As filed with the Securities and Exchange Commission on
October 16, 1996 (File No. 2-17613)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933 Post-Effective Amendment No. 88
[ X ]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 Amendment No. [ X ]
IVY FUND
(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 become effective on January 1, 1997
pursuant to subparagraph (a)(2) of Rule
485.
The Registrant has elected to register an indefinite
number of shares of beneficial interest under the
Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940; accordingly, no fee is
payable herewith. The Registrant filed on February 28,
1996 its notice pursuant to Rule 24f-2 for the
Registrant's most recent fiscal year ended December 31, 1995.
The total number of pages is __________.
The exhibit index is on page __________.
THIS POST-EFFECTIVE AMENDMENT NO. 88 IS BEING FILED
SOLELY IN ORDER TO ADD THREE NEW SERIES TO THE
REGISTRANT, DESIGNATED AS
IVY GLOBAL NATURAL RESOURCES FUND, IVY ASIA PACIFIC
FUND AND IVY INTERNATIONAL VALUE FUND. AS SUCH, THE
PROSPECTUSES AND
STATEMENTS OF ADDITIONAL INFORMATION THAT ARE INCLUDED
IN THIS POST-EFFECTIVE AMENDMENT NO. 88 ARE TO BE USED
CONCURRENTLY WITH
AND SEPARATELY FROM EACH PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION FOR THE OTHER 14 SERIES OFFERED
BY THE REGISTRANT,
WHICH ARE INCORPORATED BY REFERENCE TO THIS FILING.
IVY FUND
CROSS REFERENCE SHEET
Post-Effective Amendment No. 88 contains the
Prospectuses and Statements of Additional Information
to be used with Ivy Global Natural Resources Fund, Ivy
Asia Pacific Fund and Ivy International Value Fund,
three of the seventeen series of Ivy Fund (the
"Registrant"). The other fourteen series of the
Registrant are described in six separate prospectuses and
statements of additional information, which are not included
herewith but are incorporated by reference herein.
Items Required by Form N-1A
PART A:
1 COVER PAGE: Cover Page
2 SYNOPSIS: Not Applicable
3 CONDENSED FINANCIAL INFORMATION: Schedule of Fees
4 GENERAL DESCRIPTION OF REGISTRANT: Investment
Objectives and Policies; Risk Factors and
Investment Techniques
5 MANAGEMENT OF THE FUND: Organization and
Management of the Fund; Investment Manager
6 CAPITAL STOCK AND OTHER SECURITIES: Dividends and
Taxes
7 PURCHASE OF SECURITIES BEING OFFERED: How to Buy
Shares; How Your Purchase Price is Determined; How
the Fund Values its Shares
8 REDEMPTION OR REPURCHASE: How to Redeem Shares;
Minimum Account Balance Requirements; Tax
Identification Number; Certificates; Exchange
Privilege; Reinvestment Privilege
9 PENDING LEGAL PROCEEDINGS: Not Applicable
PART B:
10 COVER PAGE: Cover Page
11 TABLE OF CONTENTS: Table of Contents
12 GENERAL INFORMATION AND HISTORY: Investment
Objectives and Policies
13 INVESTMENT OBJECTIVES AND POLICIES: Investment
Objectives and Policies; Investment Restrictions;
Additional Restrictions
14 MANAGEMENT OF THE FUND: Trustees and Officers;
Investment Advisory and Other Services
15 CONTROL PERSONS AND PRINCIPAL HOLDERS OF
SECURITIES: Trustees and Officers; Capitalization
and Voting Rights
16 INVESTMENT ADVISORY AND OTHER SERVICES:
Investment Advisory and Other Services
17 BROKERAGE ALLOCATION AND OTHER PRACTICES:
Brokerage Allocation; Portfolio Turnover
18 CAPITAL STOCK AND OTHER SECURITIES:
Capitalization and Voting Rights
19 PURCHASE, REDEMPTION AND PRICING OF SECURITIES
BEING OFFERED: Net Asset Value; Redemptions
20 TAX STATUS: Taxation
21 UNDERWRITERS: Investment Advisory and Other
Services
22 CALCULATION OF PERFORMANCE DATA: Performance
Information
23 FINANCIAL STATEMENTS: Financial Statements
PROSPECTUS
January 1, 1997
IVY ASIA PACIFIC FUND
Ivy Fund (the "Trust") is a registered investment
company currently consisting of seventeen separate
portfolios. One of these portfolios, Ivy Asia Pacific
Fund, is described in this Prospectus.
This Prospectus sets forth concisely the
information about the Fund that a prospective investor
should know before investing. Please read it carefully
and retain it for future reference. Additional
information about the Fund is contained in the
Statement of Additional Information for the Fund dated
January 1, 1997 (the "SAI"), which has been filed with the
Securities and Exchange Commission and is incorporated by
reference into this Prospectus. The SAI is available upon
request and without charge from the Trust at the
Distributor's address and telephone number below.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
TABLE OF CONTENTS
Expense Information . . . . . . . . . . . . . . . . . .
. . . . . Investment Objectives and Policies . . . . .
. . . . . . . . . . Risk Factors and Investment
Techniques . . . . . . . . . . . . . Organization and
Management of the Fund . . . . . . . . . . . . .
Investment Manager . . . . . . . . . . . . . . . . . . . . . . .
Fund Administration and Accounting . . . . . . . . . .
. . . . . Transfer Agent . . . . . . . . . . . . . . .
. . . . . . . . . . Alternative Purchase Arrangements .
. . . . . . . . . . . . . . . Dividends and Taxes . . .
. . . . . . . . . . . . . . . . . . . . Performance
Data . . . . . . . . . . . . . . . . . . . . . . . .
How to Buy Shares . . . . . . . . . . . . . . . . . . . . . . . .
How Your Purchase Price is Determined . . . . . . . . .
. . . . . How The Fund Values its Shares . . . . . . .
. . . . . . . . . . Initial Sales Charge Alternative-
Class A Shares . . . . . . . . . Contingent Deferred
Sales Charge-Class A Shares . . . . . . . . .
Qualifying for a Reduced Sales Charge . . . . . . . . . . . . . .
Contingent Deferred Sales Charge Alternative-
Class B and Class C Shares . . . . . . . . . . . .
. . . . . How to Redeem Share . . . . . . . . . . . . .
. . . . . . . . . . Minimum Account Balance
Requirements . . . . . . . . . . . . . . Signature
Guarantees . . . . . . . . . . . . . . . . . . . . . .
Choosing a Distribution Option . . . . . . . . . . . . . . . . .
Tax Identification Number . . . . . . . . . . . . . . .
. . . . . Certificates . . . . . . . . . . . . . . . .
. . . . . . . . . . Exchange Privilege . . . . . . . .
. . . . . . . . . . . . . . . Reinvestment Privilege .
. . . . . . . . . . . . . . . . . . . .
Systematic Withdrawal Plan . . . . . . . . . . . . . .
. . . . . Automatic Investment Method . . . . . . . . .
. . . . . . . . . . Consolidated Account Statements . .
. . . . . . . . . . . . . . . Retirement Plans . . . .
. . . . . . . . . . . . . . . . . . . . Shareholder
Inquiries . . . . . . . . . . . . . . . . . . . . . .
BOARD OF TRUSTEES TRANSFER AGENT
John S. Anderegg, Jr. Ivy Mackenzie Services
Paul H. Broyhill Corp.
Stanley Channick P.O. Box 3022
Frank W. DeFriece, Jr. Boca Raton, FL
Roy J. Glauber 33431-0922
Michael G. Landry 1-800-777-6472
Michael R. Peers
Joseph G. Rosenthal AUDITORS
Richard N. Silverman ____________________
J. Brendan Swan
INVESTMENT MANAGER
OFFICERS Ivy Management, Inc.
Michael G. Landry, 700 South Federal
Highway President Boca Raton,
FL 33432 Keith J. Carlson, Vice
1-800-456-5111 President
James W. Broadfoot, Vice DISTRIBUTOR
President Ivy Mackenzie
Distributors, C. William Ferris Inc.
Secretary/Treasurer Via Mizner Financial
Plaza Michael R. Peers, Chairman 700 South
Federal Highway Boca
Raton, FL 33432 LEGAL COUNSEL
1-800-456-5111 Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman &
Co.
Boston, MA
EXPENSE INFORMATION
The tables and examples below are designed to
assist you in understanding the various costs and
expenses that you will bear directly or indirectly as
an investor in the Fund. The information is based on
estimated amounts for the current fiscal year.
SHAREHOLDER TRANSACTION EXPENSES
MAXIMUM MAXIMUM
CONTINGENT
SALES LOAD DEFERRED
IMPOSED ON SALES CHARGE
PURCHASES (AS A % OF
(AS A % OF ORIGINAL
OFFERING PURCHASE
PRICE) PRICE)
Class A . . . . . . . . . . . . . 5.75%(1)
None(2) Class B . . . . . . . . . . . . . None
5.00%(3)
Class C . . . . . . . . . . . . . None
1.00%(4)
The Fund does not charge a redemption fee, an exchange
fee, or a sales load on reinvested dividends.
(1) Class A shares may be purchased under a variety of
plans that provide for the reduction or
elimination of the sales charge.
(2) A contingent deferred sales charge ("CDSC") may
apply to the redemption of Class A shares that are
purchased without an initial sales charge. See
"Purchases of Class A Shares at Net Asset Value"
and "Contingent Deferred Sales Charge -- Class A
Shares."
(3) The maximum CDSC on Class B shares applies to
redemptions during the first year after purchase.
The charge declines to 4% during the second year;
3% during the third and fourth years; 2% during
the fifth year; 1% during the sixth year; and 0%
in the seventh year and thereafter.
(4) The CDSC on Class C shares applies to redemptions
during the first year after purchase.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
TOTAL FUND
OTHER OPERATING
EXPENSES EXPENSES
12B-1 (AFTER (AFTER
SERVICE/ EXPENSE EXPENSE MANAGE-
DISTRIBU- REIMBURSE- REIMBURSE-
MENT FEES TION FEES MENTS) MENTS)(1)
Class A . . . 1.00% 0.25% 0.95%
2.20% Class B . . . 1.00% 1.00%(2) 0.95%
2.95%
Class C . . . 1.00% 1.00%(2) 0.95%
2.95%
(1) Ivy Management, Inc. ("IMI") currently limits
Total Fund Operating Expenses (excluding Rule
12b-1 fees) to an annual rate of 1.95% of the
Fund's average net assets. Without
reimbursements, "Total Fund Operating Expenses" may
increase, but are subject to a maximum of 2.50% (excluding
Rule 12b-1 fees), the highest expense ratio currently
allowed under state securities laws.
(2) Long-term investors may, as a result of the Fund's
12b-1 fees, pay more than the economic equivalent
of the maximum front- end sales charge permitted by
the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. ("NASD").
EXAMPLES
The following table lists the expenses that an
investor would pay on a $1,000 investment, assuming (1)
5% annual return and (2) unless otherwise noted,
redemption at the end of each time period. These
examples further assume reinvestment of all dividends
and distributions, and that the percentage amounts
under "Total Fund Operating Expenses"** remain the same each
year. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
HIGHER OR LOWER THAN THOSE SHOWN.
1 YEAR
3 YEARS
Class A Shares* . . . . . . . . . . . . . . $79
$122 Class B Shares . . . . . . . . . . . . . .
$80(1) $121(2)
Class B Shares (no redemption) . . . . . . $30
$91 Class C Shares . . . . . . . . . . . . . .
$40(3) $91 Class C Shares (no redemption) . . . .
. . $30 $91
* 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.
** Based on Total Fund Operating Expenses net of
expense reimbursements. See the "Annual Fund
Operating Expenses Table," above.
(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.
The information presented in the tables does not
reflect the charge of $10 per transaction that would
apply if a shareholder elects to have redemption
proceeds wired to his or her bank account. For a more
detailed discussion of the Fund's fees and expenses,
see the following sections of this Prospectus:
"Organization and Management of the Fund," "Initial Sales Charge
Alternative -- Class A Shares" and "Contingent Deferred
Sales Charge Alternative -- Class B and Class C
Shares," and "Investment Advisory and Other Services"
in the SAI.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's principal investment objective is long-
term growth. Consideration of current income is
secondary to this principal objective. The Fund's
investment objective is fundamental and may not be
changed without the approval of a majority of the
Fund's outstanding voting shares (as defined under the
Investment Company Act of 1940). Except for the Fund's
investment objective and those investment restrictions
specifically identified as fundamental, all investment policies
and practices described in this Prospectus and in the SAI
are non-fundamental, and may be changed by the Trustees
without shareholder approval. There can be no assurance
that the Fund's objective will be met. The different
types of securities and investment techniques used by
the Fund involve varying degrees of risk. For
information about the particular risks associated with
each type of investment, see "Risk Factors and Investment
Techniques," below, and the SAI.
Whenever an investment policy or restriction of
the Fund described in this Prospectus or in the SAI
states a maximum percentage of assets that may be
invested in a security or other asset or describes a
policy regarding quality standards, that percentage
limitation or standard will, unless otherwise
indicated, apply to the Fund only at the time a transaction takes
place. Thus, for example, if a percentage limitation is
adhered to at the time of investment, a later increase
or decrease in the percentage that results from
circumstances not involving any affirmative action by
the Fund will not be considered a violation.
Under normal circumstances the Fund invests at
least 65% of its total assets in securities issued in
Asia-Pacific countries, which for purposes of this
Prospectus are defined to include Australia, China,
Hong Kong, India, Indonesia, Japan, Malaysia, New
Zealand, Pakistan, the Philippines, Singapore, Sri
Lanka, South Korea, Taiwan, Thailand, and Vietnam. Securities of
Asia-Pacific issuers include: (a) securities of
companies organized under the laws of an Asia-Pacific
country or for which the principal securities trading
market is in the Asia-Pacific region; (b) securities
that are issued or guaranteed by the government of an
Asia-Pacific country, its agencies or
instrumentalities, political subdivisions or the country s
central bank; (c) securities of a company, wherever organized,
where at least 50% of the company s non-current assets,
capitalization, gross revenue or profit in any one of the
two most recent fiscal years represents (directly or
indirectly through subsidiaries) assets or activities
located in the Asia- Pacific region; or (d) any of the
preceding types of securities in the form of depository
shares.
The Fund may participate in markets throughout the
Asia- Pacific region, and it is expected that the Fund
will be invested at all times in at least three Asia-
Pacific countries. The Fund
does not expect to concentrate its investments in any
particular industry, but it may invest 25% or more of
its total assets in the securities of issuers located
in any one Asia-Pacific country.
For purposes of capital appreciation, the Fund may
invest up to 35% of its assets in investment-grade debt
securities of government or corporate issuers in
emerging market countries, investment-grade equity and
debt securities of issuers in developed countries
(including the United States), warrants, and cash or
cash equivalents, such as bank obligations (including
certificates of deposit and bankers' acceptances), commercial
paper, short-term notes and repurchase agreements. For
temporary defensive purposes, the Fund may invest
without limit in such instruments. The Fund may also
invest up to 5% of its assets in zero coupon bonds, and
in debt securities rated Ba or below by Moody's or BB
or below by S&P, or if unrated, are considered by IMI
to be of comparable quality (commonly referred to as "high
yield" or "junk" bonds).
For temporary or emergency purposes, the Fund may
borrow up to one-third of the value of its total assets
from banks, but may not purchase securities at any time
during which the value of the Fund s outstanding loans
exceeds 10% of the value of the Fund's assets. The
Fund may engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest (i) up to 10% of its total
assets in other investment companies that invest in
securities issued in Asia-Pacific countries, and (ii)
up to 15% of its net assets assets in restricted and
other illiquid securities. Securities whose proceeds
are subject to limitations on repatriation of principal
or profits for more than seven days, and those for
which market quotations are not readily available, may be deemed
illiquid for these purposes.
The Fund may purchase put and call options on
securities and stock indices, provided the premium paid
for such options does not exceed 5% of the Fund s net
assets. The Fund may also sell covered put options
with respect to up to 10% of the value of its net
assets, and may write covered call options so long as not
more than 25% of the Fund s net assets is subject to being
purchased upon the exercise of the calls. For hedging
purposes only, the Fund may engage in transactions in
stock index and foreign currency futures contracts,
provided that the Fund s aggregate investment in such
contracts does not exceed 15% of its total assets.
RISK FACTORS AND INVESTMENT TECHNIQUES
SPECIAL CONSIDERATIONS RELATING TO ASIA-PACIFIC
SECURITIES: Certain Asia-Pacific countries in which the
Fund may invest are developing countries, and may be in
the initial stages of their industrialization cycle.
The economic structures of developing countries
generally are less diverse and mature than in the
United States, and their political systems may be
relatively unstable. Historically, markets of
developing countries have been more volatile than the
markets of developed countries, yet such markets often
have provided higher rates of return to investors.
Investing in securities of issuers in Asia-Pacific
countries involves certain considerations not typically
associated with investing in securities of United
States companies, including (1) restrictions on foreign
investment and on repatriation of capital invested in
Asian countries, (2) currency fluctuations, (3) the
cost of converting foreign currency into United States dollars,
(4) potential price volatility and lesser liquidity of
shares traded on Asia-Pacific country securities
markets and (5) political and economic risks, including
the risk of nationalization or expropriation of assets
and the risk of war.
Certain Asia-Pacific countries may be more
vulnerable to the ebb and flow of international trade,
trade barriers and other protectionist or retaliatory
measures. Investments in countries such as China that
have recently opened their capital markets and that
appear to have relaxed their central planning requirement,
as well as in countries that have privatized some of their state-
owned industries, should be regarded as speculative.
The settlement period of securities transactions
in foreign markets in general may be longer than in
domestic markets, and such delays may be of particular
concern in developing countries. For example, the
possibility of political upheaval and the dependence on
foreign economic assistance may be greater in
developing countries than in developed countries, either one of
which may increase settlement delays.
Securities exchanges, issuers and broker-dealers
in some Asia-Pacific countries are subject to less
regulatory scrutiny than in the United States. In
addition, due to the limited size of the markets for
Asia-Pacific securities, the prices for such securities
may be more vulnerable to adverse publicity, investors'
perceptions or traders' positions or strategies, which
could cause a decrease not only in the value but also in the
liquidity of the Fund's investments.
BANK OBLIGATIONS: The bank obligations in which
the Fund may invest include certificates of deposit,
bankers' acceptances, and other short-term debt
obligations. Investments in certificates of deposit and
bankers' acceptances are limited to obligations of (i)
banks having total assets in excess of $1 billion, and
(ii) other banks if the principal amount of the
obligation is fully insured by the Federal Deposit Insurance
Corporation ("FDIC"). Investments in certificates of deposit
of savings associations are limited to obligations of
Federal or state-chartered institutions whose total
assets exceed $1 billion and whose deposits are insured
by the FDIC.
BORROWING: Borrowing may exaggerate the effect on
the Fund's net asset value of any increase or decrease
in the value of the Fund's portfolio securities. Money
borrowed will be subject to interest costs (which may
include commitment fees and/or the cost of maintaining
minimum average balances).
COMMERCIAL PAPER: Commercial paper represents
short-term unsecured promissory notes issued in bearer
form by bank holding companies, corporations, and
finance companies. The Fund's investments in commercial
paper are limited to obligations rated Prime-1 by
Moody's Investor Services Inc. ("Moody's") or, if not
rated, are issued by companies having an outstanding debt issue
currently rated Aaa or Aa by Moody's or AAA or AA by
Standard & Poor's Corporation ("S&P").
DEBT SECURITIES, IN GENERAL: 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. 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. Bonds
with longer maturities generally are more volatile than
bonds with shorter maturities. The market value of debt
securities also varies according to the relative
financial condition of the issuer. In general, lower-
quality bonds offer higher yields due to the increased
risk that the issuer will be unable to meet its
obligations on interest or principal payments at the time called
for by the debt instrument.
U.S. GOVERNMENT SECURITIES: U.S. Government
securities are obligations of, or guaranteed by, the
U.S. Government, its agencies or instrumentalities.
Such securities include: (1) direct obligations of the
U.S. Treasury (such as Treasury bills, notes, and
bonds) and (2) Federal agency obligations guaranteed as
to principal and interest by the U.S. Treasury (such as GNMA
certificates, which are mortgage-backed securities). When
such securities are held to maturity, the payment of
principal and interest is unconditionally guaranteed by
the U.S. Government, and thus they are of the highest
possible credit quality. U.S. Government securities
that are not held to maturity are subject to variations
in market value caused by fluctuations in interest
rates.
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.
INVESTMENT-GRADE DEBT SECURITIES: Bonds rated
Aaa by Moody's and AAA by S&P are judged to be of the
best quality (i.e., capacity to pay interest and repay
principal is extremely strong). Bonds rated Aa/AA are
considered to be of high quality (i.e., capacity to pay
interest and repay interest is very strong and differs
from the highest rated issues only to a small degree).
Bonds rated A are viewed as having many favorable
investment attributes, but elements may be present that suggest a
susceptibility to the adverse effects of changes in
circumstances and economic conditions than debt in
higher rated categories. Bonds rated Baa/BBB
(considered by Moody's to be "medium grade"
obligations) are considered to have an adequate capacity to pay
interest and repay principal, but certain protective
elements may be lacking (i.e., such bonds lack
outstanding investment characteristics and have some
speculative characteristics). The Fund may invest in
debt securities that are given an investment- grade
rating by Moody's or S&P, and may also invest in unrated
debt securities that are considered by IMI to be of comparable
quality.
FOREIGN SECURITIES: The foreign securities in
which the Fund may invest include non-U.S. dollar-
denominated securities, Eurodollar securities,
sponsored or unsponsored American Depository Receipts
("ADRs") and debt securities issued, assumed or
guaranteed by foreign governments (or political subdivisions
or instrumentalities thereof). In recent years, many
countries around the world have undergone political
changes that have reduced government's role in economic
and personal affairs and have stimulated investment and
growth. In order for these emerging economies to
continue to expand and develop industry, infrastructure
and currency reserves, continued influx of capital is
essential. Historically, there is a strong direct correlation
between economic growth and stock market returns. While this
is no guarantee of future performance, IMI believes
that investment opportunities (particularly in the
energy, environmental services, natural resources,
basic materials, power, telecommunications and
transportation industries) may result within the
evolving economies of emerging market countries from
which the Fund and its shareholders will benefit. However,
investors should consider carefully the special risks that
arise in connection with investing in securities issued
by companies and governments of foreign nations
(especially in countries with emerging or developing
economies), which are in addition to those risks that
are associated with the Fund's investments, generally.
In many foreign countries (especially in emerging
market countries), there is less regulation of business
and industry practices, stock exchanges, brokers and
listed companies than in the United States. For
example, foreign companies are not
generally subject to uniform accounting and financial
reporting standards, and foreign securities
transactions may be subject to higher brokerage costs.
There also tends to be less publicly available
information about issuers in foreign countries, and
foreign securities markets of many of the countries in which the
Fund may invest may be smaller, less liquid and subject
to greater price volatility than those in the United
States. Generally, price fluctuations in the Fund's
foreign security holdings are likely to be high
relative to those of securities issued in the United
States.
Other risks include the possibility of
expropriation, nationalization or confiscatory
taxation, foreign exchange controls (which may include
suspension of the ability to transfer currency from a
given country), difficulties in pricing, default in
foreign government securities, high rates of inflation
(especially in emerging markets countries), difficulties in
enforcing foreign judgments, political or social instability,
or other developments that could adversely affect the
Fund's foreign investments.
The risks of investing in foreign securities are
likely to be intensified in the case of investments in
issuers domiciled or doing substantial business in
emerging market countries, some of which are located in
the Asia-Pacific region. For example, countries with
emerging markets may have relatively unstable
governments and therefore be susceptible to sudden adverse
government action (such as nationalization of businesses,
restrictions on foreign ownership or prohibitions against
repatriation of assets). Security prices in emerging markets
can also be significantly more volatile than in the
more developed nations of the world, and communications
between the U.S. and emerging market countries may be
unreliable, increasing the risk of delayed settlements
of portfolio transactions or loss of certificates for
portfolio securities. Delayed settlements could cause
the Fund to miss attractive investment opportunities or
impair its ability to dispose of portfolio securities, resulting
in a loss if the value of the securities subsequently
declines. Finally, many emerging markets have
experienced and continue to experience high rates of
inflation. In certain countries, inflation has at times
accelerated rapidly to hyperinflationary levels,
creating a negative interest rate environment and sharply
eroding the value of outstanding financial assets in those
countries.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS: The Fund
usually effects its currency exchange transactions on a
spot (i.e., cash) basis at the spot rate prevailing in
the foreign exchange market. However, some price spread
on currency exchange (e.g., to cover service charges)
is usually incurred when the Fund converts assets from
one currency to another. The Fund may also be affected
unfavorably by fluctuations in the relative rates of
exchange between the currencies of different nations.
FORWARD FOREIGN CURRENCY CONTRACTS: A forward
foreign currency contract involves an obligation to
purchase or sell a specific currency at a future date
at a predetermined price. Although these contracts are
intended to minimize the risk of loss due to a decline
in the value of the hedged currencies, they also tend
to limit any potential gain that might result should
the value of the currencies increase. In addition, there may be
an imperfect correlation between the Fund's portfolio
holdings of securities denominated in a particular
currency and forward contracts entered into by the
Fund, which may prevent the Fund from achieving the
intended hedge or expose the Fund to the risk of
currency exchange loss.
OPTIONS AND FUTURES TRANSACTIONS: The Fund may
use various techniques to increase or decrease its
exposure to changing security prices, currency exchange
rates, commodity prices, or other factors that affect
the value of the Fund's securities. These techniques
may involve derivative transactions such as purchasing
put and call options, selling put and call options, and
engaging in transactions in currency rate futures, stock
index futures and related options.
The Fund may invest in options on stock indices
and on individual securities in accordance with its
stated investment objective and policies (see above). A
put option is a short-term contract that gives the
purchaser of the option, in return for a premium, the
right to sell the underlying security or currency to
the seller of the option at a specified price during the term of
the option. A call option is a short-term contract that
gives the purchaser the right to buy the underlying
security or currency from the seller of the option at a
specified price during the term of the option. An
option on a stock index gives the purchaser the right
to receive from the seller cash equal to the difference
between the closing price of the index and the exercise
price of the option.
The Fund may also enter into futures transactions
in accordance with its stated investment objective and
policies. A stock index futures contract is an
agreement to take or make delivery of an amount of cash
based on the difference between the value of the index
at the beginning and at the end of the contract period.
A foreign currency futures contract is a standardized
contract for the future delivery of a specified amount
of a foreign currency at a future date at a price
established when the position is taken.
Investors should be aware that the risks
associated with the use of options and futures are
considerable. Options and futures transactions
generally involve a small investment of cash relative
to the magnitude of the risk assumed, and therefore
could result in a significant loss to the Fund if IMI judges
market conditions incorrectly or employs a strategy that does
not correlate well with the Fund's investments. The
Fund may also experience a significant loss if it is
unable to close a
particular position due to the lack of a liquid
secondary market. For further information regarding the
use of options and futures transactions and any
associated risks, see the SAI.
REPURCHASE AGREEMENTS: Repurchase agreements are
agreements under which the Fund buys a money market
instrument and obtains a simultaneous commitment from
the seller to repurchase the instrument at a specified
time and agreed-upon yield. The Fund may enter into
repurchase agreements with banks or broker-dealers
deemed to be creditworthy by IMI under guidelines approved by the
Board of Trustees. The Fund could experience a delay in
obtaining direct ownership of the underlying
collateral, and might incur a loss if the value of the
security should decline.
RESTRICTED AND ILLIQUID SECURITIES: There may be
a lapse of time between the Fund's decision to sell a
restricted or illiquid security and the point at which
the Fund is permitted or able to sell the security. If
adverse market conditions were to develop during that
period, the Fund might obtain a price less favorable
than the price that prevailed when it decided to sell. In
addition, issuers of restricted and other illiquid securities
may not be subject to the disclosure and other investor
protection requirements that would apply if their
securities were publicly traded.
SHARES OF OTHER INVESTMENT COMPANIES: As a
shareholder of an investment company, the Fund will
bear its ratable share of the investment company's
expenses (including management fees, in the case of a
management investment company).
SMALL COMPANIES. Investing in smaller company
stocks involves certain special considerations and
risks that are not usually associated with investing in
larger, more established companies. For example, the
securities of smaller companies may be subject to more
abrupt or erratic market movements, because they tend
to be thinly traded and are subject to a greater degree
to changes in the issuer's earnings and prospects. Small
companies also tend to have limited product lines, markets or
financial resources. Transaction costs in smaller company
stocks also may be higher than those of larger
companies.
ORGANIZATION AND MANAGEMENT OF THE FUND
The Fund is a separate, diversified portfolio of
the Trust, an open-end management investment company
organized as a Massachusetts business trust on December
21, 1983. The business and affairs of the Fund are
managed under the direction of the Trustees.
Information about the Trustees, as well as the Trust's
executive officers, may be found in the SAI. The Trust has an
unlimited number of authorized shares of beneficial
interest, and currently has 17 separate portfolios. The
Fund has three classes of shares, designated as Class
A, Class B and Class C. Shares of the Fund entitle
their holders to one vote per share (with proportionate
voting for fractional shares). The shares of each
class represent an interest in the same portfolio of
Fund investments. Each class of shares has a different
Rule 12b-1 distribution plan and bears different
distribution fees. Shares of each class have equal
rights as to voting, redemption, dividends and
liquidation but have exclusive voting rights with
respect to their Rule 12b-1 distribution plans.
The Trust employs IMI to provide business
management and investment advisory services to the
Fund. Mackenzie Investment Management Inc. ("MIMI")
provides administrative and accounting services, Ivy
Mackenzie Distributors, Inc. ("IMDI") distributes the
Fund's shares, and Ivy Mackenzie Services Corp. ("IMSC")
provides transfer agency and shareholder-related services for the
Fund. IMI, IMDI and IMSC are wholly-owned subsidiaries
of MIMI. As of September 30, 1996, IMI and MIMI had
approximately $1.76 billion and $162 million,
respectively, in assets under management. MIMI is a
subsidiary of Mackenzie Financial Corporation, which
has been an investment counsel and mutual fund manager
in Toronto, Ontario, Canada for more than 25 years.
INVESTMENT MANAGER
For IMI's business management and investment
advisory services, the Fund pays IMI a fee, which is
accrued daily and paid monthly, based on the Fund's
average net assets, at an annual rate of 1.00%. The
fees paid by the Fund are higher than those charged by
many funds that invest primarily in U.S. securities,
but not necessarily higher than the fees charged to
funds with investment objectives similar to those of the Fund.
Currently, IMI voluntarily limits the Fund's total
operating expenses (excluding Rule 12b-1 fees,
interest, taxes, brokerage commissions, litigation,
indemnification, and extraordinary expenses) to an
annual rate of 1.95% of the Fund's average daily net
assets, which may lower the Fund's expenses and increase its
total return. This voluntary expense limitation may be
terminated at any time, at which point the Fund's
expenses may increase and its total return may be
reduced.
IMI pays all expenses that it incurs in rendering
management services to the Fund. The Fund bears its own
operational costs. General expenses of the Trust that
are not readily identifiable as belonging to a
particular series of the Trust (or a particular class
thereof) are allocated among and charged to each series
based on its relative net asset size. Expenses that are
attributable to a particular Fund (or class thereof) will be
borne by that Fund (or class) directly. The fees payable to
IMI are subject to any reimbursement or fee waiver to
which IMI may agree (and to any applicable state
regulations that may require IMI to reimburse the Fund
if its aggregate operating expenses exceed certain
limitations).
PORTFOLIO MANAGEMENT: Barbara Trebbi, a Senior
Vice President of IMI and managing director of the Ivy
emerging markets research team, is the portfolio
manager of the Fund. Ms. Trebbi joined the
organization in 1988 and has eight years of
professional investment experience. She is a Chartered Financial
Analyst and holds a Graduate Diploma from the London
School of Economics.
FUND ADMINISTRATION AND ACCOUNTING
MIMI provides various administrative services for
the Fund, such as assisting with the preparation of
Federal and state income tax returns, financial
statements and periodic reports to shareholders. MIMI
also assists the Trust's legal counsel with the filing
of registration statements, proxies and other required
filings under Federal and state law. Under this arrangement, the
average net assets attributable to the Fund's Class A,
Class B and Class C shares are subject to a fee,
accrued daily and paid monthly, at an annual rate of
0.10%.
MIMI also provides certain accounting and pricing
services for the Fund (see "Fund Accounting Services"
in the SAI for more information).
TRANSFER AGENT
IMSC is the transfer and dividend-paying agent for
the Fund, and also provides certain shareholder-related
services. In addition, certain broker-dealers that
maintain shareholder accounts with the Fund 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 (see "Investment Advisory and Other Services"
in the SAI).
ALTERNATIVE PURCHASE ARRANGEMENTS
CLASS A SHARES: Class A shares are subject to an
initial sales charge, unless the amount you purchase is
$500,000 or more (see "Contingent Deferred Sales Charge
- -- Class A Shares"). Certain purchases qualify for a
reduced initial sales charge (see "Qualifying for a
Reduced Sales Charge"). Class A shares are subject to
ongoing service fees at an annual rate of 0.25% of the
Fund's average net assets attributable to its Class A shares. If
you do not specify on your Account Application which
class of shares you are purchasing, it will be assumed
that you are investing in Class A shares.
CLASS B AND CLASS C SHARES: Class B and Class C
shares are not subject to an initial sales charge, but
are subject to a CDSC if redeemed within six years of
purchase, in the case of Class B shares, or within one
year of purchase, in the case of Class C
shares. Both classes of shares are subject to ongoing
service and distribution fees at a combined annual rate
of up to 1.00% of the Fund's average net assets
attributable to its Class B or Class C shares. The
ongoing distribution fee will cause these shares to
have a higher expense ratio than that of Class A shares.
FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE:
The multi- class structure of the Fund allows you to
choose the most beneficial way to buy shares given the
size of your purchase and the length of time you expect
to hold your shares. You should consider whether,
during the anticipated life of your Fund investment,
the accumulated service and distribution fees on Class
B and Class C shares would be less than the initial sales
charge and accumulated service fees on Class A shares purchased
at the same time, and to what extent this differential
would be offset by the Class A shares' potentially
higher yield. Also, sales personnel may receive
different compensation depending on which class of
shares they are selling. The tables under the caption
"Annual Fund Operating Expenses" at the beginning of this
Prospectus contain additional information that is designed to
assist you in making this determination.
DIVIDENDS AND TAXES
DIVIDENDS: Distributions you receive from the Fund
are reinvested in additional shares of the same class
unless you elect to receive them in cash. Dividends
ordinarily will vary from one class to another.
The Fund intends to make a distribution for each
fiscal year of any net investment income and net
realized short-term capital gain, as well as any net
long-term capital gain realized during the year. An
additional distribution may be made of net investment
income, net realized short-term capital gains and net
realized long-term capital gains to comply with the calendar year
distribution requirement under the excise tax provisions
of Section 4982 of the Internal Revenue Code of 1986,
as amended (the "Code").
TAXATION: The following discussion is intended
for general information only. You should consult with
your tax adviser as to the tax consequences of an
investment in a particular Fund, including the status
of distributions from the Fund under applicable state
or local law.
The Fund intends to qualify annually as a
regulated investment company under the Code. To
qualify, the Fund must meet certain income,
distribution and diversification requirements. In any
year in which the Fund qualifies as a regulated investment
company and timely distributes all of its taxable income, the
Fund generally will not pay any Federal income or excise
tax.
Dividends paid out of the Fund's investment
company taxable income (including dividends, interest
and net short-term capital
gains) will be taxable to a shareholder as ordinary
income. If a portion of the Fund's income consists of
dividends paid by U.S. corporations, a portion of the
dividends paid by the Fund may be eligible for the
corporate dividends-received deduction. Distributions
of net capital gains (the excess of net long-term
capital gains over net short-term capital losses), if any, are
taxable as long-term capital gains, regardless of how long
the shareholder has held the Fund's shares. Dividends
are taxable to shareholders in the same manner whether
received in cash or reinvested in additional Fund
shares.
If, for any year, the Fund's total distributions
exceed its earnings and profits, the excess will
generally be treated as a return of capital. The amount
treated as a return of capital will reduce a
shareholder's adjusted basis in his/her shares (thereby
increasing potential gain or reducing potential loss on the sale
of shares) and, to the extent that the amount exceeds
this basis, will be treated as a taxable gain.
A distribution will be treated as paid on December
31 of the current calendar year if it is declared by
the 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. Such
distributions will be taxable to shareholders in the calendar
year in which the distributions are declared, rather than
the calendar year in which the distributions are
received.
Investments in securities that are issued at a
discount will result each year in income to the Fund
equal to a portion of the excess of the face value of
the securities over their issue price, even though the
Fund receives no cash interest payments from the
securities.
Income and gains received by the Fund from sources
within foreign countries may be subject to foreign
withholding and other taxes. Unless the Fund is
eligible and elects to "pass through" to its
shareholders the amount of foreign income and similar
taxes paid by the Fund, these taxes will reduce the Fund's
investment company taxable income, and distributions of
investment company taxable income received from the Fund will be
treated as U.S. source income.
Any gain or loss realized by a shareholder upon
the sale or other disposition of shares of the Fund, or
upon receipt of a distribution in complete liquidation
of the Fund, generally will be a capital gain or loss
which will be long-term or short-term, generally
depending upon the shareholder's holding period for the
shares.
The Fund may be required to withhold U.S. Federal
income tax at the rate of 31% of all taxable
distributions payable to shareholders who fail to
provide the Fund with their correct taxpayer
identification number or to make required
certifications, or who have been notified by the Internal Revenue
Service ("IRS") that they are subject to backup
withholding. Backup withholding is not an additional
tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Fund distributions may be subject to state, local
and foreign taxes. Distributions of the Fund which are
derived from interest on obligations of the U.S.
Government and certain of its agencies, authorities and
instrumentalities may be exempt from state and local
taxes in certain states. Further information relating
to tax consequences is contained in the SAI.
PERFORMANCE DATA
Performance information is computed separately for
each class of Fund shares in accordance with formulas
prescribed by the SEC. Performance information for each
class may be compared in reports and promotional
literature to indices such as the Standard and Poor's
500 Stock Index, Dow Jones Industrial Average, and
Morgan Stanley Capital International World Index.
Advertisements, sales literature and communications to
shareholders may also contain various expressions of the Fund's
total return and current distribution rate. Performance
figures will vary in part because of the different
expense structures of the Fund's different classes. ALL
PERFORMANCE INFORMATION IS HISTORICAL AND IS NOT
INTENDED TO SUGGEST FUTURE RESULTS.
"Total return" is the change in value of an
investment in the Fund for a specified period, and
assumes the reinvestment of all distributions and
imposition of the maximum applicable sales charge.
"Average annual total return" represents the average
annual compound rate of return of an investment in a particular
class of Fund shares assuming the investment is held for
one year, five years and ten years as of the end of the
most recent calendar quarter. Where the Fund provides
total return quotations for other periods, or based on
investments at various sales charge levels or at net
asset value, "total return" is based on the total of
all income and capital gains paid to (and reinvested
by) shareholders, plus (or minus) the change in the value of the
original investment expressed as a percentage of the
purchase price.
HOW TO BUY SHARES
OPENING AN ACCOUNT: Complete and sign the Account
Application on the last page of this Prospectus. Make
your check payable to Ivy Asia Pacific Fund. No third
party checks will be accepted. Deliver these items to
your registered representative or selling broker, or
send them to one of the addresses below:
Regular Mail:
IVY MACKENZIE SERVICES CORP.
P.O. BOX 3022
BOCA RATON, FL 33431-0922
Courier:
IVY MACKENZIE SERVICES CORP.
700 SOUTH FEDERAL HIGHWAY, SUITE 300
BOCA RATON, FL 33432
The Fund reserves the right to reject, for any
reason, any purchase order.
MINIMUM INVESTMENT POLICIES: The minimum initial
investment is $1,000; the minimum additional investment
is $100. Initial or additional amounts for retirement
accounts may be less (see "Retirement Plans").
BUYING ADDITIONAL SHARES: You may add to your
account at any time through any of the following
options:
BY MAIL: Complete the investment slip attached to
your statement, or write instructions including the
account registration, Fund number and account number of
the shares you wish to purchase. Send your check
(payable to the Fund in which you are investing), along
with your investment slip or written instructions, to
one of the addresses above.
THROUGH YOUR BROKER: Deliver the investment slip
attached to your statement, or written instructions,
along with your payment to your registered
representative or selling broker.
BY WIRE: Purchases may also be made by wiring
money from your bank account to your Ivy account. Your
bank may charge a fee for wiring funds. Before wiring
any funds, please call IMSC at 1- 800-777-6472. Wiring
instructions are as follows:
FIRST UNION NATIONAL BANK OF FLORIDA
JACKSONVILLE, FL
ABA#063000021
ACCOUNT #2090002063833
FOR FURTHER CREDIT TO:
YOUR IVY ACCOUNT REGISTRATION
YOUR FUND NUMBER AND ACCOUNT NUMBER
BY AUTOMATIC INVESTMENT METHOD: Complete Sections
6A and 7B on the Account Application (see "Automatic
Investment Method" on page 27 for more information).
HOW YOUR PURCHASE PRICE IS DETERMINED
Your purchase price for Class A shares of the Fund
is the net asset value ("NAV") per share plus a sales
charge, which may be reduced or eliminated in certain
circumstances. The purchase price per share is known as
the public offering price. Your purchase price for
Class B and Class C shares is the NAV per
share.
Share purchases will be made at the next
determined price after your purchase order is received.
The price is effective for orders received by IMSC or
by your registered securities dealer prior to the time
of the determination of the NAV. Any orders received
after the time of the determination of the NAV will be
entered at the next calculated price.
Orders placed with a securities dealer before the
NAV is determined that are transmitted through the
facilities of the National Securities Clearing
Corporation on the same day are confirmed at that day's
price. Any loss resulting from the dealer's failure to
submit an order by the deadline will be borne by that
dealer.
You will receive an account statement after any
purchase, exchange or full liquidation. Statements
related to reinvestment of dividends, capital gains,
automatic investment plans (see the SAI for further
explanation) and/or systematic withdrawal plans will be
sent quarterly.
HOW THE FUND VALUES ITS SHARES
The NAV per share is the value of one share. The
NAV is determined for each Class of shares as of the
close of the New York Stock Exchange on each day the
Exchange is open by dividing the value of the Fund's
net assets attributable to a class by the number of
shares of that class that are outstanding, adjusted to
the nearest cent. These procedures are described more completely
in the SAI.
The Trust's Board of Trustees has established
procedures to value the Fund's securities in order to
determine the NAV. The value of a foreign security is
determined as of the normal close of trading on the
foreign exchange on which it is traded or as of the
close of regular trading on the New York Stock Exchange, if
that is earlier. If no sale is reported at that time, the
average between the current bid and asked price is
used. All other securities for which OTC market
quotations are readily available are valued at the
average between the current bid and asked price.
Securities and other assets for which market prices are
not readily available are valued at fair value, as determined by
IMI and approved in good faith by the Board. Money market
instruments of the Fund are valued at amortized cost.
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES
Shares are purchased at a public offering price
equal to their NAV per share plus a sales charge, as
set forth below.
SALES CHARGE
PORTION
OF AS A
AS A PUBLIC PERCEN-
PERCEN- OFFERING
TAGE TAGE PRICE
OF PUBLIC OF NET RETAINED
OFFERING AMOUNT BY AMOUNT INVESTED
PRICE INVESTED DEALER
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%
* A CDSC may apply to the redemption of Class A
shares that are purchased without an initial sales
charge. See "Contingent Deferred Sales Charge --
Class A Shares."
Sales charges are not applied to any dividends or
capital gains that are reinvested in additional shares
of the Fund. An investor may be charged a transaction
fee for Class A shares purchased or redeemed at NAV
through a broker or agent other than IMDI.
With respect to purchases of $500,000 or more
through dealers or agents, IMDI may, at the time of
purchase, pay such dealers or agents from its own
resources a commission to compensate such dealers or
agents for their distribution assistance in connection
with such purchases. The commission would be computed
as set forth below:
NAV COMMISSION TABLE
PURCHASE AMOUNT
COMMISSION
First $3,000,000 . . . . . . . . . . . . . . . .
1.00%
Next $2,000,000 . . . . . . . . . . . . . . . . .
.50% Over $5,000,000 . . . . . . . . . . . . . . . . .
.25%
Dealers who receive 90% or more of the sales
charge may be deemed to be "underwriters" as that term
is defined in the 1933 Act.
IMDI compensates participating brokers who sell
Class A shares through the initial sales charge. IMDI
retains that portion of the initial sales charge that
is not reallowed to the dealers, which it may use to
distribute the Fund's Class A shares. Pursuant to
separate distribution plans for the Fund's
Class A, Class B and Class C shares, IMDI bears various
promotional and sales related expenses, including the
cost of printing and mailing prospectuses to persons
other than shareholders. Pursuant to the Fund's Class A
distribution plans, IMDI currently pays a continuing
service fee to qualified dealers at an annual rate of
0.25% of qualified investments.
IMDI may from time to time pay a bonus or other
incentive to dealers (other than IMDI) which employ a
registered representative who sells a minimum dollar
amount of the shares of the Fund and/or other funds
distributed by IMDI during a specified period of time.
This bonus or other incentive may take the form of
payment for travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered
representatives and members of their families to places
within or without the U.S. or other bonuses such as
gift certificates or the cash equivalent of such bonus
or incentive.
CONTINGENT DEFERRED SALES CHARGE -- CLASS A SHARES
Purchases of $500,000 or more of Class A shares
will be made at NAV with no initial sales charge, but
if the shares are redeemed within 24 months after the
end of the calendar month in which the purchase was
made (the CDSC period), a CDSC of 1.00% will be
imposed.
In order to recover commissions paid to dealers on
NAV transfers (as defined in "Purchases of Class A
Shares at Net Asset Value"), Class A shares of the Fund
are subject to a CDSC of 1.00% for certain redemptions
within 24 months after the date of purchase.
The charge will be assessed on an amount equal to
the lesser of the current market value or the original
purchase cost of the Class A shares redeemed.
Accordingly, no CDSC will be imposed on increases in
account value above the initial purchase price,
including any dividends or capital gains which have been
reinvested in additional Class A shares.
In determining whether a CDSC applies to a
redemption, the calculation will be determined in a
manner that results in the lowest possible rate being
charged. Therefore, it will be assumed that the
redemption is first made from any shares in your account
not subject to the CDSC. The CDSC is waived in certain
circumstances. See the discussion below under the caption "Waiver
of Contingent Deferred Sales Charge."
WAIVER OF CONTINGENT DEFERRED SALES CHARGE: The
CDSC is waived for: (i) redemptions in connection with
distributions not exceeding 12% annually of the initial
account balance (i.e., the value of the shareholder's
Class A Fund account at the time of the initial
distribution) (i.a) following retirement under a tax
qualified retirement plan, or (i.b) upon attaining age 59 1/2 in
the case of an IRA, a custodial account pursuant to
section
403(b)(7) of the Code or a Keogh Plan; (ii) redemption
resulting from tax-free return of an excess
contribution to an IRA; or (iii) any partial or
complete redemption following the death or disability
(as defined in Section 72(m)(7) of the Code) of a
shareholder from an account in which the deceased or disabled is
named, provided that the redemption is requested within
one year of death or disability. IMDI may require
documentation prior to waiver of the CDSC.
Class A shareholders may exchange their Class A
shares subject to a CDSC ("outstanding Class A shares")
for Class A shares of another Ivy or Mackenzie Fund
("new Class A shares") on the basis of the relative NAV
per Class A share, without the payment of any CDSC that
would be due upon the redemption of the outstanding
Class A shares. The original CDSC rate that would have
been charged if the outstanding Class A shares were redeemed
will carry over to the new Class A shares received in the
exchange, and will be charged accordingly at the time of
redemption.
QUALIFYING FOR A REDUCED SALES CHARGE
RIGHTS OF ACCUMULATION (ROA): Rights of
Accumulation ("ROA") is calculated by determining the
current market value of all Class A shares in all Ivy
or Mackenzie fund accounts (except Ivy Money Market
Fund) owned by you, your spouse, and your children
under 21 years of age. ROA is also applicable to
accounts under a trustee or other single fiduciary (including
retirement accounts qualified under Section 401 of the
Code). The current market value of each of your
accounts as described above is added together and then
added to your current purchase amount. If the combined
total is equal or greater than a breakpoint amount for
the Fund, then you qualify for the reduced sales
charge. To reduce or eliminate the sales charge, you must
complete Section 4B of the Account Application.
LETTER OF INTENT (LOI): A Letter of Intent
("LOI") is a non-binding agreement that states your
intention to invest in additional Class A shares,
within a thirteen-month period after the initial
purchase, an amount equal to a breakpoint amount for
the Fund. The LOI may be backdated up to 90 days. To sign a LOI,
please complete Section 4B of the Account Application.
Should the LOI not be fulfilled within the
thirteen-month period, your account will be debited for
the difference between the full sales charge that
applies for the amount actually invested and the
reduced sales charge actually paid on purchases placed
under the terms of the LOI.
PURCHASES OF CLASS A SHARES AT NET ASSET VALUE:
An investor who was a shareholder of any Ivy Fund on
December 31, 1991 or a shareholder of American
Investors Income Fund, Inc. or American Investors
Growth Fund, Inc. on October 31, 1988 and who became a
shareholder of Ivy Bond Fund (formerly Mackenzie Fixed Income
Trust) or Ivy Growth Fund as a result of the respective
reorganizations of the funds will be exempt from sales
charges on the purchase of Class A shares of any Ivy or
Mackenzie fund. This privilege is also available to
immediate family members of a shareholder (i.e., the
shareholder's children, the shareholder's spouse and
the children of the shareholder's spouse). This no- load
privilege terminates for the investor if the investor
redeems all shares owned. Shareholders and their relatives as
described above should call 1-800-235-3322 for information
about additional purchases or to inquire about their
account.
Class A shares of the Fund may be purchased
without an initial sales charge or CDSC by (i) officers
and Trustees of the Trust (and their relatives), (ii)
officers, directors, employees, retired employees,
legal counsel and accountants of IMI, MIMI, and MFC
(and their relatives), and (iii) 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). In addition, certain
investment advisors and financial planners who charge a
management, consulting or other fee for their services
and who place trades for their own accounts or the
accounts of their clients may purchase Class A shares of the Fund
without an initial sales charge or a CDSC, provided such
purchases are placed through a broker or agent who
maintains an omnibus account with that Fund. Also,
clients of these advisors and planners may make
purchases under the same conditions if the purchases
are through the master account of such advisor or
planner on the books of such broker or agent. This provision
applies to assets of retirement and deferred compensation
plans and trusts used to fund those plans including,
but not limited to, those defined in Section 401(a),
403(b) or 457 of the Code and "Rabbi Trusts" whose
assets are used to purchase shares of the Fund through
the aforementioned channels.
Class A shares of the Fund may be purchased at NAV
by retirement plans qualified under section 401(a) or
403(b) of the Code, subject to the Employee Retirement
Income Security Act of 1974, as amended. A CDSC of
1.00% will be imposed on such purchases in the event of
certain plan-level redemption transactions within 24
months following such purchases.
If investments by retirement plans at NAV are made
through a dealer who has executed a dealer agreement
with respect to the Fund, IMDI may, at the time of
purchase, pay the dealer out of IMDI's own resources a
commission to compensate the dealer for its
distribution assistance in connection with the retirement
plan's investment. Please refer to the NAV Commission Table on
page [___] of this Prospectus. Please contact IMDI for
additional information.
Class A shares can also be purchased without an
initial sales charge, but subject to a CDSC of 1.00%
during the first 24
months by: (a) any state, county, city (or any
instrumentality, department, authority or agency of
such entities) that is prohibited by applicable
investment laws from paying a sales charge or
commission when purchasing shares of a registered
investment management company (an "eligible governmental
authority"), and (b) trust companies, bank trust departments,
credit unions, savings and loans and other similar
organizations in their fiduciary capacity or for their
own accounts, subject to any minimum requirements set
by IMDI (currently, these criteria require that the
amount invested or to be invested in the subsequent 13-
month period totals at least $250,000). In either case,
IMDI may pay commissions to dealers that provide
distribution assistance on the same basis as in the preceding
paragraph.
Class A shares of the Fund may also be purchased
without a sales charge in connection with certain
liquidation, merger or acquisition transactions
involving other investment companies or personal
holding companies.
The Fund may, from time to time, waive the initial
sales charge on its Class A shares sold to clients of
various broker- dealers with which IMDI has a selling
relationship. This privilege will apply only to Class A
Shares of the Fund that are purchased using all or a
portion of the proceeds obtained by such clients
through redemptions of shares (on which a commission has
been paid) of an investment company (other than Mackenzie Series
Trust or the Trust), unit investment trust or limited
partnership ("NAV transfers"). Some dealers may elect
not to participate in this program. Those dealers that
do elect to participate in the program must complete
certain forms required by IMDI. The normal service fee,
as described in the "Initial Sales Charge Alternative -
- - Class A Shares" and "Contingent Deferred Sales Charge
Alternative -- Class B and Class C Shares" sections of
this Prospectus, will be paid to dealers in connection with these
purchases. Additional information on reductions or
waivers may be obtained from IMDI at the address listed
on the cover of the Prospectus.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B
AND CLASS C SHARES
Class B and Class C shares are offered at NAV per
share without a front end sales charge. Class C shares
redeemed within one year of purchase will be subject to
a CDSC of 1%, and Class B shares redeemed within six
years of purchase will be subject to a CDSC at the
rates set forth below. This charge 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.
Accordingly, you will not be assessed a CDSC on increases in
account value above the initial purchase price, including
shares derived from dividends or capital gains
reinvested. In determining whether a CDSC applies to a
redemption, the calculation will be determined in a
manner that results in the
lowest possible rate being charged. It will be assumed
that your redemption comes first from shares you have
held beyond the requisite maximum holding period or
those you acquire through reinvestment of dividends or
capital gains, and next from the shares you have held
the longest during the requisite holding period.
Proceeds from the CDSC are paid to IMDI. The
proceeds are used, in whole or in part, to defray its
expenses related to providing the Fund with
distribution services in connection with the sale of
Class B and Class C shares, such as compensating
selected dealers and agents for selling these shares. The
combination of the CDSC and the distribution and service fees
makes it possible for the Fund to sell Class B or Class C
shares without deducting a sales charge at the time of
the purchase.
In the case of Class B shares, the amount of the
CDSC, if any, will vary depending on the number of
years from the time you purchase your Class B shares
until the time you redeem them. Solely for purposes of
determining this holding period, any payments you make
during the quarter will be aggregated and deemed to
have been made on the last day of the quarter. In the
case of Class C shares, solely for purposes of determining this
holding period, any purchases you make during a month will
be deemed to have been made on the last day of the
month.
CLASS B SHARES
CONTINGENT
DEFERRED
SALES CHARGE
AS A
PERCENTAGE OF
DOLLAR AMOUNT
SUBJECT TO YEAR SINCE
PURCHASE CHARGE
First . . . . . . . . . . . . . . . . . . . . . 5%
Second . . . . . . . . . . . . . . . . . . . . 4%
Third . . . . . . . . . . . . . . . . . . . . . 3%
Fourth . . . . . . . . . . . . . . . . . . . . 3%
Fifth . . . . . . . . . . . . . . . . . . . . . 2%
Sixth . . . . . . . . . . . . . . . . . . . . . 1%
Seventh and thereafter . . . . . . . . . . . . 0%
IMDI currently intends to pay to dealers a sales
commission of 4% of the sale price of Class B shares
that they have sold, and will receive the entire amount
of the CDSC paid by shareholders on the redemption of
Class B shares to finance the 4% commission and related
marketing expenses.
With respect to Class C shares, IMDI currently
intends to pay to dealers a sales commission of 1% of
the sale price of Class C shares that they have sold, a
portion of which is to compensate the dealers for
providing Class C shareholder account services during
the first year of investment. IMDI will receive the
entire amount of the CDSC paid by shareholders on the
redemption of Class C shares to finance the 1% commission and
related marketing expenses.
Pursuant to separate distribution plans for the
Fund's Class B and Class C shares, IMDI bears various
promotional and sales related expenses, including the
cost of printing and mailing prospectuses to persons
other than shareholders. Under the Fund's Class B Plan,
IMDI retains 0.75% of the continuing 1.00%
service/distribution fee assessed to Class B shareholders, and
pays a continuing service fee to qualified dealers at an
annual rate of 0.25% of qualified investments. Under
the Class C Plan, IMDI pays continuing
service/distribution fees to qualified dealers at an
annual rate of 1.00% of qualified investments after the
first year of investment (0.25% of which represents a service
fee).
CONVERSION OF CLASS B SHARES: Your Class B shares
and an appropriate portion of both reinvested dividends
and capital gains on those shares will be converted
into Class A shares automatically no later than the
month following eight years after the shares were
purchased, resulting in lower annual distribution fees.
If you exchanged Class B shares into the Fund from Class B
shares of another Ivy or Mackenzie fund, the
calculation will be based on the time the shares in the
original fund were purchased.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE: The
CDSC is waived for: (i) redemptions in connection with
distributions not exceeding 12% annually of the initial
account balance (i.e., the value of the shareholder's
Class B or Class C Fund account at the time of the
initial distribution) (i.a) following retirement under
a tax qualified retirement plan, or (i.b) upon attaining
age 59 1/2 in the case of an IRA, a custodial account pursuant to
section 403(b)(7) of the Code or a Keogh Plan; (ii)
redemption resulting from tax-free return of an excess
contribution to an IRA; or (iii) any partial or
complete redemption following the death or disability
(as defined in Section 72(m)(7) of the Code) of a
shareholder from an account in which the deceased or
disabled is named, provided that the redemption is requested
within one year of death or disability. IMDI may require
documentation prior to waiver of the CDSC.
ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS: IMDI
may, at its own expense, pay concessions in addition to
those described above to dealers that satisfy certain
criteria established from time to time by IMDI. These
conditions relate to increasing sales of shares of the
Fund over specified periods and to certain other
factors. These payments may, depending on the dealer's
satisfaction of the required conditions, be periodic and may be
up to (i) 0.25% of the value of Fund shares sold by the
dealer during a particular period, and (ii) 0.10% of
the value of Fund shares held by the dealer's customers
for more than one year, calculated on an annual basis.
HOW TO REDEEM SHARES
You may redeem your Fund shares through your
registered securities representative, by mail or by
telephone. A CDSC may apply to certain Class A share
redemptions, to Class B share redemptions prior to
conversion and to Class C shares that are redeemed
within one year of purchase. All redemptions are made at
the NAV next determined after a redemption request has been
received in good order. Requests for redemptions must be
received by 4:00 p.m. Eastern time to be processed at
the NAV for that day. Any redemption request in good
order that is received after 4:00 p.m. Eastern time
will be processed at the price determined on the
following business day. IF SHARES TO BE REDEEMED WERE
PURCHASED BY CHECK, PAYMENT OF THE REDEMPTION MAY BE DELAYED
UNTIL THE CHECK HAS CLEARED OR FOR UP TO 15 DAYS AFTER THE
DATE OF PURCHASE. If you own shares of more than one
class of the Fund, the Fund will redeem first the
shares having the highest 12b-1 fees; any shares
subject to a CDSC will be redeemed last unless you
specifically elect otherwise.
When shares are redeemed, the Fund generally sends
you payment on the next business day. Under unusual
circumstances, the Fund may suspend redemptions or
postpone payment to the
extent permitted by Federal securities laws. The
proceeds of the redemption may be more or less than the
purchase price of your shares, depending upon, among
other factors, the market value of the Fund's
securities at the time of the redemption. If the
redemption is for over $50,000, or the proceeds are to be sent to
an address other than the address of record, or an
address change has occurred in the last 30 days, it
must be requested in writing with a signature
guarantee. See "Signature Guarantees," below.
If you are not certain of the requirements for a
redemption, please contact IMSC at 1-800-777-6472.
THROUGH YOUR REGISTERED SECURITIES DEALER: The
Dealer is responsible for promptly transmitting
redemption orders. Redemptions requested by dealers
will be made at the NAV (less any applicable CDSC)
determined at the close of regular trading (4:00 p.m.
Eastern time) on the day that a redemption request is
received in good order by IMSC.
BY MAIL: Requests for redemption in writing are
considered to be in "proper or good order" if they
contain the following:
- Any outstanding certificate(s) for shares
being redeemed.
- A letter of instruction, including the
account registration, fund number, the
account number and the dollar amount or
number of shares to be redeemed.
- Signatures of all registered owners whose
names appear on the account.
- Any required signature guarantees.
- Other supporting legal documentation, if
required (in the case of estates, trusts,
guardianships, corporations, unincorporated
associations, retirement plan trustees or
others acting in representative capacities).
The dollar amount or number of shares indicated
for redemption must not exceed the available shares or
NAV of your account at the next-determined prices. If
your request exceeds these limits, then the trade will
be rejected in its entirety.
Mail your request to IMSC at one of the addresses
on page 15 of this Prospectus.
BY TELEPHONE: Individual and joint accounts may
redeem up to $50,000 per day over the telephone by
contacting IMSC at 1- 800-777-6472. In times of unusual
economic or market changes, the telephone redemption
privilege may be difficult to implement. If you are
unable to execute your transaction by telephone, you may
want to consider placing the order in writing and sending it by
mail or overnight courier.
Checks will be made payable to the current account
registration and sent to the address of record. If there
has been a change of address in the last 30 days,
please use the instructions for redemption requests by
mail described above. A signature guarantee would be
required.
Requests for telephone redemptions will be
accepted from the registered owner of the account, the
designated registered representative or the registered
representative's assistant.
Shares held in certificate form cannot be redeemed
by telephone.
If Section 6E of the Account Application is not
completed, telephone redemption privileges will be
provided automatically. Although telephone redemptions
may be a convenient feature, you should realize that
you may be giving up a measure of security that you may
otherwise have if you terminated the privilege and
redeemed your shares in writing. If you do not wish to make
telephone redemptions or let your registered representative do
so on your behalf, you must notify IMSC in writing.
The Fund 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, the Fund may be liable for
any losses due to unauthorized or fraudulent telephone
instructions.
RECEIVING YOUR PROCEEDS BY FEDERAL FUNDS WIRE:
For shareholders who established this feature at the
time they opened their account, telephone instructions
will be accepted for redemption of amounts up to
$50,000 ($1,000 minimum) and proceeds will be wired on
the next business day to a predesignated bank account.
In order to add this feature to an existing
account or to change existing bank account information,
please submit a letter of instructions including your
bank information to IMSC at the address provided above.
The letter must be signed by all registered owners, and
their signatures must be guaranteed.
Your account will be charged a fee of $10 each
time redemption proceeds are wired to your bank. Your
bank may also charge you a fee for receiving a Federal
Funds wire.
Neither IMSC nor the Fund can be responsible for
the efficiency of the Federal Funds wire system or the
shareholder's bank.
MINIMUM ACCOUNT BALANCE REQUIREMENTS
Due to the high cost of maintaining small accounts
and subject to state law requirements, the Fund may
redeem the accounts of shareholders whose investment,
including sales charges paid, has been less than $1,000
for more than 12 months. The Fund will not redeem an
account unless the shareholder has been given at least
60 days' advance notice of the Fund's intention to do
so. No redemption will be made if a shareholder's
account falls below the minimum due to a reduction in the value
of the Fund's portfolio securities. This provision does
not apply to IRAs, other retirement accounts and
UGMA/UTMA accounts.
SIGNATURE GUARANTEES
For your protection, and to prevent fraudulent
redemptions, we require a signature guarantee in order
to accommodate the following requests:
- Redemption requests over $50,000.
- Requests for redemption proceeds to be sent
to someone other than the registered
shareholder.
- Requests for redemption proceeds to be sent
to an address other than the address of
record.
- Registration transfer requests.
- Requests for redemption proceeds to be wired
to your bank account (if this option was not
selected on your original application, or if
you are changing the bank wire information).
A signature guarantee may be obtained only from an
eligible guarantor institution as defined in Rule
17Ad-15 of the Securities Exchange Act of 1934, as
amended. An eligible guarantor institution includes
banks, brokers, dealers, municipal securities dealers,
government securities dealers, government securities
brokers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings
associations. The signature guarantee must not be
qualified in any way. Notarizations from notary publics
are not the same as signature guarantees, and are not
accepted.
Circumstances other than those described above may
require a signature guarantee. Please contact IMSC at
1-800-777-6472 for more information.
CHOOSING A DISTRIBUTION OPTION
You have the option of selecting the distribution
option that best suits your needs:
AUTOMATIC REINVESTMENT OPTION -- Both dividends
and capital gains are automatically reinvested at NAV
in additional shares of the same class of the Fund
unless you specify one of the other options.
INVESTMENT IN ANOTHER IVY OR MACKENZIE FUND --
Both dividends and capital gains are automatically
invested at NAV in another Ivy or Mackenzie Fund of the
same class.
DIVIDENDS IN CASH/CAPITAL GAINS REINVESTED --
Dividends will be paid in cash. Capital gains will be
reinvested at NAV in additional shares of the same
class of the Fund or another Ivy or Mackenzie Fund of
the same class.
DIVIDENDS AND CAPITAL GAINS IN CASH -- Both
dividends and capital gains will be paid in cash.
If you wish to have your cash distributions
deposited directly to your bank account via electronic
funds transfer ("EFT"), or if you wish to change your
distribution option, please contact IMSC at
1-800-777-6472.
If you wish to have your cash distributions go to
an address other than the address of record, you must
provide IMSC with a letter of instruction signed by all
registered owners with signatures guaranteed.
TAX IDENTIFICATION NUMBER
In general, to avoid being subject to a 31% U.S.
Federal backup withholding tax on dividends, capital
gains distributions and redemption proceeds, you must
furnish the Fund with your certified tax identification
number ("TIN") and certify that you are not subject to
backup withholding due to prior underreporting of
interest and dividends to the IRS. If you fail to provide a
certified TIN, or such other tax-related certifications as the
Fund may require, within 30 days of opening your new
account, the Fund reserves the right to involuntarily
redeem your account and send the proceeds to your
address of record.
You can avoid the above withholding and/or
redemption by correctly furnishing your TIN, and making
certain certifications, in Section 2 of the Account
Application at the time you open your new account,
unless the IRS requires that backup withholding be
applied to your account.
Certain payees, such as corporations, generally
are exempt from backup withholding. Please complete IRS
Form W-9 with the new account application to claim this
exemption. If the registration is for an UGMA/UTMA
account, please provide the social security number of
the minor. Non-U.S. investors who do not have a TIN
must provide, with their Account Application, a
completed IRS Form W-8.
CERTIFICATES
In order to facilitate transfers, exchanges and
redemptions, most shareholders elect not to receive
certificates. Should you wish to have a certificate
issued, please contact IMSC at 1-800- 777-6472 and
request that one be sent to you. (Retirement plan
accounts are not eligible for this service). Please note that if
you were to lose your certificate, you would incur an
expense to replace it.
Certificates requested by telephone for shares
valued up to $50,000 will be issued to the current
registration and mailed to the address of record.
Should you wish to have your certificates mailed to a
different address, or registered differently from the
current registration, contact IMSC 1-800-777-6472.
EXCHANGE PRIVILEGE
Shareholders of the Fund have an exchange
privilege with other Ivy and Mackenzie funds. The Fund
reserves the right to reject, for any reason, any
exchange orders.
Class A shareholders may exchange their
outstanding Class A shares for Class A shares of
another Ivy or Mackenzie fund on the basis of the
relative NAV per Class A share, plus an amount equal to
the difference 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.
Incremental sales charges are waived for outstanding
Class A shares that have been invested for 12 months or
longer.
Class B (and Class C) shareholders may exchange
their outstanding shares for Class B (or Class C)
shares of another Ivy or Mackenzie Fund on the basis of
the relative NAV per share, without the payment of any
CDSC that would otherwise be due upon redemption. Class
B shareholders who exercise the exchange privilege
would continue to be subject to the original Fund's
CDSC schedule (or period) following an exchange if such schedule
is higher (or longer) than the CDSC for the new Class B
shares.
Shares resulting from the reinvestment of
dividends and other distributions will not be charged
an initial sales charge or a CDSC when exchanged into
another Ivy or Mackenzie Fund.
Exchanges are considered to be taxable events, and
may result in a capital gain or a capital loss for tax
purposes. Before executing an exchange, you should
obtain and read the prospectus and consider the
investment objective of the fund to be purchased.
Shares must be uncertificated in order to execute a
telephone exchange. Exchanges are available only in states where
they can be legally made. This privilege is not intended
to provide shareholders a means by which to speculate
on short-term movements in the market. The Fund
reserves the right to limit the frequency of exchanges.
Exchanges are accepted only if the
registrations of the two accounts are identical.
Amounts to be exchanged must meet minimum investment
requirements for the Ivy or Mackenzie Fund into which
the exchange is made.
With respect to shares subject to a CDSC, if less
than all of an investment is exchanged out of the Fund,
the shares exchanged will reflect, pro rata, the cost,
capital appreciation and/or reinvestment of
distributions of the original investment as well as the
original purchase date, for purposes of calculating any
CDSC for future redemptions of the exchanged shares.
An investor who was a shareholder of American
Investors Income Fund, Inc. or American Investors
Growth Fund, Inc. prior to October 31, 1988, or a
shareholder of the Ivy Funds prior to December 31,
1991, who became a shareholder of the Fund as a result
of a reorganization or merger between the Funds may
exchange between funds without paying a sales charge. An investor
who was a shareholder of American Investors Income Fund,
Inc. or American Investors Growth Fund, Inc. on or
after October 31, 1988, who became a shareholder of the
Fund as a result of the reorganization between the
Funds will receive credit toward any applicable sales
charge imposed by any Ivy or Mackenzie Fund into which
an exchange is made.
In calculating the sales charge assessed on an
exchange, shareholders will be allowed to use the
Rights of Accumulation privilege.
EXCHANGES BY TELEPHONE: If Section 6D of the
Account Application is not completed, telephone
exchange privileges will be provided automatically.
Although telephone exchanges may be a convenient
feature, you should realize that you may be giving up a
measure of security that you may otherwise have if you
terminated the privilege and exchanged your shares in writing. If
you do not wish to make telephone exchanges or let your
registered representative do so on your behalf, you must
notify IMSC in writing.
In order to execute an exchange, please contact
IMSC at 1- 800-777-6472. Have the account number of your
current fund and the exact name in which it is
registered available to give to the telephone
representative.
The Fund 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, the Fund may be liable for
any losses due to unauthorized or fraudulent telephone
instructions.
EXCHANGES IN WRITING: In a letter, request an
exchange and provide the following information:
- The name and class of the fund whose shares you
currently own.
- Your account number.
- The name(s) in which the account is registered.
- The name of the fund in which you wish your
exchange to be invested.
- The number of shares or the dollar amount you wish
to exchange.
The request must be signed by all registered
owners.
REINVESTMENT PRIVILEGE
Investors who have redeemed Class A shares of the
Fund have a one-time privilege of reinvesting all or a
part of the proceeds of the redemption back into Class
A shares of that Fund at NAV (without a sales charge)
within 60 days after the date of redemption. IN ORDER
TO REINVEST WITHOUT A SALES CHARGE, SHAREHOLDERS OR
THEIR BROKERS MUST INFORM IMSC THAT THEY ARE EXERCISING
THE REINVESTMENT PRIVILEGE AT THE TIME OF REINVESTMENT.
The tax status of a gain realized on a redemption
generally will not be affected by the exercise of the
reinvestment privilege, but a loss realized on a redemption
generally may be disallowed by the IRS if the reinvestment
privilege is exercised within 30 days after the redemption.
In addition, upon a reinvestment, the shareholder may
not be permitted to take into account sales charges
incurred on the original purchase of shares in
computing their taxable gain or loss.
SYSTEMATIC WITHDRAWAL PLAN
You may elect the Systematic Withdrawal Plan at
any time by completing the Account Application, which
is attached to this Prospectus. You can also obtain
this application by contacting your registered
representative or IMSC at 1-800-777-6472. To be
eligible, you must have at least $5,000 in your account. Payments
(minimum distribution amount -- $50) from your account
can be made monthly, quarterly, semiannually, annually
or on a selected monthly basis, to yourself or any
other designated payee. You may elect to have your
systematic withdrawal paid directly to your bank
account via EFT, at no charge. Share certificates must be
unissued (i.e., held by the Fund) while the plan is in effect. A
Systematic Withdrawal Plan may not be established if you
are currently participating in the Automatic Investment
Method. For more information, please contact IMSC at
1-800-777-6472.
If payments you receive through the Systematic
Withdrawal Plan exceed the dividends and capital
appreciation of your account, you will be reducing the
value of your account.
Additional investments made by shareholders
participating in the Systematic Withdrawal Plan must
equal at least $1,000 while the plan is in effect.
However, it may not be advantageous to purchase
additional Class A, Class B or Class C shares when you
have a Systematic Withdrawal Plan, because you may be subject to
an initial sales charge on your purchase of Class A
shares or to a CDSC imposed on your redemptions of
Class B or Class C shares. In addition, redemptions are
taxable events.
Amounts paid to you through the Systematic
Withdrawal Plan are derived from the redemption of
shares in your account. Any applicable CDSC will be
assessed upon the redemptions. A CDSC will not be
assessed on withdrawals not exceeding 12% annually of
the initial account balance when the Systematic Withdrawal Plan
was started.
Should you wish at any time to add a Systematic
Withdrawal Plan to an existing account or change payee
instructions, you will need to submit a written
request, signed by all registered owners, with
signatures guaranteed.
Retirement accounts are eligible for Systematic
Withdrawal Plans. Please contact IMSC at 1-800-777-6472
to obtain the necessary paperwork to establish a plan.
If the U.S. Postal Service cannot deliver your
checks, or if deposits to a bank account are returned
for any reason, your redemptions will be discontinued.
AUTOMATIC INVESTMENT METHOD
You may authorize an investment to be
automatically drawn each month from your bank for
investment in Fund shares by completing Sections 6A and
7B of the Account Application. Attach a "voided" check
or deposit slip to your account application. At pre-
specified intervals, your bank account will be debited and
the proceeds will be credited to your Ivy account. The minimum
investment under this plan is $50 per month ($25 per
month for retirement plans). There is no charge to you
for this program.
You may terminate or suspend your Automatic
Investment Method by telephone at any time by
contacting IMSC at 1-800-777- 6472.
If you have investments being withdrawn from a
bank account and we are notified that the account has
been closed, your Automatic Investment Method will be
discontinued.
CONSOLIDATED ACCOUNT STATEMENTS
Shareholders with two or more Ivy or Mackenzie
fund accounts having the same taxpayer I.D. number will
receive a single quarterly account statement, unless
otherwise specified. This feature consolidates the
activity for each account onto one
statement. Requests for quarterly consolidated
statements for all other accounts must be submitted in
writing and must be signed by all registered owners.
RETIREMENT PLANS
The Ivy and Mackenzie family of funds offer
several tax- sheltered retirement plans that may fit
your needs:
- IRA (Individual Retirement Account)
- 401(k), Money Purchase Pension and Profit
Sharing Plans
- SEP-IRA (Simplified Employee Pension Plan)
- 403(b)(7) Plan
Minimum initial and subsequent investments for
retirement plans are $25.
Investors Bank & Trust, which serves as custodian
or trustee under the retirement plan prototypes
available from the Fund, charges certain nominal fees
for annual maintenance. A portion of these fees is
remitted to IMSC, as compensation for its services to
the retirement plan accounts maintained with the Fund.
Distributions from retirement plans are subject to
certain requirements under the Code. Certain
documentation, including IRS Form W4-P, must be
provided to IMSC prior to taking any distribution.
Please contact IMSC for details. The Ivy and Mackenzie
family of funds and IMSC assume no responsibility to
determine whether a distribution satisfies the conditions of
applicable tax laws, and will not be responsible for any
penalties assessed. For additional information, please
contact your broker or tax adviser.
Please call IMSC at 1-800-777-6472 for complete
information kits describing the plans, their benefits,
restrictions, provisions and fees.
SHAREHOLDER INQUIRIES
Inquiries regarding the Fund should be directed to
IMSC at 1-800-777-6472.
IVY ASIA PACIFIC FUND
ACCOUNT APPLICATION
USE THIS APPLICATION FOR CLASS A, CLASS B AND
CLASS C
Please mail applications and checks to: Ivy Mackenzie
Services Corp., P.O. Box 3022, Boca Raton, FL
33431-0922. (This application should not be used for
retirement accounts for which Ivy
is custodian.)
Account Number:
(Fund Use Only)
Dealer #:
Branch #:
Rep. I.D. #:
Acct. Type:
Soc Cd:
Div Cd:
CG Cd:
Exc Cd:
Red Cd:
1 REGISTRATION
/ / Individual
/ / Joint Tenant
/ / Estate
/ / UGMA/UTMA
/ / Corporation
/ / Partnership
/ / Sole Proprietor
/ / Trust
/ / Other
Date of Trust
Owner, Custodian or Trustee
Co-owner or Minor
Minor's State of Residence
Street
City
State
Zip Code
Phone Number -- Day
Phone Number -- Evening
2 TAX ID
Citizenship: / / U.S. / / Other ________________
Social Security Number
Tax Identification Number
Under penalties of perjury, I certify by signing
in Section 8 below that: (1) the number shown in
this section is my correct taxpayer identification
number (TIN), and (2) I am not subject to backup
withholding because: (a) I have not been notified
by the Internal Revenue Service (IRS) that I am
subject to backup withholding as a result of a failure to
report all interest or dividends, or (b) the IRS has
notified me that I am no longer subject to backup
withholding. (Cross out item (2) if you have been notified
by the IRS that you are currently subject to backup
withholding because of underreporting interest or
dividends on your tax return.) Please see the "Tax
Identification Number" section of the Prospectus
for additional information on completing this
section.
3 DEALER INFORMATION
The undersigned ("Dealer") agrees to all
applicable provisions in this Application,
guarantees the signature and legal capacity of the
Shareholder, and agrees to notify IMSC of any
purchases made under a Letter of Intent or Rights of
Accumulation.
Dealer Name
Branch Office Address
City
State
Zip Code
Representative's Name and Number
Representative's Phone Number
Authorized Signature of Dealer
4 INVESTMENTS
A. Enclosed is my check ($1,000 minimum) made
payable to Ivy Asia Pacific Fund. Please
invest it in Class A __ or Class B __ or
Class C shares.*
$_______________________(Amount Enclosed)
B. I qualify for an elimination of the sales
charge due to the following privilege
(applies only to Class A shares):
__ New Letter of Intent (if ROA or 90-day
backdate privilege is applicable,
provide account(s) information below.)
__ ROA with the account(s) listed below.
__ Existing Letter of Intent with account(s)
listed below.
Fund Name(s)
Account Number(s)
If establishing a Letter of Intent, you will
need to purchase Class A shares over a
thirteen-month period in accordance with the
provisions in the Prospectus. The Aggregate
amount of these purchases will be at least
equal to the amount indicated below (see Prospectus for
minimum amount required for reduced sales charges).
/ / $ 50,000
/ / $100,000
/ / $250,000
/ / $500,000
C. FOR DEALER USE
Confirmed trade orders: [Confirm Number,
Number of Shares, Trade Date]
5 DISTRIBUTION OPTIONS
I would like to reinvest dividends and capital
gains into additional shares in this account at
net asset value unless a different option is
checked below.
A. / / Reinvest all dividends and capital gains
into additional shares of a different
Ivy or Mackenzie fund.
Fund Name
Account Number
B. / / Pay all dividends in cash and reinvest
capital gains into additional shares in
this Fund or a different Ivy or
Mackenzie fund.
Fund Name
Account Number
C. / / Pay all dividends and capital gains in
cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN
C OR D ABOVE, BE:
/ / Sent to the address listed in the
registration. / / Sent to the special payee
listed in Section 7A / / (By Mail)
7B / / (By E.F.T.)
6 OPTIONAL SPECIAL FEATURES
A. / / Automatic Investment Method (AIM)
- I wish to invest _________________
/ / once per month
/ / twice
/ / 3 times
/ / 4 times
- My bank account will be debited on the
_________ day of the month
Please invest $___________________ each period
starting in the month of __________________ in Ivy
Asia Pacific Fund. / / Class A
/ / Class B
/ / Class C
/ / I have attached a voided check to ensure my
correct bank account will be debited.
B. Systematic Withdrawal Plans**
I wish to automatically withdraw funds from my
account in Ivy Asia Pacific Fund
/ / Monthly / / Quarterly / /Semiannually / /
Annually
/ / Once / / Twice / / 3 times / / 4 times
per month
I request the distribution be:
/ / Sent to the address listed in the
registration. / / Sent to the special payee
listed in Section 7. / / Invested into additional
shares of the same class of a different Ivy
Mackenzie fund.
Fund Name
Account Number
Amount $__________________(Minimum $50) starting
on or about the
- _______ day of the month
- _______ day of the month
- _______ day of the month*
NOTE: Account minimum: $5,000 in shares at current
offering price
C. Electronic Funds Transfer for Redemption
Proceeds**
I authorize the Agent to honor telephone
instructions for the redemption of Fund
shares up to $50,000. Proceeds may be wire
transferred to the bank account designated
($1,000 minimum). (Complete Section 7B)
D. Telephone Exchanges** / / Yes /
/ No
I authorize exchanges by telephone among the
Ivy and Mackenzie family of funds upon
instructions from any person as more fully
described in the Prospectus. To change this
option once established, written
instructions must be received from the
shareholder of record or the current
registered representative.
If neither box is checked, the telephone
exchange privilege will be provided
automatically.
E. Telephonic Redemptions** / / Yes /
/ No
The Fund or its agents are authorized to
honor telephone instructions from any person
as more fully described in the Prospectus for
the redemption of Fund shares. The amount of
the redemption shall not exceed $50,000 and
the proceeds are to be payable to the
shareholder of record and mailed to the address of
record. To change this option once established, written
instructions must be received from the shareholder
of record or the current registered
representative.
If neither box is checked, the telephone
redemption privilege will be provided
automatically.
* There must be a period of at least seven
calendar days between each
investment/withdrawal period.
** This option may not be used if shares are
issued in certificate form.
7 SPECIAL PAYEE
A. MAILING ADDRESS
Please send all disbursements to this special
payee:
Name of Bank or Individual
Account Number (If Applicable)
Street
City/State/Zip
B. FED WIRE / E.F.T. INFORMATION
Financial Institution
ABA #
Account #
Street
City/State/Zip
(Please attach a voided check)
8 SIGNATURES
Investors should be aware that the failure to
check the "No" under Section 6D or 6E above means
that the Telephone Exchange/Redemption Privileges
will be provided. The 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 "Exchange Privilege" 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.
______________________________
________________________ Signature of Owner,
Custodian, Date
Trustee or Corporate Officer
______________________________
________________________ Signature of Joint Owner,
Date
Co-Trustee or Corporate Officer
IAPGF-1-896
PROSPECTUS
January 1, 1997
IVY INTERNATIONAL VALUE FUND
Ivy Fund (the "Trust") is a registered investment
company currently consisting of seventeen separate
portfolios. One of these portfolios, Ivy International
Value Fund, is described in this Prospectus.
