As filed with the Securities and Exchange Commission on
January 21, 1997 (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. 90
[ 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 April 7, 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. 90 IS BEING FILED
SOLELY IN ORDER TO ADD A NEW SERIES TO THE REGISTRANT,
DESIGNATED AS IVY
PAN-EUROPE FUND. AS SUCH, THE PROSPECTUS AND STATEMENT
OF ADDITIONAL INFORMATION THAT ARE INCLUDED IN THIS
POST-EFFECTIVE
AMENDMENT NO. 90 ARE TO BE USED CONCURRENTLY WITH AND
SEPARATELY FROM THE PROSPECTUSES AND STATEMENTS OF
ADDITIONAL INFORMATION
FOR THE OTHER SIXTEEN SERIES OFFERED BY THE REGISTRANT,
WHICH ARE INCORPORATED BY REFERENCE TO THIS FILING.
IVY FUND
CROSS REFERENCE SHEET
Post-Effective Amendment No. 90 contains the
Prospectus and Statement of Additional Information to
be used with Ivy Pan- Europe Fund, one of the seventeen
series of Ivy Fund (the "Registrant"). The other
sixteen series of the Registrant are described in four
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 April
____, 1997
IVY PAN-EUROPE FUND
Ivy Fund (the "Trust") is a registered investment
company currently consisting of seventeen separate
portfolios. One of these portfolios, Ivy Pan-Europe
Fund (the "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 April
30, 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
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard N. Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie Services Corp.
P.O. Box 3022
Boca Raton, FL
33431-0922
1-800-777-6472
AUDITORS
[____________________________]
Ft. Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
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 MANAGE-
SERVICE/ EXPENSE EXPENSE
MENT DISTRIBU- REIMBURSE- REIMBURSE-
FEES(1) TION FEES MENTS)(1) 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.
(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.
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 "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 preceding table
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 OBJECTIVES AND POLICIES
The Fund's principal investment objective is long-
term capital growth. Consideration of current income
is secondary to this principal objective. The Fund
seeks to achieve its investment objective by investing
primarily in the equity securities of companies
domiciled or otherwise doing business (as described
below) in European countries. 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 objective, 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 will invest
at least 65% of its total assets in the equity
securities of "European companies," which include any
issuer (a) that is organized under the laws of a
European country; (b) that derives 50% or more of its
total revenues from goods produced or sold, investments made
or services performed in Europe; or (c) for which the
principal trading market is in Europe. The Fund may
also invest up to 35% of its total assets in the equity
securities of issuers domiciled outside of Europe. The
equity securities in which the Fund may invest include
common stock, preferred stock and common stock
equivalents such as warrants and convertible debt securities.
The Fund may also invest in sponsored or unsponsored
American Depository Receipts ("ADRs"), European
Depository Receipts ("EDRs"), Global Depository
Receipts ("GDRs"), American Depository Shares ("ADSs"),
European Depository Shares ("EDSs") and Global
Depository Shares ("GDSs"). 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 European
country.
The Fund may invest up to 35% of its net assets in
debt securities, but will not invest more than 20% of
its net assets in debt securities rated Ba or below by
Moody's or BB or below by S&P (commonly referred to as
"high yield" or "junk" bonds), or if unrated, are
considered by IMI to be of comparable quality. The
Fund may also purchase securities on a "when-issued" or firm
commitment basis, engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
In addition, the Fund may invest up to 5% of its net
assets in zero coupon bonds.
For temporary defensive purposes or when IMI
believes that circumstances warrant, the Fund may
invest without limit in U.S. Government securities,
investment-grade debt securities (i.e., those rated Baa
or higher by Moody's Investor Services, Inc.
("Moody's") or BBB or higher by Standard & Poor' Corporation
("S&P"), or if unrated, are considered by IMI to be of
comparable quality), warrants, and cash or cash
equivalents such as domestic or foreign bank
obligations (including certificates of deposit, time
deposits and bankers' acceptances), short-term notes,
repurchase agreements, and domestic or foreign commercial paper
(which, if issued by a corporation, must be rated Prime-1
by Moody's or A-1 by S&P, or if unrated has been issued
by a company that at the time of investment has an
outstanding debt issue rated AAA or AA by S&P or Aaa or
Aa by Moody's).
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 total assets.
The Fund may also invest (i) up to 10% of its total
assets in other investment companies, and (ii) up to 15% of
its net assets in restricted and other illiquid securities.
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
(and options on) 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
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 A-1 by S&P or
Prime-1 by 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 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, including municipal 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).
LOW-RATED DEBT SECURITIES: Securities rated
lower than Baa by Moody's or BBB by S&P and comparable
unrated securities (commonly referred to as "high
yield" or "junk" bonds) are considered by major credit-
rating organizations to have predominately speculative
characteristics with respect to the issuer's capacity
to pay interest and repay principal. Investors in the
Fund should be willing to accept the special risks
associated with these types of securities.
While high yield debt securities are likely to
have some quality and protective characteristics, these
qualities are largely outweighed by the risk of
exposure to adverse conditions and other uncertainties.
Accordingly, investments in such securities, while
generally providing for greater income and potential
opportunity for gain than investments in higher-rated
securities, also entail greater risk (including the possibility
of default or bankruptcy of the issuer) and generally
involve greater price volatility than securities in
higher rating
categories. IMI seeks to reduce risk through
diversification (including investments in foreign
securities), credit analysis and attention to current
developments and trends in both the economy and
financial markets. 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
(unless the security is downgraded below the rating of
C, in which case IMI most likely would dispose of the
security based on then existing market conditions).
