September 19, 1999 for Class A shares, August 9, 1999
for Class B shares, August 26, 1999 for Class C shares and July 2, 1999 for
Advisor Class shares. Class I shares had not commenced operations as of December
31, 1999.
MODERATE GROWTH FUND
The following table summarizes the calculation of Cumulative Total
Return for the period indicated through December 31, 1999, assuming the maximum
5.75% front-end sales charge has not been assessed.
SINCE INCEPTION[*]
Class A 18.38%
Class B 19.13%
Class C 20.70%
Advisor Class 19.54%
- ---------------------------
[*] The inception date was July 6, 1999 for Class A shares, July 30, 1999 for
Class B shares, July 23, 1999 for Class C shares and July 2, 1999 for Advisor
Class shares. Class I shares had not commenced operations as of December 31,
1999.
LONG-TERM GROWTH FUND
The following table summarizes the calculation of Cumulative Total
Return for the period indicated through December 31, 1999, assuming the maximum
5.75% front-end sales charge has not been assessed.
SINCE INCEPTION[*]
Class A 22.31%
Class B 25.57%
Class C 25.18%
Advisor Class 22.48%
- ---------------------------
[*] The inception date was July 2, 1999 for Class A shares, July 19, 1999 for
Class B shares, August 12, 1999 for Class C shares and July 2, 1999 for Advisor
Class shares. Class I shares had not commenced operations as of December 31,
1999.
AGGRESSIVE GROWTH FUND
The following table summarizes the calculation of Cumulative Total
Return for the period indicated through December 31, 1999, assuming the maximum
5.75% front-end sales charge has not been assessed.
SINCE INCEPTION[*]
Class A 16.38%
Class B 16.07%
Class C 17.65%
Advisor Class 17.95%
- ---------------------------
[*] The inception date was July 6, 1999 for Class A shares, September 13, 1999
for Class B shares, July 16, 1999 for Class C shares and July 2, 1999 for
Advisor Class shares. Class I shares had not commenced operations as of December
31, 1999.
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.
FINANCIAL STATEMENTS
Each Fund's Portfolio of Investments as of December 31, 1999, Statement of
Assets and Liabilities as of December 31, 1999, Statement of Operations for
the fiscal period ended December 31, 1999, Statement of Changes in Net Assets
for the fiscal period ended December 31, 1999, Financial Highlights, Notes to
Financial Statements, and Report of Independent Accountants, which are included
in each Fund's December 31, 1999 Annual Report to shareholders, are incorporated
by reference into this SAI.
<PAGE>
PART C. OTHER INFORMATION
ITEM 23: EXHIBITS
(a) ARTICLES OF INCORPORATION
(1) Declaration of Trust dated November 18, 1998, filed
with Pre-Effective Amendment No. 2 to Registration
Statement No. 333-67705 (the "Registration Statement")
and incorporated by reference herein.
(2) Redesignation of Series and Establishment and
Designation of Classes, filed with Pre-Effective
Amendment No. 2 to the Registration Statement and
incorporated by reference herein.
(3) Written Instrument Increasing Number of Trustees and
Appointing New Trustees, filed with Pre-Effective
Amendment No. 2 to the Registration Statement and
incorporated by reference herein.
(b) BY-LAWS: Filed with Pre-Effective Amendment No. 2 to the
Registration Statement and incorporated by reference herein.
(c) INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS: See Exhibits
23(a) and 23(b).
(d) INVESTMENT ADVISORY CONTRACTS:
(1) Master Business Management and Investment Advisory
Agreement, filed with Pre-Effective Amendment No. 3 to
the Registration Statement and incorporated by
reference herein.
(2) Business Management And Investment Advisory Agreement
Supplement for International Solutions I - Conservative
Growth, filed with Pre-Effective Amendment No. 3 to the
Registration Statement and incorporated by reference
herein.
(3) Business Management And Investment Advisory Agreement
Supplement for International Solutions II - Balanced
Growth, filed with Pre-Effective Amendment No. 3 to the
Registration Statement and incorporated by reference
herein.