This Prospectus sets forth concisely the
information about the Fund that a prospective investor
should know before investing. Please read it carefully
and retain it for future reference. Additional
information about the Fund is contained in the
Statement of Additional Information for the Fund dated
January 1, 1997 (the "SAI"), which has been filed with the
Securities and Exchange Commission and is incorporated by
reference into this Prospectus. The SAI is available upon
request and without charge from the Trust at the
Distributor's address and telephone number below.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
TABLE OF CONTENTS
Expense Information . . . . . . . . . . . . . . . . . .
. . . . . Investment Objectives and Policies . . . . .
. . . . . . . . . . Risk Factors and Investment
Techniques . . . . . . . . . . . . . Organization and
Management of the Fund . . . . . . . . . . . . .
Investment Manager . . . . . . . . . . . . . . . . . . . . . . .
Fund Administration and Accounting . . . . . . . . . .
. . . . . Transfer Agent . . . . . . . . . . . . . . .
. . . . . . . . . . Alternative Purchase Arrangements .
. . . . . . . . . . . . . . . Dividends and Taxes . . .
. . . . . . . . . . . . . . . . . . . . Performance
Data . . . . . . . . . . . . . . . . . . . . . . . .
How to Buy Shares . . . . . . . . . . . . . . . . . . . . . . . .
How Your Purchase Price is Determined . . . . . . . . .
. . . . . How The Fund Values its Shares . . . . . . .
. . . . . . . . . . Initial Sales Charge Alternative-
Class A Shares . . . . . . . . . Contingent Deferred
Sales Charge-Class A Shares . . . . . . . . .
Qualifying for a Reduced Sales Charge . . . . . . . . . . . . . .
Contingent Deferred Sales Charge Alternative-
Class B and Class C Shares . . . . . . . . . . . .
. . . . . How to Redeem Share . . . . . . . . . . . . .
. . . . . . . . . . Minimum Account Balance
Requirements . . . . . . . . . . . . . . Signature
Guarantees . . . . . . . . . . . . . . . . . . . . . .
Choosing a Distribution Option . . . . . . . . . . . . . . . . .
Tax Identification Number . . . . . . . . . . . . . . .
. . . . . Certificates . . . . . . . . . . . . . . . .
. . . . . . . . . . Exchange Privilege . . . . . . . .
. . . . . . . . . . . . . . . Reinvestment Privilege .
. . . . . . . . . . . . . . . . . . . .
Systematic Withdrawal Plan . . . . . . . . . . . . . .
. . . . . Automatic Investment Method . . . . . . . . .
. . . . . . . . . . Consolidated Account Statements . .
. . . . . . . . . . . . . . . Retirement Plans . . . .
. . . . . . . . . . . . . . . . . . . . Shareholder
Inquiries . . . . . . . . . . . . . . . . . . . . . .
BOARD OF TRUSTEES TRANSFER AGENT
John S. Anderegg, Jr. Ivy Mackenzie Services
Paul H. Broyhill Corp.
Stanley Channick P.O. Box 3022
Frank W. DeFriece, Jr. Boca Raton, FL
Roy J. Glauber 33431-0922
Michael G. Landry 1-800-777-6472
Michael R. Peers
Joseph G. Rosenthal AUDITORS
Richard N. Silverman
_______________________ J. Brendan Swan
INVESTMENT MANAGER
OFFICERS Ivy Management, Inc.
Michael G. Landry, 700 South Federal
Highway President Boca Raton,
FL 33432 Keith J. Carlson, Vice
1-800-456-5111 President
James W. Broadfoot, Vice DISTRIBUTOR
President Ivy Mackenzie
Distributors, C. William Ferris, Inc.
Secretary/Treasurer Via Mizner Financial
Plaza Michael R. Peers, Chairman 700 South
Federal Highway Boca
Raton, FL 33432 LEGAL COUNSEL
1-800-456-5111 Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman &
Co.
Boston, MA
EXPENSE INFORMATION
The tables and examples below are designed to
assist you in understanding the various costs and
expenses that you will bear directly or indirectly as
an investor in the Fund. The information is based on
estimated amounts for the current fiscal year.
SHAREHOLDER TRANSACTION EXPENSES
MAXIMUM MAXIMUM
CONTINGENT
SALES LOAD DEFERRED
IMPOSED ON SALES CHARGE
PURCHASES (AS A % OF
(AS A % OF ORIGINAL
OFFERING PURCHASE
PRICE) PRICE)
Class A . . . . . . . . . . . . . 5.75%(1)
None(2)
Class B . . . . . . . . . . . . . None
5.00%(3) Class C . . . . . . . . . . . . . None
1.00%(4) Class I . . . . . . . . . . . . .
None None
The Fund does not charge a redemption fee, an exchange
fee, or a sales load on reinvested dividends.
(1) Class A shares may be purchased under a variety of
plans that provide for the reduction or
elimination of the sales charge.
(2) A contingent deferred sales charge ("CDSC") may
apply to the redemption of Class A shares that are
purchased without an initial sales charge. See
"Purchases of Class A Shares at Net Asset Value"
and "Contingent Deferred Sales Charge -- Class A
Shares."
(3) The maximum CDSC on Class B shares applies to
redemptions during the first year after purchase.
The charge declines to 4% during the second year;
3% during the third and fourth years; 2% during
the fifth year; 1% during the sixth year; and 0%
in the seventh year and thereafter.
(4) The CDSC on Class C shares applies to redemptions
during the first year after purchase.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
TOTAL FUND
OTHER OPERATING
EXPENSES EXPENSES
12B-1 (AFTER (AFTER
SERVICE/ EXPENSE EXPENSE MANAGE-
DISTRIBU- REIMBURSE- REIMBURSE-
MENT TION FEES MENTS) MENTS)(1)
FEES
Class A . . . 1.00% 0.25% 0.95%
2.20% Class B . . . 1.00% 1.00%(2) 0.95%
2.95%
Class C . . . 1.00% 1.00%(2) 0.95%
2.95% Class I . . . 1.00% 0.00% 0.86%(3)
1.86%
(1) Ivy Management, Inc. ("IMI") currently limits
Total Fund Operating Expenses (excluding Rule
12b-1 fees) to an annual rate of 1.95% of the
Fund's average net assets. Without
reimbursements, "Total Fund Operating Expenses" may
increase, but are subject to a maximum of 2.50% (excluding
Rule 12b-1 fees), the highest expense ratio currently
allowed under state securities laws.
(2) Long-term investors may, as a result of the Fund's
12b-1 fees, pay more than the economic equivalent
of the maximum front- end sales charge permitted by
the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. ("NASD").
(3) The "Other Expenses" of Class I of the Fund are
lower than such expenses for the Fund's other
classes because Class I shares bear lower fees
than Class A, Class B and Class C shares. See
"Fund Administration and Accounting".
EXAMPLES
The following table lists the expenses that an
investor would pay on a $1,000 investment, assuming (1)
5% annual return and (2) unless otherwise noted,
redemption at the end of each time period. These
examples further assume reinvestment of all dividends
and distributions, and that the percentage amounts
under "Total Fund Operating Expenses"*** remain the same each
year. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
HIGHER OR LOWER THAN THOSE SHOWN.
1 YEAR
3 YEARS
Class A Shares* . . . . . . . . . . . . . . $79
$122 Class B Shares . . . . . . . . . . . . . .
$80(1) $121(2)
Class B Shares (no redemption) . . . . . . $30
$91 Class C Shares . . . . . . . . . . . . . .
$40(3) $91 Class C Shares (no redemption) . . . .
. . $30 $91 Class I Shares** . . . . . . . .
. . . . . $19 $58
* Assumes deduction of the maximum 5.75% initial
sales charge at the time of purchase and no
deduction of a CDSC at the time of redemption.
** Class I shares are not subject to an initial sales
charge at the time of purchase, nor are they
subject to the deduction of a CDSC at the time of
redemption.
*** Based on Total Fund Operating Expenses net of
expense reimbursements. See the "Annual Fund
Operating Expenses Table," above.
(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.
The information presented in the tables does not
reflect the charge of $10 per transaction that would
apply if a shareholder elects to have redemption
proceeds wired to his or her bank account. For a more
detailed discussion of the Fund's fees and expenses,
see the following sections of this Prospectus:
"Organization and Management of the Fund," "Initial Sales Charge
Alternative -- Class A Shares" and "Contingent Deferred
Sales Charge Alternative -- Class B and Class C
Shares," and "Investment Advisory and Other Services"
in the SAI.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's principal investment objective is long-
term growth primarily through investment in foreign
equity securities. Consideration of current income is
secondary to this principal objective. The Fund's
investment objective is fundamental and may not be
changed without the approval of a majority of the
Fund's outstanding voting shares (as defined under the Investment
Company Act of 1940). Except for the Fund's investment
objective and those investment restrictions
specifically identified as fundamental, all investment
policies and practices described in this Prospectus and
in the SAI are non-fundamental, and may be changed by
the Trustees without shareholder approval. There can be
no assurance that the Fund's objective will be met. The
different types of securities and investment techniques used by
the Fund involve varying degrees of risk. For information
about the particular risks associated with each type of
investment, see "Risk Factors and Investment
Techniques," below, and the SAI.
Whenever an investment policy or restriction of
the Fund described in this Prospectus or in the SAI
states a maximum percentage of assets that may be
invested in a security or other asset or describes a
policy regarding quality standards, that percentage
limitation or standard will, unless otherwise
indicated, apply to the Fund only at the time a transaction takes
place. Thus, for example, if a percentage limitation is
adhered to at the time of investment, a later increase
or decrease in the percentage that results from
circumstances not involving any affirmative action by
the Fund will not be considered a violation.
Under normal circumstances the Fund invests at
least 65% of its total assets in common and preferred
stocks (and securities convertible into common stocks)
of foreign issuers. For temporary defensive purposes,
the Fund may also invest in equity securities
principally traded in the United States. The Fund will
invest its assets in a variety of economic sectors,
industry segments and individual securities in order to reduce
the effects of price volatility in any area and to enable
shareholders to participate in markets that do not
necessarily move in concert with the U.S. market.
Among the factors that IMI considers in determining the
appropriate distribution of investments among various
countries and regions include prospects for relative
economic growth, expected levels of inflation,
government policies influencing business conditions and the
outlook for currency relationships.
In selecting the Fund's investments, IMI will seek
to identify securities that are attractively priced
relative to their intrinsic value. The intrinsic value
of a particular security is analyzed by reference to
characteristics such as relative price/earnings ratio,
dividend yield and other relevant factors (such as
applicable financial, tax, social and political
conditions).
When economic or market conditions warrant, the
Fund may invest without limit in U.S. Government
securities, investment- grade debt securities, zero
coupon bonds, preferred stocks, warrants, or cash or
cash equivalents such as bank obligations (including
certificates of deposit and bankers' acceptances),
commercial paper, short-term notes and repurchase agreements.
The Fund may also invest up to 5% of its assets in debt
securities rated Ba or below by Moody's or BB or below by
S&P, or if unrated, are considered by IMI to be of
comparable quality (commonly referred to as "high
yield" or "junk" bonds).
For temporary or emergency purposes, the Fund may
borrow up to one-third of the value of its total assets
from banks, but may not purchase securities at any time
during which the value of the Fund s outstanding loans
exceeds 10% of the value of the Fund's assets. The
Fund may engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest (i) up to 10% of its total
assets in other investment companies and (ii) up to 10%
of its net assets in restricted and other illiquid
securities. Securities whose proceeds are subject to
limitations on repatriation of principal or profits for
more than seven days, and those for which market
quotations are not readily available, may be deemed illiquid for
these purposes.
The Fund may purchase put and call options on
securities and stock indices, provided the premium paid
for such options does not exceed 5% of the Fund s net
assets. The Fund may also sell covered put options
with respect to up to 10% of the value of its net
assets, and may write covered call options so long as not
more than 25% of the Fund s net assets is subject to being
purchased upon the exercise of the calls. For hedging
purposes only, the Fund may engage in transactions in
stock index and foreign currency futures contracts,
provided that the Fund s aggregate investment in such
contracts does not exceed 15% of its total assets.
RISK FACTORS AND INVESTMENT TECHNIQUES
SPECIAL CONSIDERATIONS RELATING TO FOREIGN EQUITY
SECURITIES: Investing in foreign securities involves
certain considerations and risks that are not typically
associated with investing in the securities of U.S.
issuers. The risks of investing in foreign securities
(described more fully below) are likely to be
intensified in the case of investments in issuers
domiciled or doing substantial business in countries with
emerging or developing economies. For example, the small size,
inexperience and limited trading volume of the securities
markets in certain emerging market countries may cause
the Fund's investments in those countries less liquid
and more volatile than investments in countries with
more developed securities markets (such as Japan and
most Western European countries).
To take advantage of potential growth
opportunities, the
Funds might have significant investments in companies
with relatively small market capitalization.
Securities of smaller companies may be subject to more
abrupt or erratic market movements than the securities
of larger more established companies, both because they
tend to be traded in lower volume and because the
companies are subject to greater business risk.
Finally, since the Fund invests primarily in equity securities,
the Fund is vulnerable to the possibility that stock
prices in general will decline over short or extended
periods.
BANK OBLIGATIONS: The bank obligations in which
the Fund may invest include certificates of deposit,
bankers' acceptances, and other short-term debt
obligations. Investments in certificates of deposit and
bankers' acceptances are limited to obligations of (i)
banks having total assets in excess of $1 billion, and
(ii) other banks if the principal amount of the
obligation is fully insured by the Federal Deposit Insurance
Corporation ("FDIC"). Investments in certificates of deposit
of savings associations are limited to obligations of
Federal or state-chartered institutions whose total
assets exceed $1 billion and whose deposits are insured
by the FDIC.
BORROWING: Borrowing may exaggerate the effect on
the Fund's net asset value of any increase or decrease
in the value of the Fund's portfolio securities. Money
borrowed will be subject to interest costs (which may
include commitment fees and/or the cost of maintaining
minimum average balances).
COMMERCIAL PAPER: Commercial paper represents
short-term unsecured promissory notes issued in bearer
form by bank holding companies, corporations, and
finance companies. The Fund's investments in commercial
paper are limited to obligations rated Prime-1 by
Moody's Investor Services Inc. ("Moody's") or, if not
rated, are issued by companies having an outstanding debt issue
currently rated Aaa or Aa by Moody's or AAA or AA by
Standard & Poor's Corporation ("S&P").
CONVERTIBLE SECURITIES: The convertible
securities in which the Fund may invest include
corporate bonds, notes, debentures and other securities
convertible into common stocks. Because convertible
securities can be converted into equity securities,
their values will normally vary in some proportion with those of
the underlying equity securities. Convertible securities
usually provide a higher yield than the underlying
equity, however, so that the price decline of a
convertible security may sometimes be less substantial
than that of the underlying equity security.
DEBT SECURITIES, IN GENERAL: 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. 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. Bonds
with longer maturities generally are more volatile than
bonds
with shorter maturities. The market value of debt
securities also varies according to the relative
financial condition of the issuer. In general, lower-
quality bonds offer higher yields due to the increased
risk that the issuer will be unable to meet its
obligations on interest or principal payments at the time called
for by the debt instrument.
U.S. GOVERNMENT SECURITIES: U.S. Government
securities are obligations of, or guaranteed by, the
U.S. Government, its agencies or instrumentalities.
Such securities include: (1) direct obligations of the
U.S. Treasury (such as Treasury bills, notes, and
bonds) and (2) Federal agency obligations guaranteed as
to principal and interest by the U.S. Treasury (such as GNMA
certificates, which are mortgage-backed securities). When
such securities are held to maturity, the payment of
principal and interest is unconditionally guaranteed by
the U.S. Government, and thus they are of the highest
possible credit quality. U.S. Government securities
that are not held to maturity are subject to variations
in market value caused by fluctuations in interest
rates.
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.
INVESTMENT-GRADE DEBT SECURITIES: Bonds rated Aaa
by Moody's and AAA by S&P are judged to be of the best
quality (i.e., capacity to pay interest and repay
principal is extremely strong). Bonds rated Aa/AA are
considered to be of high quality (i.e., capacity to pay
interest and repay interest is very strong and differs
from the highest rated issues only to a small degree).
Bonds rated A are viewed as having many favorable
investment attributes, but elements may be present that suggest a
susceptibility to the adverse effects of changes in
circumstances and economic conditions than debt in
higher rated categories. Bonds rated Baa/BBB
(considered by Moody's to be "medium grade"
obligations) are considered to have an adequate capacity to pay
interest and repay principal, but certain protective
elements may be lacking (i.e., such bonds lack
outstanding investment characteristics and have some
speculative characteristics). The Fund may invest in
debt securities that are given an investment- grade
rating by Moody's or S&P, and may also invest in unrated
debt securities that are considered by IMI to be of
comparable quality.
FOREIGN SECURITIES: The foreign securities in
which the Fund may invest include non-U.S. dollar-
denominated securities, Eurodollar securities,
sponsored or unsponsored American Depository Receipts
("ADRs") and debt securities issued, assumed or
guaranteed by foreign governments (or political subdivisions
or instrumentalities thereof). In recent years, many
countries around the world have undergone political
changes that have reduced government's role in economic
and personal affairs and have stimulated investment and
growth. In order for these emerging economies to
continue to expand and develop industry, infrastructure
and currency reserves, continued influx of capital is
essential. Historically, there is a strong direct correlation
between economic growth and stock market returns. While this
is no guarantee of future performance, IMI believes
that investment opportunities (particularly in the
energy, environmental services, natural resources,
basic materials, power, telecommunications and
transportation industries) may result within the
evolving economies of emerging market countries from
which the Fund and its shareholders will benefit. However,
investors should consider carefully the special risks that
arise in connection with investing in securities issued
by companies and governments of foreign nations
(especially in countries with emerging or developing
economies), which are in addition to those risks that
are associated with the Fund's investments, generally.
In many foreign countries (especially in emerging
market countries), there is less regulation of business
and industry practices, stock exchanges, brokers and
listed companies than in the United States. For
example, foreign companies are not generally subject to
uniform accounting and financial reporting standards,
and foreign securities transactions may be subject to
higher brokerage costs. There also tends to be less publicly
available information about issuers in foreign countries, and
foreign securities markets of many of the countries in
which the Fund may invest may be smaller, less liquid
and subject to greater price volatility than those in
the United States. These risks may be intensified in
certain emerging market countries (e.g., in Latin
America and parts of Europe). Generally, price
fluctuations in the Fund's foreign security holdings are likely
to be high relative to those of securities issued in the
United States.
Other risks include the possibility of
expropriation, nationalization or confiscatory
taxation, foreign exchange controls (which may include
suspension of the ability to transfer currency from a
given country), difficulties in pricing, default in
foreign government securities, high rates of inflation
(especially in emerging markets countries), difficulties in
enforcing foreign judgments, political or social instability,
or other developments that could adversely affect the
Fund's foreign investments.
The risks of investing in foreign securities are
likely to be intensified in the case of investments in
issuers domiciled or doing substantial business in
emerging market countries. For example, countries with
emerging markets may have relatively unstable
governments and therefore be susceptible to sudden
adverse government action (such as nationalization of businesses,
restrictions on foreign ownership or prohibitions
against repatriation of assets). Security prices in
emerging markets can also be significantly more
volatile than in the more developed nations of the
world, and communications between the U.S. and emerging
market countries may be unreliable, increasing the risk
of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities. Delayed settlements
could cause the Fund to miss attractive investment
opportunities or impair its ability to dispose of
portfolio securities, resulting in a loss if the value
of the securities subsequently declines. Finally, many
emerging markets have experienced and continue to
experience high rates of inflation. In certain countries,
inflation has at times accelerated rapidly to hyperinflationary
levels, creating a negative interest rate environment and
sharply eroding the value of outstanding financial
assets in those countries.
In recent years, many emerging market countries
around the world have undergone political changes that
have reduced government's role in economic and personal
affairs and have stimulated investment and growth. In
order for these emerging economies to continue to
expand and develop industry, infrastructure and
currency reserves, continued influx of capital is
essential. Historically, there is a strong direct correlation
between economic growth and stock market returns. While
this is no guarantee of future performance, IMI
believes that investment opportunities (particularly in
the energy, environmental services, natural resources,
basic materials, power, telecommunications and
transportation industries) may result within the
evolving economies of emerging market countries from
which the Funds and their shareholders will benefit. IMI
believes that similar investment opportunities will be created
for companies involved in providing consumer goods and
services (e.g., food, beverages, autos, housing,
tourism and leisure, and merchandising.)
FOREIGN CURRENCY EXCHANGE TRANSACTIONS: The Fund
usually effects its currency exchange transactions on a
spot (i.e., cash) basis at the spot rate prevailing in
the foreign exchange market. However, some price spread
on currency exchange (e.g., to cover service charges)
is usually incurred when the Fund converts assets from
one currency to another. The Fund may also be affected
unfavorably by fluctuations in the relative rates of
exchange between the currencies of different nations.
FORWARD FOREIGN CURRENCY CONTRACTS: A forward
foreign currency contract involves an obligation to
purchase or sell a specific currency at a future date
at a predetermined price.
Although these contracts are intended to minimize the
risk of loss due to a decline in the value of the
hedged currencies, they also tend to limit any
potential gain that might result should the value of
the currencies increase. In addition, there may be an
imperfect correlation between the Fund's portfolio holdings of
securities denominated in a particular currency and forward
contracts entered into by the Fund, which may prevent
the Fund from achieving the intended hedge or expose
the Fund to the risk of currency exchange loss.
OPTIONS AND FUTURES TRANSACTIONS: The Fund may
use various techniques to increase or decrease its
exposure to changing security prices, currency exchange
rates, commodity prices, or other factors that affect
the value of the Fund's securities. These techniques
may involve derivative transactions such as purchasing
put and call options, selling put and call options, and
engaging in transactions in currency rate futures, stock
index futures and related options.
The Fund may invest in options on stock indices
and on individual securities in accordance with its
stated investment objective and policies (see above). A
put option is a short-term contract that gives the
purchaser of the option, in return for a premium, the
right to sell the underlying security or currency to
the seller of the option at a specified price during the term of
the option. A call option is a short-term contract that
gives the purchaser the right to buy the underlying
security or currency from the seller of the option at a
specified price during the term of the option. An
option on a stock index gives the purchaser the right
to receive from the seller cash equal to the difference
between the closing price of the index and the exercise
price of the option.
The Fund may also enter into futures transactions
in accordance with its stated investment objective and
policies. A stock index futures contract is an
agreement to take or make delivery of an amount of cash
based on the difference between the value of the index
at the beginning and at the end of the contract period.
A foreign currency futures contract is a standardized
contract for the future delivery of a specified amount
of a foreign currency at a future date at a price
established when the position is taken.
Investors should be aware that the risks
associated with the use of options and futures are
considerable. Options and futures transactions
generally involve a small investment of cash relative
to the magnitude of the risk assumed, and therefore
could result in a significant loss to the Fund if IMI judges
market conditions incorrectly or employs a strategy that does
not correlate well with the Fund's investments. The
Fund may also experience a significant loss if it is
unable to close a particular position due to the lack
of a liquid secondary market. For further information
regarding the use of options and futures transactions
and any associated risks, see the SAI.
REPURCHASE AGREEMENTS: Repurchase agreements are
agreements under which the Fund buys a money market
instrument and obtains a simultaneous commitment from
the seller to repurchase the instrument at a specified
time and agreed-upon yield. The Fund may enter into
repurchase agreements with banks or broker-dealers
deemed to be creditworthy by IMI under guidelines approved by the
Board of Trustees. The Fund could experience a delay in
obtaining direct ownership of the underlying
collateral, and might incur a loss if the value of the
security should decline.
RESTRICTED AND ILLIQUID SECURITIES: There may be
a lapse of time between the Fund's decision to sell a
restricted or illiquid security and the point at which
the Fund is permitted or able to sell the security. If
adverse market conditions were to develop during that
period, the Fund might obtain a price less favorable
than the price that prevailed when it decided to sell. In
addition, issuers of restricted and other illiquid securities
may not be subject to the disclosure and other investor
protection requirements that would apply if their
securities were publicly traded.
SHARES OF OTHER INVESTMENT COMPANIES: As a
shareholder of an investment company, the Fund will
bear its ratable share of the investment company's
expenses (including management fees, in the case of a
management investment company).
SMALL COMPANIES: Investing in smaller company
stocks involves certain special considerations and
risks that are not usually associated with investing in
larger, more established companies. For example, the
securities of smaller companies may be subject to more
abrupt or erratic market movements, because they tend
to be thinly traded and are subject to a greater degree
to changes in the issuer's earnings and prospects. Small
companies also tend to have limited product lines, markets or
financial resources. Transaction costs in smaller company
stocks also may be higher than those of larger
companies.
WARRANTS: The holder of a warrant has the right
to purchase a given number of shares of a particular
issuer at a specified price until expiration of the
warrant. Such investments can provide a greater
potential for profit or loss than an equivalent
investment in the underlying security, and are considered
speculative investments. For example, if a warrant were not
exercised by the date of its expiration, the Fund would lose
its entire investment. The Fund's investments in
warrants will not exceed 5% of the value of its net
assets.
"WHEN-ISSUED" SECURITIES AND FIRM COMMITMENTS:
Purchasing securities on a "when-issued" or firm
commitment basis involves a risk of loss if the value
of the security to be purchased declines prior to the
settlement date.
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. Since the interest on such bonds is, in
effect, compounded, they are subject to greater market
value fluctuations in response to changing interest
rates than debt securities that distribute income
regularly. In addition, for Federal income tax purposes
the Fund generally recognizes and is required to
distribute income generated by zero coupon bonds currently in the
amount of the unpaid accrued interest, even though the
actual income will not yet have been received by the
Fund.
ORGANIZATION AND MANAGEMENT OF THE FUND
The Fund is a separate, diversified portfolio of
the Trust, an open-end management investment company
organized as a Massachusetts business trust on December
21, 1983. The business and affairs of the Fund are
managed under the direction of the Trustees.
Information about the Trustees, as well as the Trust's
executive officers, may be found in the SAI. The Trust has an
unlimited number of authorized shares of beneficial
interest, and currently has 17 separate portfolios. The
Fund has four classes of shares, designated as Class A,
Class B, Class C and Class I. Shares of the Fund
entitle their holders to one vote per share (with
proportionate voting for fractional shares). The shares of
each class represent an interest in the same portfolio of Fund
investments. Each class of shares, except for Class I,
has a different Rule 12b-1 distribution plan and bears
different distribution fees. Shares of each class have
equal rights as to voting, redemption, dividends and
liquidation but have exclusive voting rights with
respect to their Rule 12b-1 distribution plans.
The Trust employs IMI to provide business
management and investment advisory services to the
Fund. Mackenzie Investment Management Inc. ("MIMI")
provides administrative and accounting services, Ivy
Mackenzie Distributors, Inc. ("IMDI") distributes the
Fund's shares, and Ivy Mackenzie Services Corp. ("IMSC")
provides transfer agency and shareholder-related services for the
Fund. IMI, IMDI and IMSC are wholly-owned subsidiaries
of MIMI. As of September 30, 1996, IMI and MIMI had
approximately $1.76 billion and $162 million,
respectively, in assets under management. MIMI is a
subsidiary of Mackenzie Financial Corporation ("MFC"),
which has been an investment counsel and mutual fund
manager in Toronto, Ontario, Canada for more than 25
years.
INVESTMENT MANAGER
For IMI's business management and investment
advisory services, the Fund pays IMI a fee, which is
accrued daily and paid monthly, based on the Fund's
average net assets, at an annual rate of 1.00%. The
fees paid by the Fund are higher than those charged by
many funds that invest primarily in U.S. securities,
but not necessarily higher than the fees charged to
funds with investment objectives similar to those of the Fund.
Currently, IMI voluntarily limits the Fund's total
operating expenses (excluding Rule 12b-1 fees,
interest, taxes, brokerage commissions, litigation,
indemnification, and extraordinary expenses) to an
annual rate of 1.95% of the Fund's average daily net
assets, which may lower the Fund's expenses and increase its
total return. This voluntary expense limitation may be
terminated at any time, at which point the Fund's
expenses may increase and its total return may be
reduced.
IMI pays all expenses that it incurs in rendering
management services to the Fund. The Fund bears its own
operational costs. General expenses of the Trust that
are not readily identifiable as belonging to a
particular series of the Trust (or a particular class
thereof) are allocated among and charged to each series
based on its relative net asset size. Expenses that are
attributable to a particular Fund (or class thereof) will be
borne by that Fund (or class) directly. The fees payable to
IMI are subject to any reimbursement or fee waiver to
which IMI may agree (and to any applicable state
regulations that may require IMI to reimburse the Fund
if its aggregate operating expenses exceed certain
limitations).
PORTFOLIO MANAGEMENT: The following individuals
have responsibilities for management of the fund:
Michael G. Landry, President and a Director of IMI
and MIMI, and President and a Trustee of the
Trust, is the portfolio manager for the Fund. Mr.
Landry has headed these organizations since 1987.
Previously he was a Senior Vice President and portfolio
manager with the Templeton organization. He has
over 20 years of professional investment experience. He has a
degree in economics from Carleton University.
Barbara Trebbi, a Senior Vice President of IMI and
managing director of the Ivy emerging markets research
team, is the portfolio manager of the Fund. Ms. Trebbi
joined the organization in 1988 and has eight years
of professional investment experience. She is a
Chartered Financial Analyst and holds a Graduate
Diploma from the London School of Economics.
FUND ADMINISTRATION AND ACCOUNTING
MIMI provides various administrative services for
the Fund, such as assisting with the preparation of
Federal and state income tax returns, financial
statements and periodic reports to shareholders. MIMI
also assists the Trust's legal counsel with the filing
of registration statements, proxies and other required
filings under Federal and state law. Under this arrangement, the
average net assets attributable to the Fund's Class A,
Class B and Class C shares are subject to a fee,
accrued daily and paid monthly, at an annual rate of
0.10%. The net assets attributable to Class I shares
are subject to a fee at the annual rate of 0.01%.
MIMI also provides certain accounting and pricing
services for the Fund (see "Fund Accounting Services"
in the SAI for more information).
TRANSFER AGENT
IMSC is the transfer and dividend-paying agent for
the Fund, and also provides certain shareholder-related
services. In addition, certain broker-dealers that
maintain shareholder accounts with the Fund 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 (see "Investment Advisory and Other Services"
in the SAI).
ALTERNATIVE PURCHASE ARRANGEMENTS
CLASS A SHARES: Class A shares are subject to an
initial sales charge, unless the amount you purchase is
$500,000 or more (see "Contingent Deferred Sales Charge
- -- Class A Shares"). Certain purchases qualify for a
reduced initial sales charge (see "Qualifying for a
Reduced Sales Charge"). Class A shares are subject to
ongoing service fees at an annual rate of 0.25% of the
Fund's average net assets attributable to its Class A shares. If
you do not specify on your Account Application which
class of shares you are purchasing, it will be assumed
that you are investing in Class A shares.
CLASS B AND CLASS C SHARES: Class B and Class C
shares are not subject to an initial sales charge, but
are subject to a CDSC if redeemed within six years of
purchase, in the case of Class B shares, or within one
year of purchase, in the case of Class C shares. Both
classes of shares are subject to ongoing service and
distribution fees at a combined annual rate of up to 1.00% of the
Fund's average net assets attributable to its Class B or
Class C shares. The ongoing distribution fee will cause
these shares to have a higher expense ratio than that
of Class A shares.
CLASS I SHARES: Class I shares are offered only to
institutions and certain individuals, and are not
subject to an initial sales charge or a CDSC, nor to
ongoing service or distribution fees. Class I shares
also bear lower fees than Class A, Class B and Class C
shares.
FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE:
The multi- class structure of the Fund allows you to
choose the most beneficial way to buy shares given the
size of your purchase and the length of time you expect
to hold your shares. You should consider whether,
during the anticipated life of your Fund investment,
the accumulated service and distribution fees on Class
B and Class C shares would be less than the initial sales
charge and accumulated service fees on Class A shares purchased
at the same time, and to what extent this differential
would be offset by the Class A shares' potentially
higher yield. Also, sales personnel may receive
different compensation depending on which class of
shares they are selling. The tables under the caption
"Annual Fund Operating Expenses" at the beginning of this
Prospectus contain additional information that is designed to
assist you in making this determination.
DIVIDENDS AND TAXES
Distributions you receive from the Fund are
reinvested in additional shares of the same class
unless you elect to receive them in cash. Dividends
ordinarily will vary from one class to another.
The Fund intends to make a distribution for each
fiscal year of any net investment income and net
realized short-term capital gain, as well as any net
long-term capital gain realized during the year. An
additional distribution may be made of net investment
income, net realized short-term capital gains and net
realized long-term capital gains to comply with the calendar year
distribution requirement under the excise tax provisions
of Section 4982 of the Internal Revenue Code of 1986,
as amended (the "Code").
TAXATION: The following discussion is intended
for general information only. You should consult with
your tax adviser as to the tax consequences of an
investment in a particular Fund, including the status
of distributions from the Fund under applicable state
or local law.
The Fund intends to qualify annually as a
regulated investment company under the Code. To
qualify, the Fund must meet certain income,
distribution and diversification requirements. In any
year in which the Fund qualifies as a regulated investment
company and timely distributes all of its taxable income, the
Fund generally will not pay any Federal income or excise
tax.
Dividends paid out of the Fund's investment
company taxable income (including dividends, interest
and net short-term capital gains) will be taxable to a
shareholder as ordinary income. If a portion of the
Fund's income consists of dividends paid by U.S.
corporations, a portion of the dividends paid by the Fund may be
eligible for the corporate dividends-received deduction.
Distributions of net capital gains (the excess of net
long-term capital gains over net short-term capital
losses), if any, are taxable as long-term capital
gains, regardless of how long the shareholder has held
the Fund's shares. Dividends are taxable to
shareholders in the same manner whether received in cash or
reinvested in additional Fund shares.
If, for any year, the Fund's total distributions
exceed its earnings and profits, the excess will
generally be treated as a return of capital. The amount
treated as a return of capital will
reduce a shareholder's adjusted basis in his/her shares
(thereby increasing potential gain or reducing
potential loss on the sale of shares) and, to the
extent that the amount exceeds this basis, will be
treated as a taxable gain.
A distribution will be treated as paid on December
31 of the current calendar year if it is declared by
the 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. Such
distributions will be taxable to shareholders in the calendar
year in which the distributions are declared, rather than
the calendar year in which the distributions are
received.
Investments in securities that are issued at a
discount will result each year in income to the Fund
equal to a portion of the excess of the face value of
the securities over their issue price, even though the
Fund receives no cash interest payments from the
securities.
Income and gains received by the Fund from sources
within foreign countries may be subject to foreign
withholding and other taxes. Unless the Fund is
eligible and elects to "pass through" to its
shareholders the amount of foreign income and similar
taxes paid by the Fund, these taxes will reduce the Fund's
investment company taxable income, and distributions of
investment company taxable income received from the Fund will be
treated as U.S. source income.
Any gain or loss realized by a shareholder upon
the sale or other disposition of shares of the Fund, or
upon receipt of a distribution in complete liquidation
of the Fund, generally will be a capital gain or loss
which will be long-term or short-term, generally
depending upon the shareholder's holding period for the
shares.
The Fund may be required to withhold U.S. Federal
income tax at the rate of 31% of all taxable
distributions payable to shareholders who fail to
provide the Fund with their correct taxpayer
identification number or to make required
certifications, or who have been notified by the Internal Revenue
Service ("IRS") that they are subject to backup
withholding. Backup withholding is not an additional
tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Fund distributions may be subject to state, local
and foreign taxes. Distributions of the Fund which are
derived from interest on obligations of the U.S.
Government and certain of its agencies, authorities and
instrumentalities may be exempt from state and local
taxes in certain states. Further information relating
to tax consequences is contained in the SAI.
PERFORMANCE DATA
Performance information is computed separately for
each class of Fund shares in accordance with formulas
prescribed by the SEC. Performance information for each
class may be compared in reports and promotional
literature to indices such as the Standard and Poor's
500 Stock Index, Dow Jones Industrial Average, and
Morgan Stanley Capital International World Index.
Advertisements, sales literature and communications to
shareholders may also contain various expressions of the Fund's
total return and current distribution rate. Performance
figures will vary in part because of the different
expense structures of the Fund's different classes. ALL
PERFORMANCE INFORMATION IS HISTORICAL AND IS NOT
INTENDED TO SUGGEST FUTURE RESULTS.
"Total return" is the change in value of an
investment in the Fund for a specified period, and
assumes the reinvestment of all distributions and
imposition of the maximum applicable sales charge.
"Average annual total return" represents the average
annual compound rate of return of an investment in a particular
class of Fund shares assuming the investment is held for
one year, five years and ten years as of the end of the
most recent calendar quarter. Where the Fund provides
total return quotations for other periods, or based on
investments at various sales charge levels or at net
asset value, "total return" is based on the total of
all income and capital gains paid to (and reinvested
by) shareholders, plus (or minus) the change in the value of the
original investment expressed as a percentage of the
purchase price.
HOW TO BUY SHARES
OPENING AN ACCOUNT: Complete and sign the Account
Application on the last page of this Prospectus. Make
your check payable to Ivy International Value Fund. No
third party checks will be accepted. Deliver these
items to your registered representative or selling
broker, or send them to one of the addresses below:
Regular Mail:
IVY MACKENZIE SERVICES CORP.
P.O. BOX 3022
BOCA RATON, FL 33431-0922
Courier:
IVY MACKENZIE SERVICES CORP.
700 SOUTH FEDERAL HIGHWAY, SUITE 300
BOCA RATON, FL 33432
The Fund reserves the right to reject, for any
reason, any purchase order.
MINIMUM INVESTMENT POLICIES: The minimum initial
investment is $1,000; the minimum additional investment
is $100. Initial or
additional amounts for retirement accounts may be less
(see "Retirement Plans").
Accounts in Class I can be opened with a minimum
initial investment of $5,000,000; the minimum
additional investment is $10,000. The minimum initial
investment in Class I may be spread over a thirteen-
month period following the opening of the account.
BUYING ADDITIONAL SHARES: You may add to your
account at any time through any of the following
options:
BY MAIL: Complete the investment slip attached to
your statement, or write instructions including the
account registration, Fund number and account number of
the shares you wish to purchase. Send your check
(payable to the Fund in which you are investing), along
with your investment slip or written instructions, to
one of the addresses above.
THROUGH YOUR BROKER: Deliver the investment slip
attached to your statement, or written instructions,
along with your payment to your registered
representative or selling broker.
BY WIRE: Purchases may also be made by wiring
money from your bank account to your Ivy account. Your
bank may charge a fee for wiring funds. Before wiring
any funds, please call IMSC at 1- 800-777-6472. Wiring
instructions are as follows:
FIRST UNION NATIONAL BANK OF FLORIDA
JACKSONVILLE, FL
ABA#063000021
ACCOUNT #2090002063833
FOR FURTHER CREDIT TO:
YOUR IVY ACCOUNT REGISTRATION
YOUR FUND NUMBER AND ACCOUNT NUMBER
BY AUTOMATIC INVESTMENT METHOD: Complete Sections
6A and 7B on the Account Application (see "Automatic
Investment Method" on page 27 for more information).
HOW YOUR PURCHASE PRICE IS DETERMINED
Your purchase price for Class A shares of the Fund
is the net asset value ("NAV") per share plus a sales
charge, which may be reduced or eliminated in certain
circumstances. The purchase price per share is known as
the public offering price. Your purchase price for
Class B, Class C and Class I shares is the NAV per
share.
Share purchases will be made at the next
determined price after your purchase order is received.
The price is effective for orders received by IMSC or
by your registered securities dealer prior to the time
of the determination of the NAV. Any orders received
after the time of the determination of the NAV will be
entered at the next calculated price.
Orders placed with a securities dealer before the
NAV is determined that are transmitted through the
facilities of the National Securities Clearing
Corporation on the same day are confirmed at that day's
price. Any loss resulting from the dealer's failure to
submit an order by the deadline will be borne by that
dealer.
You will receive an account statement after any
purchase, exchange or full liquidation. Statements
related to reinvestment of dividends, capital gains,
automatic investment plans (see the SAI for further
explanation) and/or systematic withdrawal plans will be
sent quarterly.
HOW THE FUND VALUES ITS SHARES
The NAV per share is the value of one share. The
NAV is determined for each Class of shares as of the
close of the New York Stock Exchange on each day the
Exchange is open by dividing the value of the Fund's
net assets attributable to a class by the number of
shares of that class that are outstanding, adjusted to
the nearest cent. These procedures are described more completely
in the SAI.
The Trust's Board of Trustees has established
procedures to value the Fund's securities in order to
determine the NAV. The value of a foreign security is
determined as of the normal close of trading on the
foreign exchange on which it is traded or as of the
close of regular trading on the New York Stock Exchange, if
that is earlier. If no sale is reported at that time, the
average between the current bid and asked price is
used. All other securities for which OTC market
quotations are readily available are valued at the
average between the current bid and asked price.
Securities and other assets for which market prices are
not readily available are valued at fair value, as determined by
IMI and approved in good faith by the Board. Money market
instruments of the Fund are valued at amortized cost.
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES
Shares are purchased at a public offering price
equal to their NAV per share plus a sales charge, as
set forth below.
SALES CHARGE
PORTION
OF AS A
AS A PUBLIC PERCEN-
PERCEN- OFFERING
TAGE TAGE PRICE
OF PUBLIC OF NET RETAINED
OFFERING AMOUNT BY AMOUNT INVESTED
PRICE INVESTED DEALER
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%
* A CDSC may apply to the redemption of Class A
shares that are purchased without an initial sales
charge. See "Contingent Deferred Sales Charge --
Class A Shares."
Sales charges are not applied to any dividends or
capital gains that are reinvested in additional shares
of the Fund. An investor may be charged a transaction
fee for Class A and Class I shares purchased or
redeemed at NAV through a broker or agent other than
IMDI.
With respect to purchases of $500,000 or more
through dealers or agents, IMDI may, at the time of
purchase, pay such dealers or agents from its own
resources a commission to compensate such dealers or
agents for their distribution assistance in connection
with such purchases. The commission would be computed
as set forth below:
NAV COMMISSION TABLE
PURCHASE AMOUNT
COMMISSION
First $3,000,000 . . . . . . . . . . . . . . . .
1.00%
Next $2,000,000 . . . . . . . . . . . . . . . . .
.50% Over $5,000,000 . . . . . . . . . . . . . . . . .
.25%
Dealers who receive 90% or more of the sales
charge may be deemed to be "underwriters" as that term
is defined in the 1933 Act.
IMDI compensates participating brokers who sell
Class A shares through the initial sales charge. IMDI
retains that portion of the initial sales charge that
is not reallowed to the dealers, which it may use to
distribute the Fund's Class A
shares. Pursuant to separate distribution plans for the
Fund's Class A, Class B and Class C shares, IMDI bears
various promotional and sales related expenses,
including the cost of printing and mailing prospectuses
to persons other than shareholders. Pursuant to the
Fund's Class A distribution plans, IMDI currently pays
a continuing service fee to qualified dealers at an
annual rate of 0.25% of qualified investments.
IMDI may from time to time pay a bonus or other
incentive to dealers (other than IMDI) which employ a
registered representative who sells a minimum dollar
amount of the shares of the Fund and/or other funds
distributed by IMDI during a specified period of time.
This bonus or other incentive may take the form of
payment for travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered
representatives and members of their families to places
within or without the U.S. or other bonuses such as
gift certificates or the cash equivalent of such bonus
or incentive.
CONTINGENT DEFERRED SALES CHARGE -- CLASS A SHARES
Purchases of $500,000 or more of Class A shares
will be made at NAV with no initial sales charge, but
if the shares are redeemed within 24 months after the
end of the calendar month in which the purchase was
made (the CDSC period), a CDSC of 1.00% will be
imposed.
In order to recover commissions paid to dealers on
NAV transfers (as defined in "Purchases of Class A
Shares at Net Asset Value"), Class A shares of the Fund
are subject to a CDSC of 1.00% for certain redemptions
within 24 months after the date of purchase.
The charge will be assessed on an amount equal to
the lesser of the current market value or the original
purchase cost of the Class A shares redeemed.
Accordingly, no CDSC will be imposed on increases in
account value above the initial purchase price,
including any dividends or capital gains which have been
reinvested in additional Class A shares.
In determining whether a CDSC applies to a
redemption, the calculation will be determined in a
manner that results in the lowest possible rate being
charged. Therefore, it will be assumed that the
redemption is first made from any shares in your account
not subject to the CDSC. The CDSC is waived in certain
circumstances. See the discussion below under the caption "Waiver
of Contingent Deferred Sales Charge."
WAIVER OF CONTINGENT DEFERRED SALES CHARGE: The
CDSC is waived for: (i) redemptions in connection with
distributions not exceeding 12% annually of the initial
account balance (i.e., the value of the shareholder's
Class A Fund account at the time of the initial
distribution) (i.a) following retirement under a tax
qualified retirement plan, or (i.b) upon attaining age 59 1/2 in
the case of an IRA, a custodial account pursuant to
section 403(b)(7) of the Code or a Keogh Plan; (ii)
redemption resulting from tax-free return of an excess
contribution to an IRA; or (iii) any partial or
complete redemption following the death or disability
(as defined in Section 72(m)(7) of the Code) of a
shareholder from an account in which the deceased or disabled is
named, provided that the redemption is requested within
one year of death or disability. IMDI may require
documentation prior to waiver of the CDSC.
Class A shareholders may exchange their Class A
shares subject to a CDSC ("outstanding Class A shares")
for Class A shares of another Ivy or Mackenzie Fund
("new Class A shares") on the basis of the relative NAV
per Class A share, without the payment of any CDSC that
would be due upon the redemption of the outstanding
Class A shares. The original CDSC rate that would have
been charged if the outstanding Class A shares were redeemed
will carry over to the new Class A shares received in the
exchange, and will be charged accordingly at the time of
redemption.
QUALIFYING FOR A REDUCED SALES CHARGE
RIGHTS OF ACCUMULATION (ROA): Rights of
Accumulation ("ROA") is calculated by determining the
current market value of all Class A shares in all Ivy
or Mackenzie fund accounts (except Ivy Money Market
Fund) owned by you, your spouse, and your children
under 21 years of age. ROA is also applicable to
accounts under a trustee or other single fiduciary (including
retirement accounts qualified under Section 401 of the
Code). The current market value of each of your
accounts as described above is added together and then
added to your current purchase amount. If the combined
total is equal or greater than a breakpoint amount for
the Fund, then you qualify for the reduced sales
charge. To reduce or eliminate the sales charge, you must
complete Section 4B of the Account Application.
LETTER OF INTENT (LOI): A Letter of Intent
("LOI") is a non-binding agreement that states your
intention to invest in additional Class A shares,
within a thirteen-month period after the initial
purchase, an amount equal to a breakpoint amount for
the Fund. The LOI may be backdated up to 90 days. To sign a LOI,
please complete Section 4B of the Account Application.
Should the LOI not be fulfilled within the
thirteen-month period, your account will be debited for
the difference between the full sales charge that
applies for the amount actually invested and the
reduced sales charge actually paid on purchases placed
under the terms of the LOI.
PURCHASES OF CLASS A SHARES AT NET ASSET VALUE:
An investor who was a shareholder of any Ivy Fund on
December 31, 1991 or a shareholder of American
Investors Income Fund, Inc. or American Investors
Growth Fund, Inc. on October 31, 1988 and who became a
shareholder of Ivy Bond Fund (formerly Mackenzie Fixed
Income Trust) or Ivy Growth Fund as a result of the
respective reorganizations of the funds will be exempt
from sales charges on the purchase of Class A shares of
any Ivy or Mackenzie fund. This privilege is also
available to immediate family members of a shareholder
(i.e., the shareholder's children, the shareholder's
spouse and the children of the shareholder's spouse). This no-
load privilege terminates for the investor if the investor
redeems all shares owned. Shareholders and their relatives
as described above should call 1-800-235-3322 for
information about additional purchases or to inquire
about their account.
Class A shares of the Fund may be purchased
without an initial sales charge or CDSC by (i) officers
and Trustees of the Trust (and their relatives), (ii)
officers, directors, employees, retired employees,
legal counsel and accountants of IMI, MIMI, and MFC
(and their relatives), and (iii) 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). In addition, certain
investment advisors and financial planners who charge a
management, consulting or other fee for their services
and who place trades for their own accounts or the
accounts of their clients may purchase Class A shares of the Fund
without an initial sales charge or a CDSC, provided such
purchases are placed through a broker or agent who
maintains an omnibus account with that Fund. Also,
clients of these advisors and planners may make
purchases under the same conditions if the purchases
are through the master account of such advisor or
planner on the books of such broker or agent. This provision
applies to assets of retirement and deferred compensation
plans and trusts used to fund those plans including,
but not limited to, those defined in Section 401(a),
403(b) or 457 of the Code and "Rabbi Trusts" whose
assets are used to purchase shares of the Fund through
the aforementioned channels.
Class A shares of the Fund may be purchased at NAV
by retirement plans qualified under section 401(a) or
403(b) of the Code, subject to the Employee Retirement
Income Security Act of 1974, as amended. A CDSC of
1.00% will be imposed on such purchases in the event of
certain plan-level redemption transactions within 24
months following such purchases.
If investments by retirement plans at NAV are made
through a dealer who has executed a dealer agreement
with respect to the Fund, IMDI may, at the time of
purchase, pay the dealer out of IMDI's own resources a
commission to compensate the dealer for its
distribution assistance in connection with the retirement
plan's investment. Please refer to the NAV Commission Table on
page [___] of this Prospectus. Please contact IMDI for
additional information.
Class A shares can also be purchased without an
initial
sales charge, but subject to a CDSC of 1.00% during the
first 24 months by: (a) any state, county, city (or any
instrumentality, department, authority or agency of
such entities) that is prohibited by applicable
investment laws from paying a sales charge or
commission when purchasing shares of a registered
investment management company (an "eligible governmental
authority"), and (b) trust companies, bank trust departments,
credit unions, savings and loans and other similar
organizations in their fiduciary capacity or for their
own accounts, subject to any minimum requirements set
by IMDI (currently, these criteria require that the
amount invested or to be invested in the subsequent 13-
month period totals at least $250,000). In either case,
IMDI may pay commissions to dealers that provide
distribution assistance on the same basis as in the preceding
paragraph.
Class A shares of the Fund may also be purchased
without a sales charge in connection with certain
liquidation, merger or acquisition transactions
involving other investment companies or personal
holding companies.
The Fund may, from time to time, waive the initial
sales charge on its Class A shares sold to clients of
various broker- dealers with which IMDI has a selling
relationship. This privilege will apply only to Class A
Shares of the Fund that are purchased using all or a
portion of the proceeds obtained by such clients
through redemptions of shares (on which a commission has
been paid) of an investment company (other than Mackenzie Series
Trust or the Trust), unit investment trust or limited
partnership ("NAV transfers"). Some dealers may elect
not to participate in this program. Those dealers that
do elect to participate in the program must complete
certain forms required by IMDI. The normal service fee,
as described in the "Initial Sales Charge Alternative -
- - Class A Shares" and "Contingent Deferred Sales Charge
Alternative -- Class B and Class C Shares" sections of
this Prospectus, will be paid to dealers in connection with these
purchases. Additional information on reductions or
waivers may be obtained from IMDI at the address listed
on the cover of the Prospectus.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B
AND CLASS C SHARES
Class B and Class C shares are offered at NAV per
share without a front end sales charge. Class C shares
redeemed within one year of purchase will be subject to
a CDSC of 1%, and Class B shares redeemed within six
years of purchase will be subject to a CDSC at the
rates set forth below. This charge 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.
Accordingly, you will not be assessed a CDSC on increases in
account value above the initial purchase price, including
shares derived from dividends or capital gains
reinvested. In determining whether a CDSC applies to a
redemption, the
calculation will be determined in a manner that results
in the lowest possible rate being charged. It will be
assumed that your redemption comes first from shares
you have held beyond the requisite maximum holding
period or those you acquire through reinvestment of
dividends or capital gains, and next from the shares
you have held the longest during the requisite holding
period.
Proceeds from the CDSC are paid to IMDI. The
proceeds are used, in whole or in part, to defray its
expenses related to providing the Fund with
distribution services in connection with the sale of
Class B and Class C shares, such as compensating
selected dealers and agents for selling these shares. The
combination of the CDSC and the distribution and service fees
makes it possible for the Fund to sell Class B or Class C
shares without deducting a sales charge at the time of
the purchase.
In the case of Class B shares, the amount of the
CDSC, if any, will vary depending on the number of
years from the time you purchase your Class B shares
until the time you redeem them. Solely for purposes of
determining this holding period, any payments you make
during the quarter will be aggregated and deemed to
have been made on the last day of the quarter. In the
case of Class C shares, solely for purposes of determining this
holding period, any purchases you make during a month will
be deemed to have been made on the last day of the
month.
CLASS B SHARES
CONTINGENT
DEFERRED
SALES CHARGE
AS A
PERCENTAGE OF
DOLLAR AMOUNT
SUBJECT TO YEAR SINCE
PURCHASE CHARGE
First . . . . . . . . . . . . . . . . . . . . . 5%
Second . . . . . . . . . . . . . . . . . . . . 4%
Third . . . . . . . . . . . . . . . . . . . . . 3%
Fourth . . . . . . . . . . . . . . . . . . . . 3%
Fifth . . . . . . . . . . . . . . . . . . . . . 2%
Sixth . . . . . . . . . . . . . . . . . . . . . 1%
Seventh and thereafter . . . . . . . . . . . . 0%
IMDI currently intends to pay to dealers a sales
commission of 4% of the sale price of Class B shares
that they have sold, and will receive the entire amount
of the CDSC paid by shareholders on the redemption of
Class B shares to finance the 4% commission and related
marketing expenses.
With respect to Class C shares, IMDI currently
intends to pay to dealers a sales commission of 1% of
the sale price of Class C shares that they have sold, a
portion of which is to compensate the dealers for
providing Class C shareholder account services during
the first year of investment. IMDI will receive the
entire amount of the CDSC paid by shareholders on the
redemption of Class C shares to finance the 1% commission and
related marketing expenses.
Pursuant to separate distribution plans for the
Fund's Class B and Class C shares, IMDI bears various
promotional and sales related expenses, including the
cost of printing and mailing prospectuses to persons
other than shareholders. Under the Fund's Class B Plan,
IMDI retains 0.75% of the continuing 1.00%
service/distribution fee assessed to Class B shareholders, and
pays a continuing service fee to qualified dealers at an
annual rate of 0.25% of qualified investments. Under
the Class C Plan, IMDI pays continuing
service/distribution fees to qualified dealers at an
annual rate of 1.00% of qualified investments after the
first year of investment (0.25% of which represents a service
fee).
CONVERSION OF CLASS B SHARES: Your Class B shares
and an appropriate portion of both reinvested dividends
and capital gains on those shares will be converted
into Class A shares automatically no later than the
month following eight years after the shares were
purchased, resulting in lower annual distribution fees.
If you exchanged Class B shares into the Fund from Class B
shares of another Ivy or Mackenzie fund, the
calculation will be based on the time the shares in the
original fund were purchased.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE: The
CDSC is waived for: (i) redemptions in connection with
distributions not exceeding 12% annually of the initial
account balance (i.e., the value of the shareholder's
Class B or Class C Fund account at the time of the
initial distribution) (i.a) following retirement under
a tax qualified retirement plan, or (i.b) upon attaining
age 59 1/2 in the case of an IRA, a custodial account pursuant to
section 403(b)(7) of the Code or a Keogh Plan; (ii)
redemption resulting from tax-free return of an excess
contribution to an IRA; or (iii) any partial or
complete redemption following the death or disability
(as defined in Section 72(m)(7) of the Code) of a
shareholder from an account in which the deceased or
disabled is named, provided that the redemption is requested
within one year of death or disability. IMDI may require
documentation prior to waiver of the CDSC.
ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS: IMDI
may, at its own expense, pay concessions in addition to
those described above to dealers that satisfy certain
criteria established from time to time by IMDI. These
conditions relate to increasing sales of shares of the
Fund over specified periods and to certain other
factors. These payments may, depending on the dealer's
satisfaction of the required conditions, be periodic and may be
up to (i) 0.25% of the value of Fund shares sold by the
dealer during a particular period, and (ii) 0.10% of
the value of Fund shares held by the dealer's customers
for more than one year, calculated on an annual basis.
HOW TO REDEEM SHARES
You may redeem your Fund shares through your
registered securities representative, by mail or by
telephone. A CDSC may apply to certain Class A share
redemptions, to Class B share redemptions prior to
conversion and to Class C shares that are redeemed
within one year of purchase. All redemptions are made at
the NAV next determined after a redemption request has been
received in good order. Requests for redemptions must be
received by 4:00 p.m. Eastern time to be processed at
the NAV for that day. Any redemption request in good
order that is received after 4:00 p.m. Eastern time
will be processed at the price determined on the
following business day. IF SHARES TO BE REDEEMED WERE
PURCHASED BY CHECK, PAYMENT OF THE REDEMPTION MAY BE DELAYED
UNTIL THE CHECK HAS CLEARED OR FOR UP TO 15 DAYS AFTER THE
DATE OF PURCHASE. If you own shares of more than one
class of the Fund, the Fund will redeem first the
shares having the highest 12b-1 fees; any shares
subject to a CDSC will be redeemed last unless you
specifically elect otherwise.
When shares are redeemed, the Fund generally sends
you payment on the next business day. Under unusual
circumstances, the Fund may suspend redemptions or
postpone payment to the
extent permitted by Federal securities laws. The
proceeds of the redemption may be more or less than the
purchase price of your shares, depending upon, among
other factors, the market value of the Fund's
securities at the time of the redemption. If the
redemption is for over $50,000, or the proceeds are to be sent to
an address other than the address of record, or an
address change has occurred in the last 30 days, it
must be requested in writing with a signature
guarantee. See "Signature Guarantees," below.
If you are not certain of the requirements for a
redemption, please contact IMSC at 1-800-777-6472.
THROUGH YOUR REGISTERED SECURITIES DEALER: The
Dealer is responsible for promptly transmitting
redemption orders. Redemptions requested by dealers
will be made at the NAV (less any applicable CDSC)
determined at the close of regular trading (4:00 p.m.
Eastern time) on the day that a redemption request is
received in good order by IMSC.
BY MAIL: Requests for redemption in writing are
considered to be in "proper or good order" if they
contain the following:
- Any outstanding certificate(s) for shares
being redeemed.
- A letter of instruction, including the
account registration, fund number, the
account number and the dollar amount or
number of shares to be redeemed.
- Signatures of all registered owners whose
names appear on the account.
- Any required signature guarantees.
- Other supporting legal documentation, if
required (in the case of estates, trusts,
guardianships, corporations, unincorporated
associations, retirement plan trustees or
others acting in representative capacities).
The dollar amount or number of shares indicated
for redemption must not exceed the available shares or
NAV of your account at the next-determined prices. If
your request exceeds these limits, then the trade will
be rejected in its entirety.
Mail your request to IMSC at one of the addresses
on page 15 of this Prospectus.
BY TELEPHONE: Individual and joint accounts may
redeem up to $50,000 per day over the telephone by
contacting IMSC at 1- 800-777-6472. In times of unusual
economic or market changes, the telephone redemption
privilege may be difficult to implement. If you are
unable to execute your transaction by telephone, you may
want to consider placing the order in writing and sending it by
mail or overnight courier.
Checks will be made payable to the current account
registration and sent to the address of record. If there
has been a change of address in the last 30 days,
please use the instructions for redemption requests by
mail described above. A signature guarantee would be
required.
Requests for telephone redemptions will be
accepted from the registered owner of the account, the
designated registered representative or the registered
representative's assistant.
Shares held in certificate form cannot be redeemed
by telephone.
If Section 6E of the Account Application is not
completed, telephone redemption privileges will be
provided automatically. Although telephone redemptions
may be a convenient feature, you should realize that
you may be giving up a measure of security that you may
otherwise have if you terminated the privilege and
redeemed your shares in writing. If you do not wish to make
telephone redemptions or let your registered representative do
so on your behalf, you must notify IMSC in writing.
The Fund 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, the Fund may be liable for
any losses due to unauthorized or fraudulent telephone
instructions.
RECEIVING YOUR PROCEEDS BY FEDERAL FUNDS WIRE:
For shareholders who established this feature at the
time they opened their account, telephone instructions
will be accepted for redemption of amounts up to
$50,000 ($1,000 minimum) and proceeds will be wired on
the next business day to a predesignated bank account.
In order to add this feature to an existing
account or to change existing bank account information,
please submit a letter of instructions including your
bank information to IMSC at the address provided above.
The letter must be signed by all registered owners, and
their signatures must be guaranteed.
Your account will be charged a fee of $10 each
time redemption proceeds are wired to your bank. Your
bank may also charge you a fee for receiving a Federal
Funds wire.
Neither IMSC nor the Fund can be responsible for
the efficiency of the Federal Funds wire system or the
shareholder's bank.
MINIMUM ACCOUNT BALANCE REQUIREMENTS
Due to the high cost of maintaining small accounts
and subject to state law requirements, the Fund may
redeem the accounts of shareholders whose investment,
including sales charges paid, has been less than $1,000
for more than 12 months. The Fund will not redeem an
account unless the shareholder has been given at least
60 days' advance notice of the Fund's intention to do
so. No redemption will be made if a shareholder's
account falls below the minimum due to a reduction in the value
of the Fund's portfolio securities. This provision does
not apply to IRAs, other retirement accounts and
UGMA/UTMA accounts.
SIGNATURE GUARANTEES
For your protection, and to prevent fraudulent
redemptions, we require a signature guarantee in order
to accommodate the following requests:
- Redemption requests over $50,000.
- Requests for redemption proceeds to be sent
to someone other than the registered
shareholder.
- Requests for redemption proceeds to be sent
to an address other than the address of
record.
- Registration transfer requests.
- Requests for redemption proceeds to be wired
to your bank account (if this option was not
selected on your original application, or if
you are changing the bank wire information).
A signature guarantee may be obtained only from an
eligible guarantor institution as defined in Rule
17Ad-15 of the Securities Exchange Act of 1934, as
amended. An eligible guarantor institution includes
banks, brokers, dealers, municipal securities dealers,
government securities dealers, government securities
brokers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings
associations. The signature guarantee must not be
qualified in any way. Notarizations from notary publics
are not the same as signature guarantees, and are not
accepted.
Circumstances other than those described above may
require a signature guarantee. Please contact IMSC at
1-800-777-6472 for more information.
CHOOSING A DISTRIBUTION OPTION
You have the option of selecting the distribution
option that best suits your needs:
AUTOMATIC REINVESTMENT OPTION -- Both dividends
and capital gains are automatically reinvested at NAV
in additional shares of the same class of the Fund
unless you specify one of the other options.
INVESTMENT IN ANOTHER IVY OR MACKENZIE FUND --
Both dividends and capital gains are automatically
invested at NAV in another Ivy or Mackenzie Fund of the
same class.
DIVIDENDS IN CASH/CAPITAL GAINS REINVESTED --
Dividends will be paid in cash. Capital gains will be
reinvested at NAV in additional shares of the same
class of the Fund or another Ivy or Mackenzie Fund of
the same class.
DIVIDENDS AND CAPITAL GAINS IN CASH -- Both
dividends and capital gains will be paid in cash.
If you wish to have your cash distributions
deposited directly to your bank account via electronic
funds transfer ("EFT"), or if you wish to change your
distribution option, please contact IMSC at
1-800-777-6472.
If you wish to have your cash distributions go to
an address other than the address of record, you must
provide IMSC with a letter of instruction signed by all
registered owners with signatures guaranteed.
TAX IDENTIFICATION NUMBER
In general, to avoid being subject to a 31% U.S.
Federal backup withholding tax on dividends, capital
gains distributions and redemption proceeds, you must
furnish the Fund with your certified tax identification
number ("TIN") and certify that you are not subject to
backup withholding due to prior underreporting of
interest and dividends to the IRS. If you fail to provide a
certified TIN, or such other tax-related certifications as the
Fund may require, within 30 days of opening your new
account, the Fund reserves the right to involuntarily
redeem your account and send the proceeds to your
address of record.
You can avoid the above withholding and/or
redemption by correctly furnishing your TIN, and making
certain certifications, in Section 2 of the Account
Application at the time you open your new account,
unless the IRS requires that backup withholding be
applied to your account.
Certain payees, such as corporations, generally
are exempt from backup withholding. Please complete IRS
Form W-9 with the new account application to claim this
exemption. If the registration is for an UGMA/UTMA
account, please provide the social security number of
the minor. Non-U.S. investors who do not have a TIN
must provide, with their Account Application, a
completed IRS Form W-8.
CERTIFICATES
In order to facilitate transfers, exchanges and
redemptions, most shareholders elect not to receive
certificates. Should you wish to have a certificate
issued, please contact IMSC at 1-800- 777-6472 and
request that one be sent to you. (Retirement plan
accounts are not eligible for this service). Please note that if
you were to lose your certificate, you would incur an
expense to replace it.
Certificates requested by telephone for shares
valued up to $50,000 will be issued to the current
registration and mailed to the address of record.
Should you wish to have your certificates mailed to a
different address, or registered differently from the
current registration, contact IMSC 1-800-777-6472.
EXCHANGE PRIVILEGE
Shareholders of the Fund have an exchange
privilege with other Ivy and Mackenzie funds. The Fund
reserves the right to reject, for any reason, any
exchange orders.
Class A shareholders may exchange their
outstanding Class A shares for Class A shares of
another Ivy or Mackenzie fund on the basis of the
relative NAV per Class A share, plus an amount equal to
the difference 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.
Incremental sales charges are waived for outstanding
Class A shares that have been invested for 12 months or
longer.
Class B (and Class C) shareholders may exchange
their outstanding shares for Class B (or Class C)
shares of another Ivy or Mackenzie Fund on the basis of
the relative NAV per share, without the payment of any
CDSC that would otherwise be due upon redemption. Class
B shareholders who exercise the exchange privilege
would continue to be subject to the original Fund's
CDSC schedule (or period) following an exchange if such schedule
is higher (or longer) than the CDSC for the new Class B
shares.
Class I shareholders may exchange their
outstanding Class I shares for Class I shares of
another Ivy or Mackenzie fund on the basis of the
relative NAV per Class I share.
Shares resulting from the reinvestment of
dividends and other distributions will not be charged
an initial sales charge or a CDSC when exchanged into
another Ivy or Mackenzie Fund.
Exchanges are considered to be taxable events, and
may result in a capital gain or a capital loss for tax
purposes. Before executing an exchange, you should
obtain and read the prospectus and consider the
investment objective of the fund to be purchased.
Shares must be uncertificated in order to execute a
telephone exchange. Exchanges are available only in states where
they can be legally made. This privilege is not
intended to provide shareholders a means by which to
speculate on short-term movements in the market. The
Fund reserves the right to limit the frequency of
exchanges. Exchanges are accepted only if the
registrations of the two accounts are identical. Amounts to be
exchanged must meet minimum investment requirements for the
Ivy or Mackenzie Fund into which the exchange is made.
With respect to shares subject to a CDSC, if less
than all of an investment is exchanged out of the Fund,
the shares exchanged will reflect, pro rata, the cost,
capital appreciation and/or reinvestment of
distributions of the original investment as well as the
original purchase date, for purposes of calculating any
CDSC for future redemptions of the exchanged shares.
An investor who was a shareholder of American
Investors Income Fund, Inc. or American Investors
Growth Fund, Inc. prior to October 31, 1988, or a
shareholder of the Ivy Funds prior to December 31,
1991, who became a shareholder of the Fund as a result
of a reorganization or merger between the Funds may
exchange between funds without paying a sales charge. An investor
who was a shareholder of American Investors Income Fund,
Inc. or American Investors Growth Fund, Inc. on or
after October 31, 1988, who became a shareholder of the
Fund as a result of the reorganization between the
Funds will receive credit toward any applicable sales
charge imposed by any Ivy or Mackenzie Fund into which
an exchange is made.
In calculating the sales charge assessed on an
exchange, shareholders will be allowed to use the
Rights of Accumulation privilege.
EXCHANGES BY TELEPHONE: If Section 6D of the
Account Application is not completed, telephone
exchange privileges will be provided automatically.
Although telephone exchanges may be a convenient
feature, you should realize that you may be giving up a
measure of security that you may otherwise have if you
terminated the privilege and exchanged your shares in writing. If
you do not wish to make telephone exchanges or let your
registered representative do so on your behalf, you must
notify IMSC in writing.
In order to execute an exchange, please contact
IMSC at 1- 800-777-6472. Have the account number of your
current fund and the exact name in which it is
registered available to give to the telephone
representative.
The Fund 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, the Fund may be liable for
any losses due to unauthorized or fraudulent telephone
instructions.
EXCHANGES IN WRITING: In a letter, request an
exchange and provide the following information:
- The name and class of the fund whose shares you
currently own.
- Your account number.
- The name(s) in which the account is registered.
- The name of the fund in which you wish your
exchange to be invested.
- The number of shares or the dollar amount you wish
to exchange.
The request must be signed by all registered
owners.
REINVESTMENT PRIVILEGE
Investors who have redeemed Class A shares of the
Fund have a one-time privilege of reinvesting all or a
part of the proceeds of the redemption back into Class
A shares of that Fund at NAV (without a sales charge)
within 60 days after the date of redemption. IN ORDER
TO REINVEST WITHOUT A SALES CHARGE, SHAREHOLDERS OR
THEIR BROKERS MUST INFORM IMSC THAT THEY ARE EXERCISING
THE REINVESTMENT PRIVILEGE AT THE TIME OF REINVESTMENT.
The tax status of a gain realized on a redemption
generally will not be affected by the exercise of the
reinvestment privilege, but a loss realized on a redemption
generally may be disallowed by the IRS if the reinvestment
privilege is exercised within 30 days after the redemption.
In addition, upon a reinvestment, the shareholder may
not be permitted to take into account sales charges
incurred on the original purchase of shares in
computing their taxable gain or loss.
SYSTEMATIC WITHDRAWAL PLAN
You may elect the Systematic Withdrawal Plan at
any time by completing the Account Application, which
is attached to this Prospectus. You can also obtain
this application by contacting your registered
representative or IMSC at 1-800-777-6472. To be
eligible, you must have at least $5,000 in your account. Payments
(minimum distribution amount -- $50) from your account
can be made monthly, quarterly, semiannually, annually
or on a selected monthly basis, to yourself or any
other designated payee. You may elect to have your
systematic withdrawal paid directly to your bank
account via EFT, at no charge. Share certificates must be
unissued (i.e., held by the Fund) while the plan is in effect. A
Systematic Withdrawal Plan may not be established if you
are currently participating in the Automatic Investment
Method. For more information, please contact IMSC at
1-800-777-6472.
If payments you receive through the Systematic
Withdrawal Plan exceed the dividends and capital
appreciation of your account, you will be reducing the
value of your account. Additional investments made by
shareholders participating in the Systematic Withdrawal
Plan must equal at least $1,000 while the plan is in
effect. However, it may not be advantageous to purchase
additional Class A, Class B or Class C shares when you
have a Systematic Withdrawal Plan, because you may be subject to
an initial sales charge on your purchase of Class A
shares or to a CDSC imposed on your redemptions of
Class B or Class C shares. In addition, redemptions are
taxable events.
Amounts paid to you through the Systematic
Withdrawal Plan are derived from the redemption of
shares in your account. Any applicable CDSC will be
assessed upon the redemptions. A CDSC will not be
assessed on withdrawals not exceeding 12% annually of
the initial account balance when the Systematic Withdrawal Plan
was started.
Should you wish at any time to add a Systematic
Withdrawal Plan to an existing account or change payee
instructions, you will need to submit a written
request, signed by all registered owners, with
signatures guaranteed.
Retirement accounts are eligible for Systematic
Withdrawal Plans. Please contact IMSC at 1-800-777-6472
to obtain the necessary paperwork to establish a plan.
If the U.S. Postal Service cannot deliver your
checks, or if deposits to a bank account are returned
for any reason, your redemptions will be discontinued.
AUTOMATIC INVESTMENT METHOD
You may authorize an investment to be
automatically drawn each month from your bank for
investment in Fund shares by completing Sections 6A and
7B of the Account Application. Attach a "voided" check
or deposit slip to your account application. At pre-
specified intervals, your bank account will be debited and
the proceeds will be credited to your Ivy account. The minimum
investment under this plan is $50 per month ($25 per
month for retirement plans). There is no charge to you
for this program.
You may terminate or suspend your Automatic
Investment Method by telephone at any time by
contacting IMSC at 1-800-777- 6472.
If you have investments being withdrawn from a
bank account and we are notified that the account has
been closed, your Automatic Investment Method will be
discontinued.
CONSOLIDATED ACCOUNT STATEMENTS
Shareholders with two or more Ivy or Mackenzie
fund accounts having the same taxpayer I.D. number will
receive a single quarterly account statement, unless
otherwise specified. This feature consolidates the
activity for each account onto one statement. Requests
for quarterly consolidated statements for all other
accounts must be submitted in writing and must be signed by
all registered owners.
RETIREMENT PLANS
The Ivy and Mackenzie family of funds offer
several tax- sheltered retirement plans that may fit
your needs:
- IRA (Individual Retirement Account)
- 401(k), Money Purchase Pension and Profit
Sharing Plans
- SEP-IRA (Simplified Employee Pension Plan)
- 403(b)(7) Plan
Minimum initial and subsequent investments for
retirement plans are $25.
Investors Bank & Trust, which serves as custodian
or trustee under the retirement plan prototypes
available from the Fund, charges certain nominal fees
for annual maintenance. A portion of these fees is
remitted to IMSC, as compensation for its services to
the retirement plan accounts maintained with the Fund.
Distributions from retirement plans are subject to
certain requirements under the Code. Certain
documentation, including IRS Form W4-P, must be
provided to IMSC prior to taking any distribution.
Please contact IMSC for details. The Ivy and Mackenzie
family of funds and IMSC assume no responsibility to
determine whether a distribution satisfies the conditions of
applicable tax laws, and will not be responsible for any
penalties assessed. For additional information, please
contact your broker or tax adviser.
Please call IMSC at 1-800-777-6472 for complete
information kits describing the plans, their benefits,
restrictions, provisions and fees.
SHAREHOLDER INQUIRIES
Inquiries regarding the Fund should be directed to
IMSC at 1-800-777-6472.
IVY INTERNATIONAL VALUE FUND
ACCOUNT APPLICATION
USE THIS APPLICATION FOR CLASS A, CLASS B AND
CLASS C
Please mail applications and checks to: Ivy Mackenzie
Services Corp., P.O. Box 3022, Boca Raton, FL
33431-0922.
(This application should not be used for retirement
accounts for which Ivy is custodian.)
Account Number:
(Fund Use Only)
Dealer #:
Branch #:
Rep. I.D. #:
Acct. Type:
Soc Cd:
Div Cd:
CG Cd:
Exc Cd:
Red Cd:
1 REGISTRATION
/ / Individual
/ / Joint Tenant
/ / Estate
/ / UGMA/UTMA
/ / Corporation
/ / Partnership
/ / Sole Proprietor
/ / Trust
/ / Other
Date of Trust
Owner, Custodian or Trustee
Co-owner or Minor
Minor's State of Residence
Street
City
State
Zip Code
Phone Number -- Day
Phone Number -- Evening
2 TAX ID
Citizenship: / / U.S. / / Other ________________
Social Security Number
Tax Identification Number
Under penalties of perjury, I certify by signing
in Section 8 below that: (1) the number shown in
this section is my correct taxpayer identification
number (TIN), and (2) I am not subject to backup
withholding because: (a) I have not been notified
by the Internal Revenue Service (IRS) that I am
subject to backup withholding as a result of a failure to
report all interest or dividends, or (b) the IRS has
notified me that I am no longer subject to backup
withholding. (Cross out item (2) if you have been notified
by the IRS that you are currently subject to backup
withholding because of underreporting interest or
dividends on your tax return.) Please see the "Tax
Identification Number" section of the Prospectus
for additional information on completing this
section.
3 DEALER INFORMATION
The undersigned ("Dealer") agrees to all
applicable provisions in this Application,
guarantees the signature and legal capacity of the
Shareholder, and agrees to notify IMSC of any
purchases made under a Letter of Intent or Rights of
Accumulation.
Dealer Name
Branch Office Address
City
State
Zip Code
Representative's Name and Number
Representative's Phone Number
Authorized Signature of Dealer
4 INVESTMENTS
A. Enclosed is my check ($1,000 minimum) made
payable to Ivy International Value Fund.
Please invest it in Class A __ or Class B __
or Class C shares.*
$_______________________(Amount Enclosed)
B. I qualify for an elimination of the sales
charge due to the following privilege
(applies only to Class A shares):
__ New Letter of Intent (if ROA or 90-day
backdate privilege is applicable,
provide account(s) information below.)
__ ROA with the account(s) listed below.
__ Existing Letter of Intent with account(s)
listed below.
Fund Name(s)
Account Number(s)
If establishing a Letter of Intent, you will
need to purchase Class A shares over a
thirteen-month period in accordance with the
provisions in the Prospectus. The Aggregate
amount of these purchases will be at least
equal to the amount indicated below (see Prospectus for
minimum amount required for reduced sales charges).
/ / $ 50,000
/ / $100,000
/ / $250,000
/ / $500,000
C. FOR DEALER USE
Confirmed trade orders: [Confirm Number,
Number of Shares, Trade Date]
5 DISTRIBUTION OPTIONS
I would like to reinvest dividends and capital
gains into additional shares in this account at
net asset value unless a different option is
checked below.
A. / / Reinvest all dividends and capital gains
into additional shares of a different
Ivy or Mackenzie fund.
Fund Name
Account Number
B. / / Pay all dividends in cash and reinvest
capital gains into additional shares in
this Fund or a different Ivy or
Mackenzie fund.
Fund Name
Account Number
C. / / Pay all dividends and capital gains in
cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN
C OR D ABOVE, BE:
/ / Sent to the address listed in the
registration. / / Sent to the special payee
listed in Section 7A / / (By Mail)
7B / / (By E.F.T.)
6 OPTIONAL SPECIAL FEATURES
A. / / Automatic Investment Method (AIM)
- I wish to invest _________________
/ / once per month
/ / twice
/ / 3 times
/ / 4 times
- My bank account will be debited on the
_________ day of the month
Please invest $___________________ each period
starting in the month of __________________ in Ivy
International Value Fund.
/ / Class A
/ / Class B
/ / Class C
/ / I have attached a voided check to ensure my
correct bank account will be debited.
B. Systematic Withdrawal Plans**
I wish to automatically withdraw funds from my
account in Ivy International Value Fund
/ / Monthly / / Quarterly / /Semiannually / /
Annually
/ / Once / / Twice / / 3 times / / 4 times
per month
I request the distribution be:
/ / Sent to the address listed in the
registration. / / Sent to the special payee
listed in Section 7. / / Invested into additional
shares of the same class of a different Ivy
Mackenzie fund.
Fund Name
Account Number
Amount $__________________(Minimum $50) starting
on or about the
- _______ day of the month
- _______ day of the month
- _______ day of the month*
NOTE: Account minimum: $5,000 in shares at current
offering price
C. Electronic Funds Transfer for Redemption
Proceeds**
I authorize the Agent to honor telephone
instructions for the redemption of Fund
shares up to $50,000. Proceeds may be wire
transferred to the bank account designated
($1,000 minimum). (Complete Section 7B)
D. Telephone Exchanges** / / Yes /
/ No
I authorize exchanges by telephone among the
Ivy and Mackenzie family of funds upon
instructions from any person as more fully
described in the Prospectus. To
change this option once established, written
instructions must be received from the
shareholder of record or the current
registered representative.
If neither box is checked, the telephone
exchange privilege will be provided
automatically.
E. Telephonic Redemptions** / / Yes /
/ No
The Fund or its agents are authorized to
honor telephone instructions from any person
as more fully described in the Prospectus for
the redemption of Fund shares. The amount of
the redemption shall not exceed $50,000 and
the proceeds are to be payable to the
shareholder of record and mailed to the address of
record. To change this option once established, written
instructions must be received from the shareholder
of record or the current registered
representative.
If neither box is checked, the telephone
redemption privilege will be provided
automatically.
* There must be a period of at least seven
calendar days between each
investment/withdrawal period.
** This option may not be used if shares are
issued in certificate form.
7 SPECIAL PAYEE
A. MAILING ADDRESS
Please send all disbursements to this special
payee:
Name of Bank or Individual
Account Number (If Applicable)
Street
City/State/Zip
B. FED WIRE / E.F.T. INFORMATION
Financial Institution
ABA #
Account #
Street
City/State/Zip
(Please attach a voided check)
8 SIGNATURES
Investors should be aware that the failure to
check the "No" under Section 6D or 6E above means
that the Telephone Exchange/Redemption Privileges
will be provided. The 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 "Exchange
Privilege" 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.
______________________________
________________________ Signature of Owner,
Custodian, Date
Trustee or Corporate Officer
______________________________
________________________ Signature of Joint Owner,
Date
Co-Trustee or Corporate Officer
IIVF-1-896
PROSPECTUS
January 1, 1997
IVY GLOBAL NATURAL RESOURCES FUND
Ivy Fund (the "Trust") is a registered investment
company currently consisting of seventeen separate
portfolios. One of these portfolios, Ivy Global Natural
Resources Fund, is described in this Prospectus.
This Prospectus sets forth concisely the
information about the Fund that a prospective investor
should know before investing. Please read it carefully
and retain it for future reference. Additional
information about the Fund is contained in the
Statement of Additional Information for the Fund dated
January 1, 1997 (the "SAI"), which has been filed with the
Securities and Exchange Commission and is incorporated by
reference into this Prospectus. The SAI is available upon
request and without charge from the Trust at the
Distributor's address and telephone number below.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
TABLE OF CONTENTS
Expense Information . . . . . . . . . . . . . . . . . .
. . . . . Investment Objectives and Policies . . . . .
. . . . . . . . . . Risk Factors and Investment
Techniques . . . . . . . . . . . . . Organization and
Management of the Fund . . . . . . . . . . . . .
Investment Manager . . . . . . . . . . . . . . . . . . . . . . .
Fund Administration and Accounting . . . . . . . . . .
. . . . . Transfer Agent . . . . . . . . . . . . . . .
. . . . . . . . . . Alternative Purchase Arrangements .
. . . . . . . . . . . . . . . Dividends and Taxes . . .
. . . . . . . . . . . . . . . . . . . . Performance
Data . . . . . . . . . . . . . . . . . . . . . . . .
How to Buy Shares . . . . . . . . . . . . . . . . . . . . . . . .
How Your Purchase Price is Determined . . . . . . . . .
. . . . . How The Fund Values its Shares . . . . . . .
. . . . . . . . . . Initial Sales Charge Alternative-
Class A Shares . . . . . . . . . Contingent Deferred
Sales Charge-Class A Shares . . . . . . . . .
Qualifying for a Reduced Sales Charge . . . . . . . . . . . . . .
Contingent Deferred Sales Charge Alternative-
Class B and Class C Shares . . . . . . . . . . . .