For additional information regarding the risks
associated with investing in high yield bonds, see the
SAI (particularly Appendix A thereto, which contains a
more complete description of the ratings assigned by
Moody's and S&P).
FOREIGN SECURITIES: The foreign securities in
which the Fund invests may include non-U.S. dollar-
denominated securities, Eurodollar securities,
sponsored or unsponsored ADRs, GDRs, EDRs, ADSs, GDSs
and EDSs, and debt securities issued, assumed or
guaranteed by foreign governments (or political subdivisions or
instrumentalities thereof). 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 other types of investments.
In many foreign countries (especially in emerging
market countries, such as those located in parts of
Eastern Europe), 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 countries with emerging
or developing economies ("emerging markets"). For
example, countries with emerging markets (such as those
located in parts of Eastern Europe) 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. In addition, many
emerging markets have experienced and continue to
experience especially 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
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, infrastructures 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. IMI believes that similar
investment opportunities will be crated 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 their
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. An interest rate futures contract is an
agreement between two parties to buy or sell a
specified debt security at a set price on a future
date. 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.
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: An "illiquid
security" is an asset that may not be sold or disposed
of in the ordinary course of business within seven days
at approximately the value at which the Fund has valued
the security on its books. A "restricted security" is
a security that cannot be offered to the public for
sale without first being registered under the
Securities Act of 1933, and is considered to be illiquid until
such filing takes place. 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. 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, are considered
illiquid for purposes of the percentage limitations
that apply to the Fund's investment in illiquid
securities.
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. In addition, transaction costs in
smaller company stocks 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.
"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.
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 seventeen 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 ___________, 1997, IMI and MIMI had
approximately $_______ billion and $_____ 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 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 nine 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 (e.g., "total return" and
"yield") 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
statements of the Fund's current yield, various expressions
of 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.
"Current yield" reflects the income per share
earned by the Fund's portfolio investments, and is
calculated by dividing the Fund's net investment income
per share during a recent 30-day period by the maximum
public offering price on the last day of that period
and then annualizing the result. Dividends or
distributions that were paid to the Fund's shareholders are
reflected in the "current distribution rate," which is
computed by dividing the total amount of dividends per
share paid by the Fund during the preceding 12 months
by the Fund's current maximum offering price (which
includes any applicable sales charge). The "current
distribution rate" will differ from the "current yield"
computation because it may include distributions to shareholders
from sources other than dividends and interest, short
term capital gain and net equalization credits and will
be calculated over a different period of time.
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 Pan-Europe 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 _____ 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 AS A AS
A OF PERCEN- PERCEN-
PUBLIC TAGE
TAGE OFFERING OF
PUBLIC OF NET PRICE
OFFERING AMOUNT RETAINED AMOUNT INVESTED
PRICE INVESTED BY
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 4C 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 4C 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:
Investors who held Ivy Fund shares as of December 31,
1991, or who held shares of certain funds that were
reorganized into an Ivy or Mackenzie fund, may be
exempt from sales charges on the purchase of Class A
shares of any of the Ivy or Mackenzie funds. If you
believe you may be eligible for such an exemption, please contact
IMSC at 1-800-235-3322 for additional information.
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 XX 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
CHARGE YEAR SINCE
PURCHASE
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 XX 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 at 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.
Investors who held Ivy Fund shares as of December
31, 1991, or who held shares of certain funds that were
reorganized into an Ivy or Mackenzie fund, may be
exempt from sales charges on the exchange of shares
between any of the Ivy or Mackenzie funds. If you
believe you may be eligible for such an exemption, please
contact IMSC at 1-800-235-3322 for additional information.
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) Plans
- SIMPLE Plans (Individual Retirement Account and
401(k))
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 PAN-EUROPE 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 Pan-Europe 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
Pan-Europe 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 Pan-Europe 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
IPEF-1-197
IVY PAN-EUROPE FUND
series of
IVY FUND
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL INFORMATION
April ____, 1997
_________________________________________________________________
Ivy Fund (the "Trust") is an open-end management
investment company that currently consists of seventeen
fully managed portfolios, each of which (except for Ivy
Latin America Strategy Fund) is diversified. Ivy Latin
America Strategy Fund is a non- diversified portfolio.
This Statement of Additional Information ("SAI")
describes one of the portfolios, Ivy Pan-Europe 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 April
____, 1997 (the "Prospectus"), which is available 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 BANKING INDUSTRY AND SAVINGS AND LOAN
OBLIGATIONS . . . 4 BORROWING . . . . . . . .
. . . . . . . . . . . . . . . 4 COMMERCIAL PAPER
. . . . . . . . . . . . . . . . . . . . 4 U.S.
GOVERNMENT SECURITIES . . . . . . . . . . . . . . . 5
CONVERTIBLE SECURITIES . . . . . . . . . . . . . . . . . 6
DEBT SECURITIES, IN GENERAL . . . . . . . . . . . .
. . 7 INVESTMENT-GRADE DEBT SECURITIES . . . . .
. . . . . . . 8 FOREIGN SECURITIES . . . . . . .
. . . . . . . . . . . . 9 INVESTING IN EMERGING
MARKETS . . . . . . . . . . . . . 10 FORWARD
FOREIGN CURRENCY CONTRACTS . . . . . . . . . . . 12
FOREIGN CURRENCIES . . . . . . . . . . . . . . . . . . . 13
REPURCHASE AGREEMENTS . . . . . . . . . . . . . . . .
. 14 WARRANTS . . . . . . . . . . . . . . . . . .
. . . . . . 14 OPTIONS TRANSACTIONS . . . . . . .