(4) Business Management And Investment Advisory Agreement
Supplement for International Solutions III - Moderate
Growth, filed with Pre-Effective Amendment No. 3 to the
Registration Statement and incorporated by reference
herein.
(5) Business Management And Investment Advisory Agreement
Supplement for International Solutions IV - Long-Term
Growth, filed with Pre-Effective Amendment No. 3 to the
Registration Statement and incorporated by reference
herein.
(6) Business Management And Investment Advisory Agreement
Supplement for International Solutions V - Aggressive
Growth, filed with Pre-Effective Amendment No. 3 to the
Registration Statement and incorporated by reference
herein.
(7) Form of Subadvisory Agreement between Ivy Management,
Inc. and Garmaise Investment Technologies (US) Inc.,
filed with Pre-Effective Amendment No. 3 to the
Registration Statement and incorporated by reference
herein.
(e) UNDERWRITING CONTRACTS:
(1) Distribution Agreement, filed with Pre-Effective
Amendment No. 3 to the Registration Statement and
incorporated by reference herein.
(2) Form of Dealer Agreement, filed with Pre-Effective
Amendment No. 3 to the Registration Statement and
incorporated by reference herein.
(f) BONUS OR PROFIT SHARING CONTRACTS: Not applicable.
(g) CUSTODIAN AGREEMENTS:
(1) Form of Custodian Agreement, filed with Pre-Effective
Amendment No. 3 to the Registration Statement and
incorporated by reference herein.
(h) OTHER MATERIAL CONTRACTS:
(1) Master Administrative Services Agreement, filed with
Pre-Effective Amendment No. 3 to the Registration
Statement and incorporated by reference herein.
(2) Administrative Services Agreement Supplement for
International Solutions, filed with Pre-Effective
Amendment No. 3 to the Registration Statement and
incorporated by reference herein.
(3) Transfer Agency and Shareholder Services Agreement,
filed with Pre-Effective Amendment No. 3 to the
Registration Statement and incorporated by reference
herein.
(4) Master Fund Accounting Services Agreement, filed with
Pre-Effective Amendment No. 3 to the Registration
Statement and incorporated by reference herein.
(5) Fund Accounting Services Agreement Supplement for
International Solutions, filed with Pre-Effective
Amendment No. 3 to the Registration Statement and
incorporated by reference herein.
(6) Form of Reimbursement Agreement, filed with
Pre-Effective Amendment No. 3 to the Registration
Statement and incorporated by reference herein.
(7) Expense Limitation Agreement is filed herein.
(i) LEGAL OPINION: Opinion of counsel is filed herein.
(j) OTHER OPINIONS:
(1) Consent of independent accountants is filed herein.
(2) Report of independent accountants is filed herein.
(k) OMITTED FINANCIAL STATEMENTS: Not applicable.
(l) INITIAL CAPITAL AGREEMENTS:
(1) Purchase Agreement for International Solutions, filed
with Pre-Effective Amendment No. 3 to the Registration
Statement and incorporated by reference herein.
(m) RULE 12B-1 PLAN:
(1) Distribution Plan For Mackenzie Solutions Class A
Shares, filed with Pre-Effective Amendment No. 3 to the
Registration Statement and incorporated by reference
herein.
(2) Distribution Plan For Mackenzie Solutions Class B
Shares, filed with Pre-Effective Amendment No. 3 to the
Registration Statement and incorporated by reference
herein.
(3) Distribution Plan For Mackenzie Solutions Class C
Shares, filed with Pre-Effective Amendment No. 3 to the
Registration Statement and incorporated by reference
herein.
(n) RULE 18F-3 PLAN:
(1) Plan Pursuant To Rule 18f-3 Under The Investment
Company Act Of 1940, filed with Pre-Effective Amendment
No. 3 to the Registration Statement and incorporated by
reference herein.
(p) CODE OF ETHICS: There are no codes of ethics applicable to the
Registrant as each of its series is established as a fund of
funds.
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, and Garmaise Investment
Technologies ("GIT"), the Registrant's asset allocation consultant. The list
required by this Item 26 of officers and directors of IMI and GIT, respectively,
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
each of IMI's and GIT'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 certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment No. 2 to its
Registration Statement under Rule 485(b) under the Securities Act and has duly
caused this Post-Effective Amendment No. 2 to its 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 28th day of April, 2000.