. . . . . How to Redeem Share . . . . . . . . . . . . .
. . . . . . . . . . Minimum Account Balance
Requirements . . . . . . . . . . . . . . Signature
Guarantees . . . . . . . . . . . . . . . . . . . . . .
Choosing a Distribution Option . . . . . . . . . . . . . . . . .
Tax Identification Number . . . . . . . . . . . . . . .
. . . . . Certificates . . . . . . . . . . . . . . . .
. . . . . . . . . . Exchange Privilege . . . . . . . .
. . . . . . . . . . . . . . . Reinvestment Privilege .
. . . . . . . . . . . . . . . . . . . .
Systematic Withdrawal Plan . . . . . . . . . . . . . .
. . . . . Automatic Investment Method . . . . . . . . .
. . . . . . . . . . Consolidated Account Statements . .
. . . . . . . . . . . . . . . Retirement Plans . . . .
. . . . . . . . . . . . . . . . . . . . Shareholder
Inquiries . . . . . . . . . . . . . . . . . . . . . .
BOARD OF TRUSTEES TRANSFER AGENT
John S. Anderegg, Jr. Ivy Mackenzie Services
Paul H. Broyhill Corp.
Stanley Channick P.O. Box 3022
Frank W. DeFriece, Jr. Boca Raton, FL
Roy J. Glauber 33431-0922
Michael G. Landry 1-800-777-6472
Michael R. Peers
Joseph G. Rosenthal AUDITORS
Richard N. Silverman __________________
J. Brendan Swan
INVESTMENT MANAGER
OFFICERS Ivy Management, Inc.
Michael G. Landry, 700 South Federal
Highway President Boca Raton,
FL 33432 Keith J. Carlson, Vice
1-800-456-5111 President
James W. Broadfoot, Vice DISTRIBUTOR
President Ivy Mackenzie
Distributors, C. William Ferris Inc.
Secretary/Treasurer Via Mizner Financial
Plaza Michael R. Peers, Chairman 700 South
Federal Highway Boca
Raton, FL 33432 LEGAL COUNSEL
1-800-456-5111 Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman &
Co.
Boston, MA
EXPENSE INFORMATION
The tables and examples below are designed to
assist you in understanding the various costs and
expenses that you will bear directly or indirectly as
an investor in the Fund. The information is based on
estimated amounts for the current fiscal year.
SHAREHOLDER TRANSACTION EXPENSES
MAXIMUM MAXIMUM
CONTINGENT
SALES LOAD DEFERRED
IMPOSED ON SALES CHARGE
PURCHASES (AS A % OF
(AS A % OF ORIGINAL
OFFERING PURCHASE
PRICE) PRICE)
Class A . . . . . . . . . . . . . 5.75%(1)
None(2) Class B . . . . . . . . . . . . . None
5.00%(3)
Class C . . . . . . . . . . . . . None
1.00%(4)
The Fund does not charge a redemption fee, an exchange
fee, or a sales load on reinvested dividends.
(1) Class A shares may be purchased under a variety of
plans that provide for the reduction or
elimination of the sales charge.
(2) A contingent deferred sales charge ("CDSC") may
apply to the redemption of Class A shares that are
purchased without an initial sales charge. See
"Purchases of Class A Shares at Net Asset Value"
and "Contingent Deferred Sales Charge -- Class A
Shares."
(3) The maximum CDSC on Class B shares applies to
redemptions during the first year after purchase.
The charge declines to 4% during the second year;
3% during the third and fourth years; 2% during
the fifth year; 1% during the sixth year; and 0%
in the seventh year and thereafter.
(4) The CDSC on Class C shares applies to redemptions
during the first year after purchase.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
TOTAL FUND
OTHER OPERATING
EXPENSES EXPENSES
12B-1 (AFTER (AFTER
SERVICE/ EXPENSE EXPENSE MANAGE-
DISTRIBU- REIMBURSE- REIMBURSE-
MENT FEES TION FEES MENTS) MENTS)(1)
Class A . . . 1.00% 0.25% 0.95%
2.20% Class B . . . 1.00% 1.00%(2) 0.95%
2.95%
Class C . . . 1.00% 1.00%(2) 0.95%
2.95%
(1) Ivy Management, Inc. ("IMI") currently limits
Total Fund Operating Expenses (excluding Rule
12b-1 fees) to an annual rate of 1.95% of the
Fund's average net assets. Without
reimbursements, "Total Fund Operating Expenses" may
increase, but are subject to a maximum of 2.50% (excluding
Rule 12b-1 fees), the highest expense ratio currently
allowed under state securities laws.
(2) Long-term investors may, as a result of the Fund's
12b-1 fees, pay more than the economic equivalent
of the maximum front-end sales charge permitted by
the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. ("NASD").
EXAMPLES
The following table lists the expenses that an
investor would pay on a $1,000 investment, assuming (1)
5% annual return and (2) unless otherwise noted,
redemption at the end of each time period. These
examples further assume reinvestment of all dividends
and distributions, and that the percentage amounts
under "Total Fund Operating Expenses"** remain the same each
year. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
HIGHER OR LOWER THAN THOSE SHOWN.
1 YEAR
3 YEARS
Class A Shares* . . . . . . . . . . . . . . $79
$122 Class B Shares . . . . . . . . . . . . . .
$80(1) $121(2)
Class B Shares (no redemption) . . . . . . $30
$91 Class C Shares . . . . . . . . . . . . . .
$40(3) $91 Class C Shares (no redemption) . . . .
. . $30 $91
* 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.
** Based on Total Fund Operating Expenses net of
expense reimbursements. See the "Annual Fund
Operating Expenses Table," above.
(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.
The information presented in the tables does not
reflect the charge of $10 per transaction that would
apply if a shareholder elects to have redemption
proceeds wired to his or her bank account. For a more
detailed discussion of the Fund's fees and expenses,
see the following sections of this Prospectus:
"Organization and Management of the Fund," "Initial Sales Charge
Alternative -- Class A Shares" and "Contingent Deferred
Sales Charge Alternative -- Class B and Class C
Shares," and "Investment Advisory and Other Services"
in the SAI.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term
growth. Any income realized will be incidental. The
Fund's investment objective is fundamental and may not
be changed without the approval of a majority of the
Fund's outstanding voting shares (as defined under the
Investment Company Act of 1940). Except for the Fund's
investment objective and those investment restrictions
specifically identified as fundamental, all investment policies
and practices described in this Prospectus and in the SAI
are non-fundamental, and may be changed by the Trustees
without shareholder approval. There can be no assurance
that the Fund's objective will be met. The different
types of securities and investment techniques used by
the Fund involve varying degrees of risk. For
information about the particular risks associated with
each type of investment, see "Risk Factors and Investment
Techniques," below, and the SAI.
Whenever an investment policy or restriction of
the Fund described in this Prospectus or in the SAI
states a maximum percentage of assets that may be
invested in a security or other asset or describes a
policy regarding quality standards, that percentage
limitation or standard will, unless otherwise
indicated, apply to the Fund only at the time a transaction takes
place. Thus, for example, if a percentage limitation is
adhered to at the time of investment, a later increase
or decrease in the percentage that results from
circumstances not involving any affirmative action by
the Fund will not be considered a violation.
Under normal conditions, the Fund invests at least
65% of its total assets in the equity securities of
companies throughout the world that own, explore or
develop natural resources and other basic commodities,
or supply goods and services to such companies. For
these purposes, "natural resources" generally include
precious metals (such as gold, silver and platinum),
ferrous and nonferrous metals (such as iron, aluminum and
copper), strategic metals (such as uranium and titanium), coal,
oil, natural gases, timber, undeveloped real property and
agricultural commodities. Although the Fund generally
invests in common stock, it may also invest in
preferred stock, securities convertible into common
stock and American Depositary Receipts ("ADRs"). The
Fund may also invest directly in precious metals and
other physical commodities.
IMI believes that certain political and economic
changes in the global environment in recent years have
had and will continue to have a profound effect on
global supply and demand of natural resources, and that
rising demand from developing markets and new sources
of supply should create attractive investment
opportunities. In selecting the Fund's investments, IMI will
seek to identify securities of companies that, in IMI's
opinion, appear to be undervalued relative to the value
of the companies' natural resource holdings. Under
normal conditions, at least
three different countries (one of which may be the
United States) will be represented in the Fund's
overall portfolio holdings. In light of the geographic
concentration of many natural resources, it is
anticipated that many of the companies in which the Fund
invests will be located in Canada, Australia, New Zealand,
Malaysia, Western Europe, the United Kingdom and the United
States.
For temporary defensive purposes, the Fund may
invest without limit in cash or cash equivalents, such
as bank obligations (including certificates of deposit
and bankers' acceptances), commercial paper, short-term
notes and repurchase agreements. For temporary or
emergency purposes, the Fund may borrow up to one-third
of the value of its total assets from banks, but may
not purchase securities at any time during which the
value of the Fund's outstanding loans exceeds 10% of the
value of the Fund's assets. The Fund may engage in foreign
currency exchange transactions and enter into forward foreign
currency contracts. The Fund may also invest (i) up to
10% of its total assets in other investment companies
and (ii) up to 10 % of its net assets in restricted and
other illiquid securities. Securities whose proceeds
are subject to limitations on repatriation of principal
or profits for more than seven days, and those for
which market quotations are not readily available, may
be deemed illiquid for these purposes.
For hedging purposes only, the Fund may engage in
transactions in (and options on) foreign currency futures
contracts, provided that the Fund's aggregate investment
in such contracts does not exceed 15% of its total
assets.
RISK FACTORS AND INVESTMENT TECHNIQUES
SPECIAL CONSIDERATIONS RELATING TO INVESTING IN
NATURAL RESOURCES: Since the Fund normally invests a
substantial portion of its assets in securities of
companies engaged in natural resources activities, the
Fund may be subject to greater risks and market
fluctuations than funds with more diversified
portfolios. The value of the Fund's securities will fluctuate in
response to market conditions generally, and will be
particularly sensitive to the markets for those natural
resources in which a particular issuer is involved.
The values of natural resources may also fluctuate
directly with respect to real and perceived
inflationary trends and various political developments.
The Fund's investments in precious metals (such as
gold) and other physical commodities are subject to
special risk considerations, including substantial
price fluctuations over short periods of time. On the
other hand, investments in precious metals coins or
bullion could help to moderate fluctuations in the
value of the Fund's portfolio, since the prices of
precious metals have at times tended not to fluctuate
as widely as shares of issuers engaged in the mining of precious
metals. Because precious metals and other commodities do
not
generate investment income, however, the return on such
investments will be derived solely from the gains and
losses realized by the Fund upon their sale. The Fund
may also incur storage and other costs relating to its
investments in precious metals and other commodities,
which costs may, under certain circumstances, exceed
the custodial and brokerage costs associated with
investments in other types of securities. When the
Fund purchases a precious metal, IMI currently intends that
it will only be in a form that is readily marketable and that
it will be delivered to and stored with the Fund's
custodian.
Natural resource industries throughout the world
may be subject to greater political, environmental and
other governmental regulation than many other
industries. Changes in governmental policies and the
need for regulatory approvals may have an adverse
effect on the products and services of natural
resources companies. For example, the exploration, development
and distribution of coal, oil and gas in the United States
are subject to significant Federal and state
regulation, which may affect rates of return on such
investments and the kinds of services that may be
offered to companies in those industries. In addition,
many natural resource companies have been subject to
significant costs associated with compliance with environmental
and other safety regulations. Such regulations may also
hamper the development of new technologies. The
direction, type or effect of any future regulations
affecting natural resource industries are virtually
impossible to predict.
To take advantage of potential growth
opportunities, the Fund might have significant
investments in companies with relatively small market
capitalization. Securities of smaller companies may be
subject to more abrupt or erratic market movements than
the securities of larger more established companies,
both because they tend to be traded in lower volume and
because the companies are subject to greater business risk.
Under certain economic, financial and political
conditions, the Fund may be invested heavily in foreign
securities. Investing in securities of foreign issuers
and denominated in foreign currencies involves risks
not typically associated with investing in United
States securities, including fluctuations in foreign
exchange rates, exposure to adverse political and
economic developments and the possible imposition of exchange
controls and related restrictions. Finally, competition is
intense for many natural resource companies. As a result,
the value of the securities issues by such companies
may to subject to increased share price volatility.
BANK OBLIGATIONS: The bank obligations in which
the Fund may invest include certificates of deposit,
bankers' acceptances, and other short-term debt
obligations. Investments in certificates of deposit and
bankers' acceptances are limited to obligations of (i)
banks having total assets in excess of $1 billion, and
(ii) other banks if the principal amount of the
obligation is fully insured by the Federal Deposit
Insurance Corporation ("FDIC"). Investments in
certificates of deposit of savings associations are
limited to obligations of Federal or state-chartered
institutions whose total assets exceed $1 billion and
whose deposits are insured by the FDIC.
BORROWING: Borrowing may exaggerate the effect on
the Fund's net asset value of any increase or decrease
in the value of the Fund's portfolio securities. Money
borrowed will be subject to interest costs (which may
include commitment fees and/or the cost of maintaining
minimum average balances).
COMMERCIAL PAPER: Commercial paper represents
short-term unsecured promissory notes issued in bearer
form by bank holding companies, corporations, and
finance companies. The Fund's investments in commercial
paper are limited to obligations rated Prime-1 by
Moody's Investor Services Inc. ("Moody's") or, if not
rated, are issued by companies having an outstanding debt issue
currently rated Aaa or Aa by Moody's or AAA or AA by
Standard & Poor's Corporation ("S&P").
CONVERTIBLE SECURITIES: The convertible
securities in which the Fund may invest include
corporate bonds, notes, debentures and other securities
convertible into common stocks. Because convertible
securities can be converted into equity securities,
their values will normally vary in some proportion with those of
the underlying equity securities. Convertible securities
usually provide a higher yield than the underlying
equity, however, so that the price decline of a
convertible security may sometimes be less substantial
than that of the underlying equity security.
DEBT SECURITIES, IN GENERAL: 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. 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. Bonds
with longer maturities generally are more volatile than
bonds with shorter maturities. The market value of debt
securities also varies according to the relative
financial condition of the issuer. In general, lower-
quality bonds offer higher yields due to the increased
risk that the issuer will be unable to meet its
obligations on interest or principal payments at the time called
for by the debt instrument.
U.S. GOVERNMENT SECURITIES: U.S. Government
securities are obligations of, or guaranteed by, the
U.S. Government, its agencies or instrumentalities.
Such securities include: (1) direct obligations of the
U.S. Treasury (such as Treasury bills, notes, and
bonds) and (2) Federal agency obligations guaranteed as
to principal and interest by the U.S. Treasury (such as GNMA
certificates, which are mortgage-backed securities). When
such securities are held to maturity, the payment of
principal and interest is unconditionally guaranteed by
the U.S. Government,
and thus they are of the highest possible credit
quality. U.S. Government securities that are not held
to maturity are subject to variations in market value
caused by fluctuations in interest rates.
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.
FOREIGN SECURITIES: The foreign securities in
which the Fund may invest include non-U.S. dollar-
denominated securities, Eurodollar securities,
sponsored or unsponsored American Depository Receipts
("ADRs") and debt securities issued, assumed or
guaranteed by foreign governments (or political subdivisions
or instrumentalities thereof). In recent years, many
countries around the world have undergone political
changes that have reduced government's role in economic
and personal affairs and have stimulated investment and
growth. In order for these emerging economies to
continue to expand and develop industry, infrastructure
and currency reserves, continued influx of capital is
essential. Historically, there is a strong direct correlation
between economic growth and stock market returns. While this
is no guarantee of future performance, IMI believes
that investment opportunities (particularly in the
energy, environmental services, natural resources,
basic materials, power, telecommunications and
transportation industries) may result within the
evolving economies of emerging market countries from
which the Fund and its shareholders will benefit. However,
investors should consider carefully the special risks that
arise in connection with investing in securities issued
by companies and governments of foreign nations
(especially in countries with emerging or developing
economies), which are in addition to those risks that
are associated with the Fund's investments, generally.
In many foreign countries (especially in emerging
market countries), there is less regulation of business
and industry practices, stock exchanges, brokers and
listed companies than in the United States. For
example, foreign companies are not generally subject to
uniform accounting and financial reporting standards,
and foreign securities transactions may be subject to
higher brokerage costs. There also tends to be less publicly
available information about issuers in foreign countries, and
foreign securities markets of many of the countries in
which the Fund may invest may be smaller, less liquid
and subject to greater price volatility than those in
the United States. These risks may be intensified in
certain emerging market countries (e.g., in Latin
America and parts of Europe). Generally, price
fluctuations in the Fund's foreign security holdings are likely
to be high relative to those of securities issued in the
United States.
Other risks include the possibility of
expropriation, nationalization or confiscatory
taxation, foreign exchange controls (which may include
suspension of the ability to transfer currency from a
given country), difficulties in pricing, default in
foreign government securities, high rates of inflation
(especially in emerging markets countries), difficulties in
enforcing foreign judgments, political or social instability,
or other developments that could adversely affect the
Fund's foreign investments.
The risks of investing in foreign securities are
likely to be intensified in the case of investments in
issuers domiciled or doing substantial business in
emerging market countries. For example, countries with
emerging markets may have relatively unstable
governments and therefore be susceptible to sudden
adverse government action (such as nationalization of businesses,
restrictions on foreign ownership or prohibitions
against repatriation of assets). Security prices in
emerging markets can also be significantly more
volatile than in the more developed nations of the
world, and communications between the U.S. and emerging
market countries may be unreliable, increasing the risk
of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities. Delayed settlements
could cause the Fund to miss attractive investment
opportunities or impair its ability to dispose of
portfolio securities, resulting in a loss if the value
of the securities subsequently declines. Finally, many
emerging markets have experienced and continue to
experience high rates of inflation. In certain countries,
inflation has at times accelerated rapidly to hyperinflationary
levels, creating a negative interest rate environment and
sharply eroding the value of outstanding financial
assets in those countries.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS: The Fund
usually effects its currency exchange transactions on a
spot (i.e., cash) basis at the spot rate prevailing in
the foreign exchange market. However, some price spread
on currency exchange (e.g., to cover service charges)
is usually incurred when the Fund converts assets from
one currency to another. The Fund may also be affected
unfavorably by fluctuations in the relative rates of
exchange between the currencies of different nations.
FORWARD FOREIGN CURRENCY CONTRACTS: A forward
foreign currency contract involves an obligation to
purchase or sell a specific currency at a future date
at a predetermined price.
Although these contracts are intended to minimize the
risk of loss due to a decline in the value of the
hedged currencies, they also tend to limit any
potential gain that might result should the value of
the currencies increase. In addition, there may be an
imperfect correlation between the Fund's portfolio holdings of
securities denominated in a particular currency and forward
contracts entered into by the Fund, which may prevent
the Fund from achieving the intended hedge or expose
the Fund to the risk of currency exchange loss.
INDUSTRY CONCENTRATION: Because the Fund normally
focuses its investments in natural resources
industries, the value of the Fund's shares may be more
susceptible to factors affecting those industries and
to greater market fluctuation than a fund whose
portfolio holdings are more diverse. Many companies in which the
Fund is likely to invest are subject to government
regulations and approval of their products and
services, which may affect their overall profitability
and cause their stock prices to be more volatile. In
selecting the Fund's portfolio of investments, IMI will
consider each company's ability to create new products,
secure any necessary regulatory approvals, and generate
sufficient customer demand. A company's failure to perform well
in any one of these areas, however, could cause its stock
to decline sharply.
OPTIONS AND FUTURES TRANSACTIONS: The Fund may
enter into foreign currency futures transactions in
accordance with its stated investment objective and
policies. A foreign currency futures contract is a
standardized contract for the future delivery of a
specified amount of a foreign currency at a future date
at a price established when the position is taken.
Investors should be aware that the risks
associated with the use of futures (and options
thereon) are considerable. Futures and options
transactions generally involve a small investment of
cash relative to the magnitude of the risk assumed, and therefore
could result in a significant loss to the Fund if IMI
judges market conditions incorrectly or employs a
strategy that does not correlate well with the Fund's
investments. The Fund may also experience a significant
loss if it is unable to close a particular position due
to the lack of a liquid secondary market. For further
information regarding the use of options and futures
transactions and any associated risks, see the SAI.
PRECIOUS METALS AND OTHER PHYSICAL COMMODITIES:
Commodities trading is generally considered a
speculative activity. For example, prices of precious
metals are affected by factors such as cyclical
economic conditions, political events and monetary
policies of various countries. Accordingly, markets for precious
metals may at times be volatile and there may be sharp
price fluctuations even during periods when prices
overall are rising. Investments in physical
commodities may also present practical problems of
delivery, storage and maintenance, possible
illiquidity, the unavailability of accurate market valuations and
increased expenses.
Under current U.S. tax law, the Fund may not
receive more than 10% of its yearly income from gains
resulting from selling precious metals or any other
physical commodity. Accordingly, the Fund may be
required to hold its precious metals or sell them at a
loss, or to sell its portfolio securities at a gain, when
for investment reasons it would not otherwise do so.
REPURCHASE AGREEMENTS: Repurchase agreements are
agreements under which the Fund buys a money market
instrument and obtains a simultaneous commitment from
the seller to repurchase the instrument at a specified
time and agreed-upon yield. The Fund may enter into
repurchase agreements with banks or broker-dealers
deemed to be creditworthy by IMI under guidelines approved by the
Board of Trustees. The Fund could experience a delay in
obtaining direct ownership of the underlying
collateral, and might incur a loss if the value of the
security should decline.
RESTRICTED AND ILLIQUID SECURITIES: There may be
a lapse of time between the Fund's decision to sell a
restricted or illiquid security and the point at which
the Fund is permitted or able to sell the security. If
adverse market conditions were to develop during that
period, the Fund might obtain a price less favorable
than the price that prevailed when it decided to sell. In
addition, issuers of restricted and other illiquid securities
may not be subject to the disclosure and other investor
protection requirements that would apply if their
securities were publicly traded.
SHARES OF OTHER INVESTMENT COMPANIES: As a
shareholder of an investment company, the Fund will
bear its ratable share of the investment company's
expenses (including management fees, in the case of a
management investment company).
SMALL COMPANIES: Investing in smaller company
stocks involves certain special considerations and
risks that are not usually associated with investing in
larger, more established companies. For example, the
securities of smaller companies may be subject to more
abrupt or erratic market movements, because they tend
to be thinly traded and are subject to a greater degree
to changes in the issuer's earnings and prospects. Small
companies also tend to have limited product lines, markets or
financial resources. Transaction costs in smaller company
stocks also may be higher than those of larger
companies.
WARRANTS: The holder of a warrant has the right
to purchase a given number of shares of a particular
issuer at a specified price until expiration of the
warrant. Such investments can provide a greater
potential for profit or loss than an equivalent
investment in the underlying security, and are considered
speculative investments. For example, if a warrant were not
exercised by the date of its expiration, the Fund would lose
its entire investment. The Fund's investments in
warrants will not
exceed 5% of the value of its net assets.
ORGANIZATION AND MANAGEMENT OF THE FUND
The Fund is a separate, diversified portfolio of
the Trust, an open-end management investment company
organized as a Massachusetts business trust on December
21, 1983. The business and affairs of the Fund are
managed under the direction of the Trustees.
Information about the Trustees, as well as the Trust's
executive officers, may be found in the SAI. The Trust has an
unlimited number of authorized shares of beneficial
interest, and currently has 17 separate portfolios. The
Fund has three classes of shares, designated as Class
A, Class B and Class C. Shares of the Fund entitle
their holders to one vote per share (with proportionate
voting for fractional shares). The shares of each class
represent an interest in the same portfolio of Fund
investments. Each class of shares has a different Rule 12b-1
distribution plan and bears different distribution fees.
Shares of each class have equal rights as to voting,
redemption, dividends and liquidation but have
exclusive voting rights with respect to their Rule
12b-1 distribution plans.
The Trust employs IMI to provide business
management and investment advisory services to the
Fund. Mackenzie Investment Management Inc. ("MIMI")
provides administrative and accounting services, Ivy
Mackenzie Distributors, Inc. ("IMDI") distributes the
Fund's shares, and Ivy Mackenzie Services Corp. ("IMSC")
provides transfer agency and shareholder-related services for the
Fund. IMI, IMDI and IMSC are wholly-owned subsidiaries
of MIMI. As of September 30, 1996, IMI and MIMI had
approximately $1.76 billion and $162 million,
respectively, in assets under management. MIMI is a
subsidiary of Mackenzie Financial Corporation ("MFC"),
which has been an investment counsel and mutual fund
manager in Toronto, Ontario, Canada for more than 25
years.
INVESTMENT MANAGER
For IMI's business management and investment
advisory services, the Fund pays IMI a fee, which is
accrued daily and paid monthly, based on the Fund's
average net assets, at an annual rate of 1.00%. The
fees paid by the Fund are higher than those charged by
many funds that invest primarily in U.S. securities,
but not necessarily higher than the fees charged to
funds with investment objectives similar to those of the Fund.
Currently, IMI voluntarily limits the Fund's total
operating expenses (excluding Rule 12b-1 fees,
interest, taxes, brokerage commissions, litigation,
indemnification, and extraordinary expenses) to an
annual rate of 1.95% of the Fund's average daily net
assets, which may lower the Fund's expenses and increase its
total return. This voluntary expense limitation may be
terminated at any time, at which point the Fund's
expenses may increase and its total return may be
reduced.
IMI pays all expenses that it incurs in rendering
management services to the Fund. The Fund bears its own
operational costs. General expenses of the Trust that
are not readily identifiable as belonging to a
particular series of the Trust (or a particular class
thereof) are allocated among and charged to each series
based on its relative net asset size. Expenses that are
attributable to a particular Fund (or class thereof) will be
borne by that Fund (or class) directly. The fees payable to
IMI are subject to any reimbursement or fee waiver to
which IMI may agree (and to any applicable state
regulations that may require IMI to reimburse the Fund
if its aggregate operating expenses exceed certain
limitations).
PORTFOLIO MANAGEMENT: Frederick Sturm, a Senior
Vice President of MFC, is the portfolio manager of the
fund. Mr. Sturm joined MFC in 1983 and has 12 years of
professional investment experience. In that time, Mr.
Sturm has established an excellent performance record
in Canadian equity investing, including products that
specialize in the natural resource sector. Mr. Sturm,
a Chartered Financial Analyst, is a graduate of the
University of Toronto where he earned a degree in commerce
and finance.
FUND ADMINISTRATION AND ACCOUNTING
MIMI provides various administrative services for
the Fund, such as assisting with the preparation of
Federal and state income tax returns, financial
statements and periodic reports to shareholders. MIMI
also assists the Trust's legal counsel with the filing
of registration statements, proxies and other required
filings under Federal and state law. Under this arrangement, the
Fund's average net assets are subject to a fee, accrued
daily and paid monthly, at an annual rate of 0.10%.
MIMI also provides certain accounting and pricing
services for the Fund (see "Fund Accounting Services"
in the SAI for more information).
TRANSFER AGENT
IMSC is the transfer and dividend-paying agent for
the Fund, and also provides certain shareholder-related
services. In addition, certain broker-dealers that
maintain shareholder accounts with the Fund 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 (see "Investment Advisory and Other Services"
in the SAI).
ALTERNATIVE PURCHASE ARRANGEMENTS
CLASS A SHARES: Class A shares are subject to an
initial
sales charge, unless the amount you purchase is
$500,000 or more (see "Contingent Deferred Sales Charge
- -- Class A Shares"). Certain purchases qualify for a
reduced initial sales charge (see "Qualifying for a
Reduced Sales Charge"). Class A shares are subject to
ongoing service fees at an annual rate of 0.25% of the
Fund's average net assets attributable to its Class A shares. If
you do not specify on your Account Application which
class of shares you are purchasing, it will be assumed
that you are investing in Class A shares.
CLASS B AND CLASS C SHARES: Class B and Class C
shares are not subject to an initial sales charge, but
are subject to a CDSC if redeemed within six years of
purchase, in the case of Class B shares, or within one
year of purchase, in the case of Class C shares. Both
classes of shares are subject to ongoing service and
distribution fees at a combined annual rate of up to 1.00% of the
Fund's average net assets attributable to its Class B or
Class C shares. The ongoing distribution fee will cause
these shares to have a higher expense ratio than that
of Class A shares.
FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE:
The multi- class structure of the Fund allows you to
choose the most beneficial way to buy shares given the
size of your purchase and the length of time you expect
to hold your shares. You should consider whether,
during the anticipated life of your Fund investment,
the accumulated service and distribution fees on Class
B and Class C shares would be less than the initial sales
charge and accumulated service fees on Class A shares purchased
at the same time, and to what extent this differential
would be offset by the Class A shares' potentially
higher yield. Also, sales personnel may receive
different compensation depending on which class of
shares they are selling. The tables under the caption
"Annual Fund Operating Expenses" at the beginning of this
Prospectus contain additional information that is designed to
assist you in making this determination.
DIVIDENDS AND TAXES
DIVIDENDS: Distributions you receive from the
Fund are reinvested in additional shares of the same
class unless you elect to receive them in cash.
Dividends ordinarily will vary from one class to
another.
The Fund intends to make a distribution for each
fiscal year of any net investment income and net
realized short-term capital gain, as well as any net
long-term capital gain realized during the year. An
additional distribution may be made of net investment
income, net realized short-term capital gains and net
realized long-term capital gains to comply with the calendar year
distribution requirement under the excise tax provisions
of Section 4982 of the Internal Revenue Code of 1986,
as amended (the "Code").
TAXATION: The following discussion is intended
for general
information only. You should consult with your tax
adviser as to the tax consequences of an investment in
a particular Fund, including the status of
distributions from the Fund under applicable state or
local law.
The Fund intends to qualify annually as a
regulated investment company under the Code. To
qualify, the Fund must meet certain income,
distribution and diversification requirements. In any
year in which the Fund qualifies as a regulated investment
company and timely distributes all of its taxable income, the
Fund generally will not pay any Federal income or excise
tax.
Dividends paid out of the Fund's investment
company taxable income (including dividends, interest
and net short-term capital gains) will be taxable to a
shareholder as ordinary income. If a portion of the
Fund's income consists of dividends paid by U.S.
corporations, a portion of the dividends paid by the Fund may be
eligible for the corporate dividends-received deduction.
Distributions of net capital gains (the excess of net
long-term capital gains over net short-term capital
losses), if any, are taxable as long-term capital
gains, regardless of how long the shareholder has held
the Fund's shares. Dividends are taxable to
shareholders in the same manner whether received in cash or
reinvested in additional Fund shares.
If, for any year, the Fund's total distributions
exceed its earnings and profits, the excess will
generally be treated as a return of capital. The amount
treated as a return of capital will reduce a
shareholder's adjusted basis in his/her shares (thereby
increasing potential gain or reducing potential loss on the sale
of shares) and, to the extent that the amount exceeds
this basis, will be treated as a taxable gain.
A distribution will be treated as paid on December
31 of the current calendar year if it is declared by
the 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. Such
distributions will be taxable to shareholders in the calendar
year in which the distributions are declared, rather than
the calendar year in which the distributions are
received.
Investments in securities that are issued at a
discount will result each year in income to the Fund
equal to a portion of the excess of the face value of
the securities over their issue price, even though the
Fund receives no cash interest payments from the
securities.
Income and gains received by the Fund from sources
within foreign countries may be subject to foreign
withholding and other taxes. Unless the Fund is
eligible and elects to "pass through" to its
shareholders the amount of foreign income and similar
taxes paid by the Fund, these taxes will reduce the Fund's
investment company taxable income, and distributions of
investment company taxable income received from the Fund will be
treated as U.S. source income.
Any gain or loss realized by a shareholder upon
the sale or other disposition of shares of the Fund, or
upon receipt of a distribution in complete liquidation
of the Fund, generally will be a capital gain or loss
which will be long-term or short-term, generally
depending upon the shareholder's holding period for the
shares.
The Fund may be required to withhold U.S. Federal
income tax at the rate of 31% of all taxable
distributions payable to shareholders who fail to
provide the Fund with their correct taxpayer
identification number or to make required
certifications, or who have been notified by the Internal Revenue
Service ("IRS") that they are subject to backup
withholding. Backup withholding is not an additional
tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Fund distributions may be subject to state, local
and foreign taxes. Distributions of the Fund which are
derived from interest on obligations of the U.S.
Government and certain of its agencies, authorities and
instrumentalities may be exempt from state and local
taxes in certain states. Further information relating
to tax consequences is contained in the SAI.
PERFORMANCE DATA
Performance information is computed separately for
each class of Fund shares in accordance with formulas
prescribed by the SEC. Performance information for each
class may be compared in reports and promotional
literature to indices such as the Standard and Poor's
500 Stock Index, Dow Jones Industrial Average, and
Morgan Stanley Capital International World Index.
Advertisements, sales literature and communications to
shareholders may also contain various expressions of the Fund's
total return and current distribution rate. Performance
figures will vary in part because of the different
expense structures of the Fund's different classes. ALL
PERFORMANCE INFORMATION IS HISTORICAL AND IS NOT
INTENDED TO SUGGEST FUTURE RESULTS.
"Total return" is the change in value of an
investment in the Fund for a specified period, and
assumes the reinvestment of all distributions and
imposition of the maximum applicable sales charge.
"Average annual total return" represents the average
annual compound rate of return of an investment in a particular
class of Fund shares assuming the investment is held for
one year, five years and ten years as of the end of the
most recent calendar quarter. Where the Fund provides
total return quotations for other periods, or based on
investments at various sales charge levels or at net
asset value, "total return" is based on the total of
all income and capital gains paid to (and reinvested
by) shareholders, plus (or minus) the change in the value of the
original investment expressed as a percentage of the
purchase
price.
HOW TO BUY SHARES
OPENING AN ACCOUNT: Complete and sign the Account
Application on the last page of this Prospectus. Make
your check payable to Ivy Global Natural Resources
Fund. No third party checks will be accepted. Deliver
these items to your registered representative or
selling broker, or send them to one of the addresses
below:
Regular Mail:
IVY MACKENZIE SERVICES CORP.
P.O. BOX 3022
BOCA RATON, FL 33431-0922
Courier:
IVY MACKENZIE SERVICES CORP.
700 SOUTH FEDERAL HIGHWAY, SUITE 300
BOCA RATON, FL 33432
The Fund reserves the right to reject, for any
reason, any purchase order.
MINIMUM INVESTMENT POLICIES: The minimum initial
investment is $1,000; the minimum additional investment
is $100. Initial or additional amounts for retirement
accounts may be less (see "Retirement Plans").
BUYING ADDITIONAL SHARES: You may add to your
account at any time through any of the following
options:
BY MAIL: Complete the investment slip attached to
your statement, or write instructions including the
account registration, Fund number and account number of
the shares you wish to purchase. Send your check
(payable to the Fund in which you are investing), along
with your investment slip or written instructions, to
one of the addresses above.
THROUGH YOUR BROKER: Deliver the investment slip
attached to your statement, or written instructions,
along with your payment to your registered
representative or selling broker.
BY WIRE: Purchases may also be made by wiring
money from your bank account to your Ivy account. Your
bank may charge a fee for wiring funds. Before wiring
any funds, please call IMSC at 1- 800-777-6472. Wiring
instructions are as follows:
FIRST UNION NATIONAL BANK OF FLORIDA
JACKSONVILLE, FL
ABA#063000021
ACCOUNT #2090002063833
FOR FURTHER CREDIT TO:
YOUR IVY ACCOUNT REGISTRATION
YOUR FUND NUMBER AND ACCOUNT NUMBER
BY AUTOMATIC INVESTMENT METHOD: Complete Sections
6A and 7B on the Account Application (see "Automatic
Investment Method" on page 27 for more information).
HOW YOUR PURCHASE PRICE IS DETERMINED
Your purchase price for Class A shares of the Fund
is the net asset value ("NAV") per share plus a sales
charge, which may be reduced or eliminated in certain
circumstances. The purchase price per share is known as
the public offering price. Your purchase price for
Class B and Class C shares is the NAV per share.
Share purchases will be made at the next
determined price after your purchase order is received.
The price is effective for orders received by IMSC or
by your registered securities dealer prior to the time
of the determination of the NAV. Any orders received
after the time of the determination of the NAV will be
entered at the next calculated price.
Orders placed with a securities dealer before the
NAV is determined that are transmitted through the
facilities of the National Securities Clearing
Corporation on the same day are confirmed at that day's
price. Any loss resulting from the dealer's failure to
submit an order by the deadline will be borne by that
dealer.
You will receive an account statement after any
purchase, exchange or full liquidation. Statements
related to reinvestment of dividends, capital gains,
automatic investment plans (see the SAI for further
explanation) and/or systematic withdrawal plans will be
sent quarterly.
HOW THE FUND VALUES ITS SHARES
The NAV per share is the value of one share. The
NAV is determined for each Class of shares as of the
close of the New York Stock Exchange on each day the
Exchange is open by dividing the value of the Fund's
net assets attributable to a class by the number of
shares of that class that are outstanding, adjusted to
the nearest cent. These procedures are described more completely
in the SAI.
The Trust's Board of Trustees has established
procedures to value the Fund's securities in order to
determine the NAV. The value of a foreign security is
determined as of the normal close of trading on the
foreign exchange on which it is traded or as of the
close of regular trading on the New York Stock Exchange, if
that is earlier. If no sale is reported at that time, the
average between the current bid and asked price is
used. All other
securities for which OTC market quotations are readily
available are valued at the average between the current
bid and asked price. Securities and other assets for
which market prices are not readily available are
valued at fair value, as determined by IMI and approved
in good faith by the Board. Money market instruments of
the Fund are valued at amortized cost.
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES
Shares are purchased at a public offering price
equal to their NAV per share plus a sales charge, as
set forth below.
SALES CHARGE
PORTION
OF AS A
AS A PUBLIC PERCEN-
PERCEN- OFFERING
TAGE TAGE PRICE
OF PUBLIC OF NET RETAINED
OFFERING AMOUNT BY AMOUNT INVESTED
PRICE INVESTED DEALER
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%
* A CDSC may apply to the redemption of Class A
shares that are purchased without an initial sales
charge. See "Contingent Deferred Sales Charge --
Class A Shares."
Sales charges are not applied to any dividends or
capital gains that are reinvested in additional shares
of the Fund. An investor may be charged a transaction
fee for Class A shares purchased or redeemed at NAV
through a broker or agent other than IMDI.
With respect to purchases of $500,000 or more
through dealers or agents, IMDI may, at the time of
purchase, pay such dealers or agents from its own
resources a commission to compensate such dealers or
agents for their distribution assistance in connection
with such purchases. The commission would be computed
as set forth below:
NAV COMMISSION TABLE
PURCHASE AMOUNT
COMMISSION
First $3,000,000 . . . . . . . . . . . . . . . .
1.00% Next $2,000,000 . . . . . . . . . . . . . . . .
. .50%
Over $5,000,000 . . . . . . . . . . . . . . . . .
.25%
Dealers who receive 90% or more of the sales
charge may be deemed to be "underwriters" as that term
is defined in the 1933 Act.
IMDI compensates participating brokers who sell
Class A shares through the initial sales charge. IMDI
retains that portion of the initial sales charge that
is not reallowed to the dealers, which it may use to
distribute the Fund's Class A shares. Pursuant to
separate distribution plans for the Fund's Class A,
Class B and Class C shares, IMDI bears various
promotional and sales related expenses, including the cost of
printing and mailing prospectuses to persons other than
shareholders. Pursuant to the Fund's Class A distribution
plans, IMDI currently pays a continuing service fee to
qualified dealers at an annual rate of 0.25% of
qualified investments.
IMDI may from time to time pay a bonus or other
incentive to dealers (other than IMDI) which employ a
registered representative who sells a minimum dollar
amount of the shares of the Fund and/or other funds
distributed by IMDI during a specified period of time.
This bonus or other incentive may take the form of
payment for travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered
representatives and members of their families to places
within or without the U.S. or other bonuses such as
gift certificates or the cash equivalent of such bonus
or incentive.
CONTINGENT DEFERRED SALES CHARGE -- CLASS A SHARES
Purchases of $500,000 or more of Class A shares
will be made at NAV with no initial sales charge, but
if the shares are redeemed within 24 months after the
end of the calendar month in which the purchase was
made (the CDSC period), a CDSC of 1.00% will be
imposed.
In order to recover commissions paid to dealers on
NAV transfers (as defined in "Purchases of Class A
Shares at Net Asset Value"), Class A shares of the Fund
are subject to a CDSC of 1.00% for certain redemptions
within 24 months after the date of purchase.
The charge will be assessed on an amount equal to
the lesser of the current market value or the original
purchase cost of the Class A shares redeemed.
Accordingly, no CDSC will be imposed on
increases in account value above the initial purchase
price, including any dividends or capital gains which
have been reinvested in additional Class A shares.
In determining whether a CDSC applies to a
redemption, the calculation will be determined in a
manner that results in the lowest possible rate being
charged. Therefore, it will be assumed that the
redemption is first made from any shares in your account
not subject to the CDSC. The CDSC is waived in certain
circumstances. See the discussion below under the caption "Waiver
of Contingent Deferred Sales Charge."
WAIVER OF CONTINGENT DEFERRED SALES CHARGE: The
CDSC is waived for: (i) redemptions in connection with
distributions not exceeding 12% annually of the initial
account balance (i.e., the value of the shareholder's
Class A Fund account at the time of the initial
distribution) (i.a) following retirement under a tax
qualified retirement plan, or (i.b) upon attaining age 59 1/2 in
the case of an IRA, a custodial account pursuant to
section 403(b)(7) of the Code or a Keogh Plan; (ii)
redemption resulting from tax-free return of an excess
contribution to an IRA; or (iii) any partial or
complete redemption following the death or disability
(as defined in Section 72(m)(7) of the Code) of a
shareholder from an account in which the deceased or disabled is
named, provided that the redemption is requested within
one year of death or disability. IMDI may require
documentation prior to waiver of the CDSC.
Class A shareholders may exchange their Class A
shares subject to a CDSC ("outstanding Class A shares")
for Class A shares of another Ivy or Mackenzie Fund
("new Class A shares") on the basis of the relative NAV
per Class A share, without the payment of any CDSC that
would be due upon the redemption of the outstanding
Class A shares. The original CDSC rate that would have
been charged if the outstanding Class A shares were redeemed
will carry over to the new Class A shares received in the
exchange, and will be charged accordingly at the time of
redemption.
QUALIFYING FOR A REDUCED SALES CHARGE
RIGHTS OF ACCUMULATION (ROA): Rights of
Accumulation ("ROA") is calculated by determining the
current market value of all Class A shares in all Ivy
or Mackenzie fund accounts (except Ivy Money Market
Fund) owned by you, your spouse, and your children
under 21 years of age. ROA is also applicable to
accounts under a trustee or other single fiduciary (including
retirement accounts qualified under Section 401 of the
Code). The current market value of each of your
accounts as described above is added together and then
added to your current purchase amount. If the combined
total is equal or greater than a breakpoint amount for
the Fund, then you qualify for the reduced sales
charge. To reduce or eliminate the sales charge, you must
complete Section 4B of the Account Application.
LETTER OF INTENT (LOI): A Letter of Intent
("LOI") is a non-binding agreement that states your
intention to invest in additional Class A shares,
within a thirteen-month period after the initial
purchase, an amount equal to a breakpoint amount for
the Fund. The LOI may be backdated up to 90 days. To sign an LOI,
please complete Section 4B of the Account Application.
Should the LOI not be fulfilled within the
thirteen-month period, your account will be debited for
the difference between the full sales charge that
applies for the amount actually invested and the
reduced sales charge actually paid on purchases placed
under the terms of the LOI.
PURCHASES OF CLASS A SHARES AT NET ASSET VALUE:
An investor who was a shareholder of any Ivy Fund on
December 31, 1991 or a shareholder of American
Investors Income Fund, Inc. or American Investors
Growth Fund, Inc. on October 31, 1988 and who became a
shareholder of Ivy Bond Fund (formerly Mackenzie Fixed Income
Trust) or Ivy Growth Fund as a result of the respective
reorganizations of the funds will be exempt from sales
charges on the purchase of Class A shares of any Ivy or
Mackenzie fund. This privilege is also available to
immediate family members of a shareholder (i.e., the
shareholder's children, the shareholder's spouse and
the children of the shareholder's spouse). This no- load
privilege terminates for the investor if the investor
redeems all shares owned. Shareholders and their relatives as
described above should call 1-800-235-3322 for information
about additional purchases or to inquire about their
account.
Class A shares of the Fund may be purchased
without an initial sales charge or CDSC by (i) officers
and Trustees of the Trust (and their relatives), (ii)
officers, directors, employees, retired employees,
legal counsel and accountants of IMI, MIMI, and MFC
(and their relatives), and (iii) 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). In addition, certain
investment advisors and financial planners who charge a
management, consulting or other fee for their services
and who place trades for their own accounts or the
accounts of their clients may purchase Class A shares of the Fund
without an initial sales charge or a CDSC, provided such
purchases are placed through a broker or agent who
maintains an omnibus account with that Fund. Also,
clients of these advisors and planners may make
purchases under the same conditions if the purchases
are through the master account of such advisor or
planner on the books of such broker or agent. This provision
applies to assets of retirement and deferred compensation
plans and trusts used to fund those plans including,
but not limited to, those defined in Section 401(a),
403(b) or 457 of the Code and "Rabbi Trusts" whose
assets are used to purchase shares of the Fund through
the aforementioned channels.
Class A shares of the Fund may be purchased at NAV
by retirement plans qualified under section 401(a) or
403(b) of the Code, subject to the Employee Retirement
Income Security Act of 1974, as amended. A CDSC of
1.00% will be imposed on such purchases in the event of
certain plan-level redemption transactions within 24
months following such purchases.
If investments by retirement plans at NAV are made
through a dealer who has executed a dealer agreement
with respect to the Fund, IMDI may, at the time of
purchase, pay the dealer out of IMDI's own resources a
commission to compensate the dealer for its
distribution assistance in connection with the retirement
plan's investment. Please refer to the NAV Commission Table on
page [___] of this Prospectus. Please contact IMDI for
additional information.
Class A shares can also be purchased without an
initial sales charge, but subject to a CDSC of 1.00%
during the first 24 months by: (a) any state, county,
city (or any instrumentality, department, authority or
agency of such entities) that is prohibited by
applicable investment laws from paying a sales charge
or commission when purchasing shares of a registered
investment management company (an "eligible governmental
authority"), and (b) trust companies, bank trust departments,
credit unions, savings and loans and other similar
organizations in their fiduciary capacity or for their
own accounts, subject to any minimum requirements set
by IMDI (currently, these criteria require that the
amount invested or to be invested in the subsequent 13-
month period totals at least $250,000). In either case,
IMDI may pay commissions to dealers that provide
distribution assistance on the same basis as in the preceding
paragraph.
Class A shares of the Fund may also be purchased
without a sales charge in connection with certain
liquidation, merger or acquisition transactions
involving other investment companies or personal
holding companies.
The Fund may, from time to time, waive the initial
sales charge on its Class A shares sold to clients of
various broker- dealers with which IMDI has a selling
relationship. This privilege will apply only to Class A
Shares of the Fund that are purchased using all or a
portion of the proceeds obtained by such clients
through redemptions of shares (on which a commission has
been paid) of an investment company (other than Mackenzie Series
Trust or the Trust), unit investment trust or limited
partnership ("NAV transfers"). Some dealers may elect
not to participate in this program. Those dealers that
do elect to participate in the program must complete
certain forms required by IMDI. The normal service fee,
as described in the "Initial Sales Charge Alternative -
- - Class A Shares" and "Contingent Deferred Sales Charge
Alternative -- Class B and Class C Shares" sections of
this Prospectus, will be paid to dealers in connection with these
purchases. Additional information on reductions or
waivers may be
obtained from IMDI at the address listed on the cover
of the Prospectus.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B
AND CLASS C SHARES
Class B and Class C shares are offered at NAV per
share without a front end sales charge. Class C shares
redeemed within one year of purchase will be subject to
a CDSC of 1%, and Class B shares redeemed within six
years of purchase will be subject to a CDSC at the
rates set forth below. This charge 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.
Accordingly, you will not be assessed a CDSC on increases in
account value above the initial purchase price, including
shares derived from dividends or capital gains
reinvested. In determining whether a CDSC applies to a
redemption, the calculation will be determined in a
manner that results in the lowest possible rate being
charged. It will be assumed that your redemption comes
first from shares you have held beyond the requisite
maximum holding period or those you acquire through
reinvestment of dividends or capital gains, and next from the
shares you have held the longest during the requisite
holding period.
Proceeds from the CDSC are paid to IMDI. The
proceeds are used, in whole or in part, to defray its
expenses related to providing the Fund with
distribution services in connection with the sale of
Class B and Class C shares, such as compensating
selected dealers and agents for selling these shares. The
combination of the CDSC and the distribution and service fees
makes it possible for the Fund to sell Class B or Class C
shares without deducting a sales charge at the time of
the purchase.
In the case of Class B shares, the amount of the
CDSC, if any, will vary depending on the number of
years from the time you purchase your Class B shares
until the time you redeem them. Solely for purposes of
determining this holding period, any payments you make
during the quarter will be aggregated and deemed to
have been made on the last day of the quarter. In the
case of Class C shares, solely for purposes of determining this
holding period, any purchases you make during a month will
be deemed to have been made on the last day of the
month.
CLASS B SHARES
CONTINGENT
DEFERRED
SALES CHARGE
AS A
PERCENTAGE OF
DOLLAR AMOUNT
SUBJECT TO YEAR SINCE
PURCHASE CHARGE
First . . . . . . . . . . . . . . . . . . . . . 5%
Second . . . . . . . . . . . . . . . . . . . . 4%
Third . . . . . . . . . . . . . . . . . . . . . 3%
Fourth . . . . . . . . . . . . . . . . . . . . 3%
Fifth . . . . . . . . . . . . . . . . . . . . . 2%
Sixth . . . . . . . . . . . . . . . . . . . . . 1%
Seventh and thereafter . . . . . . . . . . . . 0%
IMDI currently intends to pay to dealers a sales
commission of 4% of the sale price of Class B shares
that they have sold, and will receive the entire amount
of the CDSC paid by shareholders on the redemption of
Class B shares to finance the 4% commission and related
marketing expenses.
With respect to Class C shares, IMDI currently
intends to pay to dealers a sales commission of 1% of
the sale price of Class C shares that they have sold, a
portion of which is to compensate the dealers for
providing Class C shareholder account services during
the first year of investment. IMDI will receive the
entire amount of the CDSC paid by shareholders on the
redemption of Class C shares to finance the 1% commission and
related marketing expenses.
Pursuant to separate distribution plans for the
Fund's Class B and Class C shares, IMDI bears various
promotional and sales related expenses, including the
cost of printing and mailing prospectuses to persons
other than shareholders. Under the Fund's Class B Plan,
IMDI retains 0.75% of the continuing 1.00%
service/distribution fee assessed to Class B shareholders, and
pays a continuing service fee to qualified dealers at an
annual rate of 0.25% of qualified investments. Under
the Class C Plan, IMDI pays continuing
service/distribution fees to qualified dealers at an
annual rate of 1.00% of qualified investments after the
first year of investment (0.25% of which represents a service
fee).
CONVERSION OF CLASS B SHARES: Your Class B shares
and an appropriate portion of both reinvested dividends
and capital gains on those shares will be converted
into Class A shares automatically no later than the
month following eight years after the shares were
purchased, resulting in lower annual distribution
fees. If you exchanged Class B shares into the Fund
from Class B shares of another Ivy or Mackenzie fund,
the calculation will be based on the time the shares in
the original fund were purchased.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE: The
CDSC is waived for: (i) redemptions in connection with
distributions not exceeding 12% annually of the initial
account balance (i.e., the value of the shareholder's
Class B or Class C Fund account at the time of the
initial distribution) (i.a) following retirement under
a tax qualified retirement plan, or (i.b) upon attaining
age 59 1/2 in the case of an IRA, a custodial account pursuant to
section 403(b)(7) of the Code or a Keogh Plan; (ii)
redemption resulting from tax-free return of an excess
contribution to an IRA; or (iii) any partial or
complete redemption following the death or disability
(as defined in Section 72(m)(7) of the Code) of a
shareholder from an account in which the deceased or
disabled is named, provided that the redemption is requested
within one year of death or disability. IMDI may require
documentation prior to waiver of the CDSC.
ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS: IMDI
may, at its own expense, pay concessions in addition to
those described above to dealers that satisfy certain
criteria established from time to time by IMDI. These
conditions relate to increasing sales of shares of the
Fund over specified periods and to certain other
factors. These payments may, depending on the dealer's
satisfaction of the required conditions, be periodic and may be
up to (i) 0.25% of the value of Fund shares sold by the
dealer during a particular period, and (ii) 0.10% of
the value of Fund shares held by the dealer's customers
for more than one year, calculated on an annual basis.
HOW TO REDEEM SHARES
You may redeem your Fund shares through your
registered securities representative, by mail or by
telephone. A CDSC may apply to certain Class A share
redemptions, to Class B share redemptions prior to
conversion and to Class C shares that are redeemed
within one year of purchase. All redemptions are made at
the NAV next determined after a redemption request has been
received in good order. Requests for redemptions must be
received by 4:00 p.m. Eastern time to be processed at
the NAV for that day. Any redemption request in good
order that is received after 4:00 p.m. Eastern time
will be processed at the price determined on the
following business day. IF SHARES TO BE REDEEMED WERE
PURCHASED BY CHECK, PAYMENT OF THE REDEMPTION MAY BE DELAYED
UNTIL THE CHECK HAS CLEARED OR FOR UP TO 15 DAYS AFTER THE
DATE OF PURCHASE. If you own shares of more than one
class of the Fund, the Fund will redeem first the
shares having the highest 12b-1 fees; any shares
subject to a CDSC will be redeemed last unless you
specifically elect otherwise.
When shares are redeemed, the Fund generally sends
you payment on the next business day. Under unusual
circumstances,
the Fund may suspend redemptions or postpone payment to
the extent permitted by Federal securities laws. The
proceeds of the redemption may be more or less than the
purchase price of your shares, depending upon, among
other factors, the market value of the Fund's
securities at the time of the redemption. If the
redemption is for over $50,000, or the proceeds are to be sent to
an address other than the address of record, or an
address change has occurred in the last 30 days, it
must be requested in writing with a signature
guarantee. See "Signature Guarantees," below.
If you are not certain of the requirements for a
redemption, please contact IMSC at 1-800-777-6472.
THROUGH YOUR REGISTERED SECURITIES DEALER: The
Dealer is responsible for promptly transmitting
redemption orders. Redemptions requested by dealers
will be made at the NAV (less any applicable CDSC)
determined at the close of regular trading (4:00 p.m.
Eastern time) on the day that a redemption request is
received in good order by IMSC.
BY MAIL: Requests for redemption in writing are
considered to be in "proper or good order" if they
contain the following:
- Any outstanding certificate(s) for shares
being redeemed.
- A letter of instruction, including the
account registration, fund number, the
account number and the dollar amount or
number of shares to be redeemed.
- Signatures of all registered owners whose
names appear on the account.
- Any required signature guarantees.
- Other supporting legal documentation, if
required (in the case of estates, trusts,
guardianships, corporations, unincorporated
associations, retirement plan trustees or
others acting in representative capacities).
The dollar amount or number of shares indicated
for redemption must not exceed the available shares or
NAV of your account at the next-determined prices. If
your request exceeds these limits, then the trade will
be rejected in its entirety.
Mail your request to IMSC at one of the addresses
on page 15 of this Prospectus.
BY TELEPHONE: Individual and joint accounts may
redeem up to $50,000 per day over the telephone by
contacting IMSC at 1- 800-777-6472. In times of unusual
economic or market changes, the telephone redemption
privilege may be difficult to implement. If you are
unable to execute your transaction by telephone, you may
want to consider placing the order in writing and
sending it by mail or overnight courier.
Checks will be made payable to the current account
registration and sent to the address of record. If there
has been a change of address in the last 30 days,
please use the instructions for redemption requests by
mail described above. A signature guarantee would be
required.
Requests for telephone redemptions will be
accepted from the registered owner of the account, the
designated registered representative or the registered
representative's assistant.
Shares held in certificate form cannot be redeemed
by telephone.
If Section 6E of the Account Application is not
completed, telephone redemption privileges will be
provided automatically. Although telephone redemptions
may be a convenient feature, you should realize that
you may be giving up a measure of security that you may
otherwise have if you terminated the privilege and
redeemed your shares in writing. If you do not wish to make
telephone redemptions or let your registered representative do
so on your behalf, you must notify IMSC in writing.
The Fund 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, the Fund may be liable for
any losses due to unauthorized or fraudulent telephone
instructions.
RECEIVING YOUR PROCEEDS BY FEDERAL FUNDS WIRE:
For shareholders who established this feature at the
time they opened their account, telephone instructions
will be accepted for redemption of amounts up to
$50,000 ($1,000 minimum) and proceeds will be wired on
the next business day to a predesignated bank account.
In order to add this feature to an existing
account or to change existing bank account information,
please submit a letter of instructions including your
bank information to IMSC at the address provided above.
The letter must be signed by all registered owners, and
their signatures must be guaranteed.
Your account will be charged a fee of $10 each
time redemption proceeds are wired to your bank. Your
bank may also charge you a fee for receiving a Federal
Funds wire.
Neither IMSC nor the Fund can be responsible for
the efficiency of the Federal Funds wire system or the
shareholder's bank.
MINIMUM ACCOUNT BALANCE REQUIREMENTS
Due to the high cost of maintaining small accounts
and subject to state law requirements, the Fund may
redeem the accounts of shareholders whose investment,
including sales charges paid, has been less than $1,000
for more than 12 months. The Fund will not redeem an
account unless the shareholder has been given at least
60 days' advance notice of the Fund's intention to do
so. No redemption will be made if a shareholder's
account falls below the minimum due to a reduction in the value
of the Fund's portfolio securities. This provision does
not apply to IRAs, other retirement accounts and
UGMA/UTMA accounts.
SIGNATURE GUARANTEES
For your protection, and to prevent fraudulent
redemptions, we require a signature guarantee in order
to accommodate the following requests:
- Redemption requests over $50,000.
- Requests for redemption proceeds to be sent
to someone other than the registered
shareholder.
- Requests for redemption proceeds to be sent
to an address other than the address of
record.
- Registration transfer requests.
- Requests for redemption proceeds to be wired
to your bank account (if this option was not
selected on your original application, or if
you are changing the bank wire information).
A signature guarantee may be obtained only from an
eligible guarantor institution as defined in Rule
17Ad-15 of the Securities Exchange Act of 1934, as
amended. An eligible guarantor institution includes
banks, brokers, dealers, municipal securities dealers,
government securities dealers, government securities
brokers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings
associations. The signature guarantee must not be
qualified in any way. Notarizations from notary publics
are not the same as signature guarantees, and are not
accepted.
Circumstances other than those described above may
require a signature guarantee. Please contact IMSC at
1-800-777-6472 for more information.
CHOOSING A DISTRIBUTION OPTION
You have the option of selecting the distribution
option that best suits your needs:
AUTOMATIC REINVESTMENT OPTION -- Both dividends
and capital gains are automatically reinvested at NAV
in additional shares of the same class of the Fund
unless you specify one of the other options.
INVESTMENT IN ANOTHER IVY OR MACKENZIE FUND --
Both dividends and capital gains are automatically
invested at NAV in another Ivy or Mackenzie Fund of the
same class.
DIVIDENDS IN CASH/CAPITAL GAINS REINVESTED --
Dividends will be paid in cash. Capital gains will be
reinvested at NAV in additional shares of the same
class of the Fund or another Ivy or Mackenzie Fund of
the same class.
DIVIDENDS AND CAPITAL GAINS IN CASH -- Both
dividends and capital gains will be paid in cash.
If you wish to have your cash distributions
deposited directly to your bank account via electronic
funds transfer ("EFT"), or if you wish to change your
distribution option, please contact IMSC at
1-800-777-6472.
If you wish to have your cash distributions go to
an address other than the address of record, you must
provide IMSC with a letter of instruction signed by all
registered owners with signatures guaranteed.
TAX IDENTIFICATION NUMBER
In general, to avoid being subject to a 31% U.S.
Federal backup withholding tax on dividends, capital
gains distributions and redemption proceeds, you must
furnish the Fund with your certified tax identification
number ("TIN") and certify that you are not subject to
backup withholding due to prior underreporting of
interest and dividends to the IRS. If you fail to provide a
certified TIN, or such other tax-related certifications as the
Fund may require, within 30 days of opening your new
account, the Fund reserves the right to involuntarily
redeem your account and send the proceeds to your
address of record.
You can avoid the above withholding and/or
redemption by correctly furnishing your TIN, and making
certain certifications, in Section 2 of the Account
Application at the time you open your new account,
unless the IRS requires that backup withholding be
applied to your account.
Certain payees, such as corporations, generally
are exempt from backup withholding. Please complete IRS
Form W-9 with the new account application to claim this
exemption. If the registration is for an UGMA/UTMA
account, please provide the social security number of
the minor. Non-U.S. investors who do not have a TIN
must provide, with their Account Application, a
completed IRS Form W-8.
CERTIFICATES
In order to facilitate transfers, exchanges and
redemptions, most shareholders elect not to receive
certificates. Should you wish to have a certificate
issued, please contact IMSC at 1-800- 777-6472 and
request that one be sent to you. (Retirement plan
accounts are not eligible for this service). Please note that if
you were to lose your certificate, you would incur an
expense to replace it.
Certificates requested by telephone for shares
valued up to $50,000 will be issued to the current
registration and mailed to the address of record.
Should you wish to have your certificates mailed to a
different address, or registered differently from the
current registration, contact IMSC 1-800-777-6472.
EXCHANGE PRIVILEGE
Shareholders of the Fund have an exchange
privilege with other Ivy and Mackenzie funds. The Fund
reserves the right to reject, for any reason, any
exchange orders.
Class A shareholders may exchange their
outstanding Class A shares for Class A shares of
another Ivy or Mackenzie fund on the basis of the
relative NAV per Class A share, plus an amount equal to
the difference 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.
Incremental sales charges are waived for outstanding
Class A shares that have been invested for 12 months or
longer.
Class B (and Class C) shareholders may exchange
their outstanding shares for Class B (or Class C)
shares of another Ivy or Mackenzie Fund on the basis of
the relative NAV per share, without the payment of any
CDSC that would otherwise be due upon redemption. Class
B shareholders who exercise the exchange privilege
would continue to be subject to the original Fund's
CDSC schedule (or period) following an exchange if such schedule
is higher (or longer) than the CDSC for the new Class B
shares.
Shares resulting from the reinvestment of
dividends and other distributions will not be charged
an initial sales charge or a CDSC when exchanged into
another Ivy or Mackenzie Fund.
Exchanges are considered to be taxable events, and
may result in a capital gain or a capital loss for tax
purposes. Before executing an exchange, you should
obtain and read the prospectus and consider the
investment objective of the fund to be purchased.
Shares must be uncertificated in order to execute a
telephone exchange. Exchanges are available only in states where
they can be legally made. This privilege is not intended
to provide shareholders a means by which to speculate
on short-term movements in the market. The Fund
reserves the right to limit the frequency of exchanges.
Exchanges are accepted only if the
registrations of the two accounts are identical.
Amounts to be exchanged must meet minimum investment
requirements for the Ivy or Mackenzie Fund into which
the exchange is made.
With respect to shares subject to a CDSC, if less
than all of an investment is exchanged out of the Fund,
the shares exchanged will reflect, pro rata, the cost,
capital appreciation and/or reinvestment of
distributions of the original investment as well as the
original purchase date, for purposes of calculating any
CDSC for future redemptions of the exchanged shares.
An investor who was a shareholder of American
Investors Income Fund, Inc. or American Investors
Growth Fund, Inc. prior to October 31, 1988, or a
shareholder of the Ivy Funds prior to December 31,
1991, who became a shareholder of the Fund as a result
of a reorganization or merger between the Funds may
exchange between funds without paying a sales charge. An investor
who was a shareholder of American Investors Income Fund,
Inc. or American Investors Growth Fund, Inc. on or
after October 31, 1988, who became a shareholder of the
Fund as a result of the reorganization between the
Funds will receive credit toward any applicable sales
charge imposed by any Ivy or Mackenzie Fund into which
an exchange is made.
In calculating the sales charge assessed on an
exchange, shareholders will be allowed to use the
Rights of Accumulation privilege.
EXCHANGES BY TELEPHONE: If Section 6D of the
Account Application is not completed, telephone
exchange privileges will be provided automatically.
Although telephone exchanges may be a convenient
feature, you should realize that you may be giving up a
measure of security that you may otherwise have if you
terminated the privilege and exchanged your shares in writing. If
you do not wish to make telephone exchanges or let your
registered representative do so on your behalf, you must
notify IMSC in writing.
In order to execute an exchange, please contact
IMSC at 1- 800-777-6472. Have the account number of your
current fund and the exact name in which it is
registered available to give to the telephone
representative.
The Fund 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, the Fund may be liable for
any losses due to unauthorized or fraudulent telephone
instructions.
EXCHANGES IN WRITING: In a letter, request an
exchange and provide the following information:
- The name and class of the fund whose shares you
currently own.
- Your account number.
- The name(s) in which the account is registered.
- The name of the fund in which you wish your
exchange to be invested.
- The number of shares or the dollar amount you wish
to exchange.
The request must be signed by all registered
owners.
REINVESTMENT PRIVILEGE
Investors who have redeemed Class A shares of the
Fund have a one-time privilege of reinvesting all or a
part of the proceeds of the redemption back into Class
A shares of that Fund at NAV (without a sales charge)
within 60 days after the date of redemption. IN ORDER
TO REINVEST WITHOUT A SALES CHARGE, SHAREHOLDERS OR
THEIR BROKERS MUST INFORM IMSC THAT THEY ARE EXERCISING
THE REINVESTMENT PRIVILEGE AT THE TIME OF REINVESTMENT.
The tax status of a gain realized on a redemption
generally will not be affected by the exercise of the
reinvestment privilege, but a loss realized on a redemption
generally may be disallowed by the IRS if the reinvestment
privilege is exercised within 30 days after the redemption.
In addition, upon a reinvestment, the shareholder may
not be permitted to take into account sales charges
incurred on the original purchase of shares in
computing their taxable gain or loss.
SYSTEMATIC WITHDRAWAL PLAN
You may elect the Systematic Withdrawal Plan at
any time by completing the Account Application, which
is attached to this Prospectus. You can also obtain
this application by contacting your registered
representative or IMSC at 1-800-777-6472. To be
eligible, you must have at least $5,000 in your account. Payments
(minimum distribution amount -- $50) from your account
can be made monthly, quarterly, semiannually, annually
or on a selected monthly basis, to yourself or any
other designated payee. You may elect to have your
systematic withdrawal paid directly to your bank
account via EFT, at no charge. Share certificates must be
unissued (i.e., held by the Fund) while the plan is in effect. A
Systematic Withdrawal Plan may not be established if you
are currently participating in the Automatic Investment
Method. For more information, please contact IMSC at
1-800-777-6472.
If payments you receive through the Systematic
Withdrawal Plan exceed the dividends and capital
appreciation of your account, you will be reducing the
value of your account.
Additional investments made by shareholders
participating in the Systematic Withdrawal Plan must
equal at least $1,000 while the plan is in effect.
However, it may not be advantageous to purchase
additional Class A, Class B or Class C shares when you
have a Systematic Withdrawal Plan, because you may be subject to
an initial sales charge on your purchase of Class A
shares or to a CDSC imposed on your redemptions of
Class B or Class C shares. In addition, redemptions are
taxable events.
Amounts paid to you through the Systematic
Withdrawal Plan are derived from the redemption of
shares in your account. Any applicable CDSC will be
assessed upon the redemptions. A CDSC will not be
assessed on withdrawals not exceeding 12% annually of
the initial account balance when the Systematic Withdrawal Plan
was started.
Should you wish at any time to add a Systematic
Withdrawal Plan to an existing account or change payee
instructions, you will need to submit a written
request, signed by all registered owners, with
signatures guaranteed.
Retirement accounts are eligible for Systematic
Withdrawal Plans. Please contact IMSC at 1-800-777-6472
to obtain the necessary paperwork to establish a plan.
If the U.S. Postal Service cannot deliver your
checks, or if deposits to a bank account are returned
for any reason, your redemptions will be discontinued.
AUTOMATIC INVESTMENT METHOD
You may authorize an investment to be
automatically drawn each month from your bank for
investment in Fund shares by completing Sections 6A and
7B of the Account Application. Attach a "voided" check
or deposit slip to your account application. At pre-
specified intervals, your bank account will be debited and
the proceeds will be credited to your Ivy account. The minimum
investment under this plan is $50 per month ($25 per
month for retirement plans). There is no charge to you
for this program.
You may terminate or suspend your Automatic
Investment Method by telephone at any time by
contacting IMSC at 1-800-777- 6472.
If you have investments being withdrawn from a
bank account and we are notified that the account has
been closed, your Automatic Investment Method will be
discontinued.
CONSOLIDATED ACCOUNT STATEMENTS
Shareholders with two or more Ivy or Mackenzie
fund accounts having the same taxpayer I.D. number will
receive a single quarterly account statement, unless
otherwise specified. This feature consolidates the
activity for each account onto one
statement. Requests for quarterly consolidated
statements for all other accounts must be submitted in
writing and must be signed by all registered owners.
RETIREMENT PLANS
The Ivy and Mackenzie family of funds offer
several tax- sheltered retirement plans that may fit
your needs:
- IRA (Individual Retirement Account)
- 401(k), Money Purchase Pension and Profit
Sharing Plans
- SEP-IRA (Simplified Employee Pension Plan)
- 403(b)(7) Plan
Minimum initial and subsequent investments for
retirement plans are $25.
Investors Bank & Trust, which serves as custodian
or trustee under the retirement plan prototypes
available from the Fund, charges certain nominal fees
for annual maintenance. A portion of these fees is
remitted to IMSC, as compensation for its services to
the retirement plan accounts maintained with the Fund.
Distributions from retirement plans are subject to
certain requirements under the Code. Certain
documentation, including IRS Form W4-P, must be
provided to IMSC prior to taking any distribution.
Please contact IMSC for details. The Ivy and Mackenzie
family of funds and IMSC assume no responsibility to
determine whether a distribution satisfies the conditions of
applicable tax laws, and will not be responsible for any
penalties assessed. For additional information, please
contact your broker or tax adviser.
Please call IMSC at 1-800-777-6472 for complete
information kits describing the plans, their benefits,
restrictions, provisions and fees.
SHAREHOLDER INQUIRIES
Inquiries regarding the Fund should be directed to
IMSC at 1-800-777-6472.
IVY GLOBAL NATURAL RESOURCES FUND
ACCOUNT APPLICATION
USE THIS APPLICATION FOR CLASS A, CLASS B AND
CLASS C
Please mail applications and checks to: Ivy Mackenzie
Services Corp., P.O. Box 3022, Boca Raton, FL
33431-0922.
(This application should not be used for retirement
accounts for which Ivy is
custodian.)
Account Number:
(Fund Use Only)
Dealer #:
Branch #:
Rep. I.D. #:
Acct. Type:
Soc Cd:
Div Cd:
CG Cd:
Exc Cd:
Red Cd:
1 REGISTRATION
/ / Individual
/ / Joint Tenant
/ / Estate
/ / UGMA/UTMA
/ / Corporation
/ / Partnership
/ / Sole Proprietor
/ / Trust
/ / Other
Date of Trust
Owner, Custodian or Trustee
Co-owner or Minor
Minor's State of Residence
Street
City
State
Zip Code
Phone Number -- Day
Phone Number -- Evening
2 TAX ID
Citizenship: / / U.S. / / Other ________________
Social Security Number
Tax Identification Number
Under penalties of perjury, I certify by signing
in Section 8 below that: (1) the number shown in
this section is my correct taxpayer identification
number (TIN), and (2) I am not subject to backup
withholding because: (a) I have not been notified
by the Internal Revenue Service (IRS) that I am
subject to backup withholding as a result of a failure to
report all interest or dividends, or (b) the IRS has
notified me that I am no longer subject to backup
withholding. (Cross out item (2) if you have been notified
by the IRS that you are currently subject to backup
withholding because of underreporting interest or
dividends on your tax return.) Please see the "Tax
Identification Number" section of the Prospectus
for additional information on completing this
section.
3 DEALER INFORMATION
The undersigned ("Dealer") agrees to all
applicable provisions in this Application,
guarantees the signature and legal capacity of the
Shareholder, and agrees to notify IMSC of any
purchases made under a Letter of Intent or Rights of
Accumulation.
Dealer Name
Branch Office Address
City
State
Zip Code
Representative's Name and Number
Representative's Phone Number
Authorized Signature of Dealer
4 INVESTMENTS
A. Enclosed is my check ($1,000 minimum) made
payable to Ivy Global Natural Resources Fund.
Please invest it in Class A __ or Class B __
or Class C shares.*
$_______________________(Amount Enclosed)
B. I qualify for an elimination of the sales
charge due to the following privilege
(applies only to Class A shares):
__ New Letter of Intent (if ROA or 90-day
backdate privilege is applicable,
provide account(s) information below.)
__ ROA with the account(s) listed below.
__ Existing Letter of Intent with account(s)
listed below.
Fund Name(s)
Account Number(s)
If establishing a Letter of Intent, you will
need to purchase Class A shares over a
thirteen-month period in accordance with the
provisions in the Prospectus. The Aggregate
amount of these purchases will be at least
equal to the amount indicated below (see Prospectus for
minimum amount required for reduced sales charges).
/ / $ 50,000
/ / $100,000
/ / $250,000
/ / $500,000
C. FOR DEALER USE
Confirmed trade orders: [Confirm Number,
Number of Shares, Trade Date]
5 DISTRIBUTION OPTIONS
I would like to reinvest dividends and capital
gains into additional shares in this account at
net asset value unless a different option is
checked below.
A. / / Reinvest all dividends and capital gains
into additional shares of a different
Ivy or Mackenzie fund.
Fund Name
Account Number
B. / / Pay all dividends in cash and reinvest
capital gains into additional shares in
this Fund or a different Ivy or
Mackenzie fund.
Fund Name
Account Number
C. / / Pay all dividends and capital gains in
cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN
C OR D ABOVE, BE:
/ / Sent to the address listed in the
registration. / / Sent to the special payee
listed in Section 7A / / (By Mail)
7B / / (By E.F.T.)
6 OPTIONAL SPECIAL FEATURES
A. / / Automatic Investment Method (AIM)
- I wish to invest _________________
/ / once per month
/ / twice
/ / 3 times
/ / 4 times
- My bank account will be debited on the
_________ day of the month
Please invest $___________________ each period
starting in the month of __________________ in Ivy
Global Resource Fund. / / Class A
/ / Class B
/ / Class C
/ / I have attached a voided check to ensure my
correct bank account will be debited.
B. Systematic Withdrawal Plans**
I wish to automatically withdraw funds from my
account in Ivy Global Natural Resources Fund
/ / Monthly / / Quarterly / /Semiannually / /
Annually
/ / Once / / Twice / / 3 times / / 4 times
per month
I request the distribution be:
/ / Sent to the address listed in the
registration. / / Sent to the special payee
listed in Section 7. / / Invested into additional
shares of the same class of a different Ivy
Mackenzie fund.
Fund Name
Account Number
Amount $__________________(Minimum $50) starting
on or about the
- _______ day of the month
- _______ day of the month
- _______ day of the month*
NOTE: Account minimum: $5,000 in shares at current
offering price
C. Electronic Funds Transfer for Redemption
Proceeds**
I authorize the Agent to honor telephone
instructions for the redemption of Fund
shares up to $50,000. Proceeds may be wire
transferred to the bank account designated
($1,000 minimum). (Complete Section 7B)
D. Telephone Exchanges** / / Yes /
/ No
I authorize exchanges by telephone among the
Ivy and Mackenzie family of funds upon
instructions from any person as more fully
described in the Prospectus. To change this
option once established, written
instructions must be received from the
shareholder of record or the current
registered representative.
If neither box is checked, the telephone
exchange privilege will be provided
automatically.
E. Telephonic Redemptions** / / Yes /
/ No
The Fund or its agents are authorized to
honor telephone instructions from any person
as more fully described in the Prospectus for
the redemption of Fund shares. The amount of
the redemption shall not exceed $50,000 and
the proceeds are to be payable to the
shareholder of record and mailed to the address of
record. To change this option once established, written
instructions must be received from the shareholder
of record or the current registered
representative.
If neither box is checked, the telephone
redemption privilege will be provided
automatically.
* There must be a period of at least seven
calendar days between each
investment/withdrawal period.
** This option may not be used if shares are
issued in certificate form.
7 SPECIAL PAYEE
A. MAILING ADDRESS
Please send all disbursements to this special
payee:
Name of Bank or Individual
Account Number (If Applicable)
Street
City/State/Zip
B. FED WIRE / E.F.T. INFORMATION
Financial Institution
ABA #
Account #
Street
City/State/Zip
(Please attach a voided check)
8 SIGNATURES
Investors should be aware that the failure to
check the "No" under Section 6D or 6E above means
that the Telephone Exchange/Redemption Privileges
will be provided. The 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 "Exchange Privilege" 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.
______________________________
________________________ Signature of Owner,
Custodian, Date
Trustee or Corporate Officer
______________________________
________________________ Signature of Joint Owner,
Date
Co-Trustee or Corporate Officer
IGNRF-1-896
IVY ASIA PACIFIC FUND
series of
IVY FUND
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL INFORMATION
January 1, 1997
_________________________________________________________________
Ivy Fund (the "Trust") is a diversified, open-end
management investment company that currently consists
of seventeen fully managed portfolios. This Statement
of Additional Information ("SAI") describes one of the
portfolios, Ivy Asia Pacific Fund (the "Fund"). The
other sixteen portfolios of the Trust are described in
separate Statements of Additional Information.
This SAI is not a prospectus and should be read in
conjunction with the prospectus for the Fund dated
January 1, 1997 (the "Prospectus"), which may be
obtained upon request and without charge from the Trust
at the Distributor's address and telephone number
listed below.
INVESTMENT MANAGER
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 777-6472
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
TABLE OF CONTENTS
INVESTMENT OBJECTIVE AND POLICIES . . .
. . . 4 INVESTING IN ASIA PACIFIC SECURITIES . .
. . . . . . . . 4 BANKING INDUSTRY AND SAVINGS
AND LOAN OBLIGATIONS . . . 5 BORROWING . . . .
. . . . . . . . . . . . . . . . . . . 5
COMMERCIAL PAPER . . . . . . . . . . . . . . . . . . . . 5
DEBT SECURITIES, IN GENERAL . . . . . . . . . . . . . .
8 INVESTMENT-GRADE DEBT SECURITIES . . . . . . .
. . . . . 8 FOREIGN SECURITIES . . . . . . . . .
. . . . . . . . . . 10 FORWARD FOREIGN CURRENCY
CONTRACTS . . . . . . . . . . . 12 FOREIGN
CURRENCIES . . . . . . . . . . . . . . . . . . . 13
REPURCHASE AGREEMENTS . . . . . . . . . . . . . . . . . 14
. . . . . . . . . . . . . . . . . . . . . . . . . . .
. 14 ZERO COUPON BONDS . . . . . . . . . . . . .
. . . . . . 14 OPTIONS TRANSACTIONS . . . . . . .
. . . . . . . . . . . 15 GENERAL . . . . . .
. . . . . . . . . . . . . . . . 15 WRITING
OPTIONS ON INDIVIDUAL SECURITIES . . . . . 17
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES . . . . 17
PURCHASING AND WRITING OPTIONS ON SECURITIES
INDICES . . . . . . . . . . . . . . . . . . . 18
RISKS OF OPTIONS TRANSACTIONS . . . . . . . . .
. . 19 SECURITIES INDEX FUTURES CONTRACTS .
. . . . . . . 21 RISKS OF SECURITIES INDEX
FUTURES . . . . . . . . . 23 COMBINED
TRANSACTIONS . . . . . . . . . . . . . . . . . 24
RESTRICTED AND ILLIQUID SECURITIES . . . . . . . . . . . 25
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . .
. . . 25
ADDITIONAL RESTRICTIONS . . . . . . . . . . . . . . . .
. . . 27
ADDITIONAL RIGHTS AND PRIVILEGES . . . . . . . . . . .
. . . 28 AUTOMATIC INVESTMENT METHOD . . . . . .
. . . . . . . . 28 EXCHANGE OF SHARES . . . . . .
. . . . . . . . . . . . . 29 INITIAL SALES
CHARGE SHARES . . . . . . . . . . . . 29
CONTINGENT DEFERRED SALES CHARGE SHARES . . . . . . 29
LETTER OF INTENT . . . . . . . . . . . . . . . . . . .
. . . 32 RETIREMENT PLANS . . . . . . . . . . . .
. . . . . . . . 33 INDIVIDUAL RETIREMENT
ACCOUNTS . . . . . . . . . . 34 QUALIFIED
PLANS . . . . . . . . . . . . . . . . . . 35
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(b)(7)
ACCOUNT") . . . . . . . . . . . . . . . . . . 36
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS . . . . . 37
REINVESTMENT PRIVILEGE . . . . . . . . . . . . . . . .
. . . 37 RIGHTS OF ACCUMULATION . . . . . . . . .
. . . . . . . . 37 SYSTEMATIC WITHDRAWAL PLAN . .
. . . . . . . . . . . . . 38 GROUP SYSTEMATIC
INVESTMENT PROGRAM . . . . . . . . . . 39
BROKERAGE ALLOCATION . . . . . . . . . . . . . . . . .
. . . 39
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 41 PERSONAL INVESTMENTS BY EMPLOYEES OF IMI
. . . . . . . . 45
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . .
. . . 47 BUSINESS MANAGEMENT AND INVESTMENT
ADVISORY SERVICES . . 47 DISTRIBUTION SERVICES .
. . . . . . . . . . . . . . . . 49 RULE
18F-3 PLAN . . . . . . . . . . . . . . . . . . 50
RULE 12B-1 DISTRIBUTION PLANS . . . . . . . . . . . 51
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . .
53 FUND ACCOUNTING SERVICES . . . . . . . . . . .
. . . . . 53 TRANSFER AGENT AND DIVIDEND PAYING
AGENT . . . . . . . . 53 ADMINISTRATOR . . . . .
. . . . . . . . . . . . . . . . 54 AUDITORS . . .
. . . . . . . . . . . . . . . . . . . . . 54
CAPITALIZATION AND VOTING RIGHTS . . . . . . . . . . .
. . . 54
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . .
. . . 56
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . .
. . . 58
REDEMPTIONS . . . . . . . . . . . . . . . . . . . . . .
. . . 58
CONVERSION OF CLASS B SHARES . . . . . . . . . . . . .
. . . 60
TAXATION . . . . . . . . . . . . . . . . . . . . . . .
. . . 60 OPTIONS, FUTURES AND FOREIGN CURRENCY
FORWARD CONTRACTS . . . . . . . . . . . . . .
. . . . . . . 61 CURRENCY FLUCTUATIONS --
"SECTION 988" GAINS OR LOSSES . . . . . .
. . . . . . . . . . . . . . . . . . . 63
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES . .
. . . 63 DEBT SECURITIES ACQUIRED AT A DISCOUNT .
. . . . . . . . 64 DISTRIBUTIONS . . . . . . . .
. . . . . . . . . . . . . 65 DISPOSITION OF
SHARES . . . . . . . . . . . . . . . . . 66
FOREIGN WITHHOLDING TAXES . . . . . . . . . . . . . . . 66
BACKUP WITHHOLDING . . . . . . . . . . . . . . . . . . .
67
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . .
. . . 68 AVERAGE ANNUAL TOTAL RETURN . . . .
. . . . . . . . 68 OTHER QUOTATIONS,
COMPARISONS AND GENERAL INFORMATION . .
. . . . . . . . . . . . . . . 69
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . .
. . . 70
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION
("S&P") AND MOODY'S SHAREHOLDERS SERVICE, INC.
("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS . . . . . . . . 71
APPENDIX B
STATEMENT OF ASSETS AND LIABILITIES
AS OF JULY 15, 1996
AND
REPORT OF INDEPENDENT ACCOUNTANTS . . .
. . . 74
INVESTMENT OBJECTIVE AND POLICIES
The Fund has its own investment objective and
policies, which are described in the Prospectus under
the captions "Investment Objective and Policies" and
"Risk Factors and Investment Techniques." Additional
information regarding the characteristics and risks
associated with the Fund's investment techniques is set
forth below.
INVESTING IN ASIA PACIFIC SECURITIES
Certain Asia-Pacific countries in which the Fund
may invest are considered to be developing countries.
Developing countries typically are in the initial
stages of their industrialization cycle, and their
economic structures generally are less diverse and
mature than in the United States. Such countries' political
systems also may be relatively unstable. Historically,
markets of developing countries have been more volatile
than the markets of developed countries, yet such
markets often have provided higher rates of return to
investors.
Investing in securities of issuers in Asia-Pacific
countries involves certain considerations not typically
associated with investing in securities of United
States companies, including (1) restrictions on foreign
investment and on repatriation of capital invested in
Asian countries, (2) currency fluctuations, (3) the
cost of converting foreign currency into United States dollars,
(4) potential price volatility and lesser liquidity of
shares traded on Asia-Pacific country securities
markets and (5) political and economic risks, including
the risk of nationalization or expropriation of assets
and the risk of war.
Certain Asia-Pacific countries may be more
vulnerable to the ebb and flow of international trade,
trade barriers and other protectionist or retaliatory
measures. Investments in countries that have recently
opened their capital markets (including China), and
those that have privatized some of their state-owned
industries, should be regarded as speculative.
The settlement period of securities transactions
in foreign markets in general may be longer than in
domestic markets, and such delays may be of particular
concern in developing countries. For example, the
possibility of political upheaval and the dependence on
foreign economic assistance may be greater in
developing countries than in developed countries, either one of
which may increase settlement delays.
Securities exchanges, issuers and broker-dealers
in some Asia-Pacific countries are subject to less
regulatory scrutiny than in the United States. In
addition, due to the limited size of the markets for
Asia-Pacific securities, the prices for such securities
may be more vulnerable to adverse publicity, investors'
perceptions or traders' positions or strategies, which
could cause a decrease not only in the value but also in the
liquidity of the Fund's investments.
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS
Certificates of deposit are negotiable
certificates issued against funds deposited in a
commercial bank for a definite period of time and
earning a specified return. Bankers' acceptances are
negotiable drafts or bills of exchange, normally drawn
by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank (meaning, in effect, that the
bank unconditionally agrees to pay the face value of
the instrument on maturity). The Fund's investments in
certificates of deposit and bankers' acceptances are
limited to obligations of (i) banks having total assets
in excess of $1 billion and (ii) other banks which do
not meet the $1 billion asset requirement, if the
principal amount of such obligation is fully insured by the
Federal Deposit Insurance Corporation (the "FDIC"). The
Fund's investments in certificates of deposit of
savings associations are limited to obligations of
Federal and state-chartered institutions whose total
assets exceed $1 billion and whose deposits are insured
by the FDIC.
BORROWING
Borrowing may exaggerate the effect on the Fund's
net asset value of any increase or decrease in the
value of the Fund's portfolio securities. Money
borrowed will be subject to interest costs (which may
include commitment fees and/or the cost of maintaining
minimum average balances). Although the principal of
the Fund's borrowings will be fixed, the Fund's assets may change
in value during the time a borrowing is outstanding,
thus increasing exposure to capital risk. All
borrowings will be repaid before any additional
investments are made.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured
promissory notes issued in bearer form by bank holding
companies, corporations and finance companies. The
Fund may invest in commercial paper that is rated A-1
by Standard & Poor's Corporation ("S&P") or Prime-1 by
Moody's Shareholders Service, Inc. ("Moody's") or, if
not rated by Moody's or S&P, is issued by companies
having an outstanding debt issue rated AAA or AA by S&P
or Aaa or Aa by Moody's.
U.S. GOVERNMENT SECURITIES
U.S. Government securities are obligations of, or
guaranteed by, the U.S. Government, its agencies or
instrumentalities. Securities guaranteed by the U.S.
Government include: (1) direct obligations of the U.S.
Treasury (such as Treasury bills, notes, and bonds) and
(2) Federal agency obligations guaranteed as to
principal and interest by the U.S. Treasury (such as GNMA
certificates, which are mortgage-backed securities). When these
securities are held to maturity, the payment of
principal and interest is unconditionally guaranteed by
the U.S. Government, and thus they are of the highest
possible credit quality. U.S. Government securities
that are not held to maturity are subject to variations
in market value due to fluctuations in interest rates.
Mortgage-backed securities are securities
representing part ownership of a pool of mortgage
loans. For example, GNMA certificates are such
securities in which the timely payment of principal and
interest is guaranteed by the full faith and credit of
the U.S. Government. 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 normal
principal amortization and may be prepaid prior to
maturity. Prepayment rates vary widely and may be
affected by changes in market interest rates. In
periods of falling interest rates, the rate of prepayment tends
to increase, thereby shortening the actual average life of
the security. Conversely, when interest rates are
rising, the rate of prepayments tends to decrease,
thereby lengthening the actual average life of the
security (and increasing the security's price
volatility). Accordingly, it is not possible to predict
accurately the average life of a particular pool. Reinvestment
of prepayment may occur at higher or lower rates than the
original yield on the certificates. Due to the
prepayment feature and the need to reinvest prepayments
of principal at current rates, GNMA certificates can be
less effective than typical bonds of similar maturities
at "locking in" yields during periods of declining
interest rates. GNMA certificates may appreciate or
decline in market value during periods of declining or
rising interest rates, respectively.
Securities issued by U.S. Government
instrumentalities and certain federal agencies are
neither direct obligations of nor guaranteed by the
U.S. Treasury. However, they involve Federal
sponsorship in one way or another; some are backed by specific
types of collateral; some are supported by the issuer's
right to borrow from the Treasury; some are supported
by the discretionary authority of the Treasury to
purchase certain obligations of the issuer; others are
supported only by the credit of the issuing government
agency or instrumentality. These agencies and
instrumentalities include, but are not limited to, Federal Land
Banks, Farmers Home Administration, Central Bank for
Cooperatives, Federal Intermediate Credit Banks, Federal Home
Loan Banks, Federal National Mortgage Association, and
Student Loan Marketing Association.
CONVERTIBLE SECURITIES
Because convertible securities can be converted
into equity securities, their values will normally vary
in some proportion with those of the underlying equity
securities. Convertible securities usually provide a
higher yield than the underlying
equity, however, so that the price decline of a
convertible security may sometimes be less substantial
than that of the underlying equity security.
The Fund may invest in convertible securities,
such as corporate bonds, notes, debentures and other
securities that may be converted into common stock.
Investments in convertible securities can provide
income through interest and dividend payments as well
as an opportunity for capital appreciation by virtue of
their conversion or exchange features.
The convertible securities in which the Fund may
invest include zero coupon debt securities and
preferred stock that may be converted or exchanged at a
stated or determinable exchange ratio into underlying
shares of common stock. The exchange ratio for any
particular convertible security may be adjusted from time
to time due to stock splits, dividends, spin-offs, other
corporate distributions or scheduled changes in the exchange
ratio. Convertible debt securities and convertible
preferred stocks, until converted, have general
characteristics similar to both debt and equity
securities. Although to a lesser extent than with debt
securities generally, the market value of convertible
securities tends to decline as interest rates increase
and, conversely, tends to increase as interest rates
decline. In addition, because of the conversion or exchange
feature, the market value of convertible securities typically
changes as the market value of the underlying common
stock changes, and, therefore, also tends to follow
movements in the general market for equity securities.
A unique feature of convertible securities is that as
the market price of the underlying common stock
declines, convertible securities tend to trade
increasingly on a yield basis, and so may not experience
market value declines to the same extent as the underlying common
stock. When the market price of the underlying common
stock increases, the price of a convertible security
tends to rise as a reflection of the value of the
underlying common stock, although typically not as much
as the price of the underlying common stock. While no
securities investments are without risk, investments in
convertible securities generally entail less risk than
investments in common stock of the same issuer.
As debt securities, convertible securities are
investments which provide for a stream of income or, in
the case of zero coupon securities, accretion of income
with generally higher yields than common stocks. Of
course, like all debt securities, there can be no
assurance of income or principal payments because the
issuers of the convertible securities may default on their
obligations. Convertible securities generally offer lower
yields than non-convertible securities of similar
quality because of their conversion or exchange
features.
Convertible securities generally are subordinated
to other similar but non-convertible securities of the
same issuer, although convertible bonds, as corporate
debt obligations, are
senior in right of payment to all equity securities,
and convertible preferred stock is senior to common
stock, of the same issuer. However, convertible bonds
and convertible preferred stock typically have lower
coupon rates than similar non-convertible securities.
Convertible securities may be issued as fixed
income obligations that pay current income or as zero
coupon notes and bonds, including Liquid Yield Option
Notes ("LYONs"). Zero coupon securities pay no cash
income and are sold 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. Zero coupon convertible securities offer the
opportunity for capital appreciation because increases (or
decreases) in the market value of such securities closely
follow the movements in the market value of the
underlying common stock. Zero coupon convertible
securities generally are expected to be less volatile
than the underlying common stocks because they usually
are issued with short maturities (15 years or less) and
are issued with options and/or redemption features exercisable by
the holder of the obligation entitling the holder to
redeem the obligation and receive a defined cash
payment.
DEBT SECURITIES, IN GENERAL
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. 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. Bonds with longer
maturities generally are more volatile than bonds with
shorter maturities. The market value of debt securities
also varies according to the relative financial
condition of the issuer. In general, lower-quality
bonds offer higher yields due to the increased risk
that the issuer will be unable to meet its obligations
on interest or principal payments at the time called
for by the debt instrument.
INVESTMENT-GRADE DEBT SECURITIES
Bonds rated Aaa by Moody's and AAA by S&P are
judged to be of the best quality (i.e., capacity to pay
interest and repay principal is extremely strong).
Bonds rated Aa/AA are considered to be of high quality
(i.e., capacity to pay interest and repay principal is
very strong and differs from the highest rated issues
only to a small degree). Bonds rated A are viewed as
having many favorable investment attributes, but elements may be
present that suggest a susceptibility to the adverse
effects of changes in circumstances and economic
conditions than debt in higher rated categories. Bonds
rated Baa/BBB (considered by Moody's to be "medium
grade" obligations) are considered to have an adequate
capacity to pay interest and repay principal, but
certain protective elements may be lacking (i.e., such
bonds lack outstanding investment characteristics and
have some speculative characteristics). The Fund may
invest in debt securities that are given an investment-
grade rating by Moody's or S&P, and may also invest in
unrated debt securities that are considered by IMI to
be of comparable quality.
HIGH YIELD BONDS
The Fund may invest in corporate debt securities
rated Ba or lower by Moody's, or BB or lower by S&P.
The Fund will not, however, invest in securities that,
at the time of investment, are rated lower than C by
either Moody's or S&P. Securities rated lower than Baa
or BBB (and comparable unrated securities) are commonly
referred to as "high yield" or "junk" bonds and are
considered to be predominantly speculative with respect to the
issuer's continuing ability to meet principal and interest
payments. The lower the ratings of corporate debt
securities, the more their risks render them like
equity securities. (See Appendix A for a more complete
description of the ratings assigned by Moody's and S&P
and their respective
characteristics.)
While IMI may refer to ratings issued by
established credit rating agencies, it is not IMI's
policy to rely exclusively on such ratings, but rather
to supplement such ratings with its own independent and
ongoing review of credit quality. The Fund's
achievement of its investment objective may, to the extent of its
investment in high yield bonds, be more dependent upon
IMI's credit analysis than would be the case if the
Fund were investing in higher quality bonds. Should
the rating of a portfolio security be downgraded, IMI
will determine whether it is in the Fund's best
interest to retain or dispose of the security.
However, should any individual bond held by the Fund be
downgraded below a rating of C, IMI currently intends to dispose
of that bond based on then existing market conditions.
The secondary market on which high yield bonds are
traded may be less liquid than the market for higher
grade bonds. Less liquidity in the secondary trading
market could adversely affect the price at which the
Fund could sell a high yield bond, and cause large
fluctuations in the daily net asset value of the Fund's
shares. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the
value and liquidity of high yield bonds, especially in a
thinly traded market. When secondary markets for high
yield securities become comparatively less liquid, it
may be more difficult to value the securities in light
of the additional research that may be required, and
elements of judgment may play a greater role in the
valuation where objective and reliable data is less widely
available. Prices for high yield bonds may also be affected by
legislative and regulatory developments. (For example,
federal rules currently require savings and loan
institutions to reduce gradually their holdings of high
yield bonds).
FOREIGN SECURITIES
The Fund may invest in debt securities of foreign
issuers, including non-U.S. dollar-denominated debt
securities, Eurodollar securities, sponsored and
unsponsored American Depository Receipts ("ADRs"), and
debt securities issued, assumed or guaranteed by
foreign governments or political subdivisions or
instrumentalities thereof. Shareholders should consider
carefully the substantial risks involved in investing in
securities issued by companies and governments of foreign
nations, which are in addition to the usual risks inherent in
the Fund's domestic investments.
Although the Fund intends to invest only in
nations that IMI considers to have relatively stable
and friendly governments, there is the possibility of
expropriation, nationalization or confiscatory
taxation, taxation of income earned in a foreign
country and other foreign taxes, foreign exchange controls (which
may include suspension of the ability to transfer
currency from a given country), default in foreign
government securities, political or social instability
or diplomatic developments that could affect
investments in securities of issuers in those nations.
In addition, in many countries there is less publicly
available information about issuers than is available for U.S.
companies. For example, ownership of unsponsored ADRs may
not entitle the owner to financial or other reports
from the issuer to which it might otherwise be entitled
as the owner of a sponsored ADR. Moreover, foreign
companies are not generally subject to uniform
accounting, auditing and financial reporting standards,
and auditing practices and requirements may not be
comparable to those applicable to U.S. companies. In many
foreign countries, there is less government supervision and
regulation of business and industry practices, stock
exchanges, brokers and listed companies than in the
United States. Foreign securities transactions may
also be subject to higher brokerage costs than domestic
securities transactions. The foreign securities
markets of many of the countries in which the Fund may
invest may also be smaller, less liquid and subject to greater
price volatility than those in the United States. In
addition, the Fund may encounter difficulties or be
unable to pursue legal remedies and obtain judgment in
foreign courts.
Foreign stock markets have different clearance and
settlement procedures and in certain markets there have
been times when settlements have been unable to keep
pace with the volume of securities transactions, making
it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when
assets of the Fund are uninvested and are earning no
return. The inability of the Fund to make intended
security purchases due to settlement problems could cause the
Fund to miss attractive investment opportunities. Further,
the inability to dispose of portfolio securities due to
settlement problems could result either in losses to
the Fund because of subsequent declines in the value of
the portfolio security or, if
the Fund has entered into a contract to sell the
security, in possible liability to the purchaser.
Fixed commissions on some foreign securities exchanges
are generally higher than negotiated commissions on
U.S. exchanges, although IMI will endeavor to achieve
the most favorable net results on the Fund's portfolio
transactions. In addition, the Fund may encounter difficulties
or be unable to pursue legal remedies and obtain judgment
in foreign courts. It may be more difficult for the
Fund's agents to keep currently informed about
corporate actions such as stock dividends or other
matters that may affect the prices of portfolio
securities. Communications between the United States
and foreign countries may be less reliable than within the United
States, thus increasing the risk of delayed settlements
of portfolio transactions or loss of certificates for
portfolio securities. Moreover, individual foreign
economies may differ favorably or unfavorably from the
United States economy in such respects as growth of
gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of
payments position. IMI seeks to mitigate the risks to the Fund
associated with the foregoing considerations through
investment variation and continuous professional
management.
INVESTING IN EMERGING MARKETS. Investments in
companies domiciled in developing countries may be
subject to potentially higher risks than investments in
developed countries. These risks include (i) less
social, political and economic stability; (ii) the
small current size of the markets for such securities
and the currently low or nonexistent volume of trading, which
result in a lack of liquidity and in greater price
volatility; (iii) certain national policies that may
restrict the Fund's investment opportunities, including
restrictions on investment in issuers or industries
deemed sensitive to national interests; (iv) foreign
taxation; (v) the absence of developed structures
governing private or foreign investment or allowing for judicial
redress for injury to private property; (vi) the absence,
until relatively recently in certain Eastern European
countries, of a capital market structure or market-
oriented economy; (vii) the possibility that recent
favorable economic developments in Eastern Europe may
be slowed or reversed by unanticipated political or
social events in such countries; and (viii) the
possibility that currency devaluations could adversely affect the
value of the Fund's investments. Further, many emerging
markets have experienced and continue to experience
high rates of inflation.
Despite the dissolution of the Soviet Union, the
Communist Party may continue to exercise a significant
role in certain Eastern European countries. To the
extent of the Communist Party's influence, investments
in such countries are exposed to risks of
nationalization, expropriation and confiscatory
taxation. The communist governments of a number of Eastern
European countries expropriated large amounts of private
property in the past, in many cases without adequate
compensation, and there can be no assurance that such
expropriation will not occur
in the future. In the event of such expropriation, the
Fund could lose a substantial portion of any
investments it has made in the affected countries.
Further, few (if any) accounting standards exist in
Eastern European countries. Finally, even though
certain Eastern European currencies may be convertible
into U.S. dollars, the conversion rates may be artificial in
relation to the actual market values and may be adverse to
the Fund's Shareholders.
Certain Eastern European countries that do not
have market economies are characterized by an absence
of developed legal structures governing private and
foreign investments and private property. In addition,
certain countries require governmental approval prior
to investments by foreign persons, or limit the amount
of investment by foreign persons in a particular company,
or limit the investment of foreign persons to only a specific
class of securities of a company that may have less
advantageous terms than securities of the company
available for purchase by nationals.
Authoritarian governments in certain Eastern
European countries may require that a governmental or
quasi-governmental authority act as custodian of the
Fund's assets invested in such country. To the extent
such governmental or quasi-governmental authorities do
not satisfy the requirements of the Investment Company
Act of 1940, as amended (the "1940 Act"), with respect to
the custody of the Fund's cash and securities, the Fund's
investment in such countries may be limited or may be required
to be effected through intermediaries. The risk of
loss through governmental confiscation may also be
increased in such countries.
FORWARD FOREIGN CURRENCY CONTRACTS
A forward contract is an obligation to purchase or
sell a specific currency for an agreed price at a
future date (usually less than a year), and typically
is individually negotiated and privately traded by
currency traders and their customers. A forward
contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. Although
foreign exchange dealers do not charge a fee for commissions,
they do realize a profit based on the difference between
the price at which they are buying and selling various
currencies. Although these contracts are intended to
minimize the risk of loss due to a decline in the value
of the hedged currencies, at the same time, they tend
to limit any potential gain which might result should
the value of such currencies increase.
While the Fund may enter into forward contracts to
reduce currency exchange risks, changes in currency
exchange rates may result in poorer overall performance
for the Fund than if it had not engaged in such
transactions. Moreover, there may be an imperfect
correlation between the Fund's portfolio holdings of
securities denominated in a particular currency and forward
contracts entered into by the Fund. An imperfect
correlation of this type may prevent the Fund from
achieving the intended hedge or expose the Fund to the
risk of currency exchange loss.
The Fund will not enter into or maintain a net
exposure to a forward contract where the consummation
of the contract would obligate the Fund to deliver an
amount of currency that exceeds the value of the Fund's
portfolio securities or other assets denominated in
that currency. Further, the Fund generally will not
enter into a forward contract with a term of greater than one
year.
To the extent required by applicable law, the Fund
will hold cash or liquid securities in a segregated
account with its custodian in an amount equal (on a
daily marked-to-market basis) to the amount of the
commitments under these contracts. At the maturity of
a forward contract, the Fund may either accept or make
delivery of the currency specified in the contract, or,
prior to maturity, enter into a closing purchase transaction
involving the purchase or sale of an offsetting position.
Closing purchase transactions with respect to forward
contracts are usually effected with the currency trader
who is a party to the original forward contract.
FOREIGN CURRENCIES
Investment in foreign securities usually will
involve currencies of foreign countries. In addition,
the Fund may temporarily hold funds in bank deposits in
foreign currencies during the development of its
various investment programs. To the extent this is so,
the value of the assets of the Fund as measured in U.S.
dollars may be affected favorably or unfavorably by
changes in foreign currency exchange rates and exchange
control regulations. The Fund may also incur currency conversion
costs. Although foreign exchange dealers do not charge
a fee for conversion, they do realize a profit based on
the difference (or "spread") between the prices at
which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to
the Fund at one rate, while offering a lesser rate of
exchange should the Fund desire to resell that currency to the
dealer. The Fund will usually conduct its foreign currency
exchange transactions either on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign
currency exchange market, or through entering into
forward contracts to purchase or sell foreign
currencies (see "Forward Foreign Currency Contracts,"
above).
Because the Fund normally will be invested in both
U.S. and foreign securities markets, changes in the
Fund's share price may have a low correlation with
movements in the U.S. markets. The Fund's share price
will reflect the movements of both the different stock
and bond markets in which it is invested and of the
currencies in which the investments are denominated. The
strength or weakness of the U.S. dollar against foreign
currencies may account for part of the Fund's
investment performance. U.S. and foreign securities
markets do not always move in step with each other, and
the total returns from different markets may vary
significantly.
REPURCHASE AGREEMENTS
Repurchase agreements are contracts under which
the Fund buys a money market instrument and obtains a
simultaneous commitment from the seller to repurchase
the instrument at a specified time and at an agreed-
upon yield. Under guidelines approved by the Trust's
Board of Trustees (the "Board"), the Fund is permitted
to enter into repurchase agreements only if the
repurchase agreements are at least fully collateralized with U.S.
Government securities or other securities that the
Fund's investment adviser has approved for use as
collateral for repurchase agreements, and the
collateral must be marked-to- market daily. The Fund
will enter into repurchase agreements only with banks
and broker-dealers deemed to be creditworthy by the
Fund's investment adviser under guidelines approved by the
Board. In the unlikely event of failure of the executing bank
or broker-dealer, 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 costs in disposing
of the security.
SMALL COMPANIES
Investing in smaller company stocks involves
certain special considerations and risks that are not
usually associated with investing in larger, more
established companies. For example, the securities of
smaller companies may be subject to more abrupt or
erratic market movements, because they tend to be thinly
traded and are subject to a greater degree to changes in the
issuer's earnings and prospects. Transaction costs in
smaller company stocks also may be higher than those of
larger companies.
WARRANTS
The holder of a warrant has the right, until the
warrant expires, to purchase a given number of shares
of a particular issuer at a specified price. Such
investments can provide a greater potential for profit
or loss than an equivalent investment in the underlying
security. However, prices of warrants do not
necessarily move in tandem with the prices of the
underlying securities, and are therefore considered speculative
investments. Warrants pay no dividends and confer no
rights other than a purchase option. Thus, if a
warrant held by the Fund were not exercised by the date
of its expiration, the Fund would lose the entire
purchase price of the warrant.
ZERO COUPON BONDS
The Fund may purchase zero coupon bonds in
accordance with
the Fund's credit quality standards. Zero coupon bonds
are debt obligations issued at a significant discount
from face value, without any requirement for the
periodic payment of interest. 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 the Fund holds zero coupon bonds in its
portfolio, however, 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 such
income to shareholders currently, even though funds
representing such income would not have been received by the
Fund. Cash to pay dividends representing unpaid, accrued
interest may be obtained from sales proceeds of portfolio
securities and Fund shares and from loan proceeds.
However, this may result in the Fund's having to sell
portfolio securities at a time when it might otherwise
choose not to do so, and the Fund might incur a capital
loss on such sales. Because interest on zero coupon
obligations is not distributed to the Fund on a current
basis, but is in effect compounded, the value of such
securities is subject to greater fluctuations in response to
changing interest rates than the value of debt obligations
that distribute income regularly.
OPTIONS TRANSACTIONS
GENERAL. The Fund may engage in transactions in
options on securities and stock indices in accordance
with its stated investment objective and policies. The
Fund may also purchase put options on securities and
may purchase and sell (write) put and call options on
stock indices. Options on securities and stock indices
purchased or written by the Fund will be limited to
options traded on national securities exchanges, boards of trade
or similar entities, or in the OTC markets.
A call option is a short-term contract (having a
duration of less than one year) pursuant to which the
purchaser, in return for the premium paid, has the
right to buy the security underlying the option at the
specified exercise price at any time during the term of
the option. The writer of the call option, who
receives the premium, has the obligation, upon exercise of
the option, to deliver the underlying security against payment
of the exercise price. A put option is a similar
contract pursuant to which the purchaser, in return for
the premium paid, has the right to sell the security
underlying the option at the specified exercise price
at any time during the term of the option. The writer
of the put option, who receives the premium, has the
obligation, upon exercise of the option, to buy the underlying
security at the exercise price. The premium paid by the
purchaser of an option will reflect, among other things,
the relationship of the exercise price to the market
price and volatility of the underlying security, the
time remaining to expiration of the option, supply and
demand, and interest rates.
If the writer of an option wishes to terminate the
obligation, the writer may effect a "closing purchase
transaction." This is accomplished by buying an option of
the same series as the option previously written. The
effect of the purchase is that the writer's position
will be canceled by the Options Clearing Corporation.
However, a writer may not effect a closing purchase
transaction after it has been notified of the exercise
of an option. Likewise, an investor who is the holder
of an option may liquidate his or her position by effecting a
"closing sale transaction." This is accomplished by selling
an option of the same series as the option previously
purchased. There is no guarantee that either a closing
purchase or a closing sale transaction can be effected
at any particular time or at any acceptable price. If
any call or put option is not exercised or sold, it
will become worthless on its expiration date.
The Fund will realize a gain (or a loss) on a
closing purchase transaction with respect to a call or
a put previously written by the Fund if the premium,
plus commission costs, paid by the Fund to purchase the
call or the put is less (or greater) than the premium,
less commission costs, received by the Fund on the sale
of the call or the put. A gain also will be realized if
a call or a put that the Fund has written lapses unexercised,
because the Fund would retain the premium. Any such gains
(or losses) are considered short-term capital gains (or
losses) for Federal income tax purposes. Net short-
term capital gains, when distributed by the Fund, are
taxable as ordinary income. See "Taxation."
The Fund will realize a gain (or a loss) on a
closing sale transaction with respect to a call or a
put previously purchased by the Fund if the premium,
less commission costs, received by the Fund on the sale
of the call or the put is greater (or less) than the
premium, plus commission costs, paid by the Fund to
purchase the call or the put. If a put or a call expires
unexercised, it will become worthless on the expiration date,
and the Fund will realize a loss in the amount of the
premium paid, plus commission costs. Any such gain or
loss will be long-term or short-term gain or loss,
depending upon the Fund's holding period for the
option.
Exchange-traded options generally have
standardized terms and are issued by a regulated
clearing organization (such as the Options Clearing
Corporation), which, in effect, guarantees the
completion of every exchange-traded option transaction. In
contrast, the terms of OTC options are negotiated by the Fund
and its counterparty (usually a securities dealer or a
financial institution) with no clearing organization
guarantee. When the Fund purchases an OTC option, it
relies on the party from whom it has purchased the
option (the "counterparty") to make delivery of the
instrument underlying the option. If the counterparty fails
to do so, the Fund will lose any premium paid for the option,
as well as any expected benefit of the transaction.
Accordingly, IMI will assess the creditworthiness of
each counterparty to
determine the likelihood that the terms of the OTC
option will be satisfied.
WRITING OPTIONS ON INDIVIDUAL SECURITIES. The
Fund may write (sell) covered call options on the
Fund's securities in an attempt to realize a greater
current return than would be realized on the securities
alone. The Fund may also write covered call options to
hedge a possible stock or bond market decline (only to
the extent of the premium paid to the Fund for the
options). In view of the investment objectives of the Fund,
the Fund generally would write call options only in
circumstances where the investment adviser to the Fund
does not anticipate significant appreciation of the
underlying security in the near future or has otherwise
determined to dispose of the security.
The Fund may write covered call options as
described in the Prospectus. A "covered" call option
means generally that so long as the Fund is obligated
as the writer of a call option, the Fund will (i) own
the underlying securities subject to the option, or
(ii) have the right to acquire the underlying securities through
immediate conversion or exchange of convertible preferred
stocks or convertible debt securities owned by the
Fund. Although the Fund receives premium income from
these activities, any appreciation realized on an
underlying security will be limited by the terms of the
call option. The Fund may purchase call options on
individual securities only to effect a "closing
purchase transaction."
As the writer of a call option, the Fund receives
a premium for undertaking the obligation to sell the
underlying security at a fixed price during the option
period, if the option is exercised. So long as the
Fund remains obligated as a writer of a call option, it
forgoes the opportunity to profit from increases in the
market price of the underlying security above the
exercise price of the option, except insofar as the premium
represents such a profit (and retains the risk of loss should
the value of the underlying security decline).
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES. The
Fund may purchase a put option on an underlying
security that it owns as a defensive technique in order
to protect against an anticipated decline in the value
of the security. The Fund, as the holder of the put
option, may sell the underlying security at the exercise
price regardless of any decline in its market price. In order
for a put option to be profitable, the market price of the
underlying security must decline sufficiently below the
exercise price to cover the premium and transaction
costs that the Fund must pay. These costs will reduce
any profit the Fund might have realized had it sold the
underlying security instead of buying the put option.
The premium paid for the put option would reduce any
capital gain otherwise available for distribution when the
security is eventually sold. The purchase of put options will
not be used by the Fund for leverage purposes.
The Fund may also purchase a put option on an
underlying security that it owns and at the same time
write a call option on the same security with the same
exercise price and expiration date. Depending on
whether the underlying security appreciates or
depreciates in value, the Fund would sell the underlying
security for the exercise price either upon exercise of the call
option written by it or by exercising the put option held
by it. The Fund would enter into such transactions in
order to profit from the difference between the premium
received by the Fund for the writing of the call option
and the premium paid by the Fund for the purchase of
the put option, thereby increasing the Fund's current
return.
The Fund will purchase put options only to the
extent permitted by the policies of state securities
authorities in states where shares of the Fund are
qualified for offer and sale. Such authorities may
impose further limitations on the ability of the Fund
to purchase options. The Fund may write (sell) put
options on individual securities only to effect a "closing sale
transaction."
PURCHASING AND WRITING OPTIONS ON SECURITIES
INDICES. The Fund may purchase and sell (write) put
and call options on securities indices. An index
assigns relative values to the securities included in
the index and the index fluctuates with changes in the
market values of the securities so included. Options
on indices are similar to options on individual
securities, except that, rather than giving the purchaser the
right to take delivery of an individual security at a
specified price, they give the purchaser the right to
receive cash. The amount of cash is equal to the
difference between the closing price of the index and
the exercise price of the option, expressed in dollars,
times a specified multiple (the "multiplier"). The
writer of the option is obligated, in return for the
premium received, to make delivery of this amount.
The multiplier for an index option performs a
function similar to the unit of trading for a stock
option. It determines the total dollar value per
contract of each point in the difference between the
exercise price of an option and the current level of
the underlying index. A multiplier of 100 means that a
one-point difference will yield $100. Options on
different indices have different multipliers.
When the Fund writes a call or put option on a
stock index, the option is "covered," in the case of a
call, or "secured," in the case of a put, if the Fund
maintains in a segregated account with its custodian
cash or liquid securities equal to the contract value.
A call option is also covered if the Fund holds a call
on the same index as the call written where the exercise
price of the call held is (i) equal to or less than the exercise
price of the call written or (ii) greater than the
exercise price of the call written, provided that the
Fund maintains in a segregated account with its
custodian the difference in cash or
liquid securities. A put option is also "secured" if
the Fund holds a put on the same index as the put
written where the exercise price of the put held is (i)
equal to or greater than the exercise price of the put
written or (ii) less than the exercise price of the put
written, provided that the Fund maintains in a
segregated account with its custodian the difference in
cash or liquid securities.
RISKS OF OPTIONS TRANSACTIONS. The purchase and
writing of options involves certain risks. During the
option period, the covered call writer has, in return
for the premium on the option, given up the opportunity
to profit from a price increase in the underlying
securities above the exercise price, but, as long as
its obligation as a writer continues, has retained the risk of
loss should the price of the underlying security decline.
The writer of an option has no control over the time
when it may be required to fulfill its obligation as a
writer of the option. Once an option writer has
received an exercise notice, it cannot effect a closing
purchase transaction in order to terminate its
obligation under the option and must deliver the underlying
securities (or cash in the case of an index option) at the
exercise price. If a put or call option purchased by the
Fund is not sold when it has remaining value, and if
the market price of the underlying security (or index),
in the case of a put, remains equal to or greater than
the exercise price or, in the case of a call, remains
less than or equal to the exercise price, the Fund will
lose its entire investment in the option. Also, where a put
or call option on a particular security (or index) is
purchased to hedge against price movements in a related
security (or securities), the price of the put or call
option may move more or less than the price of the
related security (or securities). In this regard,
there are differences between the securities and
options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to
achieve its objective.
There can be no assurance that a liquid market
will exist when the Fund seeks to close out an option
position. Furthermore, if trading restrictions or
suspensions are imposed on the options markets, the
Fund may be unable to close out a position. Finally,
trading could be interrupted, for example, because of
supply and demand imbalances arising from a lack of
either buyers or sellers, or the options exchange could suspend
trading after the price has risen or fallen more than the
maximum amount specified by the exchange. Closing
transactions can be made for OTC options only by
negotiating directly with the counterparty or by a
transaction in the secondary market, if any such market
exists. There is no assurance that the Fund will be
able to close out an OTC option position at a favorable price
prior to its expiration. In the event of insolvency of the
counterparty, the Fund might be unable to close out an
OTC option position at any time prior to its
expiration. Although the Fund may be able to offset to
some extent any adverse effects of being unable to
liquidate an option position, the Fund may experience
losses in some cases as a result of such inability.
The Fund's options activities also may have an
impact upon the level of its portfolio turnover and
brokerage commissions. See "Portfolio Turnover."
The Fund's success in using options techniques
depends, among other things, on IMI's ability to
predict accurately the direction and volatility of
price movements in the options and securities markets,
and to select the proper type, time and duration of
options.
FUTURES CONTRACTS
GENERAL. The Fund may enter into futures
contracts for hedging purposes. A futures contract
provides for the future sale by one party and purchase
by another party of a specified quantity of a commodity
at a specified price and time. When a purchase or sale
of a futures contract is made by the Fund, the Fund is
required to deposit with its custodian (or broker, if
legally permitted) a specified amount of cash or U.S. Government
securities ("initial margin"). The margin required for a
futures contract is set by the exchange on which the
contract is traded and may be modified during the term
of the contract. The initial margin is in the nature
of a performance bond or good faith deposit on the
futures contract which is returned to the Fund upon
termination of the contract, assuming all contractual
obligations have been satisfied. A futures contract held by the
Fund is valued daily at the official settlement price of
the exchange on which it is traded. Each day the Fund
pays or receives cash, called "variation margin," equal
to the daily change in value of the futures contract.
This process is known as "marking to market."
Variation margin does not represent a borrowing or loan
by the Fund but is instead a settlement between the
Fund and the broker of the amount one would owe the other if
the futures contract expired. In computing daily net asset
value, the Fund will mark-to-market its open futures
position.
Although some futures contracts call for making or
taking delivery of the underlying securities, generally
these obligations are closed out prior to delivery of
offsetting purchases or sales of matching futures
contracts (same exchange, underlying security or index,
and delivery month). If an offsetting purchase price
is less than the original sale price, the Fund
generally realizes a capital gain, or if it is more, the
Fund generally realizes a capital loss. Conversely, if an
offsetting sale price is more than the original purchase price,
the Fund generally realizes a capital gain, or if it is
less, the Fund generally realizes a capital loss. The
transaction costs must also be included in these
calculations. When purchasing a futures contract, the
Fund will maintain with its Custodian (and mark-to-
market on a daily basis) cash or liquid securities that,
when added to the amounts deposited with a futures commission
merchant ("FCM") as margin, are equal to the market value of
the
futures contract.
When selling a futures contact, a Fund will
maintain with its custodian in a segregated account
(and mark-to-market on a daily basis) cash or liquid
securities that, when added to the amounts deposited
with an FCM as margin, are equal to the market value of
the instruments underlying the contract. Alternatively,
the Fund may "cover" its position by owning the instruments
underlying the contract (or, in the case of an index futures
contract, a portfolio with a volatility substantially
similar to that of the index on which the futures
contract is based).
The Fund will only enter into futures contracts
which are standardized and traded on a U.S. or foreign
exchange, board of trade, or similar entity or quoted
on an automated quotation system. The Fund will not
enter into a futures contract if, immediately
thereafter, the aggregate initial margin deposits for
futures contracts held by the Fund plus premiums paid by it for
open futures option positions, less the amount by which
any such positions are "in-the-money," would exceed 5%
of the liquidation value of the Fund's portfolio (or
the Fund's net asset value), after taking into account
unrealized profits and unrealized losses on any such
contracts the Fund has entered into.
The requirements for qualification as a regulated
investment company also may limit the extent to which
the Fund may enter into futures.
FOREIGN CURRENCY FUTURES CONTRACTS. The Fund may
engage in foreign currency futures contracts for
hedging purposes. A foreign currency futures contract
provides for the future sale by one party and purchase
by another party of a specified quantity of a foreign
currency at a specified price and time.
SECURITIES INDEX FUTURES CONTRACTS.The Fund may
enter into securities index futures contracts as an
efficient means of regulating the Fund's exposure to
the equity markets. The Fund will not engage in
transactions in futures contracts for speculation but
only as a hedge against changes resulting from market
conditions in the values of securities held in the Fund's
portfolio or which it intends to purchase.
An index futures contract is a contract to buy or
sell units of an index at a specified future date at a
price agreed upon when the contract is made. Entering
into a contract to buy units of an index is commonly
referred to as purchasing a contract or holding a long
position in the index. Entering into a contract to
sell units of an index is commonly referred to as selling a
contract or holding a short position. The value of a unit is
the current value of the stock index. For example, the
S&P 500 Index is composed of 500 selected common
stocks, most of which are listed on the New York Stock
Exchange (the "Exchange"). The S&P 500 Index assigns
relative weightings to the 500 common stocks included
in the Index, and the Index fluctuates with changes in
the market values of the shares of those common stocks.
In the case of the S&P 500 Index, contracts are to buy
or sell 500 units. Thus, if the value of the S&P 500
Index were $150, one contract would be worth $75,000
(500 units x $150). The index futures contract
specifies that no delivery of the actual securities
making up the index will take place. Instead,
settlement in cash must occur upon the termination of the
contract, with the settlement being the difference between the
contract price and the actual level of the stock index at
the expiration of the contract. For example, if the
Fund enters into a futures contract to buy 500 units of
the S&P 500 Index at a specified future date at a
contract price of $150 and the S&P 500 Index is at $154
on that future date, the Fund will gain $2,000 (500
units x gain of $4). If the Fund enters into a futures
contract to sell 500 units of the stock index at a specified
future date at a contract price of $150 and the S&P 500 Index
is at $154 on that future date, the Fund will lose
$2,000 (500 units x loss of $4).
RISKS ASSOCIATED WITH FUTURES. There are several
risks associated with the use of futures contracts as
hedging techniques. A purchase or sale of a futures
contract may result in losses in excess of the amount
invested in the futures contract. There can be no
guarantee that there will be a correlation between
price movements in the hedging vehicle and in the
Fund's portfolio securities being hedged. In addition, there
are significant differences between the securities and
futures markets that could result in an imperfect
correlation between the markets, causing a given hedge
not to achieve its objectives. The degree of
imperfection of correlation depends on circumstances
such as variations in speculative market demand for
futures on securities, including technical influences in futures
trading, and differences between the financial
instruments being hedged and the instruments underlying
the standard contracts available for trading in such
respects as interest rate levels, maturities, and
creditworthiness of issuers. A decision as to whether,
when and how to hedge involves the exercise of skill and
judgment, and even a well-conceived hedge may be unsuccessful to
some degree because of market behavior or unexpected
interest rate trends.
Futures exchanges may limit the amount of
fluctuation permitted in certain futures contract
prices during a single trading day. The daily limit
establishes the maximum amount that the price of a
futures contract may vary either up or down from the
previous day's settlement price at the end of the current
trading session. Once the daily limit has been reached in a
futures contract subject to the limit, no more trades may be
made on that day at a price beyond that limit. The
daily limit governs only price movements during a
particular trading day and therefore does not limit
potential losses because the limit may work to prevent
the liquidation of unfavorable positions. For example,
futures prices have occasionally moved to the daily
limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of
positions and subjecting some holders of futures
contracts to substantial losses.
There can be no assurance that a liquid market
will exist at a time when the Fund seeks to close out a
futures position, and the Fund would remain obligated
to meet margin requirements until the position is
closed. In addition, there can be no assurance that an
active secondary market will continue to exist.
Currency futures contracts may be traded on
foreign exchanges. Such transactions may not be
regulated as effectively as similar transactions in the
United States; may not involve a clearing mechanism and
related guarantees; and are subject to the risk of
governmental actions affecting trading in, or the prices
of, foreign securities. The value of such position also could 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.
RISKS OF SECURITIES INDEX FUTURES. The Fund's
success in using hedging techniques depends, among
other things, on IMI's ability to predict correctly the
direction and volatility of price movements in the
futures markets as well as in the securities markets
and to select the proper type, time and duration of
hedges. The skills necessary for successful use of
hedges are different from those used in the selection of
individual stocks.
The Fund's ability to hedge effectively all or a
portion of its securities through transactions in index
futures (and therefore the extent of its gain or loss
on such transactions) depends on the degree to which
price movements in the underlying index correlate with
price movements in the Fund's securities. Insofar as
such securities do not duplicate the components of an
index, the correlation probably will not be perfect.
Consequently, the Fund will bear the risk that the prices of the
securities being hedged will not move in the same amount
as the hedging instrument. This risk will increase as
the composition of the Fund's portfolio diverges from
the composition of the hedging instrument.
Although the Fund intends to establish positions
in these instruments only when there appears to be an
active market, there is no assurance that a liquid
market will exist at a time when the Fund seeks to
close a particular futures position. Trading could be
interrupted, for example, because of supply and demand
imbalances arising from a lack of either buyers or sellers. In
addition, the futures exchanges may suspend trading after
the
price has risen or fallen more than the maximum amount
specified by the exchange. In some cases, the Fund may
experience losses as a result of its inability to close
out a position, and it may have to liquidate other
investments to meet its cash needs.
Although some index futures contracts call for
making or taking delivery of the underlying securities,
generally these obligations are closed out prior to
delivery by offsetting purchases or sales of matching
futures contracts (same exchange, underlying security
or index, and delivery month). If an offsetting
purchase price is less than the original sale price,
the Fund generally realizes a capital gain, or if it is more, the
Fund generally realizes a capital loss. Conversely, if
an offsetting sale price is more than the original
purchase price, the Fund generally realizes a capital
gain, or if it is less, the Fund generally realizes a
capital loss. The transaction costs must also be
included in these calculations.
The Fund will only enter into index futures
contracts that are standardized and traded on a U.S. or
foreign exchange or board of trade, or similar entity,
or quoted on an automated quotation system. The Fund
will use futures contracts only for "bona fide hedging"
purposes, as such term is defined in applicable
regulations of the CFTC.
When purchasing an index futures contract, the
Fund will maintain with its custodian in a segregated
account (and mark-to- market on a daily basis) cash or
liquid securities that, when added to the amounts
deposited with a futures commission merchant ("FCM") as
margin, are equal to the market value of the futures
contract.
When selling an index futures contract, the Fund
will maintain with its custodian in a segregated
account (and mark-to- market on a daily basis) cash or
liquid securities that, when added to the amounts
deposited with an FCM as margin, are equal to the
market value of the instruments underlying the contract.
Alternatively, the Fund may "cover" its position by owning the
instruments underlying the contract (or, in the case of an
index futures contract, a portfolio with a volatility
substantially similar to that of the index on which the
futures contract is based).
COMBINED TRANSACTIONS
The Fund may enter into multiple transactions,
including multiple options transactions, multiple
futures transactions, multiple currency transactions
(including forward currency contracts) and multiple
interest rate transactions and some combinations of
futures, options, currency and interest rate
transactions ("component" transactions), instead of a single
transaction, as part of a single or combined strategy when,
in the opinion of IMI, it is in the best interests of
the Fund to do so. A combined transaction will usually
contain elements of risk
that are present in each of its component transactions.
Although combined transactions are normally entered
into based on IMI's judgment that the combined
strategies will reduce risk or otherwise more
effectively achieve the desired portfolio management
goal, it is possible that the combination will instead
increase such risks or hinder achievement of the management
objective.
RESTRICTED AND ILLIQUID SECURITIES
Restricted securities may be sold only in
privately negotiated transactions or in a public
offering with respect to which a registration statement
is in effect under the Securities Act of 1933. Where a
registration statement is required, the Fund may be
required to bear all or part of the registration
expenses. 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. There may also be a lapse of time
between the Fund's decision to sell a restricted or
illiquid security and the point at which the Fund is
permitted or able to do so. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a
less favorable price than the price that prevailed when
it decided to sell. Since it is not possible to
predict with assurance that the market for securities
eligible for resale under Rule 144A will continue to be
liquid, the Fund will monitor each of its investments
in these securities, focusing on factors such as
valuation, liquidity and availability of information. This
investment practice could have the effect of increasing the
level of illiquidity in the Fund to the extent that
qualified institutional buyers become, for a time,
uninterested in purchasing these restricted securities.
INVESTMENT RESTRICTIONS
The Fund's investment objective, as set forth in
the Prospectus under "Investment Objectives and
Policies," and the investment restrictions set forth
below are fundamental policies of the Fund and may not
be changed without the approval of a majority (as
defined in the 1940 Act) of the Fund's outstanding
voting shares. Under these restrictions, the Fund may not:
(i) borrow money, except as a temporary
measure for extraordinary or emergency
purposes, and provided that the Fund
maintains asset coverage of 300% for all
borrowings;
(ii) purchase securities on margin, except
such short- term credits as are necessary
for the clearance of transactions, but
the Fund may make margin deposits in
connection with transactions in options,
futures and options on futures;
(iii) make loans, except this restriction
shall not
prohibit (a) the purchase and holding of
a portion of an issue of publicly
distributed debt securi- ties, (b) the
entry into repurchase agreements with
banks or broker-dealers, or (c) the lending
of the Fund's portfolio securities in accordance
with applicable guidelines established by the
Securities and Exchange Commission (the "SEC") and
any guidelines established by the Trust's
Trustees;
(iv) participate in an underwriting or
selling group in connection with the
public distribution of securities except
for its own capital stock;
(v) invest in real estate, real estate
mortgage loans, commodities or interests
in oil, gas and/or mineral exploration
or development programs, although (a)
the Fund may purchase and sell
marketable securities of issuers which are secured
by real estate, (b) the Fund may purchase and sell
securities of issuers which invest or deal in
real estate, (c) the Fund may enter into
forward foreign currency contracts as
described in the Fund's prospectus, and
(d) the Fund may write or buy puts,
calls, straddles or spreads and may
invest in commodity futures contracts and options
on futures contracts;
(vi) make an investment in securities of
companies in any one industry (except
obligations of domestic banks or the
U.S. Government, its agencies,
authorities, or instrumentalities) if such
investment would cause investments in such
industry to exceed 25% of the market value of the
Fund's total assets at the time of such
investment;
(vii) issue senior securities, except as
appropriate to evidence indebtedness
which it is permitted to incur, and
except to the extent that shares of the
separate classes or series of the Trust may be
deemed to be senior securities; provided that
collateral arrangements with respect to currency-
related contracts, futures contracts, options or
other permitted investments, including
deposits of initial and variation
margin, are not considered to be the
issuance of senior securities for
purposes of this restriction; or
(viii) purchase securities of any one issuer
(except U.S.
Government securities) if as a result
more than 5% of the Fund's total assets
would be invested in such issuer or the
Fund would own or hold more than 10% of
the outstanding voting securities of
that issuer; provided, however, that up to 25% of
the value of the Fund's total assets may be
invested without regard to these limitations.
Under the 1940 Act, the Fund is permitted, subject
to the above investment restrictions, to borrow money
only from banks. Further, the Fund has no current
intention of lending portfolio securities.
ADDITIONAL RESTRICTIONS
Unless otherwise indicated, the Fund has adopted
the following additional restrictions, which are not
fundamental and which may be changed without
shareholder approval to the extent permitted by
applicable law, regulation or regulatory policy. Under
these restrictions, the Fund may not:
(i) invest in oil, gas or other mineral
leases or exploration or development
programs;
(ii) invest in companies for the purpose of
exercising control of management;
(iii) purchase securities of other investment
companies, except in connection with a
merger, consolidation or sale of assets,
and except that it may purchase shares
of other investment companies subject to
such restrictions as may be imposed by the
Investment Company Act of 1940 and rules
thereunder;
(iv) invest more than 15% of its net assets
taken at market value at the time of
investment in "illiquid securities."
Illiquid securities may include
securities subject to legal or contractual
restrictions on resale (including private
placements), repurchase agreements maturing in
more than seven days, certain options traded over
the counter that the Fund has purchased,
securities being used to cover certain options
that a fund has written, securities for which
market quotations are not readily
available, or other securities which
legally or in IMI's opinion, subject to
the Board's supervision, may be deemed
illiquid, but shall not include any
instrument that, due to the existence of a trading
market, to the Fund's compliance with certain
conditions intended to provide liquidity, or to
other factors, is liquid;
(v) sell securities short, except for short
sales "against the box;" or
(vi) participate on a joint or a joint and
several basis in any trading account in
securities. The "bunching" of orders of
the Fund and of other accounts under the
investment management of the Fund's
investment adviser, Mackenzie Financial
Corporation (the "Investment Adviser") for the
sale or purchase of portfolio securities shall not
be considered participation in a joint securities
trading account.
Whenever an investment objective, policy or
restriction set forth in the Prospectus or this SAI
states a maximum percentage of assets that may be
invested in any security or other asset or describes a
policy regarding quality standards, such percentage
limitation or standard shall, unless otherwise indicated, apply
to the Fund only at the time a transaction is entered
into. Accordingly, if a percentage limitation is
adhered to at the time of investment, a later increase
or decrease in the percentage which results from
circumstances not involving any affirmative action by
the Fund, such as a change in market conditions or a
change in the Fund's asset level or other circumstances beyond
the Fund's control, will not be considered a violation.
ADDITIONAL RIGHTS AND PRIVILEGES
The Trust offers and (except as noted below) bears
the cost of providing to investors the following rights
and privileges. The Trust 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.
Certain of the rights and privileges described
below refer to funds other than the Fund whose shares
are distributed by Ivy Mackenzie Distributors, Inc.
("IMDI") (formerly known as Mackenzie Ivy Funds
Distribution, Inc.). These funds are: Ivy Bond Fund,
Ivy Growth Fund, Ivy Growth with Income Fund, Ivy
Emerging Growth Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy
Global Fund, Ivy International Fund, Ivy Latin America
Strategy Fund, Ivy New Century Fund, Ivy International
Bond Fund, Ivy Short-Term Bond Fund, Ivy Money Market
Fund, Ivy Global Science & Technology Fund, Ivy
International Value Fund and Ivy Global Natural
Resources Fund (the other sixteen series of the Trust);
and Mackenzie California Municipal Fund, Mackenzie Limited Term
Municipal Fund, Mackenzie National Municipal Fund and
Mackenzie New York Municipal Fund (the four series of
Mackenzie Series Trust)(collectively, with the Fund,
the "Ivy Mackenzie Funds"). Shareholders should obtain
a current prospectus for these funds before exercising
any right or privilege that may relate to them.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method is available for
Class A, Class B and Class C shares. The minimum
initial and subsequent investment pursuant to this plan
is $50 per month (except in the case of a tax qualified
retirement plan for which the minimum initial and
subsequent investment is $25 per month). A shareholder
may terminate the Automatic Investment Method at any
time upon delivery to Ivy Mackenzie Services Corp. ("IMSC")
(formerly known as Mackenzie Ivy Investor Services Corp.) of
telephone instructions or written notice from the
shareholder. See "Automatic Investment Method" in the
Account Application.
EXCHANGE OF SHARES
As described in the Prospectus, shareholders of
the Fund have an exchange privilege with certain other
Ivy Mackenzie Funds. Before effecting an exchange,
shareholders of the Fund should obtain and read the
currently effective prospectus for the Ivy or Mackenzie
Fund into which the exchange is to be made.
INITIAL SALES CHARGE SHARES. Class A shareholders
may exchange their Class A shares ("outstanding Class A
shares") for Class A shares of another Ivy or Mackenzie
Fund ("new Class A Shares") on the basis of the
relative net asset value per Class A share, plus (in
the case of funds other than Ivy Money Market Fund) 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 outstanding Class A shares that have
been invested for a period of 12 months or longer.)
Class A shareholders may also exchange their Class A
shares for Class A shares of Ivy Money Market Fund (no
initial sales charge will be assessed at the time of
such an exchange).
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 Ivy or Mackenzie 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
the Fund's CDSC period following an exchange if such
schedule is higher (or such period is longer) than the
CDSC period, if any, applicable 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 Ivy or Mackenzie 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 the Fund's CDSC schedule (or period)
following an exchange if such schedule is higher (or such
period is longer) than the CDSC schedule (or period)
applicable to the new Class B shares.
Class B shares of the Fund acquired through an
exchange of Class B shares of another Ivy or Mackenzie
Fund will be subject to the Fund's CDSC schedule (or
period) if such schedule is higher (or such period is
longer) than the CDSC schedule (or period) applicable
to the Ivy or Mackenzie Fund from which the exchange
was made.
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 CDSC table ("Table 1") applies to
Class B shares of the Fund, Ivy Global Fund, Ivy Growth
Fund, Ivy Growth with Income Fund, Ivy Emerging Growth
Fund, Ivy International Fund, Ivy China Region Fund,
Ivy Latin America Strategy Fund, Ivy New Century Fund,
Ivy International Bond Fund, Ivy Bond Fund, Ivy Canada
Fund, Ivy Global Science & Technology Fund, Ivy
International Value Fund, Ivy Global Natural Resources Fund,
Mackenzie California Municipal Fund, Mackenzie National
Municipal Fund and Mackenzie New York Municipal Fund
("Table 1 Funds"):
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF DOLLAR
AMOUNT SUBJECT TO YEAR SINCE PURCHASE
CHARGE
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and thereafter 0%
The following CDSC table ("Table 2") applies to
Class B shares of Ivy Short-Term Bond Fund and
Mackenzie Limited Term Municipal Fund ("Table 2
Funds"):
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF DOLLAR
AMOUNT SUBJECT TO YEAR SINCE PURCHASE
CHARGE
First 3%
Second 2.5%
Third 2%
Fourth 1.5%
Fifth 1%
Sixth and thereafter 0%
The CDSC schedule for Table 1 Funds is higher (and
the period is longer) than the CDSC schedule (and
period) for Table 2 Funds.
If a shareholder exchanges Class B shares of a
Table 1 Fund for Class B shares of a Table 2 Fund,
Table 1 will continue to apply to the Class B shares
following the exchange. For example, an investor may
decide to exchange Class B shares of a Table 1 Fund
("outstanding Class B shares") for Class B shares of a Table
2 Fund ("new Class B shares") after having held the
outstanding Class B shares for two years. The 4% CDSC
that generally would apply to a redemption of
outstanding Class B shares held for two years would not
be deducted at the time of the exchange. If, three
years later, the investor redeems the new Class B shares, a
2% CDSC will be assessed upon the redemption because by
"tacking" the two year holding period of the
outstanding Class B shares onto the three year holding
period of the new Class B shares, the investor will be
deemed to have held the new Class B shares for five
years.
If a shareholder exchanges Class B shares of a
Table 2 Fund for Class B shares of a Table 1 Fund,
Table 1 will apply to the Class B shares following the
exchange. For example, an investor may decide to
exchange Class B shares of a Table 2 Fund ("outstanding
Class B shares") for Class B shares of a Table 1 Fund
("new Class B shares") after having held the outstanding
Class B shares for two years. The 2.5% CDSC that generally would
apply to a redemption of outstanding Class B shares held
for two years would not be deducted at the time of the
exchange. If, three years later, the investor redeems
the new Class B shares, a 2% CDSC will be assessed upon
the redemption because by "tacking" the two year
holding period of the outstanding Class B shares onto
the three year holding period of the new Class B shares, the
investor will be deemed to have held the new Class B shares
for five years.
CLASS C. Class C shareholders may exchange their
Class C shares ("outstanding Class C shares") for Class
C shares of another Ivy or Mackenzie 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.)
ALL CLASSES. The minimum amount which may be
exchanged into an Ivy Mackenzie Fund in which shares
are not already held is $1,000. No exchange out of the
Fund (other than by a complete exchange of all Fund
shares) may be made if it would reduce the
shareholder's interest in the Fund to less than $1,000.
Exchanges are available only in states where the exchange can
legally be made.
Each exchange will be made on the basis of the
relative net asset values per share of the Fund of the
Ivy Mackenzie Funds next computed following receipt by
IMSC of telephone instructions or a properly executed
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 Ivy
Mackenzie Funds will 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 Fund 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 the 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 back-dated. A shareholder may include,
as an accumulation credit, the value (at the applicable offering
price) of all Class A shares of the Fund, Ivy Bond
Fund, Ivy Emerging Growth Fund, Ivy Global Fund, Ivy
Growth Fund, Ivy Growth with Income Fund, Ivy
International Bond Fund, Ivy Short- Term Bond Fund, Ivy
Global Science & Technology Fund, Ivy International
Value Fund, Ivy Global Natural Resources Fund,
Mackenzie California Municipal Fund, Mackenzie Limited Term
Municipal Fund, Mackenzie National Municipal Fund, and
Mackenzie New York Municipal Fund (and shares that have
been exchanged into Ivy Money Market Fund from any of
the other funds in the Ivy Mackenzie 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, the Fund's transfer agent 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 thereof before
signing.
RETIREMENT PLANS
Shares may be purchased in connection with several
types of tax-deferred retirement plans. Shares of more
than one fund distributed by IMDI may be purchased in a
single application establishing a single plan account,
and shares held in such an account may be exchanged
among the funds in the Ivy Mackenzie 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
account
For shareholders whose retirement accounts are
diversified across several funds of the Ivy Mackenzie
Funds, the annual maintenance fee will be limited to
not more than $20.
The following discussion describes the tax
treatment of certain tax-deferred retirement plans
under current Federal income tax law. State income tax
consequences may vary. An individual considering the
establishment of a retirement plan should consult with
an attorney and/or an accountant with respect
to the terms and tax aspects of the plan.
INDIVIDUAL RETIREMENT ACCOUNTS: Shares of the
Trust 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, which may impose a charge for
establishing the account. Individuals should consult
their tax advisers before investing IRA assets in the Fund (which
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. However, if one spouse has (or elects to be treated
as having) no earned income for IRA purposes for a
year, the other spouse may contribute to an IRA on his
or her behalf. In such a case, the working spouse may
contribute up to the lesser of $2,250 or 100% or his or
her compensation or earned income for the year to IRAs
for both spouses, provided that no more than $2,000 is
contributed to the IRA of one spouse. Rollover
contributions are not subject to these limits.
An individual may deduct his or her annual
contributions to an IRA in computing his or her Federal
income tax within the limits described above, provided
he or she (or his or her spouse, if they file a joint
Federal income tax return) is not an active participant
in a qualified retirement plan (such as a qualified
corporate, sole proprietorship, or partnership pension, profit
sharing, 401(k) or stock bonus plan), qualified annuity
plan, 403(b) plan, simplified employee pension, or
governmental plan. If he or she (or his or her spouse)
is an active participant, a full deduction is only
available if he or she has adjusted gross income that
is less than a specified level ($40,000 for married
couples filing a joint return, $25,000 for single individuals,
and $0 for a married individual filing a separate return).
The deduction is phased out ratably for active
participants with adjusted gross income between certain
levels ($40,000 and $50,000 for married individuals
filing a joint return, $25,000 and $35,000 for single
individuals, and $0 and $10,000 for married
individuals filing separate returns). Individuals who
are active participants with income above the specified
phase-out level may not deduct their IRA contributions.
Rollover contributions are not includable in income for
Federal income tax purposes and therefore are not
deductible from it.
Generally, earnings on an IRA are not subject to
current Federal income tax until distributed.
Distributions attributable to tax-deductible
contributions and to IRA earnings are taxed as ordinary
income. Distributions of non-deductible contributions
are not subject to Federal income tax. In general, distributions
from an IRA to an individual before he or she reaches
age 59-1/2 are subject to a nondeductible penalty tax
equal to 10% of the taxable amount of the distribution.
The 10% penalty tax does not apply to amounts withdrawn
from an IRA after the individual reaches age 59-1/2,
becomes disabled or dies, or if withdrawn in the form
of substantially equal payments over the life or life
expectancy of the individual and his or her designated benefi-
ciary, if any, or rolled over into another IRA.
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 distribu- tions
will result in the imposition of a 50% non-deductible
penalty tax. Extremely large distributions in any one year from
an IRA (or from an IRA and other retirement plans) may
also result in a penalty tax.
QUALIFIED PLANS: For those self-employed
individuals who wish to purchase shares of one or more
of the funds in the Ivy Mackenzie 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 Fund's transfer agent will furnish custodial
services to the employer and any participating
employees.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(b)(7) ACCOUNT"):
Section 403(b)(7) of the Internal Revenue Code of 1986,
as amended (the "Code"), permits public school systems
and certain charitable organizations to use mutual fund
shares held in a custodial account to fund deferred
compensation arrangements with their employees. A custodial
account agreement is available for those employers whose
employees wish to purchase shares of the Trust in conjunction
with such an arrangement. The sales charge for
purchases of less than $10,000 of Class A shares is set
forth under "Retirement Plans" in the Prospectus.
Sales charges for purchases of $10,000 or more of Class
A shares are the same as those set forth under "Initial
Sales Charge Alternative -- Class A Shares" in the
Prospectus. 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.
REINVESTMENT PRIVILEGE
Shareholders who have redeemed Class A shares of
the 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."
RIGHTS OF ACCUMULATION
A scale of reduced sales charges applies to any
investment of $50,000 or more in Class A shares of the
Fund. 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). It is also applicable to current purchases of
all of the funds in the Ivy Mackenzie Funds (except Ivy
Money Market Fund) by any of the persons enumerated
above, where the aggregate quantity of Class A shares
of the Fund, Ivy Global Fund, Ivy Growth Fund, Ivy Growth
with Income Fund, Ivy Emerging Growth Fund, Ivy China Region
Fund, Ivy Latin America Strategy Fund, Ivy New Century Fund,
Ivy International Bond Fund, Ivy International Fund,
Ivy Bond Fund, Ivy Short-Term Bond Fund, Ivy Canada
Fund, Ivy Global Science & Technology Fund, Ivy
International Value Fund, Ivy Global Natural Resources
Fund, Mackenzie National Municipal Fund, Mackenzie
California Municipal Fund, Mackenzie Limited Term Municipal Fund
and Mackenzie New York Municipal Fund (and shares that
have been
exchanged into Ivy Money Market Fund from any of the
other funds in the Ivy Mackenzie 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 $50,000 or more for the Fund, Ivy Global
Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy
Emerging Growth Fund, Ivy International Fund, Ivy China
Region Fund, Ivy Latin America Strategy Fund, Ivy New
Century Fund, Ivy Canada Fund, Ivy Global Science &
Technology Fund, Ivy International Value Fund and Ivy
Global Natural Resources Fund; $100,000 or more for
International Bond Fund, Ivy Bond Fund, Mackenzie
National Municipal Fund, Mackenzie California Municipal Fund and
Mackenzie New York Municipal Fund; or $25,000 or more for
Mackenzie Limited Term Municipal Fund; or $1,000,000 or
more for Ivy Short-Term Bond Fund.
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 Fund's records.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may establish a Systematic
Withdrawal Plan (a "Withdrawal Plan"), by telephone
instructions or by delivery to IMSC of a written
election to have his or her shares withdrawn
periodically, accompanied by a surrender to IMSC of all share
certificates then outstanding in the shareholder's name,
properly endorsed by the shareholder. To be eligible
to elect a Withdrawal Plan, a shareholder must have at
least $5,000 in his or her account. A Withdrawal Plan
may not be established if the investor is utilizing 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 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
Trust or IMSC may terminate the Withdrawal Plan option
at any time after reasonable notice to shareholders.
GROUP SYSTEMATIC INVESTMENT PROGRAM
Shares of the Fund may be purchased in connection
with investment programs established by employee or
other groups using systematic payroll deductions or
other systematic payment arrangements. The Trust does
not itself organize, offer or administer any such
programs. However, it 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 Fund 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 Trust
reserves the right to refuse a purchase 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, as
described in the Prospectus, 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 Trust and IMI
each currently charge a maintenance fee of $3.00 (or
portion thereof) for each twelve-month period (or
portion thereof) that the account is maintained. The Trust
may collect this 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 the
fee. The Trust reserves the right to change such fees
from time to time without advance notice.
BROKERAGE ALLOCATION
Subject to the overall supervision of the
President and the Board, IMI places orders for the
purchase and sale of the Fund's portfolio securities.
All portfolio transactions are effected at the best
price and execution obtainable. Purchases and sales of
debt securities are usually principal transactions, and therefore
brokerage commissions are usually not required to be
paid by the Fund for such purchases and sales (although
the price paid generally includes undisclosed
compensation to the dealer). The prices paid to
underwriters of newly-issued securities usually include
a concession paid by the issuer to the underwriter, and
purchases of after-market securities from dealers normally
reflect the spread between the bid and asked prices. In
connection with OTC transactions, IMI attempts to deal directly
with the principal market makers, except in those
circumstances where believes that a better price and
execution are available elsewhere.
IMI selects broker-dealers to execute transactions
and evaluates the reasonableness of commissions on the
basis of
quality, quantity, and the nature of the firms'
professional services. Commissions to be charged and
the rendering of investment services, including
statistical, research, and counseling services by
brokerage firms, are factors to be considered in the
placing of brokerage business. The types of research
services provided by brokers may include general
economic and industry data, and information on securities of
specific companies. Research services furnished by brokers
through whom the Trust effects securities transactions may
be used by in servicing all of its accounts. In
addition, not all of these services may be used by in
connection with the services it provides the Fund or
the Trust. IMI may consider sales of shares of the
Fund as a factor in the selection of broker-dealers and
may select broker-dealers who provide it with research
services. IMI will not, however, execute brokerage transactions
other than at the best price and execution.
The Fund may, under some circumstances, accept
securities in lieu of cash as payment for Fund shares.
The Fund will accept securities only to increase its
holdings in a portfolio security or to take a new
portfolio position in a security that IMI deems to be a
desirable investment for the Fund. While no minimum has
been established, it is expected that the Fund will not accept
securities having an aggregate value of less than $1
million. The Trust may reject in whole or in part any
or all offers to pay for Fund shares with securities
and may discontinue accepting securities as payment for
Fund shares at any time without notice. The Trust will
value accepted securities in the manner and at the same
time provided for valuing portfolio securities of the Fund,
and Fund shares will be sold for net asset value determined at
the same time the accepted securities are valued. The
Trust will only accept securities delivered in proper
form and will not accept securities subject to legal
restrictions on transfer. The acceptance of securities
by the Trust must comply with the applicable laws of
certain states.
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of the Trust,
their business addresses and principal occupations
during the past five years are:
POSITION
WITH THE BUSINESS
AFFILIATIONS NAME, ADDRESS, AGE TRUST AND
PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman,
Dynamics 60 Concord Street Research
Corp. instruments Wilmington, MA 01887
and controls); Director, Age: 72
Burr-Brown Corp.
(operational amplifiers);
Director, Metritage
Incorporated (level
measuring instruments);
Trustee of Mackenzie Series
Trust (1992-present).
James W. Broadfoot Vice Vice President, T. Rowe
President Price Associates
Inc. (1972-1982);
Partner, Johnson,
Valliant &
Broadfoot, Inc. (1982-
1987); Director and Senior
Vice President of Mackenzie
Investment Mangement Inc.
(1995-present); Senior Vice
President of Mackenzie
Investment Management
Inc. (1994-1995);
Executive Vice
President of Ivy
Management, Inc. (1996-
present); Senior Vice
President of Ivy
Management, Inc. (1992-
1996).
Paul H. Broyhill Trustee Chairman, BMC
Fund, Inc. 800 Hickory Blvd. (1983-
present); Chairman, Golfview Park
Broyhill Family Foundation, Lenoir, NC 28645
Inc. (1983-Present); Age: 72
Chairman and President,
Broyhill Investments, Inc.
(1983-present); Chairman,
Broyhill Timber Resources
(1983-present); Management
of a personal
portfolio of
fixed-income and equity
investments (1983-present);
Trustee of Mackenzie Series
Trust (1988-present);
Director of The
Mackenzie Funds
Inc. (1988-1995).
Stanley Channick Trustee President, The Whitestone
11 Bala Avenue Corporation
(insurance Bala Cynwyd, PA 19004
agency); President, Scott Age: 71
Management Company
(administrative services
for insurance companies);
President, The Channick
Group (consultants to
insurance companies and
national trade
associations); Director of
The Mackenzie Funds Inc.
(1994-1995).
Frank W. DeFriece, Jr. Trustee Director, Manager
and Vice The Landmark Centre
President, Massengill- 113 Landmark Lane,
DeFriece Foundation Suite B
(charitable organization) Bristol, TN 37625
(1950-present); Trustee and Age: 75
Second Vice Chairman, East
Tennessee Public
Communications Corp. (WSJK-
TV) (1984-present); Trustee
of Mackenzie Series
Trust (1985-
present); Director of
The Mackenzie Funds Inc.
(1987-1995).
Roy J. Glauber Trustee Mallinckrodt Professor of
Lyman Laboratory Physics, Harvard
of Physics University (1974-
present); Harvard University Trustee
of Mackenzie Series Cambridge, MA 02138
Trust (1994-present). Age: 70
Michael G. Landry Trustee President,
Chairman and 700 South Federal Hwy. and
Director of Mackenzie Suite 300
President Investment Management Boca Raton, FL
33432 Inc. (1987-present); Age: 49
President and Director [*Deemed
to be an of Ivy Management, Inc.
"interested person" (1992-present); Chairman
of the Trust, as and Director of
defined under the Mackenzie Ivy Investor
1940 Act.] Services Corp. (1993-
present);
Director and
President of Mackenzie Ivy
Funds Distribution, Inc.
(1993-1994); Chairman and
Director of Mackenzie Ivy
Funds
Distribution, Inc.
(1994-present); Director
and President of The
Mackenzie Funds Inc. (1987-
1995); Trustee and
President of Mackenzie
Series Trust (1987-
present).
Michael R. Peers Trustee Chairman of the
Board, 737 Periwinkle Way and Ivy
Management, Inc. Sanibel, FL 33957 Chairman
(1984-1991); Chairman Age: 66 of the
of the Board, Ivy Fund [*Deemed to be an
Board (1974-present); Private "interested
person" Investor.
of the Trust, as
defined under the
1940 Act.]
Joseph G. Rosenthal Trustee Chartered
Accountant 110 Jardin Drive (1958-
present); Trustee Unit #12
of Mackenzie Series Concord, Ontario Canada
Trust (1985-present); L4K 2T7
Director of The Mackenzie Age: 61
Funds Inc. (1987-1995).
Richard N. Silverman Trustee Formerly
President, 18 Bonnybrook Road Hy-Sil
Manufacturing Waban, MA 02168
Company, a division of Age: 71
Van Leer, U.S.A., Inc.
(gift packaging materials
and metalized film
products); Formerly
Director, Waters
Manufacturing Co.
(manufacturer of electronic
parts); Director, Panorama
Television Network.
J. Brendan Swan Trustee President,
Airspray 4701 North Federal Hwy.
International, Inc.; Suite 465
Joint Managing Director, Pompano Beach, FL 33064
Airspray International Age: 65
B.V. (an environmentally
sensitive packaging
company); Director, The
Mackenzie Funds Inc. (1992-
1995); Trustee of Mackenzie
Series Trust (1992-
present).
Keith J. Carlson Vice Senior Vice
President 700 South Federal Hwy. President and
Director of Mackenzie Suite 300
Investment Management,
Boca Raton, FL 33432 Inc. (1994-
present); Age: 39 Senior
Vice President,
Secretary and Treasurer of
Mackenzie Investment
Management Inc. (1985-
1994); Senior Vice
President and Director of
Ivy Management, Inc. (1994-
present); Senior Vice
President, Treasurer and
Director of Ivy Management,
Inc. (1992-1994);
Vice President of
The Mackenzie
Funds Inc. (1987-1995);
President and Director of
Mackenzie Ivy Investor
Services Corp. (1993-1996);
Vice President of Mackenzie
Series Trust (1994-
present); Treasurer of
Mackenzie Series Trust
(1985-1994); President
and Director of
Ivy Mackenzie
Distributors, Inc. (1994-
present); Executive Vice
President and Director of
Mackenzie Ivy Funds
Distribution, Inc. (1993-
1994).
C. William Ferris Secretary/ Senior Vice
President, 700 South Federal Hwy. Treasurer
Secretary/Treasurer Suite 300
and Director of Boca Raton, FL 33432
Mackenzie Investment Age: 51
Management Inc. (1994-
present); Senior Vice
President, Finance and
Administration/Compliance
Officer of Mackenzie
Investment Management Inc.
(1989-1994); Senior Vice
President, Secretary/
Treasurer and Clerk of Ivy
Management, Inc. (1994-
present); Senior
Vice President,
Finance and
Administration/Compliance
Officer of Ivy Management,
Inc. (1992-1994); Senior
Vice President, Secretary/
Treasurer and Clerk of Ivy
Management, Inc. (1989-
1994); Senior Vice
President, Secretary/
Treasurer of
Mackenzie Ivy
Funds Distribution, Inc.
(1994-present); Secretary/
Treasurer and Director of
Mackenzie Ivy Funds
Distribution, Inc. (1993-
1994); Secretary/Treasurer
and Director of Mackenzie
Ivy Investor Services
Corp.
(1993-1996); President and
Director of Ivy Mackenzie
Services Corp. (1996-
present); Secretary/
Treasurer of The Mackenzie
Funds Inc. (1993-1995);
Secretary/Treasurer of
Mackenzie Series Trust
(1994-present).
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI
Employees of IMI are permitted to make personal
securities transactions, subject to the requirements
and restrictions set forth in IMI's Code of Ethics.
The Code of Ethics is designed to identify and address
certain conflicts of interest between personal
investment activities and the interests of investment
advisory clients such as the Fund. Among other things, the Code
of Ethics, which generally complies with standards
recommended by the Investment Company Institute's
Advisory Group on Personal Investing, prohibits certain
types of transactions absent prior approval, imposes
time periods during which personal transactions may not
be made in certain securities, and requires the
submission of duplicate broker confirmations and monthly
reporting of securities transactions. Additional restrictions
apply to portfolio managers, traders, research analysts and
others involved in the investment advisory process.
Exceptions to these and other provisions of the Code of
Ethics may be granted in particular circumstances after
review by appropriate personnel.
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1995)
TOTAL PENSION OR
COMPENSA- RETIREMENT
TION FROM
BENEFITS ESTIMATED TRUST AND
AGGREGATE ACCRUED AS ANNUAL FUND COM-
COMPENSA- PART OF BENEFITS PLEX PAID
NAME, TION FUND UPON TO
POSITION FROM TRUST EXPENSES RETIREMENT
TRUSTEES
John S. 7,112 N/A N/A
8,000 Anderegg, Jr.
(Trustee)
Paul H. 7,112 N/A N/A
8,000 Broyhill
(Trustee)
Stanley -0- N/A N/A
8,000 Channick[*]
(Trustee)
Frank W. 7,112 N/A N/A
8,000 DeFriece, Jr.
(Trustee)
Roy J. -0- N/A N/A
8,000 Glauber[*]
(Trustee)
Michael G. -0- N/A N/A
- -0- Landry
(Trustee and
President)
Michael R. -0- N/A N/A
- -0- Peers
(Trustee and
Chairman of
the Board)
Joseph G. 7,112 N/A N/A
8,000 Rosenthal
(Trustee)
Richard N. 8,000 N/A N/A
8,000 Silverman
(Trustee)
J. Brendan 7,112 N/A N/A
8,000 Swan
(Trustee)
Keith J. -0- N/A N/A
- -0- Carlson
(Vice President)
C. William -0- N/A N/A
- -0- Ferris
(Secretary/Treasurer)
[*] Appointed as a Trustee of the Trust at a meeting
of the Board of Trustees held on February 10,
1996.
As of November 30, 1996, the Officers and Trustees
of the Trust as a group owned beneficially or of record
none of the outstanding Class A, Class B or Class C
shares of the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES
IMI provides business management and investment
advisory services to the Fund pursuant to a Business
Management and Investment Advisory Agreement with the
Trust (the "Agreement"). The Agreement was approved by
the sole shareholder of the Fund on ________, 1996. On
__________, 1996, the Agreement was approved on behalf
of the Fund by the Trustees, including a majority of
the Trustees who are neither "interested persons" (as defined in
the 1940 Act) of the Trust nor have any direct or
indirect financial interest in the operation of the
distribution plan (see "Distribution Services") or in
any related agreement (the "Independent Trustees").
IMI is a wholly owned subsidiary of MIMI, which
currently acts as manager and investment adviser to the
following registered investment companies: Mackenzie
National Municipal Fund, Mackenzie New York Municipal Fund,
Mackenzie California Municipal Fund and Mackenzie Limited Term
Municipal Fund. 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 Toronto Stock Exchange. MFC
is registered in Ontario as a mutual fund dealer and
advises Ivy Canada Fund.
The Agreement obligates IMI to make investments
for the accounts of the Fund in accordance with its
best judgment, consistent with the Fund's investment
objective and restrictions set forth in the Prospectus,
the 1940 Act and the provisions of the Code relating to
regulated investment companies, and any policy
decisions adopted by the Board. IMI also determines the
securities to be purchased or sold by the Fund and places orders
with brokers or dealers who deal in such securities.
Under the Agreement, IMI also provides certain
business management services. IMI is obligated to (1)
coordinate with the 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 Fund; (3) provide the Fund with necessary office
space, telephones and other communications facilities
as are adequate for the Fund's needs; (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 Fund or by IMI acting in
some other capacity pursuant to a separate agreement or
arrangements with the Fund; (5) maintain or supervise
the maintenance by third parties of such books and
records of the Trust 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 Trust to serve in such
capacities; and (7) take such other action with respect to
the Trust, after approval by the Trust as may be
required by applicable law, including without
limitation the rules and regulations of the SEC and of
state securities commissions and other regulatory
agencies.
For providing business management and investment
advisory services, the Fund pays IMI a monthly fee at
an annual rate of 1.00% of the Fund's average daily net
assets.
Under the Agreement, the Trust pays the following
expenses: (1) the fees and expenses of the Trust's
Independent Trustees; (2) the salaries and expenses of
any of the Trust's 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 Trust's 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 Trust's legal
existence and of shareholders' meetings; (12) expenses
of preparation and distribution to existing
shareholders of periodic reports, proxy materials and
prospectuses; and (13) fees and expenses of membership
in industry organizations.
The Agreement provides that if the Fund's total
expenses in any fiscal year (other than interest,
taxes, distribution expenses, brokerage commissions and
other portfolio transaction expenses, other
expenditures which are capitalized in accordance with
generally accepted accounting principles and any extraor-
dinary expenses including, without limitation, litigation and
indemnification expenses) exceed the permissible limits appli-
cable to the Fund in any state in which its shares are
then
qualified for sale, IMI will bear the excess expenses.
At the present time, the most restrictive state expense
limitation provision limits the Fund's annual expenses
to 2.5% of the first $30 million of its average daily
net assets, 2.0% of the next $70 million and 1.5% of
its average daily net assets over $100 million.
IMI currently limits the Fund's total operating
expenses (excluding Rule 12b-1 fees, interest, taxes,
brokerage commissions, litigation and indemnification
expenses, and other extraordinary expenses) to an
annual rate of 1.95% of the Fund's average daily net
assets. As long as the Fund's expense limitation
continues, it may lower the Fund's expenses and
increase its yield. The Fund's expense limitation may be
terminated or revised at any time, which could cause the Fund's
expenses to increase and its yield to be reduced,
depending on the total assets of the Fund when the
termination occurs.
The initial term of the Agreement between IMI and
the Fund, which is scheduled to commence operations on
January 1, 1997, will run for a period of two years
from the date of commencement. The Agreement will
continue in effect with respect to the Fund from year
to year 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 the Fund or
(b) by the vote of a majority of the entire Board of
Trustees. If the question of continuance of the
Agreement (or adoption of any new agreement) is
presented to shareholders, continuance (or adoption) shall be
effected only if approved by the affirmative vote of a
majority of the outstanding voting securities of the
Fund. See "Capitalization and Voting Rights."
The Agreement may be terminated with respect to
the Fund at any time, without payment of any penalty,
by the vote of a majority of the Trustees, or by a vote
of a majority of the outstanding voting securities of
the Fund, on 60 days' written notice to IMI, or by IMI
on 60 days' written notice to the Trust. The Agreement
shall terminate automatically in the event of its
assignment.
DISTRIBUTION SERVICES
IMDI, a wholly owned subsidiary of MIMI, serves as
the exclusive distributor of the Fund's shares pursuant
to an Amended and Restated Distribution Agreement with
the Trust dated October 23, 1991, as amended from time
to time (the "Distribution Agreement"). The
Distribution Agreement was last approved by the Board
of Trustees on August 24, 1996. IMDI distributes shares of
the Fund 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 Fund on a continuous basis,
but reserves the right to suspend or
discontinue distribution on that basis. IMDI is not
obligated to sell any specific amount of Fund shares.
Pursuant to the Distribution Agreement, IMDI is
entitled to deduct a commission on all classes of 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, the 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. Since the Fund will not have
commenced operations until January 1, 1997, no payments
had been made in connection with the sale of Fund shares as of
the date of this SAI.