. . . . . . . . . . . 15 OPTIONS, IN GENERAL
. . . . . . . . . . . . . . . . 15 WRITING
OPTIONS ON INDIVIDUAL SECURITIES . . . . . 16
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES . . . . 17
PURCHASING AND WRITING OPTIONS ON SECURITIES
INDICES . . . . . . . . . . . . . . . . . . . 18
RISKS OF OPTIONS TRANSACTIONS . . . . . . . . .
. . 18 SECURITIES INDEX FUTURES CONTRACTS .
. . . . . . . 21 RISKS OF SECURITIES INDEX
FUTURES . . . . . . . . . 23 COMBINED
TRANSACTIONS . . . . . . . . . . . . . . . . . 24
RESTRICTED AND ILLIQUID SECURITIES . . . . . . . . . . . 25
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . .
. . . 26
ADDITIONAL RESTRICTIONS . . . . . . . . . . . . . . . .
. . . 28
ADDITIONAL RIGHTS AND PRIVILEGES . . . . . . . . . . .
. . . 29 AUTOMATIC INVESTMENT METHOD . . . . . .
. . . . . . . . 29 EXCHANGE OF SHARES . . . . . .
. . . . . . . . . . . . . 30 INITIAL SALES
CHARGE SHARES . . . . . . . . . . . . 30
CONTINGENT DEFERRED SALES CHARGE SHARES . . . . . . 30
LETTER OF INTENT . . . . . . . . . . . . . . . . . . . . 33
RETIREMENT PLANS . . . . . . . . . . . . . . . . . .
. . 34 INDIVIDUAL RETIREMENT ACCOUNTS . . .
. . . . . . . 35 QUALIFIED PLANS . . . . . .
. . . . . . . . . . . . 36 DEFERRED
COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(b)(7)
ACCOUNT") . . . . . . . . . . . . . . . . . . 37
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS . . . . . 38
REINVESTMENT PRIVILEGE . . . . . . . . . . . . . . . . .
38 RIGHTS OF ACCUMULATION . . . . . . . . . . . .
. . . . . 39 SYSTEMATIC WITHDRAWAL PLAN . . . . .
. . . . . . . . . . 39 GROUP SYSTEMATIC
INVESTMENT PROGRAM . . . . . . . . . . 40
BROKERAGE ALLOCATION . . . . . . . . . . . . . . . . .
. . . 41
TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . .
. . . 43 PERSONAL INVESTMENTS BY EMPLOYEES OF IMI
. . . . . . . . 47
COMPENSATION TABLE . . . . . . . . . . . . . . . . . .
. . . 48
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . .
. . . 49 BUSINESS MANAGEMENT AND INVESTMENT
ADVISORY SERVICES . . 49 DISTRIBUTION SERVICES .
. . . . . . . . . . . . . . . . 51 RULE
18F-3 PLAN . . . . . . . . . . . . . . . . . . 52
RULE 12B-1 DISTRIBUTION PLANS . . . . . . . . . . . 53
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . .
54 FUND ACCOUNTING SERVICES . . . . . . . . . . .
. . . . . 55 TRANSFER AGENT AND DIVIDEND PAYING
AGENT . . . . . . . . 55 ADMINISTRATOR . . . . .
. . . . . . . . . . . . . . . . 56 AUDITORS . . .
. . . . . . . . . . . . . . . . . . . . . 56
CAPITALIZATION AND VOTING RIGHTS . . . . . . . . . . .
. . . 56
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . .
. . . 58
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . .
. . . 60
REDEMPTIONS . . . . . . . . . . . . . . . . . . . . . .
. . . 60
CONVERSION OF CLASS B SHARES . . . . . . . . . . . . .
. . . 62
TAXATION . . . . . . . . . . . . . . . . . . . . . . .
. . . 62 OPTIONS, FUTURES AND FOREIGN CURRENCY
FORWARD CONTRACTS . . . . . . . . . . . . . .
. . . . . . . 63 CURRENCY FLUCTUATIONS --
"SECTION 988" GAINS OR LOSSES . 65
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES . .
. . . 65 DEBT SECURITIES ACQUIRED AT A DISCOUNT .
. . . . . . . . 66 DISTRIBUTIONS . . . . . . . .
. . . . . . . . . . . . . 67 DISPOSITION OF
SHARES . . . . . . . . . . . . . . . . . 68
FOREIGN WITHHOLDING TAXES . . . . . . . . . . . . . . . 68
BACKUP WITHHOLDING . . . . . . . . . . . . . . . . . . .
69
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . .
. . . 70 AVERAGE ANNUAL TOTAL RETURN . . . .
. . . . . . . . 70 OTHER QUOTATIONS,
COMPARISONS AND GENERAL INFORMATION . .
. . . . . . . . . . . . . . . 71
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . .
. . . 72
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION
("S&P") AND MOODY'S SHAREHOLDERS SERVICE, INC.
("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS . . . . . . . . 73
APPENDIX B
STATEMENT OF ASSETS AND LIABILITIES
AS OF ________
AND
REPORT OF INDEPENDENT ACCOUNTANTS . . .
. . . 76
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 at 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) 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.
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 Investors 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.
DEPOSITORY RECEIPTS
American Depository Receipts ("ADRs"), European
Depository Receipts ("EDRs"), Global Depository
Receipts ("GDRs"), American
Depository Shares ("ADSs"), European Depository Shares
("EDSs") and Global Depository Shares ("GDSs") are
depository instruments, the issuance of which is
typically administered by a U.S. or foreign bank or
trust company. These instruments evidence ownership of
underlying securities issued by a U.S. or foreign
corporation. Unsponsored programs are organized independently
and without the cooperation of the issuer of the underlying
securities. As a result, available information
concerning the issuer may not be as current as for
sponsored depository instruments and their prices may
be more volatile than if they were sponsored by the
issuers of the underlying securities.