MACKENZIE SOLUTIONS
By: James W. Broadfoot***
President
By: /s/Joseph R. Fleming
Joseph R. Fleming, Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 2 Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
SIGNATURE: TITLE: DATE:
James W. Broadfoot*** President and Trustee April 28, 2000
Keith J. Carlson*** Chairman and Trustee April 28, 2000
(Chief Executive Officer)
Ian Carmichael** Trustee April 28, 2000
P. Rodney Cunningham** Trustee April 28, 2000
Gary R. Ellis** Trustee April 28, 2000
C. William Ferris* Vice President, April 28, 2000
Secretary/Treasurer
(Chief Financial Officer)
By: /s/Joseph R. Fleming
Joseph R. Fleming, Attorney-in-Fact
* Executed pursuant to power of attorney filed with Registrant's initial
Registration Statement.
** Executed pursuant to powers of attorney filed with Pre-Effective Amendment
No. 2 to Registrant's Registration Statement.
*** Executed pursuant to powers of attorney filed herein.
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints each of Joseph R. Fleming and Sheldon A. Jones his true and lawful
attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place, and stead, to sign any and all
registration statements applicable to Mackenzie Solutions and any notices,
amendments or supplements thereto, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed to these presents
this 27th day of October, 1999.
By: Title:
- -- -----
/s/James W. Broadfoot President and Trustee
- ---------------------
James W. Broadfoot
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints each of Joseph R. Fleming and Sheldon A. Jones his true and lawful
attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place, and stead, to sign any and all
registration statements applicable to Mackenzie Solutions and any notices,
amendments or supplements thereto, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed to these presents
this 27th day of October, 1999.
By: Title:
- -- -----
/s/Keith J. Carlson Chairman and Trustee
- -------------------
Keith J. Carlson (Chief Executive Officer)
<PAGE>
EXHIBIT INDEX
Exhibit (h)(6): Expense Limitation Agreement.
Exhibit (i): Opinion and consent of counsel.
Exhibit (j)(1): Consent of independent accountants.
Exhibit (j)(2): Report of independent accountants.
Exhibit (h)(6)
EXPENSE LIMITATION AGREEMENT
EXPENSE LIMITATION AGREEMENT, effective as of April 30, 2000, by and
between Ivy Management, Inc. (the "Investment Manager") and Mackenzie Solutions
(the "Trust"), on behalf of each series of the Trust set forth in Schedule A
(each a "Fund," and collectively, the "Funds").
WHEREAS, the Trust is a Massachusetts Business Trust, (and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company of the series type, and each
Fund is a series of the Trust; and
WHEREAS, the Trust and the Investment Manager have entered into an
Investment Management Agreement dated June 28, 1999, as amended ("Management
Agreement"), pursuant to which the Investment Manager provides investment
management services to each Fund for compensation based on the value of the
average net assets of each such Fund; and
WHEREAS, the Trust and the Investment Manager have determined that it
is appropriate and in the best interest of each Fund and its shareholders to
maintain the expenses of each Fund at a level below the level to which each such
Fund may normally be subject;
NOW THEREFORE, the parties hereto agree as follows:
1. Expense Limitation.
1.1 Applicable Expense Limit. To the extent that the ordinary operating
expenses incurred by a Fund in any fiscal year ("Fund Operating
Expenses"), including but not limited t investment management fees,
but excluding interest, taxes, brokerage commissions, extraordinary
expenses such as litigation, expenses not incurred in the ordinary
course of such Fund's business, and amounts payable pursuant to a plan
adopted in accordance with Rule 12b-1 under the 1940 Act, exceed the
Operating Expense Limit, as defined in Section 1.2 below, such excess
amount (the "Excess Amount") shall be the liability of the Investment
Manager.
1.2 Operating Expense Limit. The maximum Operating Expense Limit and term
of this Agreement with respect to each Fund are set forth in Item #1
and Item #2 on Schedule A. All Operating Expense Limits presented on
Schedule A are based on a percentage of the average net assets of each
Fund.