The Distribution Agreement will continue in effect
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 the Fund at any time, without payment of any
penalty, by IMDI on 60 days' written notice to the Fund
or by the Fund by vote of either a majority of the
outstanding voting securities of the 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/trustees and filed with the SEC. At a
meeting held on December 1-2, 1995, the Board adopted a multi-
class plan (the "Rule 18f-3 plan") on behalf of thirteen of
the series of the Trust, and at a meeting held on June
7-8, 1996, the Board adopted the Rule 18f-3 plan on
behalf of the Ivy Global Science & Technology Fund. At
a meeting held on _____, the Board adopted the Rule
18f-3 plan on behalf of the Fund, the Ivy International
Value Fund and the Ivy Global Natural Resources Fund.
The key features of the Rule 18f-3 plan are as follows:
(i) shares of each class of the Fund represent an equal pro rata
interest in the 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 the Fund may be exchanged for
shares of the same class of another Ivy or Mackenzie
fund; and (iii) the Fund's Class B shares will convert
automatically into Class A shares of the 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. At a meeting held
on ________, the Trustees adopted on behalf of the
Fund, in accordance with Rule 12b-1 under the 1940 Act
("Rule 12b-1"), separate distribution plans pertaining
to the Fund's Class A, Class B and Class C shares
(each, a "Plan"). In adopting each Plan, a majority of
the Independent Trustees 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
each Plan should result in greater sales and/or fewer
redemptions of the Fund's shares, although it is
impossible to know for certain the level of sales and
redemptions of the Fund's shares in the absence of a
Plan or under an alternative distribution arrangement.
Under each Plan, the Fund pays 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 shares, Class B shares or
Class C shares, as the case may be. 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 Fund 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 the 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 given 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 Fund's Class B and Class C Plans, the
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 fee
compensates IMDI for expenses incurred in connection with
activities primarily intended to result in the sale of the
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 the
Fund's Class B and Class C Plans, 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) it will continue
in effect only so long as such continuance is approved
at least annually, and any material amendment thereto
is approved, by the vote of a majority of the Board, including
the Independent Trustees, cast in person at a meeting
called for that purpose; (3) payments by the 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 affected 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 Trust shall be committed to the
discretion of the Trustees who are not "interested persons" of
the Trust.
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 Fund's shares. To qualify for such payments,
shares may be subject to a minimum holding period.
However, no such payments will be made to any dealer or
broker if at the end of each year the amount of shares
held does not exceed a minimum amount. The minimum
holding period and minimum level of holdings will be
determined from time to time by IMDI.
A report of the amount expended pursuant to each
Plan, and the purposes for which such expenditures were
incurred, must be made to the Board for its review at
least quarterly. Since the Fund will not have
commenced operations until January 1, 1997, no payments
had been made in marketing Fund shares as of the date of
this SAI.
Each Plan may be amended at any time with respect
to the class of shares of the 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 the
amendment. Each Plan may be terminated at any time with
respect to the class of shares 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 the affected class.
If the Distribution Agreement or the Distribution
Plans are
terminated (or not renewed) with respect any of the Ivy
Mackenzie 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).
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, maintains custody of the assets of
the Fund held in the United States. Rules adopted
under the 1940 Act permit the Trust to maintain its foreign
securities and cash in the custody of certain eligible foreign
banks and securities depositories. In accordance with
these rules, the Custodian has entered into
subcustodial agreements for the holding of the Fund's
foreign securities. In connection with the services it
provides on behalf of the Fund, the Custodian may
receive, as partial payment for its services, a portion of the
Trust's brokerage business, subject to its ability to
provide best price and execution.
FUND ACCOUNTING SERVICES
Pursuant to the Fund Accounting Services Agreement
with the Trust, MIMI provides certain accounting and
pricing services for the Fund. As compensation for
these services, the Fund pays MIMI a monthly fee plus
out-of-pocket expenses as incurred. The monthly fee is
based upon the net assets of the 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.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Pursuant to a Transfer Agency and Shareholder
Service Agreement with the Trust, IMSC, a wholly owned
subsidiary of MIMI, is the transfer agent for the Fund.
For these services, the Fund pays a monthly fee at an
annual rate of $20.00 for each open Class A, Class B
and Class C account. In addition, the Fund pays a
monthly fee at an annual rate of $4.48 per account that is
closed plus certain out-of-pocket expenses. Certain broker-
dealers that maintain shareholder accounts with the Fund
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 fee (e.g., .10%), based on the
average daily net asset value of the omnibus account (or
a combination thereof).
ADMINISTRATOR
Pursuant to an Administrative Services Agreement
with the Trust, MIMI provides certain administrative
services to the Fund. As compensation for these
services, the Fund pays MIMI a monthly fee at the
annual rate of .10% of the Fund's average daily net
assets.
Outside of providing administrative services to
the Trust, as described above, MIMI may also act on
behalf of IMDI in paying commissions to broker-dealers
with respect to sales of the Fund's Class B and Class C
shares.
AUDITORS
____________, independent certified public
accountants,______________________________, has been
selected as auditors for the Trust. The audit services
performed by_______________ include audits of the
annual financial statements of each of the funds of the
Trust. Other services provided principally relate to
filings with the SEC and the preparation of the funds'
tax returns.
CAPITALIZATION AND VOTING RIGHTS
The capitalization of the Trust consists of an
unlimited number of shares of beneficial interest (no
par value per share). When issued, shares of each
class of the Fund are fully paid, non-assessable,
redeemable and fully transferable. No class of shares
of the Fund has preemptive rights or subscription rights.
The Amended and Restated Declaration of Trust
permits the Trustees to create separate series of
shares and to divide any series into one or more
classes. The Trustees have authorized seventeen
series, each of which represents a "fund." The
Trustees have further authorized the issuance of Classes A, B and
C for the Fund, Ivy Bond Fund, Ivy Canada Fund, Ivy
China Region Fund, Ivy Emerging Growth Fund, Ivy Global
Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy
International Fund, Ivy International Bond Fund, Ivy
Latin America Strategy Fund, Ivy Money Market Fund, Ivy
New Century Fund, Ivy Global Science & Technology Fund,
Ivy International Value Fund and Ivy Global Natural
Resources Fund, as well as Classes A, B and I for Ivy
Short-Term Bond Fund; Class I for Ivy Bond Fund, Ivy
International Fund, Ivy Global Science & Technology Fund and Ivy
International Value Fund; and Class D for Ivy Growth with
Income Fund. [FN][The Class D shares of Ivy Growth
with Income Fund were initially issued as "Ivy Growth
with Income Fund -- Class C" to shareholders of
Mackenzie Growth & Income Fund, a former series of the
Company, in connection with the reorganization between
the Fund and Ivy Growth with Income Fund and not offered
for sale to the public. On February 29, 1996, the Trustees of
the Trust resolved by written consent to establish a new
class of shares designated as "Class C" for all Ivy
Fund portfolios (other
than Ivy Short-Term Bond Fund) and to redesignate the
shares of beneficial interest of "Ivy Growth with
Income Fund--Class C" as shares of beneficial interest
of "Ivy Growth with Income Fund-- Class D," which
establishment and redesignation, respectively, are to
become effective on April 30, 1996. The voting, dividend,
liquidation and other rights, preferences, powers, restrictions,
limitations, qualifications, terms and conditions of the
Class D shares of Ivy Growth with Income Fund, as set
forth in Ivy Fund's Declaration of Trust, as amended
from time to time, will not be changed by this
redesignation.]
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 the Fund entitle their holders to one
vote per share (with proportionate voting for fractional shares).
Shareholders of the Fund are entitled to vote alone on
matters that only affect the Fund. All classes of
shares of the Fund will vote together, except with
respect to the separate distribution plans for the
Fund's Class A, Class B and Class C shares, or when a
class vote is required by the 1940 Act. On matters
relating to all funds of the Trust, but affecting the
funds 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 the funds. If the Trustees determine
that a matter does not affect the interests of a Fund,
then the shareholders of that fund will not be entitled
to vote on that matter. Matters that affect the Trust
in general, such as ratification of the selection of
independent public accountants, 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 the funds, the
matter shall have been effectively acted upon with
respect to each fund if a majority of the outstanding
voting securities of each 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 of the Trust; or (2) the
matter has not been approved by a majority of the outstanding
voting securities of the Trust.
The Amended and Restated 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 as if Section 26(c) of the
Act were applicable.
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
Amended and Restated 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 Amended and Restated
Declaration of Trust 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 series of the
Trust is liable for the obligations of any other series
of the Trust.
NET ASSET VALUE
The share price, or value, for the separate
classes of shares of the Fund is called the net asset
value per share. The net asset value per share of the
Fund is computed by dividing the value of the assets of
the Fund, less its liabilities, by the number of shares
of the Fund outstanding. For purposes of determining
the aggregate net assets of the Fund, cash and
receivables will be valued at their realizable amounts. A
security listed or traded on a recognized stock exchange or
NASDAQ is valued at its last sale price on the principal
exchange on which the security is traded. The value of
a foreign security is determined in its national
currency as of the normal close of trading on the
foreign exchange on which it is traded or as of the
close of regular trading on the Exchange, if that is earlier,
and that value is then converted into its U.S. dollar
equivalent at the foreign exchange rate in effect at
noon, Eastern time, on the day the value of the foreign
security is determined. If no sale is reported at that
time, the average between the current bid and asked
price is used. All other securities for which OTC
market quotations are readily available are valued at the average
between the current bid and asked price. Interest will
be recorded as accrued. Securities and other assets
for which market prices are not readily available are
valued at fair value as determined by IMI and approved
in good faith by the Board. Money market instruments
of the Fund are valued at amortized cost, which
approximates money market value.
The Fund's liabilities are allocated between its
classes. The total of such liabilities allocated to a
class plus that class's distribution fee and any other
expenses specially allocated to that class are then
deducted from the class's proportionate interest in the
Fund's assets, and the resulting amount for each class
is divided by the number of shares of that class
outstanding to produce the net asset value per share.
Portfolio securities are valued and the net asset
value per share is determined as of the close of
regular trading on the Exchange (normally 4:00 p.m.,
Eastern Time), every Monday through Friday (exclusive
of national business holidays). The Trust's offices
will be closed, and net asset value will not be
calculated, on the following national business holidays: New
Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. On any day when either or both of the Fund's
Custodian or the Exchange close early as a result of
that day being a partial holiday or otherwise, the
Trust reserves the right to advance the time on that
day by which purchase and redemption requests must be
received.
When the Fund writes an option, an amount equal to
the premium received by the Fund is included in the
Fund's Statement of Assets and Liabilities as an asset
and as an equivalent liability. The amount of the
liability will be subsequently marked-to-market daily
to reflect the current market value of the option
written. The current market value of a written option is
the last sale on the principal exchange on which the option is
traded or, in the absence of a sale, the last offering
price.
The premium paid by the Fund for the purchase of a
call or a put option will be deducted from its assets
and an equal amount will be included in the asset
section of the Fund's Statement of Assets and
Liabilities as an investment and subsequently adjusted
to the current market value of the option. For example, if the
current market value of the option exceeds the premium
paid, the excess would be unrealized appreciation and,
conversely, if the premium exceeds the current market
value, such excess would be unrealized depreciation.
The current market value of a purchased option will be
the last sale price on the principal exchange on which
the option is traded or, in the absence of a sale, the last
bid price. If the Fund exercises a call option that it has
purchased, the cost of the security that the Fund purchased
upon exercise will be increased by the premium
originally paid.
The sale of Fund shares will be suspended during
any period
when the determination of its 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 best interest of the Fund to do so.
PORTFOLIO TURNOVER
The Fund purchases securities that are believed by
IMI to have above average potential for capital
appreciation. Common stocks are disposed of in
situations where it is believed that potential for such
appreciation has lessened or that other common stocks
have a greater potential. Therefore, the Fund may
purchase and sell securities without regard to the length of time
the security is to be, or has been, held. A change in
securities held by the Fund is known as "portfolio
turnover" and may involve the payment by the Fund of
dealer markup or underwriting commission and other
transaction costs on the sale of securities, as well as
on the reinvestment of the proceeds in other
securities. The Fund's portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio
securities for the most recently completed fiscal year
by the monthly average of the value of the portfolio
securities owned by the Fund during that year. For
purposes of determining the Fund's portfolio turnover
rate, all securities whose maturities at the time of
acquisition were one year or less are excluded.
REDEMPTIONS
Shares of the Fund 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 Trust reserves 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
Fund is not reasonably practicable or it is not
reasonably practicable for the 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 Fund.
Under unusual circumstances, when the Board deems
it in the best interest of the Fund's shareholders, the
Fund may make payment for shares repurchased or
redeemed in whole or in part in securities of the Fund
taken at current values. If any such redemption in
kind is to be made, the Fund intends to make an
election pursuant to Rule 18f-1 under the 1940 Act. This will
require the Fund to redeem with cash at a shareholder's
election in any case where the redemption involves less
than $250,000 (or 1% of the Fund's net asset value at
the beginning of each 90-day period during which such
redemptions are in effect, if that amount is less than
$250,000). Should payment be made in securities, the
redeeming shareholder may incur brokerage costs in
converting such securities to cash.
Subject to state law restrictions, the Trust may
redeem those accounts of shareholders who have
maintained an investment, including sales charges paid,
of less than $1,000 in the Fund for a period of more
than 12 months. All accounts below that minimum will
be redeemed simultaneously when MIMI deems it advisable.
The $1,000 balance will be determined by actual dollar amounts
invested by the shareholder, unaffected by market
fluctuations. The Trust will notify any such
shareholder by certified mail of its intention to
redeem such account, and the shareholder shall have 60
days from the date of such letter to invest such
additional sums as shall raise the value of such account above
that minimum. Should the shareholder fail to forward such
sum within 60 days of the date of the Trust's letter of
notification, the Trust will redeem the shares held in
such account and transmit the redemption in value
thereof to the shareholder. However, those
shareholders who are investing pursuant to the
Automatic Investment Method will not be redeemed automatically
unless they have ceased making payments pursuant to the
plan for a period of at least six consecutive months,
and these shareholders will be given six-months' notice
by the Trust before such redemption. Shareholders in a
qualified retirement, pension or profit sharing plan
who wish to avoid tax consequences must "rollover" any
sum so redeemed into another qualified plan within 60
days. The Trustees of the Trust may change the minimum
account size.
If a shareholder has given authorization for
telephonic redemption privilege, shares can be redeemed
and proceeds sent by Federal wire to a single
previously designated bank account. Delivery of the
proceeds of a wire redemption request of $250,000 or
more may be delayed by the Fund for up to seven days if deemed
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 Fund employs 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, the 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
the Fund will automatically convert to Class A shares
of the respective 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 the 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.
TAXATION
The following is a general discussion of certain
tax rules thought to be applicable with respect to the
Fund. 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 advisor about the tax consequences to them of
investing in the Fund.
The Fund intends to be taxed as a regulated
investment company under Subchapter M of the Code.
Accordingly, the 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; (b)
derive in each taxable year less than 30% of its gross
income from the sale or other disposition of certain
assets held less than three months, namely: (i) stock
or securities; (ii) options, futures, or forward
contracts (other than those on foreign currencies); or
(iii) foreign currencies (or options, futures, or forward
contracts on foreign currencies) that are not directly related
to the Fund's principal business of investing in stock
or securities (or options and futures with respect to
stock or securities) (the "30% Limitation"); and (c)
diversify its holdings so that, at the end of each
fiscal quarter, (i) at least 50% of the market value
of the 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 the 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, the 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. The 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, the 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, the
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 the 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.
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS
The taxation of equity options and OTC options on
debt securities is governed by Code section 1234.
Pursuant to Code section 1234, the premium received by
the Fund for selling a put or call option is not
included in income at the time of receipt. If the
option expires, the premium is short-term capital gain to
the Fund. If the Fund enters into a closing transaction, the
difference between the amount paid to close out its
position and the premium received is short-term capital
gain or loss. If a call option written by the Fund is
exercised, thereby requiring the Fund to sell the
underlying security, the premium will increase the
amount realized upon the sale of such security and any
resulting gain or loss will be a capital gain or loss, and
will be long-term or short-term depending upon the
holding period of the security. With respect to a put
or call option that is purchased by the Fund, if the
option is sold, any resulting gain or loss will be a
capital gain or loss, and will be long-term or short-
term, depending upon the holding period of the option. If
the option expires, the resulting loss is a capital loss and is
long-term or short-term, depending upon the holding
period of the option. If the option is exercised, the
cost of the option, in the case of a call option, is
added to the basis of the purchased security and, in
the case of a put option, reduces the amount realized
on the underlying security in determining gain or loss.
Some of the options, futures and foreign currency
forward contracts in which the Fund may invest may be
"section 1256 contracts." Gains (or losses) on these
contracts generally are considered to be 60% long-term
and 40% short-term capital gains or losses; however
foreign currency gains or losses arising from certain
section 1256 contracts are ordinary in character. Also,
section 1256 contracts held by the Fund at the end of each
taxable year (and on certain other dates prescribed in the
Code) are "marked-to-market" with the result that
unrealized gains or losses are treated as though they
were realized.
The transactions in options, futures and forward
contracts undertaken by the Fund may result in
"straddles" for Federal income tax purposes. The
straddle rules may affect the character of gains or
losses realized by the Fund. In addition, losses
realized by the Fund on positions that are part of a straddle may
be deferred under the straddle rules, rather than being
taken into account in calculating the taxable income
for the taxable year in which such losses are realized.
Because only a few regulations implementing the
straddle rules have been promulgated, the consequences
of such transactions to the Fund are not entirely
clear. The straddle rules may increase the amount of
short-term capital gain realized by the Fund, which is
taxed as ordinary income when distributed to shareholders.
The Fund may make one or more of the elections
available under the Code which are applicable to
straddles. If the Fund makes any of the elections, the
amount, character and timing of the recognition of
gains or losses from the affected straddle positions
will be determined under rules that vary according to
the election(s) made. The rules applicable under certain of the
elections may operate to accelerate the recognition of
gains or losses from the affected straddle positions.
Because application of the straddle rules may
affect the character of gains or losses, defer losses
and/or accelerate the recognition of gains or losses
from the affected straddle positions, the amount which
must be distributed to shareholders as ordinary income
or long-term capital gain, may be increased or
decreased substantially as compared to a fund that did not engage
in such transactions.
The 30% Limitation and the diversification
requirements applicable to the Fund's assets may limit
the extent to which the Fund will be able to engage in
transactions in options, futures and forward contracts.
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES
Gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund
accrues receivables or liabilities denominated in a
foreign currency and the time the Fund actually
collects such receivables or pays such liabilities
generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of some investments, including debt
securities denominated in a foreign currency and certain
options, futures and forward contracts, gains or losses
attributable to fluctuations in the value of the
foreign currency between the date of acquisition of the
security or contract and the date of disposition also
are treated as ordinary gain or loss. These gains and
losses, referred to under the Code as "section 988"
gains or losses, increase or decrease the amount of the Fund's
investment company taxable income available to be
distributed to its shareholders as ordinary income. If
section 988 losses exceed other investment company
taxable income during a taxable year, the Fund would
not be able to make any ordinary dividend
distributions, or distributions made before the losses were
realized would be recharacterized as a return of capital to
shareholders, rather than as an ordinary dividend, reducing
each shareholder's basis in his or her Fund shares.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund may invest in shares of foreign
corporations which may be classified under the Code as
passive foreign investment companies ("PFICs"). In
general, a foreign corporation is classified as a PFIC
if at least one-half of its assets constitute
investment-type assets, or 75% or more of its gross
income is investment-type income. If the Fund receives a so-
called "excess distribution" with respect to PFIC stock, the
Fund itself may be subject to a tax on a portion of the
excess distribution, whether or not the corresponding
income is distributed by the Fund to shareholders. In
general, under the PFIC rules, an excess distribution
is treated as having been realized ratably over the
period during which the Fund held the PFIC shares. The
Fund itself will be subject to tax on the portion, if
any, of an excess distribution that is so allocated to
prior Fund taxable years and an interest factor will be added
to the tax, as if the tax had been payable in such prior
taxable years. Certain distributions from a PFIC as
well as gain from the sale of PFIC shares are treated
as excess distributions. Excess distributions are
characterized as ordinary income even though, absent
application of the PFIC rules, certain excess
distributions might have been classified as capital gain.
The Fund may be eligible to elect alternative tax
treatment with respect to PFIC shares. Under an
election that currently is available in some
circumstances, the Fund generally would be required to
include in its gross income its share of the earnings
of a PFIC on a current basis, regardless of whether distributions
are received from the PFIC in a given year. If this
election were made, the special rules, discussed above,
relating to the taxation of excess distributions, would
not apply. In addition, other elections may become
available that would affect the tax treatment of PFIC
shares held by the Fund.
DEBT SECURITIES ACQUIRED AT A DISCOUNT
Some of the debt securities (with a fixed maturity
date of more than one year from the date of issuance)
that may be acquired by the Fund may be treated as debt
securities that are issued originally at a discount.
Generally, the amount of the original issue discount
("OID") is treated as interest income and is included
in income over the term of the debt security, even
though payment of that amount is not received until a later time,
usually when the debt security matures.
If the Fund invests in certain high yield original
issue discount obligations issued by corporations, a
portion of the original issue discount accruing on the
obligation may be eligible for the deduction for
dividends received by corporations. In such event,
dividends of investment company taxable income received
from the Fund by its corporate shareholders, to the
extent attributable to such portion of accrued original
issue discount, may be eligible for this deduction for
dividends received by corporations if so designated by
the Fund in a written notice to shareholders.
Some of the debt securities (with a fixed maturity
date of more than one year from the date of issuance)
that may be acquired by the Fund in the secondary
market may be treated as having market discount.
Generally, gain recognized on the disposition of, and
any partial payment of principal on, a debt security
having market discount is treated as ordinary income to
the extent the gain, or principal payment, does not exceed the
"accrued market discount" on such debt security. In
addition, the deduction of any interest expenses
attributable to debt securities having market discount
may be deferred. Market discount generally accrues in
equal daily installments. The Fund may make one or
more of the elections applicable to debt securities
having market discount, which could affect the
character and timing of recognition of income.
Some debt securities (with a fixed maturity date
of one year or less from the date of issuance) that may
be acquired by the Fund may be treated as having
acquisition discount, or OID in the case of certain
types of debt securities. Generally, the Fund will be
required to include the acquisition discount, or OID, in
income over the term of the debt security, even though payment of
that amount is not received until a later time, usually
when the debt security matures. The Fund may make one
or more of the elections applicable to debt securities
having acquisition discount, or OID, which could affect
the character and timing of recognition of income.
The Fund generally will be required to distribute
dividends to shareholders representing discount on debt
securities that is currently includible in income, even
though cash representing such income may not have been
received by the Fund. Cash to pay such dividends may
be obtained from sales proceeds of securities held by
the Fund.
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
Fund to a corporate shareholder, to the extent such
dividends are attributable to dividends received from
U.S. corporations by the 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 the Fund as capital gain dividends, are
taxable as long-term capital gains, whether paid in
cash or in shares, regardless of how long the
shareholder has held the Fund's shares and 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 the Fund on
the distribution date. A distribution of an amount in
excess of the 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.
If the net asset value of shares is reduced below
a shareholder's cost as a result of a distribution by
the 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 which 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 generally 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 the 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.
FOREIGN WITHHOLDING TAXES
Income received by the 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 the Fund's total
assets at the close of its taxable year consists of
securities of foreign corporations, the Fund will be
eligible and may elect to "pass- through" to the Fund's
shareholders the amount of foreign income and similar
taxes paid by the Fund. Pursuant to this election, a
shareholder will be required to include in gross income (in
addition to taxable dividends actually received) his or her
pro rata share of the foreign income and similar taxes
paid by the Fund, and will be entitled either to deduct
his or her pro rata
share of foreign income and similar taxes in computing
his or her taxable income or to use it as a foreign tax
credit against his or her U.S. Federal income taxes,
subject to limitations. No deduction for foreign taxes
may be claimed by a shareholder who does not itemize
deductions. Foreign taxes generally may not be
deducted by a shareholder that is an individual in computing the
alternative minimum tax. Each shareholder will be
notified within 60 days after the close of the Fund's
taxable year whether the foreign taxes paid by the Fund
will "pass-through" for that year and, if so, such
notification will designate (1) the shareholder's
portion of the foreign taxes paid to each such country
and (2) the portion of the dividend which represents
income derived from sources within each such country.
Generally, a credit for foreign taxes is subject
to the limitation that it may not exceed the
shareholder's U.S. tax attributable to his or her total
foreign source taxable income. For this purpose, if
the Fund makes the election described in the preceding
paragraph, the source of the Fund's income flows
through to its shareholders. With respect to the Fund, gains
from the sale of securities generally will be treated as
derived from U.S. sources and section 988 gains will be
treated as ordinary income derived from U.S. sources.
The limitation on the foreign tax credit is applied
separately to foreign source passive income, including
foreign source passive income received from the Fund.
In addition, the foreign tax credit may offset only 90%
of the revised alternative minimum tax imposed on
corporations and individuals.
The foregoing is only a general description of the
foreign tax credit under current law. Because
application of the credit depends on the particular
circumstances of each shareholder, shareholders are
advised to consult their own tax advisers.
BACKUP WITHHOLDING
The Fund will be required to report to the
Internal Revenue Service ("IRS") all taxable
distributions, including gross proceeds from redemption
of the Fund's shares, except in the case of certain
exempt shareholders. All such distributions 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 Fund 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 Fund.
PERFORMANCE INFORMATION
Comparisons of the Fund's performance may be made
with respect to various unmanaged indices (including
the TSE 300, S&P 100, S&P 500, Dow Jones Industrial
Average and Major Market Index) which assume
reinvestment of dividends, but do not reflect
deductions for administrative and management costs. The Fund
also may be compared to Lipper's Analytical Reports, reports
produced by a widely used independent research firm that
ranks mutual funds by overall performance, investment
objectives and assets, or to Wiesenberger Reports.
Lipper Analytical Services does not include sales
charges in computing performance. Further information
on comparisons is contained in the Prospectus.
Performance rankings will be based on historical information and
are not intended to indicate future performance.
In addition, the Trust may, from time to time,
include the average annual total return and the
cumulative total return of shares of the Fund in
advertisements, promotional literature or reports to
shareholders or prospective investors.
AVERAGE ANNUAL TOTAL RETURN. Quotations of
standardized average annual total return ("Standardized
Return") for a specific class of shares of the 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 the
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 shares and Class C shares, the
applicable CDSC imposed upon redemption of Class B
shares or Class C shares held for the period is
deducted. Standardized Return quotations for the 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 Fund 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.
In determining the average annual total return for
a specific Class of shares of the Fund, recurring fees,
if any, that are charged to all shareholder accounts
are taken into consideration. For any account fees
that vary with the size of the account of the Fund, the
account fee used for purposes of the following
computations is assumed to be the fee that would be
charged to the mean account size of the Fund.
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 the Trust's existence and may or may
not include the impact of sales charges, taxes or other factors.
Performance quotations for the Fund will vary from
time to time depending on market conditions, the
composition of the Fund's portfolio and operating
expenses of the Fund. These factors and possible
differences in the methods used in calculating
performance quotations should be considered when
comparing performance information regarding the Fund's 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 Fund's shares and the risks associated
with the Fund's 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 Fund may also cite endorsements or use for
comparison their 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 Shareholder, International Fund Monitor,
Shareholder'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 Director of Investment
Managers, New York Times, Newsweek, No Load Fund
Shareholder, No Load Fund* X, Oakland Tribune, Pension
World, Pensions and Investment Age, Personal
Shareholder, Rugg and Steele, Time, U.S. News and World Report,
USA Today, The Wall Street Journal, and Washington Post.
FINANCIAL STATEMENTS
The Statement of Assets and Liabilities for the
Fund as of ____________ and the Report of Independent
Accountants are attached hereto as Appendix B.
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION
("S&P") AND MOODY'S SHAREHOLDERS SERVICE, INC.
("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS
[FN][From "Moody's Bond Record," November 1994 Issue
(Moody's Shareholder Service, New York, 1994), and
"Standard & Poor's Municipal Ratings Handbook," October
1994 Issue (McGraw Hill, New York, 1994).]
MOODY'S:
(a) CORPORATE BONDS. Bonds rated Aaa by Moody's
are judged by Moody's to be of the best quality,
carrying the smallest degree of investment risk.
Interest payments are protected by a large or
exceptionally stable margin and principal is secure.
Bonds rated Aa are judged by Moody's to be of high quality by all
standards. Aa bonds are rated lower than Aaa bonds
because margins of protection may not be as large as
those of Aaa bonds, or fluctuations of protective
elements may be of greater amplitude, or there may be
other elements present which make the long-term risks
appear somewhat larger than those applicable to Aaa
securities. Bonds which are rated A by Moody's possess many
favorable investment attributes and are considered as upper
medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but
elements may be present which suggest a susceptibility
to impairment sometime in the future.
Bonds rated Baa by Moody's are considered medium-
grade obligations, i.e., they are neither highly
protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of
time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well. Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered
well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes
bonds in this class. Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments of or maintenance of other
terms of the contract over any long period of time may
be small.
Bonds which are rated Caa are of poor standing.
Such issues may be in default or there may be present
elements of danger with respect to principal or
interest. Bonds which are rated Ca represent
obligations which are speculative in a high degree.
Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class
of bonds and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real
investment standing.
(b) COMMERCIAL PAPER. The Prime rating is the
highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the
management of the issuer; (2) economic evaluation of
the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain
areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity;
(5) amount and quality of long-term debt; (6) trend of
earnings over a period of ten years; (7) financial
strength of a parent company and the relationships
which exist with the issuer; and (8) recognition by
management of obligations which may be present or may
arise as a result of public interest questions and
preparations to meet such obligations. Issuers within this Prime
category may be given ratings 1, 2 or 3, depending on
the relative strengths of these factors. The
designation of Prime-1 indicates the highest quality
repayment capacity of the rated issue.
S&P:
(a) CORPORATE BONDS. An S&P corporate debt
rating is a current assessment of the creditworthiness
of an obligor with respect to a specific obligation.
The ratings are based on current information furnished
by the issuer or obtained by S&P from other sources it
considers reliable. The ratings described below may be
modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
Debt rated AAA by S&P is considered by S&P to be
the highest grade obligation. Capacity to pay interest
and repay principal is extremely strong. Debt rated AA
is judged by S&P to have a very strong capacity to pay
interest and repay principal and differs from the
highest rated issues only in small degree. Debt rated
A by S&P has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
Debt rated BBB by S&P is regarded by S&P as having
an adequate capacity to pay interest and repay
principal. Although such bonds normally exhibit
adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay
principal than debt in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as
having predominately speculative characteristics with
respect to capacity to pay interest and repay
principal. BB indicates the least degree of
speculation and C the highest. While such debt will
likely have some quality and protective characteristics,
these are outweighed by large uncertainties or exposures to
adverse conditions. Debt rated BB has less near-term
vulnerability to default than other speculative issues. However,
it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions
which could lead to inadequate capacity to meet timely
interest and principal payments. The BB rating
category is also used for debt subordinated to senior
debt that is assigned an actual or implied BBB- rating.
Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating
category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB-
rating. Debt rated CCC has a currently identifiable
vulnerability to default, and is dependent upon
favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In
the event of adverse business, financial or economic
conditions, it is not likely to have the capacity to
pay interest and repay principal. The CCC rating
category is also used for debt subordinated to senior
debt that is assigned an actual or implied B or B-
rating. The rating CC typically is applied to debt
subordinated to senior debt which is assigned an actual or
implied CCC debt rating. The rating C typically is applied to
debt subordinated to senior debt which is assigned an
actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are
continued.
(b) COMMERCIAL PAPER. An S&P commercial paper
rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of
no more than 365 days.
Commercial paper rated A by S&P has the following
characteristics: (i) liquidity ratios are adequate to
meet cash requirements; (ii) long-term senior debt
rating should be A or better, although in some cases
BBB credits may be allowed if other factors outweigh
the BBB; (iii) the issuer should have access to at
least one additional channel of borrowing; (iv) basic
earnings and cash flow should have an upward trend with
allowances made for unusual circumstances; and (v) typically the
issuer's industry should be well established and the
issuer should have a strong position within its
industry and the reliability and quality of management
should be unquestioned. Issues rated A are further
referred to by use of numbers 1, 2 and 3 to denote
relative strength within this highest classification.
For example, the A-1 designation indicates that the degree of
safety regarding timely payment of debt is strong.
Issues rated B are regarded as having only
speculative capacity for timely payment. The C rating
is assigned to short- term debt obligations with a
doubtful capacity for payment.
APPENDIX B
STATEMENT OF ASSETS AND LIABILITIES
AS OF JULY 15, 1996
AND
REPORT OF INDEPENDENT ACCOUNTANTS
_________________________________________________________________
IVY ASIA PACIFIC FUND
STATEMENT OF ASSETS AND LIABILITIES
____________, 199_
_________________________________________________________________
ASSETS
Cash . . . . . . . . . . . . . . . . $ __
Deferred organization expenses . . . ______
-------
Total Assets . . . . . . . . . . . ______
-------
LIABILITIES
Due to affiliate . . . . . . . . . . ______
-------
NET ASSETS . . . . . . . . . . . . . . $ __
=======
CLASS A:
Net asset value and
redemption price per share
($10 / 1 share outstanding) . . . $ ______
=======
Maximum offering price
per share
($10.00 x 100 / 94.25)* . . . . . $ ______
=======
CLASS B:
Net asset value and
offering price per share
($10 / 1 share outstanding)** . . $ ______
=======
CLASS C:
Net asset value and
offering price per share
($10 / 1 share outstanding)** . . $ ______
=======
NET ASSETS CONSIST OF:
Capital paid-in . . . . . . . . . . . $ __
=======
* On sales of more than $50,000 the offering price
is reduced. ** Redemption price per share is equal to
the net asset value per share less any applicable
contingent deferred sales charge, up to a maximum
of 5%.
(See Notes to Financial Statements)
_________________________________________________________________
IVY ASIA PACIFIC FUND
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
____________, 199_
_________________________________________________________________
1. ORGANIZATION: Ivy Asia Pacific Fund is a series of
shares of Ivy Fund. The shares of beneficial interest
are assigned no par value and an unlimited number of
shares of Class A, Class B and Class C are authorized.
Ivy Fund was organized as a Massachusetts business
trust under a Declaration of Trust dated December 21,
1983 and is registered under the Investment Company Act of 1940,
as amended, as a diversified, open-end management
investment company.
The Fund will commence operations on January 1, 1997.
As of the date of this report, operations have been
limited to organizational matters and the issuance of
initial shares to Mackenzie Investment Management Inc.
(MIMI).
2. ORGANIZATION COSTS AND TRANSACTIONS WITH AFFILIATES:
Organization expenses are being amortized over a five
year period from January 1, 1997, the commencement date
of operations. Such organizational expenses have been
paid by MIMI and will be reimbursed by the Fund.
Ivy Management, Inc. (IMI), a wholly owned subsidiary
of MIMI, is the Manager and Investment Adviser of the
Fund. Currently, IMI voluntarily limits the Fund's
total operating expenses (excluding taxes, 12b-1 fees,
brokerage commissions, interest, litigation and
indemnification expenses, and any other extraordinary
expenses) to an annual rate of 1.95% of its average net assets.
MIMI provides certain administrative, accounting and
pricing services for the Fund.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned
subsidiary of MIMI, is the underwriter and distributor
of the Fund's shares, and as such, purchases shares
from the Fund at net asset value to settle orders from
investment dealers.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned
subsidiary of MIMI, is the transfer and shareholder
servicing agent for the Fund.
Officers of Ivy Fund are officers and/or employees of
MIMI, IMI, IMDI and IMSC. Such individuals are not
compensated by the Fund for services in their capacity
as officers of Ivy Fund. Trustees of Ivy Fund who are
not affiliated with MIMI or IMI receive compensation
from the Fund.
IVY INTERNATIONAL VALUE FUND
series of
IVY FUND
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL INFORMATION
January 1, 1997
_________________________________________________________________
Ivy Fund (the "Trust") is a diversified, open-end
management investment company that currently consists
of seventeen fully managed portfolios. This Statement
of Additional Information ("SAI") describes one of the
portfolios, Ivy International Value Fund (the "Fund").
The other sixteen portfolios of the Trust are described
in separate Statements of Additional Information.
This SAI is not a prospectus and should be read in
conjunction with the prospectus for the Fund dated
January 1, 1997 (the "Prospectus"), which may be
obtained upon request and without charge from the Trust
at the Distributor's address and telephone number
listed below.
INVESTMENT MANAGER
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 777-6472
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
TABLE OF CONTENTS
INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . . . .
. . . 5 BANKING INDUSTRY AND SAVINGS AND LOAN
OBLIGATIONS . . . 5 BORROWING . . . . . . . .
. . . . . . . . . . . . . . . 5 COMMERCIAL PAPER
. . . . . . . . . . . . . . . . . . . . 5 U.S.
GOVERNMENT SECURITIES . . . . . . . . . . . . . . . 5
CONVERTIBLE SECURITIES . . . . . . . . . . . . . . . . . 7
DEBT SECURITIES, IN GENERAL . . . . . . . . . . . .
. . 8 INVESTMENT-GRADE DEBT SECURITIES . . . . .
. . . . . . . 8 FOREIGN SECURITIES . . . . . . .
. . . . . . . . . . . . 10 INVESTING IN
EMERGING MARKETS . . . . . . . . 11 FORWARD
FOREIGN CURRENCY CONTRACTS . . . . . . . . . . . 12
FOREIGN CURRENCIES . . . . . . . . . . . . . . . . . . . 13
REPURCHASE AGREEMENTS . . . . . . . . . . . . . . . .
. 14 WARRANTS . . . . . . . . . . . . . . . . . .
. . . . . . 14 ZERO COUPON BONDS . . . . . . . .
. . . . . . . . . . . 15 OPTIONS TRANSACTIONS . .
. . . . . . . . . . . . . . . . 15 GENERAL .
. . . . . . . . . . . . . . . . . . . . . 15
WRITING OPTIONS ON INDIVIDUAL SECURITIES . . . . . 17
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES . . . . 17
PURCHASING AND WRITING OPTIONS ON SECURITIES
INDICES . . . . . . . . . . . . . . . . . .
. 18 RISKS OF OPTIONS TRANSACTIONS . . . . .
. . . . . . 19 SECURITIES INDEX FUTURES
CONTRACTS . . . . . . . . 21 RISKS OF
SECURITIES INDEX FUTURES . . . . . . . . . 23
COMBINED TRANSACTIONS . . . . . . . . . . . . . . . . . 24
RESTRICTED AND ILLIQUID SECURITIES . . . . . . . . . . .
25
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . .
. . . 25
ADDITIONAL RESTRICTIONS . . . . . . . . . . . . . . . .
. . . 27
ADDITIONAL RIGHTS AND PRIVILEGES . . . . . . . . . . .
. . . 28 AUTOMATIC INVESTMENT METHOD . . . . . .
. . . . . . . . 29 EXCHANGE OF SHARES . . . . . .
. . . . . . . . . . . . . 29 INITIAL SALES
CHARGE SHARES . . . . . . . . . . . . 29
CONTINGENT DEFERRED SALES CHARGE SHARES . . . . . . 29
LETTER OF INTENT . . . . . . . . . . . . . . . . . . .
. . . 33 RETIREMENT PLANS . . . . . . . . . . . .
. . . . . . . . 33 INDIVIDUAL RETIREMENT
ACCOUNTS . . . . . . . . . . 34 QUALIFIED
PLANS . . . . . . . . . . . . . . . . . . 35
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(b)(7)
ACCOUNT") . . . . . . . . . . . . . . . . . . 36
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS . . . . . 37
REINVESTMENT PRIVILEGE . . . . . . . . . . . . . . . .
. . . 37 RIGHTS OF ACCUMULATION . . . . . . . . .
. . . . . . . . 38 SYSTEMATIC WITHDRAWAL PLAN . .
. . . . . . . . . . . . . 38 GROUP SYSTEMATIC
INVESTMENT PROGRAM . . . . . . . . . . 39
BROKERAGE ALLOCATION . . . . . . . . . . . . . . . . .
. . . 40
TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . .
. . . 42 PERSONAL INVESTMENTS BY EMPLOYEES OF IMI
. . . . . . . . 46
COMPENSATION TABLE . . . . . . . . . . . . . . . . . .
. . . 47
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . .
. . . 48 BUSINESS MANAGEMENT AND INVESTMENT
ADVISORY SERVICES . . 48 DISTRIBUTION SERVICES .
. . . . . . . . . . . . . . . . 50 RULE
18F-3 PLAN . . . . . . . . . . . . . . . . . . 51
RULE 12B-1 DISTRIBUTION PLANS . . . . . . . . . . . 52
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . .
54 FUND ACCOUNTING SERVICES . . . . . . . . . . .
. . . . . 54 TRANSFER AGENT AND DIVIDEND PAYING
AGENT . . . . . . . . 54 ADMINISTRATOR . . . . .
. . . . . . . . . . . . . . . . 55 AUDITORS . . .
. . . . . . . . . . . . . . . . . . . . . 55
CAPITALIZATION AND VOTING RIGHTS . . . . . . . . . . .
. . . 55
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . .
. . . 57
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . .
. . . 59
REDEMPTIONS . . . . . . . . . . . . . . . . . . . . . .
. . . 59
CONVERSION OF CLASS B SHARES . . . . . . . . . . . . .
. . . 61
TAXATION . . . . . . . . . . . . . . . . . . . . . . .
. . . 61 OPTIONS, FUTURES AND FOREIGN CURRENCY
FORWARD CONTRACTS . . . . . . . . . . . . . .
. . . . . . . 62 CURRENCY FLUCTUATIONS --
"SECTION 988" GAINS OR LOSSES . . . . . .
. . . . . . . . . . . . . . . . . . . 64
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES . .
. . . 64 DEBT SECURITIES ACQUIRED AT A DISCOUNT .
. . . . . . . . 65 DISTRIBUTIONS . . . . . . . .
. . . . . . . . . . . . . 66 DISPOSITION OF
SHARES . . . . . . . . . . . . . . . . . 67
FOREIGN WITHHOLDING TAXES . . . . . . . . . . . . . . . 67
BACKUP WITHHOLDING . . . . . . . . . . . . . . . . . . .
68
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . .
. . . 69 AVERAGE ANNUAL TOTAL RETURN . . . .
. . . . . . . . 69 OTHER QUOTATIONS,
COMPARISONS AND GENERAL INFORMATION . .
. . . . . . . . . . . . . . . 70
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . .
. . . 71
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION
("S&P") AND MOODY'S SHAREHOLDERS SERVICE, INC.
("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS . . . . . . . . 72
APPENDIX B
STATEMENT OF ASSETS AND LIABILITIES
AS OF ________
AND
REPORT OF INDEPENDENT ACCOUNTANTS . . .
. . . 75
INVESTMENT OBJECTIVE AND POLICIES
The Fund has its own investment objective and
policies, which are described in the Prospectus under
the captions "Investment Objective and Policies" and
"Risk Factors and Investment Techniques." Additional
information regarding the characteristics and risks
associated with the Fund's investment techniques is set
forth below.
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS
Certificates of deposit are negotiable
certificates issued against funds deposited in a
commercial bank for a definite period of time and
earning a specified return. Bankers' acceptances are
negotiable drafts or bills of exchange, normally drawn
by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank (meaning, in effect, that the
bank unconditionally agrees to pay the face value of
the instrument on maturity). The Fund's investments in
certificates of deposit and bankers' acceptances are
limited to obligations of (i) banks having total assets
in excess of $1 billion and (ii) other banks which do
not meet the $1 billion asset requirement, if the
principal amount of such obligation is fully insured by the
Federal Deposit Insurance Corporation (the "FDIC"). The
Fund's investments in certificates of deposit of
savings associations are limited to obligations of
Federal and state-chartered institutions whose total
assets exceed $1 billion and whose deposits are insured
by the FDIC.
BORROWING
Borrowing may exaggerate the effect on the Fund's
net asset value of any increase or decrease in the
value of the Fund's portfolio securities. Money
borrowed will be subject to interest costs (which may
include commitment fees and/or the cost of maintaining
minimum average balances). Although the principal of
the Fund's borrowings will be fixed, the Fund's assets may change
in value during the time a borrowing is outstanding,
thus increasing exposure to capital risk. All
borrowings will be repaid before any additional
investments are made.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured
promissory notes issued in bearer form by bank holding
companies, corporations and finance companies. The
Fund may invest in commercial paper that is rated A-1
by Standard & Poor's Corporation ("S&P") or Prime-1 by
Moody's Shareholders Service, Inc. ("Moody's") or, if
not rated by Moody's or S&P, is issued by companies
having an outstanding debt issue rated AAA or AA by S&P
or Aaa or Aa by Moody's.
U.S. GOVERNMENT SECURITIES
U.S. Government securities are obligations of, or
guaranteed by, the U.S. Government, its agencies or
instrumentalities. Securities guaranteed by the U.S.
Government include: (1) direct obligations of the U.S.
Treasury (such as Treasury bills, notes, and bonds) and
(2) Federal agency obligations guaranteed as to
principal and interest by the U.S. Treasury (such as GNMA
certificates, which are mortgage-backed securities). When these
securities are held to maturity, the payment of
principal and interest is unconditionally guaranteed by
the U.S. Government, and thus they are of the highest
possible credit quality. U.S. Government securities
that are not held to maturity are subject to variations
in market value due to fluctuations in interest rates.
Mortgage-backed securities are securities
representing part ownership of a pool of mortgage
loans. For example, GNMA certificates are such
securities in which the timely payment of principal and
interest is guaranteed by the full faith and credit of
the U.S. Government. 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 normal
principal amortization and may be prepaid prior to
maturity. Prepayment rates vary widely and may be
affected by changes in market interest rates. In
periods of falling interest rates, the rate of prepayment tends
to increase, thereby shortening the actual average life of
the security. Conversely, when interest rates are
rising, the rate of prepayments tends to decrease,
thereby lengthening the actual average life of the
security (and increasing the security's price
volatility). Accordingly, it is not possible to predict
accurately the average life of a particular pool. Reinvestment
of prepayment may occur at higher or lower rates than the
original yield on the certificates. Due to the
prepayment feature and the need to reinvest prepayments
of principal at current rates, GNMA certificates can be
less effective than typical bonds of similar maturities
at "locking in" yields during periods of declining
interest rates. GNMA certificates may appreciate or
decline in market value during periods of declining or
rising interest rates, respectively.
Securities issued by U.S. Government
instrumentalities and certain federal agencies are
neither direct obligations of nor guaranteed by the
U.S. Treasury. However, they involve Federal
sponsorship in one way or another; some are backed by specific
types of collateral; some are supported by the issuer's
right to borrow from the Treasury; some are supported
by the discretionary authority of the Treasury to
purchase certain obligations of the issuer; others are
supported only by the credit of the issuing government
agency or instrumentality. These agencies and
instrumentalities include, but are not limited to, Federal Land
Banks, Farmers Home Administration, Central Bank for
Cooperatives, Federal Intermediate Credit Banks, Federal Home
Loan Banks, Federal National Mortgage Association, and
Student Loan Marketing Association.
CONVERTIBLE SECURITIES
Because convertible securities can be converted
into equity securities, their values will normally vary
in some proportion with those of the underlying equity
securities. Convertible securities usually provide a
higher yield than the underlying equity, however, so
that the price decline of a convertible security may
sometimes be less substantial than that of the
underlying equity security.
The Fund may invest in convertible securities,
such as corporate bonds, notes, debentures and other
securities that may be converted into common stock.
Investments in convertible securities can provide
income through interest and dividend payments as well
as an opportunity for capital appreciation by virtue of
their conversion or exchange features.
The convertible securities in which the Fund may
invest include zero coupon debt securities, and
preferred stock that may be converted or exchanged at a
stated or determinable exchange ratio into underlying
shares of common stock. The exchange ratio for any
particular convertible security may be adjusted from time
to time due to stock splits, dividends, spin-offs, other
corporate distributions or scheduled changes in the exchange
ratio. Convertible debt securities and convertible
preferred stocks, until converted, have general
characteristics similar to both debt and equity
securities. Although to a lesser extent than with debt
securities generally, the market value of convertible
securities tends to decline as interest rates increase
and, conversely, tends to increase as interest rates
decline. In addition, because of the conversion or exchange
feature, the market value of convertible securities typically
changes as the market value of the underlying common
stock changes, and, therefore, also tends to follow
movements in the general market for equity securities.
A unique feature of convertible securities is that as
the market price of the underlying common stock
declines, convertible securities tend to trade
increasingly on a yield basis, and so may not experience
market value declines to the same extent as the underlying common
stock. When the market price of the underlying common
stock increases, the price of a convertible security
tends to rise as a reflection of the value of the
underlying common stock, although typically not as much
as the price of the underlying common stock. While no
securities investments are without risk, investments in
convertible securities generally entail less risk than
investments in common stock of the same issuer.
As debt securities, convertible securities are
investments which provide for a stream of income or, in
the case of zero coupon securities, accretion of income
with generally higher yields than common stocks. Of
course, like all debt securities, there can be no
assurance of income or principal payments because the
issuers of the convertible securities may default on their
obligations. Convertible securities generally offer lower
yields
than non-convertible securities of similar quality
because of their conversion or exchange features.
Convertible securities generally are subordinated
to other similar but non-convertible securities of the
same issuer, although convertible bonds, as corporate
debt obligations, are senior in right of payment to all
equity securities, and convertible preferred stock is
senior to common stock, of the same issuer. However,
convertible bonds and convertible preferred stock
typically have lower coupon rates than similar non-
convertible securities.
Convertible securities may be issued as fixed
income obligations that pay current income or as zero
coupon notes and bonds, including Liquid Yield Option
Notes ("LYONs"). Zero coupon securities pay no cash
income and are sold 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. Zero coupon convertible securities offer the
opportunity for capital appreciation because increases (or
decreases) in the market value of such securities closely
follow the movements in the market value of the
underlying common stock. Zero coupon convertible
securities generally are expected to be less volatile
than the underlying common stocks because they usually
are issued with short maturities (15 years or less) and
are issued with options and/or redemption features exercisable by
the holder of the obligation entitling the holder to
redeem the obligation and receive a defined cash
payment.
DEBT SECURITIES, IN GENERAL
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. 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. Bonds with longer
maturities generally are more volatile than bonds with
shorter maturities. The market value of debt securities
also varies according to the relative financial
condition of the issuer. In general, lower-quality
bonds offer higher yields due to the increased risk
that the issuer will be unable to meet its obligations
on interest or principal payments at the time called
for by the debt instrument.
INVESTMENT-GRADE DEBT SECURITIES
Bonds rated Aaa by Moody's and AAA by S&P are
judged to be of the best quality (i.e., capacity to pay
interest and repay principal is extremely strong).
Bonds rated Aa/AA are considered to be of high quality
(i.e., capacity to pay interest and repay principal is
very strong and differs from the highest rated issues
only to a small degree). Bonds rated A are viewed as
having many favorable investment attributes, but
elements may be present that suggest a susceptibility
to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated
categories. Bonds rated Baa/BBB (considered by Moody's
to be "medium grade" obligations) are considered to have
an adequate capacity to pay interest and repay principal, but
certain protective elements may be lacking (i.e., such bonds
lack outstanding investment characteristics and have
some speculative characteristics). The Fund may invest
in debt securities that are given an investment-grade
rating by Moody's or S&P, and may also invest in
unrated debt securities that are considered by IMI to
be of comparable quality.
HIGH YIELD BONDS
The Fund may invest in corporate debt securities
rated Ba or lower by Moody's, or BB or lower by S&P.
The Fund will not, however, invest in securities that,
at the time of investment, are rated lower than C by
either Moody's or S&P. Securities rated lower than Baa
or BBB (and comparable unrated securities) are commonly
referred to as "high yield" or "junk" bonds and are
considered to be predominantly speculative with respect to the
issuer's continuing ability to meet principal and interest
payments. The lower the ratings of corporate debt
securities, the more their risks render them like
equity securities. (See Appendix A for a more complete
description of the ratings assigned by Moody's and S&P
and their respective
characteristics.)
While IMI may refer to ratings issued by
established credit rating agencies, it is not IMI's
policy to rely exclusively on such ratings, but rather
to supplement such ratings with its own independent and
ongoing review of credit quality. The Fund's
achievement of its investment objective may, to the extent of its
investment in high yield bonds, be more dependent upon
IMI's credit analysis than would be the case if the
Fund were investing in higher quality bonds. Should
the rating of a portfolio security be downgraded, IMI
will determine whether it is in the Fund's best
interest to retain or dispose of the security.
However, should any individual bond held by the Fund be
downgraded below a rating of C, IMI currently intends to dispose
of that bond based on then existing market conditions.
The secondary market on which high yield bonds are
traded may be less liquid than the market for higher
grade bonds. Less liquidity in the secondary trading
market could adversely affect the price at which the
Fund could sell a high yield bond, and cause large
fluctuations in the daily net asset value of the Fund's
shares. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the
value and liquidity of high yield bonds, especially in a
thinly traded market. When secondary markets for high
yield securities become comparatively less liquid, it
may be more difficult to value the securities in light
of the additional research that may
be required, and elements of judgment may play a
greater role in the valuation where objective and
reliable data is less widely available. Prices for
high yield bonds may also be affected by legislative
and regulatory developments. (For example, federal
rules currently require savings and loan institutions to reduce
gradually their holdings of high yield bonds).
FOREIGN SECURITIES
The Fund may invest in debt securities of foreign
issuers, including non-U.S. dollar-denominated debt
securities, Eurodollar securities, sponsored and
unsponsored American Depository Receipts ("ADRs") and
debt securities issued, assumed or guaranteed by
foreign governments (or political subdivisions or
instrumentalities thereof). Shareholders should consider
carefully the substantial risks involved in investing in
securities issued by companies and governments of foreign
nations, which are in addition to the usual risks inherent in
the Fund's domestic investments.
Although the Fund intends to invest only in
nations that IMI considers to have relatively stable
and friendly governments, there is the possibility of
expropriation, nationalization or confiscatory
taxation, taxation of income earned in a foreign
country and other foreign taxes, foreign exchange controls (which
may include suspension of the ability to transfer
currency from a given country), default in foreign
government securities, political or social instability
or diplomatic developments that could affect
investments in securities of issuers in those nations.
In addition, in many countries there is less publicly
available information about issuers than is available for U.S.
companies. For example, ownership of unsponsored ADRs may
not entitle the owner to financial or other reports
from the issuer to which it might otherwise be entitled
as the owner of a sponsored ADR. Moreover, foreign
companies are not generally subject to uniform
accounting, auditing and financial reporting standards,
and auditing practices and requirements may not be
comparable to those applicable to U.S. companies. In many
foreign countries, there is less government supervision and
regulation of business and industry practices, stock
exchanges, brokers and listed companies than in the
United States. Foreign securities transactions may
also be subject to higher brokerage costs than domestic
securities transactions. The foreign securities
markets of many of the countries in which the Fund may
invest may also be smaller, less liquid and subject to greater
price volatility than those in the United States. In
addition, the Fund may encounter difficulties or be
unable to pursue legal remedies and obtain judgment in
foreign courts.
Foreign stock markets have different clearance and
settlement procedures and in certain markets there have
been times when settlements have been unable to keep
pace with the volume of securities transactions, making
it difficult to conduct such transactions. Delays in
settlement could result in
temporary periods when assets of the Fund are
uninvested and are earning no return. The inability of
the Fund to make intended security purchases due to
settlement problems could cause the Fund to miss
attractive investment opportunities. Further, the
inability to dispose of portfolio securities due to settlement
problems could result either in losses to the Fund because
of subsequent declines in the value of the portfolio
security or, if the Fund has entered into a contract to
sell the security, in possible liability to the
purchaser. Fixed commissions on some foreign
securities exchanges are generally higher than negotiated
commissions on U.S. exchanges, although IMI will endeavor to
achieve the most favorable net results on the Fund's
portfolio transactions. In addition, the Fund may
encounter difficulties or be unable to pursue legal
remedies and obtain judgment in foreign courts. It may
be more difficult for the Fund's agents to keep
currently informed about corporate actions such as stock
dividends or other matters that may affect the prices of
portfolio securities. Communications between the United States
and foreign countries may be less reliable than within the
United States, thus increasing the risk of delayed
settlements of portfolio transactions or loss of
certificates for portfolio securities. Moreover,
individual foreign economies may differ favorably or
unfavorably from the United States economy in such
respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and
balance of payments position. IMI seeks to mitigate
the risks to the Fund associated with the foregoing
considerations through investment variation and
continuous professional management.
INVESTING IN EMERGING MARKETS. Investments in
companies domiciled in developing countries may be
subject to potentially higher risks than investments in
developed countries. These risks include (i) less
social, political and economic stability; (ii) the
small current size of the markets for such securities
and the currently low or nonexistent volume of trading, which
result in a lack of liquidity and in greater price
volatility; (iii) certain national policies that may
restrict the Fund's investment opportunities, including
restrictions on investment in issuers or industries
deemed sensitive to national interests; (iv) foreign
taxation; (v) the absence of developed structures
governing private or foreign investment or allowing for judicial
redress for injury to private property; (vi) the absence,
until relatively recently in certain Eastern European
countries, of a capital market structure or market-
oriented economy; (vii) the possibility that recent
favorable economic developments in Eastern Europe may
be slowed or reversed by unanticipated political or
social events in such countries; and (viii) the
possibility that currency devaluations could adversely affect the
value of the Fund's investments. Further, many emerging
markets have experienced and continue to experience
high rates of inflation.
Despite the dissolution of the Soviet Union, the
Communist Party may continue to exercise a significant
role in certain
Eastern European countries. To the extent of the
Communist Party's influence, investments in such
countries are exposed to risks of nationalization,
expropriation and confiscatory taxation. The communist
governments of a number of Eastern European countries
expropriated large amounts of private property in the
past, in many cases without adequate compensation, and
there can be no assurance that such expropriation will not occur
in the future. In the event of such expropriation, the
Fund could lose a substantial portion of any
investments it has made in the affected countries.
Further, few (if any) accounting standards exist in
Eastern European countries. Finally, even though
certain Eastern European currencies may be convertible
into U.S. dollars, the conversion rates may be artificial in
relation to the actual market values and may be adverse to
the Fund's Shareholders.
Certain Eastern European countries that do not
have market economies are characterized by an absence
of developed legal structures governing private and
foreign investments and private property. In addition,
certain countries require governmental approval prior
to investments by foreign persons, or limit the amount
of investment by foreign persons in a particular company,
or limit the investment of foreign persons to only a specific
class of securities of a company that may have less
advantageous terms than securities of the company
available for purchase by nationals.
Authoritarian governments in certain Eastern
European countries may require that a governmental or
quasi-governmental authority act as custodian of the
Fund's assets invested in such country. To the extent
such governmental or quasi-governmental authorities do
not satisfy the requirements of the Investment Company
Act of 1940, as amended (the "1940 Act"), with respect to
the custody of the Fund's cash and securities, the Fund's
investment in such countries may be limited or may be required
to be effected through intermediaries. The risk of
loss through governmental confiscation may also be
increased in such countries.
FORWARD FOREIGN CURRENCY CONTRACTS
A forward contract is an obligation to purchase or
sell a specific currency for an agreed price at a
future date (usually less than a year), and typically
is individually negotiated and privately traded by
currency traders and their customers. A forward
contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. Although
foreign exchange dealers do not charge a fee for commissions,
they do realize a profit based on the difference between
the price at which they are buying and selling various
currencies. Although these contracts are intended to
minimize the risk of loss due to a decline in the value
of the hedged currencies, at the same time, they tend
to limit any potential gain which might result should
the value of such currencies increase.
While the Fund may enter into forward contracts to
reduce currency exchange risks, changes in currency
exchange rates may result in poorer overall performance
for the Fund than if it had not engaged in such
transactions. Moreover, there may be an imperfect
correlation between the Fund's portfolio holdings of
securities denominated in a particular currency and forward
contracts entered into by the Fund. An imperfect correlation
of this type may prevent the Fund from achieving the
intended hedge or expose the Fund to the risk of
currency exchange loss.
The Fund will not enter into or maintain a net
exposure to a forward contract where the consummation
of the contract would obligate the Fund to deliver an
amount of currency that exceeds the value of the Fund's
portfolio securities or other assets denominated in
that currency. Further, the Fund generally will not
enter into a forward contract with a term of greater than one
year.
To the extent required by applicable law, the Fund
will hold cash or liquid securities in a segregated
account with its custodian in an amount equal (on a
daily marked-to-market basis) to the amount of the
commitments under these contracts. At the maturity of
a forward contract, the Fund may either accept or make
delivery of the currency specified in the contract, or,
prior to maturity, enter into a closing purchase transaction
involving the purchase or sale of an offsetting position.
Closing purchase transactions with respect to forward
contracts are usually effected with the currency trader
who is a party to the original forward contract.
FOREIGN CURRENCIES
Investment in foreign securities usually will
involve currencies of foreign countries. In addition,
the Fund may temporarily hold funds in bank deposits in
foreign currencies during the development of its
various investment programs. To the extent this is so,
the value of the assets of the Fund as measured in U.S.
dollars may be affected favorably or unfavorably by
changes in foreign currency exchange rates and exchange
control regulations. The Fund may also incur currency conversion
costs. Although foreign exchange dealers do not charge
a fee for conversion, they do realize a profit based on
the difference (or "spread") between the prices at
which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to
the Fund at one rate, while offering a lesser rate of
exchange should the Fund desire to resell that currency to the
dealer. The Fund will usually conduct its foreign currency
exchange transactions either on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign
currency exchange market, or through entering into
forward contracts to purchase or sell foreign
currencies (see "Forward Foreign Currency Contracts,"
above).
Because the Fund normally will be invested in both
U.S. and
foreign securities markets, changes in the Fund's share
price may have a low correlation with movements in the
U.S. markets. The Fund's share price will reflect the
movements of both the different stock and bond markets
in which it is invested and of the currencies in which
the investments are denominated. The strength or
weakness of the U.S. dollar against foreign currencies
may account for part of the Fund's investment
performance. U.S. and foreign securities markets do not always
move in step with each other, and the total returns from
different markets may vary significantly.
REPURCHASE AGREEMENTS
Repurchase agreements are contracts under which
the Fund buys a money market instrument and obtains a
simultaneous commitment from the seller to repurchase
the instrument at a specified time and at an agreed-
upon yield. Under guidelines approved by the Trust's
Board of Trustees (the "Board"), the Fund is permitted
to enter into repurchase agreements only if the
repurchase agreements are at least fully collateralized with U.S.
Government securities or other securities that the
Fund's investment adviser has approved for use as
collateral for repurchase agreements, and the
collateral must be marked-to- market daily. The Fund
will enter into repurchase agreements only with banks
and broker-dealers deemed to be creditworthy by the
Fund's investment adviser under guidelines approved by the
Board. In the unlikely event of failure of the executing bank
or broker-dealer, 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 costs in disposing
of the security.
SMALL COMPANIES
Investing in smaller company stocks involves
certain special considerations and risks that are not
usually associated with investing in larger, more
established companies. For example, the securities of
smaller companies may be subject to more abrupt or
erratic market movements, because they tend to be thinly
traded and are subject to a greater degree to changes in the
issuer's earnings and prospects. Transaction costs in
smaller company stocks also may be higher than those of
larger companies.
WARRANTS
The holder of a warrant has the right, until the
warrant expires, to purchase a given number of shares
of a particular issuer at a specified price. Such
investments can provide a greater potential for profit
or loss than an equivalent investment in the underlying
security. However, prices of warrants do not
necessarily move in tandem with the prices of the
underlying securities, and are therefore considered speculative
investments. Warrants pay no dividends and confer no
rights
other than a purchase option. Thus, if a warrant held
by the Fund were not exercised by the date of its
expiration, the Fund would lose the entire purchase
price of the warrant. The Fund's investments in
warrants will not exceed 5% of the value of its net
assets.
ZERO COUPON BONDS
The Fund may purchase zero coupon bonds in
accordance with the Fund's credit quality standards.
Zero coupon bonds are debt obligations issued at a
significant discount from face value, without any
requirement for the periodic payment of interest. 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 the Fund holds zero coupon bonds in
its portfolio, however, 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 such
income to shareholders currently, even though funds
representing such income would not have been received by the
Fund. Cash to pay dividends representing unpaid, accrued
interest may be obtained from sales proceeds of portfolio
securities and Fund shares and from loan proceeds.
However, this may result in the Fund's having to sell
portfolio securities at a time when it might otherwise
choose not to do so, and the Fund might incur a capital
loss on such sales. Because interest on zero coupon
obligations is not distributed to the Fund on a current
basis, but is in effect compounded, the value of such
securities is subject to greater fluctuations in response to
changing interest rates than the value of debt obligations
that distribute income regularly.
OPTIONS TRANSACTIONS
GENERAL. The Fund may engage in transactions in
options on securities and stock indices in accordance
with its stated investment objective and policies. The
Fund may also purchase put options on securities and
may purchase and sell (write) put and call options on
stock indices. Options on securities and stock indices
purchased or written by the Fund will be limited to
options traded on national securities exchanges, boards of trade
or similar entities, or in the OTC markets.
A call option is a short-term contract (having a
duration of less than one year) pursuant to which the
purchaser, in return for the premium paid, has the
right to buy the security underlying the option at the
specified exercise price at any time during the term of
the option. The writer of the call option, who
receives the premium, has the obligation, upon exercise of
the option, to deliver the underlying security against payment
of the exercise price. A put option is a similar
contract pursuant to which the purchaser, in return for
the premium paid, has the right to sell the security
underlying the option at the specified
exercise price at any time during the term of the
option. The writer of the put option, who receives the
premium, has the obligation, upon exercise of the
option, to buy the underlying security at the exercise
price. The premium paid by the purchaser of an option
will reflect, among other things, the relationship of
the exercise price to the market price and volatility
of the underlying security, the time remaining to
expiration of the option, supply and demand, and interest rates.
If the writer of an option wishes to terminate the
obligation, the writer may effect a "closing purchase
transaction." This is accomplished by buying an option of
the same series as the option previously written. The
effect of the purchase is that the writer's position
will be canceled by the Options Clearing Corporation.
However, a writer may not effect a closing purchase
transaction after it has been notified of the exercise
of an option. Likewise, an investor who is the holder
of an option may liquidate his or her position by effecting a
"closing sale transaction." This is accomplished by selling
an option of the same series as the option previously
purchased. There is no guarantee that either a closing
purchase or a closing sale transaction can be effected
at any particular time or at any acceptable price. If
any call or put option is not exercised or sold, it
will become worthless on its expiration date.
The Fund will realize a gain (or a loss) on a
closing purchase transaction with respect to a call or
a put previously written by the Fund if the premium,
plus commission costs, paid by the Fund to purchase the
call or the put is less (or greater) than the premium,
less commission costs, received by the Fund on the sale
of the call or the put. A gain also will be realized if
a call or a put that the Fund has written lapses unexercised,
because the Fund would retain the premium. Any such gains
(or losses) are considered short-term capital gains (or
losses) for Federal income tax purposes. Net short-
term capital gains, when distributed by the Fund, are
taxable as ordinary income. See "Taxation."
The Fund will realize a gain (or a loss) on a
closing sale transaction with respect to a call or a
put previously purchased by the Fund if the premium,
less commission costs, received by the Fund on the sale
of the call or the put is greater (or less) than the
premium, plus commission costs, paid by the Fund to
purchase the call or the put. If a put or a call expires
unexercised, it will become worthless on the expiration date,
and the Fund will realize a loss in the amount of the
premium paid, plus commission costs. Any such gain or
loss will be long-term or short-term gain or loss,
depending upon the Fund's holding period for the
option.
Exchange-traded options generally have
standardized terms and are issued by a regulated
clearing organization (such as the Options Clearing
Corporation), which, in effect, guarantees the
completion of every exchange-traded option transaction. In
contrast, the terms of OTC options are negotiated by
the Fund and its counterparty (usually a securities
dealer or a financial institution) with no clearing
organization guarantee. When the Fund purchases an OTC
option, it relies on the party from whom it has
purchased the option (the "counterparty") to make delivery of
the instrument underlying the option. If the counterparty
fails to do so, the Fund will lose any premium paid for
the option, as well as any expected benefit of the
transaction. Accordingly, IMI will assess the
creditworthiness of each counterparty to determine the
likelihood that the terms of the OTC option will be
satisfied.
WRITING OPTIONS ON INDIVIDUAL SECURITIES. The
Fund may write (sell) covered call options on the
Fund's securities in an attempt to realize a greater
current return than would be realized on the securities
alone. The Fund may also write covered call options to
hedge a possible stock or bond market decline (only to
the extent of the premium paid to the Fund for the
options). In view of the investment objectives of the Fund,
the Fund generally would write call options only in
circumstances where the investment adviser to the Fund
does not anticipate significant appreciation of the
underlying security in the near future or has otherwise
determined to dispose of the security.
The Fund may write covered call options as
described in the Prospectus. A "covered" call option
means generally that so long as the Fund is obligated
as the writer of a call option, the Fund will (i) own
the underlying securities subject to the option, or
(ii) have the right to acquire the underlying securities through
immediate conversion or exchange of convertible preferred
stocks or convertible debt securities owned by the
Fund. Although the Fund receives premium income from
these activities, any appreciation realized on an
underlying security will be limited by the terms of the
call option. The Fund may purchase call options on
individual securities only to effect a "closing
purchase transaction."
As the writer of a call option, the Fund receives
a premium for undertaking the obligation to sell the
underlying security at a fixed price during the option
period, if the option is exercised. So long as the
Fund remains obligated as a writer of a call option, it
forgoes the opportunity to profit from increases in the
market price of the underlying security above the
exercise price of the option, except insofar as the premium
represents such a profit (and retains the risk of loss should
the value of the underlying security decline).
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES. The
Fund may purchase a put option on an underlying
security that it owns as a defensive technique in order
to protect against an anticipated decline in the value
of the security. The Fund, as the holder of the put
option, may sell the underlying security at the exercise
price regardless of any decline in its market price. In order
for a put option to be profitable, the market price of the
underlying security must decline sufficiently below the
exercise price to cover the premium and transaction
costs that the Fund must pay. These costs will reduce
any profit the Fund might have realized had it sold the
underlying security instead of buying the put option.
The premium paid for the put option would reduce any
capital gain otherwise available for distribution when the
security is eventually sold. The purchase of put options will
not be used by the Fund for leverage purposes.
The Fund may also purchase a put option on an
underlying security that it owns and at the same time
write a call option on the same security with the same
exercise price and expiration date. Depending on
whether the underlying security appreciates or
depreciates in value, the Fund would sell the underlying
security for the exercise price either upon exercise of the call
option written by it or by exercising the put option held
by it. The Fund would enter into such transactions in
order to profit from the difference between the premium
received by the Fund for the writing of the call option
and the premium paid by the Fund for the purchase of
the put option, thereby increasing the Fund's current
return.
The Fund will purchase put options only to the
extent permitted by the policies of state securities
authorities in states where shares of the Fund are
qualified for offer and sale. Such authorities may
impose further limitations on the ability of the Fund
to purchase options. The Fund may write (sell) put
options on individual securities only to effect a "closing sale
transaction."
PURCHASING AND WRITING OPTIONS ON SECURITIES
INDICES. The Fund may purchase and sell (write) put
and call options on securities indices. An index
assigns relative values to the securities included in
the index and the index fluctuates with changes in the
market values of the securities so included. Options
on indices are similar to options on individual
securities, except that, rather than giving the purchaser the
right to take delivery of an individual security at a
specified price, they give the purchaser the right to
receive cash. The amount of cash is equal to the
difference between the closing price of the index and
the exercise price of the option, expressed in dollars,
times a specified multiple (the "multiplier"). The
writer of the option is obligated, in return for the
premium received, to make delivery of this amount.
The multiplier for an index option performs a
function similar to the unit of trading for a stock
option. It determines the total dollar value per
contract of each point in the difference between the
exercise price of an option and the current level of
the underlying index. A multiplier of 100 means that a
one-point difference will yield $100. Options on
different indices have different multipliers.
When the Fund writes a call or put option on a
stock index,
the option is "covered," in the case of a call, or
"secured," in the case of a put, if the Fund maintains
in a segregated account with its custodian cash or
liquid securities equal to the contract value. A call
option is also covered if the Fund holds a call on the
same index as the call written where the exercise price
of the call held is (i) equal to or less than the exercise
price of the call written or (ii) greater than the exercise
price of the call written, provided that the Fund
maintains in a segregated account with its custodian
the difference in cash or liquid securities. A put
option is also "secured" if the Fund holds a put on the
same index as the put written where the exercise price
of the put held is (i) equal to or greater than the
exercise price of the put written or (ii) less than the
exercise price of the put written, provided that the Fund
maintains in a segregated account with its custodian the
difference in cash or liquid securities.
RISKS OF OPTIONS TRANSACTIONS. The purchase and
writing of options involves certain risks. During the
option period, the covered call writer has, in return
for the premium on the option, given up the opportunity
to profit from a price increase in the underlying
securities above the exercise price, but, as long as
its obligation as a writer continues, has retained the risk of
loss should the price of the underlying security decline.
The writer of an option has no control over the time
when it may be required to fulfill its obligation as a
writer of the option. Once an option writer has
received an exercise notice, it cannot effect a closing
purchase transaction in order to terminate its
obligation under the option and must deliver the underlying
securities (or cash in the case of an index option) at the
exercise price. If a put or call option purchased by the
Fund is not sold when it has remaining value, and if
the market price of the underlying security (or index),
in the case of a put, remains equal to or greater than
the exercise price or, in the case of a call, remains
less than or equal to the exercise price, the Fund will
lose its entire investment in the option. Also, where a put
or call option on a particular security (or index) is
purchased to hedge against price movements in a related
security (or securities), the price of the put or call
option may move more or less than the price of the
related security (or securities). In this regard,
there are differences between the securities and
options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to
achieve its objective.
There can be no assurance that a liquid market
will exist when the Fund seeks to close out an option
position. Furthermore, if trading restrictions or
suspensions are imposed on the options markets, the
Fund may be unable to close out a position. Finally,
trading could be interrupted, for example, because of
supply and demand imbalances arising from a lack of
either buyers or sellers, or the options exchange could suspend
trading after the price has risen or fallen more than the
maximum amount specified by the exchange. Closing
transactions can be
made for OTC options only by negotiating directly with
the counterparty or by a transaction in the secondary
market, if any such market exists. There is no
assurance that the Fund will be able to close out an
OTC option position at a favorable price prior to its
expiration. In the event of insolvency of the
counterparty, the Fund might be unable to close out an OTC option
position at any time prior to its expiration. Although
the Fund may be able to offset to some extent any
adverse effects of being unable to liquidate an option
position, the Fund may experience losses in some cases
as a result of such inability.
The Fund's options activities also may have an
impact upon the level of its portfolio turnover and
brokerage commissions. See "Portfolio Turnover."
The Fund's success in using options techniques
depends, among other things, on IMI's ability to
predict accurately the direction and volatility of
price movements in the options and securities markets,
and to select the proper type, time and duration of
options.
FUTURES CONTRACTS
GENERAL. The Fund may enter into futures
contracts for hedging purposes. A futures contract
provides for the future sale by one party and purchase
by another party of a specified quantity of a commodity
at a specified price and time. When a purchase or sale
of a futures contract is made by the Fund, the Fund is
required to deposit with its custodian (or broker, if
legally permitted) a specified amount of cash or U.S. Government
securities ("initial margin"). The margin required for a
futures contract is set by the exchange on which the
contract is traded and may be modified during the term
of the contract. The initial margin is in the nature
of a performance bond or good faith deposit on the
futures contract which is returned to the Fund upon
termination of the contract, assuming all contractual
obligations have been satisfied. A futures contract held by the
Fund is valued daily at the official settlement price of
the exchange on which it is traded. Each day the Fund
pays or receives cash, called "variation margin," equal
to the daily change in value of the futures contract.
This process is known as "marking to market."
Variation margin does not represent a borrowing or loan
by the Fund but is instead a settlement between the
Fund and the broker of the amount one would owe the other if
the futures contract expired. In computing daily net asset
value, the Fund will mark-to-market its open futures
position.
Although some futures contracts call for making or
taking delivery of the underlying securities, generally
these obligations are closed out prior to delivery of
offsetting purchases or sales of matching futures
contracts (same exchange, underlying security or index,
and delivery month). If an offsetting purchase price
is less than the original sale price, the Fund
generally realizes a capital gain, or if it is more, the
Fund generally realizes a capital loss. Conversely, if
an offsetting sale price is more than the original
purchase price, the Fund generally realizes a capital
gain, or if it is less, the Fund generally realizes a
capital loss. The transaction costs must also be
included in these calculations. When purchasing a
futures contract, the Fund will maintain with its Custodian (and
mark-to-market on a daily basis) cash or liquid
securities that, when added to the amounts deposited
with a futures commission merchant ("FCM") as margin,
are equal to the market value of the futures contract.
When selling a futures contact, a Fund will
maintain with its custodian in a segregated account
(and mark-to-market on a daily basis) cash or liquid
securities that, when added to the amounts deposited
with an FCM as margin, are equal to the market value of
the instruments underlying the contract. Alternatively,
the Fund may "cover" its position by owning the instruments
underlying the contract (or, in the case of an index futures
contract, a portfolio with a volatility substantially
similar to that of the index on which the futures
contract is based).
The Fund will only enter into futures contracts
which are standardized and traded on a U.S. or foreign
exchange, board of trade, or similar entity or quoted
on an automated quotation system. The Fund will not
enter into a futures contract if, immediately
thereafter, the aggregate initial margin deposits for
futures contracts held by the Fund plus premiums paid by it for
open futures option positions, less the amount by which
any such positions are "in-the-money," would exceed 5%
of the liquidation value of the Fund's portfolio (or
the Fund's net asset value), after taking into account
unrealized profits and unrealized losses on any such
contracts the Fund has entered into.
The requirements for qualification as a regulated
investment company also may limit the extent to which
the Fund may enter into futures.
FOREIGN CURRENCY FUTURES CONTRACTS. The Fund may
engage in foreign currency futures contracts for
hedging purposes. A foreign currency futures contract
provides for the future sale by one party and purchase
by another party of a specified quantity of a foreign
currency at a specified price and time.
SECURITIES INDEX FUTURES CONTRACTS.The Fund may
enter into securities index futures contracts as an
efficient means of regulating the Fund's exposure to
the equity markets. The Fund will not engage in
transactions in futures contracts for speculation but
only as a hedge against changes resulting from market
conditions in the values of securities held in the Fund's
portfolio or which it intends to purchase.
An index futures contract is a contract to buy or
sell units of an index at a specified future date at a
price agreed upon when the contract is made. Entering
into a contract to buy units
of an index is commonly referred to as purchasing a
contract or holding a long position in the index.
Entering into a contract to sell units of an index is
commonly referred to as selling a contract or holding a
short position. The value of a unit is the current
value of the stock index. For example, the S&P 500 Index
is composed of 500 selected common stocks, most of which are
listed on the New York Stock Exchange (the "Exchange"). The
S&P 500 Index assigns relative weightings to the 500
common stocks included in the Index, and the Index
fluctuates with changes in the market values of the
shares of those common stocks. In the case of the S&P
500 Index, contracts are to buy or sell 500 units.
Thus, if the value of the S&P 500 Index were $150, one
contract would be worth $75,000 (500 units x $150). The index
futures contract specifies that no delivery of the actual
securities making up the index will take place. Instead,
settlement in cash must occur upon the termination of the
contract, with the settlement being the difference
between the contract price and the actual level of the
stock index at the expiration of the contract. For
example, if the Fund enters into a futures contract to
buy 500 units of the S&P 500 Index at a specified
future date at a contract price of $150 and the S&P 500
Index is at $154 on that future date, the Fund will gain $2,000
(500 units x gain of $4). If the Fund enters into a
futures contract to sell 500 units of the stock index
at a specified future date at a contract price of $150
and the S&P 500 Index is at $154 on that future date,
the Fund will lose $2,000 (500 units x loss of $4).
RISKS ASSOCIATED WITH FUTURES. There are several
risks associated with the use of futures contracts as
hedging techniques. A purchase or sale of a futures
contract may result in losses in excess of the amount
invested in the futures contract. There can be no
guarantee that there will be a correlation between
price movements in the hedging vehicle and in the
Fund's portfolio securities being hedged. In addition, there
are significant differences between the securities and
futures markets that could result in an imperfect
correlation between the markets, causing a given hedge
not to achieve its objectives. The degree of
imperfection of correlation depends on circumstances
such as variations in speculative market demand for
futures on securities, including technical influences in futures
trading, and differences between the financial
instruments being hedged and the instruments underlying
the standard contracts available for trading in such
respects as interest rate levels, maturities, and
creditworthiness of issuers. A decision as to whether,
when and how to hedge involves the exercise of skill and
judgment, and even a well-conceived hedge may be unsuccessful to
some degree because of market behavior or unexpected
interest rate trends.
Futures exchanges may limit the amount of
fluctuation permitted in certain futures contract
prices during a single trading day. The daily limit
establishes the maximum amount that the price of a
futures contract may vary either up or down from
the previous day's settlement price at the end of the
current trading session. Once the daily limit has been
reached in a futures contract subject to the limit, no
more trades may be made on that day at a price beyond
that limit. The daily limit governs only price
movements during a particular trading day and therefore
does not limit potential losses because the limit may
work to prevent the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the
daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of
futures contracts to substantial losses.
There can be no assurance that a liquid market
will exist at a time when the Fund seeks to close out a
futures position, and the Fund would remain obligated
to meet margin requirements until the position is
closed. In addition, there can be no assurance that an
active secondary market will continue to exist.
Currency futures contracts may be traded on
foreign exchanges. Such transactions may not be
regulated as effectively as similar transactions in the
United States; may not involve a clearing mechanism and
related guarantees; and are subject to the risk of
governmental actions affecting trading in, or the prices
of, foreign securities. The value of such position also could 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.
RISKS OF SECURITIES INDEX FUTURES. The Fund's
success in using hedging techniques depends, among
other things, on IMI's ability to predict correctly the
direction and volatility of price movements in the
futures markets as well as in the securities markets
and to select the proper type, time and duration of
hedges. The skills necessary for successful use of
hedges are different from those used in the selection of
individual stocks.
The Fund's ability to hedge effectively all or a
portion of its securities through transactions in index
futures (and therefore the extent of its gain or loss
on such transactions) depends on the degree to which
price movements in the underlying index correlate with
price movements in the Fund's securities. Insofar as
such securities do not duplicate the components of an
index, the correlation probably will not be perfect.
Consequently, the Fund will bear the risk that the prices of the
securities being hedged will not move in the same amount
as the hedging instrument. This risk will increase as
the composition of the Fund's portfolio diverges from
the composition of the
hedging instrument.
Although the Fund intends to establish positions
in these instruments only when there appears to be an
active market, there is no assurance that a liquid
market will exist at a time when the Fund seeks to
close a particular futures position. Trading could be
interrupted, for example, because of supply and demand
imbalances arising from a lack of either buyers or sellers. In
addition, the futures exchanges may suspend trading after
the price has risen or fallen more than the maximum
amount specified by the exchange. In some cases, the
Fund may experience losses as a result of its inability
to close out a position, and it may have to liquidate
other investments to meet its cash needs.