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 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 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 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, rising interest rates tend to
decrease the rate of prepayments, 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, mortgage-
backed securities can be less effective than typical
bonds of similar maturities at "locking in" yields
during periods of declining interest rates. Such
securities 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,
Federal Home Loan 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.
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.
LOW-RATED DEBT SECURITIES
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 relatively less liquid, it may
be more difficult to value the securities, requiring
additional research, and elements of judgment. 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 securities of foreign
issuers, including non-U.S. dollar-denominated debt
securities, Eurodollar securities, sponsored and
unsponsored ADRs, EDRs, GDRs, ADSs, EDSs and GDSs 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
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, repatriation 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 no return is
earned thereon. 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. 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.
Investors should recognize that investing in
certain foreign securities involves special
considerations, including those set forth below, that
are not typically associated with investing in United
States securities and that may affect the Fund's
performance favorably or unfavorably. (See "Foreign Securities"
under the caption "Risk Factors and Investment
Techniques" in the Prospectus.)
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.
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.
Investments in companies domiciled in developing
countries may be subject to potentially higher risks
than investments in developed countries. Such risks
include (i) less social, political and economic
stability; (ii) a small market for securities and/or a
low or nonexistent volume of trading, which result in a
lack of liquidity and 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 will involve 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 net asset value.
Certain Eastern European countries that do not
have well- established trading markets 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 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 will usually
involve currencies of foreign countries. In addition,
the Fund may temporarily hold foreign currency deposits
during the completion of investment programs and may
purchase forward contracts. Because of these factors,
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 costs in connection
with conversions between various currencies. Although
the Fund values its assets daily in terms of U.S.
dollars, the Fund does not intend to convert its
holdings of foreign currencies into U.S. dollars on a
daily basis. The Fund may do so from time to time, and
investors should be aware of the costs of currency
conversion. 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 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 U.S. markets. The Fund's share price will
reflect movements of the stock and bond markets in
which it is invested (both U.S. and foreign) and of the
currencies in which its foreign investments are denominated.
Thus, the strength or weakness of the U.S. dollar against
foreign currencies accounts 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.
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 without
any requirement for the periodic payment of interest,
and are issued at a significant discount from face
value. The discount approximates the total amount of
interest the bonds would accrue and compound over the period
until maturity at a rate of interest reflecting the
market rate at the time of issuance. If the Fund holds
zero coupon bonds in its portfolio, it would recognize
income currently for Federal income tax purposes in the
amount of the unpaid, accrued interest and generally
would be required to distribute dividends repre- senting
such income to shareholders currently, even though the
cash representing such income would not have been received by the
Fund. Cash to pay dividends representing unpaid,
accrued interest may be obtained from, for example,
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.
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. 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, 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.
OPTIONS TRANSACTIONS
OPTIONS, IN 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 owned by the Fund 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
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 the 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 the
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 the 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
FUTURES, IN 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.
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 and options 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 option or 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 or futures options 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 and
related options 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. Alternatively, the Fund may "cover" its position by
purchasing a put option on the same futures contract with a
strike price as high as or higher than the price of the
contract held by the Fund.
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), or by holding a call option
permitting the Fund to purchase the same futures
contract at a price no higher than the price of the
contract written by the Fund (or at a higher price if
the difference is maintained in liquid assets with the Fund's
custodian).
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 combination 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.
FIRM COMMITMENT AGREEMENTS AND WHEN-ISSUED SECURITIES
New issues of certain debt securities are often
offered on a "when-issued basis," meaning the payment
obligation and the interest rate are fixed at the time
the buyer enters into the commitment, but delivery and
payment for the securities normally take place after
the date of the commitment to purchase. Firm
commitment agreements call for the purchase of securities at an
agreed-upon price on a specified future date. The Fund
uses such investment techniques in order to secure what
is considered to be an advantageous price and yield to
the Fund and not for purposes of leveraging the Fund's
assets. In either instance, the Fund will maintain in a
segregated account with its custodian cash or liquid
securities equal (on a daily marked-to-market basis) to
the amount of its commitment to purchase the underlying
securities.
RESTRICTED AND ILLIQUID SECURITIES
An "illiquid security" is an asset that may not be
sold or disposed of in the ordinary course of business
within seven days at approximately the value at which
the Fund has valued the security on its books. A
"restricted security" is a security that cannot be
offered to the public for sale without first being
registered under the Securities Act of 1933, and is considered to
be illiquid until such filing takes place. 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.
LOANS OF PORTFOLIO SECURITIES
The Fund may with approval of its Board, but
currently does not intend to, lend its investment
securities to brokers, dealers
and financial institutions for the purpose of realizing
additional income. Loans of securities by the Fund will
be collateralized by cash, letters of credit, or
securities issued or guaranteed by the U.S Government
or its agencies or instrumentalities. The collateral
will equal (on a daily marked- to-market basis) at least
100% of the current market value of the loaned
securities. The risks in lending portfolio securities, as
with other extensions of credit, involve a possible loss of
rights in the collateral should the borrower fail
financially. In determining whether to lend
securities, IMI will consider all relevant facts and
circumstances, including the creditworthiness of the
borrower.
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 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"). These funds are: 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
International Bond Fund, Ivy International Fund, Ivy
International Small Companies Fund, Ivy Latin America Strategy
Fund, Ivy Money Market Fund and Ivy New Century 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, which enables a
shareholder to have specified amounts automatically
drawn each month from his or her bank for investment in
Fund shares, 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") of telephone
instructions or written notice from the shareholder.