1.3 Duration of Operating Expense Limit. The Operating Expense Limit with
respect to each Fund shall remain in effect until the date specified
for that Fund. The Investment Manager may extend, but may not during
the term of this Agreement shorten, the duration of the Operating
Expense Limit for any Fund without the consent of the Trust by
delivery a revised Schedule A to the Trust reflecting such extension.
1.4 Changes to Operating Expense Limit. The Investment Manger may lower,
but may not during the term of this Agreement increase, the Operating
Expense Limit for any Fund by delivering a revised Schedule A to the
Trust reflecting such reduction. The Investment Manager may also cover
additional series of Mackenzie Solutions under this Agreement by
delivering a revised Schedule A to the Trust.
1.5 Method of Computation. To determine the Investment Manager's
obligation with respect to the Excess Amount, each day Fund Operating
Expenses for each Fund shall be annualized. If the annualized Fund
Operating Expenses of a Fund for any day exceed the Operating Expense
Limit of such Fund, the Investment Manager shall remit to the Fund an
amount equal to that day's Excess Amount.
1.6 Payment of Excess Amount. Any Excess Amount accrued during a month
shall be paid by the Investment Manager within the first 10 days of
the following month.
2. Fund Reimbursement of Prior Expense Reimbursements.
If on any day during which the Management Agreement is in effect, the
estimated annualized Fund Operating Expenses of a Fund for that day are
less than the Operating Expense Limit, the Investment Manager shall be
entitled to reimbursement by such Fund of the payments previously
remitted by the Investment Manger to the Fund pursuant to section 1
hereof (the "Reimbursement Amount") to the extent that the Fund's
annualized Operating Expenses plus the amount reimbursed to the
Investment Manager equals, for such day, the Operating Expense Limit
provided in Schedule A.
3. Term and Termination of Agreement.
This Agreement shall terminate upon termination of the Investment
Management Agreement, or it may be terminated by either party hereto,
without payment of any penalty, upon ninety (90) days' prior written
notice to the other party, at its principal place of business.
4. Miscellaneous.
4.1 Captions. The captions in this Agreement are included for convenience
of reference only and in no other way define or delineate any of the
provisions hereof.
4.2 Interpretation. Nothing contained herein shall be deemed to require
the Trust or the Funds to take any action contrary to the Trust'
Articles of Incorporation or By-laws, or any applicable statutory or
regulatory requirement to which it is subject or by which it is bound,
or to relieve or deprive the Trust's Board of Trustees of its
responsibility for and control of the conduct of the affairs of the
Trust or the Funds.
4.3 Definitions. Any question of interpretation of any term or provision
of this Agreement, including but not limited to the investment
management fee, the computations of net asset values, and the
allocation of expenses, having a counterpart in or otherwise derived
from the terms and provisions of the Management Agreement or the 1940
Act, shall have the same meaning as and be resolved by reference to
such Management Agreement or the 1940 Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective officers thereunto duly authorized and their
respective corporate seals to be hereunto affixed, as of April 30,
2000.
SIGNATURES
This Agreement has been signed below by the following persons on
behalf of the Investment Manager and Trust and in the capacities and
on the dates indicated.
ON BEHALF OF MACKENZIE SOLUTIONS, AND EACH OF ITS SERIES,
By (Signature and Title) /s/C. WILLIAM FERRIS
C. William Ferris,
Secretary/Treasurer
ON BEHALF OF IVY MANAGEMENT, INC.