Although some index futures contracts call for
making or taking delivery of the underlying securities,
generally these obligations are closed out prior to
delivery by offsetting purchases or sales of matching
futures contracts (same exchange, underlying security
or index, and delivery month). If an offsetting
purchase price is less than the original sale price,
the Fund generally realizes a capital gain, or if it is more, the
Fund generally realizes a capital loss. Conversely, if
an offsetting sale price is more than the original
purchase price, the Fund generally realizes a capital
gain, or if it is less, the Fund generally realizes a
capital loss. The transaction costs must also be
included in these calculations.
The Fund will only enter into index futures
contracts that are standardized and traded on a U.S. or
foreign exchange or board of trade, or similar entity,
or quoted on an automated quotation system. The Fund
will use futures contracts only for "bona fide hedging"
purposes, as such term is defined in applicable
regulations of the CFTC.
When purchasing an index futures contract, the
Fund will maintain with its custodian in a segregated
account (and mark-to- market on a daily basis) cash or
liquid securities that, when added to the amounts
deposited with a futures commission merchant ("FCM") as
margin, are equal to the market value of the futures
contract.
When selling an index futures contract, the Fund
will maintain with its custodian in a segregated
account (and mark-to- market on a daily basis) cash or
liquid securities that, when added to the amounts
deposited with an FCM as margin, are equal to the
market value of the instruments underlying the contract.
Alternatively, the Fund may "cover" its position by owning the
instruments underlying the contract (or, in the case of an
index futures contract, a portfolio with a volatility
substantially similar to that of the index on which the
futures contract is based).
COMBINED TRANSACTIONS
The Fund may enter into multiple transactions,
including multiple options transactions, multiple
futures transactions, multiple currency transactions
(including forward currency contracts) and multiple
interest rate transactions and some combinations of
futures, options, currency and interest rate
transactions ("component" transactions), instead of a single
transaction, as part of a single or combined strategy when,
in the opinion of IMI, it is in the best interests of
the Fund to do so. A combined transaction will usually
contain elements of risk that are present in each of
its component transactions. Although combined
transactions are normally entered into based on IMI's
judgment that the combined strategies will reduce risk or
otherwise more effectively achieve the desired portfolio
management goal, it is possible that the combination will
instead increase such risks or hinder achievement of
the management objective.
RESTRICTED AND ILLIQUID SECURITIES
Restricted securities may be sold only in
privately negotiated transactions or in a public
offering with respect to which a registration statement
is in effect under the Securities Act of 1933. Where a
registration statement is required, the Fund may be
required to bear all or part of the registration
expenses. 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. There may also be a lapse of time
between the Fund's decision to sell a restricted or
illiquid security and the point at which the Fund is
permitted or able to do so. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a
less favorable price than the price that prevailed when
it decided to sell. Since it is not possible to
predict with assurance that the market for securities
eligible for resale under Rule 144A will continue to be
liquid, the Fund will monitor each of its investments
in these securities, focusing on factors such as
valuation, liquidity and availability of information. This
investment practice could have the effect of increasing the
level of illiquidity in the Fund to the extent that
qualified institutional buyers become, for a time,
uninterested in purchasing these restricted securities.
INVESTMENT RESTRICTIONS
The Fund's investment objective, as set forth in
the Prospectus under "Investment Objectives and
Policies," and the investment restrictions set forth
below are fundamental policies of the Fund and may not
be changed without the approval of a majority (as
defined in the 1940 Act) of the Fund's outstanding
voting shares. Under these restrictions, the Fund may not:
(i) with respect to 75% of its total assets,
purchase the securities of any one
issuer, other than securities issued by
the U.S. Government or its
agencies or instrumentalities, if
immediately after such purchase more
than 5% of the value of the total assets
of the Fund would be invested in
securities of such issuer, or if immediately after
such purchase the Fund would own more than 10% of
the outstanding voting securities of such
issuer;
(ii) invest in real estate, real estate
mortgage loans, commodities or interests
in oil, gas and/or mineral exploration
or development programs, although (a)
the Fund may purchase and sell
marketable securities of issuers which are secured
by real estate, (b) the Fund may purchase and sell
securities of issuers which invest or deal in
real estate, (c) the Fund may enter into
forward foreign currency contracts as
described in the Fund's prospectus, and
(d) the Fund may write or buy puts,
calls, straddles or spreads and may
invest in commodity futures contracts and options
on futures contracts;
(iii) make investments in securities for the
purpose of exercising control over or
management of the issuer;
(iv) purchase securities on margin, except
such short- term credits as are necessary
for the clearance of transactions, but
the Fund may make margin deposits in
connection with transactions in options,
futures and options on futures;
(v) make loans, except this restriction
shall not prohibit (a) the purchase and
holding of a portion of an issue of
publicly distributed debt securi- ties,
(b) the entry into repurchase agreements
with banks or broker-dealers, or (c) the lending
of the Fund's portfolio securities in accordance
with applicable guidelines established by the
Securities and Exchange Commission (the "SEC")
and any guidelines established by the
Trust's Trustees;
(vi) borrow money, except as a temporary
measure for extraordinary or emergency
purposes, and provided that the Fund
maintains asset coverage of 300% for all
borrowings;
(vii) make an investment in securities of
companies in any one industry (except
obligations of domestic banks or the
U.S. Government, its agencies,
authorities, or instrumentalities) if such
investment would cause investments in such
industry to exceed 25% of the market value of the
Fund's total assets at the time of such
investment;
(viii) act as an underwriter of securities,
except to the extent that, in connection
with the sale of securities, it may be
deemed to be an underwriter under
applicable securities laws; or
(ix) issue senior securities, except as
appropriate to evidence indebtedness
which it is permitted to incur, and
except to the extent that shares of the
separate classes or series of the Trust may be
deemed to be senior securities; provided that
collateral arrangements with respect to currency-
related contracts, futures contracts, options or
other permitted investments, including
deposits of initial and variation
margin, are not considered to be the
issuance of senior securities for
purposes of this restriction.
Under the 1940 Act, the Fund is permitted, subject
to the above investment restrictions, to borrow money
only from banks. Further, the Fund has no current
intention of lending portfolio securities.
ADDITIONAL RESTRICTIONS
The Fund has adopted the following additional
restrictions, which are not fundamental and which may
be changed without shareholder approval, to the extent
permitted by applicable law, regulation or regulatory
policy. Under these restrictions, the Fund may not:
(i) purchase or sell real estate limited
partnership interests;
(ii) purchase or sell interests in oil, gas
or mineral leases (other than securities
of companies that invest in or sponsor
such programs);
(iii) purchase securities of other investment
companies, except in connection with a
merger, consolidation or sale of assets,
and except that it may purchase shares
of other investment companies subject to
such restrictions as may be imposed by the
Investment Company Act of 1940 and rules
thereunder;
(iv) invest more than 10% of its net assets
taken at market value at the time of
investment in "illiquid securities."
Illiquid securities may include
securities subject to legal or contractual
restrictions on resale (including private
placements), repurchase agreements maturing in
more than seven days, certain options traded over
the counter that the Fund has purchased,
securities being used to cover certain
options that a fund has written,
securities for which market quotations
are not readily available, or other
securities which legally or in IMI's
opinion, subject to the Board's supervision, may
be deemed illiquid, but shall not include any
instrument that, due to the existence of a trading
market, to the Fund's compliance with certain
conditions intended to provide liquidity,
or to other factors, is liquid;
(v) sell securities short, except for short
sales "against the box;" or
(vi) participate on a joint or a joint and
several basis in any trading account in
securities. The "bunching" of orders of
the Fund and of other accounts under the
investment management of the Fund's
investment adviser, Mackenzie Financial
Corporation (the "Investment Adviser") for the
sale or purchase of portfolio securities shall not
be considered participation in a joint securities
trading account.
Whenever an investment objective, policy or
restriction set forth in the Prospectus or this SAI
states a maximum percentage of assets that may be
invested in any security or other asset or describes a
policy regarding quality standards, such percentage
limitation or standard shall, unless otherwise indicated, apply
to the Fund only at the time a transaction is entered
into. Accordingly, if a percentage limitation is
adhered to at the time of investment, a later increase
or decrease in the percentage which results from
circumstances not involving any affirmative action by
the Fund, such as a change in market conditions or a
change in the Fund's asset level or other circumstances beyond
the Fund's control, will not be considered a violation.
ADDITIONAL RIGHTS AND PRIVILEGES
The Trust offers and (except as noted below) bears
the cost of providing to investors the following rights
and privileges. The Trust 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.
Certain of the rights and privileges described
below refer to funds other than the Fund whose shares
are distributed by Ivy Mackenzie Distributors, Inc.
("IMDI") (formerly known as Mackenzie Ivy Funds
Distribution, Inc.). These funds are: Ivy Bond Fund,
Ivy Growth Fund, Ivy Growth with Income Fund, Ivy
Emerging Growth Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy
Global Fund, Ivy International Fund, Ivy Latin America
Strategy
Fund, Ivy New Century Fund, Ivy International Bond
Fund, Ivy Short-Term Bond Fund, Ivy Money Market Fund,
Ivy Global Science & Technology Fund, Ivy Global
Natural Resources Fund and Ivy Asia Pacific Fund (the
other sixteen series of the Trust); and Mackenzie
California Municipal Fund, Mackenzie Limited Term
Municipal Fund, Mackenzie National Municipal Fund and Mackenzie
New York Municipal Fund (the four series of Mackenzie
Series Trust)(collectively, with the Fund, the "Ivy
Mackenzie Funds"). Shareholders should obtain a
current prospectus for these funds before exercising
any right or privilege that may relate to them.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method is available for
Class A, Class B and Class C shares. The minimum
initial and subsequent investment pursuant to this plan
is $50 per month (except in the case of a tax qualified
retirement plan for which the minimum initial and
subsequent investment is $25 per month). A shareholder
may terminate the Automatic Investment Method at any
time upon delivery to Ivy Mackenzie Services Corp. ("IMSC")
(formerly known as Mackenzie Ivy Investor Services Corp.) of
telephone instructions or written notice from the
shareholder. See "Automatic Investment Method" in the
Account Application.
EXCHANGE OF SHARES
As described in the Prospectus, shareholders of
the Fund have an exchange privilege with certain other
Ivy Mackenzie Funds. Before effecting an exchange,
shareholders of the Fund should obtain and read the
currently effective prospectus for the Ivy or Mackenzie
Fund into which the exchange is to be made.
INITIAL SALES CHARGE SHARES. Class A shareholders
may exchange their Class A shares ("outstanding Class A
shares") for Class A shares of another Ivy or Mackenzie
Fund ("new Class A Shares") on the basis of the
relative net asset value per Class A share, plus (in
the case of funds other than Ivy Money Market Fund) 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 outstanding Class A shares that have
been invested for a period of 12 months or longer.)
Class A shareholders may also exchange their Class A
shares for Class A shares of Ivy Money Market Fund (no
initial sales charge will be assessed at the time of
such an exchange).
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 Ivy or Mackenzie 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 the Fund's CDSC period
following an exchange if such schedule is higher (or such
period is longer) than the CDSC period, if any, applicable 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 Ivy or Mackenzie 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 the Fund's CDSC schedule (or period)
following an exchange if such schedule is higher (or such
period is longer) than the CDSC schedule (or period)
applicable to the new Class B shares.
Class B shares of the Fund acquired through an
exchange of Class B shares of another Ivy or Mackenzie
Fund will be subject to the Fund's CDSC schedule (or
period) if such schedule is higher (or such period is
longer) than the CDSC schedule (or period) applicable
to the Ivy or Mackenzie Fund from which the exchange
was made.
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 CDSC table ("Table 1") applies to
Class B shares of the Fund, Ivy Global Fund, Ivy Growth
Fund, Ivy Growth with Income Fund, Ivy Emerging Growth
Fund, Ivy International Fund, Ivy China Region Fund,
Ivy Latin America Strategy Fund, Ivy New Century Fund,
Ivy International Bond Fund, Ivy Bond Fund, Ivy Canada
Fund, Ivy Global Science & Technology Fund, Ivy Global
Natural Resources Fund, Ivy Asia Pacific Fund, Mackenzie
California Municipal Fund, Mackenzie National Municipal Fund and
Mackenzie New York Municipal Fund ("Table 1 Funds"):
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF DOLLAR
AMOUNT SUBJECT TO YEAR SINCE PURCHASE
CHARGE
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and thereafter 0%
The following CDSC table ("Table 2") applies to
Class B shares of Ivy Short-Term Bond Fund and
Mackenzie Limited Term Municipal Fund ("Table 2
Funds"):
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF DOLLAR
AMOUNT SUBJECT TO YEAR SINCE PURCHASE
CHARGE
First 3%
Second 2.5%
Third 2%
Fourth 1.5%
Fifth 1%
Sixth and thereafter 0%
The CDSC schedule for Table 1 Funds is higher (and
the period is longer) than the CDSC schedule (and
period) for Table 2 Funds.
If a shareholder exchanges Class B shares of a
Table 1 Fund for Class B shares of a Table 2 Fund,
Table 1 will continue to apply to the Class B shares
following the exchange. For example, an investor may
decide to exchange Class B shares of a Table 1 Fund
("outstanding Class B shares") for Class B shares of a Table
2 Fund ("new Class B shares") after having held the
outstanding Class B shares for two years. The 4% CDSC
that generally would apply to a redemption of
outstanding Class B shares held for two years would not
be deducted at the time of the exchange. If, three
years later, the investor redeems the new Class B shares, a
2% CDSC will be assessed upon the redemption because by
"tacking" the two year holding period of the
outstanding Class B shares onto the three year holding
period of the new Class B shares, the investor will be
deemed to have held the new Class B shares for five
years.
If a shareholder exchanges Class B shares of a
Table 2 Fund for Class B shares of a Table 1 Fund,
Table 1 will apply to the Class B shares following the
exchange. For example, an investor may decide to
exchange Class B shares of a Table 2 Fund ("outstanding
Class B shares") for Class B shares of a Table 1
Fund ("new Class B shares") after having held the
outstanding Class B shares for two years. The 2.5%
CDSC that generally would apply to a redemption of
outstanding Class B shares held for two years would not
be deducted at the time of the exchange. If, three
years later, the investor redeems the new Class B shares, a
2% CDSC will be assessed upon the redemption because by
"tacking" the two year holding period of the
outstanding Class B shares onto the three year holding
period of the new Class B shares, the investor will be
deemed to have held the new Class B shares for five
years.
CLASS C. Class C shareholders may exchange their
Class C shares ("outstanding Class C shares") for Class
C shares of another Ivy or Mackenzie 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. Class I shareholders may exchange their
Class I shares for Class I shares of another Ivy or
Mackenzie Fund on the basis of the relative net asset
value per Class I share.
ALL CLASSES. The minimum amount which may be
exchanged into an Ivy Mackenzie Fund in which shares
are not already held is $1,000. No exchange out of the
Fund (other than by a complete exchange of all Fund
shares) may be made if it would reduce the
shareholder's interest in the Fund to less than $1,000.
Exchanges are available only in states where the exchange can
legally be made.
Each exchange will be made on the basis of the
relative net asset values per share of the Fund of the
Ivy Mackenzie Funds next computed following receipt by
IMSC of telephone instructions or a properly executed
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 Ivy
Mackenzie Funds will 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 Fund 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 the 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 back-dated. A shareholder may include,
as an accumulation credit, the value (at the applicable offering
price) of all Class A shares of the Fund, Ivy Bond Fund,
Ivy Emerging Growth Fund, Ivy Global Fund, Ivy Growth
Fund, Ivy Growth with Income Fund, Ivy International
Bond Fund, Ivy Short- Term Bond Fund, Ivy Global Science
& Technology Fund, Ivy Global Natural Resources Fund,
Ivy Asia Pacific Fund, Mackenzie California Municipal
Fund, Mackenzie Limited Term Municipal Fund, Mackenzie
National Municipal Fund, and Mackenzie New York
Municipal Fund (and shares that have been exchanged into Ivy
Money Market Fund from any of the other funds in the Ivy
Mackenzie 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, the Fund's transfer agent 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 thereof before signing.
RETIREMENT PLANS
Shares may be purchased in connection with several
types of tax-deferred retirement plans. Shares of more
than one fund
distributed by IMDI may be purchased in a single
application establishing a single plan account, and
shares held in such an account may be exchanged among
the funds in the Ivy Mackenzie 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
account
For shareholders whose retirement accounts are
diversified across several funds of the Ivy Mackenzie
Funds, the annual maintenance fee will be limited to
not more than $20.
The following discussion describes the tax
treatment of certain tax-deferred retirement plans
under current Federal income tax law. State income tax
consequences may vary. An individual considering the
establishment of a retirement plan should consult with
an attorney and/or an accountant with respect to the
terms and tax aspects of the plan.
INDIVIDUAL RETIREMENT ACCOUNTS: Shares of the
Trust 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, which may impose a charge for
establishing the account. Individuals should consult
their tax advisers before investing IRA assets in the Fund (which
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. However, if one spouse has (or elects to be treated
as having) no earned income for IRA purposes for a
year, the other spouse may contribute to an IRA on his
or her behalf. In such a
case, the working spouse may contribute up to the
lesser of $2,250 or 100% or his or her compensation or
earned income for the year to IRAs for both spouses,
provided that no more than $2,000 is contributed to the
IRA of one spouse. Rollover contributions are not
subject to these limits.
An individual may deduct his or her annual
contributions to an IRA in computing his or her Federal
income tax within the limits described above, provided
he or she (or his or her spouse, if they file a joint
Federal income tax return) is not an active participant
in a qualified retirement plan (such as a qualified
corporate, sole proprietorship, or partnership pension, profit
sharing, 401(k) or stock bonus plan), qualified annuity
plan, 403(b) plan, simplified employee pension, or
governmental plan. If he or she (or his or her spouse)
is an active participant, a full deduction is only
available if he or she has adjusted gross income that
is less than a specified level ($40,000 for married
couples filing a joint return, $25,000 for single individuals,
and $0 for a married individual filing a separate return).
The deduction is phased out ratably for active
participants with adjusted gross income between certain
levels ($40,000 and $50,000 for married individuals
filing a joint return, $25,000 and $35,000 for single
individuals, and $0 and $10,000 for married individuals
filing separate returns). Individuals who are active
participants with income above the specified phase-out level may
not deduct their IRA contributions. Rollover
contributions are not includable in income for Federal
income tax purposes and therefore are not deductible
from it.
Generally, earnings on an IRA are not subject to
current Federal income tax until distributed.
Distributions attributable to tax-deductible
contributions and to IRA earnings are taxed as ordinary
income. Distributions of non-deductible contributions
are not subject to Federal income tax. In general, distributions
from an IRA to an individual before he or she reaches
age 59-1/2 are subject to a nondeductible penalty tax
equal to 10% of the taxable amount of the distribution.
The 10% penalty tax does not apply to amounts withdrawn
from an IRA after the individual reaches age 59-1/2,
becomes disabled or dies, or if withdrawn in the form
of substantially equal payments over the life or life
expectancy of the individual and his or her designated benefi-
ciary, if any, or rolled over into another IRA.
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 distribu- tions
will result in the imposition of a 50% non-deductible
penalty tax. Extremely large distributions in any one year from
an IRA (or from an IRA and other retirement plans) may
also result in a penalty tax.
QUALIFIED PLANS: For those self-employed
individuals who wish to purchase shares of one or more
of the funds in the Ivy Mackenzie 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 Fund's transfer agent will furnish custodial
services to the employer and any participating
employees.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(b)(7) ACCOUNT"):
Section 403(b)(7) of the Internal Revenue Code of 1986,
as amended (the "Code"), permits
public school systems and certain charitable
organizations to use mutual fund shares held in a
custodial account to fund deferred compensation
arrangements with their employees. A custodial account
agreement is available for those employers whose
employees wish to purchase shares of the Trust in conjunction
with such an arrangement. The sales charge for purchases of
less than $10,000 of Class A shares is set forth under
"Retirement Plans" in the Prospectus. Sales charges
for purchases of $10,000 or more of Class A shares are
the same as those set forth under "Initial Sales Charge
Alternative -- Class A Shares" in the Prospectus. 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.
REINVESTMENT PRIVILEGE
Shareholders who have redeemed Class A shares of
the 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."
RIGHTS OF ACCUMULATION
A scale of reduced sales charges applies to any
investment of $50,000 or more in Class A shares of the
Fund. 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). It is also applicable to current purchases of
all of the funds in the Ivy Mackenzie Funds (except Ivy
Money Market Fund) by any of the persons enumerated
above, where the aggregate quantity of Class A shares
of the Fund, Ivy Global Fund, Ivy Growth Fund, Ivy Growth
with Income Fund, Ivy Emerging Growth Fund, Ivy China Region
Fund, Ivy Latin America Strategy Fund, Ivy New Century Fund,
Ivy International Bond Fund, Ivy International Fund,
Ivy Bond Fund, Ivy Short-Term Bond Fund, Ivy Canada
Fund, Ivy Global Science & Technology Fund, Ivy Global
Natural Resources Fund, Ivy Asia Pacific Fund,
Mackenzie National Municipal Fund, Mackenzie California
Municipal Fund, Mackenzie Limited Term Municipal Fund
and Mackenzie New York Municipal Fund (and shares that have been
exchanged into Ivy Money Market Fund from any of the
other funds in the Ivy Mackenzie 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 $50,000 or more for the Fund, Ivy Global
Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy
Emerging Growth Fund, Ivy International Fund, Ivy China
Region Fund, Ivy Latin America Strategy Fund, Ivy New
Century Fund, Ivy Canada Fund, Ivy Global Science &
Technology Fund, Ivy Global Natural Resources Fund and
Ivy Asia Pacific Fund; $100,000 or more for
International Bond Fund, Ivy Bond Fund, Mackenzie National
Municipal Fund, Mackenzie California Municipal Fund and
Mackenzie New York Municipal Fund; or $25,000 or more
for Mackenzie Limited Term Municipal Fund; or
$1,000,000 or more for Ivy Short-Term Bond Fund.
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 Fund's records.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may establish a Systematic
Withdrawal Plan (a "Withdrawal Plan"), by telephone
instructions or by delivery to IMSC of a written
election to have his or her shares withdrawn
periodically, accompanied by a surrender to IMSC of all share
certificates then outstanding in the shareholder's name,
properly endorsed by the shareholder. To be eligible
to elect a
Withdrawal Plan, a shareholder must have at least
$5,000 in his or her account. A Withdrawal Plan may not
be established if the investor is utilizing 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 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
Trust or IMSC may terminate the Withdrawal Plan option
at any time after reasonable notice to shareholders.
GROUP SYSTEMATIC INVESTMENT PROGRAM
Shares of the Fund may be purchased in connection
with investment programs established by employee or
other groups using systematic payroll deductions or
other systematic payment arrangements. The Trust does
not itself organize, offer or administer any such
programs. However, it 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 Fund 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 Trust
reserves the right to refuse a purchase 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, as
described in the Prospectus, 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 Trust and IMI
each currently charge a maintenance fee of $3.00 (or
portion thereof) for each twelve-month period (or
portion thereof) that the account is maintained. The Trust
may collect this 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 the
fee. The Trust reserves the right to change such fees
from time to time without
advance notice.
BROKERAGE ALLOCATION
Subject to the overall supervision of the
President and the Board, IMI places orders for the
purchase and sale of the Fund's portfolio securities.
All portfolio transactions are effected at the best
price and execution obtainable. Purchases and sales of
debt securities are usually principal transactions, and therefore
brokerage commissions are usually not required to be
paid by the Fund for such purchases and sales (although
the price paid generally includes undisclosed
compensation to the dealer). The prices paid to
underwriters of newly-issued securities usually include
a concession paid by the issuer to the underwriter, and
purchases of after-market securities from dealers normally
reflect the spread between the bid and asked prices. In
connection with OTC transactions, IMI attempts to deal directly
with the principal market makers, except in those
circumstances where believes that a better price and
execution are available elsewhere.
IMI selects broker-dealers to execute transactions
and evaluates the reasonableness of commissions on the
basis of quality, quantity, and the nature of the
firms' professional services. Commissions to be
charged and the rendering of investment services,
including statistical, research, and counseling
services by brokerage firms, are factors to be
considered in the placing of brokerage business. The types of
research services provided by brokers may include general
economic and industry data, and information on securities
of specific companies. Research services furnished by
brokers through whom the Trust effects securities
transactions may be used by in servicing all of its
accounts. In addition, not all of these services may
be used by in connection with the services it provides
the Fund or the Trust. IMI may consider sales of
shares of the Fund as a factor in the selection of broker-dealers
and may select broker-dealers who provide it with
research services. IMI will not, however, execute
brokerage transactions other than at the best price and
execution.
The Fund may, under some circumstances, accept
securities in lieu of cash as payment for Fund shares.
The Fund will accept securities only to increase its
holdings in a portfolio security or to take a new
portfolio position in a security that IMI deems to be a
desirable investment for the Fund. While no minimum has
been established, it is expected that the Fund will not accept
securities having an aggregate value of less than $1
million. The Trust may reject in whole or in part any
or all offers to pay for Fund shares with securities
and may discontinue accepting securities as payment for
Fund shares at any time without notice. The Trust will
value accepted securities in the manner and at the same
time provided for valuing portfolio securities of the Fund,
and Fund shares will be sold for net asset value determined at
the same time the accepted securities are valued. The
Trust will
only accept securities delivered in proper form and
will not accept securities subject to legal
restrictions on transfer. The acceptance of securities
by the Trust must comply with the applicable laws of
certain states.
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of the Trust,
their business addresses and principal occupations
during the past five years are:
POSITION
WITH THE BUSINESS
AFFILIATIONS NAME, ADDRESS, AGE TRUST AND
PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman,
Dynamics 60 Concord Street Research
Corp. instruments Wilmington, MA 01887
and controls); Director, Age: 72
Burr-Brown Corp.
(operational amplifiers);
Director, Metritage
Incorporated (level
measuring instruments);
Trustee of Mackenzie Series
Trust (1992-present).
James W. Broadfoot Vice Vice President, T. Rowe
President Price Associates
Inc. (1972-1982);
Partner, Johnson,
Valliant &
Broadfoot, Inc. (1982-
1987); Director and Senior
Vice President of Mackenzie
Investment Mangement Inc.
(1995-present); Senior Vice
President of Mackenzie
Investment Management
Inc. (1994-1995);
Executive Vice
President of Ivy
Management, Inc. (1996-
present); Senior Vice
President of Ivy
Management, Inc. (1992-
1996).
Paul H. Broyhill Trustee Chairman, BMC
Fund, Inc. 800 Hickory Blvd. (1983-
present); Chairman, Golfview Park
Broyhill Family Foundation, Lenoir, NC 28645
Inc. (1983-Present); Age: 72
Chairman and President,
Broyhill Investments, Inc.
(1983-present); Chairman,
Broyhill Timber Resources
(1983-present); Management
of a personal
portfolio of
fixed-income and equity
investments (1983-present);
Trustee of Mackenzie Series
Trust (1988-present);
Director of The
Mackenzie Funds
Inc. (1988-1995).
Stanley Channick Trustee President, The Whitestone
11 Bala Avenue Corporation
(insurance Bala Cynwyd, PA 19004
agency); President, Scott Age: 71
Management Company
(administrative services
for insurance companies);
President, The Channick
Group (consultants to
insurance companies and
national trade
associations); Director of
The Mackenzie Funds Inc.
(1994-1995).
Frank W. DeFriece, Jr. Trustee Director, Manager
and Vice The Landmark Centre
President, Massengill- 113 Landmark Lane,
DeFriece Foundation Suite B
(charitable organization) Bristol, TN 37625
(1950-present); Trustee and Age: 75
Second Vice Chairman, East
Tennessee Public
Communications Corp. (WSJK-
TV) (1984-present); Trustee
of Mackenzie Series
Trust (1985-
present); Director of
The Mackenzie Funds Inc.
(1987-1995).
Roy J. Glauber Trustee Mallinckrodt Professor of
Lyman Laboratory Physics, Harvard
of Physics University (1974-
present); Harvard University Trustee
of Mackenzie Series Cambridge, MA 02138
Trust (1994-present). Age: 70
Michael G. Landry Trustee President,
Chairman and 700 South Federal Hwy. and
Director of Mackenzie Suite 300
President Investment Management Boca Raton, FL
33432 Inc. (1987-present); Age: 49
President and Director [*Deemed
to be an of Ivy Management, Inc.
"interested person" (1992-present); Chairman
of the Trust, as and Director of
defined under the Mackenzie Ivy Investor
1940 Act.] Services Corp. (1993-
present);
Director and
President of Mackenzie Ivy
Funds Distribution, Inc.
(1993-1994); Chairman and
Director of Mackenzie Ivy
Funds
Distribution, Inc.
(1994-present); Director
and President of The
Mackenzie Funds Inc. (1987-
1995); Trustee and
President of Mackenzie
Series Trust (1987-
present).
Michael R. Peers Trustee Chairman of the
Board, 737 Periwinkle Way and Ivy
Management, Inc. Sanibel, FL 33957 Chairman
(1984-1991); Chairman Age: 66 of the
of the Board, Ivy Fund [*Deemed to be an
Board (1974-present); Private "interested
person" Investor.
of the Trust, as
defined under the
1940 Act.]
Joseph G. Rosenthal Trustee Chartered
Accountant 110 Jardin Drive (1958-
present); Trustee Unit #12
of Mackenzie Series Concord, Ontario Canada
Trust (1985-present); L4K 2T7
Director of The Mackenzie Age: 61
Funds Inc. (1987-1995).
Richard N. Silverman Trustee Formerly
President, 18 Bonnybrook Road Hy-Sil
Manufacturing Waban, MA 02168
Company, a division of Age: 71
Van Leer, U.S.A., Inc.
(gift packaging materials
and metalized film
products); Formerly
Director, Waters
Manufacturing Co.
(manufacturer of electronic
parts); Director, Panorama
Television Network.
J. Brendan Swan Trustee President,
Airspray 4701 North Federal Hwy.
International, Inc.; Suite 465
Joint Managing Director, Pompano Beach, FL 33064
Airspray International Age: 65
B.V. (an environmentally
sensitive packaging
company); Director, The
Mackenzie Funds Inc. (1992-
1995); Trustee of Mackenzie
Series Trust (1992-
present).
Keith J. Carlson Vice Senior Vice
President 700 South Federal Hwy. President and
Director of Mackenzie Suite 300
Investment Management,
Boca Raton, FL 33432 Inc. (1994-
present); Age: 39 Senior
Vice President,
Secretary and Treasurer of
Mackenzie Investment
Management Inc. (1985-
1994); Senior Vice
President and Director of
Ivy Management, Inc. (1994-
present); Senior Vice
President, Treasurer and
Director of Ivy Management,
Inc. (1992-1994);
Vice President of
The Mackenzie
Funds Inc. (1987-1995);
President and Director of
Mackenzie Ivy Investor
Services Corp. (1993-1996);
Vice President of Mackenzie
Series Trust (1994-
present); Treasurer of
Mackenzie Series Trust
(1985-1994); President
and Director of
Ivy Mackenzie
Distributors, Inc. (1994-
present); Executive Vice
President and Director of
Mackenzie Ivy Funds
Distribution, Inc. (1993-
1994).
C. William Ferris Secretary/ Senior Vice
President, 700 South Federal Hwy. Treasurer
Secretary/Treasurer Suite 300
and Director of Boca Raton, FL 33432
Mackenzie Investment Age: 51
Management Inc. (1994-
present); Senior Vice
President, Finance and
Administration/Compliance
Officer of Mackenzie
Investment Management Inc.
(1989-1994); Senior Vice
President, Secretary/
Treasurer and Clerk of Ivy
Management, Inc. (1994-
present); Senior
Vice President,
Finance and
Administration/Compliance
Officer of Ivy Management,
Inc. (1992-1994); Senior
Vice President, Secretary/
Treasurer and Clerk of Ivy
Management, Inc. (1989-
1994); Senior Vice
President, Secretary/
Treasurer of
Mackenzie Ivy
Funds Distribution, Inc.
(1994-present); Secretary/
Treasurer and Director of
Mackenzie Ivy Funds
Distribution, Inc. (1993-
1994); Secretary/Treasurer
and Director of Mackenzie
Ivy Investor Services
Corp.
(1993-1996); President and
Director of Ivy Mackenzie
Services Corp. (1996-
present); Secretary/
Treasurer of The Mackenzie
Funds Inc. (1993-1995);
Secretary/Treasurer of
Mackenzie Series Trust
(1994-present).
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI
Employees of IMI are permitted to make personal
securities transactions, subject to the requirements
and restrictions set forth in IMI's Code of Ethics.
The Code of Ethics is designed to identify and address
certain conflicts of interest between personal
investment activities and the interests of investment
advisory clients such as the Fund. Among other things, the Code
of Ethics, which generally complies with standards
recommended by the Investment Company Institute's
Advisory Group on Personal Investing, prohibits certain
types of transactions absent prior approval, imposes
time periods during which personal transactions may not
be made in certain securities, and requires the
submission of duplicate broker confirmations and monthly
reporting of securities transactions. Additional restrictions
apply to portfolio managers, traders, research analysts and
others involved in the investment advisory process.
Exceptions to these and other provisions of the Code of
Ethics may be granted in particular circumstances after
review by appropriate personnel.
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1995)
TOTAL PENSION OR
COMPENSA- RETIREMENT
TION FROM
BENEFITS ESTIMATED TRUST AND
AGGREGATE ACCRUED AS ANNUAL FUND COM-
COMPENSA- PART OF BENEFITS PLEX PAID
NAME, TION FUND UPON TO
POSITION FROM TRUST EXPENSES RETIREMENT
TRUSTEES
John S. 7,112 N/A N/A
8,000 Anderegg, Jr.
(Trustee)
Paul H. 7,112 N/A N/A
8,000 Broyhill
(Trustee)
Stanley -0- N/A N/A
8,000 Channick[*]
(Trustee)
Frank W. 7,112 N/A N/A
8,000 DeFriece, Jr.
(Trustee)
Roy J. -0- N/A N/A
8,000 Glauber[*]
(Trustee)
Michael G. -0- N/A N/A
- -0- Landry
(Trustee and
President)
Michael R. -0- N/A N/A
- -0- Peers
(Trustee and
Chairman of
the Board)
Joseph G. 7,112 N/A N/A
8,000 Rosenthal
(Trustee)
Richard N. 8,000 N/A N/A
8,000 Silverman
(Trustee)
J. Brendan 7,112 N/A N/A
8,000 Swan
(Trustee)
Keith J. -0- N/A N/A
- -0- Carlson
(Vice President)
C. William -0- N/A N/A
- -0- Ferris
(Secretary/Treasurer)
[*] Appointed as a Trustee of the Trust at a meeting
of the Board of Trustees held on February 10,
1996.
As of November 30, 1996, the Officers and Trustees
of the Trust as a group owned beneficially or of record
none of the outstanding Class A, Class B, Class C or
Class I shares of the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES
IMI provides business management and investment
advisory services to the Fund pursuant to a Business
Management and Investment Advisory Agreement with the
Trust (the "Agreement"). The Agreement was approved by
the sole shareholder of the Fund on _____, 1996. On
_____, 1996, the Agreement was approved on behalf of
the Fund by the Trustees, including a majority of the
Trustees who are neither "interested persons" (as defined in the
1940 Act) of the Trust nor have any direct or indirect
financial interest in the operation of the distribution
plan (see "Distribution Services") or in any related
agreement (the "Independent Trustees"). IMI is a
wholly owned subsidiary of MIMI, which currently acts
as manager and investment adviser to the following
registered investment companies: Mackenzie National
Municipal Fund, Mackenzie New York Municipal Fund,
Mackenzie California Municipal Fund and Mackenzie Limited Term
Municipal Fund. 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 Toronto Stock Exchange. MFC
is registered in Ontario as a mutual fund dealer and
advises Ivy Canada Fund.
The Agreement obligates IMI to make investments
for the accounts of the Fund in accordance with its
best judgment, consistent with the Fund's investment
objective and restrictions set forth in the Prospectus,
the 1940 Act and the provisions of the Code relating to
regulated investment companies, and any policy
decisions adopted by the Board. IMI also determines the
securities to be purchased or sold by the Fund and places orders
with brokers or dealers who deal in such securities.
Under the Agreement, IMI also provides certain
business management services. IMI is obligated to (1)
coordinate with the 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 Fund; (3) provide the Fund with necessary office
space, telephones and other communications facilities
as are adequate for the Fund's needs; (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 Fund or by IMI acting in
some other capacity pursuant to a separate agreement or
arrangements with the Fund; (5) maintain or supervise
the maintenance by third parties of such books and
records of the Trust 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 Trust to serve in such
capacities; and (7) take such other action with respect to
the Trust, after approval by the Trust as may be
required by applicable law, including without
limitation the rules and regulations of the SEC and of
state securities commissions and other regulatory
agencies.
For providing business management and investment
advisory services, the Fund pays IMI a monthly fee at
an annual rate of 1.00% of the Fund's average daily net
assets.
Under the Agreement, the Trust pays the following
expenses: (1) the fees and expenses of the Trust's
Independent Trustees; (2) the salaries and expenses of
any of the Trust's 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 Trust's 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 Trust's legal
existence and of shareholders' meetings; (12) expenses
of preparation and distribution to existing
shareholders of periodic reports, proxy materials and
prospectuses; and (13) fees and expenses of membership
in industry organizations.
The Agreement provides that if the Fund's total
expenses in any fiscal year (other than interest,
taxes, distribution expenses, brokerage commissions and
other portfolio transaction expenses, other
expenditures which are capitalized in accordance with
generally accepted accounting principles and any extraor-
dinary expenses including, without limitation, litigation and
indemnification expenses) exceed the permissible limits
appli
cable to the Fund in any state in which its shares are
then qualified for sale, IMI will bear the excess
expenses. At the present time, the most restrictive
state expense limitation provision limits the Fund's
annual expenses to 2.5% of the first $30 million of its
average daily net assets, 2.0% of the next $70 million
and 1.5% of its average daily net assets over $100
million.
IMI currently limits the Fund's total operating
expenses (excluding Rule 12b-1 fees, interest, taxes,
brokerage commissions, litigation and indemnification
expenses, and other extraordinary expenses) to an
annual rate of 1.95% of the Fund's average daily net
assets. As long as the Fund's expense limitation
continues, it may lower the Fund's expenses and
increase its yield. The Fund's expense limitation may be
terminated or revised at any time, which could cause the Fund's
expenses to increase and its yield to be reduced,
depending on the total assets of the Fund when the
termination occurs.
The initial term of the Agreement between IMI and
the Fund, which is scheduled to commence operations on
January 1, 1997, will run for a period of two years
from the date of commencement. The Agreement will
continue in effect with respect to the Fund from year
to year 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 the Fund or
(b) by the vote of a majority of the entire Board of
Trustees. If the question of continuance of the
Agreement (or adoption of any new agreement) is
presented to shareholders, continuance (or adoption) shall be
effected only if approved by the affirmative vote of a
majority of the outstanding voting securities of the
Fund. See "Capitalization and Voting Rights."
The Agreement may be terminated with respect to
the Fund at any time, without payment of any penalty,
by the vote of a majority of the Trustees, or by a vote
of a majority of the outstanding voting securities of
the Fund, on 60 days' written notice to IMI, or by IMI
on 60 days' written notice to the Trust. The Agreement
shall terminate automatically in the event of its
assignment.
DISTRIBUTION SERVICES
IMDI, a wholly owned subsidiary of MIMI, serves as
the exclusive distributor of the Fund's shares pursuant
to an Amended and Restated Distribution Agreement with
the Trust dated October 23, 1991, as amended from time
to time (the "Distribution Agreement"). The
Distribution Agreement was last approved by the Board
of Trustees on August 24, 1996. IMDI distributes shares of
the Fund 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 Fund
on a continuous basis, but reserves the right to
suspend or discontinue distribution on that basis.
IMDI is not obligated to sell any specific amount of
Fund shares.
Pursuant to the Distribution Agreement, IMDI is
entitled to deduct a commission on all classes of 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, the 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. Since the Fund will not have
commenced operations until January 1, 1997, no payments
had been made in connection with the sale of Fund shares as of
the date of this SAI.
The Distribution Agreement will continue in effect
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 the Fund at any time, without payment of any
penalty, by IMDI on 60 days' written notice to the Fund
or by the Fund by vote of either a majority of the
outstanding voting securities of the 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/trustees and filed with the SEC. At a
meeting held on December 1-2, 1995, the Board adopted a multi-
class plan (the "Rule 18f-3 plan") on behalf of thirteen of
the series of the Trust, and at a meeting held on June
7-8, 1996, the Board adopted the Rule 18f-3 plan on
behalf of the Ivy Global Science & Technology Fund. At
a meeting held on __________, the Board adopted the
Rule 18f-3 plan on behalf of the Fund, Ivy Global
Natural Resources and Ivy Asia Pacific Fund. The key
features of the Rule 18f-3 plan are as follows: (i) shares of
each class of the Fund represent an equal pro rata interest
in the 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 the Fund may be exchanged for
shares of the same class of another Ivy or Mackenzie
fund; and (iii) the Fund's Class B shares will convert
automatically into Class A shares of the 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. At a meeting held
on ______, 1996, the Trustees adopted on behalf of the
Fund, in accordance with Rule 12b-1 under the 1940 Act
("Rule 12b-1"), separate distribution plans pertaining
to the Fund's Class A, Class B and Class C shares
(each, a "Plan"). In adopting each Plan, a majority of
the Independent Trustees 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 each Plan
should result in greater sales and/or fewer redemptions
of the Fund's shares, although it is impossible to know
for certain the level of sales and redemptions of the
Fund's shares in the absence of a Plan or under an
alternative distribution arrangement.
Under each Plan, the Fund pays 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 shares, Class B shares or
Class C shares, as the case may be. 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 Fund 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 the 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 given 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 Fund's Class B and Class C Plans, the
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 fee
compensates IMDI for expenses incurred in connection with
activities primarily intended to result in the sale of the
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 the
Fund's Class B and Class C Plans, 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) it will continue
in effect only so long as such continuance is approved
at least annually, and any material amendment thereto
is approved, by the vote of a majority of the Board, including
the Independent Trustees, cast in person at a meeting
called for that purpose; (3) payments by the 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 affected 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 Trust shall be committed to the
discretion of the Trustees who are not "interested persons" of
the Trust.
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 Fund's shares. To qualify for such payments,
shares may be subject to a minimum holding period.
However, no such payments will be made to any dealer or
broker if at the end of each year the amount of shares
held does not exceed a minimum amount. The minimum
holding period and minimum level of holdings will be
determined from time to time by IMDI.
A report of the amount expended pursuant to each
Plan, and the purposes for which such expenditures were
incurred, must be made to the Board for its review at
least quarterly. Since the Fund will not have
commenced operations until January 1, 1997, no payments
had been made in marketing Fund shares as of the date of
this SAI.
Each Plan may be amended at any time with respect
to the class of shares of the 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 the
amendment. Each Plan may be terminated at any time with
respect to the class of shares 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 the affected class.
If the Distribution Agreement or the Distribution
Plans are
terminated (or not renewed) with respect any of the Ivy
Mackenzie 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).
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, maintains custody of the assets of
the Fund held in the United States. Rules adopted
under the 1940 Act permit the Trust to maintain its foreign
securities and cash in the custody of certain eligible foreign
banks and securities depositories. In accordance with
these rules, the Custodian has entered into
subcustodial agreements for the holding of the Fund's
foreign securities. In connection with the services it
provides on behalf of the Fund, the Custodian may
receive, as partial payment for its services, a portion of the
Trust's brokerage business, subject to its ability to
provide best price and execution.
FUND ACCOUNTING SERVICES
Pursuant to the Fund Accounting Services Agreement
with the Trust, MIMI provides certain accounting and
pricing services for the Fund. As compensation for
these services, the Fund pays MIMI a monthly fee plus
out-of-pocket expenses as incurred. The monthly fee is
based upon the net assets of the 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.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Pursuant to a Transfer Agency and Shareholder
Service Agreement with the Trust, IMSC, a wholly owned
subsidiary of MIMI, is the transfer agent for the Fund.
For these services, the Fund pays a monthly fee at an
annual rate of $20.00 for each open Class A, Class B
and Class C account, and $10.25 for each open Class I
account. In addition, the Fund pays a monthly fee at
an annual rate of $4.48 per account that is closed plus
certain out-of-pocket expenses. Certain broker-dealers that
maintain shareholder accounts with the Fund 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 fee (e.g., .10%), based on the
average daily net asset value of the omnibus account (or
a combination thereof).
ADMINISTRATOR
Pursuant to an Administrative Services Agreement
with the Trust, MIMI provides certain administrative
services to the Fund. As compensation for these
services, the Fund pays MIMI a monthly fee at the
annual rate of .10% of the Fund's average daily net
assets.
Outside of providing administrative services to
the Trust, as described above, MIMI may also act on
behalf of IMDI in paying commissions to broker-dealers
with respect to sales of the Fund's Class B and Class C
shares.
AUDITORS
_________________, independent certified public
accountants, _________________________, has been
selected as auditors for the Trust. The audit services
performed by Coopers & Lybrand L.L.P. include audits of
the annual financial statements of each of the funds of
the Trust. Other services provided principally relate
to filings with the SEC and the preparation of the funds' tax
returns.
CAPITALIZATION AND VOTING RIGHTS
The capitalization of the Trust consists of an
unlimited number of shares of beneficial interest (no
par value per share). When issued, shares of each
class of the Fund are fully paid, non-assessable,
redeemable and fully transferable. No class of shares
of the Fund has preemptive rights or subscription rights.
The Amended and Restated Declaration of Trust
permits the Trustees to create separate series of
shares and to divide any series into one or more
classes. The Trustees have authorized seventeen
series, each of which represents a "fund." The
Trustees have further authorized the issuance of Classes A, B and
C for the Fund, Ivy Bond Fund, Ivy Canada Fund, Ivy
China Region Fund, Ivy Emerging Growth Fund, Ivy Global
Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy
International Fund, Ivy International Bond Fund, Ivy
Latin America Strategy Fund, Ivy Money Market Fund, Ivy
New Century Fund, Ivy Global Science & Technology Fund,
Ivy Global Natural Resources Fund and Ivy Asia Pacific
Fund, as well as Classes A, B and I for Ivy Short-Term
Bond Fund; Class I for the Fund, Ivy Bond Fund, Ivy International
Fund and Ivy Global Science & Technology Fund; and Class
D for Ivy Growth with Income Fund. [FN][The Class D
shares of Ivy Growth with Income Fund were initially
issued as "Ivy Growth with Income Fund -- Class C" to
shareholders of Mackenzie Growth & Income Fund, a
former series of the Company, in connection with the
reorganization between the Fund and Ivy Growth with Income
Fund and not offered for sale to the public. On February 29,
1996, the Trustees of the Trust resolved by written
consent to establish a new class of shares designated
as "Class C" for all Ivy Fund portfolios (other than
Ivy Short-Term Bond Fund) and to
redesignate the shares of beneficial interest of "Ivy
Growth with Income Fund--Class C" as shares of
beneficial interest of "Ivy Growth with Income Fund--
Class D," which establishment and redesignation,
respectively, are to become effective on April 30,
1996. The voting, dividend, liquidation and other rights,
preferences, powers, restrictions, limitations, qualifications,
terms and conditions of the Class D shares of Ivy Growth
with Income Fund, as set forth in Ivy Fund's
Declaration of Trust, as amended from time to time,
will not be changed by this redesignation.]
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 the Fund entitle their holders to one
vote per share (with proportionate voting for fractional shares).
Shareholders of the Fund are entitled to vote alone on
matters that only affect the Fund. All classes of
shares of the Fund will vote together, except with
respect to the separate distribution plans for the
Fund's Class A, Class B and Class C shares, or when a
class vote is required by the 1940 Act. On matters
relating to all funds of the Trust, but affecting the
funds 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 the funds. If the Trustees determine
that a matter does not affect the interests of a Fund,
then the shareholders of that fund will not be entitled
to vote on that matter. Matters that affect the Trust
in general, such as ratification of the selection of
independent public accountants, 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 the funds, the
matter shall have been effectively acted upon with
respect to each fund if a majority of the outstanding
voting securities of each 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 of the Trust; or (2) the
matter has not been approved by a majority of the outstanding
voting securities of the Trust.
The Amended and Restated 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 as if Section 26(c) of the
Act were applicable.
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
Amended and Restated 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 Amended and Restated
Declaration of Trust 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 series of the
Trust is liable for the obligations of any other series
of the Trust.
NET ASSET VALUE
The share price, or value, for the separate
classes of shares of the Fund is called the net asset
value per share. The net asset value per share of the
Fund is computed by dividing the value of the assets of
the Fund, less its liabilities, by the number of shares
of the Fund outstanding. For purposes of determining
the aggregate net assets of the Fund, cash and
receivables will be valued at their realizable amounts. A
security listed or traded on a recognized stock exchange or
NASDAQ is valued at its last sale price on the principal
exchange on which the security is traded. The value of
a foreign security is determined in its national
currency as of the normal close of trading on the
foreign exchange on which it is traded or as of the
close of regular trading on the Exchange, if that is earlier,
and that value is then converted into its U.S. dollar
equivalent at the foreign exchange rate in effect at
noon, Eastern time, on the day the value of the foreign
security is determined. If no sale is reported at that
time, the average between the current bid and asked
price is used. All other securities for which OTC
market quotations are readily available are valued at the average
between the current bid and asked price. Interest will
be recorded as accrued. Securities and other assets
for which market prices are not readily available are
valued at fair value as determined by IMI and approved
in good faith by the Board. Money market instruments
of the Fund are valued at amortized cost, which
approximates money market value.
The Fund's liabilities are allocated between its
classes. The total of such liabilities allocated to a
class plus that class's distribution fee and any other
expenses specially allocated to that class are then
deducted from the class's proportionate interest in the
Fund's assets, and the resulting amount for each class
is divided by the number of shares of that class
outstanding to produce the net asset value per share.
Portfolio securities are valued and the net asset
value per share is determined as of the close of
regular trading on the Exchange (normally 4:00 p.m.,
Eastern Time), every Monday through Friday (exclusive
of national business holidays). The Trust's offices
will be closed, and net asset value will not be
calculated, on the following national business holidays: New
Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. On any day when either or both of the Fund's
Custodian or the Exchange close early as a result of
that day being a partial holiday or otherwise, the
Trust reserves the right to advance the time on that
day by which purchase and redemption requests must be
received.
When the Fund writes an option, an amount equal to
the premium received by the Fund is included in the
Fund's Statement of Assets and Liabilities as an asset
and as an equivalent liability. The amount of the
liability will be subsequently marked-to-market daily
to reflect the current market value of the option
written. The current market value of a written option is
the last sale on the principal exchange on which the option is
traded or, in the absence of a sale, the last offering
price.
The premium paid by the Fund for the purchase of a
call or a put option will be deducted from its assets
and an equal amount will be included in the asset
section of the Fund's Statement of Assets and
Liabilities as an investment and subsequently adjusted
to the current market value of the option. For example, if the
current market value of the option exceeds the premium
paid, the excess would be unrealized appreciation and,
conversely, if the premium exceeds the current market
value, such excess would be unrealized depreciation.
The current market value of a purchased option will be
the last sale price on the principal exchange on which
the option is traded or, in the absence of a sale, the last
bid price. If the Fund exercises a call option that it has
purchased, the cost of the security that the Fund purchased
upon exercise will be increased by the premium
originally paid.
The sale of Fund shares will be suspended during
any period
when the determination of its 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 best interest of the Fund to do so.
PORTFOLIO TURNOVER
The Fund purchases securities that are believed by
IMI to have above average potential for capital
appreciation. Common stocks are disposed of in
situations where it is believed that potential for such
appreciation has lessened or that other common stocks
have a greater potential. Therefore, the Fund may
purchase and sell securities without regard to the length of time
the security is to be, or has been, held. A change in
securities held by the Fund is known as "portfolio
turnover" and may involve the payment by the Fund of
dealer markup or underwriting commission and other
transaction costs on the sale of securities, as well as
on the reinvestment of the proceeds in other
securities. The Fund's portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio
securities for the most recently completed fiscal year
by the monthly average of the value of the portfolio
securities owned by the Fund during that year. For
purposes of determining the Fund's portfolio turnover
rate, all securities whose maturities at the time of
acquisition were one year or less are excluded.
REDEMPTIONS
Shares of the Fund 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 Trust reserves 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
Fund is not reasonably practicable or it is not
reasonably practicable for the 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 Fund.
Under unusual circumstances, when the Board deems
it in the best interest of the Fund's shareholders, the
Fund may make payment for shares repurchased or
redeemed in whole or in part in securities of the Fund
taken at current values. If any such redemption in
kind is to be made, the Fund intends to make an
election pursuant to Rule 18f-1 under the 1940 Act. This will
require the Fund to redeem with cash at a shareholder's
election in any case where the redemption involves less
than $250,000 (or 1% of the Fund's net asset value at
the beginning of each 90-day period during which such
redemptions are in effect, if that amount is less than
$250,000). Should payment be made in securities, the
redeeming shareholder may incur brokerage costs in
converting such securities to cash.
Subject to state law restrictions, the Trust may
redeem those accounts of shareholders who have
maintained an investment, including sales charges paid,
of less than $1,000 in the Fund for a period of more
than 12 months. All accounts below that minimum will
be redeemed simultaneously when MIMI deems it advisable.
The $1,000 balance will be determined by actual dollar amounts
invested by the shareholder, unaffected by market
fluctuations. The Trust will notify any such
shareholder by certified mail of its intention to
redeem such account, and the shareholder shall have 60
days from the date of such letter to invest such
additional sums as shall raise the value of such account above
that minimum. Should the shareholder fail to forward such
sum within 60 days of the date of the Trust's letter of
notification, the Trust will redeem the shares held in
such account and transmit the redemption in value
thereof to the shareholder. However, those
shareholders who are investing pursuant to the
Automatic Investment Method will not be redeemed automatically
unless they have ceased making payments pursuant to the
plan for a period of at least six consecutive months,
and these shareholders will be given six-months' notice
by the Trust before such redemption. Shareholders in a
qualified retirement, pension or profit sharing plan
who wish to avoid tax consequences must "rollover" any
sum so redeemed into another qualified plan within 60
days. The Trustees of the Trust may change the minimum
account size.
If a shareholder has given authorization for
telephonic redemption privilege, shares can be redeemed
and proceeds sent by Federal wire to a single
previously designated bank account. Delivery of the
proceeds of a wire redemption request of $250,000 or
more may be delayed by the Fund for up to seven days if deemed
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 Fund employs 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, the 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
the Fund will automatically convert to Class A shares
of the respective 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 the 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.
TAXATION
The following is a general discussion of certain
tax rules thought to be applicable with respect to the
Fund. 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 advisor about the tax consequences to them of
investing in the Fund.
The Fund intends to be taxed as a regulated
investment company under Subchapter M of the Code.
Accordingly, the 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; (b)
derive in each taxable year less than 30% of its gross
income from the sale or other disposition of certain
assets held less than three months, namely: (i) stock
or securities; (ii) options, futures, or forward
contracts (other than those on foreign currencies); or
(iii) foreign currencies (or options, futures, or forward
contracts on foreign currencies) that are not directly related
to the Fund's principal business of investing in stock
or securities (or options and futures with respect to
stock or securities) (the "30% Limitation"); and (c)
diversify its holdings so that, at the end of each
fiscal quarter, (i) at least 50% of the market value
of the 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 the 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, the 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. The 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, the 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, the
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 the 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.
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS
The taxation of equity options and OTC options on
debt securities is governed by Code section 1234.
Pursuant to Code section 1234, the premium received by
the Fund for selling a put or call option is not
included in income at the time of receipt. If the
option expires, the premium is short-term capital gain to
the Fund. If the Fund enters into a closing transaction, the
difference between the amount paid to close out its
position and the premium received is short-term capital
gain or loss. If a call option written by the Fund is
exercised, thereby requiring the Fund to sell the
underlying security, the premium will increase the
amount realized upon the sale of such security and any
resulting gain or loss will be a capital gain or loss, and
will be long-term or short-term depending upon the
holding period of the security. With respect to a put
or call option that is purchased by the Fund, if the
option is sold, any resulting gain or loss will be a
capital gain or loss, and will be long-term or short-
term, depending upon the holding period of the option. If
the option expires, the resulting loss is a capital loss and is
long-term or short-term, depending upon the holding
period of the option. If the option is exercised, the
cost of the option, in the case of a call option, is
added to the basis of the purchased security and, in
the case of a put option, reduces the amount realized
on the underlying security in determining gain or loss.
Some of the options, futures and foreign currency
forward contracts in which the Fund may invest may be
"section 1256 contracts." Gains (or losses) on these
contracts generally are considered to be 60% long-term
and 40% short-term capital gains or losses; however
foreign currency gains or losses arising from certain
section 1256 contracts are ordinary in character. Also,
section 1256 contracts held by the Fund at the end of each
taxable year (and on certain other dates prescribed in the
Code) are "marked-to-market" with the result that
unrealized gains or losses are treated as though they
were realized.
The transactions in options, futures and forward
contracts undertaken by the Fund may result in
"straddles" for Federal income tax purposes. The
straddle rules may affect the character of gains or
losses realized by the Fund. In addition, losses
realized by the Fund on positions that are part of a straddle may
be deferred under the straddle rules, rather than being
taken into account in calculating the taxable income
for the taxable year in which such losses are realized.
Because only a few regulations implementing the
straddle rules have been promulgated, the consequences
of such transactions to the Fund are not entirely
clear. The straddle rules may increase the amount of
short-term capital gain realized by the Fund, which is
taxed as ordinary income when distributed to shareholders.
The Fund may make one or more of the elections
available under the Code which are applicable to
straddles. If the Fund makes any of the elections, the
amount, character and timing of the recognition of
gains or losses from the affected straddle positions
will be determined under rules that vary according to
the election(s) made. The rules applicable under certain of the
elections may operate to accelerate the recognition of
gains or losses from the affected straddle positions.
Because application of the straddle rules may
affect the character of gains or losses, defer losses
and/or accelerate the recognition of gains or losses
from the affected straddle positions, the amount which
must be distributed to shareholders as ordinary income
or long-term capital gain, may be increased or
decreased substantially as compared to a fund that did not engage
in such transactions.
The 30% Limitation and the diversification
requirements applicable to the Fund's assets may limit
the extent to which the Fund will be able to engage in
transactions in options, futures and forward contracts.
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES
Gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund
accrues receivables or liabilities denominated in a
foreign currency and the time the Fund actually
collects such receivables or pays such liabilities
generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of some investments, including debt
securities denominated in a foreign currency and certain
options, futures and forward contracts, gains or losses
attributable to fluctuations in the value of the
foreign currency between the date of acquisition of the
security or contract and the date of disposition also
are treated as ordinary gain or loss. These gains and
losses, referred to under the Code as "section 988"
gains or losses, increase or decrease the amount of the Fund's
investment company taxable income available to be
distributed to its shareholders as ordinary income. If
section 988 losses exceed other investment company
taxable income during a taxable year, the Fund would
not be able to make any ordinary dividend
distributions, or distributions made before the losses were
realized would be recharacterized as a return of capital to
shareholders, rather than as an ordinary dividend, reducing
each shareholder's basis in his or her Fund shares.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund may invest in shares of foreign
corporations which may be classified under the Code as
passive foreign investment companies ("PFICs"). In
general, a foreign corporation is classified as a PFIC
if at least one-half of its assets constitute
investment-type assets, or 75% or more of its gross
income is investment-type income. If the Fund receives a so-
called "excess distribution" with respect to PFIC stock, the
Fund itself may be subject to a tax on a portion of the
excess distribution, whether or not the corresponding
income is distributed by the Fund to shareholders. In
general, under the PFIC rules, an excess distribution
is treated as having been realized ratably over the
period during which the Fund held the PFIC shares. The
Fund itself will be subject to tax on the portion, if
any, of an excess distribution that is so allocated to
prior Fund taxable years and an interest factor will be added
to the tax, as if the tax had been payable in such prior
taxable years. Certain distributions from a PFIC as
well as gain from the sale of PFIC shares are treated
as excess distributions. Excess distributions are
characterized as ordinary income even though, absent
application of the PFIC rules, certain excess
distributions might have been classified as capital gain.
The Fund may be eligible to elect alternative tax
treatment with respect to PFIC shares. Under an
election that currently is available in some
circumstances, the Fund generally would be required to
include in its gross income its share of the earnings
of a PFIC on a current basis, regardless of whether distributions
are received from the PFIC in a given year. If this
election were made, the special rules, discussed above,
relating to the taxation of excess distributions, would
not apply. In addition, other elections may become
available that would affect the tax treatment of PFIC
shares held by the Fund.
DEBT SECURITIES ACQUIRED AT A DISCOUNT
Some of the debt securities (with a fixed maturity
date of more than one year from the date of issuance)
that may be acquired by the Fund may be treated as debt
securities that are issued originally at a discount.
Generally, the amount of the original issue discount
("OID") is treated as interest income and is included
in income over the term of the debt security, even
though payment of that amount is not received until a later time,
usually when the debt security matures.
If the Fund invests in certain high yield original
issue discount obligations issued by corporations, a
portion of the original issue discount accruing on the
obligation may be eligible for the deduction for
dividends received by corporations. In such event,
dividends of investment company taxable income received
from the Fund by its corporate shareholders, to the
extent attributable to such portion of accrued original
issue discount, may be eligible for this deduction for
dividends received by corporations if so designated by
the Fund in a written notice to shareholders.
Some of the debt securities (with a fixed maturity
date of more than one year from the date of issuance)
that may be acquired by the Fund in the secondary
market may be treated as having market discount.
Generally, gain recognized on the disposition of, and
any partial payment of principal on, a debt security
having market discount is treated as ordinary income to
the extent the gain, or principal payment, does not exceed the
"accrued market discount" on such debt security. In
addition, the deduction of any interest expenses
attributable to debt securities having market discount
may be deferred. Market discount generally accrues in
equal daily installments. The Fund may make one or
more of the elections applicable to debt securities
having market discount, which could affect the
character and timing of recognition of income.
Some debt securities (with a fixed maturity date
of one year or less from the date of issuance) that may
be acquired by the Fund may be treated as having
acquisition discount, or OID in the case of certain
types of debt securities. Generally, the Fund will be
required to include the acquisition discount, or OID, in
income over the term of the debt security, even though payment of
that amount is not received until a later time, usually
when the debt security matures. The Fund may make one
or more of the elections applicable to debt securities
having acquisition discount, or OID, which could affect
the character and timing of recognition of income.
The Fund generally will be required to distribute
dividends to shareholders representing discount on debt
securities that is currently includible in income, even
though cash representing such income may not have been
received by the Fund. Cash to pay such dividends may
be obtained from sales proceeds of securities held by
the Fund.
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
Fund to a corporate shareholder, to the extent such
dividends are attributable to dividends received from
U.S. corporations by the 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 the Fund as capital gain dividends, are
taxable as long-term capital gains, whether paid in
cash or in shares, regardless of how long the
shareholder has held the Fund's shares and 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 the Fund on
the distribution date. A distribution of an amount in
excess of the 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.
If the net asset value of shares is reduced below
a shareholder's cost as a result of a distribution by
the 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 which 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 generally 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 the 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.
FOREIGN WITHHOLDING TAXES
Income received by the 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 the Fund's total
assets at the close of its taxable year consists of
securities of foreign corporations, the Fund will be
eligible and may elect to "pass- through" to the Fund's
shareholders the amount of foreign income and similar
taxes paid by the Fund. Pursuant to this election, a
shareholder will be required to include in gross income (in
addition to taxable dividends actually received) his or her
pro rata share of the foreign income and similar taxes
paid by the Fund, and will be entitled either to deduct
his or her pro rata
share of foreign income and similar taxes in computing
his or her taxable income or to use it as a foreign tax
credit against his or her U.S. Federal income taxes,
subject to limitations. No deduction for foreign taxes
may be claimed by a shareholder who does not itemize
deductions. Foreign taxes generally may not be
deducted by a shareholder that is an individual in computing the
alternative minimum tax. Each shareholder will be
notified within 60 days after the close of the Fund's
taxable year whether the foreign taxes paid by the Fund
will "pass-through" for that year and, if so, such
notification will designate (1) the shareholder's
portion of the foreign taxes paid to each such country
and (2) the portion of the dividend which represents
income derived from sources within each such country.
Generally, a credit for foreign taxes is subject
to the limitation that it may not exceed the
shareholder's U.S. tax attributable to his or her total
foreign source taxable income. For this purpose, if
the Fund makes the election described in the preceding
paragraph, the source of the Fund's income flows
through to its shareholders. With respect to the Fund, gains
from the sale of securities generally will be treated as
derived from U.S. sources and section 988 gains will be
treated as ordinary income derived from U.S. sources.
The limitation on the foreign tax credit is applied
separately to foreign source passive income, including
foreign source passive income received from the Fund.
In addition, the foreign tax credit may offset only 90%
of the revised alternative minimum tax imposed on
corporations and individuals.
The foregoing is only a general description of the
foreign tax credit under current law. Because
application of the credit depends on the particular
circumstances of each shareholder, shareholders are
advised to consult their own tax advisers.
BACKUP WITHHOLDING
The Fund will be required to report to the
Internal Revenue Service ("IRS") all taxable
distributions, including gross proceeds from redemption
of the Fund's shares, except in the case of certain
exempt shareholders. All such distributions 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 Fund 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 Fund.
PERFORMANCE INFORMATION
Comparisons of the Fund's performance may be made
with respect to various unmanaged indices (including
the TSE 300, S&P 100, S&P 500, Dow Jones Industrial
Average and Major Market Index) which assume
reinvestment of dividends, but do not reflect
deductions for administrative and management costs. The Fund
also may be compared to Lipper's Analytical Reports, reports
produced by a widely used independent research firm that
ranks mutual funds by overall performance, investment
objectives and assets, or to Wiesenberger Reports.
Lipper Analytical Services does not include sales
charges in computing performance. Further information
on comparisons is contained in the Prospectus.
Performance rankings will be based on historical information and
are not intended to indicate future performance.
In addition, the Trust may, from time to time,
include the average annual total return and the
cumulative total return of shares of the Fund in
advertisements, promotional literature or reports to
shareholders or prospective investors.
AVERAGE ANNUAL TOTAL RETURN. Quotations of
standardized average annual total return ("Standardized
Return") for a specific class of shares of the 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 the
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 shares and Class C shares, the
applicable CDSC imposed upon redemption of Class B
shares or Class C shares held for the period is
deducted. Standardized Return quotations for the 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 Fund 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.
In determining the average annual total return for
a specific Class of shares of the Fund, recurring fees,
if any, that are charged to all shareholder accounts
are taken into consideration. For any account fees
that vary with the size of the account of the Fund, the
account fee used for purposes of the following
computations is assumed to be the fee that would be
charged to the mean account size of the Fund.
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 the Trust's existence and may or may
not include the impact of sales charges, taxes or other factors.
Performance quotations for the Fund will vary from
time to time depending on market conditions, the
composition of the Fund's portfolio and operating
expenses of the Fund. These factors and possible
differences in the methods used in calculating
performance quotations should be considered when
comparing performance information regarding the Fund's 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 Fund's shares and the risks associated
with the Fund's 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 Fund may also cite endorsements or use for
comparison their 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 Shareholder, International Fund Monitor,
Shareholder'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 Director of Investment
Managers, New York Times, Newsweek, No Load Fund
Shareholder, No Load Fund* X, Oakland Tribune, Pension
World, Pensions and Investment Age, Personal
Shareholder, Rugg and Steele, Time, U.S. News and World Report,
USA Today, The Wall Street Journal, and Washington Post.
FINANCIAL STATEMENTS
The Statement of Assets and Liabilities for the
Fund as of _________ and the Report of Independent
Accountants are attached hereto as Appendix B.
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION
("S&P") AND MOODY'S SHAREHOLDERS SERVICE, INC.
("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS
[From "Moody's Bond Record," November 1994 Issue
(Moody's Shareholder Service, New York, 1994), and
"Standard & Poor's Municipal Ratings Handbook," October
1994 Issue (McGraw Hill, New York, 1994).]
MOODY'S:
(a) CORPORATE BONDS. Bonds rated Aaa by Moody's
are judged by Moody's to be of the best quality,
carrying the smallest degree of investment risk.
Interest payments are protected by a large or
exceptionally stable margin and principal is secure.
Bonds rated Aa are judged by Moody's to be of high quality by all
standards. Aa bonds are rated lower than Aaa bonds
because margins of protection may not be as large as
those of Aaa bonds, or fluctuations of protective
elements may be of greater amplitude, or there may be
other elements present which make the long-term risks
appear somewhat larger than those applicable to Aaa
securities. Bonds which are rated A by Moody's possess many
favorable investment attributes and are considered as upper
medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but
elements may be present which suggest a susceptibility
to impairment sometime in the future.
Bonds rated Baa by Moody's are considered medium-
grade obligations, i.e., they are neither highly
protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of
time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well. Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered
well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes
bonds in this class. Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments of or maintenance of other
terms of the contract over any long period of time may
be small.
Bonds which are rated Caa are of poor standing.
Such issues may be in default or there may be present
elements of danger with respect to principal or
interest. Bonds which are rated Ca represent
obligations which are speculative in a high degree.
Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class
of bonds and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real
investment standing.
(b) COMMERCIAL PAPER. The Prime rating is the
highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the
management of the issuer; (2) economic evaluation of
the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain
areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity;
(5) amount and quality of long-term debt; (6) trend of
earnings over a period of ten years; (7) financial
strength of a parent company and the relationships
which exist with the issuer; and (8) recognition by
management of obligations which may be present or may
arise as a result of public interest questions and
preparations to meet such obligations. Issuers within this Prime
category may be given ratings 1, 2 or 3, depending on
the relative strengths of these factors. The
designation of Prime-1 indicates the highest quality
repayment capacity of the rated issue.
S&P:
(a) CORPORATE BONDS. An S&P corporate debt
rating is a current assessment of the creditworthiness
of an obligor with respect to a specific obligation.
The ratings are based on current information furnished
by the issuer or obtained by S&P from other sources it
considers reliable. The ratings described below may be
modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
Debt rated AAA by S&P is considered by S&P to be
the highest grade obligation. Capacity to pay interest
and repay principal is extremely strong. Debt rated AA
is judged by S&P to have a very strong capacity to pay
interest and repay principal and differs from the
highest rated issues only in small degree. Debt rated
A by S&P has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
Debt rated BBB by S&P is regarded by S&P as having
an adequate capacity to pay interest and repay
principal. Although such bonds normally exhibit
adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay
principal than debt in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as
having predominately speculative characteristics with
respect to capacity to pay interest and repay
principal. BB indicates the least degree of
speculation and C the highest. While such debt will
likely have some quality and protective characteristics,
these are outweighed by large uncertainties or exposures to
adverse conditions. Debt rated BB has less near-term
vulnerability to default than other speculative issues. However,
it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions
which could lead to inadequate capacity to meet timely
interest and principal payments. The BB rating
category is also used for debt subordinated to senior
debt that is assigned an actual or implied BBB- rating.
Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating
category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB-
rating. Debt rated CCC has a currently identifiable
vulnerability to default, and is dependent upon
favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In
the event of adverse business, financial or economic
conditions, it is not likely to have the capacity to
pay interest and repay principal. The CCC rating
category is also used for debt subordinated to senior
debt that is assigned an actual or implied B or B-
rating. The rating CC typically is applied to debt
subordinated to senior debt which is assigned an actual or
implied CCC debt rating. The rating C typically is applied to
debt subordinated to senior debt which is assigned an
actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are
continued.
(b) COMMERCIAL PAPER. An S&P commercial paper
rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of
no more than 365 days.
Commercial paper rated A by S&P has the following
characteristics: (i) liquidity ratios are adequate to
meet cash requirements; (ii) long-term senior debt
rating should be A or better, although in some cases
BBB credits may be allowed if other factors outweigh
the BBB; (iii) the issuer should have access to at
least one additional channel of borrowing; (iv) basic
earnings and cash flow should have an upward trend with
allowances made for unusual circumstances; and (v) typically the
issuer's industry should be well established and the
issuer should have a strong position within its
industry and the reliability and quality of management
should be unquestioned. Issues rated A are further
referred to by use of numbers 1, 2 and 3 to denote
relative strength within this highest classification.
For example, the A-1 designation indicates that the degree of
safety regarding timely payment of debt is strong.
Issues rated B are regarded as having only
speculative capacity for timely payment. The C rating
is assigned to short- term debt obligations with a
doubtful capacity for payment.
APPENDIX B
STATEMENT OF ASSETS AND LIABILITIES
AS OF ________
AND
REPORT OF INDEPENDENT ACCOUNTANTS
_________________________________________________________________
IVY INTERNATIONAL VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
_____________, 199_
_________________________________________________________________
ASSETS
Cash . . . . . . . . . . . . . . . . $ __
Deferred organization expenses . . . ______
-------
Total Assets . . . . . . . . . . . ______
-------
LIABILITIES
Due to affiliate . . . . . . . . . . ______
-------
NET ASSETS . . . . . . . . . . . . . . $ __
=======
CLASS A:
Net asset value and
redemption price per share
($10 / 1 share outstanding) . . . $ ______
=======
Maximum offering price
per share
($10.00 x 100 / 94.25)* . . . . . $ ______
=======
CLASS B:
Net asset value and
offering price per share
($10 / 1 share outstanding)** . . $ ______
=======
CLASS C:
Net asset value and
offering price per share
($10 / 1 share outstanding)** . . $ ______
=======
CLASS I:
Net asset value, offering price,
and redemption price per share
($10 / 1 share outstanding) . . . $ ______
=======
NET ASSETS CONSIST OF:
Capital paid-in . . . . . . . . . . . $ __
=======
* On sales of more than $50,000 the offering price
is reduced. ** Redemption price per share is equal to
the net asset value per share less any applicable
contingent deferred sales charge, up to a maximum
of 5%.
(See Notes to Financial Statements)
_________________________________________________________________
IVY INTERNATIONAL VALUE FUND
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
____________, 199_
_________________________________________________________________
1. ORGANIZATION: Ivy International Value Fund is a
series of shares of Ivy Fund. The shares of beneficial
interest are assigned no par value and an unlimited
number of shares of Class A, Class B, Class C and Class
I are authorized. Ivy Fund was organized as a
Massachusetts business trust under a Declaration of
Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as a diversified,
open-end management investment company.
The Fund will commence operations on January 1, 1997.
As of the date of this report, operations have been
limited to organizational matters and the issuance of
initial shares to Mackenzie Investment Management Inc.
(MIMI).
2. ORGANIZATION COSTS AND TRANSACTIONS WITH AFFILIATES:
Organization expenses are being amortized over a five
year period from January 1, 1997, the commencement date
of operations. Such organizational expenses have been
paid by MIMI and will be reimbursed by the Fund.
Ivy Management, Inc. (IMI), a wholly owned subsidiary
of MIMI, is the Manager and Investment Adviser of the
Fund. Currently, IMI voluntarily limits the Fund's
total operating expenses (excluding taxes, 12b-1 fees,
brokerage commissions, interest, litigation and
indemnification expenses, and any other extraordinary
expenses) to an annual rate of 1.95% of its average net assets.
MIMI provides certain administrative, accounting and
pricing services for the Fund.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned
subsidiary of MIMI, is the underwriter and distributor
of the Fund's shares, and as such, purchases shares
from the Fund at net asset value to settle orders from
investment dealers.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned
subsidiary of MIMI, is the transfer and shareholder
servicing agent for the Fund.
Officers of Ivy Fund are officers and/or employees of
MIMI, IMI, IMDI and IMSC. Such individuals are not
compensated by the Fund for services in their capacity
as officers of Ivy Fund. Trustees of Ivy Fund who are
not affiliated with MIMI or IMI receive compensation
from the Fund.
IVY GLOBAL NATURAL RESOURCES FUND
series of
IVY FUND
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL INFORMATION
January 1, 1997
_________________________________________________________________
Ivy Fund (the "Trust") is a diversified, open-end
management investment company that currently consists
of seventeen fully managed portfolios. This Statement
of Additional Information ("SAI") describes one of the
portfolios, Ivy Global Natural Resources Fund (the
"Fund"). The other sixteen portfolios of the Trust are
described in separate Statements of Additional
Information.
This SAI is not a prospectus and should be read in
conjunction with the prospectus for the Fund dated
January 1, 1997 (the "Prospectus"), which may be
obtained upon request and without charge from the Trust
at the Distributor's address and telephone number
listed below.
INVESTMENT MANAGER
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 777-6472
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
TABLE OF CONTENTS
INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . . . .
. . . 4 INVESTING IN NATURAL RESOURCES . . . . .
. . . . . . . . 4 BANKING INDUSTRY AND SAVINGS
AND LOAN OBLIGATIONS . . . 5 BORROWING . . . .
. . . . . . . . . . . . . . . . . . . 5
COMMERCIAL PAPER . . . . . . . . . . . . . . . . . . . . 6
CONVERTIBLE SECURITIES . . . . . . . . . . . . . . . . .
7 DEBT SECURITIES, IN GENERAL . . . . . . . . .
. . . . . 8 FOREIGN SECURITIES . . . . . . . . .
. . . . . . . . . . 8 FORWARD FOREIGN CURRENCY
CONTRACTS . . . . . . . . . . . 11 FOREIGN
CURRENCIES . . . . . . . . . . . . . . . . . . . 12
INDUSTRY CONCENTRATION . . . . . . . . . . . . . . . . . 12
PRECIOUS METALS AND OTHER PHYSICAL COMMODITIES . . . .
. 13 REPURCHASE AGREEMENTS . . . . . . . . . . .
. . . . . . 13 WARRANTS . . . . . . . . . . . . .
. . . . . . . . . . . 13 SMALL COMPANIES . . . .
. . . . . . . . . . . . . . . . 14 FUTURES
CONTRACTS . . . . . . . . . . . . . . . . . . . 14
COMBINED TRANSACTIONS . . . . . . . . . . . . . . . . . 18
RESTRICTED AND ILLIQUID SECURITIES . . . . . . . . . .
. 18
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . .
. . . 19
ADDITIONAL RESTRICTIONS . . . . . . . . . . . . . . . .
. . . 20
ADDITIONAL RIGHTS AND PRIVILEGES . . . . . . . . . . .
. . . 21 AUTOMATIC INVESTMENT METHOD . . . . . .
. . . . . . . . 22 EXCHANGE OF SHARES . . . . . .
. . . . . . . . . . . . . 22 INITIAL SALES
CHARGE SHARES . . . . . . . . . . . . 22
CONTINGENT DEFERRED SALES CHARGE SHARES . . . . . . 23
LETTER OF INTENT . . . . . . . . . . . . . . . . . . .
. . . 26 RETIREMENT PLANS . . . . . . . . . . . .
. . . . . . . . 27 INDIVIDUAL RETIREMENT
ACCOUNTS . . . . . . . . . . 27 QUALIFIED
PLANS . . . . . . . . . . . . . . . . . . 29
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(b)(7)
ACCOUNT") . . . . . . . . . . . . . . . . . . 30
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS . . . . . 30
REINVESTMENT PRIVILEGE . . . . . . . . . . . . . . . .
. . . 30 RIGHTS OF ACCUMULATION . . . . . . . . .
. . . . . . . . 31 SYSTEMATIC WITHDRAWAL PLAN . .
. . . . . . . . . . . . . 31 GROUP SYSTEMATIC
INVESTMENT PROGRAM . . . . . . . . . . 32
BROKERAGE ALLOCATION . . . . . . . . . . . . . . . . .
. . . 33
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 35 PERSONAL INVESTMENTS BY EMPLOYEES OF IMI
. . . . . . . . 39
COMPENSATION TABLE . . . . . . . . . . . . . . . . . .
. . . 40
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . .
. . . 41
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY
SERVICES . . 41 DISTRIBUTION SERVICES . . . . .
. . . . . . . . . . . . 43 RULE 18F-3 PLAN .
. . . . . . . . . . . . . . . . . 44 RULE
12B-1 DISTRIBUTION PLANS . . . . . . . . . . . 45
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . 47
FUND ACCOUNTING SERVICES . . . . . . . . . . . . . . . .
47 TRANSFER AGENT AND DIVIDEND PAYING AGENT . . .
. . . . . 47 ADMINISTRATOR . . . . . . . . . . .
. . . . . . . . . . 47 AUDITORS . . . . . . . . .
. . . . . . . . . . . . . . . 48
CAPITALIZATION AND VOTING RIGHTS . . . . . . . . . . .
. . . 48
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . .
. . . 50
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . .
. . . 52
REDEMPTIONS . . . . . . . . . . . . . . . . . . . . . .
. . . 52
CONVERSION OF CLASS B SHARES . . . . . . . . . . . . .
. . . 53
TAXATION . . . . . . . . . . . . . . . . . . . . . . .
. . . 54 OPTIONS, FUTURES AND FOREIGN CURRENCY
FORWARD CONTRACTS . . . . . . . . . . . . . .
. . . . . . . 55 CURRENCY FLUCTUATIONS --
"SECTION 988" GAINS OR LOSSES . . . . . .
. . . . . . . . . . . . . . . . . . . 57
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES . .
. . . 57 DEBT SECURITIES ACQUIRED AT A DISCOUNT .
. . . . . . . . 58 DISTRIBUTIONS . . . . . . . .
. . . . . . . . . . . . . 59 DISPOSITION OF
SHARES . . . . . . . . . . . . . . . . . 59
FOREIGN WITHHOLDING TAXES . . . . . . . . . . . . . . . 60
BACKUP WITHHOLDING . . . . . . . . . . . . . . . . . . .
61
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . .
. . . 62 AVERAGE ANNUAL TOTAL RETURN . . . .
. . . . . . . . 62 OTHER QUOTATIONS,
COMPARISONS AND GENERAL INFORMATION . .
. . . . . . . . . . . . . . . 63
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . .
. . . 64
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION
("S&P") AND MOODY'S SHAREHOLDERS SERVICE, INC.
("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS . . . . . . . . 65
APPENDIX B
STATEMENT OF ASSETS AND LIABILITIES
AS OF _______
AND
REPORT OF INDEPENDENT ACCOUNTANTS . . .
. . . 68
INVESTMENT OBJECTIVE AND POLICIES
The Fund has its own investment objective and
policies, which are described in the Prospectus under
the captions "Investment Objective and Policies" and
"Risk Factors and Investment Techniques." Additional
information regarding the characteristics and risks
associated with the Fund's investment techniques is set
forth below.
INVESTING IN NATURAL RESOURCES
Since the Fund normally invests a substantial
portion of its assets in securities of companies
engaged in natural resources activities, the Fund may
be subject to greater risks and market fluctuations
than funds with more diversified portfolios. The value
of the Fund's securities will fluctuate in response to
market conditions generally, and will be particularly sensitive
to the markets for those natural resources in which a
particular issuer is involved. The values of natural
resources may also fluctuate directly with respect to
real and perceived inflationary trends and various
political developments.