See "Automatic Investment Method" in the Prospectus. To begin
the plan, complete Sections 6A and 7B of 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 Class A shares that have been
invested for a period of 12 months or longer.) Class A
shareholders may also exchange their 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 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
International Bond Fund, Ivy International Fund, Ivy
International Small Companies Fund, Ivy Latin America
Strategy Fund, Ivy New Century 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 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 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 International Bond Fund, Ivy
International Fund, Ivy International Small Companies Fund,
Ivy Latin America Strategy Fund, Ivy New Century 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
of such letter 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, who 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. For years after 1996, the result is similar even if
one spouse has no earned income; if the joint earned
income of the spouses is at least $4,000, a
contribution of up to $2,000 may be made to each
spouse's IRA. For years before 1997, however, if one
spouse has (or elects to be treated as having) no earned
income for IRA purposes for a year, the working spouse may
contribute up to the lesser of $2,250 or 100% of 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 includible in income for Federal
income tax purposes and therefore are not deductible
from it.
Generally, earnings on an IRA are not subject to
current Federal income tax until distributed.
Distributions attributable
to tax-deductible contributions and to IRA earnings are
taxed as ordinary income. Distributions of non-
deductible contributions are not subject to Federal
income tax. In general, distributions from an IRA to
an individual before he or she reaches age 59-1/2 are
subject to a nondeductible penalty tax equal to 10% of the
taxable amount of the distribution. The 10% penalty tax does
not apply to amounts withdrawn from an IRA after the
individual reaches age 59-1/2, becomes disabled or
dies, or if withdrawn in the form of substantially
equal payments over the life or life expectancy of the
individual and his or her designated benefi- ciary, if
any, or rolled over into another IRA, or, for years
after 1996, amounts withdrawn and used to pay for deductible
medical expenses and amounts withdrawn by certain unemployed
individuals not in excess of amounts paid for certain
health insurance premiums. Distributions must begin to
be withdrawn not later than April 1 of the calendar
year following the calendar year in which the
individual reaches age 70-1/2. Failure to take certain
minimum required distributions will result in the
imposition of a 50% non-deductible penalty tax. Extremely large
distributions in any one year (other than 1997, 1998 or
1999) 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 arrange for
Investors Bank & Trust to furnish custodial services to
the employer and any participating employees.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(b)(7) ACCOUNT"):
Section 403(b)(7) of the Internal Revenue Code of 1986,
as amended (the "Code"), permits public school systems
and certain charitable organizations to use mutual fund
shares held in a custodial account to fund deferred
compensation arrangements with their employees. A custodial
account agreement is available for those employers whose
employees wish to purchase shares of the 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. No new
salary reduction SEPs ("SARSEPs") may be established after 1996,
but existing SARSEPs may continue to be maintained, and non-
salary reduction SEPs may continue to be established as
well as maintained after 1996.
SIMPLE PLANS: An employer may establish a SIMPLE IRA or
a SIMPLE 401(k) for years after 1996. An employee can
make pre-tax salary reduction contributions to a SIMPLE
Plan, up to $6,000 a year. Subject to certain limits,
the employer will either match a portion of employee
contributions, or will make a contribution equal to 2%
of each employee's compensation without regard to the
amount the employee contributes. An employer cannot maintain a
SIMPLE Plan for its employees if any contributions or
benefits are credited to those employees under any
other qualified retirement plan maintained by the
employer.
REINVESTMENT PRIVILEGE
Shareholders who have redeemed Class A shares of
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 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
International Bond Fund, Ivy International Fund, Ivy
International Small Companies Fund, Ivy Latin America
Strategy Fund, Ivy New Century 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) 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 Asia Pacific 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 International Fund, Ivy International
Small Companies Fund, Ivy Latin America Strategy Fund
and Ivy New Century Fund; $100,000 or more for Ivy Bond
Fund, International Bond Fund, Mackenzie California
Municipal Fund, Mackenzie National Municipal Fund and
Mackenzie New York Municipal Fund; or $25,000 or more for
Mackenzie Limited Term Municipal 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 currently
participating in the Automatic Investment Method. A
Withdrawal Plan may involve the depletion of a
shareholder's principal, depending on the amount withdrawn.
A redemption under a Withdrawal Plan is a taxable
event. Shareholders contemplating participating in a
Withdrawal Plan should consult their tax advisers.
Additional investments made by investors
participating in a Withdrawal Plan must equal at least
$1,000 each 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 purchases at any time or
suspend the offering of shares in connection with group
systematic investment programs, and to restrict the
offering of shareholder privileges, such as check
writing, simplified redemptions and other optional privileges, 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 such fee (and any fees due to IMI) through a
deduction from distributions to the shareholders involved or
by causing on the date the fee is assessed a redemption
in each such shareholder account sufficient to pay the
fee. The Trust reserves the right to change these 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.
Since the Fund will not have commenced operations
until ________, 1997, brokerage commission information
is not yet available for the Fund.
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).
Paul H. Broyhill Trustee Chairman, BMC
Fund, Inc. 800 Hickory Blvd. (1983-
present); Chairman, Golfview Park-Box 500
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 and
Chief 11 Bala Avenue Executive
Officer, The Bala Cynwyd, PA 19004
Whitestone Corporation Age: 73
(insurance agency);
Chairman, Scott Management
Company (administrative
services for insurance
companies); President, The
Channick Group (consultants
to insurance companies
and national
trade
associations); Trustee of
Mackenzie Series Trust
(1994-present); Director of
The Mackenzie Funds Inc.
(1994-1995).