By (Signature and Title) /s/JAMES W. BROADFOOT
James W. Broadfoot,
President
Date: April 30, 2000
<PAGE>
Schedule A
Item #1 - Operating Expense Limit through April 29, 2000:
International Solutions I - Conservative Growth
Class A 0.87%
Class B 1.62%
Class C 1.62%
Class I 0.53%
Advisor Class 0.62%
International Solutions II - Balanced Growth
Class A 0.83%
Class B 1.58%
Class C 1.58%
Class I 0.49%
Advisor Class 0.58%
International Solutions III - Moderate Growth
Class A 0.75%
Class B 1.50%
Class C 1.50%
Class I 0.41%
Advisor Class 0.50%
International Solutions IV - Long-term Growth
Class A 0.69%
Class B 1.44%
Class C 1.44%
Class I 0.35%
Advisor Class 0.44%
International Solutions V - Aggressive Growth
Class A 0.65%
Class B 1.40%
Class C 1.40%
Class I 0.31%
Advisor Class 0.40%
Item #2 - Operating Expense Limit from April 30, 2000 through April
29, 2009:
International Solutions I - Conservative Growth
Class A 1.42%
Class B 2.17%
Class C 2.17%
Class I 1.08%
Advisor Class 1.17%
International Solutions II - Balanced Growth
Class A 1.38%
Class B 2.13%
Class C 2.13%
Class I 1.04%
Advisor Class 1.13%
International Solutions III - Moderate Growth
Class A 1.30%
Class B 2.05%
Class C 2.05%
Class I 0.96%
Advisor Class 1.05%
International Solutions IV - Long-term Growth
Class A 1.24%
Class B 1.99%
Class C 1.99%
Class I 0.90%
Advisor Class 0.99%
International Solutions V - Aggressive Growth
Class A 1.20%
Class B 1.95%
Class C 1.95%
Class I 0.86%
Advisor Class 0.95%
Exhibit (i)
[Dechert Price & Rhoads letterhead]
April 28, 2000
Mackenzie Solutions
Via Mizner Financial Plaza
700 South Federal Highway
Suite 300
Boca Raton, Florida 33432
Dear Sirs:
As counsel for Mackenzie Solutions (the "Trust"), we are familiar with
the registration of the Trust under the Investment Company Act of 1940, as
amended (the "1940 Act") (File No. 811-09107), and the Prospectus contained in
Post-Effective Amendment No. 2 to the Trust's registration statement relating to
the shares of beneficial interest (the "Shares") of International Solutions I -
Conservative Growth, International Solutions II - Balanced Growth, International
Solutions III - Moderate Growth, International Solutions IV - Long-Term Growth,
and International Solutions V - Aggressive Growth (the "Funds") being filed
under the Securities Act of 1933, as amended (File No. 333-67705)
("Post-Effective Amendment No. 2"). We have also examined such other records of
the Trust, agreements, documents and instruments as we deemed appropriate.
Based upon the foregoing, it is our opinion that the Shares have been
duly authorized and, when issued and sold at the public offering price
contemplated by the Prospectus for the Funds and delivered by the Trust against
receipt of the net asset value of the Shares, will be issued as fully paid and
nonassessable shares of the Trust.
We consent to the filing of this opinion on behalf of the Trust with
the Securities and Exchange Commission in connection with the filing of
Post-Effective Amendment No. 2.
Very truly yours,
DECHERT PRICE & RHOADS
Exhibit (j)(1)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 2 to the Registration Statement on Form N-1A (File No. 333-67705,
hereafter the "Registration Statement") of our report dated February 4, 2000,
relating to the financial statements and financial highlights of International
Solutions I - Conservative Growth, International Solutions II - Balanced Growth,
International Solutions III - Moderate Growth, International Solutions IV -
Long-term Growth and International Solutions V - Aggressive Growth which appears
in the December 31, 1999 Annual Report to Shareholders, which is also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings "Financial Highlights" and "Auditors" in
such Registration Statement.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
April 28, 2000
Exhibit (j)(2)
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of
Mackenzie Solutions
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the International Solutions
I--Conservative Growth, International Solutions II--Balanced Growth,
International Solutions III--Moderate Growth, International Solutions
IV--Long-term Growth and International Solutions V--Aggressive Growth
(constituting Mackenzie Solutions, hereafter referred to as the "Company") at
December 31, 1999, and the results of each of their operations and the changes
in each of their net assets for the period July 1, 1999 (commencement of
operations) through December 31, 1999 and the financial highlights for each of
the periods presented, in conformity with accounting principles generally
accepted in the United States. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the Unites States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian and with the transfer
agents of the underlying funds, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