The Fund's investments in precious metals (such as
gold) and other physical commodities are subject to
special risk considerations, including substantial
price fluctuations over short periods of time. On the
other hand, investments in precious metals coins or
bullion could help to moderate fluctuations in the
value of the Fund's portfolio, since the prices of
precious metals have at times tended not to fluctuate
as widely as shares of issuers engaged in the mining of precious
metals. Because precious metals and other commodities do
not generate investment income, however, the return on
such investments will be derived solely from the gains
and losses realized by the Fund upon their sale. The
Fund may also incur storage and other costs relating to
its investments in precious metals and other
commodities, which costs may, under certain
circumstances, exceed the custodial and brokerage costs
associated with investments in other types of securities. When
the Fund purchases a precious metal, IMI currently intends
that it will only be in a form that is readily
marketable and that it will be delivered to and stored
with the Fund's custodian.
Natural resource industries throughout the world
may be subject to greater political, environmental and
other governmental regulation than many other
industries. Changes in governmental policies and the
need for regulatory approvals may have an adverse
effect on the products and services of natural
resources companies. For example, the exploration, development
and distribution of coal, oil and gas in the United States
are subject to significant Federal and state
regulation, which may affect rates of return on such
investments and the kinds of services that may be
offered to companies in those industries. In addition,
many natural resource companies have been subject to
significant costs associated with compliance with environmental
and other safety regulations. Such regulations may
also hamper the development of new technologies. The
direction, type or effect of any future regulations
affecting natural resource industries are virtually
impossible to predict.
To take advantage of potential growth
opportunities, the Fund might have significant
investments in companies with relatively small market
capitalization. Securities of smaller companies may be
subject to more abrupt or erratic market movements than
the securities of larger more established companies,
both because they tend to be traded in lower volume and
because the companies are subject to greater business risk.
Under certain economic, financial and political
conditions, the Fund may be invested heavily in foreign
securities. Investing in securities of foreign issuers
and denominated in foreign currencies involves risks
not typically associated with investing in United
States securities, including fluctuations in foreign
exchange rates, exposure to adverse political and
economic developments and the possible imposition of exchange
controls and related restrictions. Finally, competition is
intense for many natural resource companies. As a result,
the value of the securities issues by such companies
may to subject to increased share price volatility.
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS
Certificates of deposit are negotiable
certificates issued against funds deposited in a
commercial bank for a definite period of time and
earning a specified return. Bankers' acceptances are
negotiable drafts or bills of exchange, normally drawn
by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank (meaning, in effect, that the
bank unconditionally agrees to pay the face value of
the instrument on maturity). In addition to investing
in certificates of deposit and bankers' acceptances,
the Fund may invest in time deposits in banks or
savings and loan associations. Time deposits are
generally similar to certificates of deposit, but are
uncertificated. The Fund's investments in certificates of
deposit, time deposits, and bankers' acceptances are limited to
obligations of (i) banks having total assets in excess of
$1 billion and (ii) U.S. banks which do not meet the $1
billion asset requirement, if the principal amount of
such obligation is fully insured by the Federal Deposit
Insurance Corporation (the "FDIC"). The Fund's
investments in certificates of deposit of savings
associations are limited to obligations of Federal and
state-chartered institutions whose total assets exceed $1 billion
and whose deposits are insured by the FDIC.
BORROWING
Borrowing may exaggerate the effect on the Fund's
net asset value of any increase or decrease in the
value of the Fund's portfolio securities. Money
borrowed will be subject to interest
costs (which may include commitment fees and/or the
cost of maintaining minimum average balances).
Although the principal of the Fund's borrowings will be
fixed, the Fund's assets may change in value during the
time a borrowing is outstanding, thus increasing
exposure to capital risk. All borrowings will be
repaid before any additional investments are made.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured
promissory notes issued in bearer form by bank holding
companies, corporations and finance companies. The
Fund may invest in commercial paper that is rated A-1
by Standard & Poor's Corporation ("S&P") or Prime-1 by
Moody's Shareholders Service, Inc. ("Moody's") or, if
not rated by Moody's or S&P, is issued by companies
having an outstanding debt issue rated AAA or AA by S&P
or Aaa or Aa by Moody's.
U.S. GOVERNMENT SECURITIES
U.S. Government securities are obligations of, or
guaranteed by, the U.S. Government, its agencies or
instrumentalities. Securities guaranteed by the U.S.
Government include: (1) direct obligations of the U.S.
Treasury (such as Treasury bills, notes, and bonds) and
(2) Federal agency obligations guaranteed as to
principal and interest by the U.S. Treasury (such as GNMA
certificates, which are mortgage-backed securities). When these
securities are held to maturity, the payment of
principal and interest is unconditionally guaranteed by
the U.S. Government, and thus they are of the highest
possible credit quality. U.S. Government securities
that are not held to maturity are subject to variations
in market value due to fluctuations in interest rates.
Mortgage-backed securities are securities
representing part ownership of a pool of mortgage
loans. For example, GNMA certificates are such
securities in which the timely payment of principal and
interest is guaranteed by the full faith and credit of
the U.S. Government. 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 normal
principal amortization and may be prepaid prior to
maturity. Prepayment rates vary widely and may be
affected by changes in market interest rates. In
periods of falling interest rates, the rate of prepayment tends
to increase, thereby shortening the actual average life of
the security. Conversely, when interest rates are
rising, the rate of prepayments tends to decrease,
thereby lengthening the actual average life of the
security (and increasing the security's price
volatility). Accordingly, it is not possible to predict
accurately the average life of a particular pool. Reinvestment
of prepayment may occur at higher or lower rates than the
original yield on the certificates. Due to the
prepayment feature and the need to reinvest prepayments
of principal at
current rates, GNMA certificates can be less effective
than typical bonds of similar maturities at "locking
in" yields during periods of declining interest rates.
GNMA certificates may appreciate or decline in market
value during periods of declining or rising interest
rates, respectively.
Securities issued by U.S. Government
instrumentalities and certain federal agencies are
neither direct obligations of nor guaranteed by the
U.S. Treasury. However, they involve Federal
sponsorship in one way or another; some are backed by specific
types of collateral; some are supported by the issuer's
right to borrow from the Treasury; some are supported
by the discretionary authority of the Treasury to
purchase certain obligations of the issuer; others are
supported only by the credit of the issuing government
agency or instrumentality. These agencies and
instrumentalities include, but are not limited to, Federal Land
Banks, Farmers Home Administration, Central Bank for
Cooperatives, Federal Intermediate Credit Banks, Federal Home
Loan Banks, Federal National Mortgage Association, and
Student Loan Marketing Association.
CONVERTIBLE SECURITIES
Because convertible securities can be converted
into equity securities, their values will normally vary
in some proportion with those of the underlying equity
securities. Convertible securities usually provide a
higher yield than the underlying equity, however, so
that the price decline of a convertible security may
sometimes be less substantial than that of the
underlying equity security.
The Fund may invest in convertible securities,
such as corporate bonds, notes, debentures and other
securities that may be converted into common stock.
Investments in convertible securities can provide
income through interest and dividend payments as well
as an opportunity for capital appreciation by virtue of
their conversion or exchange features.
The convertible securities in which the Fund may
invest include preferred stock that may be converted or
exchanged at a stated or determinable exchange ratio
into underlying shares of common stock. The exchange
ratio for any particular convertible security may be
adjusted from time to time due to stock splits,
dividends, spin-offs, other corporate distributions or scheduled
changes in the exchange ratio. Convertible debt
securities and convertible preferred stocks, until
converted, have general characteristics similar to both
debt and equity securities. Although to a lesser
extent than with debt securities generally, the market
value of convertible securities tends to decline as
interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the
conversion or exchange feature, the market value of
convertible securities typically changes as the market
value of the underlying common stock changes, and,
therefore, also tends to follow movements in
the general market for equity securities. A unique
feature of convertible securities is that as the market
price of the underlying common stock declines,
convertible securities tend to trade increasingly on a
yield basis, and so may not experience market value
declines to the same extent as the underlying common
stock. When the market price of the underlying common stock
increases, the price of a convertible security tends to rise
as a reflection of the value of the underlying common
stock, although typically not as much as the price of
the underlying common stock. While no securities
investments are without risk, investments in
convertible securities generally entail less risk than
investments in common stock of the same issuer.
As debt securities, convertible securities are
investments which provide for a stream of income. Of
course, like all debt securities, there can be no
assurance of income or principal payments because the
issuers of the convertible securities may default on
their obligations. Convertible securities generally
offer lower yields than non-convertible securities of similar
quality because of their conversion or exchange features.
Convertible securities generally are subordinated
to other similar but non-convertible securities of the
same issuer, although convertible bonds, as corporate
debt obligations, are senior in right of payment to all
equity securities, and convertible preferred stock is
senior to common stock, of the same issuer. However,
convertible bonds and convertible preferred stock
typically have lower coupon rates than similar non-
convertible securities. Convertible securities may be issued
as fixed income obligations that pay current income
DEBT SECURITIES, IN GENERAL
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. 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. Bonds with longer
maturities generally are more volatile than bonds with
shorter maturities. The market value of debt securities
also varies according to the relative financial
condition of the issuer. In general, lower-quality
bonds offer higher yields due to the increased risk
that the issuer will be unable to meet its obligations
on interest or principal payments at the time called
for by the debt instrument.
FOREIGN SECURITIES
The Fund may invest in debt securities of foreign
issuers, including non-U.S. dollar-denominated debt
securities, Eurodollar securities, sponsored and
unsponsored American Depository Receipts ("ADRs"), and
debt securities issued, assumed or guaranteed by
foreign governments or political subdivisions or
instrumentalities thereof. Shareholders should
consider carefully the substantial risks involved in
investing in securities issued by companies and
governments of foreign nations, which are in addition
to the usual risks inherent in the Fund's domestic
investments.
Although the Fund intends to invest only in
nations that IMI considers to have relatively stable
and friendly governments, there is the possibility of
expropriation, nationalization or confiscatory
taxation, taxation of income earned in a foreign
country and other foreign taxes, foreign exchange controls (which
may include suspension of the ability to transfer
currency from a given country), default in foreign
government securities, political or social instability
or diplomatic developments that could affect
investments in securities of issuers in those nations.
In addition, in many countries there is less publicly
available information about issuers than is available for U.S.
companies. For example, ownership of unsponsored ADRs may
not entitle the owner to financial or other reports
from the issuer to which it might otherwise be entitled
as the owner of a sponsored ADR. Moreover, foreign
companies are not generally subject to uniform
accounting, auditing and financial reporting standards,
and auditing practices and requirements may not be
comparable to those applicable to U.S. companies. In many
foreign countries, there is less government supervision and
regulation of business and industry practices, stock
exchanges, brokers and listed companies than in the
United States. Foreign securities transactions may
also be subject to higher brokerage costs than domestic
securities transactions. The foreign securities
markets of many of the countries in which the Fund may
invest may also be smaller, less liquid and subject to greater
price volatility than those in the United States. In
addition, the Fund may encounter difficulties or be
unable to pursue legal remedies and obtain judgment in
foreign courts.
Foreign stock markets have different clearance and
settlement procedures and in certain markets there have
been times when settlements have been unable to keep
pace with the volume of securities transactions, making
it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when
assets of the Fund are uninvested and are earning no
return. The inability of the Fund to make intended
security purchases due to settlement problems could cause the
Fund to miss attractive investment opportunities. Further,
the inability to dispose of portfolio securities due to
settlement problems could result either in losses to
the Fund because of subsequent declines in the value of
the portfolio security or, if the Fund has entered into
a contract to sell the security, in possible liability
to the purchaser. Fixed commissions on some foreign
securities exchanges are generally higher than negotiated
commissions on U.S. exchanges, although IMI will endeavor to
achieve the most favorable net results on the Fund's
portfolio transactions. In addition, the Fund may
encounter difficulties or be unable to pursue legal
remedies and obtain judgment in
foreign courts. It may be more difficult for the
Fund's agents to keep currently informed about
corporate actions such as stock dividends or other
matters that may affect the prices of portfolio
securities. Communications between the United States
and foreign countries may be less reliable than within the United
States, thus increasing the risk of delayed settlements
of portfolio transactions or loss of certificates for
portfolio securities. Moreover, individual foreign
economies may differ favorably or unfavorably from the
United States economy in such respects as growth of
gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of
payments position. IMI seeks to mitigate the risks to the Fund
associated with the foregoing considerations through
investment variation and continuous professional
management.
INVESTING IN EMERGING MARKETS. Investments in
companies domiciled in developing countries may be
subject to potentially higher risks than investments in
developed countries. These risks include (i) less
social, political and economic stability; (ii) the
small current size of the markets for such securities
and the currently low or nonexistent volume of trading, which
result in a lack of liquidity and in greater price
volatility; (iii) certain national policies that may
restrict the Fund's investment opportunities, including
restrictions on investment in issuers or industries
deemed sensitive to national interests; (iv) foreign
taxation; (v) the absence of developed structures
governing private or foreign investment or allowing for judicial
redress for injury to private property; (vi) the absence,
until relatively recently in certain Eastern European
countries, of a capital market structure or market-
oriented economy; (vii) the possibility that recent
favorable economic developments in Eastern Europe may
be slowed or reversed by unanticipated political or
social events in such countries; and (viii) the
possibility that currency devaluations could adversely affect the
value of the Fund's investments. Further, many emerging
markets have experienced and continue to experience
high rates of inflation.
Despite the dissolution of the Soviet Union, the
Communist Party may continue to exercise a significant
role in certain Eastern European countries. To the
extent of the Communist Party's influence, investments
in such countries are exposed to risks of
nationalization, expropriation and confiscatory
taxation. The communist governments of a number of Eastern
European countries expropriated large amounts of private
property in the past, in many cases without adequate
compensation, and there can be no assurance that such
expropriation will not occur in the future. In the
event of such expropriation, the Fund could lose a
substantial portion of any investments it has made in
the affected countries. Further, few (if any) accounting
standards exist in Eastern European countries. Finally, even
though certain Eastern European currencies may be
convertible into U.S. dollars, the conversion rates may
be artificial in relation to the actual market values
and may be adverse to the
Fund's Shareholders.
Certain Eastern European countries that do not
have market economies are characterized by an absence
of developed legal structures governing private and
foreign investments and private property. In addition,
certain countries require governmental approval prior
to investments by foreign persons, or limit the amount
of investment by foreign persons in a particular company,
or limit the investment of foreign persons to only a specific
class of securities of a company that may have less
advantageous terms than securities of the company
available for purchase by nationals.
Authoritarian governments in certain Eastern
European countries may require that a governmental or
quasi-governmental authority act as custodian of the
Fund's assets invested in such country. To the extent
such governmental or quasi-governmental authorities do
not satisfy the requirements of the Investment Company
Act of 1940, as amended (the "1940 Act"), with respect to
the custody of the Fund's cash and securities, the Fund's
investment in such countries may be limited or may be required
to be effected through intermediaries. The risk of
loss through governmental confiscation may also be
increased in such countries.
FORWARD FOREIGN CURRENCY CONTRACTS
A forward contract is an obligation to purchase or
sell a specific currency for an agreed price at a
future date (usually less than a year), and typically
is individually negotiated and privately traded by
currency traders and their customers. A forward
contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. Although
foreign exchange dealers do not charge a fee for commissions,
they do realize a profit based on the difference between
the price at which they are buying and selling various
currencies. Although these contracts are intended to
minimize the risk of loss due to a decline in the value
of the hedged currencies, at the same time, they tend
to limit any potential gain which might result should
the value of such currencies increase.
While the Fund may enter into forward contracts to
reduce currency exchange risks, changes in currency
exchange rates may result in poorer overall performance
for the Fund than if it had not engaged in such
transactions. Moreover, there may be an imperfect
correlation between the Fund's portfolio holdings of
securities denominated in a particular currency and forward
contracts entered into by the Fund. An imperfect correlation
of this type may prevent the Fund from achieving the
intended hedge or expose the Fund to the risk of
currency exchange loss.
The Fund will not enter into or maintain a net
exposure to a forward contract where the consummation
of the contract would obligate the Fund to deliver an
amount of currency that exceeds
the value of the Fund's portfolio securities or other
assets denominated in that currency. Further, the Fund
generally will not enter into a forward contract with a
term of greater than one year.
To the extent required by applicable law, the Fund
will hold cash or liquid securities in a segregated
account with its custodian in an amount equal (on a
daily marked-to-market basis) to the amount of the
commitments under these contracts. At the maturity of
a forward contract, the Fund may either accept or make
delivery of the currency specified in the contract, or,
prior to maturity, enter into a closing purchase transaction
involving the purchase or sale of an offsetting position.
Closing purchase transactions with respect to forward
contracts are usually effected with the currency trader
who is a party to the original forward contract.
FOREIGN CURRENCIES
Investment in foreign securities usually will
involve currencies of foreign countries. In addition,
the Fund may temporarily hold funds in bank deposits in
foreign currencies during the development of its
various investment programs. To the extent this is so,
the value of the assets of the Fund as measured in U.S.
dollars may be affected favorably or unfavorably by
changes in foreign currency exchange rates and exchange
control regulations. The Fund may also incur currency conversion
costs. Although foreign exchange dealers do not charge
a fee for conversion, they do realize a profit based on
the difference (or "spread") between the prices at
which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to
the Fund at one rate, while offering a lesser rate of
exchange should the Fund desire to resell that currency to the
dealer. The Fund will usually conduct its foreign currency
exchange transactions either on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign
currency exchange market, or through entering into
forward contracts to purchase or sell foreign
currencies (see "Forward Foreign Currency Contracts,"
above).
Because the Fund normally will be invested in both
U.S. and foreign securities markets, changes in the
Fund's share price may have a low correlation with
movements in the U.S. markets. The Fund's share price
will reflect the movements of both the different stock
and bond markets in which it is invested and of the
currencies in which the investments are denominated. The
strength or weakness of the U.S. dollar against foreign
currencies may account for part of the Fund's investment
performance. U.S. and foreign securities markets do not always
move in step with each other, and the total returns from
different markets may vary significantly.
INDUSTRY CONCENTRATION
Because the Fund normally focuses its investments
in particular industries, the value of the Fund's
shares may be more susceptible to factors affecting
those industries. For example, rapid scientific or
technological advances in a particular industry are
likely to render existing products in that industry
obsolete. In addition, many companies are subject to government
regulations that may limit rates of return and slow the
general pace of development, causing increased
competition among such companies and their stock prices
to be more volatile.
PRECIOUS METALS AND OTHER PHYSICAL COMMODITIES
Commodities trading is generally considered a
speculative activity. For example, prices of precious
metals are affected by factors such as cyclical
economic conditions, political events and monetary
policies of various countries. Accordingly, markets
for precious metals may at times be volatile and there may be
sharp price fluctuations even during periods when prices
overall are rising. Investments in physical
commodities may also present practical problems of
delivery, storage and maintenance, possible
illiquidity, the unavailability of accurate market valuations and
increased expenses.
Under current U.S. tax law, the Fund may not
receive more than 10% of its yearly income from gains
resulting from selling precious metals or any other
physical commodity. Accordingly, the Fund may be
required to hold its precious metals or sell them at a
loss, or to sell its portfolio securities at a gain, when
for investment reasons it would not otherwise do so.
REPURCHASE AGREEMENTS
Repurchase agreements are contracts under which
the Fund buys a money market instrument and obtains a
simultaneous commitment from the seller to repurchase
the instrument at a specified time and at an agreed-
upon yield. Under guidelines approved by the Trust's
Board of Trustees (the "Board"), the Fund is permitted
to enter into repurchase agreements only if the
repurchase agreements are at least fully collateralized with U.S.
Government securities or other securities that the
Fund's investment adviser has approved for use as
collateral for repurchase agreements, and the
collateral must be marked-to- market daily. The Fund
will enter into repurchase agreements only with banks
and broker-dealers deemed to be creditworthy by the
Fund's investment adviser under guidelines approved by the
Board. In the unlikely event of failure of the executing bank
or broker-dealer, 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 costs in disposing
of the security.
WARRANTS
The holder of a warrant has the right, until the
warrant
expires, to purchase a given number of shares of a
particular issuer at a specified price. Such
investments can provide a greater potential for profit
or loss than an equivalent investment in the underlying
security. However, prices of warrants do not
necessarily move in tandem with the prices of the
underlying securities, and are therefore considered speculative
investments. Warrants pay no dividends and confer no
rights other than a purchase option. Thus, if a
warrant held by the Fund were not exercised by the date
of its expiration, the Fund would lose the entire
purchase price of the warrant. The Fund's investments
in warrants will not exceed 5% of the value of its net
assets.
SMALL COMPANIES
Investing in smaller company stocks involves
certain special considerations and risks that are not
usually associated with investing in larger, more
established companies. For example, the securities of
smaller companies may be subject to more abrupt or
erratic market movements, because they tend to be thinly
traded and are subject to a greater degree to changes in the
issuer's earnings and prospects. Transaction costs in
smaller company stocks also may be higher than those of
larger companies.
FUTURES CONTRACTS
GENERAL. The Fund may enter into futures
contracts for hedging purposes. A futures contract
provides for the future sale by one party and purchase
by another party of a specified quantity of a commodity
at a specified price and time. When a purchase or sale
of a futures contract is made by the Fund, the Fund is
required to deposit with its custodian (or broker, if
legally permitted) a specified amount of cash or U.S. Government
securities ("initial margin"). The margin required for a
futures contract is set by the exchange on which the
contract is traded and may be modified during the term
of the contract. The initial margin is in the nature
of a performance bond or good faith deposit on the
futures contract which is returned to the Fund upon
termination of the contract, assuming all contractual
obligations have been satisfied. A futures contract held by the
Fund is valued daily at the official settlement price of
the exchange on which it is traded. Each day the Fund
pays or receives cash, called "variation margin," equal
to the daily change in value of the futures contract.
This process is known as "marking to market."
Variation margin does not represent a borrowing or loan
by the Fund but is instead a settlement between the
Fund and the broker of the amount one would owe the other if
the futures contract expired. In computing daily net asset
value, the Fund will mark-to-market its open futures
position.
Although some futures contracts call for making or
taking delivery of the underlying securities, generally
these obligations are closed out prior to delivery of
offsetting purchases or sales of matching futures
contracts (same exchange,
underlying security or index, and delivery month). If
an offsetting purchase price is less than the original
sale price, the Fund generally realizes a capital gain,
or if it is more, the Fund generally realizes a capital
loss. Conversely, if an offsetting sale price is more
than the original purchase price, the Fund generally
realizes a capital gain, or if it is less, the Fund
generally realizes a capital loss. The transaction costs
must also be included in these calculations. When purchasing a
futures contract, the Fund will maintain with its
Custodian (and mark-to-market on a daily basis) cash or
liquid securities that, when added to the amounts
deposited with a futures commission merchant ("FCM") as
margin, are equal to the market value of the futures
contract.
When selling a futures contact, a Fund will
maintain with its custodian in a segregated account
(and mark-to-market on a daily basis) cash or liquid
securities that, when added to the amounts deposited
with an FCM as margin, are equal to the market value of
the instruments underlying the contract. Alternatively,
the Fund may "cover" its position by owning the instruments
underlying the contract.
The Fund will only enter into futures contracts
which are standardized and traded on a U.S. or foreign
exchange, board of trade, or similar entity or quoted
on an automated quotation system. The Fund will not
enter into a futures contract if, immediately
thereafter, the aggregate initial margin deposits for
futures contracts held by the Fund plus premiums paid by it for
open futures option positions, less the amount by which
any such positions are "in-the-money," would exceed 5%
of the liquidation value of the Fund's portfolio (or
the Fund's net asset value), after taking into account
unrealized profits and unrealized losses on any such
contracts the Fund has entered into.
The requirements for qualification as a regulated
investment company also may limit the extent to which
the Fund may enter into futures.
FOREIGN CURRENCY FUTURES CONTRACTS. The Fund may
engage in foreign currency futures contracts for
hedging purposes. A foreign currency futures contract
provides for the future sale by one party and purchase
by another party of a specified quantity of a foreign
currency at a specified price and time.
RISKS ASSOCIATED WITH FUTURES. There are several
risks associated with the use of futures contracts as
hedging techniques. A purchase or sale of a futures
contract may result in losses in excess of the amount
invested in the futures contract. There can be no
guarantee that there will be a correlation between
price movements in the hedging vehicle and in the
Fund's portfolio securities being hedged. In addition, there
are significant differences between the securities and
futures markets that could result in an imperfect
correlation between the markets, causing a given hedge
not to achieve its objectives.
The degree of imperfection of correlation depends on
circumstances such as variations in speculative market
demand for futures on securities, including technical
influences in futures trading, and differences between
the financial instruments being hedged and the
instruments underlying the standard contracts available
for trading in such respects as interest rate levels,
maturities, and creditworthiness of issuers. A decision as to
whether, when and how to hedge involves the exercise of
skill and judgment, and even a well-conceived hedge may
be unsuccessful to some degree because of market
behavior or unexpected interest rate trends.
Futures exchanges may limit the amount of
fluctuation permitted in certain futures contract
prices during a single trading day. The daily limit
establishes the maximum amount that the price of a
futures contract may vary either up or down from the
previous day's settlement price at the end of the current
trading session. Once the daily limit has been reached in a
futures contract subject to the limit, no more trades may be
made on that day at a price beyond that limit. The
daily limit governs only price movements during a
particular trading day and therefore does not limit
potential losses because the limit may work to prevent
the liquidation of unfavorable positions. For example,
futures prices have occasionally moved to the daily
limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of positions
and subjecting some holders of futures contracts to
substantial losses.
There can be no assurance that a liquid market
will exist at a time when the Fund seeks to close out a
futures position, and the Fund would remain obligated
to meet margin requirements until the position is
closed. In addition, there can be no assurance that an
active secondary market will continue to exist.
Currency futures contracts may be traded on
foreign exchanges. Such transactions may not be
regulated as effectively as similar transactions in the
United States; may not involve a clearing mechanism and
related guarantees; and are subject to the risk of
governmental actions affecting trading in, or the prices
of, foreign securities. The value of such position also could 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.
RISKS OF SECURITIES INDEX FUTURES. The Fund's
success in using hedging techniques depends, among
other things, on IMI's ability to predict correctly the
direction and volatility of price movements in the
futures markets as well as in the
securities markets and to select the proper type, time
and duration of hedges. The skills necessary for
successful use of hedges are different from those used
in the selection of individual stocks.
The Fund's ability to hedge effectively all or a
portion of its securities through transactions in index
futures (and therefore the extent of its gain or loss
on such transactions) depends on the degree to which
price movements in the underlying index correlate with
price movements in the Fund's securities. Insofar as
such securities do not duplicate the components of an
index, the correlation probably will not be perfect.
Consequently, the Fund will bear the risk that the prices of the
securities being hedged will not move in the same amount
as the hedging instrument. This risk will increase as
the composition of the Fund's portfolio diverges from
the composition of the hedging instrument.
Although the Fund intends to establish positions
in these instruments only when there appears to be an
active market, there is no assurance that a liquid
market will exist at a time when the Fund seeks to
close a particular futures position. Trading could be
interrupted, for example, because of supply and demand
imbalances arising from a lack of either buyers or sellers. In
addition, the futures exchanges may suspend trading after
the price has risen or fallen more than the maximum
amount specified by the exchange. In some cases, the
Fund may experience losses as a result of its inability
to close out a position, and it may have to liquidate
other investments to meet its cash needs.
Although some index futures contracts call for
making or taking delivery of the underlying securities,
generally these obligations are closed out prior to
delivery by offsetting purchases or sales of matching
futures contracts (same exchange, underlying security
or index, and delivery month). If an offsetting
purchase price is less than the original sale price,
the Fund generally realizes a capital gain, or if it is more, the
Fund generally realizes a capital loss. Conversely, if
an offsetting sale price is more than the original
purchase price, the Fund generally realizes a capital
gain, or if it is less, the Fund generally realizes a
capital loss. The transaction costs must also be
included in these calculations.
The Fund will only enter into index futures
contracts that are standardized and traded on a U.S. or
foreign exchange or board of trade, or similar entity,
or quoted on an automated quotation system. The Fund
will use futures contracts only for "bona fide hedging"
purposes, as such term is defined in applicable
regulations of the CFTC.
When purchasing an index futures contract, the
Fund will maintain with its custodian in a segregated
account (and mark-to- market on a daily basis) cash or
liquid securities that, when added to the amounts
deposited with a futures commission merchant
("FCM") as margin, are equal to the market value of the
futures contract.
When selling an index futures contract, the Fund
will maintain with its custodian in a segregated
account (and mark-to- market on a daily basis) cash or
liquid securities that, when added to the amounts
deposited with an FCM as margin, are equal to the
market value of the instruments underlying the contract.
Alternatively, the Fund may "cover" its position by owning the
instruments underlying the contract (or, in the case of an
index futures contract, a portfolio with a volatility
substantially similar to that of the index on which the
futures contract is based).
COMBINED TRANSACTIONS
The Fund may enter into multiple transactions,
including multiple options transactions, multiple
futures transactions, multiple currency transactions
(including forward currency contracts) and multiple
interest rate transactions and some combinations of
futures, options, currency and interest rate
transactions ("component" transactions), instead of a single
transaction, as part of a single or combined strategy when,
in the opinion of IMI, it is in the best interests of
the Fund to do so. A combined transaction will usually
contain elements of risk that are present in each of
its component transactions. Although combined
transactions are normally entered into based on IMI's
judgment that the combined strategies will reduce risk or
otherwise more effectively achieve the desired portfolio
management goal, it is possible that the combination will
instead increase such risks or hinder achievement of
the management objective.
RESTRICTED AND ILLIQUID SECURITIES
Restricted securities may be sold only in
privately negotiated transactions or in a public
offering with respect to which a registration statement
is in effect under the Securities Act of 1933. Where a
registration statement is required, the Fund may be
required to bear all or part of the registration
expenses. 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. There may also be a lapse of time
between the Fund's decision to sell a restricted or
illiquid security and the point at which the Fund is
permitted or able to do so. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a
less favorable price than the price that prevailed when
it decided to sell. Since it is not possible to
predict with assurance that the market for securities
eligible for resale under Rule 144A will continue to be
liquid, the Fund will monitor each of its investments
in these securities, focusing on factors such as
valuation, liquidity and availability of information. This
investment practice could have the effect of increasing the
level
of illiquidity in the Fund to the extent that qualified
institutional buyers become, for a time, uninterested in
purchasing these restricted securities.
INVESTMENT RESTRICTIONS
The Fund's investment objective, as set forth in
the Prospectus under "Investment Objectives and
Policies," and the investment restrictions set forth
below are fundamental policies of the Fund and may not
be changed without the approval of a majority (as
defined in the 1940 Act) of the Fund's outstanding
voting shares. Under these restrictions, the Fund may not:
(i) with respect to 75% of its total assets,
purchase the securities of any one
issuer, other than securities issued by
the U.S. Government or its agencies or
instrumentalities, if immediately after
such purchase more than 5% of the value of
the total assets of the Fund would be invested in
securities of such issuer, or if immediately after
such purchase the Fund would own more than 10%
of the outstanding voting securities of
such issuer;
(ii) invest in real estate, real estate
mortgage loans or interests in oil, gas
and/or mineral exploration or
development programs, although the Fund
may (a) purchase and sell marketable
securities of issuers which are secured by real
estate, (b) purchase and sell securities of
issuers that invest or deal in real estate, (c)
purchase and sell securities of issuers that
invest in oil, gas and/or mineral exploration or
development programs, (d) enter into
forward foreign currency contracts as
described in the Fund's prospectus, and
(e) write or buy puts, calls, straddles
or spreads and may invest in commodity
futures contracts and options on futures
contracts;
(iii) make investments in securities for the
purpose of exercising control over or
management of the issuer;
(iv) purchase securities on margin, except
such short- term credits as are necessary
for the clearance of transactions, but
the Fund may make margin deposits in
connection with transactions in options,
futures and options on futures;
(v) make loans, except this restriction
shall not prohibit (a) the purchase and
holding of a portion of an issue of
publicly distributed debt securi- ties,
(b) the entry into repurchase agreements
with banks or broker-dealers, or (c) the lending
of the Fund's portfolio securities in
accordance with applicable guidelines
established by the Securities and
Exchange Commission (the "SEC") and any
guidelines established by the Trust's
Trustees;
(vi) borrow money, except as a temporary
measure for extraordinary or emergency
purposes, and provided that the Fund
maintains asset coverage of 300% for all
borrowings;
(vii) act as an underwriter of securities,
except to the extent that, in connection
with the sale of securities, it may be
deemed to be an underwriter under
applicable securities laws;
(viii) make an investment in securities of
companies in any one industry (except
obligations of domestic banks or the
U.S. Government, its agencies,
authorities, or instrumentalities) if such
investment would cause investments in such
industry to exceed 25% of the market value of the
Fund's total assets at the time of such
investment; or
(ix) issue senior securities, except as
appropriate to evidence indebtedness
which it is permitted to incur, and
except to the extent that shares of the
separate classes or series of the Trust may be
deemed to be senior securities; provided that
collateral arrangements with respect to currency-
related contracts, futures contracts, options or
other permitted investments, including
deposits of initial and variation
margin, are not considered to be the
issuance of senior securities for
purposes of this restriction.
Under the 1940 Act, the Fund is permitted, subject
to the above investment restrictions, to borrow money
only from banks. Further, the Fund has no current
intention of lending portfolio securities.
ADDITIONAL RESTRICTIONS
The Fund has adopted the following additional
restrictions which are not fundamental and which may be
changed without shareholder approval, to the extent
permitted by applicable law, regulation or regulatory
policy. Under these restrictions, the Fund may not:
(i) sell securities short, except for short
sales "against the box";
(ii) purchase or sell interests in oil, gas
or mineral
leases (other than securities of
companies that invest in or sponsor such
programs);
(iii) purchase securities of other investment
companies, except in connection with a
merger, consolidation or sale of assets,
and except that it may purchase shares
of other investment companies subject to
such restrictions as may be imposed by the
Investment Company Act of 1940 and rules
thereunder;
(iv) participate on a joint or a joint and
several basis in any trading account in
securities. The "bunching" of orders of
the Fund and of other accounts under the
investment management of the Fund's
investment adviser, Mackenzie Financial
Corporation (the "Investment Adviser") for the
sale or purchase of portfolio securities shall not
be considered participation in a joint securities
trading account; or
(v) invest more than 15% of its net assets
taken at market value at the time of
investment in "illiquid securities."
Illiquid securities may include
securities subject to legal or contractual
restrictions on resale (including private
placements), repurchase agreements maturing in
more than seven days, certain options traded over
the counter that the Fund has purchased,
securities being used to cover certain options
that a fund has written, securities for which
market quotations are not readily
available, or other securities which
legally or in IMI's opinion, subject to
the Board's supervision, may be deemed
illiquid, but shall not include any
instrument that, due to the existence of a trading
market, to the Fund's compliance with certain
conditions intended to provide liquidity, or to
other factors, is liquid.
Whenever an investment objective, policy or
restriction set forth in the Prospectus or this SAI
states a maximum percentage of assets that may be
invested in any security or other asset or describes a
policy regarding quality standards, such percentage
limitation or standard shall, unless otherwise indicated, apply
to the Fund only at the time a transaction is entered
into. Accordingly, if a percentage limitation is
adhered to at the time of investment, a later increase
or decrease in the percentage which results from
circumstances not involving any affirmative action by
the Fund, such as a change in market conditions or a
change in the Fund's asset level or other circumstances beyond
the Fund's control, will not be considered a violation.
ADDITIONAL RIGHTS AND PRIVILEGES
The Trust offers and (except as noted below) bears
the cost of providing to investors the following rights
and privileges. The Trust 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.
Certain of the rights and privileges described
below refer to funds other than the Fund whose shares
are distributed by Ivy Mackenzie Distributors, Inc.
("IMDI") (formerly known as Mackenzie Ivy Funds
Distribution, Inc.). These funds are: Ivy Bond Fund,
Ivy Growth Fund, Ivy Growth with Income Fund, Ivy
Emerging Growth Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy
Global Fund, Ivy International Fund, Ivy Latin America
Strategy Fund, Ivy New Century Fund, Ivy International
Bond Fund, Ivy Short-Term Bond Fund, Ivy Money Market
Fund, Ivy Global Science & Technology Fund, Ivy
International Value Fund and Ivy Asia Pacific Fund (the
other sixteen series of the Trust); and Mackenzie
California Municipal Fund, Mackenzie Limited Term
Municipal Fund, Mackenzie National Municipal Fund and Mackenzie
New York Municipal Fund (the four series of Mackenzie
Series Trust)(collectively, with the Fund, the "Ivy
Mackenzie Funds"). Shareholders should obtain a
current prospectus for these funds before exercising
any right or privilege that may relate to them.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method is available for
Class A, Class B and Class C shares. The minimum
initial and subsequent investment pursuant to this plan
is $50 per month (except in the case of a tax qualified
retirement plan for which the minimum initial and
subsequent investment is $25 per month). A shareholder
may terminate the Automatic Investment Method at any
time upon delivery to Ivy Mackenzie Services Corp. ("IMSC")
(formerly known as Mackenzie Ivy Investor Services Corp.) of
telephone instructions or written notice from the
shareholder. See "Automatic Investment Method" in the
Account Application.
EXCHANGE OF SHARES
As described in the Prospectus, shareholders of
the Fund have an exchange privilege with certain other
Ivy Mackenzie Funds. Before effecting an exchange,
shareholders of the Fund should obtain and read the
currently effective prospectus for the Ivy or Mackenzie
Fund into which the exchange is to be made.
INITIAL SALES CHARGE SHARES. Class A shareholders
may exchange their Class A shares ("outstanding Class A
shares") for Class A shares of another Ivy or Mackenzie
Fund ("new Class A Shares") on the basis of the
relative net asset value per Class A share, plus (in
the case of funds other than Ivy Money Market Fund) 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 outstanding Class A shares that have been
invested for a period of 12 months or longer.) Class A
shareholders may also exchange their Class A shares for
Class A shares of Ivy Money Market Fund (no initial
sales charge will be assessed at the time of such an
exchange).
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 Ivy or Mackenzie 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
the Fund's CDSC period following an exchange if such
schedule is higher (or such period is longer) than the
CDSC period, if any, applicable 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 Ivy or Mackenzie 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 the Fund's CDSC schedule (or period)
following an exchange if such schedule is higher (or such
period is longer) than the CDSC schedule (or period)
applicable to the new Class B shares.
Class B shares of the Fund acquired through an
exchange of Class B shares of another Ivy or Mackenzie
Fund will be subject to the Fund's CDSC schedule (or
period) if such schedule is higher (or such period is
longer) than the CDSC schedule (or period) applicable
to the Ivy or Mackenzie Fund from which the exchange
was made.
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 CDSC table ("Table 1") applies to
Class B shares of the Fund, Ivy Global Fund, Ivy Growth
Fund, Ivy Growth
with Income Fund, Ivy Emerging Growth Fund, Ivy
International Fund, Ivy China Region Fund, Ivy Latin
America Strategy Fund, Ivy New Century Fund, Ivy
International Bond Fund, Ivy Bond Fund, Ivy Canada
Fund, Ivy Global Science & Technology Fund, Ivy
International Value Fund, Ivy Asia Pacific Fund, Mackenzie
California Municipal Fund, Mackenzie National Municipal Fund
and Mackenzie New York Municipal Fund ("Table 1
Funds"):
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF DOLLAR
AMOUNT SUBJECT TO YEAR SINCE PURCHASE
CHARGE
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and thereafter 0%
The following CDSC table ("Table 2") applies to
Class B shares of Ivy Short-Term Bond Fund and
Mackenzie Limited Term Municipal Fund ("Table 2
Funds"):
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF DOLLAR
AMOUNT SUBJECT TO YEAR SINCE PURCHASE
CHARGE
First 3%
Second 2.5%
Third 2%
Fourth 1.5%
Fifth 1%
Sixth and thereafter 0%
The CDSC schedule for Table 1 Funds is higher (and
the period is longer) than the CDSC schedule (and
period) for Table 2 Funds.
If a shareholder exchanges Class B shares of a
Table 1 Fund for Class B shares of a Table 2 Fund,
Table 1 will continue to apply to the Class B shares
following the exchange. For example, an investor may
decide to exchange Class B shares of a Table 1 Fund
("outstanding Class B shares") for Class B shares of a Table
2 Fund ("new Class B shares") after having held the
outstanding Class B shares for two years. The 4% CDSC
that generally would apply to a redemption of
outstanding Class B shares held for two years would not
be deducted at the time of the exchange. If, three
years later, the investor redeems the new Class B shares, a
2% CDSC will be assessed upon the redemption because by
"tacking" the two year holding period of the
outstanding Class B shares onto the three year holding
period of the new Class B shares, the
investor will be deemed to have held the new Class B
shares for five years.
If a shareholder exchanges Class B shares of a
Table 2 Fund for Class B shares of a Table 1 Fund,
Table 1 will apply to the Class B shares following the
exchange. For example, an investor may decide to
exchange Class B shares of a Table 2 Fund ("outstanding
Class B shares") for Class B shares of a Table 1 Fund
("new Class B shares") after having held the outstanding
Class B shares for two years. The 2.5% CDSC that generally would
apply to a redemption of outstanding Class B shares held
for two years would not be deducted at the time of the
exchange. If, three years later, the investor redeems
the new Class B shares, a 2% CDSC will be assessed upon
the redemption because by "tacking" the two year
holding period of the outstanding Class B shares onto
the three year holding period of the new Class B shares, the
investor will be deemed to have held the new Class B shares
for five years.
CLASS C. Class C shareholders may exchange their
Class C shares ("outstanding Class C shares") for Class
C shares of another Ivy or Mackenzie 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.)
ALL CLASSES. The minimum amount which may be
exchanged into an Ivy Mackenzie Fund in which shares
are not already held is $1,000. No exchange out of the
Fund (other than by a complete exchange of all Fund
shares) may be made if it would reduce the
shareholder's interest in the Fund to less than $1,000.
Exchanges are available only in states where the exchange can
legally be made.
Each exchange will be made on the basis of the
relative net asset values per share of the Fund of the
Ivy Mackenzie Funds next computed following receipt by
IMSC of telephone instructions or a properly executed
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 Ivy
Mackenzie Funds will 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 Fund 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 the 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 back-dated. A shareholder may include,
as an accumulation credit, the value (at the applicable offering
price) of all Class A shares of the Fund, Ivy Bond Fund,
Ivy Emerging Growth Fund, Ivy Global Fund, Ivy Growth
Fund, Ivy Growth with Income Fund, Ivy International
Bond Fund, Ivy Short- Term Bond Fund, Ivy Global Science
& Technology Fund, Ivy International Value Fund, Ivy
Asia Pacific Fund, Mackenzie California Municipal Fund,
Mackenzie Limited Term Municipal Fund, Mackenzie
National Municipal Fund, and Mackenzie New York
Municipal Fund (and shares that have been exchanged into Ivy
Money Market Fund from any of the other funds in the Ivy
Mackenzie 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, the Fund's transfer agent 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 thereof before signing.
RETIREMENT PLANS
Shares may be purchased in connection with several
types of tax-deferred retirement plans. Shares of more
than one fund distributed by IMDI may be purchased in a
single application establishing a single plan account,
and shares held in such an account may be exchanged
among the funds in the Ivy Mackenzie 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
account
For shareholders whose retirement accounts are
diversified across several funds of the Ivy Mackenzie
Funds, the annual maintenance fee will be limited to
not more than $20.
The following discussion describes the tax
treatment of certain tax-deferred retirement plans
under current Federal income tax law. State income tax
consequences may vary. An individual considering the
establishment of a retirement plan should consult with
an attorney and/or an accountant with respect to the
terms and tax aspects of the plan.
INDIVIDUAL RETIREMENT ACCOUNTS: Shares of the
Trust 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, which may impose a charge for
establishing the account. Individuals should consult
their tax advisers before investing IRA assets in the Fund (which
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. However, if one spouse has (or
elects to be treated as having) no earned income for
IRA purposes for a year, the other spouse may
contribute to an IRA on his or her behalf. In such a
case, the working spouse may contribute up to the lesser of
$2,250 or 100% or his or her compensation or earned income for
the year to IRAs for both spouses, provided that no more
than $2,000 is contributed to the IRA of one spouse.
Rollover contributions are not subject to these limits.
An individual may deduct his or her annual
contributions to an IRA in computing his or her Federal
income tax within the limits described above, provided
he or she (or his or her spouse, if they file a joint
Federal income tax return) is not an active participant
in a qualified retirement plan (such as a qualified
corporate, sole proprietorship, or partnership pension, profit
sharing, 401(k) or stock bonus plan), qualified annuity
plan, 403(b) plan, simplified employee pension, or
governmental plan. If he or she (or his or her spouse)
is an active participant, a full deduction is only
available if he or she has adjusted gross income that
is less than a specified level ($40,000 for married
couples filing a joint return, $25,000 for single individuals,
and $0 for a married individual filing a separate return).
The deduction is phased out ratably for active
participants with adjusted gross income between certain
levels ($40,000 and $50,000 for married individuals
filing a joint return, $25,000 and $35,000 for single
individuals, and $0 and $10,000 for married individuals
filing separate returns). Individuals who are active
participants with income above the specified phase-out level may
not deduct their IRA contributions. Rollover
contributions are not includable in income for Federal
income tax purposes and therefore are not deductible
from it.
Generally, earnings on an IRA are not subject to
current Federal income tax until distributed.
Distributions attributable to tax-deductible
contributions and to IRA earnings are taxed as ordinary
income. Distributions of non-deductible contributions
are not subject to Federal income tax. In general, distributions
from an IRA to an individual before he or she reaches
age 59-1/2 are subject to a nondeductible penalty tax
equal to 10% of the taxable amount of the distribution.
The 10% penalty tax does not apply to amounts withdrawn
from an IRA after the individual reaches age 59-1/2,
becomes disabled or dies, or if withdrawn in the form
of substantially equal payments over the life or life
expectancy of the individual and his or her designated benefi-
ciary, if any, or rolled over into another IRA.
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 distribu- tions
will result in the imposition of a 50% non-deductible
penalty tax. Extremely large distributions in any one year from
an IRA (or from an IRA and other retirement plans) may
also result in a penalty tax.
QUALIFIED PLANS: For those self-employed
individuals who wish to purchase shares of one or more
of the funds in the Ivy Mackenzie 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 Fund's transfer agent will furnish custodial
services to the employer and any participating
employees.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(b)(7) ACCOUNT"):
Section 403(b)(7) of the Internal Revenue Code of 1986,
as amended (the "Code"), permits public school systems
and certain charitable organizations to use mutual fund
shares held in a custodial account to fund deferred
compensation arrangements with their employees. A custodial
account agreement is available for those employers whose
employees wish to purchase shares of the Trust in conjunction
with such an arrangement. The sales charge for
purchases of less than $10,000 of Class A shares is set
forth under "Retirement Plans" in the Prospectus.
Sales charges for purchases of $10,000 or more of Class
A shares are the same as those set forth under "Initial
Sales Charge Alternative -- Class A Shares" in the
Prospectus. 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.
REINVESTMENT PRIVILEGE
Shareholders who have redeemed Class A shares of
the 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."
RIGHTS OF ACCUMULATION
A scale of reduced sales charges applies to any
investment of $50,000 or more in Class A shares of the
Fund. 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). It is also applicable to current purchases of
all of the funds in the Ivy Mackenzie Funds (except Ivy
Money Market Fund) by any of the persons enumerated
above, where the aggregate quantity of Class A shares
of the Fund, Ivy Global Fund, Ivy Growth Fund, Ivy Growth
with Income Fund, Ivy Emerging Growth Fund, Ivy China Region
Fund, Ivy Latin America Strategy Fund, Ivy New Century Fund,
Ivy International Bond Fund, Ivy International Fund,
Ivy Bond Fund, Ivy Short-Term Bond Fund, Ivy Canada
Fund, Ivy Global Science & Technology Fund, Ivy
International Value Fund, Ivy Asia Pacific Fund,
Mackenzie National Municipal Fund, Mackenzie California
Municipal Fund, Mackenzie Limited Term Municipal Fund and
Mackenzie New York Municipal Fund (and shares that have been
exchanged into Ivy Money Market Fund from any of the other
funds in the Ivy Mackenzie 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 $50,000 or more for the Fund, Ivy Global
Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy Emerging
Growth Fund, Ivy International Fund, Ivy China Region
Fund, Ivy Latin America Strategy Fund, Ivy New Century
Fund, Ivy Canada Fund, Ivy Global Science & Technology
Fund, Ivy International Value Fund and Ivy Asia Pacific
Fund; $100,000 or more for International Bond Fund, Ivy
Bond Fund, Mackenzie National Municipal Fund, Mackenzie
California Municipal Fund and Mackenzie New York
Municipal Fund; or $25,000 or more for Mackenzie Limited
Term Municipal Fund; or $1,000,000 or more for Ivy Short-Term
Bond Fund.
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 Fund's records.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may establish a Systematic
Withdrawal Plan (a "Withdrawal Plan"), by telephone
instructions or by delivery to IMSC of a written
election to have his or her shares withdrawn
periodically, accompanied by a surrender to IMSC of all
share certificates then outstanding in the
shareholder's name, properly endorsed by the
shareholder. To be eligible to elect a Withdrawal
Plan, a shareholder must have at least $5,000 in his or
her account. A Withdrawal Plan may not be established if the
investor is utilizing 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 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
Trust or IMSC may terminate the Withdrawal Plan option
at any time after reasonable notice to shareholders.
GROUP SYSTEMATIC INVESTMENT PROGRAM
Shares of the Fund may be purchased in connection
with investment programs established by employee or
other groups using systematic payroll deductions or
other systematic payment arrangements. The Trust does
not itself organize, offer or administer any such
programs. However, it 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 Fund 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 Trust
reserves the right to refuse a purchase 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, as
described in the Prospectus, 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 Trust and IMI
each currently charge a maintenance fee of $3.00 (or
portion thereof) for each twelve-month period (or
portion thereof) that the account is maintained. The Trust
may collect this 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 the
fee. The Trust reserves the right to change such fees
from time to time without advance notice.
BROKERAGE ALLOCATION
Subject to the overall supervision of the
President and the Board, IMI places orders for the
purchase and sale of the Fund's portfolio securities.
All portfolio transactions are effected at the best
price and execution obtainable. Purchases and sales of
debt securities are usually principal transactions, and therefore
brokerage commissions are usually not required to be
paid by the Fund for such purchases and sales (although
the price paid generally includes undisclosed
compensation to the dealer). The prices paid to
underwriters of newly-issued securities usually include
a concession paid by the issuer to the underwriter, and
purchases of after-market securities from dealers normally
reflect the spread between the bid and asked prices. In
connection with OTC transactions, IMI attempts to deal directly
with the principal market makers, except in those
circumstances where believes that a better price and
execution are available elsewhere.
IMI selects broker-dealers to execute transactions
and evaluates the reasonableness of commissions on the
basis of quality, quantity, and the nature of the
firms' professional services. Commissions to be
charged and the rendering of investment services,
including statistical, research, and counseling
services by brokerage firms, are factors to be
considered in the placing of brokerage business. The types of
research services provided by brokers may include general
economic and industry data, and information on securities
of specific companies. Research services furnished by
brokers through whom the Trust effects securities
transactions may be used by in servicing all of its
accounts. In addition, not all of these services may
be used by in connection with the services it provides
the Fund or the Trust. IMI may consider sales of
shares of the Fund as a factor in the selection of broker-dealers
and may select broker-dealers who provide it with
research services. IMI will not, however, execute
brokerage transactions other than at the best price and
execution.
The Fund may, under some circumstances, accept
securities in lieu of cash as payment for Fund shares.
The Fund will accept securities only to increase its
holdings in a portfolio security or to take a new
portfolio position in a security that IMI deems to be a
desirable investment for the Fund. While no minimum has
been established, it is expected that the Fund will not accept
securities having an aggregate value of less than $1
million. The Trust may reject in whole or in part any
or all offers to pay for Fund shares with securities
and may discontinue accepting securities as payment for
Fund shares at any time without notice. The Trust will
value accepted securities in the manner and at the
same time provided for valuing portfolio securities of
the Fund, and Fund shares will be sold for net asset
value determined at the same time the accepted
securities are valued. The Trust will only accept
securities delivered in proper form and will not accept
securities subject to legal restrictions on transfer. The
acceptance of securities by the Trust must comply with the
applicable laws of certain states.
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of the Trust,
their business addresses and principal occupations
during the past five years are:
POSITION
WITH THE BUSINESS
AFFILIATIONS NAME, ADDRESS, AGE TRUST AND
PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman,
Dynamics 60 Concord Street Research
Corp. instruments Wilmington, MA 01887
and controls); Director, Age: 72
Burr-Brown Corp.
(operational amplifiers);
Director, Metritage
Incorporated (level
measuring instruments);
Trustee of Mackenzie Series
Trust (1992-present).
James W. Broadfoot Vice Vice President, T. Rowe
President Price Associates
Inc. (1972-1982);
Partner, Johnson,
Valliant &
Broadfoot, Inc. (1982-
1987); Director and Senior
Vice President of Mackenzie
Investment Mangement Inc.
(1995-present); Senior Vice
President of Mackenzie
Investment Management
Inc. (1994-1995);
Executive Vice
President of Ivy
Management, Inc. (1996-
present); Senior Vice
President of Ivy
Management, Inc. (1992-
1996).
Paul H. Broyhill Trustee Chairman, BMC
Fund, Inc. 800 Hickory Blvd. (1983-
present); Chairman, Golfview Park
Broyhill Family Foundation, Lenoir, NC 28645
Inc. (1983-Present); Age: 72
Chairman and President,
Broyhill Investments, Inc.
(1983-present); Chairman,
Broyhill Timber Resources
(1983-present); Management
of a personal
portfolio of
fixed-income and equity
investments (1983-present);
Trustee of Mackenzie Series
Trust (1988-present);
Director of The
Mackenzie Funds
Inc. (1988-1995).
Stanley Channick Trustee President, The Whitestone
11 Bala Avenue Corporation
(insurance Bala Cynwyd, PA 19004
agency); President, Scott Age: 71
Management Company
(administrative services
for insurance companies);
President, The Channick
Group (consultants to
insurance companies and
national trade
associations); Director of
The Mackenzie Funds Inc.
(1994-1995).
Frank W. DeFriece, Jr. Trustee Director, Manager
and Vice The Landmark Centre
President, Massengill- 113 Landmark Lane,
DeFriece Foundation Suite B
(charitable organization) Bristol, TN 37625
(1950-present); Trustee and Age: 75
Second Vice Chairman, East
Tennessee Public
Communications Corp. (WSJK-
TV) (1984-present); Trustee
of Mackenzie Series
Trust (1985-
present); Director of
The Mackenzie Funds Inc.
(1987-1995).
Roy J. Glauber Trustee Mallinckrodt Professor of
Lyman Laboratory Physics, Harvard
of Physics University (1974-
present); Harvard University Trustee
of Mackenzie Series Cambridge, MA 02138
Trust (1994-present). Age: 70
Michael G. Landry Trustee President,
Chairman and 700 South Federal Hwy. and
Director of Mackenzie Suite 300
President Investment Management Boca Raton, FL
33432 Inc. (1987-present); Age: 49
President and Director [*Deemed
to be an of Ivy Management, Inc.
"interested person" (1992-present); Chairman
of the Trust, as and Director of
defined under the Mackenzie Ivy Investor
1940 Act.] Services Corp. (1993-
present);
Director and
President of Mackenzie Ivy
Funds Distribution, Inc.
(1993-1994); Chairman and
Director of Mackenzie Ivy
Funds
Distribution, Inc.
(1994-present); Director
and President of The
Mackenzie Funds Inc. (1987-
1995); Trustee and
President of Mackenzie
Series Trust (1987-
present).
Michael R. Peers Trustee Chairman of the
Board, 737 Periwinkle Way and Ivy
Management, Inc. Sanibel, FL 33957 Chairman
(1984-1991); Chairman Age: 66 of the
of the Board, Ivy Fund [*Deemed to be an
Board (1974-present); Private "interested
person" Investor.
of the Trust, as
defined under the
1940 Act.]
Joseph G. Rosenthal Trustee Chartered
Accountant 110 Jardin Drive (1958-
present); Trustee Unit #12
of Mackenzie Series Concord, Ontario Canada
Trust (1985-present); L4K 2T7
Director of The Mackenzie Age: 61
Funds Inc. (1987-1995).
Richard N. Silverman Trustee Formerly
President, 18 Bonnybrook Road Hy-Sil
Manufacturing Waban, MA 02168
Company, a division of Age: 71
Van Leer, U.S.A., Inc.
(gift packaging materials
and metalized film
products); Formerly
Director, Waters
Manufacturing Co.
(manufacturer of electronic
parts); Director, Panorama
Television Network.
J. Brendan Swan Trustee President,
Airspray 4701 North Federal Hwy.
International, Inc.; Suite 465
Joint Managing Director, Pompano Beach, FL 33064
Airspray International Age: 65
B.V. (an environmentally
sensitive packaging
company); Director, The
Mackenzie Funds Inc. (1992-
1995); Trustee of Mackenzie
Series Trust (1992-
present).
Keith J. Carlson Vice Senior Vice
President 700 South Federal Hwy. President and
Director of Mackenzie Suite 300
Investment Management,
Boca Raton, FL 33432 Inc. (1994-
present); Age: 39 Senior
Vice President,
Secretary and Treasurer of
Mackenzie Investment
Management Inc. (1985-
1994); Senior Vice
President and Director of
Ivy Management, Inc. (1994-
present); Senior Vice
President, Treasurer and
Director of Ivy Management,
Inc. (1992-1994);
Vice President of
The Mackenzie
Funds Inc. (1987-1995);
President and Director of
Mackenzie Ivy Investor
Services Corp. (1993-1996);
Vice President of Mackenzie
Series Trust (1994-
present); Treasurer of
Mackenzie Series Trust
(1985-1994); President
and Director of
Ivy Mackenzie
Distributors, Inc. (1994-
present); Executive Vice
President and Director of
Mackenzie Ivy Funds
Distribution, Inc. (1993-
1994).
C. William Ferris Secretary/ Senior Vice
President, 700 South Federal Hwy. Treasurer
Secretary/Treasurer Suite 300
and Director of Boca Raton, FL 33432
Mackenzie Investment Age: 51
Management Inc. (1994-
present); Senior Vice
President, Finance and
Administration/Compliance
Officer of Mackenzie
Investment Management Inc.
(1989-1994); Senior Vice
President, Secretary/
Treasurer and Clerk of Ivy
Management, Inc. (1994-
present); Senior
Vice President,
Finance and
Administration/Compliance
Officer of Ivy Management,
Inc. (1992-1994); Senior
Vice President, Secretary/
Treasurer and Clerk of Ivy
Management, Inc. (1989-
1994); Senior Vice
President, Secretary/
Treasurer of
Mackenzie Ivy
Funds Distribution, Inc.
(1994-present); Secretary/
Treasurer and Director of
Mackenzie Ivy Funds
Distribution, Inc. (1993-
1994); Secretary/Treasurer
and Director of Mackenzie
Ivy Investor Services
Corp.
(1993-1996); President and
Director of Ivy Mackenzie
Services Corp. (1996-
present); Secretary/
Treasurer of The Mackenzie
Funds Inc. (1993-1995);
Secretary/Treasurer of
Mackenzie Series Trust
(1994-present).
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI
Employees of IMI are permitted to make personal
securities transactions, subject to the requirements
and restrictions set forth in IMI's Code of Ethics.
The Code of Ethics is designed to identify and address
certain conflicts of interest between personal
investment activities and the interests of investment
advisory clients such as the Fund. Among other things, the Code
of Ethics, which generally complies with standards
recommended by the Investment Company Institute's
Advisory Group on Personal Investing, prohibits certain
types of transactions absent prior approval, imposes
time periods during which personal transactions may not
be made in certain securities, and requires the
submission of duplicate broker confirmations and monthly
reporting of securities transactions. Additional restrictions
apply to portfolio managers, traders, research analysts and
others involved in the investment advisory process.
Exceptions to these and other provisions of the Code of
Ethics may be granted in particular circumstances after
review by appropriate personnel.
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1995)
TOTAL PENSION OR
COMPENSA- RETIREMENT
TION FROM
BENEFITS ESTIMATED TRUST AND
AGGREGATE ACCRUED AS ANNUAL FUND COM-
COMPENSA- PART OF BENEFITS PLEX PAID
NAME, TION FUND UPON TO
POSITION FROM TRUST EXPENSES RETIREMENT
TRUSTEES
John S. 7,112 N/A N/A
8,000 Anderegg, Jr.
(Trustee)
Paul H. 7,112 N/A N/A
8,000 Broyhill
(Trustee)
Stanley -0- N/A N/A
8,000 Channick[*]
(Trustee)
Frank W. 7,112 N/A N/A
8,000 DeFriece, Jr.
(Trustee)
Roy J. -0- N/A N/A
8,000 Glauber[*]
(Trustee)
Michael G. -0- N/A N/A
- -0- Landry
(Trustee and
President)
Michael R. -0- N/A N/A
- -0- Peers
(Trustee and
Chairman of
the Board)
Joseph G. 7,112 N/A N/A
8,000 Rosenthal
(Trustee)
Richard N. 8,000 N/A N/A
8,000 Silverman
(Trustee)
J. Brendan 7,112 N/A N/A
8,000 Swan
(Trustee)
Keith J. -0- N/A N/A
- -0- Carlson
(Vice President)
C. William -0- N/A N/A
- -0- Ferris
(Secretary/Treasurer)
[*] Appointed as a Trustee of the Trust at a meeting
of the Board of Trustees held on February 10,
1996.
As of November 30, 1996, the Officers and Trustees
of the Trust as a group owned beneficially or of record
none of the outstanding Class A, Class B or Class C
shares of the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES
IMI provides business management and investment
advisory services to the Fund pursuant to a Business
Management and Investment Advisory Agreement with the
Trust (the "Agreement"). The Agreement was approved by
the sole shareholder of the Fund on ______, 1996. On
______, 1996, the Agreement was approved on behalf of
the Fund by the Trustees, including a majority of the
Trustees who are neither "interested persons" (as defined in the
1940 Act) of the Trust nor have any direct or indirect
financial interest in the operation of the distribution
plan (see "Distribution Services") or in any related
agreement (the "Independent Trustees"). IMI is a
wholly owned subsidiary of MIMI, which currently acts
as manager and investment adviser to the following
registered investment companies: Mackenzie National
Municipal Fund, Mackenzie New York Municipal Fund,
Mackenzie California Municipal Fund and Mackenzie Limited Term
Municipal Fund. 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 Toronto Stock Exchange. MFC
is registered in Ontario as a mutual fund dealer and
advises Ivy Canada Fund.
The Agreement obligates IMI to make investments
for the accounts of the Fund in accordance with its
best judgment, consistent with the Fund's investment
objective and restrictions set forth in the Prospectus,
the 1940 Act and the provisions of the Code relating to
regulated investment companies, and any policy
decisions adopted by the Board. IMI also determines the
securities to be purchased or sold by the Fund and places orders
with brokers or dealers who deal in such securities.
Under the Agreement, IMI also provides certain
business management services. IMI is obligated to (1)
coordinate with the 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 Fund; (3) provide the Fund with necessary office
space, telephones and other communications facilities
as are adequate for the Fund's needs; (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 Fund or by IMI acting in
some other capacity pursuant to a separate agreement or
arrangements with the Fund; (5) maintain or supervise
the maintenance by third parties of such books and
records of the Trust 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 Trust to serve in such
capacities; and (7) take such other action with respect to
the Trust, after approval by the Trust as may be
required by applicable law, including without
limitation the rules and regulations of the SEC and of
state securities commissions and other regulatory
agencies.
For providing business management and investment
advisory services, the Fund pays IMI a monthly fee at
an annual rate of 1.00% of the Fund's average daily net
assets.
Under the Agreement, the Trust pays the following
expenses: (1) the fees and expenses of the Trust's
Independent Trustees; (2) the salaries and expenses of
any of the Trust's 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 Trust's 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 Trust's legal
existence and of shareholders' meetings; (12) expenses
of preparation and distribution to existing
shareholders of periodic reports, proxy materials and
prospectuses; and (13) fees and expenses of membership
in industry organizations.
The Agreement provides that if the Fund's total
expenses in any fiscal year (other than interest,
taxes, distribution expenses, brokerage commissions and
other portfolio transaction expenses, other
expenditures which are capitalized in accordance with
generally accepted accounting principles and any extraor-
dinary expenses including, without limitation, litigation and
indemnification expenses) exceed the permissible limits appli-
cable to the Fund in any state in which its shares are
then
qualified for sale, IMI will bear the excess expenses.
At the present time, the most restrictive state expense
limitation provision limits the Fund's annual expenses
to 2.5% of the first $30 million of its average daily
net assets, 2.0% of the next $70 million and 1.5% of
its average daily net assets over $100 million.
IMI currently limits the Fund's total operating
expenses (excluding Rule 12b-1 fees, interest, taxes,
brokerage commissions, litigation and indemnification
expenses, and other extraordinary expenses) to an
annual rate of 1.95% of the Fund's average daily net
assets. As long as the Fund's expense limitation
continues, it may lower the Fund's expenses and
increase its yield. The Fund's expense limitation may be
terminated or revised at any time, which could cause the Fund's
expenses to increase and its yield to be reduced,
depending on the total assets of the Fund when the
termination occurs.
The initial term of the Agreement between IMI and
the Fund, which is scheduled to commence operations on
January 1, 1997, will run for a period of two years
from the date of commencement. The Agreement will
continue in effect with respect to the Fund from year
to year 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 the Fund or
(b) by the vote of a majority of the entire Board of
Trustees. If the question of continuance of the
Agreement (or adoption of any new agreement) is
presented to shareholders, continuance (or adoption) shall be
effected only if approved by the affirmative vote of a
majority of the outstanding voting securities of the
Fund. See "Capitalization and Voting Rights."
The Agreement may be terminated with respect to
the Fund at any time, without payment of any penalty,
by the vote of a majority of the Trustees, or by a vote
of a majority of the outstanding voting securities of
the Fund, on 60 days' written notice to IMI, or by IMI
on 60 days' written notice to the Trust. The Agreement
shall terminate automatically in the event of its
assignment.
DISTRIBUTION SERVICES
IMDI, a wholly owned subsidiary of MIMI, serves as
the exclusive distributor of the Fund's shares pursuant
to an Amended and Restated Distribution Agreement with
the Trust dated October 23, 1991, as amended from time
to time (the "Distribution Agreement"). The
Distribution Agreement was last approved by the Board
of Trustees on August 24, 1996. IMDI distributes shares of
the Fund 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 Fund on a continuous basis,
but reserves the right to suspend or
discontinue distribution on that basis. IMDI is not
obligated to sell any specific amount of Fund shares.
Pursuant to the Distribution Agreement, IMDI is
entitled to deduct a commission on all classes of 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, the 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. Since the Fund will not have
commenced operations until January 1, 1997, no payments
had been made in connection with the sale of Fund shares as of
the date of this SAI.
The Distribution Agreement will continue in effect
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 the Fund at any time, without payment of any
penalty, by IMDI on 60 days' written notice to the Fund
or by the Fund by vote of either a majority of the
outstanding voting securities of the 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/trustees and filed with the SEC. At a
meeting held on December 1-2, 1995, the Board adopted a multi-
class plan (the "Rule 18f-3 plan") on behalf of thirteen of
the series of the Trust, and at a meeting held on June
7-8, 1996, the Board adopted the Rule 18f-3 plan on
behalf of the Ivy Global Science & Technology Fund. At
a meeting held on ________, the Board adopted the Rule
18f-3 plan on behalf of the Fund, Ivy International
Value Fund and Ivy Asia Pacific Fund. The key features
of the Rule 18f-3 plan are as follows: (i) shares of
each class of the Fund represent an equal pro rata interest in
the 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 the Fund may be exchanged for shares of
the same class of another Ivy or Mackenzie fund; and
(iii) the Fund's Class B shares will convert
automatically into Class A shares of the 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. At a meeting held
on ______, the Trustees adopted on behalf of the Fund,
in accordance with Rule 12b-1 under the 1940 Act ("Rule
12b-1"), separate distribution plans pertaining to the
Fund's Class A, Class B and Class C shares (each, a
"Plan"). In adopting each Plan, a majority of the
Independent Trustees 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 each Plan
should result in greater sales and/or fewer redemptions of
the Fund's shares, although it is impossible to know
for certain the level of sales and redemptions of the
Fund's shares in the absence of a Plan or under an
alternative distribution arrangement.
Under each Plan, the Fund pays 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 shares, Class B shares or
Class C shares, as the case may be. 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 Fund 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 the 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 given 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 Fund's Class B and Class C Plans, the
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 fee
compensates IMDI for expenses incurred in connection with
activities primarily intended to result in the sale of the
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 the Fund's Class B
and Class C Plans, 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) it will continue
in effect only so long as such continuance is approved
at least annually, and any material amendment thereto
is approved, by the vote of a majority of the Board, including
the Independent Trustees, cast in person at a meeting
called for that purpose; (3) payments by the 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 affected 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 Trust shall be committed to the
discretion of the Trustees who are not "interested persons" of
the Trust.
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 Fund's shares. To qualify for such payments,
shares may be subject to a minimum holding period.
However, no such payments will be made to any dealer or
broker if at the end of each year the amount of shares
held does not exceed a minimum amount. The minimum
holding period and minimum level of holdings will be
determined from time to time by IMDI.
A report of the amount expended pursuant to each
Plan, and the purposes for which such expenditures were
incurred, must be made to the Board for its review at
least quarterly. Since the Fund will not have
commenced operations until January 1, 1997, no payments
had been made in marketing Fund shares as of the date of
this SAI.
Each Plan may be amended at any time with respect
to the class of shares of the 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 the
amendment. Each Plan may be terminated at any time with
respect to the class of shares 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 the affected class.
If the Distribution Agreement or the Distribution
Plans are terminated (or not renewed) with respect any
of the Ivy Mackenzie
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).
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, maintains custody of the assets of
the Fund held in the United States. Rules adopted
under the 1940 Act permit the Trust to maintain its foreign
securities and cash in the custody of certain eligible foreign
banks and securities depositories. In accordance with
these rules, the Custodian has entered into
subcustodial agreements for the holding of the Fund's
foreign securities. In connection with the services it
provides on behalf of the Fund, the Custodian may
receive, as partial payment for its services, a portion of the
Trust's brokerage business, subject to its ability to
provide best price and execution.
FUND ACCOUNTING SERVICES
Pursuant to the Fund Accounting Services Agreement
with the Trust, MIMI provides certain accounting and
pricing services for the Fund. As compensation for
these services, the Fund pays MIMI a monthly fee plus
out-of-pocket expenses as incurred. The monthly fee is
based upon the net assets of the 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.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Pursuant to a Transfer Agency and Shareholder
Service Agreement with the Trust, IMSC, a wholly owned
subsidiary of MIMI, is the transfer agent for the Fund.
For these services, the Fund pays a monthly fee at an
annual rate of $20.00 for each open Class A, Class B
and Class C account. In addition, the Fund pays a
monthly fee at an annual rate of $4.48 per account that is
closed plus certain out-of-pocket expenses. Certain broker-
dealers that maintain shareholder accounts with the Fund
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 fee (e.g., .10%), based on the
average daily net asset value of the omnibus account (or
a combination thereof).
ADMINISTRATOR
Pursuant to an Administrative Services Agreement
with the Trust, MIMI provides certain administrative
services to the Fund. As compensation for these
services, the Fund pays MIMI a monthly fee at the
annual rate of .10% of the Fund's average daily net
assets.
Outside of providing administrative services to
the Trust, as described above, MIMI may also act on
behalf of IMDI in paying commissions to broker-dealers
with respect to sales of the Fund's Class B and Class C
shares.
AUDITORS
________________-, independent certified public
accountants,
____________________________________________________, has been
selected as auditors for the Trust. The audit services
performed by Coopers & Lybrand L.L.P. include audits of
the annual financial statements of each of the funds of
the Trust. Other services provided principally relate
to filings with the SEC and the preparation of the
funds' tax returns.
CAPITALIZATION AND VOTING RIGHTS
The capitalization of the Trust consists of an
unlimited number of shares of beneficial interest (no
par value per share). When issued, shares of each
class of the Fund are fully paid, non-assessable,
redeemable and fully transferable. No class of shares
of the Fund has preemptive rights or subscription rights.
The Amended and Restated Declaration of Trust
permits the Trustees to create separate series of
shares and to divide any series into one or more
classes. The Trustees have authorized fourteen series,
each of which represents a "fund." The Trustees have
further authorized the issuance of Classes A, B and C for
the Fund, Ivy Bond Fund, Ivy Canada Fund, Ivy China Region Fund,
Ivy Emerging Growth Fund, Ivy Global Fund, Ivy Growth
Fund, Ivy Growth with Income Fund, Ivy International
Fund, Ivy International Bond Fund, Ivy Latin America
Strategy Fund, Ivy Money Market Fund, Ivy New Century
Fund, Ivy Global Science & Technology Fund, Ivy
International Value Fund and Ivy Asia Pacific Fund, as
well as Classes A, B and I for Ivy Short-Term Bond
Fund; Class I for Ivy Bond Fund, Ivy International Fund, Ivy
Global Science & Technology Fund and Ivy International Value
Fund; and Class D for Ivy Growth with Income Fund.
[FN][The Class D shares of Ivy Growth with Income Fund
were initially issued as "Ivy Growth with Income Fund -
- - Class C" to shareholders of Mackenzie Growth & Income
Fund, a former series of the Company, in connection
with the reorganization between the Fund and Ivy Growth
with Income Fund and not offered for sale to the public.
On February 29, 1996, the Trustees of the Trust resolved by
written consent to establish a new class of shares designated
as "Class C" for all Ivy Fund portfolios (other than
Ivy Short-Term Bond Fund) and to redesignate the shares
of beneficial interest of "Ivy Growth with Income Fund-
- -Class C" as shares of beneficial
interest of "Ivy Growth with Income Fund--Class D,"
which establishment and redesignation, respectively,
are to become effective on April 30, 1996. The voting,
dividend, liquidation and other rights, preferences,
powers, restrictions, limitations, qualifications,
terms and conditions of the Class D shares of Ivy
Growth with Income Fund, as set forth in Ivy Fund's Declaration
of Trust, as amended from time to time, will not be
changed by this redesignation.]
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 the Fund entitle their holders to one
vote per share (with proportionate voting for fractional shares).
Shareholders of the Fund are entitled to vote alone on
matters that only affect the Fund. All classes of
shares of the Fund will vote together, except with
respect to the separate distribution plans for the
Fund's Class A, Class B and Class C shares, or when a
class vote is required by the 1940 Act. On matters
relating to all funds of the Trust, but affecting the
funds 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 the funds. If the Trustees determine
that a matter does not affect the interests of a Fund,
then the shareholders of that fund will not be entitled
to vote on that matter. Matters that affect the Trust
in general, such as ratification of the selection of
independent public accountants, 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 the funds, the
matter shall have been effectively acted upon with
respect to each fund if a majority of the outstanding
voting securities of each 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 of the Trust; or (2) the
matter has not been approved by a majority of the outstanding
voting securities of the Trust.
The Amended and Restated 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 as if Section 26(c) of the Act were
applicable.
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
Amended and Restated 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 Amended and Restated
Declaration of Trust 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 series of the
Trust is liable for the obligations of any other series
of the Trust.
NET ASSET VALUE
The share price, or value, for the separate
classes of shares of the Fund is called the net asset
value per share. The net asset value per share of the
Fund is computed by dividing the value of the assets of
the Fund, less its liabilities, by the number of shares
of the Fund outstanding. For purposes of determining
the aggregate net assets of the Fund, cash and
receivables will be valued at their realizable amounts. A
security listed or traded on a recognized stock exchange or
NASDAQ is valued at its last sale price on the principal
exchange on which the security is traded. The value of
a foreign security is determined in its national
currency as of the normal close of trading on the
foreign exchange on which it is traded or as of the
close of regular trading on the Exchange, if that is earlier,
and that value is then converted into its U.S. dollar
equivalent at the foreign exchange rate in effect at
noon, Eastern time, on the day the value of the foreign
security is determined. If no sale is reported at that
time, the average between the current bid and asked
price is used. All other securities for which OTC
market quotations are readily available are valued at the average
between the current bid and asked price. Interest will
be recorded as accrued. Securities and other assets
for which
market prices are not readily available are valued at
fair value as determined by IMI and approved in good
faith by the Board. Money market instruments of the
Fund are valued at amortized cost, which approximates
money market value.
The Fund's liabilities are allocated between its
classes. The total of such liabilities allocated to a
class plus that class's distribution fee and any other
expenses specially allocated to that class are then
deducted from the class's proportionate interest in the
Fund's assets, and the resulting amount for each class
is divided by the number of shares of that class
outstanding to produce the net asset value per share.
Portfolio securities are valued and the net asset
value per share is determined as of the close of
regular trading on the Exchange (normally 4:00 p.m.,
Eastern Time), every Monday through Friday (exclusive
of national business holidays). The Trust's offices
will be closed, and net asset value will not be
calculated, on the following national business holidays: New
Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. On any day when either or both of the Fund's
Custodian or the Exchange close early as a result of
that day being a partial holiday or otherwise, the
Trust reserves the right to advance the time on that
day by which purchase and redemption requests must be
received.
When the Fund writes an option, an amount equal to
the premium received by the Fund is included in the
Fund's Statement of Assets and Liabilities as an asset
and as an equivalent liability. The amount of the
liability will be subsequently marked-to-market daily
to reflect the current market value of the option
written. The current market value of a written option is
the last sale on the principal exchange on which the option is
traded or, in the absence of a sale, the last offering
price.
The premium paid by the Fund for the purchase of a
call or a put option will be deducted from its assets
and an equal amount will be included in the asset
section of the Fund's Statement of Assets and
Liabilities as an investment and subsequently adjusted
to the current market value of the option. For example, if the
current market value of the option exceeds the premium
paid, the excess would be unrealized appreciation and,
conversely, if the premium exceeds the current market
value, such excess would be unrealized depreciation.
The current market value of a purchased option will be
the last sale price on the principal exchange on which
the option is traded or, in the absence of a sale, the last
bid price. If the Fund exercises a call option that it has
purchased, the cost of the security that the Fund purchased
upon exercise will be increased by the premium
originally paid.
The sale of Fund shares will be suspended during
any period when the determination of its 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 best
interest of the Fund to do so.
PORTFOLIO TURNOVER
The Fund purchases securities that are believed by
IMI to have above average potential for capital
appreciation. Common stocks are disposed of in
situations where it is believed that potential for such
appreciation has lessened or that other common stocks
have a greater potential. Therefore, the Fund may
purchase and sell securities without regard to the length of time
the security is to be, or has been, held. A change in
securities held by the Fund is known as "portfolio
turnover" and may involve the payment by the Fund of
dealer markup or underwriting commission and other
transaction costs on the sale of securities, as well as
on the reinvestment of the proceeds in other
securities. The Fund's portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio
securities for the most recently completed fiscal year
by the monthly average of the value of the portfolio
securities owned by the Fund during that year. For
purposes of determining the Fund's portfolio turnover
rate, all securities whose maturities at the time of
acquisition were one year or less are excluded.
REDEMPTIONS
Shares of the Fund 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 Trust reserves 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
Fund is not reasonably practicable or it is not
reasonably practicable for the 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 Fund.
Under unusual circumstances, when the Board deems
it in the best interest of the Fund's shareholders, the
Fund may make payment for shares repurchased or
redeemed in whole or in part in securities of the Fund
taken at current values. If any such redemption in
kind is to be made, the Fund intends to make an
election pursuant to Rule 18f-1 under the 1940 Act. This will
require the Fund to redeem with cash at a shareholder's
election in any case where the redemption involves less
than $250,000 (or
1% of the Fund's net asset value at the beginning of
each 90-day period during which such redemptions are in
effect, if that amount is less than $250,000). Should
payment be made in securities, the redeeming
shareholder may incur brokerage costs in converting
such securities to cash.
Subject to state law restrictions, the Trust may
redeem those accounts of shareholders who have
maintained an investment, including sales charges paid,
of less than $1,000 in the Fund for a period of more
than 12 months. All accounts below that minimum will
be redeemed simultaneously when MIMI deems it advisable.
The $1,000 balance will be determined by actual dollar amounts
invested by the shareholder, unaffected by market
fluctuations. The Trust will notify any such
shareholder by certified mail of its intention to
redeem such account, and the shareholder shall have 60
days from the date of such letter to invest such
additional sums as shall raise the value of such account above
that minimum. Should the shareholder fail to forward such
sum within 60 days of the date of the Trust's letter of
notification, the Trust will redeem the shares held in
such account and transmit the redemption in value
thereof to the shareholder. However, those
shareholders who are investing pursuant to the
Automatic Investment Method will not be redeemed automatically
unless they have ceased making payments pursuant to the
plan for a period of at least six consecutive months,
and these shareholders will be given six-months' notice
by the Trust before such redemption. Shareholders in a
qualified retirement, pension or profit sharing plan
who wish to avoid tax consequences must "rollover" any
sum so redeemed into another qualified plan within 60
days. The Trustees of the Trust may change the minimum
account size.
If a shareholder has given authorization for
telephonic redemption privilege, shares can be redeemed
and proceeds sent by Federal wire to a single
previously designated bank account. Delivery of the
proceeds of a wire redemption request of $250,000 or
more may be delayed by the Fund for up to seven days if deemed
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 Fund employs 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, the 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
the Fund will automatically convert to Class A shares
of the respective 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 the 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.
TAXATION
The following is a general discussion of certain
tax rules thought to be applicable with respect to the
Fund. 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 advisor about the tax consequences to them of
investing in the Fund.
The Fund intends to be taxed as a regulated
investment company under Subchapter M of the Code.
Accordingly, the 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; (b)
derive in each taxable year less than 30% of its gross
income from the sale or other disposition of certain
assets held less than three months, namely: (i) stock
or securities; (ii) options, futures, or forward
contracts (other than those on foreign currencies); or
(iii) foreign currencies (or options, futures, or forward
contracts on foreign currencies) that are not directly related
to the Fund's principal business of investing in stock
or securities (or options and futures with respect to
stock or securities) (the "30% Limitation"); and (c)
diversify its holdings so that, at the end of each
fiscal quarter, (i) at least 50% of the market value of
the 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 the 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, the 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. The 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, the 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, the
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 the 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.
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS
The taxation of equity options and OTC options on
debt securities is governed by Code section 1234.
Pursuant to Code section 1234, the premium received by
the Fund for selling a put or call option is not
included in income at the time of receipt. If the
option expires, the premium is short-term capital gain to
the Fund. If the Fund enters into a closing transaction, the
difference between the amount paid to close out its
position and the premium received is short-term capital
gain or loss. If a call option written by the Fund is
exercised, thereby requiring the Fund to sell the
underlying security, the premium will increase the
amount realized upon the sale of such security and any
resulting gain or loss will be a capital gain or loss, and
will be long-term or short-term depending upon the holding
period of the security. With respect to a put or call
option that is
purchased by the Fund, if the option is sold, any
resulting gain or loss will be a capital gain or loss,
and will be long-term or short-term, depending upon the
holding period of the option. If the option expires,
the resulting loss is a capital loss and is long-term
or short-term, depending upon the holding period of the
option. If the option is exercised, the cost of the option, in
the case of a call option, is added to the basis of the
purchased security and, in the case of a put option,
reduces the amount realized on the underlying security
in determining gain or loss.