Frank W. DeFriece, Jr. Trustee Director, Manager
and Vice The Landmark Centre
President, Director and 113 Landmark Lane,
Fund Manager, Massengill- Suite B
DeFriece Foundation Bristol, TN 37620-2285
(charitable organization) Age: 75
(1950-present); Trustee and
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: 71
Michael G. Landry Trustee President, Chief
Executive 700 South Federal Hwy. and Officer
and Suite 300 Chairman Director of
Mackenzie Boca Raton, FL 33432
Investment Management Age: 50
Inc. (1987-present); [*Deemed to be an
President, Director and "interested person"
Chairman of Ivy Management, of the Trust, as
Inc. (1992-present); defined under
the Chairman and Director of 1940
Act.] Ivy Mackenzie Services
Corp.(1993-present);
Chairman and Director of
Ivy Mackenzie
Distributors,
Inc. (1994-present);
Director and President of
Ivy Mackenzie Distributors,
Inc. (1993-1994); Director
and President of The
Mackenzie Funds Inc. (1987-
1995); Trustee and
President of Mackenzie
Series Trust (1987-
present).
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: 62
Funds Inc. (1987-1995).
Richard N. Silverman Trustee Director, Newton-
Wellesley 18 Bonnybrook Road
Hospital; Director, Beth Waban, MA 02168
Israel Hospital; Director, Age: 72
Boston Ballet; Director,
Boston Children's Museum;
Director, Brimmer and May
School.
J. Brendan Swan Trustee President,
Airspray 4701 North Federal Hwy.
International, Inc.; Suite 465
Joint Managing Director, Pompano Beach, FL 33064
Airspray International Age: 66
B.V. (an environmentally
sensitive packaging
company); Director of
Polyglass LTD.; Director,
The Mackenzie Funds Inc.
(1992-1995); Trustee of
Mackenzie Series Trust
(1992-present).
Keith J. Carlson Trustee Senior Vice
President 700 South Federal Hwy. and and
Director of Mackenzie Suite 300 Vice
Investment Management, Boca Raton, FL 33432
President Inc. (1994-present); Age: 40
Senior Vice President, [*Deemed to be an
Treasurer of Mackenzie "interested
person" Investment Management Inc. of
the Trust, as (1989-1994); Senior Vice
defined under the President and Director
of 1940 Act.] 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);
Senior Vice President and
Director, Ivy
Mackenzie
Services Corp. (1996-
present); President and
Director of Ivy Mackenzie
Services Corp. (1993-1996);
Vice President of Mackenzie
Series Trust (1994-
present); Treasurer of
Mackenzie Series Trust
(1985-1994); President,
Chief Executive
Officer and
Director of Ivy Mackenzie
Distributors, Inc. (1994-
present); Executive Vice
President and Director of
Ivy Mackenzie Distributors,
Inc. (1993-1994);
Trustee of
Mackenzie Series Trust
(1996-present).
C. William Ferris Secretary/ Senior Vice
President, 700 South Federal Hwy. Treasurer Chief
Financial Officer Suite 300
and Secretary/Treasurer Boca Raton, FL 33432
of Mackenzie Investment Age: 52
Management Inc. (1995-
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); Vice President,
Finance/Administration and
Compliance Officer of Ivy
Management, Inc. (1992-
1994); Senior Vice
President, Secretary/
Treasurer and Director of
Ivy Mackenzie
Distributors,
Inc. (1994-present);
Secretary/ Treasurer and
Director of Ivy Mackenzie
Distributors, Inc. (1993-
1994); President and
Director of Ivy Mackenzie
Services Corp. (1996-
present);
Secretary/Treasurer and
Director of Ivy Mackenzie
Services Corp. (1993-1996);
Secretary/ Treasurer of The
Mackenzie Funds Inc. (1993-
1995); Secretary/Treasurer
of Mackenzie Series
Trust (1994-
present).
James W. Broadfoot Vice Executive Vice
President, 700 South Federal Hwy. President Ivy
Management, Inc. (1996 Suite 300
-present); Senior Vice Boca Raton, FL 33432
President, Ivy Management, Age:54
Inc. (1992-1996); Director
and Senior Vice President,
Mackenzie Investment
Management Inc. (1995-
present); Senior Vice
President, Mackenzie
Investment Management
Inc.
(1990-1995);
Author/Consultant (1987-
1990).
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, applies to
portfolio managers, traders, research analysts and
others involved in the investment advisory process, and
imposes time periods during which personal transactions may
not be made in certain securities, and requires the submission
of duplicate broker confirmations and monthly reporting
of securities transactions. Exceptions to these and
other provisions of the Code of Ethics may be granted
in particular circumstances after review by appropriate
personnel.
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 held on February 10, 1996.
As of _________, 1997 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 _____, 1997. On
_____, 1997, the Agreement was approved on behalf of
the Fund by the Board, 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 and Ivy Global Natural Resources
Fund. IMI currently acts as manager and investment adviser to
the following additional investment companies registered
under the 1940 Act: Ivy Asia Pacific Fund, Ivy Bond
Fund, Ivy China Region Fund, Ivy Emerging Growth Fund,
Ivy Global Fund, Ivy Global Science & Technology Fund,
Ivy Growth Fund, Ivy Growth with Income Fund, Ivy
International Bond Fund, Ivy International Fund, Ivy
International Small Companies Fund, Ivy Latin America
Strategy Fund, Ivy Money Market Fund and Ivy New Century Fund.
IMI currently acts as manager to Ivy Canada Fund and Ivy
Global Natural Resources Fund.
The Agreement obligates IMI to make investments
for the accounts of the Fund in accordance with its
best judgment and within the investment objectives and
restrictions set forth in the Prospectus, the 1940 Act
and the provisions of the Code relating to regulated
investment companies, subject to 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. Advisory fee information is not yet available
for the Fund, which is scheduled to commence operations
on _______, 1997.