Some of the options, futures and foreign currency
forward contracts in which the Fund may invest may be
"section 1256 contracts." Gains (or losses) on these
contracts generally are considered to be 60% long-term
and 40% short-term capital gains or losses; however
foreign currency gains or losses arising from certain
section 1256 contracts are ordinary in character. Also,
section 1256 contracts held by the Fund at the end of each
taxable year (and on certain other dates prescribed in the
Code) are "marked-to-market" with the result that
unrealized gains or losses are treated as though they
were realized.
The transactions in options, futures and forward
contracts undertaken by the Fund may result in
"straddles" for Federal income tax purposes. The
straddle rules may affect the character of gains or
losses realized by the Fund. In addition, losses
realized by the Fund on positions that are part of a straddle may
be deferred under the straddle rules, rather than being
taken into account in calculating the taxable income
for the taxable year in which such losses are realized.
Because only a few regulations implementing the
straddle rules have been promulgated, the consequences
of such transactions to the Fund are not entirely
clear. The straddle rules may increase the amount of
short-term capital gain realized by the Fund, which is
taxed as ordinary income when distributed to shareholders.
The Fund may make one or more of the elections
available under the Code which are applicable to
straddles. If the Fund makes any of the elections, the
amount, character and timing of the recognition of
gains or losses from the affected straddle positions
will be determined under rules that vary according to
the election(s) made. The rules applicable under certain of the
elections may operate to accelerate the recognition of
gains or losses from the affected straddle positions.
Because application of the straddle rules may
affect the character of gains or losses, defer losses
and/or accelerate the recognition of gains or losses
from the affected straddle positions, the amount which
must be distributed to shareholders as ordinary income
or long-term capital gain, may be increased or
decreased substantially as compared to a fund that did not engage
in such transactions.
The 30% Limitation and the diversification
requirements applicable to the Fund's assets may limit
the extent to which the
Fund will be able to engage in transactions in options,
futures and forward contracts.
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES
Gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund
accrues receivables or liabilities denominated in a
foreign currency and the time the Fund actually
collects such receivables or pays such liabilities
generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of some investments, including debt
securities denominated in a foreign currency and certain
options, futures and forward contracts, gains or losses
attributable to fluctuations in the value of the
foreign currency between the date of acquisition of the
security or contract and the date of disposition also
are treated as ordinary gain or loss. These gains and
losses, referred to under the Code as "section 988"
gains or losses, increase or decrease the amount of the Fund's
investment company taxable income available to be
distributed to its shareholders as ordinary income. If
section 988 losses exceed other investment company
taxable income during a taxable year, the Fund would
not be able to make any ordinary dividend
distributions, or distributions made before the losses were
realized would be recharacterized as a return of capital to
shareholders, rather than as an ordinary dividend, reducing
each shareholder's basis in his or her Fund shares.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund may invest in shares of foreign
corporations which may be classified under the Code as
passive foreign investment companies ("PFICs"). In
general, a foreign corporation is classified as a PFIC
if at least one-half of its assets constitute
investment-type assets, or 75% or more of its gross
income is investment-type income. If the Fund receives a so-
called "excess distribution" with respect to PFIC stock, the
Fund itself may be subject to a tax on a portion of the
excess distribution, whether or not the corresponding
income is distributed by the Fund to shareholders. In
general, under the PFIC rules, an excess distribution
is treated as having been realized ratably over the
period during which the Fund held the PFIC shares. The
Fund itself will be subject to tax on the portion, if
any, of an excess distribution that is so allocated to
prior Fund taxable years and an interest factor will be added
to the tax, as if the tax had been payable in such prior
taxable years. Certain distributions from a PFIC as
well as gain from the sale of PFIC shares are treated
as excess distributions. Excess distributions are
characterized as ordinary income even though, absent
application of the PFIC rules, certain excess
distributions might have been classified as capital gain.
The Fund may be eligible to elect alternative tax
treatment with respect to PFIC shares. Under an
election that currently is
available in some circumstances, the Fund generally
would be required to include in its gross income its
share of the earnings of a PFIC on a current basis,
regardless of whether distributions are received from
the PFIC in a given year. If this election were made,
the special rules, discussed above, relating to the
taxation of excess distributions, would not apply. In addition,
other elections may become available that would affect
the tax treatment of PFIC shares held by the Fund.
DEBT SECURITIES ACQUIRED AT A DISCOUNT
Some of the debt securities (with a fixed maturity
date of more than one year from the date of issuance)
that may be acquired by the Fund may be treated as debt
securities that are issued originally at a discount.
Generally, the amount of the original issue discount
("OID") is treated as interest income and is included
in income over the term of the debt security, even
though payment of that amount is not received until a later time,
usually when the debt security matures.
If the Fund invests in certain high yield original
issue discount obligations issued by corporations, a
portion of the original issue discount accruing on the
obligation may be eligible for the deduction for
dividends received by corporations. In such event,
dividends of investment company taxable income received
from the Fund by its corporate shareholders, to the
extent attributable to such portion of accrued original
issue discount, may be eligible for this deduction for
dividends received by corporations if so designated by
the Fund in a written notice to shareholders.
Some of the debt securities (with a fixed maturity
date of more than one year from the date of issuance)
that may be acquired by the Fund in the secondary
market may be treated as having market discount.
Generally, gain recognized on the disposition of, and
any partial payment of principal on, a debt security
having market discount is treated as ordinary income to
the extent the gain, or principal payment, does not exceed the
"accrued market discount" on such debt security. In
addition, the deduction of any interest expenses
attributable to debt securities having market discount
may be deferred. Market discount generally accrues in
equal daily installments. The Fund may make one or
more of the elections applicable to debt securities
having market discount, which could affect the
character and timing of recognition of income.
Some debt securities (with a fixed maturity date
of one year or less from the date of issuance) that may
be acquired by the Fund may be treated as having
acquisition discount, or OID in the case of certain
types of debt securities. Generally, the Fund will be
required to include the acquisition discount, or OID, in
income over the term of the debt security, even though payment of
that amount is not received until a later time, usually
when the debt security matures. The Fund may make one
or more of the
elections applicable to debt securities having
acquisition discount, or OID, which could affect the
character and timing of recognition of income.
The Fund generally will be required to distribute
dividends to shareholders representing discount on debt
securities that is currently includible in income, even
though cash representing such income may not have been
received by the Fund. Cash to pay such dividends may
be obtained from sales proceeds of securities held by
the Fund.
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
Fund to a corporate shareholder, to the extent such
dividends are attributable to dividends received from
U.S. corporations by the 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 the Fund as capital gain dividends, are
taxable as long-term capital gains, whether paid in
cash or in shares, regardless of how long the
shareholder has held the Fund's shares and 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 the Fund on
the distribution date. A distribution of an amount in
excess of the 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.
If the net asset value of shares is reduced below
a shareholder's cost as a result of a distribution by
the 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 which 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 generally 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 the 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.
FOREIGN WITHHOLDING TAXES
Income received by the 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 the Fund's total
assets at the close of its taxable year consists of
securities of foreign corporations, the Fund will be
eligible and may elect to "pass- through" to the Fund's
shareholders the amount of foreign income and similar
taxes paid by the Fund. Pursuant to this election, a
shareholder will be required to include in gross income (in
addition to taxable dividends actually received) his or her
pro rata share of the foreign income and similar taxes
paid by the Fund, and will be entitled either to deduct
his or her pro rata share of foreign income and similar
taxes in computing his or her taxable income or to use
it as a foreign tax credit against his
or her U.S. Federal income taxes, subject to
limitations. No deduction for foreign taxes may be
claimed by a shareholder who does not itemize
deductions. Foreign taxes generally may not be
deducted by a shareholder that is an individual in computing the
alternative minimum tax. Each shareholder will be
notified within 60 days after the close of the Fund's
taxable year whether the foreign taxes paid by the Fund
will "pass-through" for that year and, if so, such
notification will designate (1) the shareholder's
portion of the foreign taxes paid to each such country
and (2) the portion of the dividend which represents
income derived from sources within each such country.
Generally, a credit for foreign taxes is subject
to the limitation that it may not exceed the
shareholder's U.S. tax attributable to his or her total
foreign source taxable income. For this purpose, if
the Fund makes the election described in the preceding
paragraph, the source of the Fund's income flows
through to its shareholders. With respect to the Fund, gains
from the sale of securities generally will be treated as
derived from U.S. sources and section 988 gains will be
treated as ordinary income derived from U.S. sources.
The limitation on the foreign tax credit is applied
separately to foreign source passive income, including
foreign source passive income received from the Fund.
In addition, the foreign tax credit may offset only 90%
of the revised alternative minimum tax imposed on
corporations and individuals.
The foregoing is only a general description of the
foreign tax credit under current law. Because
application of the credit depends on the particular
circumstances of each shareholder, shareholders are
advised to consult their own tax advisers.
BACKUP WITHHOLDING
The Fund will be required to report to the
Internal Revenue Service ("IRS") all taxable
distributions, including gross proceeds from redemption
of the Fund's shares, except in the case of certain
exempt shareholders. All such distributions 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
Fund 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 Fund.
PERFORMANCE INFORMATION
Comparisons of the Fund's performance may be made
with respect to various unmanaged indices (including
the TSE 300, S&P 100, S&P 500, Dow Jones Industrial
Average and Major Market Index) which assume
reinvestment of dividends, but do not reflect
deductions for administrative and management costs. The Fund
also may be compared to Lipper's Analytical Reports, reports
produced by a widely used independent research firm that
ranks mutual funds by overall performance, investment
objectives and assets, or to Wiesenberger Reports.
Lipper Analytical Services does not include sales
charges in computing performance. Further information
on comparisons is contained in the Prospectus.
Performance rankings will be based on historical information and
are not intended to indicate future performance.
In addition, the Trust may, from time to time,
include the average annual total return and the
cumulative total return of shares of the Fund in
advertisements, promotional literature or reports to
shareholders or prospective investors.
AVERAGE ANNUAL TOTAL RETURN. Quotations of
standardized average annual total return ("Standardized
Return") for a specific class of shares of the 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 the
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 shares and Class C shares, the
applicable CDSC imposed upon redemption of Class B
shares or Class C shares held for the period is
deducted. Standardized Return quotations for the 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 Fund 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.
In determining the average annual total return for
a specific Class of shares of the Fund, recurring fees,
if any, that are charged to all shareholder accounts
are taken into consideration. For any account fees
that vary with the size of the account of the Fund, the
account fee used for purposes of the following
computations is assumed to be the fee that would be
charged to the mean account size of the Fund.
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 the Trust's existence and may or may
not include the impact of sales charges, taxes or other factors.
Performance quotations for the Fund will vary from
time to time depending on market conditions, the
composition of the Fund's portfolio and operating
expenses of the Fund. These factors and possible
differences in the methods used in calculating
performance quotations should be considered when
comparing performance information regarding the Fund's 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 Fund's shares and the risks associated
with the Fund's 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 Fund may also cite endorsements or use for
comparison their 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 Shareholder, International Fund Monitor,
Shareholder'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 Director of Investment
Managers, New York Times, Newsweek, No Load Fund
Shareholder, No Load Fund* X, Oakland Tribune, Pension
World, Pensions and Investment Age, Personal
Shareholder, Rugg and Steele, Time, U.S. News and World Report,
USA Today, The Wall Street Journal, and Washington Post.
FINANCIAL STATEMENTS
The Statement of Assets and Liabilities for the
Fund as of _________ and the Report of Independent
Accountants are attached hereto as Appendix B.
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION
("S&P") AND MOODY'S SHAREHOLDERS SERVICE, INC.
("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS
[From "Moody's Bond Record," November 1994 Issue
(Moody's Shareholder Service, New York, 1994), and
"Standard & Poor's Municipal Ratings Handbook," October
1994 Issue (McGraw Hill, New York, 1994).]
MOODY'S:
(a) CORPORATE BONDS. Bonds rated Aaa by Moody's
are judged by Moody's to be of the best quality,
carrying the smallest degree of investment risk.
Interest payments are protected by a large or
exceptionally stable margin and principal is secure.
Bonds rated Aa are judged by Moody's to be of high quality by all
standards. Aa bonds are rated lower than Aaa bonds
because margins of protection may not be as large as
those of Aaa bonds, or fluctuations of protective
elements may be of greater amplitude, or there may be
other elements present which make the long-term risks
appear somewhat larger than those applicable to Aaa
securities. Bonds which are rated A by Moody's possess many
favorable investment attributes and are considered as upper
medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but
elements may be present which suggest a susceptibility
to impairment sometime in the future.
Bonds rated Baa by Moody's are considered medium-
grade obligations, i.e., they are neither highly
protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of
time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well. Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered
well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes
bonds in this class. Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments of or maintenance of other
terms of the contract over any long period of time may
be small.
Bonds which are rated Caa are of poor standing.
Such issues may be in default or there may be present
elements of danger with respect to principal or
interest. Bonds which are rated Ca represent
obligations which are speculative in a high degree.
Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class
of bonds and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real
investment standing.
(b) COMMERCIAL PAPER. The Prime rating is the
highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the
management of the issuer; (2) economic evaluation of
the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain
areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity;
(5) amount and quality of long-term debt; (6) trend of
earnings over a period of ten years; (7) financial
strength of a parent company and the relationships
which exist with the issuer; and (8) recognition by
management of obligations which may be present or may
arise as a result of public interest questions and
preparations to meet such obligations. Issuers within this Prime
category may be given ratings 1, 2 or 3, depending on
the relative strengths of these factors. The
designation of Prime-1 indicates the highest quality
repayment capacity of the rated issue.
S&P:
(a) CORPORATE BONDS. An S&P corporate debt
rating is a current assessment of the creditworthiness
of an obligor with respect to a specific obligation.
The ratings are based on current information furnished
by the issuer or obtained by S&P from other sources it
considers reliable. The ratings described below may be
modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
Debt rated AAA by S&P is considered by S&P to be
the highest grade obligation. Capacity to pay interest
and repay principal is extremely strong. Debt rated AA
is judged by S&P to have a very strong capacity to pay
interest and repay principal and differs from the
highest rated issues only in small degree. Debt rated
A by S&P has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
Debt rated BBB by S&P is regarded by S&P as having
an adequate capacity to pay interest and repay
principal. Although such bonds normally exhibit
adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay
principal than debt in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as
having predominately speculative characteristics with
respect to capacity to pay interest and repay
principal. BB indicates the least degree of
speculation and C the highest. While such debt will
likely have some quality and protective characteristics,
these are outweighed by large uncertainties or exposures to
adverse conditions. Debt rated BB has less near-term
vulnerability to default than other speculative issues. However,
it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions
which could lead to inadequate capacity to meet timely
interest and principal payments. The BB rating
category is also used for debt subordinated to senior
debt that is assigned an actual or implied BBB- rating.
Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating
category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB-
rating. Debt rated CCC has a currently identifiable
vulnerability to default, and is dependent upon
favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In
the event of adverse business, financial or economic
conditions, it is not likely to have the capacity to
pay interest and repay principal. The CCC rating
category is also used for debt subordinated to senior
debt that is assigned an actual or implied B or B-
rating. The rating CC typically is applied to debt
subordinated to senior debt which is assigned an actual or
implied CCC debt rating. The rating C typically is applied to
debt subordinated to senior debt which is assigned an
actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are
continued.
(b) COMMERCIAL PAPER. An S&P commercial paper
rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of
no more than 365 days.
Commercial paper rated A by S&P has the following
characteristics: (i) liquidity ratios are adequate to
meet cash requirements; (ii) long-term senior debt
rating should be A or better, although in some cases
BBB credits may be allowed if other factors outweigh
the BBB; (iii) the issuer should have access to at
least one additional channel of borrowing; (iv) basic
earnings and cash flow should have an upward trend with
allowances made for unusual circumstances; and (v) typically the
issuer's industry should be well established and the
issuer should have a strong position within its
industry and the reliability and quality of management
should be unquestioned. Issues rated A are further
referred to by use of numbers 1, 2 and 3 to denote
relative strength within this highest classification.
For example, the A-1 designation indicates that the degree of
safety regarding timely payment of debt is strong.
Issues rated B are regarded as having only
speculative capacity for timely payment. The C rating
is assigned to short- term debt obligations with a
doubtful capacity for payment.
APPENDIX B
STATEMENT OF ASSETS AND LIABILITIES
AS OF _______
AND
REPORT OF INDEPENDENT ACCOUNTANTS
_________________________________________________________________
IVY GLOBAL NATURAL RESOURCES FUND
STATEMENT OF ASSETS AND LIABILITIES
______________, 199_
_________________________________________________________________
ASSETS
Cash . . . . . . . . . . . . . . . . $ __
Deferred organization expenses . . . ______
-------
Total Assets . . . . . . . . . . . ______
-------
LIABILITIES
Due to affiliate . . . . . . . . . . ______
-------
NET ASSETS . . . . . . . . . . . . . . $ __
=======
CLASS A:
Net asset value and
redemption price per share
($10 / 1 share outstanding) . . . $ ______
=======
Maximum offering price
per share
($10.00 x 100 / 94.25)* . . . . . $ ______
=======
CLASS B:
Net asset value and
offering price per share
($10 / 1 share outstanding)** . . $ ______
=======
CLASS C:
Net asset value and
offering price per share
($10 / 1 share outstanding)** . . $ ______
=======
NET ASSETS CONSIST OF:
Capital paid-in . . . . . . . . . . . $ __
=======
* On sales of more than $50,000 the offering price
is reduced. ** Redemption price per share is equal to
the net asset value per share less any applicable
contingent deferred sales charge, up to a maximum
of 5%.
(See Notes to Financial Statements)
_________________________________________________________________
IVY GLOBAL NATURAL RESOURCES FUND
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
____________, 199_
_________________________________________________________________
1. ORGANIZATION: Ivy Global Natural Resources Fund is a
series of shares of Ivy Fund. The shares of beneficial
interest are assigned no par value and an unlimited
number of shares of Class A, Class B and Class C are
authorized. Ivy Fund was organized as a Massachusetts
business trust under a Declaration of Trust dated
December 21, 1983 and is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end
management investment company.
The Fund will commence operations on January 1, 1997.
As of the date of this report, operations have been
limited to organizational matters and the issuance of
initial shares to Mackenzie Investment Management Inc.
(MIMI).
2. ORGANIZATION COSTS AND TRANSACTIONS WITH AFFILIATES:
Organization expenses are being amortized over a five
year period from January 1, 1997, the commencement date
of operations. Such organizational expenses have been
paid by MIMI and will be reimbursed by the Fund.
Ivy Management, Inc. (IMI), a wholly owned subsidiary
of MIMI, is the Manager and Investment Adviser of the
Fund. Currently, IMI voluntarily limits the Fund's
total operating expenses (excluding taxes, 12b-1 fees,
brokerage commissions, interest, litigation and
indemnification expenses, and any other extraordinary
expenses) to an annual rate of 1.95% of its average net assets.
MIMI provides certain administrative, accounting and
pricing services for the Fund.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned
subsidiary of MIMI, is the underwriter and distributor
of the Fund's shares, and as such, purchases shares
from the Fund at net asset value to settle orders from
investment dealers.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned
subsidiary of MIMI, is the transfer and shareholder
servicing agent for the Fund.
Officers of Ivy Fund are officers and/or employees of
MIMI, IMI, IMDI and IMSC. Such individuals are not
compensated by the Fund for services in their capacity
as officers of Ivy Fund. Trustees of Ivy Fund who are
not affiliated with MIMI or IMI receive compensation
from the Fund.
PART C. OTHER INFORMATION
Item 24: Financial Statements and Exhibits
(a) Financial Statements:
- Included in Part A: Not applicable.
- Included in Part B: Statement of Assets
and Liabilities as of ___________, 1996
and Related Notes (to be filed by
amendment)
(b) Exhibits:
1. (a) Amended and Restated Declaration of
Trust dated December 10, 1992 filed
with Post- Effective Amendment No.
71 to Registration Statement No.
2-17613 and incorporated by
reference herein.
(b) Amendment to Amended and Restated
Declaration of Trust filed with
Post-Effective Amendment No. 73 to
Registration Statement No. 2-17613
and incorporated by reference herein.
(c) Amendment to Amended and Restated
Declaration of Trust filed with
Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613
and incorporated by reference herein.
(d) Establishment and Designation of
Additional Series (Ivy Emerging
Growth Fund) filed with Post-
Effective Amendment No. 73 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(e) Redesignation of Shares (Ivy Growth
with Income Fund--Class A) and
Establishment and Designation of
Additional Class (Ivy Growth with
Income Fund--Class C) filed with Post-
Effective Amendment No. 73 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(f) Redesignation of Shares (Ivy
Emerging Growth Fund--Class A, Ivy
Growth Fund--Class A and Ivy
International Fund--Class A) filed with
Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(g) Establishment and Designation of
Additional Series (Ivy China Region
Fund) filed with Post-Effective
Amendment No. 74 to
Registration Statement No. 2-17613
and incorporated by reference
herein.
(h) Establishment and Designation of
Additional Class (Ivy China Region
Fund--Class B, Ivy Emerging Growth
Fund--Class B, Ivy Growth Fund--
Class B, Ivy Growth with Income Fund--
Class B and Ivy International Fund--Class B)
filed with Post-Effective Amendment No. 74
for Registration Statement No. 2-17613 and
incorporated by reference herein.
(i) Establishment and Designation of
Additional Class (Ivy International
Fund--Class I) filed with Post-
Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(j) Establishment and Designation of
Series and Classes (Ivy Latin
American Strategy Fund-- Class A and
Class B, Ivy New Century Fund--
Class A and Class B) filed with Post-
Effective Amendment No. 75 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(k) Establishment and Designation of
Series and Classes (Ivy
International Bond Fund--Class A
and Class B) filed with Post-Effective
Amendment No. 76 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(l) Establishment and Designation of
Series and Classes (Ivy Bond Fund,
Ivy Canada Fund, Ivy Global Fund,
Ivy Short-Term U.S. Government
Securities Fund (now known as Ivy Short-Term
Bond Fund) -- Class A and Class B) filed with
Post-Effective Amendment No. 77 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(m) Redesignation of Ivy Short-Term
U.S. Government Securities Fund as
Ivy Short-Term Bond Fund filed with
Post-Effective Amendment No. 81 to
Registration Statement No. 2-17613
and incorporated by reference herein.
(n) Redesignation of Shares (Ivy Money
Market Fund--Class A and Ivy Money
Market Fund-- Class B) filed with
Post-Effective Amendment No. 84 to
Registration Statement No. 2-17613
and incorporated by reference herein.
(o) Form of Establishment and
Designation of Additional Class
(Ivy Bond Fund--Class C; Ivy Canada
Fund--Class C; Ivy China Region Fund--
Class C; Ivy Emerging Growth Fund--Class C;
Ivy Global Fund--Class C; Ivy Growth Fund--
Class C; Ivy Growth with Income Fund--Class
C; Ivy International Fund--Class C; Ivy
Latin America Strategy Fund--Class
C; Ivy International Bond Fund--
Class C; Ivy Money Market Fund--
Class C; Ivy New Century Fund--
Class C) filed with Post-Effective Amendment
No. 84 to Registration Statement No. 2-17613
and incorporated by reference herein.
(p) Establishment and Designation of
Series and Classes (Ivy Global
Science & Technology Fund--Class A,
Class B, Class C and Class I) filed
with Post-Effective Amendment No. 86 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
2. By-Laws, as amended and filed with Post-
Effective Amendment No. 48 to
Registration Statement No. 2- 17613 and
incorporated by reference herein.
3. Not Applicable
4. (a) Specimen Securities for Ivy Growth
Fund, Ivy Growth with Income Fund,
Ivy International Fund and Ivy
Money Market Fund filed with Post-
Effective Amendment No. 49 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(b) Specimen Security for Ivy Emerging
Growth Fund filed with Post-
Effective Amendment No. 70 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(c) Specimen Security for Ivy China
Region Fund filed with Post-
Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(d) Specimen Security for Ivy Latin
American Strategy Fund filed with
Post-Effective Amendment No. 75 to
Registration Statement No. 2-17613
and incorporated by reference
herein.
(e) Specimen Security for Ivy New
Century Fund filed with Post-
Effective Amendment No. 75 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(f) Specimen Security for Ivy
International Bond Fund filed with
Post-Effective Amendment No. 76 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(g) Specimen Securities for Ivy Bond
Fund, Ivy Canada Fund, Ivy Global
Fund, and Ivy Short- Term U.S.
Government Securities Fund filed
with Post-Effective Amendment No. 77 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
5. (a) Master Business Management and
Investment Advisory Agreement
between Ivy Fund and Ivy
Management, Inc. and Supplements for Ivy
Growth Fund, Ivy Growth with Income Fund, Ivy
International Fund and Ivy Money Market Fund
filed with Post-Effective Amendment No. 68
to Registration Statement No.
2-17613 and incorporated by
reference herein.
(b) Subadvisory Contract by and among
Ivy Fund, Ivy Management, Inc. and
Boston Overseas Investors, Inc.
filed with Post-Effective Amendment
No. 68 to Registration Statement
No. 2-17613 and incorporated by the reference
herein.
(c) Assignment Agreement relating to
Subadvisory Contract filed with
Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613
and incorporated by reference herein.
(d) Business Management and Investment
Advisory Agreement Supplement for
Ivy Emerging Growth Fund filed with
Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(e) Business Management and Investment
Advisory Agreement Supplement for
Ivy China Region Fund filed with
Post-Effective Amendment No. 71 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(f) Form of Business Management and
Investment Advisory Supplement for
Ivy Latin America Strategy Fund
filed with Post-Effective Amendment
No. 75 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(g) Form of Business Management and
Investment Advisory Agreement
Supplement for Ivy New
Century Fund filed with Post-
Effective Amendment No. 75 to
Registration Statement No. 2-17613
and incorporated by reference
herein.
(h) Form of Business Management and
Investment Advisory Agreement
Supplement for Ivy International
Bond Fund filed with Post- Effective
Amendment No. 76 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(i) Business Management and Investment
Advisory Agreement Supplement for
Ivy Bond Fund, Ivy Global Fund and
Ivy Short-Term U.S. Government
Securities Fund filed with Post-
Effective Amendment No. 81 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(j) Master Business Management
Agreement between Ivy Fund and Ivy
Management, Inc. filed with Post-
Effective Amendment No. 81 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(k) Form of Supplement to Master
Business Agreement between Ivy Fund
and Ivy Management, Inc. (Ivy
Canada Fund) filed with Post-
Effective Amendment No. 77 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(l) Form of Investment Advisory
Agreement between Ivy Fund and
Mackenzie Financial Corporation
filed with Post-Effective Amendment No. 77 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(m) Form of Supplement to Master
Business Management and Investment
Advisory Agreement between Ivy Fund
and Ivy Management, Inc. (Ivy
Global Science & Technology Fund) filed
with Post-Effective Amendment No. 86 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(n) Form of Supplement to Master
Business Management and Investment
Advisory Agreement between Ivy Fund
and Ivy Management, Inc. (Ivy
Global Natural Resources Fund, Ivy Asia
Pacific Fund and Ivy International Value
Fund) filed with this Post-Effective
Amendment No. 88 to Registration
Statement No. 2-17613.
6. (a) Dealer Agreement, as amended and
filed with Post-Effective Amendment
No. 70 to Registration Statement
No. 2-17613 and incorporated by
reference herein.
(b) Amended and Restated Distribution
Agreement filed with Post-Effective
Amendment No. 73 to Registration
Statement No. 2-17613 and
incorporated by reference herein.
(c) Addendum to Amended and Restated
Distribution Agreement filed with
Post-Effective Amendment No. 73 to
Registration Statement No. 2-17613
and incorporated by reference herein.
(d) Addendum to Amended and Restated
Distribution Agreement (Ivy Money
Market Fund--Class A and Class B)
filed with Post-Effective Amendment
No. 84 to Registration Statement No. 2-17613
and incorporated by reference herein.
(e) Form of Addendum to Amended and
Restated Distribution Agreement
(Class C) filed with Post-Effective
Amendment No. 84 to Registration
Statement No. 2-17613 and
incorporated by reference herein.
(f) Form of Addendum to Amended and
Restated Distribution Agreement
(Ivy Global Science & Technology
Fund--Class A, Class B, Class C and
Class I) filed with Post-Effective
Amendment No. 86 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(g) Form of Addendum to Amended and
Restated Distribution Agreement
(Ivy Global Natural Resources Fund-
- -Class A, Class B and Class C; Ivy
Asia Pacific Fund--Class A, Class B and
Class C; Ivy International Value Fund--Class
A, Class B, Class C, and Class I) filed with
this Post-Effective Amendment No. 88 to
Registration Statement No. 2-17613.
7. Not Applicable
8. Custodian Agreement between Ivy Fund and
Brown Brothers Harriman & Co. filed with
Post-Effective Amendment No. 74 to
Registration No. 2-17613 and
incorporated by reference herein.
9. (a) Master Administrative Services
Agreement between Ivy Fund and
Mackenzie Investment Management
Inc. and Supplements for Ivy Growth
Fund, Ivy Growth with Income Fund, Ivy
International Fund and Ivy Money Market Fund
filed with Post-Effective Amendment No. 68 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(b) Addendum to Administrative Services
Agreement Supplement for Ivy
International Fund filed with Post-
Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(c) Administrative Services Agreement
Supplement for Ivy Emerging Growth
Fund filed with Post- Effective
Amendment No. 73 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(d) Administrative Services Agreement
Supplement for Ivy China Region
Fund filed with Post- Effective
Amendment No. 73 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(e) Administrative Services Agreement
Supplement for Class I Shares of
Ivy International Fund filed with
Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(f) Master Fund Accounting Services
Agreement between Ivy Fund and
Mackenzie Investment Management
Inc. and Supplements for Ivy Growth
Fund, Ivy Emerging Growth Fund and Ivy
Money Market Fund filed with Post-Effective
Amendment No. 73 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(g) Fund Accounting Services Agreement
Supplement for Ivy Growth with
Income Fund filed with Post-
Effective Amendment No. 73 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(h) Fund Accounting Services Agreement
Supplement for Ivy China Region
Fund filed with Post- Effective
Amendment No. 73 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(i) Transfer Agency and Shareholder
Services Agreement between Ivy Fund
and Ivy Management, Inc. filed with
Post-Effective Amendment No. 71 to
Registration Statement No. 2-17613
and incorporated by reference
herein.
(j) Addendum to Transfer Agency and
Shareholder Services Agreement
filed with Post-Effective Amendment
No. 73 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(k) Assignment Agreement relating to
Transfer Agency and Shareholder
Services Agreement filed with Post-
Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(l) Form of Administrative Services
Agreement Supplement for Ivy Latin
America Strategy Fund filed with
Post-Effective Amendment No. 75 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(m) Form of Administrative Services
Agreement Supplement for Ivy New
Century Fund filed with Post-
Effective Amendment No. 75 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(n) Form of Fund Accounting Services
Agreement Supplement for Ivy Latin
America Strategy Fund filed with
Post-Effective Amendment No. 75 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(o) Form of Fund Accounting Services
Agreement Supplement for Ivy New
Century Fund filed with Post-
Effective Amendment No. 75 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(p) Form of Administrative Services
Agreement Supplement for Ivy
International Bond Fund filed with
Post-Effective Amendment No. 76 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(q) Form of Fund Accounting Services
Agreement Supplement for
International Bond Fund filed with
Post-Effective Amendment No. 76 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(r) Addendum to Transfer Agency and
Shareholder Services Agreement
filed with Post-Effective Amendment
No. 76 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(s) Addendum to Transfer Agency and
Shareholder Services Agreement
filed with Post-Effective Amendment
No. 77 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(t) Administrative Services Agreement
Supplement for Ivy Bond Fund, Ivy
Global Fund and Ivy Short-Term U.S.
Government Securities Fund filed
with Post-Effective Amendment No. 81 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(u) Fund Accounting Services Agreement
Supplement for Ivy Bond Fund, Ivy
Global Fund and Ivy Short-Term U.S.
Government Securities Fund filed
with Post-Effective Amendment No. 81 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(v) Form of Administrative Services
Agreement Supplement for Ivy Bond
Fund, Ivy Canada Fund, Ivy China
Region Fund, Ivy Emerging Growth
Fund, Ivy Global Fund, Ivy Growth
Fund, Ivy Growth with Income Fund, Ivy
International Fund, Ivy International Bond
Fund, Ivy Latin America Strategy Fund, Ivy
Money Market Fund and Ivy New Century Fund
filed with Post-Effective Amendment No. 84 to
Registration Statement No. 2-17613
and incorporated by reference
herein.
(w) Form of Addendum to Transfer Agency
and Shareholder Services Agreement
filed with Post-Effective Amendment
No. 84 to Registration Statement
No. 2-17613 and incorporated by
reference herein.
(x) Form of Administrative Services
Agreement Supplement for Ivy Global
Science & Technology Fund filed
with Post-Effective Amendment No.
86 to Registration Statement No.
2-17613 and incorporated by reference
herein.
(y) Form of Fund Accounting Services
Agreement Supplement for Ivy Global
Science & Technology Fund filed
with Post-Effective
Amendment No. 86 to Registration
Statement No. 2-17613 and
incorporated by reference herein.
(z) Form of Addendum to Transfer Agency
and Shareholder Services Agreement
for Ivy Global Science & Technology
Fund filed with Post- Effective
Amendment No. 86 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(aa) Form of Administrative Services
Agreement Supplement for Ivy Global
Natural Resources Fund, Ivy Asia
Pacific Fund and Ivy International
Value Fund filed with this Post-
Effective Amendment No. 88 to
Registration Statement No. 2-17613.
(bb) Form of Fund Accounting Services
Agreement Supplement for Ivy Global
Natural Resources Fund, Ivy Asia
Pacific Fund and Ivy International
Value Fund filed with this Post-
Effective Amendment No. 88 to
Registration Statement No. 2-17613.
(cc) Form of Addendum to Transfer Agency
and Shareholder Services Agreement
for Ivy Global Natural Resources
Fund, Ivy Asia Pacific Fund and Ivy
International Value Fund filed with
this Post-Effective Amendment No. 88 to
Registration Statement No. 2-17613.
10. Opinion and Consent of Dechert Price &
Rhoads, filed herewith.
11. Not applicable
12. Not applicable
13. Not applicable
14. Not applicable
15. (a) Amended and Restated Distribution
Plan for Class A shares of Ivy
China Region Fund, Ivy Growth Fund,
Ivy Growth with Income Fund, Ivy
International Fund and Ivy Emerging Growth
Fund filed with Post-Effective Amendment No.
73 to Registration Statement No. 2-17613 and
incorporated by reference herein.
(b) Distribution Plan for Class B
shares of Ivy China Region Fund,
Ivy Growth Fund, Ivy Growth with
Income Fund, Ivy International
Fund and Ivy Emerging Growth Fund
filed with Post-Effective Amendment
No. 73 to Registration Statement
No. 2-17613 and incorporated by
reference herein.
(c) Distribution Plan for Class C
Shares of Ivy Growth with Income
Fund filed with Post- Effective
Amendment No. 73 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(d) Form of Rule 12b-1 Related
Agreement filed with Post-Effective
Amendment No. 73 to Registration
Statement No. 2-17613 and
incorporated by reference herein.
(e) Supplement to Master Amended and
Restated Distribution Plan for Ivy
Fund Class A Shares filed with
Post-Effective Amendment No. 76 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(f) Supplement to Distribution Plan for
Ivy Fund Class B Shares filed with
Post-Effective Amendment No. 76 to
Registration Statement No. 2-17613
and incorporated by reference
herein.
(g) Supplement to Master Amended and
Restated Distribution Plan for Ivy
Fund Class A Shares filed with
Post-Effective Amendment No. 77 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(h) Supplement to Distribution Plan for
Ivy Fund Class B Shares filed with
Post-Effective Amendment No. 77 to
Registration Statement No. 2-17613
and incorporated by reference
herein.
(i) Form of Supplement to Distribution
Plan for Ivy Growth with Income
Fund Class C Shares (Redesignation
as Class D Shares) filed with Post-
Effective Amendment No. 84 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(j) Form of Distribution Plan for Class
C shares of Ivy Bond Fund, Ivy
Canada Fund, Ivy China Region Fund,
Ivy Emerging Growth Fund, Ivy
Global Fund, Ivy Growth Fund, Ivy Growth with
Income Fund, Ivy International Fund, Ivy
International Bond Fund, Ivy Latin America
Strategy Fund and Ivy New Century Fund filed
with Post-Effective Amendment No.
85 to Registration Statement No.
2-17613 and incorporated by
reference herein.
(k) Form of Supplement to Master
Amended and Restated Distribution
Plan for Ivy Fund Class A Shares
(Ivy Global Science & Technology
Fund), filed with Post-Effective Amendment
No. 87 to Registration Statement No. 2-17613
and incorporated by reference herein.
(l) Form of Supplement to Distribution
Plan for Ivy Fund Class B Shares
(Ivy Global Science & Technology
Fund), filed with Post-Effective
Amendment No. 87 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(m) Form of Supplement to Distribution
Plan for Ivy Fund Class C Shares
(Ivy Global Science & Technology
Fund), filed with Post-Effective
Amendment No. 87 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(n) Form of Supplement to Master
Amended and Restated Distribution
Plan for Ivy Fund Class A Shares
(Ivy Global Natural Resources Fund,
Ivy Asia Pacific Fund and Ivy International
Value Fund), filed with this Post-Effective
Amendment No. 88 to Registration Statement
No. 2-17613.
(o) Form of Supplement to Distribution Plan for Ivy Fund
Class B Shares (Ivy Global Natural Resources Fund, Ivy
Asia Pacific Fund and Ivy International Value Fund),
filed with this Post-Effective Amendment No. 88 to
Registration Statement No. 2-17613.
(p) Form of Supplement to Distribution Plan for Ivy Fund
Class C Shares (Ivy Global Natural Resources Fund, Ivy
Asia Pacific Fund and Ivy International Value Fund),
filed with this Post-Effective Amendment No. 88 to
Registration Statement No. 2-17613.
16. Schedule of Computation of Standardized
Performance Quotations filed with Post-
Effective Amendment No. 71 to
Registration Statement No. 2- 17613 and
incorporated by reference herein.
17. Not applicable.
18. (a) Plan adopted pursuant to Rule 18f-3
under the Investment Company Act of
1940 filed with Post-Effective
Amendment No. 83 to
Registration Statement No. 2-17613
and incorporated by reference
herein.
(b) Form of Amended and Restated Plan
adopted pursuant to Rule 18f-3
under the Investment Company Act of
1940 filed with Post-Effective
Amendment No. 85 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(c) Form of Amended and Restated Plan
adopted pursuant to Rule 18f-3
under the Investment Company Act of
1940 filed with Post-Effective
Amendment No. 87 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(d) Form of Amended and Restated Plan
adopted pursuant to Rule 18f-3
under the Investment Company Act of
1940 filed with this Post- Effective
Amendment No. 88 to Registration
Statement No. 2-17613.
25. Persons Controlled by or Under Common Control with
Registrant: Not applicable
26. Number of Holders of Securities
Fund: Date Class Record
Holders
Ivy Bond Fund 9/30/96 Class A 4,823
Class B 198
Class C 33
Class I 0
Ivy Canada Fund 9/30/96 Class A 2,384
Class B 119
Class C 9
Ivy China Region 9/30/96 Class A 2,168
Class B 1,136
Class C 6
Ivy Emerging 9/30/96 Class A 4,773
Growth Fund Class B 2,799
Class C 87
Ivy Global Fund 9/30/96 Class A 1,507
Class B 503
Class C 3
Ivy Global Science 9/30/96 Class A 59
& Technology Fund Class B 4
Class C 1
Class I 1
Ivy Growth Fund 9/30/96 Class A 30,785
Class B 290
Class C 5
Ivy Growth with 9/30/96 Class A 6,086
Income Fund Class B 290
Class C 5
Class D 42
Ivy International 9/30/96 Class A 19,267
Fund Class B 11,409
Class C 426
Class I 269
Ivy International 9/30/96 Class A 0
Bond Fund Class B 0
Class C 0
Ivy Latin America 9/30/96 Class A 289
Strategy Fund Class B 129
Class C 3
Ivy Money Market 9/30/96 Class A 2,528
Fund Class B 98
Class C 6
Ivy New Century 9/30/96 Class A 725
Fund Class B 372
Class C 16
Ivy Short-Term 9/30/96 Class A 234
Bond Fund Class B 12
Class I 0
27. Indemnification
The information required by this item is
incorporated by reference to Item 27 of Part C of
Post-Effective Amendment No. 48 to Registrant's
Registration Statement on Form N-1A under the
Securities Act of 1933 (File No. 2-17613).
Mackenzie Investment Management Inc. ("Mackenzie") has
agreed to indemnify certain disinterested Trustees of the
Fund for legal fees and court costs, not exceeding
$250,000 in the aggregate, except to the extent
that indemnification is otherwise provided by the
Fund or such fees or costs are covered by
insurance. Mackenzie is not obligated to
indemnify any such Trustee if he is finally adjudicated by
the SEC or any court to have acted in bad faith or with
gross negligence or willful misconduct with respect to
any Board action in connection with Mackenzie's
purchase of all of the outstanding capital stock
of Ivy Management, Inc. Mackenzie has also agreed
to indemnify the selling
shareholders, consisting of William M. Watson and
a company controlled by Michael R. Peers (Trustees
and Officers of Ivy Fund), against a variety of
matters with respect to the sale of such stock to
Mackenzie.
28. Business and Other Connections of Investment
Adviser
Information Regarding Adviser and Subadviser Under
Advisory Arrangements. Reference is made to the
Form ADV of each of Ivy Management, Inc., the
adviser to the Trust, Mackenzie Financial
Corporation, the adviser to Ivy Canada Fund, and
Northern Cross Investments Limited (the successor to Boston
Overseas Investors, Inc.), the subadviser to Ivy
International Fund.
The list required by this Item 28 of officers and
directors of Ivy Management, Inc. and Northern
Cross Investments Limited, 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 firm's respective Form ADV.
29. Principal Underwriters
(a) Ivy Mackenzie Distribution, Inc. ("IMDI"),
formerly Mackenzie Ivy Funds Distribution,
Inc., 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
also serves as the distributor for Mackenzie
Series Trust. IMDI is the successor to
MIMI's distribution activities.
(b) The information required by this Item 29
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.
(c) Not applicable
30. Location of Accounts and Records
The information required by this item is
incorporated by reference to Item 7 of Part II of
Post-Effective Amendment No. 46 to Registration
Statement No. 2-17613.
31. Not applicable
32. Undertakings
(a) Not applicable
(b) Registrant undertakes to file a Post-
Effective Amendment, using reasonably current
financial statements of Ivy Global Natural
Resources Fund, Ivy Asia Pacific Fund and Ivy
International Value Fund, within four to six
months from the effective date of this Post-
Effective Amendment No. 88 to Registrant's
Registration Statement under the Securities Act of
1933.
(c) Registrant undertakes to furnish each person
to whom a prospectus is delivered with a copy
of Registrant's latest annual report to
shareholders, upon request and without
charge.
SIGNATURES
Pursuant to the requirements of the Securities Act
of 1933 and the Investment Company Act of 1940, the
Registrant has duly caused this Post-Effective
Amendment No. 88 to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, and Commonwealth of
Massachusetts, on the 16th day of October, 1996.
IVY FUND
By: MICHAEL G.
LANDRY*
President *By: JOSEPH R. FLEMING
Attorney-in-fact
Pursuant to the requirements of the Securities Act
of 1933, this Post-Effective Amendment No. 88 to the
Registration Statement has been signed below by the
following persons in the capacities and on the dates
indicated.
SIGNATURES TITLE
DATE
MICHAEL G. LANDRY* Trustee and
10/16/96 President (Chief
Executive Officer)
JOHN S. ANDEREGG, JR.* Trustee
10/16/96
PAUL H. BROYHILL* Trustee
10/16/96
STANLEY CHANNICK* Trustee
10/16/96
FRANK W. DEFRIECE, JR.* Trustee
10/16/96
ROY J. GLAUBER* Trustee
10/16/96
MICHAEL R. PEERS* Trustee and Chairman
10/16/96 of the Board
JOSEPH G. ROSENTHAL* Trustee
10/16/96
RICHARD N. SILVERMAN* Trustee
10/16/96
J. BRENDAN SWAN* Trustee
10/16/96
C. WILLIAM FERRIS* Treasurer (Chief
10/16/96 Financial
Officer)
*By: JOSEPH R. FLEMING
Attorney-in-fact
* Executed pursuant to powers of attorney filed with
Post- Effective Amendments Nos. 69, 73, 74 and 84
to Registration Statement No. 2-17613.
EXHIBIT INDEX
5(n) Form of Supplement to Master Business
Management and Investment Advisory Agreement
between Ivy Fund and Ivy Management, Inc.
(Ivy Global Natural Resources Fund, Ivy Asia
Pacific Fund and Ivy International Value Fund)
6(g) Form of Addendum to Amended and Restated
Distribution Agreement (Ivy Global Natural
Resources Fund--Class A, Class B and Class C;
Ivy Asia Pacific Fund--Class A, Class B and
Class C; Ivy International Value Fund-- Class
A, Class B, Class C and Class I)
9(aa) Form of Administrative Services Agreement
Supplement for Ivy Global Natural Resources
Fund, Ivy Asia Pacific Fund and Ivy
International Value Fund
9(bb) Form of Fund Accounting Services Agreement
Supplement for Ivy Global Natural Resources
Fund, Ivy Asia Pacific Fund and Ivy
International Value Fund
9(cc) Form of Addendum to Transfer Agency and
Shareholder Services Agreement for Ivy Global
Natural Resources Fund, Ivy Asia Pacific Fund
and Ivy International Value Fund
10 Opinion and Consent of Dechert Price & Rhoads
15(n) Form of Supplement to Master Amended and
Restated Distribution Plan For Ivy Fund Class
A Shares (Ivy Global Natural Resources, Ivy
Asia Pacific Fund and Ivy International Value
Fund)
15(o) Form of Supplement to Distribution Plan For
Ivy Fund Class B Shares (Ivy Global Natural
Resources Fund, Ivy Asia Pacific Fund and Ivy
International Value Fund)
15(p) Form of Supplement to Distribution Plan For
Ivy Fund Class C Shares (Ivy Global Natural
Resources Fund, Ivy Asia Pacific Fund and Ivy
International Value Fund)
18(d) Form of Amended and Restated Plan adopted
pursuant to Rule 18f-3 under the Investment
Company Act of 1940
EXHIBIT 5(n)
IVY FUND
MASTER BUSINESS MANAGEMENT AND INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
Ivy Global Natural Resources Fund
Ivy Asia Pacific Fund
Ivy International Value Fund
AGREEMENT made as of the 31st day of December, 1996, by and
between Ivy Fund (the "Trust") and Ivy Management, Inc. (the
"Manager").
WHEREAS, the Trust is an open-end investment company, organized
as a Massachusetts business trust, and consists of such separate
investment portfolios as have been or may be established and
designated by the Trustees of the Trust from time to time;
WHEREAS, a separate class of shares of the Trust is offered to
investors with respect to each investment portfolio;
WHEREAS, the Trust has adopted a Master Business Management and
Investment Advisory Agreement dated December 31, 1991 (the
"Master Agreement"), pursuant to which the Trust has appointed
the Manager to provide the business management and investment
advisory services specified in that Master Agreement; and
WHEREAS, Ivy Global Natural Resources Fund, Ivy Asia Pacific Fund
and Ivy International Value Fund (each, a "Fund" and collectively
the "Funds") are separate investment portfolios of the Trust.
NOW, THEREFORE, the Trustees of the Trust hereby take the
following actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Trust
hereby adopts the Master Agreement with respect to the Funds, and
the Manager hereby acknowledges that the Master Agreement shall
pertain to the Funds, the terms and conditions of such Master
Agreement being hereby incorporated herein by reference.
2. The term "Portfolio" as used in the Master Agreement
shall, for purposes of this Supplement, pertain to each Fund.
3. As provided in the Master Agreement and subject to
further conditions as set forth therein, each Fund shall pay the
Manager a monthly fee on the first business day of each month
based upon the average daily value (as determined on each
business day at the time set forth in the Prospectus of each Fund
for determining net asset value per share) of the net assets of
that Fund during the preceding month at the annual rate of 1.00%.
4. This Supplement and the Master Agreement (together, the
"Agreement") shall become effective with respect to each of the
Funds as of the date specified above, and unless sooner
terminated as hereinafter provided, the Agreement shall remain in
effect with respect to a Fund for a period of more than two (2)
years from such date only so long as the continuance is
specifically approved at least annually (a) by the vote of a
majority of the outstanding voting securities of that Fund (as
defined in the Investment Company Act of 1940, as amended (the
"1940 Act")) or by the Trust's entire Board of Trustees and (b)
by the vote, cast in person at a meeting called for that purpose,
of a majority of the Trust's Independent Trustees. This
Agreement may be terminated with respect to a Fund at any time,
without payment of any penalty, by vote of a majority of the
outstanding voting securities of that Fund (as defined in the
1940 Act) or by vote of a majority of the Trust's entire Board of
Trustees on sixty (60) days' written notice to the Manager or by
the Manager on sixty (60) days' written notice to the Trust.
This Agreement shall terminate automatically in the event of its
assignment (as defined in the 1940 Act).
IVY FUND, on behalf of
Ivy Global Natural Resources Fund,
Ivy Asia Pacific Fund and
Ivy International Value Fund
By: _____________________________
Michael G. Landry, President
IVY MANAGEMENT, INC.
By: _____________________________
Michael G. Landry, President
EXHIBIT 6(g)
IVY FUND
ADDENDUM TO
AMENDED AND RESTATED DISTRIBUTION AGREEMENT
Ivy Global Natural Resources Fund,
Ivy Asia Pacific Fund and
Ivy International Value Fund
Class A, Class B and Class C Shares
Ivy International Value Fund
Class I Shares
AGREEMENT made as of the 31st day of December, 1996, by and
between Ivy Fund (the "Trust") and Ivy Mackenzie Distributors,
Inc. ("IMDI")(formerly "Mackenzie Ivy Funds Distribution, Inc.").
WHEREAS, the Trust is registered as an open-end investment
company under the Investment Company Act of 1940, as amended, and
consists of one or more separate investment portfolios, as may be
designated from time to time; and
WHEREAS, IMDI serves as the Trust's distributor pursuant to
an Amended and Restated Distribution Agreement dated October 23,
1993 (the "Agreement"); and
WHEREAS, the Trustees of the Trust, at a meeting held on
December 6 and 7, 1996, duly approved an amendment to the
Agreement to include the Class A, Class B and Class C shares of
Ivy Global Natural Resources Fund, Ivy Asia Pacific Fund and Ivy
International Value Fund (the "Funds") and the Class I shares of
Ivy International Value Fund (the "Shares").
WHEREAS, the Shares were established and designated by the
Board of Trustees of the Trust by written consent made effective
as of the date that the Registration Statement for the Funds was
filed with the Securities and Exchange Commission in accordance
with Rule 485(a)(2) under the Securities Act of 1933.
NOW THEREFORE, the Trust and IMDI hereby agree as follows:
Effective as of December 31, 1996, the
Agreement shall relate in all respects to the
Shares, in addition to the classes of shares
of the Funds and any other series of the
Trust specifically identified in Paragraph 1
of the Agreement and any other Addenda
thereto.
IN WITNESS WHEREOF, the Trust and IMDI have adopted this
Addendum as of the date first set forth above.
IVY FUND
By: _____________________________
Michael G. Landry, President
IVY MACKENZIE DISTRIBUTORS, INC.
By: _____________________________
Keith J. Carlson, President
EXHIBIT 9(aa)
IVY FUND
ADMINISTRATIVE SERVICES AGREEMENT SUPPLEMENT
Ivy Global Natural Resources Fund
Ivy Asia Pacific Fund
Ivy International Value Fund
AGREEMENT made as of the 31st day of December, 1996, by and
between Ivy Fund (the "Trust") and Mackenzie Investment
Management Inc. ("MIMI").
WHEREAS, the Trust is an open-end investment company,
organized as a Massachusetts business trust, and consists of such
separate investment portfolios as have been or may be established
and designated by the Trustees of the Trust from time to time;
WHEREAS, a separate series of shares of the Trust is offered
to investors with respect to each investment portfolio;
WHEREAS, the Trust has adopted a Master Administrative
Services Agreement dated September 1, 1992 (the "Master Services
Agreement"), pursuant to which the Trust has appointed MIMI to
provide the administrative services specified in the Master
Services Agreement; and
WHEREAS, Ivy Global Natural Resources Fund, Ivy Asia Pacific
Fund and Ivy International Value Fund (each, a "Fund" and
collectively the "Funds") are separate investment portfolios of
the Trust.
NOW, THEREFORE, the Trustees of the Trust hereby take the
following actions, subject to the conditions set forth:
1. As provided for in the Master Services Agreement, the
Trust hereby adopts the Master Services Agreement with respect to
the Funds, and MIMI hereby acknowledges that the Master Services
Agreement shall pertain to the Funds, the terms and conditions of
such Master Services Agreement being incorporated herein by
reference.
2. The term "Fund" as used in the Master Services
Agreement shall, for purposes of this Supplement, pertain to each
Fund.
3. As provided in the Master Services Agreement and
subject to further conditions as set forth therein, each Fund
shall pay MIMI a monthly fee on the first business day of each
month based upon the average daily value (as determined on each
business day at the time set forth in each Fund's Prospectus for
determining net asset value per share) of the net assets of that
Fund during the preceding month at the annual rate of (i) 0.10%
with respect to that Fund's Class A, Class B and Class C shares,
and (ii) in the case of Ivy International Value Fund, 0.01%, with
respect to that Fund's Class I shares.
4. This Supplement and the Master Services Agreement
(together, the "Agreement") shall become effective with respect
to each of the Funds as of the date specified above, and unless
sooner terminated as hereinafter provided, the Agreement shall
remain in effect for a period of two years from that date.
Thereafter, the Agreement shall continue in effect with respect
to each Fund from year to year, provided such continuance with
respect to each Fund is approved at least annually by the Trust's
Board of Trustees, including the vote or written consent of a
majority of the Trust's Independent Trustees (as defined in the
Investment Company Act of 1940, as amended). This Agreement may
be terminated with respect to a Fund at any time, without payment
of any penalty, by MIMI upon at least sixty (60) days' prior
written notice to that Fund, or by a Fund upon at least sixty
(60) days' written notice to MIMI; provided, that in case of
termination by a Fund, such action shall have been authorized by
the Trust's Board of Trustees, including the vote or written
consent of a majority of the Trust's Independent Trustees.
IVY FUND, on behalf of
Ivy Global Natural Resources Fund,
Ivy Asia Pacific Fund and
Ivy International Value Fund
By: _____________________________
Michael G. Landry, President
MACKENZIE INVESTMENT MANAGEMENT INC.
By: _____________________________
Michael G. Landry, President
EXHIBIT 9(bb)
IVY FUND
FUND ACCOUNTING SERVICES AGREEMENT SUPPLEMENT
Ivy Global Natural Resources Fund
Ivy Asia Pacific Fund
Ivy International Value Fund
AGREEMENT made as of the 31st day of December, 1996, by and
between Ivy Fund (the "Trust") and Mackenzie Investment
Management Inc. (the "Agent").
WHEREAS, the Trust is an open-end investment company,
organized as a Massachusetts business trust, and consists of such
separate investment portfolios as have been or may be established
and designated by the Trustees of the Trust from time to time;
WHEREAS, a separate class of shares of the Trust is offered
to investors with respect to each investment portfolio;
WHEREAS, the Trust has adopted a Master Fund Accounting
Services Agreement dated January 25, 1993 (the "Master
Agreement"), pursuant to which the Trust has appointed the Agent
to provide the fund accounting services specified in the Master
Agreement; and
WHEREAS, Ivy Global Natural Resources Fund, Ivy Asia Pacific
Fund and Ivy International Value Fund (each, a "Fund" and
collectively the "Funds") are separate investment portfolios of
the Trust.
NOW, THEREFORE, the Trustees of the Trust hereby take the
following actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Trust
hereby adopts the Master Agreement with respect to the Funds, and
the Manager hereby acknowledges that the Master Agreement shall
pertain to the Funds, the terms and conditions of such Master
Agreement being hereby incorporated herein by reference.
2. The term "Portfolio" as used in the Master Agreement
shall, for purposes of this Supplement, pertain to each Fund.
3. As provided in the Master Agreement and subject to
further conditions as set forth therein, each Fund shall pay the
Agent a monthly fee based upon the rate(s) set forth in the Fee
Schedule attached hereto as Annex 1.
4. This Supplement and the Master Agreement (together, the
"Agreement") shall become effective with respect to each of the
Funds as of the date specified above, and unless sooner
terminated as hereinafter provided, the Agreement shall remain in
effect with respect to a Fund for a period of more than one (1)
year from such date only so long as the continuance is
specifically approved at least annually by the Trust's Board of
Trustees, including the vote or written consent of a majority of
the Trust's Independent Trustees (as defined in the Investment
Company Act of 1940, as amended). This Agreement may be
terminated with respect to a Fund, without payment of any
penalty, by that Fund upon at least ninety (90) days' prior
written notice to the Agent or by the Agent upon at least ninety
(90) days' prior written notice to that Fund; provided, that in
the case of termination by a Fund, such action shall have been
authorized by the Trust's Board of Trustees, including the vote
or written consent of a majority of the Trust's Independent
Trustees.
IVY FUND, on behalf of
Ivy Global Natural Resources Fund,
Ivy Asia Pacific Fund and
Ivy International Value Fund
By: ___________________________________
Michael G. Landry, President
MACKENZIE INVESTMENT MANAGEMENT INC.
By: ___________________________________
Michael G. Landry, President
ANNEX 1
FUND ACCOUNTING SERVICES AGREEMENT
FEE SCHEDULE
Based upon assets under management (in millions):
$0-$10 >$10-$40 >$40-$75 Over $75
Ivy Global $1,250 $2,500 $5,000 $6,500
Natural Resources
Fund
Ivy Asia Pacific $1,250 $2,500 $5,000 $6,500
Fund
Ivy International $1,250 $2,500 $5,000 $6,500
Value Fund
EXHIBIT 9(cc)
ADDENDUM TO TRANSFER AGENCY AND SHAREHOLDER SERVICES AGREEMENT
IVY FUND
The Transfer Agency and Shareholder Services Agreement, made
as of the 1st day of January, 1992 between Ivy Fund and Ivy
Management, Inc. ("IMI"), the duties of IMI thereunder of which
were assigned on October 1, 1993 to Ivy Mackenzie Services Corp.
("IMSC")(formerly "Mackenzie Ivy Investor Services Corp."), is
hereby revised as set forth below in this Addendum.
Schedule A of the Agreement is revised in its entirety to read as
follows:
SCHEDULE A
Ivy Fees:
The transfer agency and shareholder service fees are based
on an annual per account fee. These fees are payable on a
monthly basis at the rate of 1/12 of the annual fee and are
charged with respect to all open accounts.
A. Per Account Fees
Fund Annual Fee
Ivy Asia Pacific Fund $ 20.00
(Classes A, B and C)
Ivy Bond Fund (Classes A, B and C) 20.75
Ivy Bond Fund (Class I) 10.25
Ivy Canada Fund 20.00
Ivy China Region Fund 20.00
Ivy Emerging Growth Fund 20.00
Ivy Global Fund 20.00
Ivy Global Natural Resources Fund 20.00
(Classes A, B and C)
Ivy Global Science & Technology Fund 20.00
(Classes A, B and C)
Ivy Global Science & Technology Fund 10.25
(Class I)
Ivy Growth Fund 20.00
Ivy Growth with Income Fund 20.00
Ivy International Fund 20.00
(Classes A, B and C)
Ivy International Fund (Class I) 10.25
Ivy International Bond Fund 20.00
Ivy International Value Fund 20.00
(Classes A, B and C)
Ivy International Value Fund 10.25
(Class I)
Ivy Latin America Strategy Fund 20.00
Ivy Money Market Fund 22.00
Ivy New Century Fund 20.00
Ivy Short-Term Bond Fund (Classes A and B) 20.75
Ivy Short-Term Bond Fund (Class I) 10.25
In addition, in accordance with an agreement between IMSC
and The Shareholder Services Group, each Fund will pay a fee of
$4.48 for each account that is closed, which fee may be increased
from time to time in accordance with the terms of that agreement.
B. Special Services
Fees for activities of a non-recurring nature, such as
preparation of special reports, portfolio consolidations, or
reorganization, and extraordinary shipments will be subject to
negotiation.
This Addendum shall take effect as of the date that the
Registration Statement pertaining to Ivy Global Natural Resources
Fund, Ivy Asia Pacific Fund and Ivy International Value Fund,
filed with the Securities and Exchange Commission on or about
October 16, 1996 pursuant to Rule 485(a)(2) under the Securities
Act of 1933, first becomes effective.
IN WITNESS WHEREOF, the parties hereto have caused this
Addendum to be executed as of this 31st day of December, 1996.
IVY FUND
By: ___________________________________
Michael G. Landry, President
IVY MACKENZIE SERVICES CORP.
By: ___________________________________
C. William Ferris, President
EXHIBIT 10
DECHERT PRICE & RHOADS
TEN POST OFFICE SQUARE -- SOUTH
SUITE 1230
BOSTON, MA 02109-4603
October 16, 1996
Ivy Fund
Via Mizner Financial Plaza
700 South Federal Highway
Suite 300
Boca Raton, Florida 33432
Dear Sirs:
As counsel for Ivy Fund (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. 811-1028), and Post-
Effective Amendment No. 88 to the Trust's registration statement
relating to the shares of beneficial interest of Ivy Global
Natural Resources Fund, Ivy Asia Pacific Fund and Ivy
International Value Fund (the "Shares") being filed under the
Securities Act of 1933, as amended (File No. 2-17613)("Post-
Effective Amendment No. 88"). 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 Prospectuses for Ivy Global
Natural Resources Fund, Ivy Asia Pacific Fund and Ivy
International Value Fund 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. 88.
Very truly yours,
DECHERT PRICE & RHOADS
EXHIBIT 15(n)
SUPPLEMENT TO
MASTER AMENDED AND RESTATED DISTRIBUTION PLAN
FOR IVY FUND CLASS A SHARES
WHEREAS, Ivy Fund is registered as an open-end investment
company under the Investment Company Act of 1940 (the "1940 Act")
and consists of one or more separate investment portfolios as may
be established and designated from time to time (each, a
"Portfolio");
WHEREAS, the Board of Trustees of Ivy Fund has adopted a
Plan dated December 21, 1991 and amended and restated on October
23, 1993 (the "Plan"), in accordance with the requirements of the
1940 Act, and determined that there is a reasonable likelihood
that the Plan will benefit Ivy Fund and its shareholders; and
WHEREAS, the Board of Trustees of Ivy Fund, pursuant to
Section 1 of the Plan, desires to supplement the Plan so that it
pertains to the Class A Shares of three new Portfolios of Ivy
Fund referred to as Ivy Global Natural Resources Fund, Ivy Asia
Pacific Fund and Ivy International Value Fund.
NOW THEREFORE, the Board of Trustees of Ivy Fund having
determined that the Plan shall pertain to the Class A shares of
Ivy Global Natural Resources Fund, Ivy Asia Pacific Fund and Ivy
International Value Fund, Ivy Fund hereby adopts this Supplement
as of this 31st day of December, 1996.
IVY FUND
By: ____________________________
Michael G. Landry, President
EXHIBIT 15(o)
SUPPLEMENT TO
DISTRIBUTION PLAN FOR IVY FUND CLASS B SHARES
WHEREAS, Ivy Fund is registered as an open-end investment
company under the Investment Company Act of 1940 (the "1940 Act")
and consists of one or more separate investment portfolios as may
be established and designated from time to time (each, a
"Portfolio");
WHEREAS, the Board of Trustees of Ivy Fund has adopted a
Plan dated October 23, 1993 (the "Plan"), in accordance with the
requirements of the 1940 Act, and determined that there is a
reasonable likelihood that the Plan will benefit Ivy Fund and its
shareholders; and
WHEREAS, the Board of Trustees of Ivy Fund, pursuant to
Section 1 of the Plan, desires to supplement the Plan so that it
pertains to the Class B Shares of three new Portfolios of Ivy
Fund referred to as Ivy Global Natural Resources Fund, Ivy Asia
Pacific Fund and Ivy International Value Fund.
NOW THEREFORE, the Board of Trustees of Ivy Fund having
determined that the Plan shall pertain to the Class B shares of
Ivy Global Natural Resources Fund, Ivy Asia Pacific Fund and Ivy
International Value Fund, Ivy Fund hereby adopts this Supplement
as of this 31st day of December, 1996.
IVY FUND
By: ____________________________
Michael G. Landry, President
EXHIBIT 15(p)
SUPPLEMENT TO
DISTRIBUTION PLAN FOR IVY FUND CLASS C SHARES
WHEREAS, Ivy Fund is registered as an open-end investment
company under the Investment Company Act of 1940 (the "1940 Act")
and consists of one or more separate investment portfolios as may
be established and designated from time to time (each, a
"Portfolio");
WHEREAS, the Board of Trustees of Ivy Fund has adopted a
Plan dated February 10, 1996 (the "Plan"), in accordance with the
requirements of the 1940 Act, and determined that there is a
reasonable likelihood that the Plan will benefit Ivy Fund and its
shareholders; and
WHEREAS, the Board of Trustees of Ivy Fund, pursuant to
Section 1 of the Plan, desires to supplement the Plan so that it
pertains to the Class C Shares of three new Portfolios of Ivy
Fund referred to as Ivy Global Natural Resources Fund, Ivy Asia
Pacific Fund and Ivy International Value Fund.
NOW THEREFORE, the Board of Trustees of Ivy Fund having
determined that the Plan shall pertain to the Class C shares of
Ivy Global Natural Resources Fund, Ivy Asia Pacific Fund and Ivy
International Value Fund, Ivy Fund hereby adopts this Supplement
as of this 31st day of December, 1996.
IVY FUND
By: ____________________________
Michael G. Landry, President
EXHIBIT 18(d)
IVY FUND
PLAN PURSUANT TO RULE 18F-3
UNDER THE
INVESTMENT COMPANY ACT OF 1940
(As Amended and Restated on December 7, 1996)
I. INTRODUCTION
In accordance with Rule 18f-3 under the Investment Company
Act of 1940, as amended (the "1940 Act"), this Plan describes the
multi-class structure that will apply to certain series of Ivy
Fund (each, a "Fund" and collectively, the "Funds"), including
the separate class arrangements for the service and distribution
of shares, the method for allocating the expenses and income of
each Fund among its classes, and any related exchange privileges
and conversion features that apply to the different classes.
II. THE MULTI-CLASS STRUCTURE
Each of the following Funds is authorized to issue three
classes of shares, identified as Class A, Class B and Class C,
respectively: Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy Canada
Fund, Ivy China Region Fund, Ivy Emerging Growth Fund, Ivy Global
Fund, Ivy Global Natural Resources Fund, Ivy Global Science &
Technology Fund, Ivy Growth Fund, Ivy Growth with Income Fund,
Ivy Latin America Strategy Fund, Ivy Money Market Fund,[FN1][The
separation of Ivy Money Market Fund shares into three separate
classes has been authorized as a means of enabling the Funds'
transfer agent to track the contingent deferred sales charge
period that applies to Class B and Class C shares of other Ivy or
Mackenzie Funds that are being exchanged for shares of Ivy Money
Market Fund. In all other relevant respects, the three classes
of Ivy Money Market Fund shares are identical (i.e., having the
same arrangement for shareholder services and the distribution of
securities), and are not subject to any sales load other than in
connection with the redemption of Class B or Class C shares of
that have been acquired pursuant to an exchange from another Ivy
or Mackenzie Fund. (See Section III.D.)] Ivy International Fund,
Ivy International Bond Fund, Ivy International Value Fund and Ivy
New Century Fund. Ivy Bond Fund, Ivy Global Science & Technology
Fund, Ivy International Fund and Ivy International Value Fund are
also authorized to issue a fourth class of shares, identified as
Class I. Ivy Short-Term Bond Fund is authorized to issue Class
A, Class B and Class I shares.
Shares of each class of a Fund represent an equal pro rata
interest in the underlying assets of that Fund, and generally
have identical voting, dividend, liquidation, and other rights,
preferences, powers, restrictions, limitations, qualifications
and terms and conditions, except that: (a) each class shall have
a different designation; (b) each class shall bear certain class-
specific expenses, as described more fully in Section III.C.2.,
below; (c) each class shall have exclusive voting rights on any
matter submitted to shareholders that relates solely to its
arrangement; and (d) each class shall have separate voting rights
on any matter submitted to shareholders in which the interests of
one class differ from the interests of any other class. Each
class of shares shall also have the distinct features described
in Section III, below.
III. CLASS ARRANGEMENTS
A. FRONT-END SALES CHARGES AND CONTINGENT DEFERRED SALES
CHARGES
Class A shares shall be offered at net asset value plus a
front-end sales charge. The front-end sales charge shall be in
such amount as is disclosed in each Fund's current prospectus and
shall be subject to reductions for larger purchases and such
waivers or reductions as are determined or approved by the Board
of Trustees. Class A shares generally will not be subject to a
contingent deferred sales charge (a "CDSC"), although a CDSC may
be imposed in certain limited cases as disclosed in each Fund's
current prospectus or prospectus supplement.
Class B and Class C shares shall be offered at net asset
value without the imposition of a front-end sales charge. A CDSC
in such amount as is described in each Fund's current prospectus
or prospectus supplement shall be imposed on Class B and Class C
shares, subject to such waivers or reductions as are determined
or approved by the Board of Trustees.
Class I shares are not subject to a front-end sales charge
or a CDSC.
B. RULE 12B-1 PLANS
Each Fund (other than Ivy Money Market Fund) has adopted a
service and distribution plan pursuant to Rule 12b-1 under the
1940 Act (a "12b-1 plan") under which it pays to Ivy Mackenzie
Distributors, Inc. (the "Distributor") an annual fee based on the
average daily net assets value of the Fund's outstanding Class A,
Class B and Class C shares, respectively.[FN2][Class I shares are
not subject to Rule 12b-1 service or distribution fees.] The
maximum fees currently charged to each Fund under its 12b-1 plan
are set forth in the table below, and are expressed as a
percentage of the Fund's average daily net assets.[FN3][Fees for
services in connection with the Rule 12b-1 plans will be
consistent with any applicable restriction imposed by the
National Association of Securities Dealers, Inc.]
The services that the Distributor provides in connection
with each Rule 12b-1 plan for which service fees[FN4][Each Fund
pays the Distributor at the annual rate of up to 0.25% of the
average daily net asset value attributable to its Class A, Class
B and Class C shares, respectively. Ivy Canada Fund pays an
additional service-related fee of 0.15% of the average daily net
asset value attributable to its Class A shares. In addition,
each Fund (other than Ivy Canada Fund and Ivy Short-Term Bond
Fund) pays the Distributor a fee for other distribution services
at the annual rate of 0.75% of the Fund's average daily net
assets attributable to its Class B and Class C shares. Ivy
Canada Fund and Ivy Short-Term Bond Fund pay the Distributor an
additional amount for other distribution services at the annual
rate of 0.60% and 0.50%, respectively, of average daily net
assets attributable to their respective Class B and Class C
shares.] are paid include, among other things, advising clients
or customers regarding the purchase, sale or retention of a
Fund's Class A, Class B or Class C shares, answering routine
inquiries concerning the Fund, assisting shareholders in changing
options or enrolling in specific plans and providing shareholders
with information regarding the Fund and related developments.
The other distribution services provided by the Distributor
in connection with each Fund's Rule 12b-1 plan include any
activities primarily intended to result in the sale of the Fund's
Class B and Class C shares. For such distribution services, the
Distributor is paid for, among other things, compensation to
broker-dealers and other entities that have entered into
agreements with the Distributor; bonuses and other incentives
paid to broker-dealers or such other entities; compensation to
and expenses of employees of the Distributor who engage in or
support distribution of a Fund's Class B or Class C shares;
telephone expenses; interest expense (only to the extent not
prohibited by a regulation or order of the SEC); printing of
prospectuses and reports for other than existing shareholders;
and preparation, printing and distribution of sales literature
and advertising materials.
RULE 12b-1 FEES
CLASS B AND
CLASS A CLASS A CLASS C SHARES
SHARES SHARES (SERVICE AND
(SERVICE (DISTRIBUTION DISTRIBUTION
FUND NAME FEE) FEES) FEES)
Ivy Asia Pacific Fund 0.25% 0.00% 1.00%
Ivy Bond Fund 0.25% 0.00% 1.00%
Ivy Canada Fund 0.25% 0.15% 1.00%
Ivy China Region Fund 0.25% 0.00% 1.00%
Ivy Emerging Growth
Fund 0.25% 0.00% 1.00%
Ivy Global Fund 0.25% 0.00% 1.00%
Ivy Global Natural
Resources Fund 0.25% 0.00% 1.00%
Ivy Global Science &
Technology Fund 0.25% 0.00% 1.00%
Ivy Growth Fund 0.25% 0.00% 1.00%
Ivy Growth with Income
Fund 0.25% 0.00% 1.00%
Ivy International Bond
Fund 0.25% 0.00% 1.00%
Ivy International Fund 0.25% 0.00% 1.00%
Ivy International
Value Fund 0.25% 0.00% 1.00%
Ivy Latin America
Strategy Fund 0.25% 0.00% 1.00%
Ivy Money Market Fund* 0.00% 0.00% 0.00%
Ivy New Century Fund 0.25% 0.00% 1.00%
Ivy Short-Term Bond
Fund 0.25% 0.00% 0.75%**
* See footnote 1.
** Ivy Short-Term Bond Fund has no Class C shares.
C. ALLOCATION OF EXPENSES AND INCOME
1. "TRUST" AND "FUND" EXPENSES
The gross income, realized and unrealized capital gains and
losses and expenses (other than "Class Expenses," as defined
below) of each Fund shall be allocated to each class on the basis
of its net asset value relative to the net asset value of the
Fund. Expenses so allocated include expenses of Ivy Fund that
are not attributable to a particular Fund or class of a Fund
("Trust Expenses") and expenses of a Fund not attributable to a
particular class of the Fund ("Fund Expenses"). Trust Expenses
include, but are not limited to, Trustees' fees and expenses;
insurance costs; certain legal fees; expenses related to
shareholder reports; and printing expenses. Fund Expenses
include, but are not limited to, certain registration fees (i.e.,
state registration fees imposed on a Fund-wide basis and SEC
registration Fees); custodial fees; transfer agent fees; advisory
fees; fees related to the preparation of separate documents of a
particular Fund, such as a separate prospectus; and other
expenses relating to the management of the Fund's assets.
2. "CLASS" EXPENSES
The types of expenses attributable to a particular class
("Class Expenses") include: (a) payments pursuant to the Rule
12b-1 plan for that class[FN5][Class I shares of Ivy Bond Fund,
Ivy Global Science & Technology Fund, Ivy Short-Term Bond Fund,
Ivy International Fund and Ivy International Value Fund bear no
distribution or service fees.]; (b) transfer agent fees
attributable to a particular class; (c) printing and postage
expenses related to preparing and distributing shareholder
reports, prospectuses and proxy materials; (d) registration fees
(other than those set forth in Section C.1. above); (e) the
expense of administrative personnel and services as required to
support the shareholders of a particular class[FN6][Class I
shares of Ivy Bond Fund, Ivy Global Science & Technology Fund,
Ivy International Fund and Ivy International Value Fund bear
lower administrative services fees relative to these Funds' other
classes of shares (i.e., Class I shares of the Funds pay a
monthly administrative services fee based upon each Fund's
average daily net assets at the annual rate of only 0.01%, while
Class A, Class B and Class C shares of these two Funds pay such a
fee at the annual rate of 0.10%).]; (f) litigation or other legal
expenses relating solely to a particular class; (g) Trustees'
fees incurred as a result of issues relating to a particular
class; and (h) the expense of holding meetings solely for
shareholders of a particular class. Expenses described in
subpart (a) of this paragraph must be allocated to the class for
which they are incurred. All other expenses described in this
paragraph may (but need not) be allocated as Class Expenses, but
only if Ivy Fund's Board of Trustees determines, or Ivy Fund's
President and Secretary/Treasurer have determined, subject to
ratification by the Board of Trustees, that the allocation of
such expenses by class is consistent with applicable legal
principles under the 1940 Act and the Internal Revenue Code of
1986, as amended.
In the event that a particular expense is no longer
reasonably allocable by class or to a particular class, it shall
be treated as a Trust Expense or Fund Expense, and in the event a
Trust Expense or Fund Expense becomes reasonably allocable as a
Class Expense, it shall be so allocated, subject to compliance
with Rule 18f-3 and to approval or ratification by the Board of
Trustees.
3. WAIVERS OR REIMBURSEMENTS OF EXPENSES
Expenses may be waived or reimbursed by any adviser to Ivy
Fund, by Ivy Fund's underwriter or any other provider of services
to Ivy Fund without the prior approval of Ivy Fund's Board of
Trustees.
D. EXCHANGE PRIVILEGES
Shareholders of each Fund have exchange privileges with the
other Funds and with the five funds that comprise Mackenzie
Series Trust (together, with the Funds, the "Ivy and Mackenzie
Funds").[FN7][Other exchange privileges, not described herein,
exist under certain other circumstances, as described in each
Fund's current prospectus or prospectus supplement.]
1. CLASS A:
INITIAL SALES CHARGE SHARES. Class A shareholders may
exchange their Class A shares ("outstanding Class A shares") for
Class A shares of another Ivy or Mackenzie Fund (or for shares of
another Ivy or Mackenzie Fund that currently offers only a single
class of shares) ("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.
Incremental sales charges are waived for outstanding Class A
shares that have been invested for 12 months or longer.
CONTINGENT DEFERRED SALES CHARGE SHARES. Class A
shareholders may exchange their Class A shares subject to a
contingent deferred sales charge ("CDSC"), as described in the
Prospectus ("outstanding Class A shares"), for Class A shares of
another Ivy or Mackenzie Fund (or for shares of another Ivy or
Mackenzie Fund that currently offers only a single class of
shares) ("new Class A shares") on the basis of the relative net
asset value per Class A share, without the payment of a CDSC that
would otherwise be due upon the redemption of the outstanding
Class A shares. Class A shareholders of a Fund exercising the
exchange privilege will continue to be subject to the Fund's CDSC
schedule (or period) following an exchange, unless the CDSC
schedule that applies to the new Class A shares is higher (or
such period is longer) than the CDSC schedule (or period), if
any, applicable to the outstanding Class A shares, in which case
the schedule (or period) of the Fund into which the exchange is
made shall apply.
2. CLASS B AND CLASS C:
Shareholders may exchange their Class B or Class C shares
("outstanding Class B shares" or "outstanding Class C shares,"
respectively) for Class B (or Class C) shares of another Ivy or
Mackenzie Fund ("new Class B shares" or "new Class C shares,"
respectively) on the basis of the net asset value per Class B (or
Class C) share, without the payment of any CDSC that would
otherwise be due upon the redemption of the outstanding Class B
(or Class C) shares. Class B and Class C shareholders of a Fund
exercising the exchange privilege will continue to be subject to
the Fund's CDSC schedule (or period) following an exchange,
unless, in the case of Class B shareholders, the CDSC schedule
that applies to the new Class B shares is higher (or such period
is longer) than the CDSC schedule (or period) applicable to the
outstanding Class B shares, in which case the schedule (or
period) of the Fund into which the exchange is made shall apply.
3. CLASS I:
Class I shareholders may exchange their outstanding Class I
shares for Class I shares of another Fund or Mackenzie Fund on
the basis of the net asset value per Class I share.
4. GENERAL:
Shares resulting from the reinvestment of dividends and
other distributions will not be charged an initial sales charge
or CDSC when exchanged into another Ivy or Mackenzie Fund.
With respect to Fund shares subject to a CDSC, if less than
all of an investment is exchanged out of the Fund, the shares
exchanged will reflect, pro rata, the cost, capital appreciation
and/or reinvestment of distributions of the original investment
as well as the original purchase date, for purposes of
calculating any CDSC for future redemptions of the exchanged
shares.
E. CONVERSION FEATURE
Class B shares of a Fund convert automatically to Class A
shares of the Fund as of the close of business on the first
business day after the last day of the calendar quarter in which
the eighth anniversary of the purchase date of the Class B shares
occurs. The conversion will be based on the relative net asset
values per share of the two classes, without the imposition of
any sales load, fee or other charge. For purposes of calculating
the eight year holding period, the "purchase date" shall mean the
date on which the Class B shares were initially purchased,
regardless of whether the Class B shares that are subject to the
conversion were obtained through an exchange (or series of
exchanges) from a different Ivy or Mackenzie Fund. For purposes
of conversion of Class B shares, Class B shares acquired 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.
IV. BOARD REVIEW
A. INITIAL APPROVAL
The Board of Trustees of Ivy Fund, including a majority of
the Trustees who are not interested persons of Ivy Fund, as
defined under the 1940 Act (the "Independent Trustees"), at a
meeting held on December 1-2, 1995, initially approved this Plan
based on a determination that the Plan, including the expense
allocation, is in the best interests of each class of shares of
each Fund individually and Ivy Fund as a whole.[FN8][The Plan, as
initially approved, pertained only to the Class A and Class B
shares of the Funds, and the Class I shares of Ivy Bond Fund, Ivy
Short-Term Bond Fund and Ivy International Fund. The Plan was
amended and restated on April 30, 1996 to reflect the
establishment and designation of Class C shares of the Funds
(other than Ivy Short-Term Bond Fund). The Plan was amended and
restated on June 8, 1996 to reflect the establishment and
designation of Ivy Global Science and Technology Fund. The Plan
has been further amended and restated, as of the date set forth
on the first page hereof, to reflect the establishment and
designation of Ivy Global Natural Resources Fund, Ivy Asia
Pacific Fund and Ivy International Value Fund.
B. APPROVAL OF AMENDMENTS
Before any material amendments to this Plan, Ivy Fund's
Board of Trustees, including a majority of the Independent
Trustees, must find that the Plan, as proposed to be amended
(including any proposed amendments to the method of allocating
class and/or fund expenses), is in the best interests of each
class of shares of each Fund individually and Ivy Fund as a
whole. In considering whether to approve any proposed
amendment(s) to the Plan, the Trustees of Ivy Fund shall request
and evaluate such information as they consider reasonably
necessary to evaluate the proposed amendment(s) to the Plan.
Such information shall address the issue of whether any waivers
or reimbursements of advisory or administrative fees could be
considered a cross-subsidization of one class by another, and
other potential conflicts of interest between classes.
C. PERIODIC REVIEW
The Board of Trustees of Ivy Fund shall review the Plan as
frequently as it deems necessary, consistent with applicable
legal requirements.
V. EFFECTIVE DATE
The Plan first became effective as of January 1, 1996.