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.
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 net assets,
which may lower the Fund's expenses and increase its
yield. The Fund's expense limitation may be terminated
or revised at any time, at which time its expenses may
increase and its yield may be reduced.
The initial term of the Agreement between IMI and
the Fund, which is scheduled to commence operations on
_________, 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. 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 Board, 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
on August 25, 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 Class A Fund
shares sold equal to the difference, if any, between
the public offering price, as set
forth in the Fund's then-current prospectus, and the
net asset value on which such price is based. Out of
that commission, IMDI may reallow to dealers such
concession as IMDI may determine from time to time. In
addition, IMDI is entitled to deduct a CDSC on the
redemption of Class A shares sold without an initial sales
charge and Class B and Class C shares, in accordance with, and
in the manner set forth in, the Prospectus.
Under the Distribution Agreement, 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 ________, 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
series of the Trust, and at a meeting held on June 7,
1996, the Board adopted the Rule 18f-3 plan on behalf
of the Ivy Asia Pacific Fund, Ivy Global Natural
Resources Fund, Ivy Global Science & Technology Fund
and Ivy International Small Companies Fund. At a
meeting held on ______, 1997, the Board adopted the Rule 18f-3
plan on behalf of the 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 ______, 1997, the Board 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 Board believes 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 one month may be reimbursed in a
subsequent month. The Class A Plan does not provide
for the payment of interest or carrying charges as
distribution expenses.
Under the 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 Board 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 relevant class; and (4) while
each Plan is in effect, the selection and nomination of
Trustees who are not "interested persons" (as defined
in the 1940 Act) of the 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 _______, 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 Board, including a majority of
the Independent Trustees, cast in person at a meeting
called for the purpose of considering such amendment.
Each Plan may be terminated at any time with respect to
the class of shares to which the Plan relates, without payment
of any penalty, by vote of a majority of the Independent
Trustees, or by vote of a majority of the outstanding
voting securities of that class.
If the Distribution Agreement or the Distribution
Plans are terminated (or not renewed) with respect to
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. ("Brown Brothers" or 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.
Pursuant to those rules, Brown Brothers has entered into
subcustodial agreements for the holding of the Fund's
foreign securities. With respect to the Fund, Brown
Brothers 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.
Since the Fund will not have commenced operations
until _______, 1997, no payments had been made with
respect to the provision of these services for the Fund
as of the date of this SAI.
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 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).
Since the Fund will not have commenced operations
until _______, 1997, no payments had been made with
respect to the
provision of these services for the Fund as of the date
of this SAI.
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.
Since the Fund will not have commenced operations
until _______, 1997, no payments had been made with
respect to the provision of these services for the Fund
as of the date of this SAI.
AUDITORS
Coopers & Lybrand L.L.P., independent certified
public accountants, 200 East Las Olas Boulevard, Suite
1700, Ft. Lauderdale, Florida 33301, 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 Fund's 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 Board to create separate series or
portfolios and to divide any series or portfolio into
one or more classes. The Board has authorized
seventeen series, each of which represents a fund. The
Board has further authorized the issuance of Classes A, B and
C for the Fund, 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 International
Bond Fund, Ivy International Fund, Ivy International
Small Companies Fund, Ivy Latin America Strategy Fund,
Ivy Money Market Fund and Ivy New Century Fund, as well as
Class I for Ivy Bond Fund, Ivy Global Science & Technology
Fund, Ivy International Fund and Ivy International
Small Companies
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 that Fund and Ivy
Growth with Income Fund and not offered for sale to the public.
On February 29, 1996, the Board resolved by written
consent to establish a new class of shares designated
as "Class C" for all Ivy Fund portfolios 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, became
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 Board 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 each fund of the Trust. If the Board
determines 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 of the
Trust.
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 that 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 a fund, the
matter shall have been effectively acted upon with
respect to that fund if a majority of the outstanding
voting securities of that 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
Board is 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 those days 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 such
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 such 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 which it has purchased, the
cost of the security which 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 Board 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, as well as gross proceeds from the
redemption of the Fund's shares, except in the case of
certain exempt shareholders. All such distributions and
proceeds will be subject to withholding of Federal income tax at
a rate of 31% ("backup withholding") in the case of non-
exempt shareholders if (1) the shareholder fails to
furnish the Fund with and to certify the shareholder's
correct taxpayer identification number or social
security number, (2) the IRS notifies the shareholder
or the Fund that the shareholder has failed to report
properly certain interest and dividend income to the
IRS and to respond to notices to that effect, or (3) when
required to do so, the shareholder fails to certify
that he or she is not subject to backup withholding.
If the withholding provisions are applicable, any such
distributions or proceeds, whether reinvested in
additional shares or taken in cash, will be reduced by
the amounts required to be withheld.
Distributions may also be subject to additional
state, local and foreign taxes depending on each
shareholder's particular situation. Non-U.S.
shareholders may be subject to U.S. tax rules that
differ significantly from those summarized above. This
discussion does not purport to deal with all of the tax
consequences applicable to the 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.
Since the Fund will not have commenced operations
until ________, 1997, no performance information is
available for the Fund as of the date of this SAI.
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 Investor, International Fund Monitor, Investor's
Daily, Los Angeles Times, Medical Economics, Miami
Herald, Money Mutual Fund Forecaster, Mutual Fund
Letter, Mutual Fund Source Book, Mutual Fund Values,
National Underwriter Nelson's Directory of Investment
Managers, New York Times, Newsweek, No Load Fund
Investor, No Load Fund* X, Oakland Tribune, Pension World,
Pensions and Investment Age, Personal Investor, Rugg and
Steele, Time, U.S. News and World Report, USA Today,
The Wall Street Journal, and Washington Post.
FINANCIAL STATEMENTS
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 PAN-EUROPE FUND
STATEMENT OF ASSETS AND LIABILITIES
_______________, 1997
_________________________________________________________________
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 PAN-EUROPE 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 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 ___________, 1997
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.
(q) Establishment and designation of
Series and Classes (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 Small Companies Fund--Class
A, Class B, Class C and Class I), filed with
Post-Effective Amendment No. 89 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 Asia
Pacific Fund and Ivy International
Small Companies Fund), filed with Post-
Effective Amendment No. 89 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(o) Form of Supplement to Master
Business Management Agreement
between Ivy Fund and Ivy
Management, Inc. (Ivy Global Natural
Resources Fund), filed with Post-Effective
Amendment No. 89 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(p) Form of Supplement to Investment
Advisory Agreement between Ivy Fund
and Mackenzie Financial Corporation
(Ivy Global Natural Resources
Fund), filed with Post-Effective
Amendment No. 89 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
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 Small Companies
Fund--Class A, Class B, Class C, and Class
I), filed with Post-Effective Amendment No.
89 to Registration Statement No. 2-17613
and incorporated by reference
herein.
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
Small Companies Fund, filed with
Post-Effective Amendment No. 89 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(bb) Form of Fund Accounting Services
Agreement Supplement for Ivy Global
Natural Resources Fund, Ivy Asia
Pacific Fund and Ivy International
Small Companies Fund, filed with
Post-Effective Amendment No. 89 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(cc) Form of Addendum to Transfer Agency
and Shareholder Services Agreement
for Ivy Global Natural Resources
Fund, Ivy Asia Pacific Fund and Ivy
International Small Companies Fund,
filed with Post-Effective Amendment No. 89 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
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
Small Companies Fund), filed with Post-
Effective Amendment No. 89 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(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 Small Companies Fund), filed
with Post-Effective Amendment No. 89 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(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 Small Companies Fund), filed
with Post-Effective Amendment No. 89 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
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 Post-
Effective Amendment No. 89 to
Registration Statement No. 2-17613
and incorporated by reference
herein.
25. Not applicable
26. Number of Holders of Securities
Fund: Date Class Record
Holders
Ivy Bond Fund 12/31/96 Class A 4,684
Class B 206
Class C 40
Class I 0
Ivy Canada Fund 12/31/96 Class A 2,227
Class B 155
Class C 14
Ivy China Region 12/31/96 Class A 3,134
Class B 1,102
Class C 28
Ivy Emerging 12/31/96 Class A 5,036
Growth Fund Class B 3,143
Class C 209
Ivy Global Fund 12/31/96 Class A 1,469
Class B 593
Class C 6
Ivy Global Science 12/31/96 Class A 408
& Technology Fund Class B 288
Class C 123
Class I 0
Ivy Growth Fund 12/31/96 Class A 30,117
Class B 279
Class C 6
Ivy Growth with 12/31/96 Class A 6,030
Income Fund Class B 1,039
Class C 5
Class D 40
Ivy International 12/31/96 Class A 21,257
Fund Class B 13,878
Class C 898
Class I 294
Ivy International 12/31/96 Class A 0
Bond Fund Class B 0
Class C 0
Ivy Latin America 12/31/96 Class A 311
Strategy Fund Class B 137
Class C 4
Ivy Money Market 12/31/96 Class A 2,458
Fund Class B 151
Class C 8
Ivy New Century 12/31/96 Class A 815
Fund Class B 458
Class C 122
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 Pan-Europe Fund,
within four to six months from the effective
date of this Post-Effective Amendment No. 90
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. 90 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 21st day of January, 1997.
IVY FUND
By: Keith J.
Carlson*
President *By: JOSEPH R. FLEMING
Attorney-in-fact
Pursuant to the requirements of the Securities Act
of 1933, this Post-Effective Amendment No. 89 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
1/21/97 Chairman (Chief
Executive Officer)
JOHN S. ANDEREGG, JR.* Trustee
1/21/97
PAUL H. BROYHILL* Trustee
1/21/97
STANLEY CHANNICK* Trustee
1/21/97
FRANK W. DEFRIECE, JR.* Trustee
1/21/97
ROY J. GLAUBER* Trustee
1/21/97
KEITH J. CARLSON** Trustee and
1/21/97 President
JOSEPH G. ROSENTHAL* Trustee
1/21/97
RICHARD N. SILVERMAN* Trustee
1/21/97
J. BRENDAN SWAN* Trustee
1/21/97
C. WILLIAM FERRIS* Treasurer (Chief
1/21/97 Financial
Officer)
*By: JOSEPH R. FLEMING
Attorney-in-fact
* Executed pursuant to powers of attorney filed with
Post-Effective Amendments Nos. 69, 73, 74, 84 and
89 to Registration Statement No. 2-17613.
EXHIBIT INDEX
10 Opinion and Consent of Dechert Price & Rhoads
EXHIBIT 10
DECHERT PRICE & RHOADS
TEN POST OFFICE SQUARE -- SOUTH
SUITE 1230
BOSTON, MA 02109-4603
January 21, 1997
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. 90 to the Trust's registration statement
relating to the shares of beneficial interest of Ivy Pan-Europe
Fund (the "Shares") being filed under the Securities Act of 1933,
as amended (File No. 2-17613)("Post-Effective Amendment No. 90").
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 Pan-
Europe 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. 90.
Very truly yours,
DECHERT PRICE & RHOADS
